1st Quarter Results

RNS Number : 3579O

F&C Private Equity Trust PLC

27 May 2015

 



To: Stock Exchange	For immediate release:
	27 May 2015

F&C Private Equity Trust plc

Quarterly results for the three months to 31 March 2015 (unaudited)

 

·      Share price total return for the three months of 4.9 per cent for the Ordinary Shares.

·      NAV total return for the three months of -0.7 per cent for the Ordinary Shares.

·      Strong deal flow in funds and co-investments.

Manager's Review

Introduction

At 31 March 2015 the net asset value ('NAV') of the Company was £202.0 million, giving a fully diluted NAV per ordinary share of 275.49p, a decrease of 0.7 per cent over the quarter. The Company had net debt of £29.0 million giving gearing of 12.6 per cent. Outstanding undrawn commitments stood at £58.2 million at the end of the period and, of this, approximately £17 million is to funds where the investment period has expired and hence only a small proportion of this amount is expected to be drawn.

New Investments and Drawdowns

The total amount invested through drawdowns from funds and co-investments during the first quarter was £12.4 million. Three new investments were made; one primary fund commitment, one advanced primary investment and one co-investment. €5 million was committed to Iberian fund Corpfin IV. This leading Spanish mid-market specialist has come through the recession well and is well placed to acquire companies as the economies of Spain and Portugal continue to recover. Also aiming to capture some attractive investment opportunities in Southern Europe, we committed €4 million to Italian fund Aliante 3. This fund has been established for three years and already has four companies in its portfolio, giving unusually good visibility and immediate maturity to the portfolio.  The managers, who are based in Milan, have particular expertise in the food and beverage sectors of the Italian mid-market. A new co-investment has also been added to the portfolio: £4.5 million has been invested for a 28 per cent stake in Dover-based Burgess Marine. This deal, which was led by RJD Partners, gives the Company exposure to a fast growing marine engineering services company. Burgess Marine has three main businesses: refitting of commercial and naval vessels; boat building for shallow draft workboats and wind farm support vessels; and refitting superyachts. Each of these sections is experiencing good growth.

There have been several fund drawdowns for new investments. These are for a typically diverse range of new investments. Inflexion called a total of £1.4 million from their 2010 Fund and 2012 Co-investment Fund for investment in luxury travel agency Scott Dunn. The upper end of the holiday market has shown strong growth characteristics in recent years. £0.5 million has been invested into the Agilitas led co-investment in damage control services company Recover Nordic for an add-on acquisition in Sweden. In Germany, DBAG VI called £0.4 million for iron foundry company Geinanth which specialises in casting engine blocks for large diesel and gas engines.

Realisations

The strong flow of realisations experienced in 2014 appears to have continued into this year with a total of £10.8 million coming in during the first quarter.

The largest single realisation was £2.7 million from pallet racking system company Whittan. This company was severely impacted by the recession but it was refinanced and recovered fairly strongly such that the combined original cost of the investment was recovered when it was sold to European private equity house Bregal after an eight year hold. There were a handful of other significant exits in the UK. Piper Private Equity IV sold Rollover Holdings, the UK's leading food service hotdog company, to Kerry Group plc, achieving a 2.5x multiple with proceeds of £0.8 million. Inflexion sold Aspen Pumps from their 2006 Fund returning £0.7 million which represents a hugely impressive multiple of 14.0x cost and an IRR of over 40 per cent. There is potential for this to improve further as Inflexion retains a stake in the acquirer, CP Electronics. Inflexion also returned £0.7 million from their 2010 Fund and 2012 Co-investment Fund from the refinancing of Marston's, the UK's leading debt enforcement business. Hutton Collins III returned £0.5 million from the refinancing of UK restaurant chain Wagamama. This represents 1.9x cost and an IRR of 18 per cent. As the fund still retains an equity stake the return could increase further.  TDR Capital II returned £0.3 million from the refinancing of its pub chain company Stonegate where the company has undertaken a sale and leaseback of some of its properties.

Life Science Partners, the Netherlands based specialist venture capitalist, returned £1.7 million as part of the proceeds from the sale of Prosensa, the pharmaceutical company specialising in RNA modulating therapeutics with applications in certain genetic diseases such as Duchenne muscular dystrophy. In Eastern Europe, Accession Mezzanine II distributed £0.7 million as proceeds from the sale of Polish metallic enhancement company Norican, which was sold to Altor, a Nordic buy-out house. This investment had a challenging time during the recession and the ultimate outcome was for a small premium to cost. In the Company's small US portfolio, £0.4 million came in from US mid-market fund of funds RCP II after the fund realised some of its remaining holdings via a secondary transaction. The very longstanding holding in Hicks Muse Tate & Furst IV distributed £0.5 million as a result of the merger of LIN Media with Media General. The fund retains shares in the latter company and these have appreciated in value since the deal.

Valuation Changes

The first quarter is traditionally a quiet one for valuation movements with the valuation point falling less than two months after the full year valuation is confirmed. Notable movements included a £0.7 million uplift for the Inflexion led co-investment SMD Hydrovision, which has now been sold to Chinese buyer ZhouZou CSR. Proceeds of £8.3 million were received in April and this is reflected in the valuation.  We had incorporated a small discount to the expected proceeds in the year end valuation pending receipt of the funds. This seven year hold has achieved a multiple of 2.1x cost and an IRR of 11 per cent. Other uplifts reflect realisations or uplifts based on improved trading. Hutton Collins III is up by £0.3 million, Blue Point Capital II by £0.4 million, Gilde Buyout III by £0.4 million and Hicks Muse Tate & Furst IV by £0.6 million.

There have also been some downgrades. Blues Clothing, the character licensing textiles company was sold after the quarter end at a disappointing price, representing a multiple of 0.2x cost; there was a £0.2 million downgrade in the valuation to reflect this and a further £0.2 million downgrade from the Penta fund, in which it is also held. Once again, there has been an adverse influence from currency movements. This is mainly Euro weakness with a decrease of over 7 per cent against sterling over the quarter. The US Dollar appreciated by almost the same amount which offset some of the impact, as did the Company's Euro-denominated debt, resulting in a net effect on the Company's NAV of just over 1 per cent.

Financing

Since the quarter end, the Company has received the proceeds of the SMD Hydrovision sale of £8.3 million and several other smaller realisations, such that the current level of net debt is £26.2 million (as at 27 May 2015). This gives considerable capacity to make further investments. As the year progresses, the competitive terms on which the Company is borrowing compared with its previous borrowing via zero dividend preference shares will become noticeable and this, coupled with the partial hedging benefits from the Euro-denominated debt noted above, are helpful features.

Outlook

There is a strong flow of fund and co-investment opportunities at present and we are selectively participating in this. Anecdotal evidence and headline pricing statistics indicate that in some areas value is difficult to find, however our investment partners are on the whole finding attractive deals without paying dangerously high prices. Our co-investment dealflow is also reasonably priced. There remain serious issues in parts of the Eurozone that need to be addressed, but much of this is well understood and factored into the prices paid by private equity specialists. Expectations of management are for continued economic growth this year with very low inflation, low interest rates and improving public finances. The relatively buoyant conditions of the recent past are expected to continue and this should prove positive for private equity activity, for value creation and returns for your Company.

Hamish Mair

Investment Manager

F&C Investment Business Limited

F&C PRIVATE EQUITY TRUST PLC

Statement of Comprehensive Income for the

three months ended 31 March 2015 (unaudited)

	Revenue £'000	Capital £'000	Total £'000
Income
Losses on investments held at fair value	-	(2,984)	(2,984)
Exchange gains	-	2,546	2,546
Investment income	19	-	19
Other income	4	-	4
Total income	23	(438)	(415)
Expenditure
Investment management fee - basic fee	(123)	(371)	(494)
Investment management fee - performance fee	-	-	-
Other expenses	(168)	-	(168)
Total expenditure	(291)	(371)	(662)
Loss before finance costs and taxation	(268)	(809)	(1,077)
Finance costs	(113)	(340)	(453)
Loss before taxation	(381)	(1,149)	(1,530)
Taxation	-	-	-
Loss for period/total comprehensive income	(381)	(1,149)	(1,530)
Return per Ordinary Share - Basic	(0.53)p	(1.59)p	(2.12)p
Return per Ordinary Share - Fully diluted	(0.51)p	(1.55)p	(2.06)p

F&C PRIVATE EQUITY TRUST PLC

Consolidated Statement of Comprehensive Income for the

three months ended 31 March 2014 (unaudited)

	Revenue £'000	Capital £'000	Total £'000
Income
Losses on investments held at fair value	-	(1,208)	(1,208)
Exchange gains	-	73	73
Investment income	1,611	-	1,611
Other income	6	-	6
Total income	1,617	(1,135)	482
Expenditure
Investment management fee - basic fee	(131)	(392)	(523)
Investment management fee - performance fee	-	-	-
Other expenses	(129)	-	(129)
Total expenditure	(260)	(392)	(652)
Profit/(loss) before finance costs and taxation	1,357	(1,527)	(170)
Finance costs	(69)	(1,164)	(1,233)
Profit/(loss) before taxation	1,288	(2,691)	(1,403)
Taxation	(296)	296	-
Profit/(loss) for period/total comprehensive income	992	(2,395)	(1,403)
Return per Ordinary Share - Basic	1.37p	(3.31)p	(1.94)p
Return per Ordinary Share - Fully diluted	1.34p	(3.23)p	(1.89)p

F&C PRIVATE EQUITY TRUST PLC

Consolidated Statement of Comprehensive Income for the

year ended 31 December 2014 (audited)

	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	18,587	18,587
Exchange gains	-	572	572
Investment income	3,972	-	3,972
Other income	27	-	27
Total income	3,999	19,159	23,158
Expenditure
Investment management fee - basic fee	(516)	(1,548)	(2,064)
Investment management fee - performance fee	-	(1,085)	(1,085)
Other expenses	(745)	-	(745)
Total expenditure	(1,261)	(2,633)	(3,894)
Profit before finance costs and taxation	2,738	16,526	19,264
Finance costs	(349)	(4,854)	(5,203)
Profit before taxation	2,389	11,672	14,061
Taxation	(451)	451	-
Profit for year/total comprehensive income	1,938	12,123	14,061
Return per Ordinary Share - Basic	2.68p	16.77p	19.45p
Return per Ordinary Share - Fully diluted	2.61p	16.33p	18.94p

F&C PRIVATE EQUITY TRUST PLC

Balance Sheet

	As at 31 March 2015	As at 31 March 2014	As at 31 December 2014
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	233,441	231,431	234,414
Current assets
Other receivables	36	299	2,577
Cash and short-term deposits	6,268	9,493	6,946
	6,304	9,792	9,523
Current liabilities
Other payables	(16,979)	(2,618)	(18,117)
Zero dividend preference shares	-	(42,791)	-
Net current liabilities	(10,675)	(35,617)	(8,594)
Total assets less current liabilities	222,766	195,814	225,820
Non-current liabilities
Interest-bearing bank loan	(20,788)	-	(22,312)
Net assets	201,978	195,814	203,508
Equity
Called-up ordinary share capital	723	723	723
Special distributable capital reserve	15,679	15,679	15,679
Special distributable revenue reserve	31,403	31,403	31,403
Capital redemption reserve	1,335	1,335	1,335
Capital reserve	148,620	143,021	149,769
Revenue reserve	4,218	3,653	4,599
Shareholders' funds	201,978	195,814	203,508
Net asset value per Ordinary Share - Basic	279.43p	270.90p	281.55p
Net asset value per Ordinary Share - Fully diluted	275.49p	267.18p	277.55p

F&C PRIVATE EQUITY TRUST PLC

Reconciliation of Movements in Shareholders' Funds

 

	Three months ended 31 March 2015	Three months ended 31 March 2014	Year ended 31 December 2014
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Opening shareholders' funds	203,508	197,217	197,217
(Loss)/profit for the period/total comprehensive income	(1,530)	(1,403)	14,061
Dividends paid	-	-	(7,770)
Closing shareholders' funds	201,978	195,814	203,508

 

 

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 Company for the year ended 31 December 2014.  The Company's wholly owned subsidiary, F&C Private Equity Zeros plc, entered into voluntary members liquidation on 12 December 2014.  Consolidation accounts have not been prepared for the current period on the basis that control was transferred out of the Group on 12 December 2014. 

2.   Investment management fee:

	Three months ended 31 March 2015			Three months ended  31 March 2014			Year ended 31 December 2014
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment management fee - basic fee	123	371	494	131	392	523	516	1,548	2,064
Investment management       fee - performance fee	-	-	-	-	-	-	-	1,085	1,085
	123	371	494	131	392	523	516	2,633	3,149

3.   Finance costs:

	Three months ended 31 March 2015			Three months ended  31 March 2014			Year ended 31 December 2014
	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	113	340	453	69	208	277	349	1,047	1,396
Finance costs attributable    to ZDP Shares	-	-	-	-	956	956	-	3,807	3,807
	113	340	453	69	1,164	1,233	349	4,854	5,203

4.   The basic return per Ordinary Share is based on a net loss on ordinary activities after taxation of £1,530,000 (31 March 2014 - loss £1,403,000; 31 December 2014 - profit £14,061,000) and on 72,282,273 (31 March 2014 - 72,282,273; 31 December 2014 - 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 £1,530,000 (31 March 2014 - loss £1,403,000; 31 December 2014 - profit £14,061,000) and on 74,241,429 (31 March 2014 - 74,241,429; 31 December 2014 - 74,241,429) shares, being the weighted average number of Ordinary Shares in issue during the period after conversion of the Ordinary Share warrants.

5.   The basic net asset value per Ordinary Share is based on net assets at the period end of £201,978,000 (31 March 2014 - £195,814,000; 31 December 2014 - £203,508,000) and on 72,282,273 (31 March 2014 - 72,282,273; 31 December 2014 - 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 £204,524,000 (31 March 2014 - £198,360,000; 31 December 2014 - £206,054,000) and on 74,241,429 (31 March 2014 - 74,241,429; 31 December 2014 - 74,241,429) shares, being the number of Ordinary Shares in issue at the period end after conversion of the Ordinary Share warrants.

6.   The financial information for the three months ended 31 March 2015, 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 2014, 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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