3rd Quarter Results

RNS Number : 8323W

F&C Private Equity Trust PLC

26 November 2010

 



To: Stock Exchange	For immediate release:
	26 November 2010

F&C Private Equity Trust plc

Final results for the third quarter and nine months to 30 September 2010

 

·      NAV total return for the three months of +3.4 per cent for the ordinary shares;

·      NAV total return for the three months of +2.1 per cent for the restricted voting shares.

Manager's Review

Introduction

At the 30^th September 2010 the portfolio of F&C Private Equity Trust had a total valuation of £196.4m. After deducting the accrued value of the zero dividend preference shares of £32.07m and the net debt of £7.6m the net assets of the ordinary share pool and the restricted voting share pool are £152.3m and £4.9m respectively. The NAV per share on a fully diluted basis is 208.59p for the ordinary shares and 7.26p for the restricted voting shares, increases over the quarter of 3.4% and 2.1% respectively.  Since the quarter-end the restricted voting share pool has accumulated over £1 million of cash from realisations and accordingly a special dividend of 1.30 pence per restricted voting share will be paid on 7 January 2011.

Investment activity has continued at similar levels to the first half. In the quarter £14.5m of new investments were made. £11m of this was by drawdowns from private equity funds with an additional £3.5m for the new Aurora Fund and Blueway investments. This compares with £11.6m invested in the previous quarter. If this level of activity is maintained the total of new investments for 2010 will exceed £40m, double the total for 2009. This is important as these investments are likely to be a significant contributor to the Company's growth in asset value in the medium and longer term.  Realisations have been fewer this quarter totalling £3.8m. This brings the total for the first nine months to £16.0m.

Since the quarter end there have been a further £2.5m of drawdowns and £5.4m of realisations giving a net inflow of £2.9m. The total of realisations in the year to date is now £20m and it seems probable that the full year outcome will not be far below the £27.8m recorded, excluding secondary sales, in both 2009 and 2008.

Over the last quarter there has been a discernible improvement in confidence in the international private equity market.

New Investments

The UK remains the largest individual market for the Company but it has been relatively less active than Continental Europe in this year so far. New Investments of £3.3m were made in the UK in the quarter. The larger ones give an idea of the wide range of businesses that are being backed by our investment partners. Primary Capital III called £800k for investment in Paperchase the stationary and greeting card retailer. The company has 65 High Street shops and a further 35 in store concessions. Dunedin Buy-out Fund called £578k for investment in crawler cranes company, Weldex. RJD Partners Fund II called £617k for Verdant Leisure, a caravan park company which has two sites near Dunbar in East Lothian. RJD have specialist expertise in leisure and the management team for Verdant is derived from the successful team which built up and sold the LGV investment South Lakeland Leisure. In all these sectors there is sufficient earnings visibility to justify new investment and this indicates that belief in economic recovery is well established.

Our first fresh commitment to a UK Buy-out fund for two years was made during the quarter. F&C PET has committed £7m to the Inflexion 2010 Fund. This is the fourth Inflexion Fund we have backed. Additionally we have coinvested with them on four occasions. Two have seen excellent exits (Viking and ICS), one incurred a total loss (Eurotel) and one is very promising (SMD Hydrovision). We will continue to back managers who have performed well.

On the Continent there are signs of renewed confidence with fresh investments being made in France, Germany, Spain, the Nordic region and Eastern Europe. The more significant new investments demonstrate the range of opportunities in Europe. The previously reported co-investment of £2m in convertible loan stock in Norwegian Helicopter company Blueway was made on 9^th July. Progress to date is ahead of budget and Reiten's valuation is now at the conversion price. Also in Norway Herkules III called £0.4m for investment in Intelecom, an enterprise communications solution provider in the Nordic Region and the UK. This company provides call centre solutions amongst other services. In France Ciclad 4 drew £0.6m for two companies, Copac, a designer, manufacturer and lessor of ancilliary equipment for the construction industry and Satori which maintains and refurbishes aircraft components. In Spain Ibersuizas II invested for us in ICFC, an own label Ice Cream maker (£0.2m) and in Grupo Multiasistencia, a business process outsourcing company (£0.5m). The largest individual new investment was made by the Hutton Collins Funds II and III. £1.8m was invested in Vizada, the French based global leading provider of satellite communication services. This market is experiencing strong growth. Vizada was formed in 2007 from the merger of the satellite services businesses of France Telecom and Telenor.  This exposure has been reduced after the quarter end by £0.2m through syndication. Total European investments were £10.4m.

The US also saw some new investments. In particular Camden Partners Strategic Fund IV made two investments drawing £0.5m in total. Minsec, based in Pennsylvania, is a regional leader in the community corrections industry and Santa Rosa Consulting provides advisory services to hospitals on their implementation of technology.

Realisations

This has been a quiet quarter for realisations with only £2.4m coming in. The largest individual inflow was £1.4m from RJD II Fund's sale of supply teacher agency, Teaching Personnel, to Graphite. The exit statistics were an investment multiple of 3.1x and an IRR of 49%. In France Ciclad 4 sold the wetsuit company, Norprotex, returning £0.3m to F&CPET and achieving an investment multiple of 2.7x and an IRR of 23%.

Valuation Changes

There were a number of changes during the quarter although it should be noted that most 30^th September reports have yet to be received. There was one significant adverse movement.  The company's residual position in Viking Moorings has been reduced to nil reflecting  challenging trading. This involves a write down of £1.3m. Other larger movements include an uplift of £2.0m from the Aurora Fund where, as previously intimated, the portfolio was immediately revalued.

This quarter has seen a wide range of small upward movements in value. In most cases this reflects improved trading rather than large uplifts in multiples. The uplifts were across all fund types and geographies. After a prolonged period of subdued performance some of our venture funds are recovering. In particular Life Science Partners III, the Amsterdam based fund, is uplifted by £0.5m as a result of the sale completed after the quarter end of Movetis, the Belgian GI medicines company, to Shire Pharmaceuticals. This gave an uplift of £0.7m in this valuation and a cash inflow of £1.3m in the next quarter. This exit achieved a 4x investment multiple and IRR of 50%. Alta Berkeley VI, a very longstanding venture fund, recorded an uplift of £0.3m this quarter.

The Company's mezzanine fund portfolio has had strong quarter with both funds managed by MML Capital showing good uplifts. International Mezzanine Investment, which is in its 16^th year, was uplifted by £0.5m and the more recent Mezzanine Management Fund IV Fund was uplifted by £0.4m. The two most recent Hutton Collins funds have recorded uplifts of £0.4m for Fund II and £0.2m for Fund III. Growth Capital Fund IIB is up by £0.4m reflecting strong trading and advanced exit planning of its major investments.

Amongst the UK buy-out funds there has been a mild aggregate decline in valuation over the quarter. Most downgrades are slight with the exception of Penta where the co-investment fund is down by £1.1m. This reflects a write-down of 50% of wireless mast company WIG and the prepack administration of search consultancy Kinsey Allen. The European buy-out funds showed a stronger performance with healthy upgrades from both Chequers Capital (+£0.3m) and Chequers Capital XV (+£0.4m).

Our co-investments, with the exception of the remnant Viking Holdings position mentioned above, are making good fundamental progress which is coming through gradually into valuations. 3si, having been refinanced, is trading comfortably ahead of last year and reducing debt thus justifying an uplift of £0.5m in the quarter. Lifeways Community Care continues to win tenders and is making acquisitions at relatively low prices. Management is working towards an exit next year. Over the quarter the valuation was uplifted by £0.3m.

The influence of exchange rate movements this quarter was positive by about £3m or 1.7%. It thus accounted for just less than half of the total uplift this quarter.    

Financing

 The excess of drawdowns over realisations of some £12m in the quarter has necessitated further drawing of the revolving credit facility. At the end of September £8m of the £40m was drawn. At the end of September the total outstanding undrawn commitments were £95.7m. This is after adding in the £7m commitment to the Inflexion 2010 Fund and the £2.5m commitment from the Aurora Fund. With subsequent drawdowns the outstanding commitment total is now £93m. We are comfortably in compliance with all covenants.

Outlook

A number of economic and market indicators have been positive for some time and, as noted above, there is a significant improvement in confidence and hence in activity. A number of our investment partners are more optimistic than at any time in the last two years. There is steady activity but volumes are low by historic standards and the debt component of deals is generally below 50%. Surprisingly there is evidence in some quarters of pricing at very high levels. This is most obvious with certain larger deals and larger funds. Some commentators suggest that the upswing in activity after long periods of inactivity reflects the pressure to deploy funds before the expiry of investment periods. In some cases this may be creating a 'use it or lose it' attitude. In parts of the market prices have been pushed up to pre crisis levels and this cannot be explained in every case by the quality of the companies being acquired. This has fortunately not been much in evidence in our portfolio where discipline appears to be holding well. We are potentially beneficiaries of this phenomenon with the mid market funds finding exits through secondary buy-outs.

The fundamentals of the underlying companies are on an improving trend. The issue is one of the gradient of increase and the degree to which the fortunes of the companies are related to the overall economy. The full impact of government spending cuts and other austerity measures such as VAT rises is as yet unclear. There are a number of brightspots in the portfolio. In the co-investments Lifeways, led by August Equity, is growing rapidly and has a high profile in its sector. An exit at a significant premium to our current £4.4m valuation is expected by the end of Q3 next year. Of our very old holdings International Mezzanine Investment is approaching its final phase with the sales of its two remaining holdings Industrial Acoustics and Hallmark planned for the next 12 months. This should provide the natural point to wind up the restricted voting pool. SMD Hydrovision has built an impressive order book and as this is translated into profits next year we should see a significant uplift. Again this business is subject to acquisitive interest and we would expect an attractive multiple of cost to be achieved on its ultimate sale but not before 2012. Similar developments are taking place at different scales within the funds. Looking forward into 2011 we expect further good progress in asset value.

Hamish Mair

For more information, please contact:

Hamish Mair	0131 718 1184
Gordon Hay Smith	0131 718 1018
[e-mail]  / [e-mail]

F&C PRIVATE EQUITY TRUST PLC

Consolidated Statement of Comprehensive Income for the

nine months ended 30 September 2010

	Unaudited
	Revenue £'000	Capital £'000	Total £'000
Capital gains on investments
Gains on investments held at fair value	-	5,435	5,435
Currency gains	-	597	597
	-	6,032	6,032
Revenue
Investment income	2,066	-	2,066
Other income	36	-	36
Total income	2,102	6,032	8,134
Expenditure
Investment management fee	(312)	(935)	(1,247)
Other expenses	(546)	-	(546)
Total expenditure	(858)	(935)	(1,793)
Profit before finance costs and taxation	1,244	5,097	6,341
Finance costs	(115)	(2,400)	(2,515)
Profit before taxation	1,129	2,697	3,826
Taxation	(292)	321	29
Total comprehensive income	837	3,018	3,855
Return per ordinary share - Basic	1.14p	3.54p	4.68p
Return per ordinary share - Fully diluted	1.11p	3.45p	4.56p
Return per restricted voting share - Basic	0.01p	0.69p	0.70p

F&C PRIVATE EQUITY TRUST PLC

Consolidated Statement of Comprehensive Income for the

nine months ended 30 September 2009

	Unaudited
	Revenue £'000	Capital £'000	Total £'000
Capital losses on investments
Losses on investments held at fair value	-	(15,511)	(15,511)
Currency gains	-	2,336	2,336
	-	(13,175)	(13,175)
Revenue
Investment income	1,413	-	1,413
Other income	19	-	19
Total income	1,432	(13,175)	(11,743)
Expenditure
Investment management fee	(253)	(758)	(1,011)
Other expenses	(564)	-	(564)
Total expenditure	(817)	(758)	(1,575)
Profit/(loss) before finance costs and taxation	615	(13,933)	(13,318)
Finance costs	(170)	(509)	(679)
Profit/(loss) before taxation	445	(14,442)	(13,997)
Taxation	(131)	131	-
Total comprehensive income	314	(14,311)	(13,997)
Return/(loss) per ordinary share - Basic	0.44p	(19.84)p	(19.40)p
Return/(loss) per ordinary share - Fully diluted	0.43p	(19.31)p	(18.88)p
(Loss)/return per restricted voting share - Basic	(0.01)p	0.04p	0.03p

F&C PRIVATE EQUITY TRUST PLC

Consolidated Statement of Comprehensive Income for the

year ended 31 December 2009

	Audited
	Revenue £'000	Capital £'000	Total £'000
Capital losses on investments
Losses on investments held at fair value	-	(12,896)	(12,896)
Currency gains	-	3,767	3,767
	-	(9,129)	(9,129)
Revenue
Investment income	1,813	-	1,813
Other income	42	-	42
Total income	1,855	(9,129)	(7,274)
Expenditure
Investment management fee	(356)	(1,067)	(1,423)
Other expenses	(720)	-	(720)
Total expenditure	(1,076)	(1,067)	(2,143)
Profit/(loss) before finance costs and taxation	779	(10,196)	(9,417)
Finance costs	(195)	(709)	(904)
Profit/(loss) before taxation	584	(10,905)	(10,321)
Taxation	(164)	164	-
Total comprehensive income	420	(10,741)	(10,321)
Return/(loss) per ordinary share - Basic	0.58p	(14.89)p	(14.31)p
Return/(loss) per ordinary share - Fully diluted	0.56p	(14.49)p	(13.93)p
Return/(loss) per restricted voting share - Basic	0.00p	0.03p	0.03p

F&C PRIVATE EQUITY TRUST PLC

Consolidated Balance Sheets

	As at 30 September 2010	As at 30 September 2009	As at 31 December 2009
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	196,367	173,023	171,011
	196,367	173,023	171,011
Current assets
Other receivables	9	784	157
Cash and cash equivalents	430	11,931	13,509
	439	12,715	13,666
Current liabilities
Other payables	(8,572)	(34,835)	(1,106)
Net current assets/(liabilities)	(8,133)	(22,120)	12,560
Total assets less current liabilities	188,234	150,903	183,571
Non-current liabilities
Zero dividend preference shares	(31,049)	-	(28,992)
Net assets	157,185	150,903	154,579
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	36,686	37,357	37,537
Capital redemption reserve	664	664	664
Capital reserve	101,832	95,244	98,814
Revenue reserve	930	565	671
Shareholders' funds	157,185	150,903	154,579
Net asset value per ordinary share - Basic	210.73p	201.75p	206.84p
Net asset value per ordinary share - Fully diluted	208.59p	199.86p	204.81p
Net asset value per restricted voting share - Basic	7.26p	7.56p	7.56p

F&C PRIVATE EQUITY TRUST PLC

Consolidated Statement of Changes in Equity

		Share Capital	Special Distributable Capital Reserve	Special Distributable Revenue Reserve		Capital Redemption Reserve		Capital Reserve		Revenue Reserve	Total
		£'000	£'000	£'000		£'000		£'000		£'000	£'000
For the nine months ended 30 September 2010 (unaudited)
Net assets at 1 January 2010		1,394	15,679	37,357		664		98,814		671	154,579
Total comprehensive income		-	-	-		-		3,018		837	3,855
Dividends paid		-	-	(671)		-		-		(578)	(1,249)
Net assets at 30 September 2010		1,394	15,679	36,686		664		101,832		930	157,185
For the nine months ended 30 September 2009 (unaudited)
Net assets at 1 January 2009		1,394	15,679	37,692		664		109,555		587	165,571
Total comprehensive income		-	-	-		-		(14,311)		314	(13,997)
Dividends paid		-	-	(335)		-		-		(336)	(671)
Net assets at 30 September 2009		1,394	15,679	37,357		664		95,244		565	150,903
For the year ended 31 December 2009 (audited)
Net assets at 1 January 2009	1,394		15,679		37,692		664		109,555	587	165,571
Total comprehensive income	-		-		-		-		(10,741)	420	(10,321)
Dividends paid	-		-		(335)		-		-	(336)	(671)
Net assets at 31 December 2009	1,394		15,679		37,357		664		98,814	671	154,579

 

 

 

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 2009. 

2.   These are not full statutory accounts in terms of Section 434 of the Companies Act 2006.  The full audited accounts for the year to 31 December 2009, which were unqualified, have been lodged with the Registrar of Companies.  The quarterly report will be available on the Company's website.

3.   Returns per Restricted Voting share are based on the average number of shares in issue during the period of 67,084,807.

Returns per Ordinary share are based on the following average number of shares in issue during the period:-

Basic                72,282,273

Fully diluted       74,241,429

Basic net asset value per Restricted Voting share is based on 67,084,807 shares in issue at the end of the period.

Basic net asset value per Ordinary share is based on 72,282,273 shares in issue at the end of the period.

Fully diluted net asset value per Ordinary share is based on 74,241,429 shares in issue at the end of the period.

4. A special dividend of 1.30 pence per restricted voting share will be paid on 7 January 2011 to shareholders on the register on 10 December 2010.

 

END

 

 

QRTEASFSAFPEFFF