Dunedin Ent.it. Regulatory News (DNE)

15 Dec 2005 07:00

Dunedin Enterprise Inv Trust PLC15 December 2005 For release 07.00am 15 December 2005 Dunedin Enterprise Investment Trust PLC ("Dunedin Enterprise" or "the Trust") Interim Results for six months ended 31 October 2005 Dunedin Enterprise Investment Trust PLC, the private equity investment trustwhich specialises in the provision of private equity for management buyouts,management buyins and growing businesses, announces its interim results for thesix months ended 31 October 2005. Highlights for the period: • Net asset value per share up by 8.5% to 451.3p per share • Share price up by 18.8% to 411p • New investments of £14 million • Interim dividend of 2.0p per share, up 5% • Realisations of £10 million • 10 largest investments account for 61.7% of net assets Comparative Performance Periods to 31 October 2005 FTSE Small Cap FTSE All Share (ex Inv Cos) (ex Inv Cos) Net asset value Share price Index Index Six months +8.5%* +18.8% +6.2% +11.0%One year +18.5%* +42.7% +14.3% +15.7%Three years +58.3% +84.3% +66.9% +36.8%Five years +7.6% +14.6% -8.4% -13.4%Ten years +105.8% +119.8% +54.0% +53.7% * these net asset values have been calculated using net asset values restated toreflect changes in UK GAAP. See notes 2 and 3 to the accounts for the impact ofthese changes and further details of the adjustments that have been made. Highlights since the period end: • Davenham Group flotation in November realised £11.2 million, a return of 31% over five years • Acquisition of Sand Aire Private Equity by Dunedin Capital Partners in November • Inclusion in the FTSE All Share Index effective 19 December 2005 Edward Dawnay, Chairman of Dunedin Enterprise Investment Trust PLC, commented: "The portfolio continues to perform satisfactorily and there is a prospect offurther realisations in the second half of the year. Following the acquisitionof Sand Aire Private Equity, your Manager now has an investment team in Londonwhich will enhance its ability to source new transactions." For further information please contact Ross Marshall Peter Binns/Chris SteeleChief Executive Binns & Co PR LtdDunedin Capital Partners 020 7786 96000131 225 669907768 794 180ross.marshall@dunedin.com Notes to Editors Dunedin Enterprise Investment Trust PLC is managed by Dunedin Capital PartnersLimited. Dunedin Capital Partners Limited is an independent private equitycompany owned by its directors. The company specialises in providing equityfinance for management buyouts, management buyins and growing businesses with atransaction size of £10 - 50 million. It operates throughout the United Kingdomfrom its offices in Edinburgh and London. Dunedin Capital Partners is itself the result of a management buyout which tookplace in 1996. Dunedin Enterprise's primary objective is to achieve substantial long termgrowth in its assets through capital gains from its investments. For more information on Dunedin Enterprise, its portfolio and investmentapproach, please visit the website www.dunedin.com. Investors can buy shares in the company through regular savings, PEP/ISA andpension plans. For further information, call the Aberdeen Asset Managershelpline on 0800 028 6789 or visit the website atwww.dunedinenterprisetrust.co.uk.com. Manager's Review Overview The results for the six months to 31 October 2005 represent further progress forDunedin Enterprise Investment Trust. Continued momentum was achieved in building net asset value and the investmentfocus remained at the lower-end of the mid-market, with investments inmanagement buyins and buyouts with a transaction size of between £10 million and£50 million. The unaudited net asset value attributable to ordinary shareholders at 31October 2005 was £137.0 million compared to £126.3 million at 30 April 2005.Net asset value per share increased by 8.5% in the six months to 31 October 2005from 415.9p to 451.3p per ordinary share. The increase of 8.5% compares to anincrease of 6.2% in the FTSE Small Cap Index (ex investment companies) over thesame period. During the same six month period, the share price of DunedinEnterprise rose from 346p to 411p, an 18.8% increase. In the half year, Dunedin Enterprise invested £14.0 million in two newinvestments and six follow-on investments. Disposals by Dunedin Enterpriseduring the half year realised £10.0 million and produced a gain of £2.0 millionover valuations at 30 April 2005, a 25% uplift. Following the half year, Davenham achieved a successful AIM listing on 22November 2005. Dunedin Enterprise realised £11.2 million on listing andretained a 10% interest in the company. Investments In June 2005, Dunedin Enterprise invested £7.0 million in the £27.0 millionmanagement buyout of ZVC Group ("Zenith"). Zenith is a niche provider ofbespoke fleet management services, normally to companies with car fleets ofbetween 250 and 1,500 cars. The company has a strong service culture, combinedwith a focus on the effective use of information technology, allowing it todevelop a blue chip client base including Asda, DuPont, Ernst & Young,Persimmon, Remploy and BUPA. In September 2005, Dunedin Enterprise invested £3.8 million in the managementbuyout of Practice Plan. Practice Plan is one of the UK's leading providers ofindependent payment schemes to dental practices. The company is involved in thecreation and facilitation of healthcare maintenance schemes for healthcareprofessionals. These are principally aimed at the dental sector but are alsotargeted at vets and opticians. A further £3.2 million was invested in existing portfolio companies. Dunedin Enterprise has made a commitment to two limited partnership funds in thehalf year. A £5.0 million commitment has been made to LGV5 a mid market UKbuyout fund managed by Legal & General Ventures. This affords DunedinEnterprise exposure to transactions at the upper end of UK mid market buyouts.The Company has also made a £10.0 million commitment to the Sand Aire EquityHarvest Fund which is expected to be drawndown over the next four years. Thisfund was formerly managed by Sand Aire Private Equity, which was purchased byyour Manager, Dunedin Capital Partners, in November 2005. The Sand Aire EquityHarvest Fund provides capital to enable owner-managers to develop their existingbusinesses without losing control, while creating opportunities for them tounlock the wealth they have built into their companies. Realisations Hayley Conference Centres, the provider of conference facilities, was soldduring the half year generating £3.9 million. This investment was acquired aspart of the Group Trust portfolio and Dunedin Enterprise has received capitaland income of £4.9 million in return for £2.0 million invested. This representsa total multiple of 2.4 and an annual return of 27%. Two further portfolio companies were realised which were originally purchased aspart of the Group Trust portfolio. Trident Components, the component designerand manufacturer for the automotive industry, and Cheynet, the manufacturer ofnarrow elastic fibres, were sold in the half year realising £2.6 million and£1.1 million respectively. This compares to valuations of £2.4 million and £0.8million respectively at 30 April 2005. A further £2.4 million was realised from portfolio companies through loan stockrepayments, preference share redemptions and other smaller disposals. In November 2005, Davenham, the provider of niche short term lending products,listed on AIM. Dunedin Enterprise made an investment of £4.9 million inDavenham in June 2000. During the period to listing Dunedin Enterprise hasreceived £13.6 million in capital and income proceeds and continues to hold aquoted shareholding which, valued at the November listing price of £2.54,equates to £6.5 million. This represents a money multiple of 4.1 times and areturn of 31% over five years. As at 31 October 2005, your Managers have valuedthe investment in Davenham based on the cash received subsequent to the periodend plus the value of the stock received less a discount of 25%. Results for the six months to 31 October 2005 The movement in net asset value is summarised in the table below: £'mNet asset value at 30 April 2005 126.3Unrealised valuation increases 14.8Unrealised valuation decreases (5.2)Realised profit over opening valuation 2.0Other capital movements (0.9)Net asset value at 31 October 2005 137.0 The valuation of the portfolio is in accordance with the International PrivateEquity and Venture Capital Valuation Guidelines and revised UK GAAPrequirements. The weighted average price earnings multiple used to value the portfolio at 31October 2005 was 8.3 (30 April 2005: 7.7), a discount of 43% to the FTSE AllShare price earnings multiple of 14.5 on that date (30 April 2005: 49% discountto the FTSE All Share multiple of 15.0). The majority of the unrealised valuation increases arise from four portfoliocompanies. An exit valuation placed on Davenham has given rise to an uplift of£3.5 million. A combination of debt reduction and positive movements in priceearnings ratios have led to valuation increases at Caledonian (£3.2 million),Letts Filofax (£1.9 million) and CGI (£1.6 million). Trading below plan at two portfolio companies accounts for £4.0 million of theunrealised valuation decreases. Your Manager is taking active steps to achievea return of value to these investments. Dividend The interim dividend has been increased by 5% to 2.0p per ordinary share. Thiswill be paid on 31 January 2006 to shareholders on the register at close ofbusiness on 23 December 2005. The ex-dividend date is 21 December 2005. Outlook Investors continue to look to increase their exposure to the Private EquitySector with its impressive long term performance record. Underlying portfolioshave continued to deliver strong returns and given a relatively stable economicenvironment this should continue during 2006. In general terms it has been aseller's market for some two years. Buying quality businesses at a competitiveprice has been a harder process. There is little to suggest that this state ofaffairs will alter in the coming year. The portfolio continues to perform satisfactorily and there is a prospect offurther realisations in the second half of the year. Following the acquisitionof Sand Aire Private Equity, your Manager now has a larger team in London whichwill enhance its ability to source new investment opportunities. For more information on Dunedin Enterprise, its portfolio and investmentapproach, please visit the website www.dunedin.com. Dunedin Capital Partners Limited14 December 2005 Ten Largest Investmentsby value at 31 October 2005 Company name Approx. Cost of Directors' Percentage of percentage investment valuation net assets of equity £'000 £'000 % %*Letts Filofax Group Limited 41.1 345 17,358 12.7Davenham Group Holdings Limited 34.4** 4,960 16,093 11.7Caledonian Building Systems Limited 32.4 3,808 12,702 9.3CGI Group Limited 37.9 5,941 8,012 5.8ZVC Group Limited 18.3 6,980 6,980 5.1Dunedin Buyout Fund LP 13.0 3,164 6,193 4.5New Horizons (Childcare) Holdings Limited 27.8 5,870 5,870 4.3Portman Holdings Limited 16.8 2,266 4,232 3.1Practice Plan Group (Holdings) Limited 22.9 3,800 3,800 2.8ABI (UK) Group Limited 18.5 185 3,284 2.4 37,319 84,524 61.7 * 'Approx. percentage of equity' relates to ordinary share capital of therelevant company and assumes full exercise of outstanding options, warrants andconversion rights. ** Equity percentage prior to listing. Overview of Portfolio Analysed by valuation basis 31 October 30 April 2005 2005 A Price of recent investment 22% 21%B Earnings multiple 54% 72%C Imminent sale price 19% 4%D Net assets 5% 3% Analysed by industry sector 31 October 30 April 2005 2005 A Construction and building materials 21% 19%B Consumer products and services 18% 21%C Financial services 18% 18%D Healthcare 8% 8%E Leisure and hotels 9% 11%F Specialist manufacturing 4% 8%G Support services 22% 15% Analysed by deal type 31 October 30 April 2005 2005 A Management buyouts/buyins 82% 81%B Buyout funds 13% 13%C Technology funds 3% 3%D Other 2% 3% Analysed by age of investment 31 October 30 April 2005 2005 A 5 years 40% 23% Statement of Total Returnfor the six months ended 31 October 2005 Unaudited Restated unaudited Restated audited Six months ended 31 October 2005 Six months ended 31 October 2004 Year ended 30 April 2005 Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Gains and loses on investments - 11,597 11,597 - 10,890 10,890 - 20,350 20,350held at fair valueIncome 2,931 - 2,931 1,953 - 1,953 5,224 - 5,224Investment management charges (361) (917) (1,278) (304) (887) (1,191) (636) (1,799) (2,435)Other expenses (242) - (242) (211) - (211) (498) - (498)Net return before finance costs 2,328 10,680 13,008 1,438 10,003 11,441 4,090 18,551 22,641and taxationInterest payable and similar (27) (81) (108) (31) (95) (126) (62) (185) (247)chargesReturn on ordinary activities 2,301 10,599 12,900 1,407 9,908 11,315 4,028 18,366 22,394before taxationTax on ordinary activities (296) 296 - (362) 362 - (1,117) 1,117 -Return attributable to equity 2,005 10,895 12,900 1,045 10,270 11,315 2,911 19,483 22,394shareholders Earnings per ordinary shareBasic and diluted 42.5p 36.8p 73.2p The total column of this statement represents the profit and loss account of theCompany. All items in the above statement derive from continuing operations. Statement of Changes in Equityfor the six months ended 31 October 2005 Unaudited six months ended 31 October 2005 Share Capital Capital Capital Share premium redemption reserve - reserve - Revenue Total capital account reserve realised unrealised account equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening balance (restated) 7,592 47,600 334 51,709 14,459 4,609 126,303Profit for the period - - - (5,544) 16,439 2,005 12,900attributableDividends declared - - - - - (2,156) (2,156)Closing balance 7,592 47,600 334 46,165 30,898 4,458 137,047 Unaudited six months ended 31 October 2004 Share Capital Capital Capital Share premium redemption reserve - reserve - Revenue Total capital account reserve realised unrealised account equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening balance (restated) 7,680 47,600 246 42,123 5,772 4,324 107,745Profit for the period - - - 3,990 6,280 1,045 11,315attributableDividends declared - - - - - (2,058) (2,058)Closing balance (restated) 7,680 47,600 246 46,113 12,052 3,311 117,002 Audited year ended 30 April 2005 Share Capital Capital Capital Share premium redemption reserve - reserve - Revenue Total capital account reserve realised unrealised account equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 Opening balance (restated) 7,680 47,600 246 42,123 5,772 4,324 107,745Profit for the period - - - 10,796 8,687 2,911 22,394attributableDividends declared - - - - - (2,626) (2,626)Purchase of own shares (88) - 88 (1,210) - - (1,210)Closing balance (restated) 7,592 47,600 334 51,709 14,459 4,609 126,303 Balance Sheetas at 31 October 2005 Restated Restated Unaudited unaudited audited 31 October 31 October 30 April 2005 2004 2005 £'000 £'000 £'000Non-current assetsInvestments held at fair valueFixed asset investments 131,840 113,110 121,197 Current assetsTrade and other receivables 274 185 179Cash and cash equivalents 4,978 5,165 5,025 5,252 5,350 5,204Current liabilitiesTrade and other payables (45) (39) (98) Non-current liabilities - (1,419) - Net assets 137,047 117,002 126,303 Capital and reservesCalled up share capital 7,592 7,680 7,592Share premium 47,600 47,600 47,600Capital redemption reserve 334 246 334Capital reserve - realised 46,165 46,113 51,709Capital reserve - unrealised 30,898 12,052 14,459Revenue reserve 4,458 3,311 4,609 Total equity 137,047 117,002 126,303 Net asset value per share 451.3p 380.8p 415.9p Cash Flow Statementfor the six months ended 31 October 2005 Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 October 2005 31 October 2004 30 April 2005 £'000 £'000 £'000 £'000 £'000 £'000 Net cash inflow from operating activities 1,263 715 2,443 Servicing of financeInterest paid (108) (126) (247) FinancingPurchase of investments (13,994) (4,507) (22,126)Purchase of 'AAA' rated money market funds (5,655) (9,587) (17,326)Sale of investments 10,003 13,669 36,499Sale of 'AAA' rated money market funds 10,600 2,000 6,000Net cash inflow from financial investment 954 1,575 3,047 Equity dividends paid (2,156) (2,049) (2,626) Net cash (outflow)/inflow (47) 115 2,617 FinancingPurchase of ordinary shares - - (1,210)Currency loan - - (1,432) (Decrease)/increase in cash at bank (47) 115 (25) Notes to the Accounts 1. Accounting basis and policies a. Accounting convention The accounts have been prepared under the historical cost convention, modifiedto include the revaluation of investments and in accordance with applicableAccounting Standards and with the Statement of Recommended Practice ("SORP") forInvestment Trust Companies. b. Associated undertakings Those private equity investments that may be termed associated undertakings arecarried at fair value in accordance with the Company's normal policy and are notequity accounted as required by the Companies Act 1985. The Directors considerthat, as these investments are held as part of the Company's portfolio with aview to the ultimate realisation of capital gains, equity accounting would notgive a true and fair view of the Company's interests in these investments. Thequantification of the effect of this departure is not practicable. The policy tocontinue to investment account is specifically permitted under FRS 9 "Associatesand Joint Ventures", where venture capital entities hold investments as part ofa portfolio. c. Investment income Dividends receivable on quoted equity shares are brought into account on theex-dividend basis. Dividends receivable on equity shares where no ex-dividenddate is applicable are brought into account when the Group's right to receivepayment is established. Interest income is accounted for on an effective yieldbasis except where there is uncertainty as to whether the interest will bereceived. Franked investment income is reported net of tax credits in accordancewith FRS 16 "Current Tax". d. Management and finance expenses The accounting method for management fees (inclusive of any irrecoverable VATthereon) and finance expenses is to charge 75% to capital. This represents thecapital element of the Board's expected long term return from the portfolio. e. Investments The Trust's investments are all classified as investments and are designated atfair value through profit or loss. Gains and losses on realisation are dealtwith through the statement of total return and taken to realised reserve. Thedifference between the fair value of investments and cost is shown as anunrealised gain or loss in the statement of total return and taken to unrealisedcapital reserve. Investments are valued by the Directors, as advised by the Investment Manager,at fair value according to the following rules and also with appropriate regardto UK GAAP and the International Private Equity and Venture Capital ValuationGuidelines. All unquoted investments are valued according to one of the following bases: i) price of recent transaction,ii) earnings multiple,iii) open market value, oriv) net assets. Investments are only valued at the price of a recent transaction for a limitedperiod after the date of acquisition, otherwise investments are valued on one ofthe other bases detailed above. Generally the earnings multiple basis ofvaluation will be used. When valuing on an earnings multiple basis, fully taxedmaintainable earnings are multiplied by an appropriate price/earnings multiple.This is normally related to a comparable quoted sector with adjustments made forrisks and earnings growth prospects of the underlying company. A marketability discount, in the range of 10% to 30% is applied to theinvestment valuation, based on the likely timing of exit and the influence overthat exit. When investments have obtained an exit (either by listing or trade sale) afterthe valuation date but before finalisation of the relevant accounts (interim orfinal), the valuation is based on the exit valuation. Listed investments are valued at bid price. 2. Major differences under the revised requirements of UK GAAP The following adjustments have been made to the Company's financial statements,arising from the revised requirements of UK GAAP. Adjustments to comparative balance sheets: (i) Dividends are not recognised as a liability in the balance sheet untildeclared. Therefore the final dividends accrued in respect of the year ended 30April 2004 and the interim dividend in respect of the six month period ended 31October 2004 have been eliminated from their respective balance sheets and arenow included in the statement of changes in equity in the periods in which theywere declared. All comparatives have been restated accordingly. (ii) Listed investments which were previously reported at mid-market value arenow shown at bid price. 3. Reconciliation of net assets and profit The analysis below shows a reconciliation of net assets and profit as reportedunder UK GAAP to the revised net assets and profit under the current UK GAAPrequirements. Reconciliation of profit attributable to equity shareholders Six months to 31 Year to 30 October 2004 April 2005 £'000 £'000 Profit after tax as previously stated 1,045 2,911Capital return after tax as previously stated 9,964 19,394Removal of discount on listed financial investments 306 89 Profit after tax restated 11,315 22,394 Reconciliation of equity 30 April 2004 31 October 2004 30 April 2005 £'000 £'000 £'000 Total equity as previously stated 105,687 116,112 124,058Removal of discount on listed financial investments - 306 89Dividend recognition 2,058 584 2,156 Total equity restated 107,745 117,002 126,303 4. Dividends Six months to 31 Six months to 31 Year to 30 October 2005 October 2004 April 2005 £'000 £'000 £'000 Dividends declared in the period 2,156 2,058 2,626 The Directors have proposed a dividend of 2.0p per share for the half year to 31October 2005, this equates to £607,399. 5. Earnings per share Six months to 31 Six months to 31 Year to 30 October 2005 October 2004 April 2005 Revenue return per ordinary share 6.6p 3.4p 9.5pCapital return per ordinary share 35.9p 33.4p 63.7pEarnings per ordinary share (basic and diluted) 42.5p 36.8p 73.2pWeighted average number of shares 30,369,943 30,721,941 30,597,536 6. Financial Statements The financial statements set out above do not constitute the Trust's statutoryaccounts for the six months ended 31 October 2005 or 31 October 2004. Theunrevised financial information for the year ended 30 April 2005 has beenextracted from the Annual Report and Accounts of the Company which have beenfiled with the Registrar of Companies. The auditors' report on those accountswas unqualified. This information is provided by RNS The company news service from the London Stock Exchange