3rd Quarter Results

RNS Number : 2338Y

F&C Private Equity Trust PLC

28 November 2014

 



To: Stock Exchange	For immediate release:
	28 November 2014

F&C Private Equity Trust plc

Quarterly results for the three months to 30 September 2014

·      NAV total return for the quarter of 2.0 per cent for the Ordinary Shares.

·      Share price total return for the quarter of -1.6 per cent for the Ordinary Shares.

·      Co-investments increased to 19.2 per cent of the portfolio.

·      Realisations for the quarter of £14.6 million.

Manager's Review

Introduction

As at 30 September 2014 the Company's net asset value ('NAV') was £196.6 million giving a fully diluted NAV per share of 268.22p, an increase over the quarter of 2.0 per cent. There was a modest adverse influence from currency movements of 0.5 per cent. The quarter saw a significant number of realisations and there have been some notable uplifts in valuation with a smaller number of downgrades. As previously announced, an interim dividend of 5.39p per share was paid on 7 November 2014.

The Company had cash of £12.0 million at the end of the period. Taking into account the accrued liability for the Zero Dividend Preference Shares ('ZDPs'), of £44.8 million, this gives total net debt of £32.8 million equivalent to a gearing level of 14.3 per cent. The Company currently has cash of £13.0 million. The ZDPs are due to be redeemed on 15 December 2014 and this will be funded using a combination of the Company's cash resources and drawings under the recently arranged borrowing facility with The Royal Bank of Scotland plc. It is expected that €30 million of this will be drawn as a term loan maturing in June 2019 with the remaining amount drawn under the revolving credit facility. This new loan facility is a more flexible and considerably cheaper form of financing for the Company over both the short and medium terms.

During the quarter combined realisations and income totalled £14.6 million and drawdowns from funds and co-investments totalled £4.7 million. The Company's total outstanding undrawn commitments at 30 September were £65.2 million of which approximately £19 million is to funds whose investment period has expired.

New Investments

During the quarter two commitments to private equity funds and one co-investment were made, and since the quarter end a further two fund commitments and one co-investment have been made.

€2 million was to Portobello Fund III, a mid-market Iberia focused buyout fund managed by the well established Spanish management group previously known as Ibersuizas. As the Spanish economy recovers, along with business confidence, following a very serious adjustment after the Global Financial Crisis, teams, such as Portobello, which have fared well through the recession are well placed to make good investments. Further afield we have rejuvenated the Company's enduring North American portfolio with a $7 million commitment to Blue Point Capital III. We have backed this Cleveland based management group twice previously and the Company has benefited from their ability to source mid-market North American investments, generally outside the private equity 'hotspots' of New York, California and Texas.

The Company's new co-investment, Fox International Group, is a leading provider of fishing tackle, including rods, reels, lures as well as clothing and camping equipment and accessories. The Company has invested £1.6 million for 17.6 per cent of the equity.  The deal was led by emerging management group Next Wave. The investment appears to have started well with encouraging progress in trading.

Since the quarter-end, two commitments have been made to related funds managed by Inflexion, one of our longstanding and most successful investment partners. £4.4 million was committed to Inflexion Buyout Fund IV, a £650 million fund, which continues Inflexion's focus on UK mid-market buyouts. Additionally, £2.6 million has been committed to Inflexion Partnership Capital Fund I, a £400 million fund, which is being raised in parallel to focus on minority investments in the UK mid-market. This latter area, where Inflexion also has a strong record, involves a slightly different investment style and previously it could only compose a limited proportion of their previous funds due to mandate restrictions. By raising two related, but distinct funds, Inflexion believe that they will be able to take advantage of more of the minority investment opportunities that they find.

One co-investment has been added to the portfolio since the quarter end. £3.8 million has been invested in Ambio Holdings Inc., a pharmaceutical company involved in the manufacture of API (Active Pharmaceutical Ingredient) peptides and development of complex peptide generic pharmaceuticals. The deal was led by the Munich and Boston based Life Science specialists, MVM, with whom we are already invested in another of the funds which we manage. Ambio, which has its corporate base in North Augusta, South Carolina and has manufacturing facilities in both the USA and China was founded by life science entrepreneur Dr Chris Bai and has developed an unusual and valuable expertise in manufacturing peptides to exacting standards. MVM are well placed to lead the deal as they have had previous success in the complex generics market. There are two streams to the business; the manufacture of API for other pharmaceutical companies and development of their 'own' complex, peptide based generics. The investment gives the Company an 11.5 per cent stake in the business.

There were a limited number of drawdowns by funds during the quarter, amounting to only £3.1 million.  The first drawdown for Blue Point Capital III, of £0.8 million, funded the first two investments, Ortholite (high performance insoles) and Hilsinger (protective eyeware products and optical accessories). Capvis IV, the Zurich based mid-market fund, drew £0.3 million for investment in Faster, (couplings for hydraulic systems), an investment with which we are very familiar having been through the Argan led deal, part of the selling syndicate. €2 million was received as proceeds of this exit early in the fourth quarter.

Realisations

This was an active quarter for realisations, with proceeds totalling £14.6 million. The exits were well spread by manager, geography and sector. Some of the larger and more notable exits are noted below.

The largest individual exit was Independent Vetcare (chain of veterinary practices) which was sold by August Equity Partners II with proceeds of £3.8 million. This achieved an excellent return of 4.0x cost and an IRR of 70 per cent. Other UK exits included the final contingent consideration from our 2010 exit of nursing agency ICS of £0.5 million. This company had been sold by Inflexion to Blackstone and when it was sold onto Towerbrook this further payment was triggered. Inflexion also returned £0.2 million from their 2006 Fund's sale of Phlexglobal, a technology enabled document management solution to the global clinical research market, achieving 2.5x cost and an IRR of 40 per cent. The Company's longstanding holding in TDR Capital has now been fully realised with the sale of its remaining holding in Phoenix Group, returning £0.6 million (2.0x cost, IRR 26 per cent). In its later fund, TDR Capital II, TDR sold the European operations of vacated property security business VPS to PAI facilitating a distribution of £0.4 million.

Paris based Chequers Capital XV has continued an active year with further exits. Silver Care, one of the top 10 Nursing home groups in Germany, was sold to French market leader Orpea achieving 2.4x cost and an IRR of 26 per cent with proceeds to the Company of £1.1 million. Chequers Capital XV also sold medical analysis laboratories chain Bio 7 to French fund Ardian for 3.3x cost, returning £0.8 million.

In the Netherlands, Gilde Buyout Fund III sold Nedschroef, a leading manufacturer of metal fasteners for the automotive industry, to Shanghai Prime Machinery. The proceeds were £0.7 million giving 2.3x cost and an IRR of 12.4 per cent.

In Southern Europe, N+1 Private Equity II sold Xanit, a private hospital group based on the Costa del Sol, to Spanish healthcare group Vithas. Proceeds were £0.6 million which, as it was a victim of recession, represents only 0.9x cost.  N+1 Private Equity II also distributed £0.5 million arising from dividends from car park operator EYSA and Salto, an electronic clocks company. In Northern Europe, Procuritas Capital IV distributed £1.2 million from the recapitalisation of Olivia (supported living services). Lastly, in the USA, Blue Point Capital II exited Cook & Boardman, the national distributor of commercial doors and frames, for 3.3x cost returning £0.5 million.

Valuation Changes

There were a number of significant valuation movements in the quarter. The largest individual fund revaluation was for Blue Point Capital II (+£1.1 million) which benefitted from the Cook & Boardman sale noted above and also from the slightly later sale of snack foods company JTM, which has been sold for 6.4x cost and an IRR of 94 per cent. This completed after the quarter-end but the uplift was recorded in the September valuation. Funds where there have been realisations or where key holdings are trading strongly have featured with good uplifts. Each of Inflexion 2006, Inflexion 2012 Co-investment Fund, Chequers Capital XV, Stirling Square Capital Partners II and DBAG V was uplifted by £0.5 million during the quarter giving a broadly based increase. Two of the co-investments were uplifted. SMD Hydrovision, the Inflexion led manufacturer of WROVs (Work class remote operated vehicles), was uplifted by £0.8 million, reflected improved prospects, and gas meter distributor Meter Provida was uplifted by £0.9 million to reflect its strong progress in profits.

There were relatively few substantial downgrades. Environmental Technologies Fund was down by £0.4 million reflecting specific difficulties with one of its portfolio companies. RJD Partners II was down by £0.3 million and Camden Partners III was down by £0.2 million.

Financing

As noted above, the Zero Dividend Preference Shares are due for redemption imminently, on 15 December. The amount to be returned to holders of the ZDPs is approximately £46 million providing them with a very respectable return of 8.75 per cent per annum for their five year hold. The capital raised in December 2009 enabled the Company to maintain a full investment programme through the recession and, as the above commentary shows, these investments are coming to exit in increasing numbers. The strong flow of realisations totals £35.5 million for the nine months to 30 September, some 25 per cent ahead of the same stage last year, and has allowed the comfortable redemption of the ZDPs and a steady programme of new investments in both funds and co-investments.

Outlook

The considerable activity in the portfolio, particularly with exits, has continued into the fourth quarter. The economic background in Europe is mixed but it is in general supportive of private equity with a recovering banking sector coupled with improved confidence by private equity investors and corporates alike, facilitating exits for mature deals and establishing new ones.  Our contention is that in the mid-market of Europe, where most of our new investments are made, there is a very healthy two-way market. With the final, often important, quarter to run, there is a good prospect that material additional returns will be made by our investment partners.

Hamish Mair

Investment Manager

F&C Investment Business Limited

F&C Private Equity Trust plc

Consolidated Statement of Comprehensive Income for the

nine months ended 30 September 2014

	(Unaudited)
	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	6,830	6,830
Exchange gains	-	115	115
Investment income	2,330	-	2,330
Other income	18	-	18
Total income	2,348	6,945	9,293
Expenditure
Investment management fee - basic fee	(392)	(1,176)	(1,568)
Investment management fee - performance fee	-	-	-
Other expenses	(496)	-	(496)
Total expenditure	(888)	(1,176)	(2,064)
Profit before finance costs and taxation	1,460	5,769	7,229
Finance costs	(255)	(3,733)	(3,988)
Profit before taxation	1,205	2,036	3,241
Taxation	(260)	260	-
Profit for period/total comprehensive income	945	2,296	3,241
Return per Ordinary Share - Basic	1.30p	3.18p	4.48p
Return per Ordinary Share - Fully diluted	1.27p	3.09p	4.36p
Return per Restricted Voting Share - Basic	n/a	n/a	n/a

F&C PRIVATE EQUITY TRUST PLC

Consolidated Statement of Comprehensive Income for the

nine months ended 30 September 2013

	(Unaudited)
	Revenue £'000	Capital £'000	Total               £'000
Income
Gains on investments held at fair value	-	14,783	14,783
Exchange losses	-	(28)	(28)
Investment income	1,659	-	1,659
Other income	32	-	32
Total income	1,691	14,755	16,446
Expenditure
Investment management fee - basic fee	(383)	(1,149)	(1,532)
Investment management fee - performance fee	-	-	-
Other expenses	(526)	-	(526)
Total expenditure	(909)	(1,149)	(2,058)
Profit before finance costs and taxation	782	13,606	14,388
Finance costs	(205)	(3,324)	(3,529)
Profit before taxation	577	10,282	10,859
Taxation	(150)	150	-
Profit for period/total comprehensive income	427	10,432	10,859
Return per Ordinary Share - Basic	0.59p	14.43p	15.02p
Return per Ordinary Share - Fully diluted	0.58p	14.05p	14.63p
Return per Restricted Voting Share - Basic	(0.01)p	0.01p	-

F&C Private Equity Trust plc

Consolidated Statement of Comprehensive Income for the

year ended 31 December 2013

	(Audited)
	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	24,606	24,606
Exchange gains	-	48	48
Investment income	2,331	-	2,331
Other income	53	-	53
Total income	2,384	24,654	27,038
Expenditure
Investment management fee - basic fee	(515)	(1,544)	(2,059)
Investment management fee - performance fee	-	(1,175)	(1,175)
Other expenses	(681)	-	(681)
Total expenditure	(1,196)	(2,719)	(3,915)
Profit before finance costs and taxation	1,188	21,935	23,123
Finance costs	(278)	(4,497)	(4,775)
Profit before taxation	910	17,438	18,348
Taxation	(215)	215	-
Profit for year/total comprehensive income	695	17,653	18,348
Return per Ordinary Share - Basic	0.97p	24.41p	25.38p
Return per Ordinary Share - Fully diluted	0.94p	23.77p	24.71p
Return per Restricted Voting Share - Basic	(0.01)p	0.01p	-

F&C Private Equity Trust plc

Amounts Recognised as Dividends

	Nine months ended 30 September 2014 (unaudited) £'000	Nine months ended 30 September 2013 (unaudited) £'000	Year ended 31 December 2013   (audited) £'000
Final Ordinary Share dividend of 5.07p per share for the year ended 31 December 2012	-	3,665	3,665
Interim Ordinary Share dividend of 5.22p per share for the year ended 31 December 2013	-	-	3,773
Final Ordinary Share dividend of 5.36p per share for the year ended 31 December 2013	3,874	-	-
	3,874	3,665	7,438

On 14 February 2013 a final Restricted Voting Shares dividend of 1.675p per Restricted Voting Share was paid. The total amount paid was £1,124,000.

F&C Private Equity Trust plc

Consolidated Balance Sheet

	As at 30 September 2014 (unaudited)	As at 30 September 2013 (unaudited)	As at 31 December 2013 (audited)
	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	229,735	229,003	237,657
Current assets
Other receivables	1,048	350	321
Cash and short-term deposits	12,020	6,434	7,018
	13,068	6,784	7,339
Current liabilities
Other payables	(1,417)	(1,406)	(5,944)
Zero dividend preference shares	(44,802)	-	(41,835)
Net current (liabilities)/assets	(33,151)	5,378	(40,440)
Total assets less current liabilities	196,584	234,381	197,217
Non-current liabilities
Zero dividend preference shares	-	(40,880)	-
Net assets	196,584	193,501	197,217
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	143,838	141,968	145,416
Revenue reserve	3,606	2,393	2,661
Shareholders' funds	196,584	193,501	197,217
Net asset value per Ordinary Share - Basic	271.97p	267.70p	272.84p
Net asset value per Ordinary Share - Fully diluted	268.22p	264.07p	269.07p

F&C Private Equity Trust plc

Reconciliation of Movements in Shareholders' Funds

 

	Nine months ended 30 September 2014	Nine months ended 30 September 2013	Year ended 31 December 2013
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Opening shareholders' funds	197,217	187,431	187,431
Profit for the period/total comprehensive income	3,241	10,859	18,348
Dividends paid (Ordinary Shares)	(3,874)	(3,665)	(7,438)
Special dividends paid (Restricted Shares)	-	(1,124)	(1,124)
Closing shareholders' funds	196,584	193,501	197,217

 

 

 

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 2013.

2.   Earnings for the nine months to 30 September 2014 should not be taken as a guide to the results for the year to 31 December 2014.

3.   Investment management fee:

	Nine months ended 30 September 2014			Nine months ended 30 September 2013			Year ended 31 December 2013
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment management fee  - basic fee	392	1,176	1,568	383	1,149	1,532	515	1,544	2,059
Investment management fee  - performance fee	-	-	-	-	-	-	-	1,175	1,175
	392	1,176	1,568	383	1,149	1,532	515	2,719	3,234

4.   Finance costs:

	Nine months ended 30 September 2014			Nine months ended 30 September 2013			Year ended 31 December 2013
	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	255	766	1,021	205	617	822	278	835	1,113
Finance costs attributable to ZDP Shares	-	2,967	2,967	-	2,707	2,707	-	3,662	3,662
	255	3,733	3,988	205	3,324	3,529	278	4,497	4,775

5.   The basic return per Ordinary Share is based on a net return on ordinary activities after taxation of £3,241,000 (30 September 2013 - £10,859,000; 31 December 2013 - £18,348,000) and on 72,282,273 (30 September 2013 - 72,282,273; 31 December 2013 - 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 return on ordinary activities after taxation of £3,241,000 (30 September 2013 - £10,859,000; 31 December 2013 - £18,348,000) and on 74,241,429 (30 September 2013 - 74,241,429; 31 December 2013 - 74,241,429) shares, being the weighted average number of Ordinary Shares in issue during the period after conversion of the Ordinary Share warrants.

6.  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 30 September 2014 was £45,075,000 based on the quoted price of 150.25p per ZDP Share.

	Number of ZDP Shares	Amount due to ZDP shareholders £'000
As at 31 December 2013	30,000,000	41,835
ZDP Shares finance cost	-	2,967
As at 30 September 2014	30,000,000	44,802

7. The basic net asset value per Ordinary Share is based on net assets at the period end of £196,584,000 (30 September 2013 - £193,501,000; 31 December 2013 - £197,217,000) and on 72,282,273 (30 September 2013 - 72,282,273; 31 December 2013 - 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 £199,130,000 (30 September 2013 - £196,047,000; 31 December 2013 - £199,763,000) and on 74,241,429 (30 September 2013 - 74,241,429; 31 December 2013 - 74,241,429) shares, being the number of Ordinary Shares in issue at the period end after conversion of the Ordinary Share warrants.

8.  The financial information for the nine months ended 30 September 2014, 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 2013, on which the auditor issued an unqualified report, have been lodged with the Registrar of Companies. The quarterly report is available at the Company's website www.fcpet.co.uk.

For more information, please contact:

Hamish Mair (Investment  Manager)	0131 718 1184 [e-mail]
Gordon Hay Smith (Company Secretary)	0131 718 1018 [e-mail]

 

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