25 Nov 2015 07:00
To: Stock Exchange | For immediate release: |
25 November 2015 |
F&C Private Equity Trust plc
Quarterly results for the three months to 30 September 2015
· NAV total return for the quarter of 6.7 per cent for the Ordinary Shares.
· Share price total return for the quarter of 5.1 per cent for the Ordinary Shares.
Manager's Review
Introduction
As at 30 September 2015 the Company's net asset value (NAV) was £218.1 million giving a fully diluted NAV per share of 298.47p, an increase over the quarter of 6.7 per cent. There was a positive influence from currency movements of 1.4 per cent. This was a very active quarter with several realisations from across the portfolio and with upgrades significantly exceeding downgrades by number and volume. As previously announced, an interim dividend of 5.58p per share was paid on 6 November 2015.
At the end of the period the Company had cash of £10.9 million. Together with borrowings of £21.3 million, under the Company's loan facility, net debt was £10.4 million, equivalent to a gearing level of 4.6 per cent. During the quarter combined realisations and income totalled £20.8 million and drawdowns from funds and co-investments totalled £12.3 million. The total of outstanding undrawn commitments at 30 September was £59.6 million; of this approximately £17 million is to funds where the investment period has expired.
New Investments and Drawdowns
During the quarter there were no new commitments to funds, but one co-investment was made and a package of four funds was purchased in a secondary transaction. The Company's new co-investment is into Collingwood Insurance Group where we have invested £3.6 million for 7.1 per cent of the company. This deal is led by European mid-market specialist JZI International (JZI). The JZI-led syndicate, which includes F&CPET together with other investors, has acquired 60 per cent of the business. Collingwood is a specialist UK motor insurer, providing a select number of products tailored specifically for certain categories of the market. It currently caters for taxis, learner drivers, younger drivers and fleets, with new niche products under development. It is based in Gibraltar with the back office, claims, call centre and processing functions based in Newcastle in the UK.
The secondary investment was a package of four Italian mid-market buyout funds acquired, alongside other funds in the BMO Global Asset Management stable, from an Italian insurance company for a net purchase price of €13.8 million with an NAV of €20 million. In aggregate the funds are 76 per cent drawn and contain 14 underlying companies with most of the value contained in nine of these. The funds are PM&Partners II, ILP III (managed by J Hirsch & Co), Progressio II and Mid-Capital Mezzanine (managed by Emisys Capital). These funds are all lower mid-market focused and they are managed by emerging managers. They are also maturing steadily and these factors together with an effective initial discount to NAV of 19 per cent, which increased to 30 per cent with portfolio appreciation, proved attractive to us. The Company's share of the consideration was £4.03 million and this comes with a cumulative £1.2 million of undrawn commitments. Where we can source secondaries of suitable focus and quality at attractive prices this can provide a useful complement to the portfolio of primary fund positions and co-investments.
The underlying funds have made several interesting new investments: Corpfin Capital IV invested £0.5 million into Preving (health and safety services, Spain); Inflexion 2010 invested £0.7 million in Shimtech (gap management components for aircraft, UK); DBAG VI invested £0.2 million in Silbitz (foundaries making components for ship and train engines and wind turbines, Germany); Lyceum Capital III made two investments, £0.3 million in Style Research (investment portfolio analysis and global research, UK) and £0.4 million in Briefing Media (agricultural publications and events, UK), the latter acquired from GCP Capital Partners Europe II, another of our holdings; Inflexion Partnership Capital I invested £0.3 million in CloserStill (international media and exhibitions business, UK); Procuritas V invested £0.2 million in Daldata AS (SME accounting software and cloud service provider, Norway and Sweden); lastly in North America, Blue Point Capital III invested a total of £0.4 million in Russell Food Equipment (foodservice equipment and supplies, Canada) and in Breitfeld & Schliekert (acquired by Hilsinger, optical solutions and accessories, USA).
Realisations
The Company has experienced a strong flow of realisations in the year to date. The total for the quarter of £20.8 million brings the total for the first nine months to £57 million, which is ahead of the whole of 2014 and some 60 per cent above the total at the same stage last year. The realisations are broadly spread by geography and sector.
In the UK buyout funds, August Equity Partners II sold FSP (chain of funeral directors) to its own successor Fund III returning £2.3 million (2.4x, 17 per cent IRR); GCP Capital Partners Europe II sold Briefing Media (agricultural publications and events) to Lyceum returning £0.6 million (3.7x, 117 per cent IRR); Inflexion 2006 sold Reward Gateway (SaaS employee benefits specialist) to Great Hill Partners returning £0.6 million (7.7x, 59 per cent IRR); Inflexion 2012 Co-Investment Fund distributed £0.7 million as proceeds from the sale of shares in Sanne Group, which was listed earlier in the year, and Primary Capital III sold Pacific Direct (toiletries and accessories for the hospitality sector) to German-based ADA Cosmetics returning £1.1 million (3.2x, 17 per cent IRR). Mezzanine Management IV exited Vanguard (mobile surgical theatres) through a sale to Livingbridge returning £0.6 million (3.3x, 27 per cent IRR). From our holdings in venture capital funds, Pentech II sold Maxymiser (cloud based software) to Oracle returning £0.7 million, an excellent return and SEP III sold Powervation (fabless semi-conductors for digital power management chips) to Rohm Semiconductor of Japan returning £0.4 million (1.2x).
In France Ciclad 4 sold OMIA (surface treatment lines for automotive and industrial sectors) to Naxicap returning £0.6 million (3.6x, 21 per cent IRR) and Chequers Capital XV sold Cenexi (contract manufacturer of pharmaceuticals) to Cathay Capital returning £0.6 million (4.5x, 24 per cent IRR).
In Germany DBAG V refinanced Formel D (documentation and quality control services to the automotive industry) returning £0.5 million (0.8x). In Spain N+1 Private Equity II sold Teltronic (security electronics) to Sepura plc returning £1.6 million (6x, 68 per cent IRR), and Portobello Capital II realised much of its portfolio through a secondary transaction which returned £1.9 million. In the Benelux region Gilde Buyout III sold Ammeraal Beltech (lightweight process and conveyer belts) to Advent International returning £0.8 million (5.7x, 44 per cent IRR).
In the Nordics, our co-investment holding in Danish housebuilder HusCompagniet was very successfully exited by deal leader FSN Capital who sold the company to fellow Nordic private equity firm EQT Capital returning £3.9 million (3.8x, 46 per cent IRR). During the holding period of just over four years the company increased its market share in Denmark and established businesses in Sweden and Germany whilst increasing profits by 23 per cent. Having been purchased at a low point in the housing market cycle the lead managers were able to achieve a significant improvement in multiple between buying and selling. Also in the Nordic region Herkules Private Equity III sold coffee shop chain Espresso House to the Benckiser Investment Group returning £1.4 million (5.7x, 80 per cent IRR).
Our holding in the BMO-managed secondary fund, The Aurora Fund, is now well into distribution mode and during the quarter distributions, reflecting several exits, totalled £0.6 million.
Valuation Changes
There were several significant uplifts during the quarter which reflected a combination of the exits noted above, improved trading and in certain cases refinancings at higher values. The largest individual uplift was for our holding in venture capital fund SEP III, which holds a significant position in flight search engine, Skyscanner, which has been uplifted by £2.3 million. Inflexion 2010 is up by £1.4 million, mainly due to the IPO of On the Beach Group plc (the market leader in short haul dynamically packaged beach holidays). The package of Italian buyout funds described above has been uplifted to NAV giving an uplift of £1.8 million in total. There were several other notable uplifts including DBAG V (£0.9 million), Chequers Capital XV (£0.9 million), Gilde Buyout III (£0.9 million), Inflexion 2012 Co-Investment Fund (£0.8 million), Ciclad 4 (£0.7 million), Park Holidays (£0.6 million), HealthpointCapital Partners III (£0.6 million), Pentech II (£0.5 million) and Herkules Private Equity III (£0.5 million).
There were some downgrades. One of these is a £0.5 million reduction in the carrying value of Fox International (angling equipment and accessories), where the exit was agreed during the quarter, but proceeds, of £4.0 million, received just after the quarter end. This has been a very successful co-investment led by Next Wave Partners. The company was sold to private equity group Mayfair Equity Partners after just 15 months of ownership achieving a net return of 2.7x cost and an IRR of 120 per cent. There are additional earn-out provisions which could increase the overall return to 4.2x but none of this has been included in the valuation and we have fully provided for carried interest. The slight reduction in valuation reflects this provision and as well as a different split between upfront and deferred consideration from the original indication upon which the previous valuation was based. SEP II, an earlier venture fund, is down by £0.4 million, Stirling Square Capital Partners II by £0.4 million and Candover 2008 by £0.4 million, each reflecting portfolio company performance issues of varying seriousness.
Financing
The Company is well placed financially with current gearing at below 5 per cent. The intention is to rebuild gearing utilising the Company's revolving credit facility and current cash resources to enlarge the portfolio and efficiently use the Company's balance sheet. The dealflow of primaries, secondaries and co-investments is encouraging across Europe and further afield. Although the Company's exposure to co-investments has dipped marginally over the quarter from 22.5 per cent to 21.9 per cent, this should prove temporary with the intention to move this component up to over 30 per cent in the coming months, subject, as always, to finding and executing deals of suitable quality and provenance.
Outlook
As was anticipated, the returns from our portfolio have strengthened noticeably during the year and the last twelve months is recording an overall return in the mid-teens. This is attributable to a combination of good profits progression and a remarkable increase in exits, which continues. Our investment partners in the mid-market of Europe continue to demonstrate the benefits of the private equity model and the rewards for having maintained steady investment activity in the post-recessionary environment. There has been considerable fund raising in the private equity sector globally and much of this has gone to larger funds to whom our investee funds are typically sellers. In addition the much improved provision of bank and non-bank debt is facilitating a very active buyout sector. Venture capital, in which we have limited involvement and which has proved a difficult subset of private equity for many years, is showing some very welcome signs of improvement. The question which most observers pose is whether the current combination of favourable conditions is sustainable. In the mid-market, we take considerable comfort from the fact that the acquisition prices of new deals and their financial structures, whilst more extended than a few years ago, remain within historic norms and our managers continue to target very acceptable returns under realistic future conditions. Much relates to confidence within the relevant business and investment communities and whilst the possibilities of external shocks are ever present, this is currently robust. Accordingly it is reasonable to expect further healthy progress in your Company's portfolio.
Hamish Mair
Investment Manager
F&C Investment Business Limited
F&C Private Equity Trust plc
Statement of Comprehensive Income for the
nine months ended 30 September 2015
| (Unaudited)
| |||
Revenue £'000 | Capital £'000 | Total £'000 | |
| Income | |||
Gains on investments held at fair value | - | 16,782 | 16,782 |
Exchange gains | - | 2,011 | 2,011 |
Investment income | 5,100 | - | 5,100 |
Other income | 34 | - | 34 |
| Total income | 5,134 | 18,793 | 23,927 |
| Expenditure | |||
Investment management fee - basic fee | (380) | (1,139) | (1,519) |
Investment management fee - performance fee | - | (1,293) | (1,293) |
Other expenses | (507) | - | (507) |
| Total expenditure | (887) | (2,432) | (3,319) |
Profit before finance costs and taxation | 4,247 | 16,361 | 20,608 |
Finance costs | (346) | (1,039) | (1,385) |
Profit before taxation | 3,901 | 15,322 | 19,223 |
Taxation | (788) | 788 | - |
Profit for period/total comprehensive income | 3,113 | 16,110 | 19,223 |
Return per Ordinary Share - Basic | 4.32p | 22.31p | 26.63p |
Return per Ordinary Share - Fully diluted | 4.20p | 21.72p | 25.92p |
F&C Private Equity Trust plc
Statement of Comprehensive Income for the
nine months ended 30 September 2014
| (Unaudited) | |||
Revenue £'000 |
Capital £'000 |
Total £'000 | |
| Income | |||
Gains on investments held at fair value | - | 6,832 | 6,832 |
Exchange gains | - | 115 | 115 |
Investment income | 2,328 | - | 2,328 |
Other income | 18 | - | 18 |
| Total income | 2,346 | 6,947 | 9,293 |
| Expenditure | |||
Investment management fee - basic fee | (392) | (1,176) | (1,568) |
Investment management fee - performance fee | - | - | - |
Other expenses | (496) | - | (496) |
| Total expenditure | (888) | (1,176) | (2,064) |
Profit before finance costs and taxation | 1,458 | 5,771 | 7,229 |
Finance costs | (255) | (3,733) | (3,988) |
Profit before taxation | 1,203 | 2,038 | 3,241 |
Taxation | (260) | 260 | - |
Profit for period/total comprehensive income | 943 | 2,298 | 3,241 |
Return per Ordinary Share - Basic | 1.30p | 3.18p | 4.48p |
Return per Ordinary Share - Fully diluted | 1.27p | 3.09p | 4.36p |
F&C Private Equity Trust plc
Statement of Comprehensive Income for the
year ended 31 December 2014
| (Audited)
| |||
Revenue £'000 | Capital £'000 | Total £'000 | |
| Income | |||
Gains on investments held at fair value | - | 18,588 | 18,588 |
Exchange gains | - | 572 | 572 |
Investment income | 3,971 | - | 3,971 |
Other income | 27 | - | 27 |
| Total income | 3,998 | 19,160 | 23,158 |
| Expenditure | |||
Investment management fee - basic fee | (516) | (1,548) | (2,064) |
Investment management fee - performance fee | - | (1,085) | (1,085) |
Other expenses | (745) | - | (745) |
| Total expenditure | (1,261) | (2,633) | (3,894) |
Profit before finance costs and taxation | 2,737 | 16,527 | 19,264 |
Finance costs | (349) | (4,854) | (5,203) |
Profit before taxation | 2,388 | 11,673 | 14,061 |
Taxation | (441) | 441 | - |
Profit for year/total comprehensive income | 1,947 | 12,114 | 14,061 |
Return per Ordinary Share - Basic | 2.69p | 16.76p | 19.45p |
Return per Ordinary Share - Fully diluted | 2.62p | 16.32p | 18.94p |
F&C Private Equity Trust plc
Amounts Recognised as Dividends
Nine months ended 30 September 2015 (unaudited) £'000 | Nine months ended 30 September 2014 (unaudited) £'000 | Year ended 31 December 2014 (audited) £'000 | |
Final Ordinary Share dividend of 5.36p per share for the year ended 31 December 2013 |
- |
3,874 |
3,874 |
Interim Ordinary Share dividend of 5.39p per share for the year ended 31 December 2014 |
- |
- |
3,896 |
Final Ordinary Share dividend of 5.45p per share for the year ended 31 December 2014 |
3,939 |
- |
- |
3,939 | 3,874 | 7,770 |
F&C Private Equity Trust plc
Balance Sheet
| As at 30 September 2015 (unaudited) | As at 30 September 2014(unaudited) | As at 31 December 2014 (audited) | |
£'000 | £'000 | £'000 | |
Non-current assets | |||
Investments at fair value through profit or loss | 231,243 | 229,735 | 234,414 |
Current assets | |||
Other receivables | 26 | 1,048 | 2,577 |
Cash and short-term deposits | 10,890 | 12,020 | 6,946 |
10,916 | 13,068 | 9,523 | |
Current liabilities | |||
Other payables | (2,715) | (1,417) | (18,117) |
Amounts due to subsidiary | - | (44,802) | - |
Net current assets/(liabilities) | 8,201 | (33,151) | (8,594) |
Total assets less current liabilities | 239,444 | 196,584 | 225,820 |
| Non-current liabilities | |||
Interest-bearing bank loan | (21,299) | - | (22,312) |
Net assets | 218,145 | 196,584 | 203,508 |
Equity | |||
Called-up ordinary share capital | 720 | 723 | 723 |
Special distributable capital reserve | 15,035 | 15,679 | 15,679 |
Special distributable revenue reserve | 31,403 | 31,403 | 31,403 |
Capital redemption reserve | 1,335 | 1,335 | 1,335 |
Capital reserve | 161,940 | 143,849 | 149,769 |
Revenue reserve | 7,712 | 3,595 | 4,599 |
Shareholders' funds | 218,145 | 196,584 | 203,508 |
Net asset value per Ordinary Share - Basic | 303.05p | 271.97p | 281.55p |
Net asset value per Ordinary Share - Fully diluted |
298.47p |
268.22p |
277.55p |
F&C Private Equity Trust plc
Reconciliation of Movements in Shareholders' Funds
Nine months ended 30 September 2015 | Nine months ended 30 September 2014 | Yearended 31 December 2014 | |
(unaudited) | (unaudited) | (audited) | |
£'000 | £'000 | £'000 | |
Opening shareholders' funds | 203,508 | 197,217 | 197,217 |
Profit for the period/total comprehensive income | 19,223 | 3,241 | 14,061 |
Dividends paid | (3,939) | (3,874) | (7,770) |
Buyback of ordinary shares | (647) | - | - |
Closing shareholders' funds | 218,145 | 196,584 | 203,508 |
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 2014.
2. Earnings for the nine months to 30 September 2015 should not be taken as a guide to the results for the year to 31 December 2015.
3. Investment management fee:
Nine months ended30 September 2015 | Nine months ended30 September 2014 | Year ended31 December 2014 | |||||||
Revenue£'000 | Capital£'000 | Total£'000 | Revenue£'000 | Capital£'000 | Total£'000 | Revenue£'000 | Capital£'000 | Total£'000 | |
Investment management fee - basic fee | 380 | 1,139 | 1,519 | 392 | 1,176 | 1,568 | 516 | 1,548 | 2,064 |
Investment management fee - performance fee | - | 1,293 | 1,293 | - | - | - | - | 1,085 | 1,085 |
380 | 2,432 | 2,812 | 392 | 1,176 | 1,568 | 516 | 2,633 | 3,149 | |
4. Finance costs:
Nine months ended30 September 2015 | Nine months ended30 September 2014 | Year ended31 December 2014 | |||||||
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 |
346 |
1,039 |
1,385 |
255 |
766 |
1,021 |
349 |
1,047 |
1,396 |
Finance costs attributable to subsidiary loan |
- |
- |
- |
- |
2,967 |
2,967 |
- |
3,807 |
3,807 |
346 | 1,039 | 1,385 | 255 | 3,733 | 3,988 | 349 | 4,854 | 5,203 | |
5. The basic return per Ordinary Share is based on a net return on ordinary activities after taxation of £19,223,000 (30 September 2014 - £3,241,000; 31 December 2014 - £14,061,000) and on 72,197,658 (30 September 2014 - 72,282,273; 31 December 2014 - 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 £19,223,000 (30 September 2014 - £3,241,000; 31 December 2014 - £14,061,000) and on 74,156,814 (30 September 2014 - 74,241,429; 31 December 2014 - 74,241,429) shares, being the weighted average number of Ordinary Shares in issue during the period after conversion of the Ordinary Share warrants.
6. The basic net asset value per Ordinary Share is based on net assets at the period end of £218,145,000 (30 September 2014 - £196,584,000; 31 December 2014 - £203,508,000) and on 71,982,273 (30 September 2014 - 72,282,273; 31 December 2014 - 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 £220,691,000 (30 September 2014 - £199,130,000; 31 December 2014 - £206,054,000) and on 73,941,429 (30 September 2014 - 74,241,429; 31 December 2014 - 74,241,429) shares, being the number of Ordinary Shares in issue at the period end after conversion of the Ordinary Share warrants.
7. The financial information for the nine months ended 30 September 2015, which has not been audited or reviewed by the Company's auditor, comprises non-statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2014, on which the auditor 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:
F&C Investment Business Limited 0131 718 1000 |