RNS Number:1745S
F&C Private Equity Trust PLC
04 October 2005
To: Stock Exchange For immediate release:
4 October 2005
The Final Results announcement released this morning, 4 October 2005, under
RNS No 1490S contained 3 typographical errors. These
have been identified with an asterisk (*) in the full text reproduced below.
F&C Private Equity Trust plc
Annual results for the year to 31 July 2005
* NAV total return for the year of 37.6 per cent for the A Shares
* NAV total return for the year of 28.4 per cent for the B Shares
* New investments of #18.2 million during the year
* Realisations of #25.5 million during the year
* #49.8 million added to net assets by the acquisition of the assets
of Discovery Trust plc subsequent to the year end
Chairman's Statement
The international private equity market has continued the strong recovery that
began during 2004. This has been helped by buoyant* stockmarkets and continued
progress in most major economies. The profits of underlying companies have grown
and this has continued to attract the interest of investors leading to
considerable mergers and acquisition activity. The trust's portfolio has been a
beneficiary of this trend and has sustained a strong flow of realisations. We
have been able to invest much of this amount through funds in a wide range of
private companies internationally. The results for our shareholders have been
excellent.
At 31 July the net asset value per A share was 38.2p. In respect of this
financial year we have declared special dividends of 14.5p per A share. In
addition an interim dividend of 0.3p per A share has been paid. The directors
are recommending a final dividend of 1.2p giving a total dividend per A share
for the year of 1.5p. Taking all of these into account the NAV total return per
A share is 37.6% over the year.
At 31 July the net asset value per B share was 130.2p. An interim dividend of
0.55p has been paid and the directors are recommending a final dividend of 1.4p
giving a total dividend for the year of 1.95p. This gives a NAV total return for
the year of 28.4%.
There has been considerable activity in the portfolio during the year.
Realisations totalled #25.5m. This represents approximately 38% of the value of
the company at the beginning of the year. These realisations have funded the
special dividends for A shareholders and new investments for the B pool. New
investments for the B pool have totalled #18.2m. This is a substantial rate of
investment and is equivalent to 45% of the value of the B pool at the start of
the year.
Although the total amount so far returned to A shareholders by way of special
and ordinary dividend is over #68m, the A pool still stands at #25.6m and from
here it is expected that over the next twelve to eighteen months most of the
remaining assets will be liquidated, enabling the payment of further special
dividends. The remaining A pool contains several funds which have mature
holdings in a wide variety of sectors and geographies. The timing of the sale of
these companies depends on many factors but the managers of our funds are in all
cases directly incentivised to realise maximum value as quickly as possible.
In the B pool we now have a portfolio of thirty three funds, four direct
investments and five quoted companies. The underlying portfolio of companies now
numbers over 250. Through our investment partners we have access to the
expertise of over twenty different private equity specialist firms. It is a key
objective to maintain strong relationships with these managers and to build a
strong, but well diversified, portfolio. Many of the funds in our portfolio
focus on the mid market in their respective private equity markets. It is in
this tier that the most obvious future value lies. Also the majority of the
private equity groups that we back are emerging management groups. Experience
suggests that this type of accomplished, but relatively new firm
tends to be highly motivated and focused, giving us an excellent chance of
achieving premium returns for shareholders.
Lastly but very importantly the management contract of your company was
transferred from Martin Currie Investment Management Limited to F&C Asset
Management plc on 20 June 2005. The management team transferred with the Trust
thus maintaining the continuity of management which your board considered was in
the best interests of the company. At the same time we entered into an agreement
to acquire the assets of Discovery Trust. This was enabled by the agreement of
their shareholders and by the subscription of new C shares by Friends Provident.
The general meetings necessary to effect this transaction proceeded successfully
in August. The significantly increased scale which this transaction brings
should be of great benefit to our shareholders by improving the range of
investment opportunities open to the managers and by enhancing the liquidity and
rating of our shares.
David Simpson
Chairman
Manager's Review
The environment for private equity investment has been positive internationally.
There has been very strong deal flow in most major markets and confidence
amongst private equity practitioners is at a high ebb. Generally buoyant stock
markets and continued economic growth against a background of low inflation and
a liquid and optimistic banking sector has led to sustained high levels of
mergers and acquisition activity. The increasing adoption of private equity as a
means for financing the growth of smaller and medium sized private companies
means that the substantial increase in the size and influence of private equity
funds will not necessarily compromise future returns. However there are certain
sub sectors and geographies where there is a risk of oversupply of capital
pushing up prices to unreasonable levels. Key determinants of the success of
private equity fund managers will be the degree of pricing discipline maintained
and the avoidance of unduly stretched capital structures. The majority of funds
in our portfolio focus on the mid market tier and as it is generally well
populated with suitable target companies, yet in most markets there are still a
limited number of experienced private equity practitioners, the risk of
over-priced deals is somewhat lower. The acquisition multiples reported to us by
the funds in our portfolio appear reasonable given the economic conditions. For
certain mid market funds the appetite for larger deals by the bigger funds is a
distinct benefit as their portfolio companies are sold on to the larger private
equity funds. Indeed this activity is so prevalent that secondary buy-outs now
outrank trade sales as the most frequent form of exit.
Our portfolio has exposure to most of the world's private equity markets through
investments in over thirty funds and several direct investments. A private
equity fund of funds has twin aims. Firstly to maximise returns for
shareholders through identifying the better managers, funds and co-investments,
but secondly to reduce the risk associated with the asset class. The former aim
is achieved through careful analysis of the very wide range of investment
opportunities, focusing on both the quantitative and qualitative attributes of
each proposition and assessing these in the light of experience. The latter is
achieved through careful diversification. It is especially important to avoid
backing funds with very similar investment styles and target markets; otherwise
the dangers of over-concentration and self-competition will detract from
returns.
In addition to monitoring the funds and direct investments in our existing
portfolio our investment team reviews hundreds of new investment opportunities
each year. Only a small subset of these are selected as investments.
During the year we made new commitments to five funds and two direct
investments.
Our international investment mandate allows flexibility to invest up to 10%
outside Europe or North America. Some of this was utilised through our $5m
commitment to the AIG Global Emerging Markets Fund II. AIG Capital Partners,
the fund's manager, has an unrivalled infrastructure and capability for private
equity investment in emerging markets. Its approach is to invest only where a
company's business model has been
proven in developed markets. Maintaining a quality exposure to North America is
important and as part of this we made a $5m commitment to RCP II, a specialist
mid-market fund of funds group. This fund will give us exposure to up to
fifteen different US mid-market buy-out funds. This fund will be complementary
to our other US investments and may also act as a source of investment
opportunities in the most attractive tier of the world's largest private equity
market.
We have made two commitments to Pan-European buy-out funds in the mid and upper
mid market area. Firstly a Euro5m commitment to Montagu III. This is the first
fund following the management group's spin-out from the HSBC group. Whilst
highly experienced, Montagu is therefore an emerging manager. We have made a
commitment of Euro10m to the Candover 2005 Fund. This Pan-European fund is the 7th
by Candover that, in various guises, we have backed. Their past performance and
present attributes both justified our continued support.
It is our policy to cover the European mid market with a combination of larger
Pan-European firms, such as Candover and Montagu, and locally managed country
funds. In this latter category we committed Euro7m to Ciclad 4, a lower mid market
MBO fund based in Paris. This is the third fund by Ciclad in which we have
invested.
Up to 25% of the B-pool may be invested directly in private companies. This
capacity is used mainly for co-investments alongside a selected group of the
funds, and also with other management groups that we know well. During the year
we invested #1.3m, alongside Royal London Private Equity, for an 8.3% in Academy
Music Group, the UK's largest owner of live music venues. In the very different
aerospace sector we invested #2.8m for 12.5% of Global Design Technologies.
This company, which has proprietary critical expertise in aircraft componentry,
was brought to us by Stirling Square Capital Partners. They lead the deal and
have assembled a small syndicate to finance it. Also in the direct investment
area we made an additional investment of #1m in Pizza Express. Its parent
company acquired Ask Central, another restaurant chain, enhancing the group's
commercial position.
There has been a substantial amount of exit activity in our funds. #25.5m was
realised over the year from eighteen funds. These came from the partial or
total realisation of over fifty companies. Many private equity funds have
arranged recapitalisations for portfolio companies. Provided it does not burden
a company with too much debt, it is an effective way of boosting returns through
reducing the money at risk rapidly.
As would be expected a number of the larger realisations are from our
longstanding mature funds, but there are also encouraging realisations from many
of the newer funds.
The most significant sale at #9.2m was the Candover 1997 Fund's exit of French
frozen food retailer Picard Surgeles. The Brown Brothers Harriman 1818
Mezzanine Fund returned #2.5m from the sale of American Tire. International
Mezzanine Investment returned #1.3m from the sale of pesticide company,
Waterbury, and recapitalisation of JJI Lighting. This fund also returned #0.9m
from the sale of its mezzanine investment in Pescanova (Spanish fishing). Hicks
Muse Tate & Furst Fund IV returned a total of #3.4m through the sale of
International Seed, the recapitalisation of EurotaxGlass's, the sale of Clear
Channel and the final sale of Microtune. In addition, HMTF distributed #2.0m in
Clear Channel shares.
Other significant realisations came from a range of funds held in the B-pool.
The Candover 2001 Fund returned #1.4m. Much of this was from recapitalisations
of Springer (#0.8m) and Gala (#0.3m). Our holding in venture capital fund SEP
II yielded #0.7m reflecting its sales of Cambridge Silicon Radio, Searchspace
and some smaller holdings. Primary Capital II is also well into realisation
mode and distributed #1.1m including nearly #1.0m from the sale of book
retailer, The Works. Notable realisations came from our mezzanine funds. Hutton
Collins has returned #0.7m from several investments, Accession Mezzanine yielded
#0.3m from the redemption of its investment in Bulgarian Telecom. In Germany
DBAG IV has successfully sold engineering company Babcock Borsig, yielding
#0.7m. In the US Blue Point Capital returned #0.6m, again from several
investments.
New investment activity has been substantial with drawdowns and direct
investments totalling #18.2m. Again this was from a wide range of funds.
In the UK SEP II evidenced the recovery in confidence in the venture sector by
investing #1.0m. LGV 4 was very active deploying #1.3m in four companies and
Royal London Private Equity and Inflexion invested #0.7m and #0.6m respectively
on our behalf. Sand Aire invested #0.4m. The Pan European funds were also
active. Candover 2001 Fund drew #1.8m for six separate investments, including
Thule, the vehicle accessories company and Alcontrol, the food and environmental
testing company. TDR Capital invested #2.0m, including #1.2m into the closed
life insurance company, Pearl and #0.8m into Algeco, the European market leader
in modular buildings. In France, Chequers Capital have made four new
investments, drawing #0.2m. Nmas 1 has invested #0.8m in three companies,
including #0.5m in perfume retailer, Bodybell. Blue Point Capital invested
#0.25m in US mid market companies and Warburg Pincus VIII drew #0.8m for five
new investments.
This substantial level of investment and realisation activity has contributed to
the growth in NAV, through realisations, usually at a notable premium to the
latest valuation and through uplifts to unrealised investments. It has also
been necessary to downgrade the valuation of certain investments. Because of the
spread and strength of the underlying portfolio good net progress has been made.
The deal flow of fund opportunities and direct investments continues from every
private equity market. This will provide a means of investing the trust's
substantial additional resources arising from the transaction with Discovery
Trust. At present the economic background for most of our fund investments is
neutral or positive. The obvious adverse factor is the high oil price, which
will inevitably result in some moderation of growth. The private equity fund
managers, because of their influence on companies, have the chance of growing
profits and building value even in conditions of deceleration or stagnation.
This is a means of value enhancement that is not normally available to investors
in the quoted markets. This is why private equity over the medium term
outperforms the stock markets and is a major incentive for investment in the
asset class. The asset class is not without risks and a fund of funds structure
remains the sensible way of achieving diversification in quality funds and
companies to mitigate these risks and maximise returns.
Hamish Mair
Manager
For more information, please contact:
Hamish Mair 0131 465 1000
Martin Cassels
hamish.mair@fandc.com / martin.cassels@fandc.com
F&C PRIVATE EQUITY TRUST plc
Statement of total return (incorporating the revenue account*) for the
year ended 31 July 2005
Unaudited
Revenue Capital Total
#'000 #'000 #'000
Gains on investments - realised - 2,991 2,991
- unrealised - 16,730 16,730
Currency gains - 56 56
Income - franked 182 - 182
- unfranked 2,870 - 2,870
Investment management fee (170) (510) (680)
Other expenses (334) - (334)
_______ _______ _______
Net return before finance costs and taxation 2,548 19,267 21,815
Interest payable and similar charges (17) (49) (66)
_______ _______ _______
Return on ordinary activities before taxation 2,531 19,218 21,749
Taxation on ordinary activities (707) 168 (539)
_______ _______ _______
Return on ordinary activities after taxation for the financial 1,824 19,386 21,210
year
Dividends in respect of equity shares (1,770) (9,727) (11,497)
_______ _______ _______
Transfer to/(from) reserves 54 9,659 9,713
_______ _______ _______
Returns per A share 1.58p 12.94p 14.52p
_______ _______ _______
Returns per B share 1.96p 27.32p 29.28p
* The revenue column of this statement is the profit and loss account of the
company. All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued in the year.
F&C PRIVATE EQUITY TRUST plc
Statement of total return (incorporating the revenue account*) for the
year ended 31 July 2004
Audited
Revenue Capital Total
#'000 #'000 #'000
Gains/(losses) on investments - realised - 15,710 15,710
- unrealised - (14,226) (14,226)
Currency gains - 6 6
Income - franked 148 - 148
- unfranked 8,023 - 8,023
Investment management fee (206) (618) (824)
Other expenses (262) - (262)
_______ _______ _______
Net return before finance costs and taxation 7,703 872 8,575
Interest payable and similar charges (51) (154) (205)
_______ _______ _______
Return on ordinary activities before taxation 7,652 718 8,370
Taxation on ordinary activities (2,256) 232 (2,024)
_______ _______ _______
Return on ordinary activities after taxation for the financial 5,396 950 6,346
year
Dividends in respect of equity shares (5,394) (29,182) (34,576)
_______ _______ _______
Transfer to/(from) reserves 2 (28,232) (28,230)
_______ _______ _______
Returns per A share 5.16p 2.39p 7.55p
_______ _______ _______
Returns per B share 4.94p (1.67p) 3.27p
* The revenue column of this statement is the profit and loss account of the
company. All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued in the year.
F&C PRIVATE EQUITY TRUST plc
BALANCE SHEET
As at 31 July 2005 As at 31 July 2004
(unaudited) (audited)
#000 #000 #000 #000
Investments at market value
Listed on recognised exchanges 9,396 5,754
Unlisted at directors' valuation 65,434 55,974
_______ _______
74,830 61,728
Current assets
Debtors 108 622
Cash at bank 9,210 13,693
_______ _______
9,318 14,315
Creditors
Amounts falling due within one (7,507) (9,115)
year
_______ _______
Net current assets / (liabilities) 1,811 5,200
_______ _______
Net assets 76,641 66,928
_______ _______
Capital and reserves
Called up ordinary capital 1,063 1,063
Special distributable capital 40,000 40,000
reserve
Special distributable revenue 5,030 14,757
reserve
Realised capital reserve 49,624 46,968
Unrealised capital reserve (19,209) (35,939)
Revenue reserve 133 79
_______ _______
Total shareholders' funds 76,641 66,928
_______ _______
Net asset value per A share 38.17p 39.66p
Net asset value per B share 130.24p 102.91p
F&C PRIVATE EQUITY TRUST plc
STATEMENT OF CASH FLOW
Year to Year to
31 July 2005 (unaudited) 31 July 2004 (audited)
#000 #000 #000 #000
Operating activities
Net dividends and interest received from 3,233 7,644
investments
Interest received from deposits 348 446
Investment management fee (765) (888)
Cash paid to and on behalf of directors (72) (72)
Bank charges (4) (3)
Other cash payments (167) (171)
_______ _______
Net cash inflow from operating activities 2,573 6,956
Servicing of finance
Interest paid (68) (211)
_______ _______
Net cash outflow from servicing of finance (68) (211)
Taxation
Corporation tax paid (1,528) (1,618)
_______ _______
Net cash outflow from taxation (1,528) (1,618)
Capital expenditure and financial
investment
Payments to acquire investments (18,243) (10,628)
Receipts from disposal of investments 25,471 52,781
_______ _______
Net cash inflow from capital expenditure 7,228 42,153
and financial investment
Equity dividends paid (12,688) (38,062)
_______ _______
Net cash (outflow)/ inflow before financing (4,483) 9,218
Financing
Movement in short-term borrowings - (4,020)
_______ _______
Net cash outflow from financing - (4,020)
_______ _______
(Decrease) / increase in cash for the year (4,483) 5,198
_______ _______
The directors have recommended a final dividend of 1.20p per A share and 1.40p*
per B share, which makes a total for the year of 1.50p per A share and 1.95p*
per B share (2004: 5.15p per A share and 4.95p per B share). These will be paid
on 9 December 2005 to shareholders on the register on 28 November 2005.
The financial information contained within this preliminary announcement does
not constitute the company's statutory financial statements as defined in s240
of the Companies Act 1985 for the years ended 31 July 2005 or 2004, but is
derived from those financial statements. The statutory financial statements for
the year ended 31 July 2004 have been delivered to the registrar of companies
and contained an audit report which was unqualified and did not contain
statements under s237 (2) or (3) of the Companies Act 1985.
The annual results will be circulated to shareholders in the form of an annual
report, copies of which will be available at the company's registered office, 80
George Street, Edinburgh EH2 3BU.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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