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28 Sep 2007 09:59
Pantheon International Participations PLC (PIP)
Preliminary Announcement of Results for the year ended 30 June 2007
CHAIRMAN'S STATEMENT
I am pleased to report a strong performance by PIP in the financial year to 30th June 2007, our 20th year. Net asset value per share increased by 15.4% to 919.2p while the ordinary share price did even better, increasing by 26.3% to 917.5p. These results compare to increases in the MSCI World index of 14.3% and the FTSE All Share index of 18.4% respectively.
Our total assets rose by ‚£169.3 million to ‚£610.3 million during the year, mainly as a result of an uplift in the value of investments and capital raising at the end of the year of ‚£100 million. This performance was achieved despite adverse currency movements, in particular the US dollar which declined 8.8% against sterling, resulting in a ‚£25.1 million reduction in the sterling value of the private equity portfolio.
INVESTMENT ACTIVITY
A buoyant environment in the private equity market globally during our past financial year ensured a healthy level of activity both in investment and realisations. PIP invested ‚£218.1 million in underlying private equity assets, an increase of 66% over the previous year. Of this amount, ‚£118.9 million was paid to meet investment calls arising from PIP's primary portfolio and ‚£99.2 million was applied to the secondary portfolio. The total amount of cash distributed to PIP as a result of investment realisations during the year was ‚£ 146.7 million. Of this amount, ‚£56.3 million came from the primary portfolio with ‚£90.4 million arising from the secondary portfolio.
PRIMARY COMMITMENTS
Consistent with such benign conditions, fundraising activity continued at the high levels seen in the previous year. While fund sizes typically expanded, particularly at the larger end of the market, access to many funds was restricted. Pantheon's relationships with top-tier private equity fund managers help to ensure that PIP gains access to top quality funds worldwide. PIP's commitments to primary investments reached its highest level of ‚£241.6 million over the year to the end June 2007, an increase of 52% over the previous year, encompassing twenty Europe-focused funds (‚£134.6 million), nineteen US-focused funds (‚£82.0 million) and a commitment of ‚£24.9 million to Pantheon's latest Asian fund of funds. Through these commitments PIP will continue to gain strategic access to buyout activity globally and to a lesser extent venture activity and special situations. In line with PIP's growing asset base, the Board increased the rate that PIP commits to primary funds from ‚£450 million to ‚£600 million over a three-year period.
SECONDARY COMMITMENTS
PIP committed ‚£145.0 million to twelve secondary transactions to purchase existing interests in private equity funds, an increase of 80% over last year's investment amount. Although a change in strategy continues to be the most common reason for a sale, it is notable that four of these twelve transactions arose through vendors actively rebalancing their private equity portfolios. The developing private equity secondary market should give rise to continued growth of more active portfolio management by institutional investors. A higher than usual weighting towards venture assets in secondary purchases in the year reflects Pantheon's view that good value could be purchased during this phase of the cycle, relative to pricing seen for secondary purchases of buyout assets.
MARKET REVIEW AND PROSPECTS
The profile of the private equity industry in the past year has increased as many familiar public companies in many major markets have become the focus of private equity groups. Availability of inexpensive debt finance helped fuel the buyout market bringing ever larger target companies within the investment scope of private equity. Many of the larger buyout groups continue to expand their reach beyond their home markets to become global investors. With such a rapidly growing profile comes increased scrutiny. Unions, politicians and the media have raised questions over private equity accountability. The private equity industry in the UK is proposing a voluntary code on disclosure to address questions raised and there is a consultation process currently underway. Of course greater accountability, through alignment of interests between management and owner, is at the heart of the successful private equity process, a fact that is recognised by its investors, so the industry remains confident that it can answer its critics. Nevertheless the case must be explained well to the increasing numbers who have a justifiable interest. Buyout fundraising exceeded expectations and surpassed the record-setting pace established in the previous year. Institutional investors worldwide increased their allocations to private equity which helped support the high level of fundraising.
The recent correction in the debt markets is expected in the short term to slow the pace of distributions from refinancings and slow the pace of investment activity by managers at the larger end of the market. In addition, levels of leverage in buyout transactions are likely to reduce. However, with continued strength in the world economy the mid-market should remain active with recovery in the larger end expected when liquidity returns to the debt markets. 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 centred around greater efficiency and building scale in middle market businesses. The venture markets continue to grow, with venture investment in the USA up 10% over the previous year. With 29% of the portfolio in venture capital funds, PIP is well placed to benefit from this growth in investment pending the development of a yet more favourable exit environment.
It is 20 years since PIP was founded with capital of ‚£12 million. PIP's substantial growth over the years is largely attributable to Pantheon's leading position in the market. The strategy that has successfully weathered the various financial storms over the last 20 years makes us confident that investing with many of the most talented private equity managers in the world, in a diversified strategy, is a sound basis for good performance in the future.
CAPITAL STRUCTURE
PIP issued ‚£100 million in value of ordinary shares during the year in order to increase the financing available to implement its investment strategy and in particular, to participate in secondary investments as they arise in the coming months. During the year PIP entered into new five year `standby' agreements with three institutional investors under which the investors have committed to subscribe, if called upon by PIP to do so, a total of ‚£70 million for new redeemable shares. This brings the total aggregate amount which institutional investors have committed, if required, to subscribe for new redeemable shares under standby agreements to ‚£120 million. In line with recent growth, the Company's borrowing facilities were increased to ‚£150 million. Consequently the Directors believe that PIP has sufficient financing to meet commitments and to continue its investment programme.
ANNUAL GENERAL MEETING AND PRESENTATION
The Annual General Meeting of the Company will take place at 12 noon on 28th November 2007 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 BARTLAMChairman28 September 2007INCOME STATEMENT (unaudited) For the year ended 30 June 2007 2006 Revenue Capital Total* Revenue Capital Total ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Gains on investments ** - 77,537 77,537 - 79,356 79,356 Currency (losses) / - (625) (625) - 263 263 gains on cash and borrowings Income
Dividends and interest 7,179 - 7,179 7,521 - 7,521
Investment management (7,189) (1,607) (8,796) (5,410) - (5,410) fee
Other expenses (1,152) (617) (1,769) (804) (141) (945)
Return on ordinary (1,162) 74,688 73,526 1,307 79,478 80,785 activities before
financing costs and tax Interest payable and (1,487) - (1,487) (852) - (852)similar charges Return on ordinary (2,649) 74,688 72,039 455 79,478 79,933 activities before tax Tax on ordinary - (1,297) (1,297) - (385) (385)activities Return on ordinary (2,649) 73,391 70,742 455 79,093 79,548 activities after tax
Return per ordinary and (4.76)p 131.89p 127.13p 0.80p 138.74p 139.54p 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 both prepared under guidance published by the Association of Investment Companies.
** Includes currency movements on investments.
RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS (unaudited)
Share Capital Share Special Capital Capital Revenue Total capital redemption premium reserve reserve- reserve- reserve reserve realised unrealised ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Movement for the year ended 30 June 2007 Opening 18,024 26 91,971 99,897 151,664 94,233 (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 26 183,139 99,861 187,543 131,745 (17,481) 610,261 Equity shareholders funds Movement for the year ended 30 June 2006 Opening 18,050 - 91,959 119,962 111,125 55,679 (15,287) 381,488 equity shareholders funds Return for - - - - 40,539 38,554 455 79,548 the year Buy back of (26) 26 - (20,065) - - - (20,065)redeemable shares Over accrual - - 12 - - - - 12 on costs of issue of redeemable shares Closing 18,024 26 91,971 99,897 151,664 94,233 (14,832) 440,983 Equity shareholders funds BALANCE SHEET (unaudited) As at 30 As at 30 June 2007 June 2006 ‚£'000 ‚£'000 Fixed assets Investments* 595,994 434,087 Current assets Debtors 2,018 1,882 Cash at bank 17,010 6,636 19,028 8,518 Creditors - amounts falling due within one 4,761 1,622 year Net current assets 14,267 6,896 Total assets less current liabilities 610,261 440,983 Capital and reserves Called-up share capital 25,428 18,024 Capital redemption reserve 26 26 Share premium account 183,139 91,971 Special reserve 99,861 99,897 Capital reserve 319,288 245,897 Revenue reserve (17,481) (14,832) Total equity shareholders' funds 610,261 440,983
* Includes fixed interest investments held for cash management purposes
As at 30 As at June 2007 30 June 2006 Number of Ordinary 67p 37,521,013 26,471,013 shares in issue Number of Redeemable 1p 28,871,255 28,871,255 shares in issue Net asset value per share 919.2p 796.8pCASHFLOW STATEMENT (unaudited) Year ended Year ended 30 June 2007 30 June 2006 ‚£'000 ‚£'000 Cash flow from operating activities Investment income received 7,107 7,701 Deposit and other interest received 12 - Investment management fees paid (6,372) (5,791) Secretarial fees paid (109) (133) Other cash payments (2,169) (616) Net cash (outflow) / inflow from (1,531) 1,161 operating activities Returns on investments and servicing of finance Revolving credit facility and (571) (10)overdraft interest paid Loan commitment and arrangement fees (1,071) (386)paid Redeemable share and PLN commitment (477) (500)fees paid Net cash outflow from returns on (2,119) (896)investment and servicing of finance Taxation Withholding tax suffered on limited (1,230) (438)partnership distributions Net cash outflow from taxation (1,230) (438) Capital expenditure and financial investment Purchases of investments (224,262) (135,888) Purchases of government securities (251,677) (417,027) Disposals of investments 149,337 154,271 Disposals of government securities 243,503 412,702 Realised currency gains (152) 9 Net cash (outflow) / inflow from (83,251) 14,067 capital expenditure and financial investment Net cash (outflow) / inflow before (88,131) 13,894 financing Financing Proceeds from issue of Ordinary shares 100,003 - Costs of Ordinary shares issue (968) 12 Payments to buy back Redeemable shares - (20,000) Costs of buy back of Redeemable shares (36) (65) Drawdown of loan 10,211 - Repayment of loan (10,211) - Realised currency gains on repayment 75 - of revolving credit facility Net cash inflow/(outflow) from 99,074 (20,053)financing Increase / (decrease) in cash 10,943 (6,159) Reconciliation of return on ordinary activities before tax and financing costs to net cash flow from operating activities Return on ordinary activities before 72,039 80,785 financing costs and tax Gains on investments (77,537) (79,356) Currency losses / (gains) on cash and 625 (263)borrowings Increase in accrued income 1,487 180 Increase / (decrease) in other 2,127 (212)creditors (Increase) / decrease in other debtors (272) 27 Net cash (outflow) / inflow from (1,531) 1,161 financing
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 2007 (2006: 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 2006 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 2007 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.comSigned on behalf of the BoardTom H. BartlamChairman
PANTHEON INTERNATIONAL PARTICIPATIONS PLC