25 Nov 2011 07:00
To: Stock Exchange | For immediate release: |
25 November 2011 |
F&C Private Equity Trust plc
Quarterly results for the three months to 30 September 2011
·; NAV total return for the three months of -0.9 per cent for the Ordinary Shares.
·; NAV total return for the three months of 1.6 per cent for the Restricted Voting Shares.
·; Sale of Senturion since the end of the quarter, returning £2.8 million, representing 2.7x cost and an IRR of 28 per cent.
·; Realisations for 2011 likely to exceed £30 million.
Manager's Review
Introduction
The economic and market background over the third quarter has been tumultuous. The future of the Euro currency zone continues to be debated and this has been a destabilising influence on business confidence which had been on a steadily improving trend for more than two years. As we have previously noted, the Company's largely European mid-market portfolio of private companies, with highly motivated management and fully engaged shareholders, is not an accurate proxy for the European economies or stockmarkets at large. The underlying portfolio has made strong fundamental progress through the recessionary years and this momentum appears to have been maintained in recent months. The portfolio is not immune to the travails of the Eurozone, but although the Company's net asset value ('NAV') has not increased this quarter it has not gone backwards significantly, ending the period at £181.1 million. The net assets of the Ordinary Share Pool at 30 September 2011 were £176.4 million, giving a fully diluted NAV per share of 241.08p, a decrease over the quarter of 0.9 per cent. Adverse movements in currency, principally Euros, reduced the portfolio by approximately 2.4 per cent, so in underlying terms the portfolio valuation was ahead by approximately 1.5 per cent. 70 per cent by value of this valuation is based upon 30 September valuations with the remainder being 30 June valuations. The net assets of the Restricted Voting Pool at 30 September 2011 were £4.7 million giving a NAV per share of 7.01p, an increase over the quarter of 1.6 per cent. There were no realisations in this portfolio during the period and no further returns of capital are proposed at the current time.
New Investments
The only new investment completed during the quarter was a commitment of £2 million to Glasgow-based venture capital fund, SEP IV. We have backed the SEP (Scottish Equity Partners) team since 1996 and in the difficult venture capital sector they have done well. This fund is expected to exceed £200 million when it reaches final close. There is some evidence that valuations for venture stage companies have become more realistic thus providing a better chance of making returns commensurate with the risks taken.
We are seeing a reasonable flow of good quality co-investment opportunities and would expect to complete a small number of these over the next few months. As we go into 2012 there are a number of our longstanding and successful investment partners who will be raising new funds and we will choose whom to back selectively and sparingly.
Drawdowns
Drawdowns from funds in the portfolio amounted to £9.0 million over the quarter, representing approximately 10 per cent of outstanding commitments.
Once again, a very broad range of investments have been completed by our investment partners. The largest individual new investment was made by TDR Capital II investing £1.5 million into debt collection company Lowell Group. Lowell is the UK market leader in the purchase of 'bought debt' and has one of the most effective trace capabilities.
Other UK investments were made by August Equity Partners II which called £2.1 million for two new investments: Advanced Vet Care, a consolidator in the veterinary services sector with 15 clinics in the Bath area, and Aspirations, a healthcare company which looks after people with complex care and specialist needs. RJD Private Equity II invested £0.9 million in Intrinsic Technology Limited, a B2B communications and IT services provider. Also in the UK, Dunedin Buyout Fund II called £0.5 million for Red Commerce, a high growth staffing business operating in the SAP market, which they have acquired from another of our investment partners, Inflexion.
In the Nordic region, Procuritas Capital IV invested £1.1 million in Gunnebo Perimeter Protection, an outdoor perimeter protection products and systems company, and Farma Holdings, a supplier of pharmaceutical products, ingredients and services to hospital pharmacies, pharmacy chains and pharmaceutical manufacturers across Norway, Sweden and Denmark. In Southern Europe, Spanish Fund N+1 Capital Privado II called £0.9 million for investment in two complementary companies, Rymsa and Teltronic, involved in the manufacture of antennas and components for telecoms equipment. In France, Chequers Capital Funds XV and XVI invested £0.5 million in Financiere ECT, a company focused on the management and recycling of inert waste.
Since the quarter end, approximately £4.5 million of additional drawdowns have been made. This is a deceleration of the investment rate seen in the third quarter.
Realisations
Over the quarter, realisations were £4.0 million. In addition, another £0.7 million of investment income has been received.
There have been a few notable realisations. Growth Capital Partners II sold confectionary business Tangerine, to Blackstone, returning £1.1 million, representing an investment multiple of 3.8x and an IRR of 31 per cent. Inflexion sold Red Commerce for 4.4x cost and achieved an IRR of 34 per cent. The Company held this though two Inflexion funds and the combined proceeds were £1.4 million. As noted above, £0.5 million of the proceeds was effectively reinvested back into the company by Dunedin. In the venture capital portfolio, SEP II sold software company Zeus to US listed group Riverbed Technology for $140 million. This represented 7.8x cost and an initial IRR of 41 per cent. The Company's share was £0.8 million. Further payments are possible and the ultimate multiple could reach 12x. From the mezzanine funds, Mezzanine Management IV made two exits during the quarter, both in France. Firstly the Company received £160,000 from the sale of Vulcanic, a manufacturer of heating and cooling equipment, representing a 1.9x multiple and 17 per cent IRR. Secondly, £318,000 was distributed from the sale of Coventya, a speciality chemicals company, making 1.5x cost.
Since the quarter end there have been a further £6.3 million of realisations. Significant amongst these has been vehicle leasing company Senturion (Translinc), an RJD led co-investment. Senturion has been sold to listed company May Gurney Integrated Services PLC for £65.6 million. The Company's proceeds were £2.8 million. This represents 2.7x cost and an IRR of 28 per cent. August Equity Partners I has sold software company, Planit Holdings, yielding £1.6 million, a 2.3x multiple and an IRR of 34 per cent. In the Blue Point Capital II portfolio, Legend Brands, a drying and restoration equipment company, has been sold, returning £0.5 million, a 2.5x multiple and 22 per cent IRR. This brings total realisations in 2011 to date to £29.5 million with five weeks to go until the year end. We expect a few more realisations before the year end and the annual total of realisations should comfortably exceed £30 million, compared with £22.6 million in 2010.
Valuation Changes
Although the overall change in the valuation of the portfolio has been minimal there have been a large number of changes to individual valuations in the quarter.
There have been several uplifts in the co-investment portfolio. 3Si, the security products company, is trading well and has been uplifted by £1.6 million. Senturion, which was sold after the quarter end, is included at its sale proceeds, an uplift over the previous carrying value of £1.1 million, or 65 per cent. HusCompagniet, the Danish housebuilder, has been uplifted by £0.7 million in line with lead manager FSN, to reflect its strong trading ahead of budget. Axitea (formerly known as Sicurglobal), the Italian security services company, has been uplifted by £0.7 million as a result of improved profits. Whittan (metal lockers and pallet-racking systems) has been increased by £0.5 million, in line with its recovering earnings. Many of the other uplifts reflect value crystallizing exits in the quarter or shortly thereafter. Blue Point Capital II (+ £0.6 million), August Equity Partners I (+ £0.5 million), and Mezzanine Management IV (+ £0.5 million) all fall into this category.
There have been several downgrades, which is unsurprising given the weak market background. Most of the larger downgrades are found outside the core European mid market portfolio. Some of the funds have a significant quoted component and in others there have been downgrades associated with significant decreases in the valuation of comparable quoted companies. AIF Capital Asia III (- £0.6 million), Pinebridge Global Emerging Markets Fund II (- £0.4 million) and Camden Partners III (- £0.5 million) have all been influenced by marking to market in this way. Other downgrades reflect pressure on company earnings. For example, Hutton Collins Capital Partners II (- £0.4 million) has been reduced mainly because of a full provision against windows company Everest where trading has been weak. The Warburg Pincus Funds VIII and IX, which are highly diversified, have both been reduced by £0.4 million. Alchemy Special Opportunities Fund, which has a concentrated portfolio of fairly economically sensitive companies, has been reduced by £0.4 million.
Financing
The Company's balance sheet remains in good shape. Including the ZDP creditor of £34.0 million, gearing at the end of the period for the Ordinary Share Pool was 20.1 per cent of total assets. The level of net debt at the current time is £8.8 million, slightly lower than at the beginning of the year. The total of outstanding commitments has reduced to £79.0 million. Of this, £14 million is to funds where the investment period has ended and we would expect very little of this to be drawn. Of the £65 million of commitments remaining within their investment periods, a significant amount will not be drawn before these periods expire. The Company at present has £27 million of undrawn borrowing facilities and approximately £4 million of cash. This gives immediate capacity to meet drawdowns and make co-investments of £31 million. If the portfolio continues to generate realisations at the current rate there should be ample cashflow to meet outstanding commitments as they are drawn down, and in due course to redeem the Zero Dividend Preference Shares. Discussions with lenders concerning the renewal of the £40 million revolving credit facility are proceeding well.
Outlook
The performance of the portfolio over the quarter and in the year to date gives cause for encouragement. Realisations have continued broadly as expected and there are a number which we expect to come through before the year end. Distributions have exceeded drawdowns and co-investments in the year to date thus validating our position that the portfolio is self financing. Our investment partners continue to find companies with growing profits at reasonable prices. Many of these are exposed to secular growth trends which provide a degree of resilience to some of the adverse economic currents. The evidence from the portfolio is that the subset of European mid-market businesses that has been able to attract private equity finance is naturally better positioned to ride out the recession. Accordingly, we believe it is reasonable to continue to expect good growth in asset value in the medium term. In the shorter term, developments in the Eurozone could present further challenges.
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 2011
| (Unaudited)
| |||
Revenue £'000 | Capital £'000 | Total £'000 | |
| Capital gains on investments | |||
Gains on investments held at fair value | - | 15,354 | 15,354 |
Currency gains | - | 387 | 387 |
- | 15,741 | 15,741 | |
| Revenue | |||
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
nine months ended 30 September 2010
| (Unaudited)
| |||
Revenue £'000 | Capital £'000 | Total £'000
| |
| Capital gains on investments | |||
Gains on investments held at fair value | - | 5,435 | 5,435 |
Currency gains | - | 597 | 597 |
- | 6,032 | 6,032 | |
| Revenue | |||
Investment income | 2,066 | - | 2,066 |
Other income | 36 | - | 36 |
| Total income | 2,102 | 6,032 | 8,134 |
| Expenditure | |||
Investment management fee | (312) | (935) | (1,247) |
Other expenses | (546) | - | (546) |
| Total expenditure | (858) | (935) | (1,793) |
Profit before finance costs and taxation | 1,244 | 5,097 | 6,341 |
Finance costs | (115) | (2,400) | (2,515) |
Profit before taxation | 1,129 | 2,697 | 3,826 |
Taxation | (292) | 321 | 29 |
Profit for period/total comprehensive income | 837 | 3,018 | 3,855 |
Return per Ordinary Share - Basic and fully diluted | 1.14p | 3.54p | 4.68p |
Return per Restricted Voting Share - Basic | 0.01p | 0.69p | 0.70p |
F&C Private Equity Trust plc
Consolidated Statement of Comprehensive Income for the
year ended 31 December 2010
| (Audited)
| |||
Revenue £'000 | Capital £'000 | Total £'000 | |
| Capital gains on investments | |||
Gains on investments held at fair value | - | 18,938 | 18,938 |
Currency gains | - | 1,000 | 1,000 |
- | 19,938 | 19,938 | |
| Revenue | |||
Investment income | 2,170 | - | 2,170 |
Other income | 41 | - | 41 |
| Total income | 2,211 | 19,938 | 22,149 |
| Expenditure | |||
Investment management fee | (420) | (1,262) | (1,682) |
Other expenses | (693) | - | (693) |
| Total expenditure | (1,113) | (1,262) | (2,375) |
Profit before finance costs and taxation | 1,098 | 18,676 | 19,774 |
Finance costs | (160) | (3,263) | (3,423) |
Profit before taxation | 938 | 15,413 | 16,351 |
Taxation | (239) | 268 | 29 |
Profit for year/total comprehensive income | 699 | 15,681 | 16,380 |
Return per Ordinary Share - Basic and fully diluted | 0.96p | 21.02p | 21.98p |
Return per Restricted Voting Share - Basic | 0.00p | 0.73p | 0.73p |
F&C Private Equity Trust plc
Amounts Recognised as Dividends
Nine months to 30 September 2011 (unaudited) £'000 | Nine months to 30 September 2010 (unaudited) £'000 |
Year to 31 December 2010 (audited) £'000 | |
Interim Ordinary Share dividend of 0.80p per share for the year ended 31 December 2009 |
- |
578 |
578 |
Final Ordinary Share dividend of 0.95p per share for the year ended 31 December 2010 |
687 |
- |
- |
687 | 578 | 578 |
On 7 May 2010 a special dividend of 1.00p per Restricted Voting Share was paid. The total amount paid was £671,000.
On 7 January 2011 a special dividend of 1.30p per Restricted Voting Share was paid. The total amount paid was £872,000.
F&C Private Equity Trust plc
Consolidated Balance Sheet
| As at 30 September 2011 (unaudited) | As at 30 September 2010(unaudited) | As at 31 December 2010 (audited) | |
£'000 | £'000 | £'000 | |
Non-current assets | |||
Investments at fair value through profit or loss | 226,419 | 196,367 | 210,914 |
Current assets | |||
Other receivables | 19 | 9 | 19 |
Cash and short-term deposits | 1,277 | 430 | 2,681 |
1,296 | 439 | 2,700 | |
Current liabilities | |||
Other payables | (12,475) | (8,572) | (12,130) |
Net current liabilities | (11,179) | (8,133) | (9,430) |
Total assets less current liabilities | 215,240 | 188,234 | 201,484 |
| Non-current liabilities | |||
Investment management fee | (75) | - | - |
Zero dividend preference shares | (34,027) | (31,049) | (31,774) |
(34,102) | (31,049) | (31,774) | |
Net assets | 181,138 | 157,185 | 169,710 |
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 | 35,814 | 36,686 | 36,686 |
Capital redemption reserve | 664 | 664 | 664 |
Capital reserve | 126,723 | 101,832 | 114,495 |
Revenue reserve | 864 | 930 | 792 |
Shareholders' funds | 181,138 | 157,185 | 169,710 |
Net asset value per Ordinary Share - Basic | 244.10p | 210.73p | 228.02p |
Net asset value per Ordinary Share - Fully diluted |
241.08p |
210.73p |
228.02p |
Net asset value per Restricted Voting Share - Basic |
7.01p |
7.26p |
7.29p |
F&C Private Equity Trust plc
Reconciliation of Movement in Shareholders' Funds
Nine months to 30 September 2011 | Nine months to 30 September 2010 | Year to 31 December 2010 | |
(unaudited) | (unaudited) | (audited) | |
£'000 | £'000 | £'000 | |
Opening shareholders' funds | 169,710 | 154,579 | 154,579 |
Profit for the period/total comprehensive income | 12,987 | 3,855 | 16,380 |
Dividends paid | (687) | (578) | (578) |
Special dividends paid | (872) | (671) | (671) |
Closing shareholders' funds | 181,138 | 157,185 | 169,710 |
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 2010.
2. Investment management fee:
Nine months to30 September 2011 | Nine months to30 September 2010 | Year ended31 December 2010 | |||||||
Revenue£'000 | Capital£'000 | Total£'000 | Revenue£'000 | Capital£'000 | Total£'000 | Revenue£'000 | Capital£'000 | Total£'000 | |
Investment management fee | 348 | 1,047 | 1,395 | 312 | 935 | 1,247 | 420 | 1,262 | 1,682 |
Incentive fee | - | 75 | 75 | - | - | - | - | - | - |
348 | 1,122 | 1,470 | 312 | 935 | 1,247 | 420 | 1,262 | 1,682 | |
3. Finance costs:
Nine months to30 September 2011 | Nine months to30 September 2010 | Year ended31 December 2010 | |||||||
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 | 151 | 455 | 606 | 115 | 344 | 459 | 160 | 481 | 641 |
Finance costs attributable to ZDP Shares | - | 2,253 | 2,253 | - | 2,056 | 2,056 | - | 2,782 | 2,782 |
151 | 2,708 | 2,859 | 115 | 2,400 | 2,515 | 160 | 3,263 | 3,423 | |
4. The basic return per Ordinary Share is based on a net return on ordinary activities after taxation of £12,307,000 (30 September 2010 - £3,386,000; 31 December 2010 - £15,889,000) and on 72,282,273 (30 September 2010 - 72,282,273; 31 December 2010 - 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 £12,307,000 (30 September 2010 - £3,386,000; 31 December 2010 - £15,889,000) and on 74,241,429 (30 September 2010 - 72,282,273; 31 December 2010 - 72,282,273) 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 return on ordinary activities after taxation of £680,000 (30 September 2010 - £469,000; 31 December 2010 - £491,000) and on 67,084,807 (30 September 2010 - 67,084,807; 31 December 2010 - 67,084,807) shares, being the weighted average number of Restricted Voting Shares in issue during the period.
5. 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 2011 was £37,575,000 based on the quoted fair price of 125.25p per ZDP Share.
Number of ZDP Shares | Amount due to ZDP shareholders £'000 | |
As at 31 December 2010 | 30,000,000 | 31,774 |
ZDP Shares finance costs | - | 2,253 |
| As at 30 September 2011 | 30,000,000 | 34,027 |
6. The basic net asset value per Ordinary Share is based on net assets at the period end of £176,438,000 (30 September 2010 - £152,315,000; 31 December 2010 - £164,818,000) and on 72,282,273 (30 September 2010 - 72,282,273; 31 December 2010 - 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 £178,983,000 (30 September 2010 - £152,315,000; 31 December 2010 - £164,818,000) and on 74,241,429 (30 September 2010 - 72,282,273; 31 December 2010 - 72,282,273) 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 £4,700,000 (30 September 2010 - £4,870,000; 31 December 2010 - £4,892,000) and on 67,084,807 (30 September 2010 - 67,084,807; 31 December 2010 - 67,084,807) shares, being the number of Restricted Voting Shares in issue at the period end.
7. The financial information for the nine months ended 30 September 2011, 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 2010, on which the auditors issued an unqualified audit 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
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