26 Aug 2008 07:00
| To: Stock Exchange | For immediate release: |
| 26 August 2008 |
F&C Private Equity Trust plc
Interim results for the six months to 30 June 2008
NAV total return for the six months of 9.4 per cent for the Ordinary shares;
NAV total return for the six months of 0.6 per cent for the Restricted Voting shares;
Ordinary share revenue dividend of 0.5 pence declared;
Restricted Voting share special dividend of 1.0 pence paid;
Realisation of private equity assets of £17.5 million;
New investment in private equity assets of £34.5 million.
Chairman's Statement
Your Company has continued to make good progress during the first half of 2008. The net asset value ("NAV") of the Ordinary share (formerly B Share) pool had increased to £184.5 million at 30 June 2008, giving a fully diluted asset value per Ordinary share of 251.86p, and a total return of 9.4 per cent for the year to date. The Board has declared an interim dividend of 0.5 pence per Ordinary share.
The net assets of the Restricted Voting Share (formerly A Share) pool had decreased to £5.0 million at the same date, following the declaration and payment of a special dividend of 1.0 pence during the half year. The total return for the Restricted Voting Shares was 0.6 per cent.
Share price performance did not reflect the fundamental progress, with the price per ordinary share decreasing by 3.7 per cent to 180.0 pence at 30 June 2008, as the discount at which the shares trade widened from 19.1 per cent to 28.5 per cent.
The Restricted Voting Share price was 15.25 pence at 30 June, a premium of 103.3 per cent to net asset value. This premium in large part reflects a value being placed by the Market on potential payment from the Dakota, Minnesota and Eastern Railroad (now part of the Canadian Pacific Railway) relating to the future construction of the Powder River Basin extension. In line with our valuation methodology no value has been placed on these contingent payments in either the Ordinary or Restricted Voting Share net asset value.
The Company had outstanding undrawn commitments of £168 million at 30 June. We had not drawn upon our £40 million revolving credit facility at that date, although we have since drawn down £15 million. The Company is now geared by 8% which we expect will contribute to shareholder returns over the long term.
The single biggest contributor to the increase in net asset value was Viking Moorings, a market leader in oil rig mooring systems which had traded very strongly, and we expect to see this investment, valued at £12.1 million at 30 June, realised during the second half of the year.
More details of both realisations and new commitments can be found in the Manager's Review. I would emphasise the range of new commitments; Spain, Switzerland, the Nordic region and the United States all featured prominently, while our £5 million commitment to Environmental Technologies Fund, with its "clean tech" remit and our £4 million investment into the Inflexion-led buy-out of SMD Hydrovision are examples of our increasing sectoral diversity.
Against the backdrop of continued volatility in financial markets the resilience of our portfolio is encouraging. Although some sales processes may have been delayed by the challenging funding environment our experience demonstrates that good quality companies remain in demand. The robust and responsive disciplines of the Private Equity Market provide us with a measure of protection against economic slowdown, especially when combined with the strength and depth of an investment portfolio of marked diversity.
David Simpson
Chairman
Manager's Review
Investment Strategy
The Company's investment strategy of focusing on mid market managers and co-investments in this segment has been relatively undisturbed by the effects of the credit crunch. As we describe below there has been considerable investment and realisation activity, albeit at lower levels than last year, and our managers in this category have been well occupied. In most new deals there is a smaller debt component than in previous years and there is some evidence of prices beginning to decline. We have always tended to back managers who favour companies with strong growth prospects and to avoid those who focus on narrow economically sensitive sectors. Given the spreading evidence of economic slowdown we will continue to adhere to that strategy. The great majority of our investment partners regard the current conditions as conducive to good investments without being too adverse for existing portfolios. We will monitor how these assessments change as the remainder of 2008 unfolds.
New Investments
New investment activity has continued strongly into 2008 with total new investments of £34.5m. This included £4m invested directly into the Inflexion led buy-out of SMD Hydrovision. This company is the world's leading privately owned designer and manufacturer of specialised systems for laying subsea cables and pipelines in trenches as well as the world's second largest supplier of Workclass Remotely Operated Vehicles "WROVs", electrically powered unmanned submarines that are able to work in depths and conditions that would otherwise be inaccessible for human divers. SMD Hydrovision primarily supplies the oil and gas sector as well as providing equipment for the telecoms, renewable energy, mining and defence industries. F&C Private Equity Trust ("F&C PET") acquired 9.6% of SMD Hydrovision in the £70m buy-out. A further £1m was invested in SMD Hydrovision through the Inflexion 2006 Buy-out Fund.
Another co-investment was F&CPET's £3.2m into Italian security company Sicurglobal where we have invested alongside Stirling Square Capital Partners in this €186m buy-out. Our €4m gives us 6.5% of the company. It is a prime beneficiary of imminent deregulation in the Italian security market which will allow the company to grow both organically and by acquisition across the regions of Italy. The acquisition multiple is below 8x EBITDA.
There was a wide range of other new investments from our funds. Some of the larger ones include £1.6m by Candover 2005 into Dutch engineering conglomerate Stork NV; £0.5m by AIG New Europe fund into Orzel Bialy, a Polish waste management company specializing in recycling car batteries; £0.86m by TDR Capital into Algeco/ Scotsman, the modular buildings manufacturer; £0.4m by DBAG V in ICTS, a leading company in aviation security systems; £0.4m by Gilde Buy-out fund III in Hofmann Menu, a market leading provider of frozen food products; £0.4m in Veinsur , a Spanish truck dealer by Ibersuizas II and £0.7m into the 'take private' of Biffa plc the market leader in industrial and commercial waste collection through the Montagu III fund. These diverse companies have the common characteristics of strong positions in growing niche markets. In all cases these have involved debt as the majority of the consideration illustrating that not withstanding the 'credit crunch' well connected private equity groups in the mid market remain capable of executing transactions in their traditional fashion.
Realisations
The first half has seen considerable exit activity and this has lead to distributions of £17.5m. Notable examples include the sale of Algeco/Scotsman by TDR I yielding £2.3m, a 3.5x investment multiple and 90% IRR. As mentioned above we have rolled forward part of the proceeds of the sale as part of a larger deal in TDR fund II. The sale of dental company IDH by LGV Fund 5 achieved an investment multiple of 4.3x, an IRR of 127% and an inflow of £1.9m to F&CPET. The earlier LGV Fund 4 also had a realisation in the healthcare sector with the sale of Classic Hospitals which yielded £0.86m with an investment multiple of 2.7x and IRR of 50%. Candover 2005 fund has sold Norwegian cable company GET returning £0.7m for F&CPET, a multiple of 2.2x and IRR of 50%. Healthcare Homes was sold by August Equity I for an investment multiple of 2.4x and an IRR of 34% returning £4.9m to F&C PET. Inflexion sold Tekton for a multiple of 1.75x cost, achieving an IRR of 53% and a £0.7m inflow. CF Holdings (Continental Foods) a longstanding holding of International Mezzanine Investments NV, was sold at a multiple of 1.8x. Allen & Heath, the professional DJ equipment manufacturer was sold by Close Brothers Growth Capital for a 1.9x multiple and 40% IRR, returning £0.7m. In the venture capital area, Life Science Partners have sold German portfolio company U3 Pharma to Daiichi Sankyo of Japan achieving an IRR of over 100% and £0.7m inflow. Once again these realisations are being achieved across diverse industries and benefiting from varying trends and evidence a level of activity which belies the feel of market slowdown.
New Commitments
We continue to broaden and strengthen the portfolio with commitments to new funds. F&CPET made seven new commitments during the first half of the year; €9m to Spanish fund N+1 Fund II, €9m to Swiss based fund Capvis III and £5m to Environmental Technologies Fund, our first investment in the 'cleantech' area. We have broadened the portfolio through the addition of two Nordic region oriented buy-out funds. In Norway we have committed 60m NOK (£6m) to Herkules (formerly known as Ferd) and in Sweden we have committed €7m to the well known mid market firm Procuritas. In addition we have made a follow on commitment to Hutton Collins of €10m for their third mezzanine fund building on a successful experience in two previous funds. Similarly we have continued our support of Baltimore-based Camden Partners by committing $10m to their Strategic Fund IV.
Valuation Changes
There were many small valuation changes over the first half of the year reflecting the trading performance and progress towards exit of underlying companies. On a fundamental basis our investment in metal shelving and locker manufacturer Whittan has performed well and there is an uplift of £0.8m over the period. F&CPET received a small escrow payment relating to the sale of Dakota, Minnesota and Eastern Railroad and this added £0.5m to the Company's valuation. The most significant valuation change has been the increase in value of our Inflexion co-investment, Viking Moorings, which has been uplifted by £8.7m and has also largely contributed to a £2m uplift in each of the Inflexion 2003 Fund and Hickory Fund Portfolio, also managed by Inflexion. Viking, the market leader in oil rig mooring systems in the North Sea, has traded very strongly. Inflexion are exploring exit possibilities and there is scope for further value improvement should an exit be achieved. Other movements in valuation include uplifts of £0.7m from DBAG V and some notable improvement in the venture capital area with an uplift of £0.4m for Life Science Partners III. There have been no material downgrades to reflect adverse trading or adoption of reduced valuation multiples but several funds have slight declines to reflect their early stage 'J Curve' status. In order to build future value it is necessary to incur this upfront 'cost'.
Outlook
The two related features of the current investment environment are the 'credit crunch' and the resulting parallel economic slowdown which is becoming manifest across the world to varying degrees. There are some signs that the consumer related sectors are feeling the adverse effects of these but this is a fairly lightly represented sector in our portfolio. It is very clear to us that capable management operating with the support of experienced value-adding private equity investors will cope better in the downturn and should still in most cases deliver good long term returns. The private equity investor who is customarily in receipt of timely and detailed information on his investee companies and who has the ability to respond to this information by virtue of a controlling shareholding is arguably much better placed to respond to these challenging conditions than investors in public companies. In the stockmarket company information, whilst more widely disseminated, is not as timely or as detailed and investors are generally unable to instigate management or strategic change. The motivated and focused ownership which is the heart of private equity is most critical in challenging conditions. Our investment partners have been selected on their proven ability to respond well to such conditions and for many of them the adjustment in the value of companies is much more of an opportunity than a threat. Through our ongoing commitments and our substantial co-investment capacity F&CPET is well placed and its broad portfolio can to some extent act as a protective shield against the inevitable jolts of economic slowdown.
Hamish Mair
For more information, please contact:
| Hamish Mair | 0131 718 1184 |
| Martin Cassels | 0131 718 1095 |
| hamish.mair@fandc.com / martin.cassels@fandc.com | |
F&C PRIVATE EQUITY TRUST plc
Income Statement for the
six months ended 30 June 2008
| Unaudited
| |||||
|
| Revenue £'000 | Capital £'000 | Total £'000
| ||
| Gains on investments |
| - | 18,174 | 18,174 | |
| Currency gains | - | 19 | 19 | ||
| Income | - franked | - | - | - | |
|
| - unfranked | 1,153 | - | 1,153 | |
| Investment management fee | (208) | (2,386) | (2,594) | ||
| Other expenses | (322) | - | (322) | ||
|
| _______ | _______ | _______ | ||
| Net return before finance costs and taxation | 623 | 15,807 | 16,430 | ||
|
|
|
|
| ||
| Interest payable and similar charges | (15) | (45) | (60) | ||
|
| _______ | _______ | _______ | ||
| Return on ordinary activities before taxation | 608 | 15,762 | 16,370 | ||
|
|
|
|
| ||
| Taxation on ordinary activities | (184) | 184 | - | ||
|
| _______ | _______ | _______ | ||
| Return on ordinary activities after taxation | 424 | 15,946 | 16,370 | ||
|
| _______ | _______ | _______ | ||
|
|
|
|
| ||
| Returns per Ordinary share - Basic | 0.52p | 21.67p | 22.19p | ||
|
| _______ | _______ | _______ | ||
| Returns per Ordinary share - Fully diluted | 0.50p | 21.10p | 21.60p | ||
|
| _______ | _______ | _______ | ||
| Returns per Restricted Voting share - Basic | 0.08p | 0.42p | 0.50p | ||
|
| _______ | _______ | _______ | ||
F&C PRIVATE EQUITY TRUST plc
Income Statement for
six months ended 30 June 2007
|
| Unaudited
| ||||
|
| Revenue £'000 | Capital £'000 | Total £'000
| ||
| Gains on investments |
| - | 30,316 | 30,316 | |
| Currency losses | - | (243) | (243) | ||
| Income | - franked | 103 | - | 103 | |
|
| - unfranked | 1,222 | - | 1,222 | |
| Investment management fee | (176) | (529) | (705) | ||
| Other expenses | (445) | - | (445) | ||
|
| _______ | _______ | _______ | ||
| Net return before finance costs and taxation | 704 | 29,544 | 30,248 | ||
|
|
|
|
| ||
| Interest payable and similar charges | (1) | (4) | (5) | ||
|
| _______ | _______ | _______ | ||
| Return on ordinary activities before taxation | 703 | 29,540 | 30,243 | ||
|
|
|
|
| ||
| Taxation on ordinary activities | (135) | 81 | (54) | ||
|
| _______ | _______ | _______ | ||
| Return on ordinary activities after taxation | 568 | 29,621 | 30,189 | ||
|
| _______ | _______ | _______ | ||
|
|
|
|
| ||
| Returns per Ordinary share - Basic | 0.51p | 31.55p | 32.06p | ||
|
| _______ | _______ | _______ | ||
| Returns per Ordinary share - Fully diluted | 0.50p | 30.72p | 31.22p | ||
|
| _______ | _______ | _______ | ||
| Returns per Restricted Voting share - Basic | 0.29p | 10.16p | 10.45p | ||
|
| _______ | _______ | _______ | ||
F&C PRIVATE EQUITY TRUST plc
Income Statement for
year ended 31 December 2007
|
| Audited
| ||||
|
| Revenue £'000 | Capital £'000 | Total £'000
| ||
| Gains on investments |
| - | 57,141 | 57,141 | |
| Currency losses | - | (1,343) | (1,343) | ||
| Income | - franked | 103 | - | 103 | |
|
| - unfranked | 2,915 | - | 2,915 | |
| Investment management fee | (391) | (1,994) | (2,385) | ||
| Other expenses | (631) | - | (631) | ||
|
| _______ | _______ | _______ | ||
| Net return before finance costs and taxation | 1,996 | 53,804 | 55,800 | ||
|
|
|
|
| ||
| Interest payable and similar charges | (17) | (49) | (66) | ||
|
| _______ | _______ | _______ | ||
| Return on ordinary activities before taxation | 1,979 | 53,755 | 55,734 | ||
|
|
|
|
| ||
| Taxation on ordinary activities | (587) | 569 | (18) | ||
|
| _______ | _______ | _______ | ||
| Return on ordinary activities after taxation | 1,392 | 54,324 | 55,716 | ||
|
| _______ | _______ | _______ | ||
|
|
|
|
| ||
| Returns per Ordinary share - Basic | 1.37p | 56.74p | 58.11p | ||
|
| _______ | _______ | _______ | ||
| Returns per Ordinary share - Fully diluted | 1.34p | 55.52p | 56.86p | ||
|
| _______ | _______ | _______ | ||
| Returns per Restricted Voting share - Basic | 0.60p | 19.84p | 20.44p | ||
|
| _______ | _______ | _______ | ||
F&C PRIVATE EQUITY TRUST plc
BALANCE SHEET
|
| As at 30 June 2008 (unaudited) | As at 30 June 2007 (unaudited) | As at 31 December 2007 (audited) | ||||
|
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Investments at market value |
|
|
|
|
|
| |
| Listed on recognised exchanges |
2,951 |
|
3,553 |
|
43,984 |
| |
| Unlisted at directors' valuation |
185,930 |
|
157,466 |
|
150,597 |
| |
|
| _______ |
| _______ |
| _______ |
| |
|
|
| 188,881 |
| 161,019 |
| 194,581 | |
|
|
|
|
|
|
|
| |
| Current assets |
|
|
|
|
|
| |
| Debtors | 1,157 |
| 450 |
| 789 |
| |
| Cash at bank | 3,426 |
| 13,744 |
| 5,822 |
| |
|
| _______ |
| _______ |
| _______ |
| |
|
| 4,583 |
| 14,194 |
| 6,611 |
| |
| Creditors |
|
|
|
|
|
| |
| Amounts falling due within one year |
(1,408) |
|
(1,269) |
|
(1,462) |
| |
|
| _______ |
| _______ |
| _______ |
| |
| Net current assets |
| 3,175 |
| 12,925 |
| 5,149 | |
|
|
| _______ |
| _______ |
| _______ | |
|
|
|
|
|
|
|
| |
| Total assets less current liabilities |
|
192,056 |
|
173,944 |
|
199,730 | |
|
|
| _______ |
| _______ |
| _______ | |
| Creditors |
|
|
|
|
|
| |
| Amounts falling due after more than one year |
|
(2,587) |
|
- |
|
(822) | |
|
|
| _______ |
| _______ |
| _______ | |
|
|
|
|
|
|
|
| |
| Net assets |
| 189,469 |
| 173,944 |
| 198,908 | |
|
|
| _______ |
| _______ |
| _______ | |
|
|
|
|
|
|
|
| |
F&C PRIVATE EQUITY TRUST plc
BALANCE SHEET (CTD)
|
|
| As at 30 June 2008 (unaudited) |
| As at 30 June 2007 (unaudited) |
| As at 31 December 2007 (audited) |
|
|
| £000 |
| £000 |
| £000 |
| Capital and reserves |
|
|
|
|
|
|
| Called up ordinary capital |
| 1,394 |
| 1,394 |
| 1,394 |
| Special distributable capital reserve |
| 15,679 |
| 40,000 |
| 40,000 |
| Special distributable revenue reserve |
| 38,363 |
| 38,363 |
| 38,363 |
| Capital redemption reserve |
| 664 |
| 664 |
| 664 |
| Capital reserve |
| 133,416 |
| 92,767 |
| 117,470 |
|
|
|
|
|
|
|
|
| Revenue reserve |
| (47) |
| 756 |
| 1,017 |
|
|
| _______ |
| _______ |
| _______ |
| Total shareholders' funds |
|
189,469 |
|
173,944 |
|
198,908 |
|
|
| _______ |
| _______ |
| _______ |
|
|
|
|
|
|
|
|
| Net asset value per Ordinary share - Basic |
|
255.16p |
|
208.27p |
|
233.82p |
| Net asset value per Ordinary share - Fully diluted |
|
251.86p |
|
206.21p |
|
231.08p |
| Net asset value per Restricted Voting share - Basic |
|
7.50p |
|
34.88p |
|
44.56p |
F&C PRIVATE EQUITY TRUST plc
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
|
| Six months ended 30 June 2008 (unaudited) | Six months ended 30 June 2007 (unaudited) | Year ended 31 December 2007 (audited) |
|
|
|
|
|
| Opening equity shareholders' funds | 198,908 | 146,233 | 146,233 |
|
|
|
|
|
| Return on ordinary activities after taxation | 16,370 |
30,189 | 55,716 |
| Dividends paid | (1,488) | (2,478) | (3,041) |
| Return of capital paid | (24,321) | - | - |
|
|
|
|
|
|
| _______ | _______ | _______ |
| Closing equity shareholders' funds | 189,469 | 173,944 | 198,908 |
|
| _______ | _______ | _______ |
|
|
|
|
|
F&C PRIVATE EQUITY TRUST plc
SUMMARISED STATEMENT OF CASH FLOWS
|
|
| Six months to 30 June 2008 (unaudited) |
| Six months to 30 June 2007 (unaudited) |
| Year to 31 December 2007 (audited) |
|
|
| £000 |
| £000 |
| £000 |
|
|
|
|
|
|
|
|
| Net cash (outflow)/inflow from operating activities |
|
(287) |
|
446 |
|
1,103 |
|
|
|
|
|
|
|
|
| Servicing of finance |
| (60) |
| - |
| (53) |
|
|
|
|
|
|
|
|
| Taxation |
| - |
| (423) |
| (550) |
|
|
|
|
|
|
|
|
| Capital expenditure and financial investment |
| 23,741 |
| 9,678 |
| 2,942 |
|
|
|
|
|
|
|
|
| Equity dividends paid |
| (1,488) |
| (2,478) |
| (3,041) |
|
|
|
|
|
|
|
|
| Return of capital paid |
| (24,321) |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
| _______ |
| _______ |
| _______ |
| (Decrease)/increase in cash |
| (2,415) |
| 7,223 |
| 401 |
|
|
| _______ |
| _______ |
| _______ |
|
|
|
|
|
|
|
|
Reconciliation of net cash flow to movement in net funds
|
|
|
|
|
|
|
|
| (Decrease)/increase in cash in the year |
| (2,415) |
| 7,223 |
| 401 |
| Currency gains/(losses) |
| 19 |
| (243) |
| (1,343) |
|
|
| _______ |
| _______ |
| _______ |
|
|
|
|
|
|
|
|
| Movement in net funds in the year |
| (2,396) |
| 6,980 |
| (942) |
|
|
| _______ |
| _______ |
| _______ |
|
|
|
|
|
|
|
|
| Opening net funds |
| 5,822 |
| 6,764 |
| 6,764 |
|
|
| _______ |
| _______ |
| _______ |
|
|
|
|
|
|
|
|
| Closing net funds |
| 3,426 |
| 13,744 |
| 5,822 |
|
|
| _______ |
| _______ |
| _______ |
|
|
|
|
|
|
|
|
Reconciliation of net return before finance costs and taxation to net cash flow from operating activities
| Net return before finance costs and taxation |
|
16,430 |
|
30,248 |
|
55,800 |
| Gains on investments |
| (18,174) |
| (30,316) |
| (57,141) |
| Currency gains/(losses) |
| (19) |
| 243 |
| 1,343 |
| Changes in working capital and other non-cash items |
|
1,476 |
|
271 |
|
1,101 |
|
|
| _______ |
| _______ |
| _______ |
|
|
|
|
|
|
|
|
| Net cash flow from operating activities |
| (287) |
| 446 |
| 1,103 |
|
|
| _______ |
| _______ |
| _______ |
|
|
|
|
|
|
|
PRINCIPAL RISKS AND UNCERTAINTIES
The Director believes that the principal risks faced by the Company include investment and strategic, external, regulatory, operational, financial and funding risks. These risks, and the way in which they are managed, are described in more detail under the heading Principal Risks and Risk Management within the Business Review in the Company's Annual Report for the year ended 31 December 2007. The Company's principal risks and uncertainties have not changed materially since the date of that report and are not expected to change materially for the remaining six months of the Company's financial year.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE INTERIM REPORT
We confirm that to the best of our knowledge:
the condensed set of financial statements have been prepared in accordance with the Statement 'Half-Yearly Financial Reports' issued by the UK Accounting Standards Board and give a true and fair view of the assets, liabilities, financial position and return of the Company;
the Chairman's Statement and Manager's Review (together constituting the Interim Management Report) include a fair review of the information required by the Disclosure and Transparency Rules ('DTR') 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the financial statements;
the Statement of Principal Risks and Uncertainties shown above is a fair review of the information required by DTR 4.2.7R; and
the condensed set of financial statements include a fair review of the information required by the DTR 4.2.8R, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the Company during the period, and any changes in the related party transactions described in the last Annual Report that could do so.
David Simpson
Director
Notes