1st Quarter Results

RNS Number : 9342D

F&C Private Equity Trust PLC

23 May 2012

 



To: Stock Exchange	For immediate release:
	23 May 2012

F&C Private Equity Trust plc

Quarterly results for the three months to 31 March 2012 (unaudited)

 

·      Realisations £8.1 million, drawdowns £5.7 million

·      Renewal of loan facility

·      Adoption of new dividend policy

·      NAV total return for the three months of -0.9 per cent for the Ordinary Shares

·      NAV total return for the three months of -1.6 per cent for the Restricted Voting Shares

Manager's Review

Introduction

The Company's net assets at 31 March 2012 were £179.9 million. The net assets of the Ordinary Share Pool were £176.6 million giving a fully diluted net asset value ('NAV') per Ordinary Share of 241.27p, a decrease over the quarter of 0.9 per cent. The net assets of the Restricted Voting Pool were £3.3 million giving a NAV per share of 4.97p. Taking into account the 1.6p special dividend paid on 27 January 2012, this is a decrease of 1.6 per cent over the quarter. The first dividend under the new policy, relating to the first half of the year, will be paid in November.

The first quarter of 2012 was a fairly active one for the Company's portfolio, which is belied by the minimal change in the NAV. There have been limited changes in the portfolio valuation since our last report of less than two months ago. We are awaiting first quarter reports from many funds and some of the realisations reported below were already 'priced in' in the last valuation. The first quarter tends also to be quiet in terms of valuation movements as it is too early in the year to assess progress towards budgets.

The net debt of the Ordinary Share Pool at 31 March 2012 was £4.9 million. The accrued liability for the Group's Zero Dividend Preference Shares ('ZDPs') is now £35.6 million. Together, this gives total debt, reduced slightly since the year end, of £40.5 million, and results in gearing of 18.7 per cent of total assets within the Ordinary Pool at the end of the period. The Restricted Voting Pool had a cash balance of £0.4 million at the end of the period. Outstanding undrawn commitments stood at £67.6 million, down from £73.2 million at the year end.

 

New Investments and Drawdowns

There were no new investments during the first quarter. A small number of fund commitments and co-investments are under consideration and we expect to be able to announce some of these at the half year stage. There are a significant number of mid-market funds seeking or planning to seek fresh capital for funds over the next 18 months or so. Our policy remains to be highly selective in making these commitments, reserving our capital for exceptional emerging managers and managers whom we know from experience have a track record of delivering strong performance. The market environment for investment is subdued with volumes of new European mid-market buy-outs down by 50 per cent year on year. This is a function of a further reduction in debt availability as a result of the continuing pressures on banks as well as the dampening effect on confidence of the persistent and as yet not fully resolved sovereign and private sector debt problems in the Eurozone. This is not very evident in the portfolio, with drawdowns at similar levels to a year ago at £5.7 million and realisations more than 100 per cent up year on year at £8.1 million.

The new investments are typically diverse by sector and geography. Contrary to received wisdom there are good deals to be done in Spain, where N+1 Private Equity Fund II called £1.1 million, mainly for investment in EYSA, the leading company in Spain in the on-street parking sector. This company has a 25 per cent market share in the city-centre paying parking zones. In Germany, DBAG Fund V called £0.5 million, mainly for investment in Brotje Automation, a company which develops machines and production lines for the automated production of aircraft. This includes riveting, joining and assembling metal or carbon-composite fuselages. This deal was a spin out of a non core division of a larger group.

In the UK, new investments included £0.8 million called by Primary Capital III for Leisure Pass Group, the world's leading provider of smart card-based multi-attraction tourist passes and associated operating systems. Hutton Collins Capital Partners III called £0.6 million for a mezzanine investment into premium wellington boot company Hunter Boot. Also with a consumer focus, Inflexion 2010 Fund invested £0.4 million on the Company's behalf in television shopping channel, Ideal Shopping, and Piper Private Equity Fund V called £0.3 million for investment in Loungers, a fresh take on the bar/café concept with 22 regional outlets to date. Whilst anecdotal evidence suggests that it can be highly competitive to secure good mid-market deals, it would appear that our investment partners continue to find interesting and well-priced companies across a range of sectors and geographies.

Realisations

Distributions during the quarter were healthy at £8.1 million, comfortably exceeding the drawdowns of £5.7 million referred to above. The largest exit was from Spain, where Portobello Capital II sold civil explosives company Maxam to Advent, returning £1.6 million to the Company, representing a multiple of 3.4x and an IRR of 28 per cent. One of the Company's longstanding holdings, the Candover 2005 Fund, now under the new management of Arle, sold Capital Safety Group, the leading fall protection equipment manufacturer, to KKR. The Company's share of the proceeds was £1.2 million, an investment multiple of 2.7x and an IRR of 26 per cent. As previously reported, RJD Partners sold the mainly French holiday company European Boating Holidays to a French consortium. The company was a victim of the recession but had recovered from its low point. Whilst the exit was at a loss, with an overall investment multiple of 0.77x, it was almost £1 million above our valuation immediately prior to confirmation of the exit (30 September 2011). The Company received £1.0 million from its co-investment. An additional £0.4 million is being rolled over into loan stock in the acquiring vehicle which will yield Euribor + 2 per cent until that entity is sold some years in the future. Other smaller realisations include the sale of Fish Insurance by Inflexion 2006 Buyout Fund to Capita. This business, which provides insurance to disabled people, was suffering from the austerity squeeze and Inflexion made a loss, recovering 0.8x of their investment (£114,000 for the Company). RJD Partners Equity Fund II achieved a creditable partial exit of Raphael Healthcare, an operator of low secure accommodation for women with mental health issues. The multiple was 1.5x returning £0.2 million to the Company. RJD's remaining investment in Raphael is via 18 per cent loan stock maturing in 2015. This investment was rather stymied when a planning decision went against them restricting their ability to grow as planned. From the global funds, the notable performers have been Warburg Pincus funds VIII and IX which have returned £0.3 million each this quarter.

In summary, this was a fairly active quarter with exits achieved in several different territories. Interestingly, some of our experienced investment partners are taking sub-optimal but nevertheless substantial exits where the investment thesis hasn't worked out. There is an appetite from investors for cash, and the managers can also keep IRRs up by achieving partial recoveries of underperforming holdings.

Valuation Changes

Changes in valuations have been fairly limited this quarter following an unusually comprehensive and up to date review for the full year figures published only seven weeks ago. A number of the realisations noted above were already factored into the year end valuation. The underlying portfolio valuation was up by approximately 0.5 per cent over the quarter. There was a negative influence of 0.4 per cent from foreign exchange movements, largely as a result of the US dollar depreciating by 2.8 per cent against sterling. The movement in the sterling/Euro exchange rate was minimal, with the Euro slipping only 0.2 per cent over the period.

The larger movements included a £0.4 million uplift in TDR Capital II, mainly accounted for by good fundamental progress by vacant property manager, VPS, and pub chain Stonegate. Pinebridge New Europe II was uplifted by £0.3 million, principally as a result of a 50 per cent increase in the listed share price of Polish car battery recycler Orzel Bialy. Warburg Pincus VIII, which has had several small but useful realisations, was up by £0.2 million. The largest individual fund downgrades were from AIF Capital Asia Fund III (£154,000), Blue Point Capital II (£153,000) and Herkules Private Equity III (£144,000). In the first two, these were adjustments related to changes in the valuation of comparable companies and some updated information from the manager. In the case of Herkules Private Equity III it relates mainly to a reduction of value for Odlo, the sports underwear company, which has suffered from the warm winter in Northern Europe.

Financing

The new facility, arranged in February, was £6.7 million drawn at 31 March 2012. Currently, just under £10 million is drawn. We have drawn the facility entirely in Euros as this provides a slight hedge against any further Euro weakness. The first quarter saw realisations exceed drawdowns. The current quarter at present is showing an outflow requiring greater utilisation of the facility. However, there is a good chance of significant realisations coming in by the quarter end which would effectively repay the drawings under the facility.

Outlook

The continuing problems of the Eurozone create an unhelpful backdrop for all kinds of business and consumer activity, including private equity investment, even in the economies which are less directly affected. There are two main interrelated problems. The first problem is the risk to the banking system across Europe which could arise from a disorderly default by Greece and an accompanying exit from the Euro currency. The priorities of governments, central banks and supranational financial institutions must be to control events and thus avoid a second banking crisis. To date there has been a tendency towards half measures, most recently seen in Spain, and procrastination. The second problem of subdued business and consumer confidence largely derives from the first and is effectively restraining growth in Europe.  Despite this there do remain many businesses and private equity funds that can see through these problems and investments continue with these risks being priced in as well as possible. The experience of the portfolio in recent years has shown that at the level of the underlying companies, growth and therefore build of long term equity value is possible even with a difficult economic background. Whilst it is early, the start to 2012 gives us confidence that our private equity investment partners are continuing to create value notwithstanding the macro-economic challenges.

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 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

three months ended 31 March 2011 (unaudited)

	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	8,011	8,011
Exchange losses	-	(12)	(12)
Investment income	690	-	690
Other income	27	-	27
Total income	717	7,999	8,716
Expenditure
Investment management fee	(114)	(496)	(610)
Other expenses	(172)	-	(172)
Total expenditure	(286)	(496)	(782)
Profit before finance costs and taxation	431	7,503	7,934
Finance costs	(48)	(871)	(919)
Profit before taxation	383	6,632	7,015
Taxation	(107)	107	-
Profit for period/total comprehensive income	276	6,739	7,015
Return per Ordinary Share - Basic	0.37p	8.30p	8.67p
Return per Ordinary Share - Fully diluted	0.36p	8.08p	8.44p
Return per Restricted Voting Share - Basic	0.01p	1.10p	1.11p

F&C PRIVATE EQUITY TRUST PLC

Consolidated Statement of Comprehensive Income for the

year ended 31 December 2011 (audited)

	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	17,923	17,923
Exchange gains	-	911	911
Investment income	2,176	-	2,176
Other income	37	-	37
Total income	2,213	18,834	21,047
Expenditure
Investment management fee	(467)	(1,403)	(1,870)
Other expenses	(694)	-	(694)
Total expenditure	(1,161)	(1,403)	(2,564)
Profit before finance costs and taxation	1,052	17,431	18,483
Finance costs	(208)	(3,672)	(3,880)
Profit before taxation	844	13,759	14,603
Taxation	(223)	216	(7)
Profit for year/total comprehensive income	621	13,975	14,596
Return per Ordinary Share - Basic	0.80p	18.75p	19.55p
Return per Ordinary Share - Fully diluted	0.78p	18.26p	19.04p
Return per Restricted Voting Share - Basic	0.06p	0.63p	0.69p

F&C PRIVATE EQUITY TRUST PLC

Consolidated Balance Sheet

	As at 31 March 2012	As at 31 March 2011	As at 31 December 2011
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	220,771	220,798	223,388
Current assets
Prepayments and other receivables	542	16	23
Cash and short term deposits	2,183	2,854	4,044
	2,725	2,870	4,067
Current liabilities
Other payables	(7,959)	(15,315)	(9,886)
Net current liabilities	(5,234)	(12,445)	(5,819)
Total assets less current liabilities	215,537	208,353	217,569
Non-current liabilities
Zero dividend preference shares	(35,627)	(32,500)	(34,822)
Net assets	179,910	175,853	182,747
Equity
Called-up ordinary share capital	1,394	1,394	1,394
Special distributable capital reserve	15,679	15,679	15,679
Special distributable revenue reserve	34,741	35,814	35,814
Capital redemption reserve	664	664	664
Capital reserve	126,492	121,234	128,470
Revenue reserve	940	1,068	726
Shareholders' funds	179,910	175,853	182,747
Net asset value per Ordinary Share - Basic	244.29p	236.69p	246.62p
Net asset value per Ordinary Share - Fully diluted	241.27p	233.88p	243.54p
Net asset value per Restricted Voting Share - Basic	4.97p	7.11p	6.68p

F&C PRIVATE EQUITY TRUST PLC

Reconciliation of Movement in Shareholders' Funds

 

	Three months ended 31 March 2012	Three months ended 31 March 2011	Year ended 31 December 2011
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Opening shareholders' funds	182,747	169,710	169,710
(Loss)/profit for the period/total comprehensive income	(1,764)	7,015	14,596
Dividends paid (Ordinary Shares)	-	-	(687)
Special dividends paid (Restricted Voting Shares)	(1,073)	(872)	(872)
Closing shareholders' funds	179,910	175,853	182,747

 

 

 

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 2011. 

2.   Investment management fee:

	Three months ended 31 March 2012			Three months ended  31 March 2011			Year ended 31 December 2011
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment management fee - basic	118	354	472	114	344	458	467	1,403	1,870
-incentive	-	-	-	-	152	152	-	-	-
	118	354	472	114	496	610	467	1,403	1,870

3.   Finance costs:

	Three months ended 31 March 2012			Three months ended  31 March 2011			Year ended 31 December 2011
	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	62	186	248	48	145	193	208	624	832
Finance costs attributable to ZDP Shares	-	805	805	-	726	726	-	3,048	3,048
	62	991	1,053	48	871	919	208	3,672	3,880

4.   The basic return per Ordinary Share is based on a net loss on ordinary activities after taxation of £1,690,000 (31 March 2011- profit £6,269,000; 31 December 2011 - profit £14,134,000) and on 72,282,273 (31 March 2011 - 72,282,273; 31 December 2011 - 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 loss on ordinary activities after taxation of £1,690,000 (31 March 2011 - profit £6,269,000; 31 December 2011 - profit £14,134,000) and on 74,241,429 (31 March 2011 - 74,241,429; 31 December 2011 - 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 loss on ordinary activities after taxation of £74,000 (31 March 2011 - profit £746,000; 31 December 2011 - profit £462,000) and on 67,084,807 (31 March 2011 - 67,084,807; 31 December 2011 - 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 100 pence per share and redeem on 15 December 2014 at 152.14 pence per share, an effective rate of 8.75 per cent per annum.

The fair value of the ZDP Shares at 31 March 2012 was £40,164,000 based on the quoted offer price of 133.88p per ZDP Share.

	Number of ZDP Shares	Amount due to ZDP shareholders £'000
As at 31 December 2011	30,000,000	34,822
ZDP Shares finance costs	-	805
As at 31 March 2012	30,000,000	35,627

6.   The basic net asset value per Ordinary Share is based on net assets at the period end of £176,575,000 (31 March 2011 - £171,087,000; 31 December 2011 - £178,264,000) and on 72,282,273 (31 March 2011 - 72,282,273; 31 December 2011 - 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 £179,121,000 (31 March 2011 - £173,632,000; 31 December 2011 - £180,810,000) and on 74,241,429 (31 March 2011 - 74,241,429; 31 December 2011 - 74,241,429) shares, being the number of Ordinary Shares in issue at the period end after conversion of the Ordinary Share warrants.

The basic net asset value per Restricted Voting Share is based on net assets at the period end of £3,335,000 (31 March 2011 - £4,766,000; 31 December 2011 - £4,483,000) and on 67,084,807 (31 March 2011 - 67,084,807; 31 December 2011 - 67,084,807) shares, being the number of Restricted Voting Shares in issue at the period end.

7.   The financial information for the three months ended 31 March 2012, which has not been audited or reviewed by the Company's auditors, comprises non-statutory accounts within the meaning of Section 434 of the Companies Act 2006.  Statutory accounts for the year ended 31 December 2011, on which the auditors 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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