1st Quarter Results

RNS Number : 8972F

F&C Private Equity Trust PLC

30 May 2013

 



To: Stock Exchange	For immediate release:
	30 May 2013

F&C Private Equity Trust plc

Quarterly results for the three months to 31 March 2013 (unaudited)

 

·      Share price total return for the three months of 8.7 per cent for the Ordinary Shares.

·      NAV total return for the three months of 3.1 per cent for the Ordinary Shares.

·      Cancellation of Restricted Voting Shares.

Manager's Review

Introduction

The net asset value ('NAV') of the Company was £192.2 million at 31 March 2013. The fully diluted NAV per Ordinary Share was 262.26p per share, an increase over the three months of 3.1 per cent.  As intimated with the full year results, the Company will pay a final dividend in respect of the year ended 31 December 2012 of 5.07p per share on 31 May to shareholders on the register on 3 May.

The Company had net cash at 31 March of £9.3 million. Taking into account the accrued liability for the Zero Dividend Preference Shares of £39.0 million, the Company's total debt was £29.7 million giving gearing of approximately 13 per cent. At the end of the period, the Company had outstanding undrawn commitments to private equity funds of £69.6 million. Of this amount, approximately £11 million is to funds whose investment period has expired and therefore only a small proportion is likely to be drawn for follow on investments. 

It has been only two months since our last report and, whilst the previous valuation was largely up to date, only just over 50 per cent of this valuation was fully up to date using 31 March valuations. The first quarter tends to be a relatively quiet quarter for valuation movements following the more comprehensive year end valuations and being struck with only the benefit of one quarter's trading as a guide to the year. There have been a number of new investments and some exits but levels of activity across the European mid-market have been slightly below the level of the prior year. However, there is significant regional variation which is characterised by more activity in Northern Europe and somewhat less in Southern Europe. Further afield there are healthy volumes of transactions.

New Investments and Drawdowns

The combined total of drawdowns under existing commitments, co-investments and secondaries made in the first quarter was £10.4 million. Of this, £4.4 million was for co-investments, secondaries and the purchase of the remaining assets of the Restricted Voting Pool, and £6.0 million was for fund drawdowns.

During the quarter, three new fund investments and one co-investment were made. The fund investments were all to European mid-market buyout funds. Of these, two were primary commitments and one was a secondary.

In Northern Europe the Company made its first commitment to a solely Finland-focused fund, with a €3 million commitment to Vaaka Partners Buyout Fund II. This fund is targeting commitments of €150 million and is managed by a team which came out of Pohjola Bank in 2010. It is in every sense an emerging manager but the team has considerable experience from its prior structure. The fund will invest in Finnish companies with enterprise values of €10 - €50 million. There are estimated to be between 2,500 and 5,000 companies of this size in Finland. Finland is a distinctive Nordic market which has proven difficult for outsiders to penetrate.

Another first was achieved during the quarter with a €3 million commitment to Avallon MBO Fund II, the Company's first commitment to a purely Polish fund. Avallon was founded in 2001 as a consultancy business advising on MBO transactions, moving into direct private equity some years later. The fund, which is targeting a close at €100 million, will invest in Polish companies with enterprise values of between €10- €20 million. The Polish private equity market has relatively few lower mid market participants and this provides an opportunity to invest at competitive prices in the enduringly strong Polish economy. Poland is the only major economy in Europe to have avoided recession so far. With a significant labour cost advantage compared with Western Europe and its proximity to these markets, the Polish private equity managers have a positive view of the prospects for strong future returns.

The third new commitment was £3.5 million to GCP Capital Partners Europe II, a £190 million Pan European mid market buyout fund. This investment was made via a secondary transaction with half of the commitment being paid immediately to acquire the existing assets of the fund at a 10 per cent discount to NAV. The remainder of the commitment will be drawn partially at the discretion of the manager and partially with the agreement of investors. GCP Capital Partners Europe is the autonomous European arm of Greenhill Capital Partners, the private equity division of Greenhill & Co, the US investment bank. The GCP Capital Partners Europe fund was raised in 2007. Recently some of the original investors were looking for liquidity and approximately £43 million of this was provided with £10 million coming from F&C Private Equity Trust plc and other similar investment vehicles. The portfolio, which is mainly based in the UK, has eight investments with almost all of the value accounted for by six of them. The attractions of this investment are the substantial visibility of the valuation of the investments and their path to realisation, the price at a discount to NAV and the ongoing opportunity to invest with a promising team.

We were also able to slightly augment a longstanding holding in French Fund Chequers Capital through exercising pre-emption rights when a commitment in the fund changed hands. This allowed us to invest an additional £0.2 million at a discount to asset value of over 20 per cent. At this late stage in the fund's life, where it is in full blown realisation mode, we would expect this investment to make an excellent return.

As previously reported, the Company invested £2 million for a 15 per cent stake in David Phillips Holdings Limited, the UK's largest specialist supplier of furniture and other accessories to the residential property market, providing a B2B furniture service to landlords, agents, developers and local authorities. The investment is led by the private equity division of Fleming Family and Partners ('FFP'). An update meeting with FFP indicated that they are happy with the company's progress to date.

The fund drawdowns during the quarter went towards the usual diverse range of complementary investments. The largest individual new investment was £1.4 million drawn by Stirling Square Capital Partners II for investment in Cartonplast, a German based European market leading provider of plastic layer pads (PLPs) which are used in the food and beverage industry to transport packaging materials such as glass containers.  Despite the well publicised difficulties in Spain, investment activity continues and N+1 Private Equity Fund II called £0.9 million for Probos, a global manufacturer of thermoplastic edgebanding for the furniture industry.  Most of its production is exported or produced in Portugal or Brazil with Iberia in total accounting for only 12 per cent of sales. In France, Chequers Capital XVI called £0.2 million for Professional Care Holding, a provider of out-of-clinic intensive care to patients. In the Netherlands, Hutton Collins III called £0.2 million for a follow-on investment in Vincent Hotels. Vaaka Buyout Partners II's first investment for the Company was £0.2 million into Solita, a provider of digital business solutions for large companies and public sector clients. In Eastern Europe, PineBridge New Europe II called £0.3 million mainly for investment in Work Service Group, a temporary staffing and personnel outsourcing company operating in Poland, The Czech Republic, Slovakia, Turkey and Germany with 27,000 employees.

In the USA, Camden Partners IV called £0.4 million, principally for investment in Collections Marketing Center (CMC), a provider of a SaaS solution for the collection of consumer debt by a range of lenders. Also in North America, Blue Point Capital II called £0.4 million for investment in Shnier, the largest distributor of floor coverings in Canada.

Realisations

During the quarter the total of distributions from funds and associated income was £8.2 million.

The largest individual distribution was from Primary Capital III who have sold Napier Turbo chargers to Wabtec Corporation, achieving an investment multiple of 5.5x and an IRR of  44% per cent. The net proceeds to the Company were £2.5 million. Global fund Warburg Pincus IX had a successful quarter with distributions totalling £1.9 million coming from the proceeds of the sale of shares of Ziggo N.V., the largest cable operator in the Netherlands which went public last year as well as from the sale of shares in Fidelity National Information Services (bank processing and payment services) and Targa Resources, a mid stream energy company. August Equity Partners II exited 4Projects, its SaaS company servicing the construction and engineering industries, to US corporation Coaxis Inc. £1.0 million was returned to the Company giving an investment multiple of 1.7x and an IRR of 10 per cent. Alchemy Special Opportunities Fund returned £0.3 million which represented the redemption of debt in estate agency Countrywide immediately prior to that company's floatation. Alchemy retains a shareholding which is locked in for a period but this investment, acquired when Countrywide was heavily distressed from November 2007 onwards, has so far achieved a return of 2.0x cost. In the USA, Camden Partners III has had an active quarter with distributions of £0.6 million arising from the sale or partial sale of three holdings.

Valuation Changes

There were a limited number of significant valuation changes this quarter. The largest uplift was £0.6 million from August Equity Partners II which benefited from the 4Projects exit and some other uplifts in a portfolio which is progressing well. There was an uplift of £0.4 million from the newly acquired GCP Capital Partners Europe II fund where the NAV has improved from the basis on which the deal was done and the discount has been unwound. Alchemy Special Opportunities Fund, as noted above, has benefited from the partial exit of Countrywide that preceded its IPO and this has added £0.2 million to its valuation. Primary Capital III was also up by £0.2 million, reflecting progress in its portfolio with the gain on exit of Napier Turbochargers having been reflected in the previous valuation. Over the quarter, currency movements were a positive influence adding approximately 3 per cent to valuations with significant strength of both the US Dollar and the Euro against sterling.

The most significant noteworthy downgrade was for Argan Capital where their holding in Swedish healthcare company Humana, which provides personal assistance to the disabled, was reduced on the back of lower multiples in that sector.

Financing

As stated above, the Company retains a healthy net cash position after making several new investments and the revolving credit facility is completely undrawn but available if required.

Outlook

The dealflow of fund and co-investment opportunities is currently excellent. The economic background is challenging in most of our core geographies but there are always companies with credible growth plans available at compelling prices. Our investment partners expend considerable effort in identifying these companies from a very broad universe of opportunities. The mid market of private equity in Europe and further afield is innately inefficient but that secular inefficiency coupled with the cyclical situations created by the slowly recovering economic background continues to provide opportunities for committed and skilled investors.

Hamish Mair

Investment Manager

F&C Investment Business Limited

F&C PRIVATE EQUITY TRUST PLC

Consolidated Statement of Comprehensive Income for the

three months ended 31 March 2013 (unaudited)

	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	7,008	7,008
Exchange gains	-	11	11
Investment income	680	-	680
Other income	10	-	10
Total income	690	7,019	7,709
Expenditure
Investment management fee	(127)	(379)	(506)
Other expenses	(209)	-	(209)
Total expenditure	(336)	(379)	(715)
Profit before finance costs and taxation	354	6,640	6,994
Finance costs	(68)	(1,075)	(1,143)
Profit before taxation	286	5,565	5,851
Taxation	(70)	70	-
Profit for period/total comprehensive income	216	5,635	5,851
Return per Ordinary Share - Basic	0.31p	7.78p	8.09p
Return per Ordinary Share - Fully diluted	0.30p	7.58p	7.88p
Return per Restricted Voting Share - Basic	(0.01)p	0.01p	-

F&C PRIVATE EQUITY TRUST PLC

Consolidated Statement of Comprehensive Income for the

three months ended 31 March 2012 (unaudited)

	Revenue £'000	Capital £'000	Total £'000
Income
Losses on investments held at fair value	-	(720)	(720)
Exchange gains	-	6	6
Investment income	693	-	693
Other income	3	-	3
Total income	696	(714)	(18)
Expenditure
Investment management fee	(118)	(354)	(472)
Other expenses	(206)	-	(206)
Total expenditure	(324)	(354)	(678)
Profit/(loss) before finance costs and taxation	372	(1,068)	(696)
Finance costs	(62)	(991)	(1,053)
Profit/(loss) before taxation	310	(2,059)	(1,749)
Taxation	(96)	81	(15)
Profit/(loss) for period/total comprehensive income	214	(1,978)	(1,764)
Return per Ordinary Share - Basic	0.30p	(2.64)p	(2.34)p
Return per Ordinary Share - Fully diluted	0.29p	(2.57)p	(2.28)p
Return per Restricted Voting Share - Basic	(0.01)p	(0.10)p	(0.11)p

F&C PRIVATE EQUITY TRUST PLC

Consolidated Statement of Comprehensive Income for the

year ended 31 December 2012 (audited)

	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	15,178	15,178
Exchange gains	-	176	176
Investment income	4,044	-	4,044
Other income	25	-	25
Total income	4,069	15,354	19,423
Expenditure
Investment management fee	(487)	(1,462)	(1,949)
Other expenses	(866)	-	(866)
Total expenditure	(1,353)	(1,462)	(2,815)
Profit before finance costs and taxation	2,716	13,892	16,608
Finance costs	(283)	(4,198)	(4,481)
Profit before taxation	2,433	9,694	12,127
Taxation	(615)	622	7
Profit for year/total comprehensive income	1,818	10,316	12,134
Return per Ordinary Share - Basic	1.81p	15.08p	16.89p
Return per Ordinary Share - Fully diluted	1.76p	14.68p	16.44p
Return per Restricted Voting Share - Basic	0.76p	(0.87)p	(0.11)p

F&C PRIVATE EQUITY TRUST PLC

Consolidated Balance Sheet

	As at 31 March 2013	As at 31 March 2012	As at 31 December 2012
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	222,983	220,771	213,662
Current assets
Other receivables	433	542	464
Cash and short-term deposits	9,289	2,183	12,931
	9,722	2,725	13,395
Current liabilities
Other payables	(1,502)	(7,959)	(1,453)
Net current assets/(liabilities)	8,220	(5,234)	11,942
Total assets less current liabilities	231,203	215,537	225,604
Non-current liabilities
Zero dividend preference shares	(39,045)	(35,627)	(38,173)
Net assets	192,158	179,910	187,431
Equity
Called-up ordinary share capital	723	1,394	1,394
Special distributable capital reserve	15,679	15,679	15,679
Special distributable revenue reserve	31,403	34,741	32,527
Capital redemption reserve	1,335	664	664
Capital reserve	140,836	126,492	135,201
Revenue reserve	2,182	940	1,966
Shareholders' funds	192,158	179,910	187,431
Net asset value per Ordinary Share - Basic	265.84p	244.29p	257.75p
Net asset value per Ordinary Share - Fully diluted	262.26p	241.27p	254.38p
Net asset value per Restricted Voting Share - Basic	n/a	4.97p	1.67p

F&C PRIVATE EQUITY TRUST PLC

Reconciliation of Movement in Shareholders' Funds

 

	Three months ended 31 March 2013	Three months ended 31 March 2012	Year ended 31 December 2012
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Opening shareholders' funds	187,431	182,747	182,747
Profit/(loss) for the period/total comprehensive income	5,851	(1,764)	12,134
Dividends paid (Ordinary Shares)	-	-	(4,163)
Dividends paid (Restricted Voting Shares)	(1,124)	(1,073)	(3,287)
Closing shareholders' funds	192,158	179,910	187,431

 

 

Notes (unaudited)

1.   The unaudited quarterly results have been prepared on the basis of the accounting policies set out in the statutory accounts of the Group for the year ended 31 December 2012. 

2.   Investment management fee:

	Three months ended 31 March 2013			Three months ended  31 March 2012			Year ended 31 December 2012
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment management       fee	127	379	506	118	354	472	487	1,462	1,949

3.   Finance costs:

	Three months ended 31 March 2013			Three months ended  31 March 2012			Year ended 31 December 2012
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Interest payable on bank loans and overdrafts	68	203	271	62	186	248	283	847	1,130
Finance costs attributable    to ZDP Shares	-	872	872	-	805	805	-	3,351	3,351
	68	1,075	1,143	62	991	1,053	283	4,198	4,481

4.   The basic return per Ordinary Share is based on a net profit on ordinary activities after taxation of £5,851,000 (31 March 2012 - loss £1,690,000; 31 December 2012 - profit £12,207,000) and on 72,282,273 (31 March 2012 - 72,282,273; 31 December 2012 - 72,282,273) shares, being the weighted average number of Ordinary Shares in issue during the period.

The fully diluted return per Ordinary Share is based on a net profit on ordinary activities after taxation of £5,851,000 (31 March 2012 - loss £1,690,000; 31 December 2012 - profit £12,207,000) and on 74,241,429 (31 March 2012 - 74,241,429; 31 December 2012 - 74,241,429) shares, being the weighted average number of Ordinary Shares in issue during the period after conversion of the Ordinary Share warrants.

The basic return per Restricted Voting Share is based on a net profit on ordinary activities after taxation of £nil (31 March 2012 - loss £74,000; 31 December 2012 - loss £73,000) and on 67,084,807 (31 March 2012 - 67,084,807; 31 December 2012 - 67,084,807) shares, being the weighted average number of Restricted Voting Shares in issue during the period.

5.  Zero Dividend Preference Shares

The Zero Dividend Preference Shares ('ZDP Shares') of F&C Private Equity Zeros plc were issued on 14 December 2009 at 100p per share and redeem on 15 December 2014 at 152.14p per share, an effective rate of 8.75 per cent per annum.

The fair value of the ZDP Shares at 31 March 2013 was £42,525,000 based on the quoted offer price of 141.75p per ZDP Share.

	Number of ZDP Shares	Amount due to ZDP shareholders £'000
As at 31 December 2012	30,000,000	38,173
ZDP Shares finance costs	-	872
As at 31 March 2013	30,000,000	39,045

6.   The basic net asset value per Ordinary Share is based on net assets at the period end of £192,158,000 (31 March 2012 - £176,575,000; 31 December 2012 - £186,308,000) and on 72,282,273 (31 March 2012 - 72,282,273; 31 December 2012 - 72,282,273) shares, being the number of Ordinary Shares in issue at the period end.

The fully diluted net asset value per Ordinary Share is based on net assets at the period end of £194,704,000 (31 March 2012 - £179,121,000; 31 December 2012 - £188,854,000) and on 74,241,429 (31 March 2012 - 74,241,429; 31 December 2012 - 74,241,429) shares, being the number of Ordinary Shares in issue at the period end after conversion of the Ordinary Share warrants.

7.  Following the payment of the final Restricted Voting Shares dividend of 1.675p per share on 14 February 2013, the Restricted Voting Pool has no assets or liabilities. The Restricted Voting Shares were converted and redesignated as Deferred Shares on 14 February 2013 and the Deferred Shares were bought back by the Company and cancelled on that date.  On 15 February 2013 the admission of the Restricted Voting Shares to the Official List of the UKLA and trading on the London Stock Exchange's Main Market were cancelled.  The Company therefore no longer has any Restricted Voting Shares in issue.

8.   The financial information for the three months ended 31 March 2013, which has not been audited or reviewed by the Company's auditor, comprises non-statutory accounts within the meaning of Section 434 of the Companies Act 2006.  Statutory accounts for the year ended 31 December 2012, on which the auditor issued an unqualified report, will be lodged with the Registrar of Companies.  The quarterly report is available on the Company's website www.fcpet.co.uk.

For more information, please contact:

Hamish Mair	0131 718 1184
Gordon Hay Smith	0131 718 1018
F&C Investment Business Limited
[e-mail]  / [e-mail]

 

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