BPET.L Regulatory News (BPET)

6 Mar 2006 09:37

F&C Private Equity Trust PLC06 March 2006 To: Stock Exchange For immediate release: 6 March 2006 F&C Private Equity Trust plc Interim results for the six months to 31 January 2006 - NAV total return per A Share of 3.3 per cent and a special dividend of 7.5p- NAV total return per B Share of 18.1per cent- £49.8 million added to net assets by the acquisition of the assets of Discovery Trust plc- Conversion of £28.5m from C to B Shares- Partial realisation and uplift of Gondola Holdings- New investments of £16.2m- Realisations of £12.2m- 12 new commitments to funds, co-investments and secondaries Chairman's Statement The first half of the Company's financial year has been an eventful andsuccessful period. As intimated in the annual report the company has expandedsignificantly through the acquisition of the assets of Discovery Trust in Augustlast year. This has given the Trust access to a wider range of investmentopportunities and is contributing to an improvement in the rating and liquidityof our shares. The transaction also broadened our shareholder base and I wouldlike to welcome all our new shareholders who have joined the Company in recentmonths. The international private equity market, in which we are investedthrough a wide range of funds and direct investments, has enjoyed a furtherstrong period of success. Against a background of global economic growth, risingstockmarkets, low interest rates and a liquid banking sector private equityinvestors are exhibiting confidence in almost all areas. The A shares, representing the increasingly concentrated portfolio of maturefunds and direct holdings, had a NAV per share at 31st January of 39.41p, anincrease over the first half of 3.3%. The A pool stands at £26.4m. £6.7m ofthis is now in cash and I am pleased to announce that a further special dividendof 7.5p will be paid to shareholders on 14th April. The A pool will continue toreturn cash as its mature portfolio is realised. Future asset value movementsfor the A pool will reflect the fortunes of a decreasing number of companies. The B shares, representing the growing continuation pool invested in a balancedrange of private equity funds and direct investments, had a NAV per share at31st January of 153.77p, an increase over the first half of 18.1%. Following theconversion of the first tranche of C shares in December, which added £17.8m, thenet assets of the B pool stood at £79.6m at 31st January 2006. This will beincreased by a further £10.7m on the 10th March with the second conversion of Cshares. The C shares, representing the reducing original portfolio of Discovery Trust,had a NAV per share at 31st January of 99.41p, a slight decrease of 0.9% sincethe pool was created on 17th August 2006. This portfolio is being steadilyrealised and will in due course merge with the B pool. At the 31st January the Cpool had net assets of £31.5m. The second conversion will reduce this toapproximately £20.0m. £28.5m or 57% of the original C pool had been realised by31st January. This is creditable progress and we expect substantially all ofthe C pool to be realised by the final conversion in September. There has been considerable comment that the private equity market isapproaching a peak and that prices in certain cases are so high as to prejudicefuture returns. It is true that highly competitive auction processes areincreasingly common although most of this activity is in the larger privateequity deals where the companies may have an enterprise value of up to and above£1bn. The great majority of the funds we invest in are focused on the mid marketof their specific countries and in this tier there is much less evidence thatdeals are being done at unreasonable prices. Whilst truly proprietary dealflowis rare, the mid market funds often source investments either directly or in apartially intermediated arena with limited competition. At all levels andgeographies of the private equity industry the risks associated with paying toomuch are likely to be increased if the growth of major economies is stalled,potentially through the influence of higher oil prices or external shocks.However we are to some extent protected by the managers of our funds beingdirectly incentivised to deliver strong absolute returns. The alignment ofinterest between manager and investor in private equity funds is often better inthe mid market funds. The mid market of private equity internationally is likely to remain inefficientfor some time and therefore to continue to reward the best managers withexcellent long term returns. The portfolio that we have in place and which iscontinually being renewed has indeed delivered good returns in the first half ofthe year. An encouraging feature of the period has been the broadly spreadprogress with many funds recording gains through realisations and upwardrevaluations reflecting strong underlying progress in company profits. We havealso seen excellent progress from our small but significant portfolio of directholdings. David Simpson Chairman Manager's Review The private equity market remains highly active at all levels with the size andvolume of deals and fund-raising at record levels in most markets and subsectors. The overall economic and stockmarket background has been benign andwhilst the future is not without challenges the current environment issupportive to the endeavours of the private equity market participants. Thepicture varies slightly from market to market but the prevailing mood is one ofoptimism that the strong period of the last two years will be sustained, albeitat a more moderate pace, for the foreseeable future. The funds and directinvestments in your portfolio have been active in harvesting gains and in layingthe foundations of future value creation. Realisations from private equity funds and direct investments have totalled£12.2m. Of this approximately £4m is attributable to the A pool and theremainder is for the B pool. The C pool is being sold down in a controlledfashion preserving shareholder value and over the period £29m has been raised.The new investments made have amounted to £16.2m. We have made several new commitments to private equity funds and we have alsocompleted two new direct investments and two secondary acquisitions. At the endof the first half the A pool had net cash of £4.7m and this has since increasedto £6.7m. This allows a special dividend to A shareholders of 10p per share,over 20% of the remaining net asset value. The B pool, which has been enlargedby the first conversion of the C shares in December, had a cash or near cashbalance of £10.3m at the end of January. It is our policy to hold most of thisin short dated government stock pending draw downs for new investments. The Cpool also holds its accumulated cash balance mainly in gilts. At the end ofJanuary the C pool's cash and near cash balance amounted to £11m. The remaininginvestments of the C pool are valued at £20m. Taking all of these liquid assetstogether the B pool has over £40m of short term capacity for private equityinvestment before considering borrowing facilities of a further 20% of the totalassets of the pool. The effective value creating deployment of these funds in atimely fashion is our key objective. The outstanding undrawn commitments of the B pool at the end of January were£91.5m. This is a substantial increase on the position at the beginning of thefinancial year and reflects additional commitments of almost £70m which we havemade over the last six months. £9m of these new commitments had been drawn bythe end of January. With the acquisition of the Discovery Trust Assets, theeffective size of the B pool will almost double by the end of this financialyear. The range of investments of different ages in the B pool and theirconsequent steady realisation process, which has begun, balanced by thepredictably steady rate of investment of the new fund commitments means thatthis level of outstanding commitment is well within the capacity of the trust. In total we made twelve new commitments to funds or direct investments. Thesecover different geographies and investment management groups. Most of these areinvolved in the mid market and several are to emerging management groups. At theupper end of the mid market we have committed a total of €15m to the Candover2005 Fund. In the middle and lower end of the mid market we have made or agreednew commitments to LGV 5 (£5m), Primary Capital III (£8m) and RJD Partners II(£8m). In the mid market of mezzanine we have backed the European fund HuttonCollins II (€10m) and in later stage venture capital SEP III (£7m). In Germanywe have backed DBAG V (€8m) and in the USA the specialist mid market fund CamdenPartners Strategic Fund III ($5m).We completed two co-investments; firstly £1.5min Equidebt, a leading debt collection agency, in a transaction led by RJDPartners. Secondly we invested £1m alongside Inflexion in Viking Moorings, themarket leader in the provision of moorings to oil rigs in the North Sea. We havecompleted the acquisition of two secondary positions in funds. Both of thesewere situations where not only did we know the managers well but had goodrelations with the vendors who were selling for strategic reasons. We acquired a£15m commitment in the well known UK mid market fund, Kleinwort Capital IV. Theacquisition cost for this partially drawn fund was £3m and we also assumed anundrawn commitment of £8m. In the USA we acquired a $5m position in BrownBrothers Harriman's 1818 Mezzanine Fund II. The consideration was $2m and weassumed an undrawn commitment of $1.3m. In both cases these positions wereacquired at substantial discounts to asset value. Where we have good visibilityon the portfolios and knowledge of the management groups and where there is acompelling valuation case we will look to add a small number of such secondariesto complement our core portfolio. The drawdowns by private equity funds were from over 20 funds for investment innearly 40 companies. The portfolio is very well spread across the internationalmid market. The new investments illustrate this diversity. Accession Mezzaninedrew £0.4m for investment in two companies, Zaberd, a Polish traffic managementand road safety company and Jet Finance International, the leading consumer debtprovider in Bulgaria. Nmas 1 (Spain) made two new investments totalling £0.5m;fitness club Holmes Place Iberia and outdoor lighting company Christer. PrimaryCapital II invested £0.5m in Amber Travel, a specialist tour operator and £0.2min JI Entertainment, a platform company investing in late night bars andrestaurants. Candover 2001 fund invested £0.7m in Gala to fund its acquisitionof Coral Eurobet. This drawdown closely followed a slightly smaller distributionof £0.5m from the recapitalisation of Gala. Hutton Collins invested £0.2m inLoch Fyne Restaurants and Candover 2001 £0.2m into HTO Thales, the world leadingmanufacturer of precision optical lenses. RJD Partners invested £0.6m in LMS,the market leading provider of outsourced legal services to the remortgagemarket. Candover 2005 Fund made its first investment of £0.5m into UPC Norway, acable company serving Oslo and the major cities of Southern Norway. Realisations during the period have also come from a wide range of funds. Of theolder holdings at an advanced stage of realisation major distributions came infrom 1818 Mezzanine (£0.7m), Candover 1994 (£0.7m), Third Private Equity, nowmanaged by Nova Capital (£0.4m), Ciclad 2 (£0.1m) and Alta Berkeley V (£0.1m).For the A pool only, we sold down the holding in Candover Investments yielding£2.6m. Of the newer funds held only in the B pool significant inflows came fromTDR Capital (£0.9m), Blue Point Capital (£0.7m), Candover 2001 (£1.4m), HuttonCollins (£0.4m) and Chequers Capital (£0.3m). Our most notable success howeverwas the proceeds from the listing of Gondola Holdings, the parent company ofPizza Express, a TDR Capital led co-investment. This yielded £3.2m during thefirst half. The remaining holding is valued at £5.8m and is subject to certainlock in restrictions. The substantial underlying activity in the portfolio has lead to a number ofmainly positive valuation changes. The biggest uplift was for Gondola Holdings.This reflected the company's listing and subsequent strong performance in theaftermarket. Our cost price was £2.4m and the money multiple of 3.7x and IRR of78% illustrates the potential benefits of selective co-investments with ourinvestment partners. The next largest uplifts were for Candover Investments PLC(£1.1m) and the Dakota Minnesota and Eastern Railroad (£1.1m), a verylongstanding, but strongly performing direct investment. Amongst our fundinvestments this period saw numerous uplifts coming from all geographies. TDRCapital (£0.8m) benefited from the Gondola listing and several other fundsincluding Nmas1 (£0.7m), RL Private Equity (£0.5m), Chequers Capital (£0.5m),Blue Point (£0.4m), Candover 2001 (£0.4m) and Accession Mezzanine (£0.4m)recorded uplifts in value reflecting good performance of underlying companiesand realisations either completed or pending. Of our co-investments it has beenpossible to revalue Academy Music Group, because of strong trading (£0.4m). Ourrecently acquired secondary holdings have also contributed with uplifts of £0.7mfor Kleinwort Capital IV and £0.3m for 1818 Mezzanine II. There were also somedowngrades. The most substantial were for our larger older holdings where someof the 'tail end' investments have been struggling. Over the period theinfluence of foreign exchange movements was minimal with an adverse effect of£0.5m. The outlook for the portfolio is good with the broadly spread underlyingportfolio performing well in fundamental terms with growing profits, reducingdebt and in some cases increasing ratings. The exit environment has been strongand as most exits take place at a significant premium to previous carrying valuethis has been a major source of the asset value growth over the first half ofthe year. The exit environment will remain strong if the stockmarket is stableor rising and the availability of fresh funds from banks and other privateequity funds is sustained. The funds in which we invest and our co-investmentportfolio are concentrated on the mid market tier of several differentcountries. In many of these this sector is still inefficient and for experiencedand suitably skilled investors offers the prospect of highly attractive mediumand long term returns. We are constantly appraising a strong dealflow of suchexperienced managers. Our policy is to seek out the best practitioners in eachfield, to back them early and to reward their success with continuing support. Hamish Mair Manager 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 for the six months ended 31 January 2006 Unaudited Revenue Capital Total £'000 £'000 £'000Gains on investments - realised - 5,122 5,122 - unrealised - 6,642 6,642Currency gains - 37 37Income - franked 324 - 324 - unfranked 871 - 871Investment management fee (187) (561) (748)Other expenses (198) (655) (853) _______ _______ _______Net return before finance costs and taxation 810 10,585 11,395 Interest payable and similar charges (17) (51) (68) _______ _______ _______Return on ordinary activities before taxation 793 10,534 11,327 Taxation on ordinary activities (148) 117 (31) _______ _______ _______Return on ordinary activities after taxation 645 10,651 11,296 Returns per A share 0.23p 1.12p 1.35p _______ _______ _______Returns per B share 0.42p 24.77p 25.19p _______ _______ _______Returns per C share 0.71p (1.63)p (0.92)p The total 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 for the six months ended 31 January 2005 (Restated) Unaudited Revenue Capital Total £'000 £'000 £'000 Gains on investments - realised - 3,010 3,010 - unrealised - 6,265 6,265Currency gains - 6 6Income - franked 76 - 76 - unfranked 781 - 781Investment management fee (87) (261) (348)Other expenses (129) - (129) _______ _______ _______Net return before finance costs and taxation 641 9,020 9,661 Interest payable and similar charges (9) (27) (36) _______ _______ _______Return on ordinary activities before taxation 632 8,993 9,625 Taxation on ordinary activities (167) 87 (80) _______ _______ _______Return on ordinary activities after taxation 465 9,080 9,545 Returns per A share 0.35p 7.73p 8.08p _______ _______ _______Returns per B share 0.60p 10.00p 10.60p _______ _______ _______Returns per C share - - - The total 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 for the year ended 31 July 2005 (Restated) Audited Revenue Capital Total £'000 £'000 £'000 Gains on investments - realised - 2,991 2,991 - unrealised - 16,544 16,544Currency gains - 56 56Income - franked 182 - 182 - unfranked 2,870 - 2,870Investment management fee (170) - (170)Other expenses (334) (510) (844) _______ _______ _______Net return before finance costs and taxation 2,548 19,081 21,629 Interest payable and similar charges (17) (49) (66) _______ _______ _______Return on ordinary activities before taxation 2,531 19,032 21,563 Taxation on ordinary activities (707) 168 (539) _______ _______ _______Return on ordinary activities after taxation 1,824 19,200 21,024 Returns per A share 1.58p 12.83p 14.41p _______ _______ _______Returns per B share 1.96p 27.05p 29.01p _______ _______ _______Returns per C share - - - The total 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 January 2006 As at 31 January 2005 As at 31 July Restated 2005 (unaudited) (unaudited) Restated (audited) £000 £000 £000 £000 £000 £000Investments at marketvalueListed on recognised 53,167 6,134 9,210exchangesUnlisted at directors' 76,801 60,553 65,434valuation _______ _______ _______ 129,968 66,687 74,644 Current assetsDebtors 2,454 955 108Cash at bank 5,797 9,009 9,210 _______ _______ _______ 8,251 9,964 9,318CreditorsAmounts falling due (767) (331) (1,123)within one year _______ _______ _______Net current assets 7,484 9,633 8,195 _______ _______ _______Net assets 137,452 76,320 82,839 _______ _______ _______ Capital and reservesCalled up ordinary 1,821 1,063 1,063capitalShare Premium account 48,707 - -Special distributable 40,000 40,000 40,000capital reserveSpecial distributable 5,030 14,757 10,061revenue reserveCapital reserve 41,116 19,956 30,229Revenue reserve 778 544 1,486 _______ _______ _______Total shareholders' 137,452 76,320 82,839funds Net asset value per A 39.41p 47.58p 46.76pshareNet asset value per B 153.77p 113.31p 131.37pshareNet asset value per C 99.41p - -share F&C PRIVATE EQUITY TRUST plc RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Six months ended 31 Six months ended 31 January 2006 January 2005 Equity shareholders' funds at 1 August (as 76,641 66,928previously reported)Less revaluation of investment from mid to bid prices (186) (153)Add dividends accrued 6,384 7,575 Equity shareholders' funds at 1 August (as 82,839 74,350restated) Return on ordinary activities after taxation 11,296 9,545Dividends paid (6,384) (7,575)Issue of C shares 49,701 - Equity shareholders' funds at 31 January 137,452 76,320 F&C PRIVATE EQUITY TRUST plc STATEMENT OF CASH FLOW Year to Year to 31 January 2006 (unaudited) 31 January 2005 (audited) £000 £000 £000 £000 Operating activitiesNet dividends and interest received from 260 331investmentsInterest received from deposits 376 183Investment management fee (478) (347)Cash paid to and on behalf of directors (98) (35)Bank charges - (1)Other cash payments (823) (86) _______ _______Net cash (outflow) / inflow from operating (763) 45activities Servicing of financeInterest paid (69) (38) _______ _______Net cash outflow from servicing of finance (69) (38) TaxationCorporation tax paid (298) (1,279) _______ _______Net cash outflow from taxation (298) (1,279) Capital expenditure and financialinvestmentPayments to acquire investments (37,836) (7,922) Receipts from disposal of investments 38,342 12,085 _______ _______Net cash inflow from capital expenditure 506 4,163and financial investmentEquity dividends paid (6,384) (7,575) _______ _______ Net cash outflow before financing (7,008) (4,684) FinancingIssue of new C shares 3,558 - _______ _______ Net cash inflow from financing 3,558 - _______ _______ Decrease in cash (3,450) (4,684) _______ _______ Notes 1. The unaudited interim results have been prepared on the basis of theaccounting policies set out in the statutory accounts of the Company for theyear ended 31 July 2005 apart from the following in accordance with FRS 21 andFRS 26 effective for accounting periods commencing 1 January 2005. • Dividends payable by the Company are recognised in the period in whichthey are paid. As a result of this change the Company's shareholders' funds as at 31 July 2005have increased by £6,384,000 (being the special dividend of 7.5 pence per sharepaid on 26 August 2005 and the revenue dividends of 1.20 pence per share paid bythe A Pool and 1.40 pence per share paid by the B Pool on 9 December 2005) andthe Company's shareholders' funds as at 31 January 2005 have increased by£5,113,000 (being the special dividend of 7.0 pence per share paid on • by the APool and the revenue dividends of 0.30 pence per share paid by the A Pool and0.55 pence per share paid by the B Pool on •) • Quoted investments are now valued at bid prices. This has the effectof reducing the valuation of the investment portfolio by £186,000 as at 31 July2005 and £166,000 as at 31 January 2005. 2. Earnings for the first six months should not be taken as a guide tothe results of the full year. 3. The Directors have declared a special dividend of 7.5 pence per Ashare to be paid on 14th April 2006 to shareholders on the register on 17thMarch 2006, having an ex-dividend date of 15th March 2006. 4. These are not full statutory accounts in terms of Section 240 of theCompanies Act 1985. The full audited accounts for the year to 31 July 2005,which were unqualified, have been lodged with the Registrar of Companies. Afull interim report will be sent to shareholders in March 2005, and will beavailable for inspection at 80 George Street, Edinburgh, the registered officeof the Company. This information is provided by RNS The company news service from the London Stock Exchange