BPET.L Regulatory News (BPET)

4 Oct 2005 09:19

F&C Private Equity Trust PLC04 October 2005 To: Stock Exchange For immediate release: 4 October 2005 F&C Private Equity Trust plc Annual results for the year to 31 July 2005 • NAV total return for the year of 37.6 per cent for the A Shares• NAV total return for the year of 28.4 per cent for the B Shares• New investments of £18.2 million during the year• Realisations of £25.5 million during the year• £49.8 million added to net assets by the acquisition of the assets of Discovery Trust plc subsequent to the year end Chairman's Statement The international private equity market has continued the strong recovery thatbegan during 2004. This has been helped by buyout stockmarkets and continuedprogress in most major economies. The profits of underlying companies have grownand this has continued to attract the interest of investors leading toconsiderable mergers and acquisition activity. The trust's portfolio has been abeneficiary of this trend and has sustained a strong flow of realisations. Wehave been able to invest much of this amount through funds in a wide range ofprivate companies internationally. The results for our shareholders have beenexcellent. At 31 July the net asset value per A share was 38.2p. In respect of thisfinancial year we have declared special dividends of 14.5p per A share. Inaddition an interim dividend of 0.3p per A share has been paid. The directorsare recommending a final dividend of 1.2p giving a total dividend per A sharefor the year of 1.5p. Taking all of these into account the NAV total return perA share is 37.6% over the year. At 31 July the net asset value per B share was 130.2p. An interim dividend of0.55p has been paid and the directors are recommending a final dividend of 1.4pgiving a total dividend for the year of 1.95p. This gives a NAV total return forthe year of 28.4%. There has been considerable activity in the portfolio during the year.Realisations totalled £25.5m. This represents approximately 38% of the value ofthe company at the beginning of the year. These realisations have funded thespecial dividends for A shareholders and new investments for the B pool. Newinvestments for the B pool have totalled £18.2m. This is a substantial rate ofinvestment and is equivalent to 45% of the value of the B pool at the start ofthe year. Although the total amount so far returned to A shareholders by way of specialand ordinary dividend is over £68m, the A pool still stands at £25.6m and fromhere it is expected that over the next twelve to eighteen months most of theremaining assets will be liquidated, enabling the payment of further specialdividends. The remaining A pool contains several funds which have matureholdings in a wide variety of sectors and geographies. The timing of the sale ofthese companies depends on many factors but the managers of our funds are in allcases directly incentivised to realise maximum value as quickly as possible. In the B pool we now have a portfolio of thirty three funds, four directinvestments and five quoted companies. The underlying portfolio of companies nownumbers over 250. Through our investment partners we have access to theexpertise of over twenty different private equity specialist firms. It is a keyobjective to maintain strong relationships with these managers and to build astrong, but well diversified, portfolio. Many of the funds in our portfoliofocus on the mid market in their respective private equity markets. It is inthis tier that the most obvious future value lies. Also the majority of theprivate equity groups that we back are emerging management groups. Experiencesuggests that this type of accomplished, but relatively new firm tends to behighly motivated and focused, giving us an excellent chance of achieving premiumreturns for shareholders. Lastly but very importantly the management contract of your company wastransferred from Martin Currie Investment Management Limited to F&C AssetManagement plc on 20 June 2005. The management team transferred with the Trustthus maintaining the continuity of management which your board considered was inthe best interests of the company. At the same time we entered into an agreementto acquire the assets of Discovery Trust. This was enabled by the agreement oftheir shareholders and by the subscription of new C shares by Friends Provident.The general meetings necessary to effect this transaction proceeded successfullyin August. The significantly increased scale which this transaction bringsshould be of great benefit to our shareholders by improving the range ofinvestment opportunities open to the managers and by enhancing the liquidity andrating of our shares. David SimpsonChairman Manager's Review The environment for private equity investment has been positive internationally.There has been very strong deal flow in most major markets and confidenceamongst private equity practitioners is at a high ebb. Generally buoyant stockmarkets and continued economic growth against a background of low inflation anda liquid and optimistic banking sector has led to sustained high levels ofmergers and acquisition activity. The increasing adoption of private equity as ameans for financing the growth of smaller and medium sized private companiesmeans that the substantial increase in the size and influence of private equityfunds will not necessarily compromise future returns. However there are certainsub sectors and geographies where there is a risk of oversupply of capitalpushing up prices to unreasonable levels. Key determinants of the success ofprivate equity fund managers will be the degree of pricing discipline maintainedand the avoidance of unduly stretched capital structures. The majority of fundsin our portfolio focus on the mid market tier and as it is generally wellpopulated with suitable target companies, yet in most markets there are still alimited number of experienced private equity practitioners, the risk ofover-priced deals is somewhat lower. The acquisition multiples reported to us bythe funds in our portfolio appear reasonable given the economic conditions. Forcertain mid market funds the appetite for larger deals by the bigger funds is adistinct benefit as their portfolio companies are sold on to the larger privateequity funds. Indeed this activity is so prevalent that secondary buy-outs nowoutrank trade sales as the most frequent form of exit. Our portfolio has exposure to most of the world's private equity markets throughinvestments in over thirty funds and several direct investments. A privateequity fund of funds has twin aims. Firstly to maximise returns forshareholders through identifying the better managers, funds and co-investments,but secondly to reduce the risk associated with the asset class. The former aimis achieved through careful analysis of the very wide range of investmentopportunities, focusing on both the quantitative and qualitative attributes ofeach proposition and assessing these in the light of experience. The latter isachieved through careful diversification. It is especially important to avoidbacking funds with very similar investment styles and target markets; otherwisethe dangers of over-concentration and self-competition will detract fromreturns. In addition to monitoring the funds and direct investments in our existingportfolio our investment team reviews hundreds of new investment opportunitieseach year. Only a small subset of these are selected as investments. During the year we made new commitments to five funds and two directinvestments. Our international investment mandate allows flexibility to invest up to 10%outside Europe or North America. Some of this was utilised through our $5mcommitment to the AIG Global Emerging Markets Fund II. AIG Capital Partners,the fund's manager, has an unrivalled infrastructure and capability for privateequity investment in emerging markets. Its approach is to invest only where acompany's business model has been proven in developed markets. Maintaining aquality exposure to North America is important and as part of this we made a $5mcommitment to RCP II, a specialist mid-market fund of funds group. This fundwill give us exposure to up to fifteen different US mid-market buy-out funds. This fundwill be complementary to our other US investments and may also act as a sourceof investment opportunities in the most attractive tier of the world's largestprivate equity market. We have made two commitments to Pan-European buy-out funds in the mid and uppermid market area. Firstly a €5m commitment to Montagu III. This is the firstfund following the management group's spin-out from the HSBC group. Whilsthighly experienced, Montagu is therefore an emerging manager. We have made acommitment of €10m to the Candover 2005 Fund. This Pan-European fund is the 7thby Candover that, in various guises, we have backed. Their past performance andpresent attributes both justified our continued support. It is our policy to cover the European mid market with a combination of largerPan-European firms, such as Candover and Montagu, and locally managed countryfunds. In this latter category we committed €7m to Ciclad 4, a lower mid marketMBO fund based in Paris. This is the third fund by Ciclad in which we haveinvested. Up to 25% of the B-pool may be invested directly in private companies. Thiscapacity is used mainly for co-investments alongside a selected group of thefunds, and also with other management groups that we know well. During the yearwe invested £1.3m, alongside Royal London Private Equity, for an 8.3% in AcademyMusic Group, the UK's largest owner of live music venues. In the very differentaerospace sector we invested £2.8m for 12.5% of Global Design Technologies.This company, which has proprietary critical expertise in aircraft componentry,was brought to us by Stirling Square Capital Partners. They lead the deal andhave assembled a small syndicate to finance it. Also in the direct investmentarea we made an additional investment of £1m in Pizza Express. Its parentcompany acquired Ask Central, another restaurant chain, enhancing the group'scommercial position. There has been a substantial amount of exit activity in our funds. £25.5m wasrealised over the year from eighteen funds. These came from the partial ortotal realisation of over fifty companies. Many private equity funds havearranged recapitalisations for portfolio companies. Provided it does not burdena company with too much debt, it is an effective way of boosting returns throughreducing the money at risk rapidly. As would be expected a number of the larger realisations are from ourlongstanding mature funds, but there are also encouraging realisations from manyof the newer funds. The most significant sale at £9.2m was the Candover 1997 Fund's exit of Frenchfrozen food retailer Picard Surgeles. The Brown Brothers Harriman 1818Mezzanine Fund returned £2.5m from the sale of American Tire. InternationalMezzanine Investment returned £1.3m from the sale of pesticide company,Waterbury, and recapitalisation of JJI Lighting. This fund also returned £0.9mfrom the sale of its mezzanine investment in Pescanova (Spanish fishing). HicksMuse Tate & Furst Fund IV returned a total of £3.4m through the sale ofInternational Seed, the recapitalisation of EurotaxGlass's, the sale of ClearChannel and the final sale of Microtune. In addition, HMTF distributed £2.0m inClear Channel shares. Other significant realisations came from a range of funds held in the B-pool.The Candover 2001 Fund returned £1.4m. Much of this was from recapitalisationsof Springer (£0.8m) and Gala (£0.3m). Our holding in venture capital fund SEPII yielded £0.7m reflecting its sales of Cambridge Silicon Radio, Searchspaceand some smaller holdings. Primary Capital II is also well into realisationmode and distributed £1.1m including nearly £1.0m from the sale of bookretailer, The Works. Notable realisations came from our mezzanine funds. HuttonCollins has returned £0.7m from several investments, Accession Mezzanine yielded£0.3m from the redemption of its investment in Bulgarian Telecom. In GermanyDBAG IV has successfully sold engineering company Babcock Borsig, yielding£0.7m. In the US Blue Point Capital returned £0.6m, again from severalinvestments. New investment activity has been substantial with drawdowns and directinvestments totalling £18.2m. Again this was from a wide range of funds. In the UK SEP II evidenced the recovery in confidence in the venture sector byinvesting £1.0m. LGV 4 was very active deploying £1.3m in four companies andRoyal London Private Equity and Inflexion invested £0.7m and £0.6m respectivelyon our behalf. Sand Aire invested £0.4m. The Pan European funds were also active. Candover 2001 Fund drew £1.8m for six separate investments,including Thule, the vehicle accessories company and Alcontrol, the food andenvironmental testing company. TDR Capital invested £2.0m, including £1.2m intothe closed life insurance company, Pearl and £0.8m into Algeco, the Europeanmarket leader in modular buildings. In France, Chequers Capital have made fournew investments, drawing £0.2m. Nmas 1 has invested £0.8m in three companies,including £0.5m in perfume retailer, Bodybell. Blue Point Capital invested£0.25m in US mid market companies and Warburg Pincus VIII drew £0.8m for fivenew investments. This substantial level of investment and realisation activity has contributed tothe growth in NAV, through realisations, usually at a notable premium to thelatest valuation and through uplifts to unrealised investments. It has alsobeen necessary to downgrade the valuation of certain investments. Because of thespread and strength of the underlying portfolio good net progress has been made. The deal flow of fund opportunities and direct investments continues from everyprivate equity market. This will provide a means of investing the trust'ssubstantial additional resources arising from the transaction with DiscoveryTrust. At present the economic background for most of our fund investments isneutral or positive. The obvious adverse factor is the high oil price, whichwill inevitably result in some moderation of growth. The private equity fundmanagers, because of their influence on companies, have the chance of growingprofits and building value even in conditions of deceleration or stagnation.This is a means of value enhancement that is not normally available to investorsin the quoted markets. This is why private equity over the medium termoutperforms the stock markets and is a major incentive for investment in theasset class. The asset class is not without risks and a fund of funds structureremains the sensible way of achieving diversification in quality funds andcompanies to mitigate these risks and maximise returns. Hamish MairManager For more information, please contact: Hamish Mair 0131 465 1000Martin Casselshamish.mair@fandc.com / martin.cassels@fandc.com F&C PRIVATE EQUITY TRUST plc Statement of total return (incorporating the revenue account*) for the year ended 31 July 2005 Unaudited Revenue Capital Total £'000 £'000 £'000 Gains on investments - realised - 2,991 2,991 - unrealised - 16,730 16,730Currency gains - 56 56Income - franked 182 - 182 - unfranked 2,870 - 2,870Investment management fee (170) (510) (680)Other expenses (334) - (334) _______ _______ _______Net return before finance costs and taxation 2,548 19,267 21,815 Interest payable and similar charges (17) (49) (66) _______ _______ _______Return on ordinary activities before taxation 2,531 19,218 21,749 Taxation on ordinary activities (707) 168 (539) _______ _______ _______Return on ordinary activities after taxation for the financial 1,824 19,386 21,210year Dividends in respect of equity shares (1,770) (9,727) (11,497) _______ _______ _______Transfer to/(from) reserves 54 9,659 9,713 _______ _______ _______Returns per A share 1.58p 12.94p 14.52p _______ _______ _______Returns per B share 1.96p 27.32p 29.28p * The revenue column of this statement is the profit and loss account of thecompany. All revenue and capital items in the above statement derive fromcontinuing operations. No operations were acquired or discontinued in the year. F&C PRIVATE EQUITY TRUST plc Statement of total return (incorporating the revenue account*) for the year ended 31 July 2004 Audited Revenue Capital Total £'000 £'000 £'000 Gains/(losses) on investments - realised - 15,710 15,710 - unrealised - (14,226) (14,226)Currency gains - 6 6Income - franked 148 - 148 - unfranked 8,023 - 8,023Investment management fee (206) (618) (824)Other expenses (262) - (262) _______ _______ _______Net return before finance costs and taxation 7,703 872 8,575 Interest payable and similar charges (51) (154) (205) _______ _______ _______Return on ordinary activities before taxation 7,652 718 8,370 Taxation on ordinary activities (2,256) 232 (2,024) _______ _______ _______Return on ordinary activities after taxation for the financial 5,396 950 6,346year Dividends in respect of equity shares (5,394) (29,182) (34,576) _______ _______ _______Transfer to/(from) reserves 2 (28,232) (28,230) _______ _______ _______Returns per A share 5.16p 2.39p 7.55p _______ _______ _______Returns per B share 4.94p (1.67p) 3.27p * The revenue column of this statement is the profit and loss account of thecompany. All revenue and capital items in the above statement derive fromcontinuing operations. No operations were acquired or discontinued in the year. F&C PRIVATE EQUITY TRUST plc BALANCE SHEET As at 31 July 2005 As at 31 July 2004 (unaudited) (audited) £000 £000 £000 £000Investments at market valueListed on recognised exchanges 9,396 5,754Unlisted at directors' valuation 65,434 55,974 _______ _______ 74,830 61,728 Current assetsDebtors 108 622Cash at bank 9,210 13,693 _______ _______ 9,318 14,315CreditorsAmounts falling due within one (7,507) (9,115)year _______ _______Net current assets / (liabilities) 1,811 5,200 _______ _______Net assets 76,641 66,928 _______ _______ Capital and reservesCalled up ordinary capital 1,063 1,063Special distributable capital 40,000 40,000reserveSpecial distributable revenue 5,030 14,757reserveRealised capital reserve 49,624 46,968Unrealised capital reserve (19,209) (35,939)Revenue reserve 133 79 _______ _______Total shareholders' funds 76,641 66,928 _______ _______ Net asset value per A share 38.17p 39.66pNet asset value per B share 130.24p 102.91p F&C PRIVATE EQUITY TRUST plc STATEMENT OF CASH FLOW Year to Year to 31 July 2005 (unaudited) 31 July 2004 (audited) £000 £000 £000 £000 Operating activitiesNet dividends and interest received from 3,233 7,644investmentsInterest received from deposits 348 446Investment management fee (765) (888)Cash paid to and on behalf of directors (72) (72)Bank charges (4) (3)Other cash payments (167) (171) _______ _______Net cash inflow from operating activities 2,573 6,956 Servicing of finance Interest paid (68) (211) _______ _______Net cash outflow from servicing of finance (68) (211) TaxationCorporation tax paid (1,528) (1,618) _______ _______Net cash outflow from taxation (1,528) (1,618) Capital expenditure and financialinvestmentPayments to acquire investments (18,243) (10,628) Receipts from disposal of investments 25,471 52,781 _______ _______Net cash inflow from capital expenditure 7,228 42,153and financial investment Equity dividends paid (12,688) (38,062) _______ _______ Net cash (outflow)/ inflow before financing (4,483) 9,218 Financing Movement in short-term borrowings - (4,020) _______ _______ Net cash outflow from financing - (4,020) _______ _______ (Decrease) / increase in cash for the year (4,483) 5,198 _______ _______ The directors have recommended a final dividend of 1.20p per A share and 1.30pper B share, which makes a total for the year of 1.50p per A share and 1.85p perB share (2004: 5.15p per A share and 4.95p per B share). These will be paid on9 December 2005 to shareholders on the register on 28 November 2005. The financial information contained within this preliminary announcement doesnot constitute the company's statutory financial statements as defined in s240of the Companies Act 1985 for the years ended 31 July 2005 or 2004, but isderived from those financial statements. The statutory financial statements forthe year ended 31 July 2004 have been delivered to the registrar of companiesand contained an audit report which was unqualified and did not containstatements under s237 (2) or (3) of the Companies Act 1985. The annual results will be circulated to shareholders in the form of an annualreport, copies of which will be available at the company's registered office, 80George Street, Edinburgh EH2 3BU. This information is provided by RNS The company news service from the London Stock Exchange