RNS Number:3664Z
F&C Private Equity Trust PLC
06 March 2006
To: Stock Exchange For immediate release:
6 March 2006
F&C Private Equity Trust plc
Interim results for the six months to 31 January 2006 - updated
The interim results announcement contained a typographical error which has now
been corrected and updated:
* NAV total return per A Share of 3.3 per cent and a special dividend of 7.5p
* NAV total return per B Share of 18.1per cent
* #49.8 million added to net assets by the acquisition of the assets of Discovery Trust plc
* Conversion of #28.5m from C to B Shares
* Partial realisation and uplift of Gondola Holdings
* New investments of #16.2m
* Realisations of #12.2m
* 12 new commitments to funds, co-investments and secondaries
Chairman's Statement
The first half of the Company's financial year has been an eventful and
successful period. As intimated in the annual report the company has expanded
significantly through the acquisition of the assets of Discovery Trust in August
last year. This has given the Trust access to a wider range of investment
opportunities and is contributing to an improvement in the rating and liquidity
of our shares. The transaction also broadened our shareholder base and I would
like to welcome all our new shareholders who have joined the Company in recent
months. The international private equity market, in which we are invested
through a wide range of funds and direct investments, has enjoyed a further
strong period of success. Against a background of global economic growth, rising
stockmarkets, low interest rates and a liquid banking sector private equity
investors are exhibiting confidence in almost all areas.
The A shares, representing the increasingly concentrated portfolio of mature
funds and direct holdings, had a NAV per share at 31st January of 39.41p, an
increase over the first half of 3.3%. The A pool stands at #26.4m. #6.7m of
this is now in cash and I am pleased to announce that a further special dividend
of 7.5p will be paid to shareholders on 14th April. The A pool will continue to
return cash as its mature portfolio is realised. Future asset value movements
for the A pool will reflect the fortunes of a decreasing number of companies.
The B shares, representing the growing continuation pool invested in a balanced
range of private equity funds and direct investments, had a NAV per share at
31st January of 153.77p, an increase over the first half of 18.1%. Following the
conversion of the first tranche of C shares in December, which added #17.8m, the
net assets of the B pool stood at #79.6m at 31st January 2006. This will be
increased by a further #10.7m on the 10th March with the second conversion of C
shares.
The C shares, representing the reducing original portfolio of Discovery Trust,
had a NAV per share at 31st January of 99.41p, a slight decrease of 0.9% since
the pool was created on 17th August 2006. This portfolio is being steadily
realised and will in due course merge with the B pool. At the 31st January the C
pool had net assets of #31.5m. The second conversion will reduce this to
approximately #20.0m. #28.5m or 57% of the original C pool had been realised by
31st January. This is creditable progress and we expect substantially all of
the C pool to be realised by the final conversion in September.
There has been considerable comment that the private equity market is
approaching a peak and that prices in certain cases are so high as to prejudice
future returns. It is true that highly competitive auction processes are
increasingly common although most of this activity is in the larger private
equity deals where the companies may have an enterprise value of up to and above
#1bn. The great majority of the funds we invest in are focused on the mid market
of their specific countries and in this tier there is much less evidence that
deals are being done at unreasonable prices. Whilst truly proprietary dealflow
is rare, the mid market funds often source investments either directly or in a
partially intermediated arena with limited competition. At all levels and
geographies of the private equity industry the risks associated with paying too
much are likely to be increased if the growth of major economies is stalled,
potentially through the influence of higher oil prices or external shocks.
However we are to some extent protected by the managers of our funds being
directly incentivised to deliver strong absolute returns. The alignment of
interest between manager and investor in private equity funds is often better in
the mid market funds.
The mid market of private equity internationally is likely to remain inefficient
for some time and therefore to continue to reward the best managers with
excellent long term returns. The portfolio that we have in place and which is
continually being renewed has indeed delivered good returns in the first half of
the year. An encouraging feature of the period has been the broadly spread
progress with many funds recording gains through realisations and upward
revaluations reflecting strong underlying progress in company profits. We have
also seen excellent progress from our small but significant portfolio of direct
holdings.
David Simpson
Chairman
Manager's Review
The private equity market remains highly active at all levels with the size and
volume of deals and fund-raising at record levels in most markets and sub
sectors. The overall economic and stockmarket background has been benign and
whilst the future is not without challenges the current environment is
supportive to the endeavours of the private equity market participants. The
picture varies slightly from market to market but the prevailing mood is one of
optimism that the strong period of the last two years will be sustained, albeit
at a more moderate pace, for the foreseeable future. The funds and direct
investments in your portfolio have been active in harvesting gains and in laying
the foundations of future value creation.
Realisations from private equity funds and direct investments have totalled
#12.2m. Of this approximately #4m is attributable to the A pool and the
remainder is for the B pool. The C pool is being sold down in a controlled
fashion preserving shareholder value and over the period #29m has been raised.
The new investments made have amounted to #16.2m.
We have made several new commitments to private equity funds and we have also
completed two new direct investments and two secondary acquisitions. At the end
of the first half the A pool had net cash of #4.7m and this has since increased
to #6.7m. This allows a special dividend to A shareholders of 10p per share,
over 20% of the remaining net asset value. The B pool, which has been enlarged
by the first conversion of the C shares in December, had a cash or near cash
balance of #10.3m at the end of January. It is our policy to hold most of this
in short dated government stock pending draw downs for new investments. The C
pool also holds its accumulated cash balance mainly in gilts. At the end of
January the C pool's cash and near cash balance amounted to #11m. The remaining
investments of the C pool are valued at #20m. Taking all of these liquid assets
together the B pool has over #40m of short term capacity for private equity
investment before considering borrowing facilities of a further 20% of the total
assets of the pool. The effective value creating deployment of these funds in a
timely fashion is our key objective.
The outstanding undrawn commitments of the B pool at the end of January were
#91.5m. This is a substantial increase on the position at the beginning of the
financial year and reflects additional commitments of almost #70m which we have
made over the last six months. #9m of these new commitments had been drawn by
the end of January. With the acquisition of the Discovery Trust Assets, the
effective size of the B pool will almost double by the end of this financial
year. The range of investments of different ages in the B pool and their
consequent steady realisation process, which has begun, balanced by the
predictably steady rate of investment of the new fund commitments means that
this level of outstanding commitment is well within the capacity of the trust.
In total we made twelve new commitments to funds or direct investments. These
cover different geographies and investment management groups. Most of these are
involved in the mid market and several are to emerging management groups. At the
upper end of the mid market we have committed a total of Euro15m to the Candover
2005 Fund. In the middle and lower end of the mid market we have made or agreed
new commitments to LGV 5 (#5m), Primary Capital III (#8m) and RJD Partners II
(#8m). In the mid market of mezzanine we have backed the European fund Hutton
Collins II (Euro10m) and in later stage venture capital SEP III (#7m). In Germany
we have backed DBAG V (Euro8m) and in the USA the specialist mid market fund Camden
Partners Strategic Fund III ($5m).We completed two co-investments; firstly #1.5m
in Equidebt, a leading debt collection agency, in a transaction led by RJD
Partners. Secondly we invested #1m alongside Inflexion in Viking Moorings, the
market leader in the provision of moorings to oil rigs in the North Sea. We have
completed the acquisition of two secondary positions in funds. Both of these
were situations where not only did we know the managers well but had good
relations with the vendors who were selling for strategic reasons. We acquired a
#15m commitment in the well known UK mid market fund, Kleinwort Capital IV. The
acquisition cost for this partially drawn fund was #3m and we also assumed an
undrawn commitment of #8m. In the USA we acquired a $5m position in Brown
Brothers Harriman's 1818 Mezzanine Fund II. The consideration was $2m and we
assumed an undrawn commitment of $1.3m. In both cases these positions were
acquired at substantial discounts to asset value. Where we have good visibility
on the portfolios and knowledge of the management groups and where there is a
compelling valuation case we will look to add a small number of such secondaries
to complement our core portfolio.
The drawdowns by private equity funds were from over 20 funds for investment in
nearly 40 companies. The portfolio is very well spread across the international
mid market. The new investments illustrate this diversity. Accession Mezzanine
drew #0.4m for investment in two companies, Zaberd, a Polish traffic management
and road safety company and Jet Finance International, the leading consumer debt
provider in Bulgaria. Nmas 1 (Spain) made two new investments totalling #0.5m;
fitness club Holmes Place Iberia and outdoor lighting company Christer. Primary
Capital II invested #0.5m in Amber Travel, a specialist tour operator and #0.2m
in JI Entertainment, a platform company investing in late night bars and
restaurants. Candover 2001 fund invested #0.7m in Gala to fund its acquisition
of Coral Eurobet. This drawdown closely followed a slightly smaller distribution
of #0.5m from the recapitalisation of Gala. Hutton Collins invested #0.2m in
Loch Fyne Restaurants and Candover 2001 #0.2m into HTO Thales, the world leading
manufacturer of precision optical lenses. RJD Partners invested #0.6m in LMS,
the market leading provider of outsourced legal services to the remortgage
market. Candover 2005 Fund made its first investment of #0.5m into UPC Norway, a
cable company serving Oslo and the major cities of Southern Norway.
Realisations during the period have also come from a wide range of funds. Of the
older holdings at an advanced stage of realisation major distributions came in
from 1818 Mezzanine (#0.7m), Candover 1994 (#0.7m), Third Private Equity, now
managed by Nova Capital (#0.4m), Ciclad 2 (#0.1m) and Alta Berkeley V (#0.1m).
For the A pool only, we sold down the holding in Candover Investments yielding
#2.6m. Of the newer funds held only in the B pool significant inflows came from
TDR Capital (#0.9m), Blue Point Capital (#0.7m), Candover 2001 (#1.4m), Hutton
Collins (#0.4m) and Chequers Capital (#0.3m). Our most notable success however
was the proceeds from the listing of Gondola Holdings, the parent company of
Pizza Express, a TDR Capital led co-investment. This yielded #3.2m during the
first half. The remaining holding is valued at #5.8m and is subject to certain
lock in restrictions.
The substantial underlying activity in the portfolio has lead to a number of
mainly positive valuation changes. The biggest uplift was for Gondola Holdings.
This reflected the company's listing and subsequent strong performance in the
aftermarket. This illustrates the potential benefits of selective co-investments
with our investment partners. The next largest uplifts were for Candover
Investments PLC (#1.1m) and the Dakota Minnesota and Eastern Railroad (#1.1m), a
very longstanding, but strongly performing direct investment. Amongst our fund
investments this period saw numerous uplifts coming from all geographies. TDR
Capital (#0.8m) benefited from the Gondola listing and several other funds
including Nmas1 (#0.7m), RL Private Equity (#0.5m), Chequers Capital (#0.5m),
Blue Point (#0.4m), Candover 2001 (#0.4m) and Accession Mezzanine (#0.4m)
recorded uplifts in value reflecting good performance of underlying companies
and realisations either completed or pending. Of our co-investments it has been
possible to revalue Academy Music Group, because of strong trading (#0.4m). Our
recently acquired secondary holdings have also contributed with uplifts of #0.7m
for Kleinwort Capital IV and #0.3m for 1818 Mezzanine II. There were also some
downgrades. The most substantial were for our larger older holdings where some
of the 'tail end' investments have been struggling. Over the period the
influence of foreign exchange movements was minimal with an adverse effect of
#0.5m.
The outlook for the portfolio is good with the broadly spread underlying
portfolio performing well in fundamental terms with growing profits, reducing
debt and in some cases increasing ratings. The exit environment has been strong
and as most exits take place at a significant premium to previous carrying value
this has been a major source of the asset value growth over the first half of
the year. The exit environment will remain strong if the stockmarket is stable
or rising and the availability of fresh funds from banks and other private
equity funds is sustained. The funds in which we invest and our co-investment
portfolio are concentrated on the mid market tier of several different
countries. In many of these this sector is still inefficient and for experienced
and suitably skilled investors offers the prospect of highly attractive medium
and long term returns. We are constantly appraising a strong dealflow of such
experienced managers. Our policy is to seek out the best practitioners in each
field, to back them early and to reward their success with continuing support.
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 for the
six months ended 31 January 2006
Unaudited
Revenue Capital Total
#'000 #'000 #'000
Gains on investments - realised - 5,122 5,122
- unrealised - 6,642 6,642
Currency gains - 37 37
Income - franked 324 - 324
- unfranked 871 - 871
Investment management fee (187) (561) (748)
Other expenses (198) (655) (853)
_______ _______ _______
Net return before finance costs and taxation 810 10,585 11,395
Interest payable and similar charges (17) (51) (68)
_______ _______ _______
Return on ordinary activities before taxation 793 10,534 11,327
Taxation on ordinary activities (148) 117 (31)
_______ _______ _______
Return on ordinary activities after taxation 645 10,651 11,296
Returns per A share 0.23p 1.12p 1.35p
_______ _______ _______
Returns per B share 0.42p 24.77p 25.19p
_______ _______ _______
Returns per C share 0.71p (1.63)p (0.92)p
The total 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 for the
six months ended 31 January 2005
(Restated)
Unaudited
Revenue Capital Total
#'000 #'000 #'000
Gains on investments - realised - 3,010 3,010
- unrealised - 6,265 6,265
Currency gains - 6 6
Income - franked 76 - 76
- unfranked 781 - 781
Investment management fee (87) (261) (348)
Other expenses (129) - (129)
_______ _______ _______
Net return before finance costs and taxation 641 9,020 9,661
Interest payable and similar charges (9) (27) (36)
_______ _______ _______
Return on ordinary activities before taxation 632 8,993 9,625
Taxation on ordinary activities (167) 87 (80)
_______ _______ _______
Return on ordinary activities after taxation 465 9,080 9,545
Returns per A share 0.35p 7.73p 8.08p
_______ _______ _______
Returns per B share 0.60p 10.00p 10.60p
_______ _______ _______
Returns per C share - - -
The total 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 for the
year ended 31 July 2005
(Restated)
Audited
Revenue Capital Total
#'000 #'000 #'000
Gains on investments - realised - 2,991 2,991
- unrealised - 16,544 16,544
Currency gains - 56 56
Income - franked 182 - 182
- unfranked 2,870 - 2,870
Investment management fee (170) - (170)
Other expenses (334) (510) (844)
_______ _______ _______
Net return before finance costs and taxation 2,548 19,081 21,629
Interest payable and similar charges (17) (49) (66)
_______ _______ _______
Return on ordinary activities before taxation 2,531 19,032 21,563
Taxation on ordinary activities (707) 168 (539)
_______ _______ _______
Return on ordinary activities after taxation 1,824 19,200 21,024
Returns per A share 1.58p 12.83p 14.41p
_______ _______ _______
Returns per B share 1.96p 27.05p 29.01p
_______ _______ _______
Returns per C share - - -
The total 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 January 2006 As at 31 January 2005 As at 31 July 2005
Restated Restated
(unaudited) (unaudited) (audited)
#000 #000 #000 #000 #000 #000
Investments at market
value
Listed on recognised 53,167 6,134 9,210
exchanges
Unlisted at directors' 76,801 60,553 65,434
valuation
_______ _______ _______
129,968 66,687 74,644
Current assets
Debtors 2,454 955 108
Cash at bank 5,797 9,009 9,210
_______ _______ _______
8,251 9,964 9,318
Creditors
Amounts falling due (767) (331) (1,123)
within one year
_______ _______ _______
Net current assets 7,484 9,633 8,195
_______ _______ _______
Net assets 137,452 76,320 82,839
_______ _______ _______
Capital and reserves
Called up ordinary 1,821 1,063 1,063
capital
Share Premium account 48,707 - -
Special distributable 40,000 40,000 40,000
capital reserve
Special distributable 5,030 14,757 10,061
revenue reserve
Capital reserve 41,116 19,956 30,229
Revenue reserve 778 544 1,486
_______ _______ _______
Total shareholders' 137,452 76,320 82,839
funds
Net asset value per A 39.41p 47.58p 46.76p
share
Net asset value per B 153.77p 113.31p 131.37p
share
Net asset value per C 99.41p - -
share
F&C PRIVATE EQUITY TRUST plc
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Six months ended 31 Six months ended 31
January 2006 January 2005
Equity shareholders' funds at 1 August (as 76,641 66,928
previously reported)
Less revaluation of investment from mid to bid (186) (153)
prices
Add dividends accrued 6,384 7,575
Equity shareholders' funds at 1 August (as 82,839 74,350
restated)
Return on ordinary activities after taxation 11,296 9,545
Dividends paid (6,384) (7,575)
Issue of C shares 49,701 -
Equity shareholders' funds at 31 January 137,452 76,320
F&C PRIVATE EQUITY TRUST plc
STATEMENT OF CASH FLOW
Year to Year to
31 January 2006 (unaudited) 31 January 2005
(audited)
#000 #000 #000 #000
Operating activities
Net dividends and interest received from 260 331
investments
Interest received from deposits 376 183
Investment management fee (478) (347)
Cash paid to and on behalf of directors (98) (35)
Bank charges - (1)
Other cash payments (823) (86)
_______ _______
Net cash (outflow) / inflow from operating (763) 45
activities
Servicing of finance
Interest paid (69) (38)
_______ _______
Net cash outflow from servicing of finance (69) (38)
Taxation
Corporation tax paid (298) (1,279)
_______ _______
Net cash outflow from taxation (298) (1,279)
Capital expenditure and financial
investment
Payments to acquire investments (37,836) (7,922)
Receipts from disposal of investments 38,342 12,085
_______ _______
Net cash inflow from capital expenditure 506 4,163
and financial investment
Equity dividends paid (6,384) (7,575)
_______ _______
Net cash outflow before financing (7,008) (4,684)
Financing
Issue of new C shares 3,558 -
_______ _______
Net cash inflow from financing 3,558 -
_______ _______
Decrease in cash (3,450) (4,684)
_______ _______
Notes
1. The unaudited interim 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 July 2005 apart from the following in accordance with FRS
21 and FRS 26 effective for accounting periods commencing 1 January 2005.
* Dividends payable by the Company are recognised in the period in which
they are paid.
As a result of this change the Company's shareholders' funds as at 31
July 2005 have increased by #6,384,000 (being the special dividend of
7.5 pence per share paid on 26 August 2005 and the revenue dividends
of 1.20 pence per share paid by the A Pool and 1.40 pence per share
paid by the B Pool on 9 December 2005) and the Company's shareholders'
funds as at 31 January 2005 have increased by #5,113,000 (being the
special dividend of 7.0 pence per share paid on * by the A Pool and
the revenue dividends of 0.30 pence per share paid by the A Pool and
0.55 pence per share paid by the B Pool on *)
* Quoted investments are now valued at bid prices. This has the effect
of reducing the valuation of the investment portfolio by #186,000 as
at 31 July 2005 and #166,000 as at 31 January 2005.
2. Earnings for the first six months should not be taken as a guide to the
results of the full year.
3. The Directors have declared a special dividend of 7.5 pence per A share to
be paid on 14th April 2006 to shareholders on the register on 17th March
2006, having an ex-dividend date of 15th March 2006.
4. These are not full statutory accounts in terms of Section 240 of the
Companies Act 1985. The full audited accounts for the year to 31 July
2005, which were unqualified, have been lodged with the Registrar of
Companies. A full interim report will be sent to shareholders in March
2005, and will be available for inspection at 80 George Street, Edinburgh,
the registered office of the Company.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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