Last checked at 
25 Sep 2008 10:47
`Pantheon International Participations PLC (PIP)
Preliminary Announcement of Results for the year ended 30 June 2008
CHAIRMAN'S STATEMENT
I am pleased to report an increase of 20.6% in PIP's NAV per share in the financial year to 30th June 2008. However, the ordinary share price fell by 18.3% as the discount widened to 32.4% from 0.2% at the beginning of the year. In part, this was due to the market's increasing concerns over the effect of recent equity market volatility on private equity valuations and the current uncertain outlook for corporate profits.
Our net assets rose by ‚£125.8 million to ‚£736.1 million during the year, mainly as a result of an uplift in the value of investments. This performance was aided by currency movements, in particular, the strengthening of the euro which appreciated 15.0% against sterling, resulting in a ‚£31m increase in the sterling value of the private equity portfolio.
INVESTMENT ACTIVITY
The lack of availability of debt and an increase in investor uncertainty has resulted in reduced activity levels in the market. These conditions contributed to a reduction in distributions and, to a lesser degree, a slower rate of new investment achieved through our primary programme in the second half of the year. In the year, PIP invested ‚£272.5 million in underlying private equity assets. Of this amount, ‚£145.4m was paid to meet investment calls arising from PIP's primary portfolio and ‚£127.1m was applied to the secondary portfolio to complete 13 new secondary purchases and to pay further calls. The total amount of cash distributed to PIP as a result of investment realisations during the year was ‚£133.0 million. Of this amount, ‚£51.3m came from the primary portfolio with ‚£81.7m arising from the secondary portfolio.
PRIMARY COMMITMENTS
Despite the challenging market conditions, the fundraising environment remained active. During tough economic periods, the dispersion of performance in private equity funds tends to increase. Pantheon's relationships with top tier private equity fund managers helps to ensure that PIP gains access to top quality funds worldwide - a factor that is critical to achieving good performance.
PIP committed a total of ‚£237.0 million to primary funds, encompassing 13 Europe-focused funds (‚£161.0m), 22 US-focused funds (‚£72.5m) and one Israeli-focused fund (‚£3.5m). In addition, PIP continued to invest in Asia via Pantheon's Asian fund of funds, which committed to 15 new funds during the year.
SECONDARY COMMITMENTS AND CO-INVESTMENTS
PIP committed ‚£112.5 million to 13 secondary transactions to purchase existing interests in private equity funds. More than half of the value of these transactions was buyout focused, with the remainder focused on venture capital and special situations.
In recent times, changes in investor strategy and the rebalancing of portfolios have been the most common reasons for sales. However, the debt market correction is increasing deal flow from investors seeking liquidity. The large flow of capital into the private equity market prior to the credit crisis should increase the supply of attractive opportunities.
PIP committed ‚£6.9m to 4 direct co-investments as part of its strategy to deploy additional capital selectively alongside top tier managers.
MARKET REVIEW AND PROSPECTS
Since August last year, the market has been increasingly characterised by the lack of available debt financing following the "credit crunch" and a weaker economic outlook. The inexpensive loans offered to buyout firms over the past few years are no longer readily available, particularly at the larger end of the market. As a result, in the second half of the financial year, we have seen in the buyout market a reduction in large transactions, secondary buyout activity and debt recapitalisations. Relatively speaking, the investment activity of venture capital firms has been less affected due to their lesser reliance on debt. However, both venture capital and buyout firms have been impacted by the slowing of the IPO and M&A markets, reducing exit opportunities and subsequent fund distributions.
As a result of the debt market correction, fears have mounted over possible knock-on effects to the wider economy, and in particular corporate profits. Early warning signs of recession and rising inflation rates have taken their toll on investor sentiment, with falls of around 13% and 9% in the FTSE All Share and MSCI World Indices respectively over PIP's reporting period. Most buyout assets are valued by comparison to listed companies, and because of the reporting time lag, the impact of falls in the valuation multiples of listed companies on private equity valuations remains to be seen. It would not be surprising if in certain circumstances some portfolio companies, especially those acquired on higher purchase multiples, or with reduced earnings or high levels of debt, experience pressure on valuations in the near term. Consequently, the outlook for returns in the buyout market is lower than the returns of the recent past. However, weak markets which may have a negative impact on valuations in the short term, can also present attractive investment opportunities. Lower valuations tend to provide circumstances where private equity managers can purchase good quality assets at attractive prices.
The diversification of PIP's portfolio across buyout, venture and special situations sectors, and across all major geographical regions of the private equity industry, should help mitigate any difficulties experienced by specific companies or sectors in the current economic conditions. As always, it is important for investors in private equity to ensure that they select the managers that are able to continue to deliver superior performance across the market cycle. Pantheon's strategy is to focus on managers that can demonstrate clear value creation. Much of this value creation is centered on greater efficiency and building scale in middle market businesses. The ability of PIP to benefit from Pantheon's truly global expertise and experience places it well for superior performance over the long term.
CAPITAL STRUCTURE AND FINANCING
As planned, during the year PIP increased by ‚£30m the total amount of "standby" commitments under which institutional investors have agreed to subscribe, if called upon by PIP to do so, for new redeemable shares. This brings the total aggregate amount under these "standby" agreements to ‚£150m.
As at 30th June 2008, PIP had utilised ‚£70m of its ‚£150m available bank loan facility during the year to facilitate the execution of its investment strategy. At the end of August, the Company had utilised a further ‚£34m.
In the coming quarters it is likely that calls will exceed distributions. While we have substantial facilities available to us, as referred to above, to meet the calls, it remains a key objective to continue to secure resources to enable PIP not only to fund outstanding commitments but also to commit to new investments. Until there is a full recovery in the level of distributions, PIP will suspend its new fund commitment programme to ensure that any cash resources not needed to finance outstanding commitments, can be applied to prioritising secondary activity.
ANNUAL GENERAL MEETING AND PRESENTATION
The Annual General Meeting of the Company will take place at 12 noon on 25th November 2008 at Pantheon's office. Pantheon will give a presentation on the progress of PIP's portfolio. Both the Directors and Pantheon look forward to meeting shareholders informally after the meeting.
TOM BARTLAMChairman25 September 2008INCOME STATEMENT (unaudited) For the year ended 30 June 2008 2007 Revenue Capital Total* Revenue Capital Total ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Gains on investments at - 137,351 137,351 - 77,537 77,537 fair value through profit or loss** Currency gains/(losses) - 310 310 - (625) (625)on cash and borrowings Investment income (Note 4,787 - 4,787 7,179 - 7,179 1) Investment management (9,768) (3,660) (13,428) (7,189) (1,607) (8,796)fees Other expenses (900) (454) (1,354) (1,152) (617) (1,769) Return on ordinary (5,881) 133,547 127,666 (1,162) 74,688 73,526 activities before financing costs and tax
Interest payable and (2,199) - (2,199) (1,487) - (1,487) similar charges/finance
costs Return on ordinary (8,080) 133,547 125,467 (2,649) 74,688 72,039 activities before tax Tax on ordinary 609 (275) 334 - (1,297) (1,297)activities
Return on ordinary (7,471) 133,272 125,801 (2,649) 73,391 70,742 activities after tax
for the financial year
Return per ordinary and (11.25)p 200.73p 189.48p (4.76)p 131.89p 127.13p redeemable share
All revenue and capital items in the above statement relate to continuing operations.
No operations were acquired or discontinued during the year.
* The total column of this statement represents the Company's profit and loss statement prepared in accordance with UK Accounting Standards. The supplementary revenue return and capital columns are prepared under guidance published by the Association of Investment Companies.
** Includes currency movements on investments.
There were no recognised gains or losses other than those passing through the income statement.
RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS (unaudited)
Share Share Capital Capital Capital Special Revenue Total capital premium reserve- reserve- reserve redemption realised unrealised reserve reserve ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Movement for the year ended 30 June 2008 Opening 25,428 183,139 26 187,543 131,745 99,861 (17,481) 610,261 equity shareholders' funds Return for - - - 39,961 93,311 - (7,471) 125,801 the year Expenses - 43 - - - - - 43 relating to issue of Ordinary shares written back Closing 25,428 183,182 26 227,504 225,056 99,861 (24,952) 736,105 Equity shareholders funds Movement for the year ended 30 June 2007 Opening 18,024 91,971 26 151,664 94,233 99,897 (14,832) 440,983 equity shareholders' funds Return for - - - 35,879 37,512 - (2,649) 70,742 the year Issue of 7,404 92,599 - - - - - 100,003 Ordinary shares Expenses - (1,431) - - - - - (1,431)relating to issue of Ordinary shares Additional - - - - - (36) - (36)costs of redemption of Redeemable shares Closing 25,428 183,139 26 187,543 131,745 99,861 (17,481) 610,261 Equity shareholders funds BALANCE SHEET (unaudited) As at 30 As at 30 June 2008 June 2007 ‚£'000 ‚£'000 Fixed assets Investments at fair value through profit 806,485 595,994*or loss Current assets Debtors 927 2,018 Cash at bank 8,801 17,010 9,728 19,028 Creditors - amounts falling due within one year Other creditors 7,888 4,761 Bank loan 69,966 - Bank overdraft 2,254 - 80,108 4,761 Net current assets (70,380) 14,267 Total assets less current liabilities 736,105 610,261 Capital and reserves Called-up share capital 25,428 25,428 Share premium account 183,182 183,139 Capital redemption reserve 26 26 Capital reserve - realised gains 227,504 187,543 Capital reserve - unrealised gains 225,056 131,745 Special reserve 99,861 99,861 Revenue reserve (24,952) (17,481) Total equity shareholders' funds 736,105 610,261
* Includes fixed interest investments held for cash management purposes
As at As at 30 June 2008 30 June 2007 Number of Ordinary 67p shares 37,521,013 37,521,013 in issue Number of Redeemable 1p shares 28,871,255 28,871,255 in issue Net asset value per share - 1108.7p 919.2pordinary and redeemable CASHFLOW STATEMENT (unaudited) Year ended Year ended 30 June 2008 30 June 2007 ‚£'000 ‚£'000 Cash flow from operating activities Investment income received 4,814 7,107 Deposit and other interest received 210 12 Investment management fees paid (9,198) (6,372) Secretarial fees paid (102) (109) Other cash payments (2,022) (2,169) Net cash (outflow) from operating (6,298) (1,531)activities Returns on investments and servicing of finance Revolving credit facility and (471) (571)overdraft interest paid Loan commitment and arrangement fees (552) (1,071)paid Redeemable share commitment fees paid (654) (477) Net cash (outflow) from returns on (1,677) (2,119)investment and servicing of finance Taxation Net taxation refund/(charge) 498 (1,230) Net cash inflow/(outflow) from 498 (1,230)taxation Capital expenditure and financial investment Purchases of investments (280,170) (224,262) Purchases of government securities (23,455) (251,677) Disposals of investments 136,172 149,337 Disposals of government securities 94,152 243,503 Realised currency (losses) (94) (152) Net cash (outflow) from capital (73,395) (83,251)expenditure and financial investment Net cash (outflow) before financing (80,872) (88,131) Financing Proceeds from issue of Ordinary - 100,003 shares Written back/costs of Ordinary shares 43 (968)issue Costs to redeem Redeemable shares - (36) Drawdown of loan 69,966 10,211 Repayment of loan - (10,211) Realised currency (losses)/gains on (594) 75 repayment of revolving credit facility Net cash inflow/(outflow) from 69,415 99,074 financing (Decrease)/increase in cash (11,457) 10,943 NOTE 1 - INCOME FROM INVESTMENTS As at 30 As at 30 June 2008 June 2007 ‚£'000 ‚£'000 Income from investments Unfranked dividends 3,037 6,312 Interest from US fixed interest - 37 investments Interest from UK fixed interest 1,540 763 investments Interest from European fixed interest - 55 investments 4,577 7,167 Other income Deposit interest 210 10 Exchange differences on income - 2 210 12 Total income 4,787 7,179 Total income comprises: Dividends 3,037 6,312 Interest 1,750 865 Exchange differences on income - 2 4,787 7,179 Analysis of income from investments Listed overseas - 92 Listed UK 1,540 763 Unlisted 3,037 6,312 4,577 7,167
These accounts have been prepared using the most recently published accounting standards and policies.
All investments held by the Company are classified as 'fair value through profit or loss'. For investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices at the close of business on the balance sheet date. For investments that are not actively traded on organised financial markets, fair value is determined using reliable valuation techniques as described in detail in the Company's last Annual Report.
The Directors do not recommend a dividend for the year ended 30 June 2008 (2007: Nil).
The above financial information does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The comparative financial information for the year ended 30 June 2007 is taken from the full accounts, which have been delivered to the Registrar of Companies and contained an unqualified audit report and did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain statements under S.237(2) or (3) of the Companies Act 1985. Statutory financial statements for the year ended 30 June 2008 have not yet been approved, audited or filed and will be delivered to the Registrar of Companies following the Annual General Meeting.
For further information please contact:
Rhoddy Swire, Director of Pantheon International Participations PLC - 020 7484 6200
Alastair Bruce, Pantheon Ventures Limited - 020 7484 6200
Andrew Lebus, Pantheon Ventures Limited - 020 7484 6200
Email: contactus@pipplc.com
vendor