BPET.L Regulatory News (BPET)

BMO Private Equity Trust PLC

· Share price total return for the three months of 1.9 per cent for the Ordinary Shares

· Quarterly dividend of 3.58p per Ordinary Share

Introduction

As at the 30 September 2018, the net assets of the Company were £272.4 million, giving a Net Asset Value ('NAV') per share of 368.45p and a total return over the quarter of 4.4%. For the first nine months of the year, the NAV total return was 6.3%. At 30 September the Company had net debt of £3.3 million. Outstanding undrawn commitments were £132.0 million with approximately £16 million of these to funds where the investment period has expired and where we would expect only a small proportion to be drawn.

The next quarterly dividend of 3.58p will be paid on 31 January 2019 to shareholders on the register on 11 January 2019. The ex-dividend date is 10 January 2019.

New Investments

There was one new fund commitment during the quarter, another just after the quarter end and one co-investment just after the quarter end.

$5 million was committed to MVM V, a transatlantic healthcare private equity fund that aims to make significant capital gains by investing in 'value-priced special situations' predominantly in the US and Europe. This firm has been well known to us for several years including through their leadership of our co-investment in Ambio.

After the quarter end the company made a $3.75 million co-investment in AccuVein, an MVM led investment. AccuVein makes a vein illumination device which makes it easier for doctors and nurses to find veins for injections. The device uses near infra-red technology and significantly improves the success rate in locating veins for patients where this is problematic, for example those with higher levels of fat. The company already has sales of $30 million and is set to grow further in its initial US market and further afield.

After the quarter end €6 million was committed to Corpfin Capital Fund V, a Spain focused mid-market buyout fund. We have previously invested with Corpfin in some of their earlier funds and they are one of the longest established buyout houses in Spain.

Our pre-existing portfolio of funds have been active building portfolios with several notable new holdings being established over the quarter. The total of drawdowns from funds and add-ons for co-investments during the quarter was £11.1 million bringing the total invested for the first nine months of the year to £51.6 million.

The new holdings are typically diverse by sector and geography.

In the UK Agilitas called £0.8 million for investment in Hydro International, a wastewater treatment business. Piper Private Equity invested £0.5 million in Bloom & Wild, an online flower gifting brand. Apposite Healthcare Fund II called £0.3 million for Medical Imaging Partnership for its acquisition of Prime Health, a Surrey based medical imaging company which specialises in sports medicine. August Equity IV was active calling £0.8 million for three investments; BAB (technology enabled compliance), Dental Partners (third largest dental group in the UK) and Fosters (low cost funeral directors). Ashtead, the Buckthorn led oil services co-investment, called £0.4 million to buyout some vendor loan notes at a discount.

In south east Europe our TRG led co-investment Pet Centar called an additional £1.3 million to fund the acquisitions of two leading pet care businesses in the region - Animax (Romania) and Mr Pet (Slovenia). In the Netherlands Volpi called £1.4 million for investment in Cyclomedia, a B2B information business providing geospatial data to government authorities in Europe and the USA. In Spain Corpfin called £0.6 million for Dimoldura (residential interior doors). In the Nordic region Procuritas VI called £0.3 million for Netcontrol, a Finland based developer of automation products and systems used in controlling electricity networks. Its products are in demand reflecting the move towards distributed renewable energy generation.

In the US our investment partners have also been active. Our co-investment in Sigma, which manufactures components for low voltage electrical products, has called an additional £0.7 million to fund an add on acquisition and a new manufacturing plant. Blue Point Capital Partners has invested £0.9 million in aggregate from its funds II and IV for YS Garments, an apparel manufacturer, based in Gardena, California which specialises in T shirts, tank tops, hoodies and jackets, mainly for the promotional market.

Realisations

The robust flow of exits continues and in the third quarter the proceeds from realisations and income amounted to £31.5 million, giving a total for the first nine months of the year of £61.4 million. This is 18% ahead of the aggregate realisations by this point last year.

The largest realisation, by some way, was the exit by MVM of 75% of our co-investment in pharmaceutical ingredient company Ambio. £17.4 million came in when Carlyle Group took over leadership of the deal. We retain 25% of our holding which is valued at £5.7 million. When we invested in October 2014 Ambio had revenues of $16.3 million and EBITDA of $3.1 million. During the four year holding period these have grown to $52.9m and $16.7m respectively. At the Carlyle exit valuation this investment has so far returned 5.0x cost with an IRR of 52%.

Another truly excellent result was achieved during the quarter by our US based investment partner Blue Point Capital with their spectacular exit of Selmet, a manufacturer of complex titanium investment castings serving the aerospace and defence industries. Selmet was sold in August to Cleveland based Consolidated Precision Products Corp. During the nearly seven year holding period EBITDA grew fivefold and the total return was 17x cost with an IRR of 55%. Our share of this was £4.0 million. Blue Point Capital II also exited steel couplings manufacturer Alco returning £0.7 million (1.5x cost, 7% IRR).

In Italy ILP III, a fund acquired with other Italian assets in a secondary transaction just over three years ago, exited the leading travel company Alpitour returning £1.9 million. We also co-invested in Alpitour when the company undertook a funding round in July 2016 and for this part of the investment we received £1.2 million which is 2.0x cost and an IRR of 37%. Also in Italy, the secondary position which we acquired in NEM Imprese III has started to pay off handsomely with three exits each of them at stronger IRRs than originally modelled. The combined proceeds were £1.3 million.

There were several other notable realisations. Inflexion Partnership Capital I sold digital billboard company Outdoor Plus to Global Radio returning £0.4 million (2.0x, 47% IRR). August Equity III sold farm and production animal veterinary group Origin to Vet Partners, another August investee company. This returned £0.4 million (1.6x cost). Vet Partners was itself sold on soon afterwards to BC Partners. Argan Capital completed the take private of Polish fire and security equipment company AAT from the Warsaw Stock Exchange. It was then acquired by an Argan managed SPV returning £0.4 million which represents 2.5x cost and an IRR of 11% for the main Argan Fund. In Germany Chequers Capital XVI sold DFG, the largest intensive care provider in Germany to Advent International returning £0.4 million (2.0x cost, 14.1% IRR).

Valuation Changes

The largest valuation change was the £5.8 million uplift associated with the previously announced partial realisation of Ambio. There were a number of other transaction based uplifts. Chequers Capital XVI has agreed to sell Italian manufacturer of linear motion components and systems Rollon to US listed company Timken and the exit valuation gives a £0.5 million uplift. Swiss based chemicals company Schaetti has merged with Dakota giving a valuation uplift of £0.8 million. Ashtead the Aberdeen based oil services company, which has recently merged with competitor Forum Subsea Rentals, has been trading well and is uplifted by £1.8 million. In the US Graycliff has successfully refinanced North American Logistics Group leading to an uplift of £0.5 million. In France Astorg VI has uplifted Autoform, its software company servicing the automotive industry, reflecting strong trading and this increases the valuation of our holding by £0.4 million.

Babington, the provider of apprenticeships and other training courses, has, in common with the rest of the industry, seen some erosion of profitability as the new levy based system settles down. The valuation is down by £1.4 million to reflect what is expected to be a temporary dip in profitability.

Financing

At the end of the quarter the company had just £3.3 million of net debt. This effectively leaves almost all of the £70 million borrowing facility comprising term loan and revolving credit facility available to fund any investments which are not covered by realisations. This provides the company with considerable scope to take advantage of opportunities to acquire secondary positions and co-investments as well as funding the ongoing drawdowns from our fund portfolio. The impact of currency movements this quarter has been small with the slight weakening of sterling having contributed approximately 0.5% to the valuation uplift.

Outlook

Just under half of the portfolio by value is invested in the UK. This is the broadest and deepest private equity market in Europe and in most years it is the single largest national market by value and number of deals. The balance of our portfolio is invested largely in Continental Europe with the exception of an enduring and very useful proportion invested in North America and a smaller case by case involvement in selected global funds. As the UK negotiates its exit from the EU and while the precise terms of this are being finalised and ratified the companies in our portfolio are to differing degrees adopting strategies to adjust to the post Brexit world. Prudence requires that investment decisions should be based on a worst case scenario even if that is undesirable and unlikely. Apart from a brief hiatus immediately after the 2016 referendum there has been a 'business as usual' attitude prevailing amongst the private equity market participants in the UK and Europe. The most recent data on the price of private equity deals in Europe suggests that after a steady rise over a number of years there is some sign of flattening in the price of new deals. The relatively lower prices in the mid-market and the lesser use of debt in the capital structure of buyouts remain as distinctive and attractive features of this tier. There is no doubt that economic growth in the UK has been constrained in the run up to Brexit and Continental Europe after years of lagging behind the UK has recently seen slightly higher growth rates, although this varies by country and region. The use of Private Equity as a means of financing the growth of smaller and medium sized companies is increasing steadily across Europe and this coupled with a supportive economic background and the vast number of enterprises which could usefully adopt private equity underpins strong and diverse dealflow. The performance of our portfolio for the year to date provides confidence of further progress for shareholders in the remainder of the year.

Hamish Mair

Investment Manager

BMO Investment Business Limited 

BMO PRIVATE EQUITY TRUST PLC

Statement of Comprehensive Income for the

nine months ended 30 September 2018 (unaudited)

BMO PRIVATE EQUITY TRUST PLC

Statement of Comprehensive Income for the

nine months ended 30 September 2017 (unaudited)

BMO PRIVATE EQUITY TRUST PLC

Statement of Comprehensive Income for the

year ended 31 December 2017 (audited)

BMO PRIVATE EQUITY TRUST PLC

Balance Sheet

BMO PRIVATE EQUITY TRUST PLC

Reconciliation of Movements in Shareholders' Funds

1. The unaudited quarterly results have been prepared on the basis of the accounting policies set out in the statutory accounts of the Company for the year ended 31 December 2017.

2. Investment management fee:

3. Finance costs:

4. The return per Ordinary Share is based on a net profit on ordinary activities after taxation of £16,196,000 (30 September 2017 - £12,182,000; 31 December 2017 - profit of £14,529,000) and on 73,941,429 (30 September 2017 - 73,941,429; 31 December 2017 - 73,941,429) shares, being the weighted average number of Ordinary Shares in issue during the period.

5. The net asset value per Ordinary Share is based on net assets at the period end of £272,436,000, (30 September 2017 - £266,914,000; 31 December 2017 - £264,144,000) and on 73,941,429 (30 September 2017 - 73,941,429; 31 December 2017 - 73,941,429) shares, being the number of Ordinary Shares in issue at the period end.

6. The financial information for the nine months ended 30 September 2018, which has not been audited or reviewed by the Company's auditor, comprises non-statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2017, on which the auditor issued an unqualified report, have been lodged with the Registrar of Companies. The quarterly report is available on the Company's website www.bmoprivateequitytrust.com

Legal Entity Identifier: 2138009FW98WZFCGRN66

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