Third Quarter Results and Dividend Announcement

RNS Number : 4008X

F&C Private Equity Trust PLC

24 November 2017

 

To: Stock Exchange	For immediate release:
	24 November 2017

F&C Private Equity Trust plc

LEI: 2138009FW98WZFCGRN66

Quarterly results for the three month period ended 30 September 2017

·      NAV total return per Ordinary Share for the nine month period ended 30 September 2017 of 4.7 per cent.

·      Share price total return per Ordinary Share for the nine month period ended 30 September 2017 of 18.5 per cent.

·      A quarterly dividend of 3.55 pence per Ordinary Share payable on 31 January 2018 to shareholders on the register on 5 January 2018.

Manager's Review

Introduction

As at 30 September 2017, the net assets of the Company were £266.9 million, giving a Net Asset Value ("NAV") per share of 360.98p, an increase over the quarter of 1.2%. For the first nine months of the year, the NAV total return is 4.7%. At 30 September, the Company had net cash of £15.5 million. Outstanding undrawn commitments were £126.8 million with approximately £15.7 million of these to funds where the investment period has expired and where we would expect only a small proportion to be drawn.

In line with the Company's new dividend policy to pay dividends on a quarterly basis, the first quarterly dividend of 3.55p will be paid on 31 January 2018 to shareholders on the register on 5 January 2018.  The ex-dividend date is 4 January 2018.

New Investments

There were two new commitments to funds and two new co-investments during the quarter.

£6.0 million was committed to Apposite Healthcare II. This fund focuses on UK lower mid market companies in healthcare services, digital health, social care and medical products and has the flexibility to invest up to 30% in Western Europe. The fund is managed by a very experienced team and already has made four investments taking the fund to approximately 20% drawn. €5.0 million has been committed to ArchiMed II, a predominantly European healthcare fund. Both funds were selected following an extensive market mapping exercise looking at opportunities in the healthcare and related sectors in Europe.

£3.0 million was committed to Swanton Care Group with an initial investment of £1.4 million. This is a platform investment led by Apposite Capital involved in residential care homes and supported living for people with learning disabilities and autism spectrum disorders. The company already has 23 properties and the plan is to add to this through acquisition during the holding period.

£2.8 million was invested in CETA, a specialist insurance broker, which concentrates on the caravan and leisure boat niches. The company has set up a Managing General Agent (MGA) which will allow it to capture more of the value chain in this sector. The investment is led by Kester Capital, the managers of GCP II.

Following the quarter-end two more co-investments have been added to the portfolio. £3.0 million has been invested in Walkers, a Leeds based transport and logistics company, which specialises in small pallet loads and operates a distribution hub for one of the large pallet networks. Pallet hubs are being utilised increasingly, in part due to the increase in the popularity of online shopping and the requirement for many small batch deliveries. This investment is led by Total Capital Partners with whom we are invested in two other investments. £4.0 million has been invested in a SEP led specialist software company Dotmatics.  This company provides sophisticated software to the pharmaceutical industry which is primarily used to facilitate research.

The total of drawdowns from funds and co-investments during the quarter is £16.5 million. £12.3 million of this was accounted for by drawdowns from the portfolio of funds covering a wide range of new investments and some follow on investment into existing holdings in the co-investment portfolio.

The largest drawdown was for TDR Capital II which drew £4.1 million as our share of the capital to create additional value in modular buildings company Algeco Scotsman. As noted above, Apposite Healthcare II has started with a partially invested portfolio of four holdings and £1.2 million was drawn for these.  £0.9 million was called from SEP V, principally for software company, Dotmatics, as described above. £0.5 million was called from Nordic Fund Summa I for its first four investments; Sortera (construction waste bags), eGain (energy saving), Lin Education (digitalisation of learning) and Summa Digital (a combination of three 'big data' analytics companies). Inflexion Enterprise IV has called £0.4 million for three investments; MyPolicy (telematics insurance broker and MGA), Prolabs (optical transceivers for fibreoptics) and Virgin Experience Days.  In the US Blue Point Capital III called £0.4 million for SASE, a provider of various products for the polishing of concrete. There were two follow on investments in co-investments; £0.6 million to Burgess Marine and £0.4 million to David Phillips.

Realisations

There were realisations totalling £24.2 million and income of £0.9 million in the third quarter. This gives a total for the first nine months of £51.9 million which is approximately a third more than at the same stage in 2016.

The largest exit was of £6.2 million when our co-investment in the Stirling Square led security products company 3si was sold in two parts to US private equity house LLR and to a European trade buyer. This was a much longer hold than expected at almost 11 years and during that time the company has had some challenges, which have necessitated a substantial, but ultimately successful, updating of its product range. The net return is 1.9x and an IRR of 9% which, whilst sub optimal, is creditable given the difficulties the company has faced. £1.8 million was distributed by Blue Point Capital III from shoe insole company Ortholite which has been sold to Trilantic North America achieving an excellent 7x investment. The German speaking area of Europe has been especially strong for exits this quarter. The remaining holding in vacuum valves company VAT Holdings, which is now listed, was sold down for Capvis Funds III and IV, together returning £1.4 million. This investment has achieved 5.2x and an IRR of 82%. DBAG V had no less than three exits returning a total of £6.4 million. Formel D (automotive documentation) achieved 4.9x on its sale to 3i. ProXES (process machinery) made 5.5x on its sale to Capvis (our share £0.3 million). Romaco (machinery for pharmaceutical packaging) was partially sold to Chinese engineering group Truking for 2.4x cost. In addition to this DBAG VI returned £1.4 million with the sale of tutoring business Schulerhilfe to Oakley Capital which represented 3.9x cost and an IRR of 51%. In Iberia, N+1 Private Equity II exited Probos, the world's third largest producer of edgebands for the furniture industry by selling to industrial buyer Surtico SE. This returned £1.6 million which was 2.1x cost and an IRR of 18%. In France Chequers Capital XV distributed £0.4 million from the sale of Accleya (IT for the aviation industry) which has been sold to Mercator achieving 11.7x cost and an IRR of 36%.   Lastly £0.8 million came in from TDR Capital II from the sale of MCS Group, which itself had developed out of the US business of property services company VPS. This represented 2.4x cost.

Valuation Changes

There were a considerable number of uplifts reflecting good underlying progress for a range of companies. The net impact of these has been partially offset by a small number of downgrades.

On the upside, we have uplifted Ambio Holdings by £3.2 million. The company, which specialises in producing API (active pharmaceutical ingredient) for a range of generic and patented peptide oriented drugs, has traded very strongly. Chequers Capital XV is uplifted by £0.9 million mainly due to the strong progress of its holding, Store Electronics Systems, which provides electronic shelf labelling systems for the food retail sector. Procuritas Capital IV, one of our principal Nordic exposures, is up by £0.9 million mainly due to further progress by ice cream machinery company Green Magnum. Lyceum Capital III is up by £0.6 million reflecting good progress across a number of holdings. Ciclad 5, one of our longest standing French relationships, is uplifted by £0.6 million mainly due to the exit of Seabird, a financial consultancy focusing on the insurance industry, which has been sold achieving 3.6x cost and an IRR of 52%. SEP IV is up by £0.5 million mainly due to the sale of online luxury retailer Matchesfashion to Apax which completed after the quarter end with an excellent  outcome of 8.3x cost and an IRR of 55%.

There was a downgrade in Burgess Marine (£1.2 million) which is in the midst of a reconstruction. Pentech II is down by £0.6 million mainly because the putative merger of FanDuel with US company DraftKings has been blocked by the Federal Trade Commission. PineBridge New Europe II is down by £0.4 million mainly because of the write off of Polish convenience store company Malpka, which has been a problem investment for some time. Schaetti, the specialist adhesives company based in Switzerland has been reduced by £0.4 million to reflect difficult trading and Calucem, the Croatia based specialist cement company is down by £0.3 million due to reduced sales volumes in the refractory market.

Financing

The Company is in a strong financial position with net cash of £15.5 million at 30 September. There has been minimal impact from exchange rate movements over the quarter. All of our £70 million borrowing facility remains available for new investments. The new quarterly dividend means that a payment of approximately £2.6 million will be made in late January 2018.

Outlook

There are a number of new funds, co-investments and secondaries at advanced stages of the investment process and these are likely to complete by the year end. There is substantial dealflow in each section and we are constantly assessing opportunities looking for distinctive ways of building shareholder value for the future. In the UK market the Brexit negotiations occupy the minds of many business people to an increasing extent, although it is our view that this has been fully priced into deal values since the Referendum last year. In Continental Europe, the improved economic background has provided some useful support to deal activity and valuations across most of the individual geographies.  The general tenor of the market is of good progress in underlying earnings with a small number of exceptions where company specific issues are being addressed. As always the quality of management and the support received from the private equity lead is critical in handling difficult challenges. This is an area on which we, with our investment partners, place much emphasis.  The price of new deals is generally at the upper end of the historic range but this varies considerably by size and by sector. Private equity managers invest on an absolute return basis and are not obliged to invest if pricing means that their target returns are unlikely to be met. The market is very broad and our portfolio deliberately covers a range of sectors and styles within its mid-market focus and in any given time period our investment partners,  in aggregate, will always find some attractive investments with potential for long term value growth. There are excellent prospects for further growth in shareholder value over the remainder of the year.

Hamish Mair

Investment Manager

F&C Investment Business Limited

F&C Private Equity Trust plc

Statement of Comprehensive Income for the

nine months ended 30 September 2017

	(Unaudited)
	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	17,889	17,889
Exchange losses	-	(802)	(802)
Investment income	1,001	-	1,001
Other income	33	-	33
Total income	1,034	17,087	18,121
Expenditure
Investment management fee - basic fee	(479)	(1,438)	(1,917)
Investment management fee - performance fee	-	(2,175)	(2,175)
Other expenses	(562)	-	(562)
Total expenditure	(1,041)	(3,613)	(4,654)
(Loss)/profit before finance costs and taxation	(7)	13,474	13,467
Finance costs	(321)	(964)	(1,285)
(Loss)/profit before taxation	(328)	12,510	12,182
Taxation	-	-	-
(Loss)/profit for period/total comprehensive income	(328)	12,510	12,182
Return per Ordinary Share - Basic	(0.44)p	16.92p	16.48p
Return per Ordinary Share - Fully diluted	(0.44)p	16.92p	16.48p

F&C Private Equity Trust plc

Statement of Comprehensive Income for the

nine months ended 30 September 2016

	(Unaudited)
	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	33,962	33,962
Exchange losses	-	(3,927)	(3,927)
Investment income	630	-	630
Other income	45	-	45
Total income	675	30,035	30,710
Expenditure
Investment management fee - basic fee	(424)	(1,273)	(1,697)
Investment management fee - performance fee	-	(1,508)	(1,508)
Other expenses	(547)	-	(547)
Total expenditure	(971)	(2,781)	(3,752)
(Loss)/profit before finance costs and taxation	(296)	27,254	26,958
Finance costs	(313)	(940)	(1,253)
(Loss)/profit before taxation	(609)	26,314	25,705
Taxation	-	-	-
(Loss)/profit for period/total comprehensive income	(609)	26,314	25,705
Return per Ordinary Share - Basic	(0.84)p	36.04p	35.20p
Return per Ordinary Share - Fully diluted	(0.83)p	35.59p	34.76p

F&C Private Equity Trust plc

Statement of Comprehensive Income for the

year ended 31 December 2016

	(Audited)
	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	58,538	58,538
Exchange losses	-	(3,584)	(3,584)
Investment income	1,386	-	1,386
Other income	54	-	54
Total income	1,440	54,954	56,394
Expenditure
Investment management fee - basic fee	(582)	(1,745)	(2,327)
Investment management fee - performance fee	-	(2,024)	(2,024)
Other expenses	(739)	-	(739)
Total expenditure	(1,321)	(3,769)	(5,090)
Profit before finance costs and taxation	119	51,185	51,304
Finance costs	(419)	(1,257)	(1,676)
(Loss)/profit before taxation	(300)	49,928	49,628
Taxation	-	-	-
(Loss)/profit for year/total comprehensive income	(300)	49,928	49,628
Return per Ordinary Share - Basic	(0.41)p	68.16p	67.75p
Return per Ordinary Share - Fully diluted	(0.41)p	67.53p	67.12p

F&C Private Equity Trust plc

Amounts Recognised as Dividends

	Nine months ended 30 September 2017 (unaudited) £'000	Nine months ended 30 September 2016 (unaudited) £'000	Year ended 31 December 2016   (audited) £'000
Final Ordinary Share dividend of 5.83p per share for the year ended 31 December 2015	-	4,251	4,251
Interim Ordinary Share dividend of 6.12p per share for the year ended 31 December 2016	-	-	4,525
Final Ordinary Share dividend of 6.48p per share for the year ended 31 December 2016	4,791	-	-
	4,791	4,251	8,776

F&C Private Equity Trust plc

Balance Sheet

	As at 30 September 2017 (unaudited)	As at 30 September 2016 (unaudited)	As at 31 December 2016 (audited)
	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	254,423	235,892	239,049
Current assets
Other receivables	166	21	26
Cash and cash equivalents	41,592	32,081	48,575
	41,758	32,102	48,601
Current liabilities
Other payables	(3,210)	(2,508)	(3,057)
Net current assets	38,548	29,594	45,544
Total assets less current liabilities	292,971	265,486	284,593
Non-current liabilities
Interest-bearing bank loan	(26,057)	(25,361)	(25,070)
Net assets	266,914	240,125	259,523
Equity
Called-up ordinary share capital	739	739	739
Share premium account	2,527	-	2,527
Special distributable capital reserve	15,040	17,567	15,040
Special distributable revenue reserve	31,403	31,403	31,403
Capital redemption reserve	1,335	1,335	1,335
Capital reserve	215,456	180,065	203,679
Revenue reserve	414	9,016	4,800
Shareholders' funds	266,914	240,125	259,523
Net asset value per Ordinary Share	360.98p	324.75p	350.98p

F&C Private Equity Trust plc

Reconciliation of Movements in Shareholders' Funds

	Nine months ended 30 September 2017	Nine months ended 30 September 2016	Year ended 31 December 2016
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Opening shareholders' funds	259,523	216,125	216,125
Issue of Ordinary Shares	-	2,546	2,546
Profit for the period/total comprehensive income	12,182	25,705	49,628
Dividends paid	(4,791)	(4,251)	(8,776)
Closing shareholders' funds	266,914	240,125	259,523

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 2016.  Earnings for the nine months to 30 September 2017 should not be taken as a guide to the results for the year to 31 December 2017.

2.   Investment management fee:

	Nine months ended 30 September 2017			Nine months ended 30 September 2016			Year ended 31 December 2016
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment management fee  - basic fee	479	1,438	1,917	424	1,273	1,697	582	1,745	2,327
Investment management fee  - performance fee	-	2,175	2,175	-	1,508	1,508	-	2,024	2,024
	479	3,613	4,092	424	2,781	3,205	582	3,769	4,351

3.   Finance costs:

	Nine months ended 30 September 2017			Nine months ended 30 September 2016			Year ended 31 December 2016
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Interest payable on bank loan	321	964	1,285	313	940	1,253	419	1,257	1,676

4.   In accordance with the Company's stated dividend policy, the Board declares a quarterly dividend of 3.55 pence per share payable on 31 January 2018 to shareholders on the register on 5 January 2018.  The ex-dividend date is 4 January 2018. 

This payment represents the first quarterly dividend to be paid by the Company.  Previously dividends were paid on a semi-annual basis.  This innovation, which was introduced to regularise the flow of income to shareholders, will result in the payment of dividends in January, April, July and October of each year.

5.   The basic return per Ordinary Share is based on a net profit on ordinary activities after taxation of £12,182,000 (30 September 2016 - £25,705,000; 31 December 2016 - £49,628,000) and on 73,941,429 (30 September 2016 - 73,017,623; 31 December 2016 - 73,249,836) 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 £12,182,000 (30 September 2016 - £25,705,000; 31 December 2016 - £49,628,000) and on 73,941,429 (30 September 2016 - 73,941,429; 31 December 2016 - 73,941,429) shares, being the weighted average number of Ordinary Shares in issue during the period after conversion of the Ordinary Share warrants.

During the year ended 31 December 2016, the Company issued 1,959,156 Ordinary Shares of 1p each in capital of the Company following the exercise of subscription rights by holders of a corresponding number of management warrants previously issued by the Company in the capital of the Company.  As at 30 September 2017, no warrants remain in issue (30 September 2016 - nil; 31 December 2016 - nil).

6. The net asset value per Ordinary Share is based on net assets at the period end of £266,914,000 (30 September 2016 - £240,125,000; 31 December 2016 - £259,523,000) and on 73,941,429 (30 September 2016 - 73,941,429; 31 December 2016 - 73,941,429) shares, being the number of Ordinary Shares in issue at the period end.

7.  The financial information for the nine months ended 30 September 2017, 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 2016, on which the auditor issued an unqualified report, have been 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:

F&C Investment Business Limited                       0131 718 1000

 

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