20 Nov 2009 07:00
| To: Stock Exchange | Embargoed until 7.00am |
| 20 November 2009 |
F&C Private Equity Trust plc
Results for the third quarter and for the nine months to 30 September 2009
NAV total return for the three months of +2.4 per cent for the Ordinary shares;
NAV total return for the three months of +7.0 per cent for the Restricted Voting shares;
Share price total return for the three months of +27.1 per cent for the Ordinary shares;
Share price total return for the three months of -13.8 per cent for the Restricted Voting shares;
Announcement of intention to issue up to £30 million of Zero Dividend Preference shares.
Manager's Review
Introduction
The valuation of the ordinary share pool of the Company at 30 September 2009 was £145.8 million, giving a fully diluted NAV per share of 199.86p, an increase over the quarter of 2.4%. The restricted voting share pool was valued at £5.1 million, giving a NAV per share of 7.56p, an increase of 7.0%. £3.9 million of the £4.5 million uplift in net assets was attributable to foreign exchange movements following appreciation of the Euro relative to Sterling over the period.
There were no cashflows for the restricted voting pool for the period with all cashflows relating to the ordinary share pool. There were net inflows of £10.9 million from the portfolio with a strong contribution from the realisation of our largest holding, Viking Moorings, in an otherwise quiet market. The bank borrowings remained at €37 million (£33.8 million at 30 September) throughout the quarter and by the end of the period the ordinary share pool had a cash balance of £11.5 million. With borrowing in Euros the Company partially hedges its significant Euro denominated portfolio. At 30 September the ordinary share pool had net debt of £22.3 million and gearing of 12.3% of total assets. Taking into account agreed sales and distributions from the portfolio since the quarter end the ordinary share pool's net debt is expected to reduce to £16 million shortly. During a period of very limited activity in the private equity market internationally the Company's portfolio has nevertheless generated a significant amount of cash from which to meet commitments as they are drawn down.
New Investments
No new fund or direct investments were made during the quarter. Our investment partners called £5.9 million for new investment in a fairly wide range of companies for several different funds. The largest of these was a drawdown of £1.1 million by August Equity II for an investment in the Funeral Services Partnership, a platform investment which will be used to execute a buy and build strategy in the fragmented funeral services market. August Equity I drew down £0.7 million to acquire Showboats International as a synergistic acquisition for specialist publisher Boat International making it the global market leader in its sector. Hutton Collins mezzanine funds drew down £0.7 million (£0.6 million into Hutton Collins III and £0.1 million into Hutton Collins II) for the acquisition of Aquafil, an Italian producer of synthetic fibres used in textile flooring. SEP III drew down £0.5 million primarily for follow-on tranches in six existing portfolio companies. TDR Capital drew down £0.4 million as part of the reorganisation of its last remaining investment, Pearl Group, a necessary step forward in its exit planning. Ciclad 4 drew down £0.3 million for the acquisitions of IT services company Netlevel and Woodbrass, an online retailer of musical instruments. Warburg Pincus X drew down £0.2 million for an investment in waste management and recycling company Transpacific Industries.
Realisations
Realisations over the quarter totalled £16.3 million. The majority of this was from Inflexion managed investments with the sale of Viking Moorings in July yielding £11.8 million on its own. This co-investment achieved an exceptional investment multiple of 11X and an IRR of 106% proving that even in difficult conditions it is possible for strongly led deals to make excellent returns. Another Inflexion led holding nursing agency ICS has been trading strongly with healthy cashflows. This has allowed repayment of loan stock resulting in an inflow of £0.9 million from our co-investment and £0.1 million from our holding through the Inflexion 2006 Fund. F&C Private Equity Trust also received £0.5 million from Hickory Fund Partnership from the sale of Dmatek and £0.2 million from the sale of the remainder of HKI from the Hickory Fund Partnership and Inflexion 2003 funds.
Our longstanding investment partner Candover achieved a strong exit from Wood Mackenzie resulting in an inflow of £0.4 million from the Candover 2001 fund. French mid market fund Ciclad 4 achieved a number of partial exits yielding proceeds of £0.6 million and German fund DBAG IV sold Lewa yielding proceeds of £0.2 million. In October we were informed that DBAG V has sold its holding in industrial services company MCE which we anticipate will result in proceeds of €3.3 million in the fourth quarter with a further potential €0.7 million to come from escrow in due course. Following discussions with another private equity investor we were able to achieve a quick sale of our holding in Geronimo Inns at cost which resulted in a useful inflow of £0.7 million from the Penta F&C Co-Investment Fund.
Valuation Changes
The largest individual change in valuation during the quarter was a £1.1 million uplift in the value of our ICS co-investment which reflects strong trading performance since acquisition. DBAG V increased by £0.7 million reflecting the expected sales proceeds of MCE. We have agreed to sell our non core holdings in Warburg Pincus X and Montagu III and have reduced these holdings by £0.9 million and £0.5 million respectively to reflect agreed sales proceeds. We have also written down 3si by £0.7 million reflecting lower margins, as the company invests for growth, and lower comparable company multiples.
Financing
The strong cash inflows in the third quarter have helped reduce the level of net borrowings to £22.3 million as at 30 September 2009.
The outstanding commitments of the Company were £142 million at 30 September 2009, slightly higher than at 30 June 2009 as the strength of the Euro increased the Company's reported value of Euro denominated commitments more than offsetting the reduction in undrawn commitments though drawdowns. The sales of Warburg Pincus X and Montagu III referred to above will reduce our outstanding commitments by over £7 million. We also expect that current fund reorganisations and expiry of commitments will shortly reduce our undrawn commitments to £125 million. Taking into account the unexpired life of the funds, and the timing of any upswing in investment activity it is reasonable to expect that a significant proportion of these commitments will not be drawn down over the next five years. We continue to expect that these commitments can be met by a combination of realisations from the portfolio and use of our borrowing facilities. In the year to date, which has been characterised by highly uncertain conditions, a constrained banking sector and a deep recession, our portfolio has generated a net inflow, before secondary sales, of £5.8 million. This reflects the much reduced but still measurable activity in the mid market where most of our portfolio is focused.
For some time the Company has been considering different means of raising finance to strengthen its position in the face of recession whilst maintaining and enhancing shareholders' returns. On 19 October the Company announced its intention to do this through the issue of up to £30 million of zero dividend preference shares. This is aimed at reinforcing the Company's ability to meet its undrawn commitments and, in due course, providing scope for making new investments.
Outlook
The valuations of private companies have generally fallen over the last 12 months. This reflects pressure on profits brought about by the recession and a reduction in earnings multiples used for valuation purposes precipitated by extreme stockmarket volatility. The reduction in private company valuations has led to a decline in asset values and, in the listed private equity company sector, share prices. There has been some recovery in listed private equity company share prices from their low point in March 2009; however, significant recovery in asset values has yet to be seen.
Against this challenging background private equity investment managers have been working closely with investee companies to steer their way through the recession. This involves working with management teams of the investee companies on such issues as company strategy, cost cutting measures and other efficiency initiatives. This can also involve change of management and, importantly, ensuring compliance with banking covenants. These activities require considerable expertise in managing, leading and advising companies during periods of economic recession.
The diversified nature of the Company's portfolio means that the companies within the underlying portfolio are involved in many sectors and depend on various and disparate economic and business trends. We believe that these companies are owned by highly motivated investors who have engaged well-incentivised managers with the skills and experience to create equity value over the medium term. Collectively, the business skills deployed in the Company's portfolio are extensive. We believe that these factors, coupled with its mid-market positioning, almost no exposure to very large over-leveraged private equity-backed companies and conservative valuations, leave the Company well placed to benefit from economic recovery.
Hamish Mair
For more information, please contact:
| Hamish Mair | 0207 628 8000 |
| Martin Cassels | 0207 628 8000 |
| hamish.mair@fandc.com / martin.cassels@fandc.com | |
F&C PRIVATE EQUITY TRUST plc
Income Statement for the
nine months ended 30 September 2009
| Unaudited | |||||
| Revenue £'000 | Capital £'000 | Total £'000 | |||
| Losses on investments | - | (15,511) | (15,511) | ||
| Currency gains | - | 2,336 | 2,336 | ||
| Income | 1,432 | - | 1,432 | ||
| Investment management fee | (253) | (758) | (1,011) | ||
| Other expenses | (564) | - | (564) | ||
| _______ | _______ | _______ | |||
| Net return before finance costs and taxation | 615 | (13,933) | (13,318) | ||
| Interest payable and similar charges | (170) | (509) | (679) | ||
| _______ | _______ | _______ | |||
| Return on ordinary activities before taxation | 445 | (14,442) | (13,997) | ||
| Taxation on ordinary activities | (131) | 131 | - | ||
| _______ | _______ | _______ | |||
| Return on ordinary activities after taxation | 314 | (14,311) | (13,997) | ||
| _______ | _______ | _______ | |||
| Returns per Ordinary share - Basic | 0.44p | (19.84)p | (19.40)p | ||
| _______ | _______ | _______ | |||
| Returns per Ordinary share - Fully diluted | 0.43p | (19.31)p | (18.88)p | ||
| _______ | _______ | _______ | |||
| Returns per Restricted Voting share - Basic | (0.01)p | 0.04p | 0.03p | ||
| _______ | _______ | _______ | |||
F&C PRIVATE EQUITY TRUST plc
Income Statement for
nine months ended 30 September 2008
| Unaudited | |||||
| Revenue £'000 | Capital £'000 | Total £'000 | |||
| Gains on investments | - | 11,136 | 11,136 | ||
| Currency gains | - | 647 | 647 | ||
| Income | 1,384 | - | 1,384 | ||
| Investment management fee | (304) | (1,986) | (2,290) | ||
| Other expenses | (504) | - | (504) | ||
| _______ | _______ | _______ | |||
| Net return before finance costs and taxation | 576 | 9,797 | 10,373 | ||
| Interest payable and similar charges | (57) | (172) | (229) | ||
| _______ | _______ | _______ | |||
| Return on ordinary activities before taxation | 519 | 9,625 | 10,144 | ||
| Taxation on ordinary activities | (140) | 140 | - | ||
| _______ | _______ | _______ | |||
| Return on ordinary activities after taxation | 379 | 9,765 | 10,144 | ||
| _______ | _______ | _______ | |||
| Returns per Ordinary share - Basic | 0.43p | 12.82p | 13.25p | ||
| _______ | _______ | _______ | |||
| Returns per Ordinary share - Fully diluted | 0.42p | 12.48p | 12.90p | ||
| _______ | _______ | _______ | |||
| Returns per Restricted Voting share - Basic | 0.10p | 0.74p | 0.84p | ||
| _______ | _______ | _______ | |||
F&C PRIVATE EQUITY TRUST plc
Income Statement for
year ended 31 December 2008
| Audited | |||||
| Revenue £'000 | Capital £'000 | Total £'000 | |||
| Losses on investments | - | (2,825) | (2,825) | ||
| Currency losses | - | (4,903) | (4,903) | ||
| Income | 2,043 | - | 2,043 | ||
| Investment management fee | (202) | 216 | 14 | ||
| Other expenses | (669) | - | (669) | ||
| _______ | _______ | _______ | |||
| Net return before finance costs and taxation | 1,172 | (7,512) | (6,340) | ||
| Interest payable and similar charges | (159) | (477) | (636) | ||
| _______ | _______ | _______ | |||
| Return on ordinary activities before taxation | 1,013 | (7,989) | (6,976) | ||
| Taxation on ordinary activities | (265) | 74 | (191) | ||
| _______ | _______ | _______ | |||
| Return on ordinary activities after taxation | 748 | (7,915) | (7,167) | ||
| _______ | _______ | _______ | |||
| Returns per Ordinary share - Basic | 0.66p | (11.98)p | (11.32)p | ||
| _______ | _______ | _______ | |||
| Returns per Ordinary share - Fully diluted | 0.64p | (11.66)p | (11.02)p | ||
| _______ | _______ | _______ | |||
| Returns per Restricted Voting share - Basic | 0.41p | 1.11p | 1.52p | ||
| _______ | _______ | _______ | |||
F&C PRIVATE EQUITY TRUST plc
BALANCE SHEET
| As at 30 September 2009 (unaudited) | As at 30 September 2008 (unaudited) | As at 31 December 2008 (audited) | |||||
| £000 | £000 | £000 | £000 | £000 | £000 | ||
| Investments at market value | |||||||
| Listed on recognised exchanges | 982 | 2,880 | 1,329 | ||||
| Unlisted at directors' valuation | 172,041 | 203,691 | 194,009 | ||||
| _______ | _______ | _______ | |||||
| 173,023 | 206,571 | 195,338 | |||||
| Current assets | |||||||
| Debtors | 784 | 474 | 740 | ||||
| Cash at bank | 11,931 | 2,895 | 4,436 | ||||
| _______ | _______ | _______ | |||||
| 12,715 | 3,369 | 5,176 | |||||
| Creditors | |||||||
| Amounts falling due within one year | (34,835) | (24,799) | (34,943) | ||||
| _______ | _______ | _______ | |||||
| Net current (liabilities)/assets | (22,120) | (21,430) | (29,767) | ||||
| _______ | _______ | _______ | |||||
| Total assets less current liabilities | 150,903 | 185,141 | 165,571 | ||||
| _______ | _______ | _______ | |||||
| Creditors | |||||||
| Amounts falling due after more than one year | - | (1,898) | - | ||||
| _______ | _______ | _______ | |||||
| Net assets | 150,903 | 183,243 | 165,571 | ||||
| _______ | _______ | _______ | |||||
F&C PRIVATE EQUITY TRUST plc
BALANCE SHEET (CTD)
| As at 30 September 2009 (unaudited) | As at 30 September 2008 (unaudited) | As at 31 December 2008 (audited) | ||||
| £000 | £000 | £000 | ||||
| Capital and reserves | ||||||
| Called up ordinary 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 | 37,692 | |||
| Capital redemption reserve | 664 | 664 | 664 | |||
| Capital reserve | 95,244 | 127,235 | 109,555 | |||
| Revenue reserve | 565 | 579 | 587 | |||
| _______ | _______ | _______ | ||||
| Total shareholders' funds | 150,903 | 183,243 | 165,571 | |||
| _______ | _______ | _______ | ||||
| Net asset value per Ordinary share - Basic | 201.75p | 246.22p | 221.15p | |||
| Net asset value per Ordinary share - Fully diluted | 199.86p | 243.15p | 218.74p | |||
| Net asset value per Restricted Voting share - Basic | 7.56p | 7.86p | 8.53p |
F&C PRIVATE EQUITY TRUST plc
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
| Nine months ended 30 September 2009 (unaudited) | Nine months ended 30 September 2008 (unaudited) | Year ended 31 December 2008 (audited) | |
| Opening equity shareholders' funds | 165,571 | 198,908 | 198,908 |
| Return on ordinary activities after taxation | (13,997) | 10,144 | (7,167) |
| Dividends paid | (336) | (817) | (1,178) |
| Special dividends paid | (335) | (671) | (671) |
| Return of capital paid | - | (24,321) | (24,321) |
| _______ | _______ | _______ | |
| Closing equity shareholders' funds | 150,903 | 183,243 | 165,571 |
| _______ | _______ | _______ | |
Notes
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.
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.