Third Quarter Results

RNS Number : 9912P

F&C Private Equity Trust PLC

24 November 2016

 

To: Stock Exchange	For immediate release:
	24 November 2016

F&C Private Equity Trust plc

Quarterly results for the three month period ended 30 September 2016

·      NAV total return per Ordinary Share of 3.4 per cent for the three month period ended 30 September 2016. 11.9 per cent for the nine month period ended 30 September 2016.

·      Share price total return per Ordinary Share of 12.5 per cent for the three month period ended 30 September 2016. 14.4 per cent for the nine month period ended 30 September 2016.

Manager's Review

Introduction

As at the 30 September 2016 the Company's net asset value (NAV) was £240.1 million giving a fully diluted NAV per share of 324.75p, an increase over the quarter of 3.4 per cent. During the period sterling has continued to weaken and this has given rise to a positive currency influence of around 1.8 per cent. A healthy level of activity has been seen with realisations comfortably exceeding drawdowns. As previously announced an interim dividend of 6.12p per share was paid on 4 November 2016.

At the end of the period the Company had a cash position of £32.1 million. Together with borrowings of £25.4 million, under the Company's loan facility, net cash was £6.7 million. During the quarter combined realisations and income totalled £19.4 million and drawdowns from funds totalled £4.8 million. There were no new co-investments during the quarter. The total of outstanding undrawn commitments at 30 September was £107.5 million and of this around £17 million is to funds where the investment period has expired.

New Investments

The third quarter has been an active one for fresh commitments to private equity funds. The emphasis has been on strengthening some of our longstanding European relationships whilst selectively adding new ones. The European mid-market for buyouts is our focus. New commitments are as follows: £5 million to Piper Private Equity VI, the consumer brands specialists whom we have backed three times before; €9 million to Bencis V, the Benelux focused mid-market fund investing in companies with enterprise values in the range €20-€100 million; €5 million to Montefiore IV, a primarily France-focused fund investing in the €25-€250 million size range, and €6.3 million and €1.2 million respectively to DBAG VII and DBAG VII B which will invest in German speaking European deals in the €75-€250 million size range. After the quarter end we have committed to two Nordic focused funds: €7 million to Procuritas VI and €4 million (40 million SEK) to Summa I. Procuritas is a long standing relationship, but Summa is a new emerging manager bringing together executives from leading Nordic houses.

There were no new co-investments in the quarter but after the quarter end we have invested £2.6 million for 12 per cent of Babington, the Derby-based provider of apprenticeships and other business training courses. This deal is led by RJD Partners, with whom we have a longstanding link. The investment thesis is based around the government mandated growth in apprenticeships which is coming through over the next few years, in part funded by the apprenticeship levy.

New investments made by the funds have included £0.7 million for Barber of Sheffield, a provider of consumables to the large and growing tattoo parlour sector (RJD Private Equity III), £0.6 million for Questionmark, a provider of human resources and assessment and certification tools (FPE II), £0.3 million for HRA Pharma, a France based speciality pharmaceutical company (Astorg VI), £0.3 million for Palex, a Spanish distributor of healthcare equipment (Corpfin Capital IV) and £0.2 million for Orbis, a company running autism specialist schools in Wales (August Equity Partners III), amongst several others.

Realisations

Total realisations for the quarter were £19.4 million, bringing the year to date total to £38.6 million, which is almost 70 per cent of the amount at the same stage last year, an exceptional year for exits. There have been a number of notable successes. As mentioned in the previous report, our investment in the Agilitas-led deal, Ionisos, gave us exposure to a fast growing company involved in the cold sterilisation market in France and neighbouring countries. This uses the radioactive isotope Cobalt 60 to sterilise medical equipment and packaging. After a hold period of only 19 months Agilitas sold the company to leading French private equity house, Ardian, achieving an excellent return of 2.9x and an IRR of 97 per cent.  The proceeds were £5.2 million. This is an excellent example of the benefits of investing in unusual niche companies with strongly growing underlying markets into which they can gain market share and where there are significant barriers to entry.

Another successful niche company Marston, was sold by Inflexion to ICG achieving an excellent return to us, across two funds, of £5.4 million. Marston is now the UK's leading debt enforcement business, having been repositioned from being a regional collector of limited debt types to the only national collector across multiple liabilities for both government and commercial clients. Chequers Capital has exited TCR, the Belgium based leasing company specialising in ground support equipment for aircraft. This returned £0.9 million representing 8.6x cost and an IRR of 26 per cent. Corpfin Capital IV have sold Spanish logistics company, Logiters, to a trade buyer achieving 11x cost and returning £0.5 million; Herkules Private Equity III sold Norway based Harding, the leading life boat producer to Palfinger. This company has faced challenging conditions given the depressed oil sector, a major market for them, but the proceeds of £0.7 million represented 1.4x cost and an IRR of 13 per cent. Lastly the Environmental Technologies Fund has exited Enbalon, a provider of enterprise stability software, through a sale to Wolters Kluwer achieving 3x cost and an IRR of 23 per cent and proceeds of £0.8 million.

Valuation Changes

There have been a number of modest, but cumulatively significant, uplifts over the quarter. DBAG V is up by £0.8 million reflecting good progress across several holdings. Procuritas Capital IV is up by £0.5 million mainly reflecting an uplift for ice cream machine manufacturer Green Magnum. In the co-investment portfolio Park Holidays, our caravan holiday park investment, is trading well and is up by £0.7 million and Avalon, the funeral plans business led by Lonsdale, is also trading well and is up by £0.5 million. On the negative side Hutton Collins Capital Partners III is down by £0.6 million, mainly reflecting a write-down for Byron Burgers which had a well-publicised incident involving the immigration authorities, which has resulted in a damaging, but probably temporary, loss of sales in July and August.  The portfolio of Italian funds (PM & Partners II, Progressio II, Mid-Capital Mezzanine and ILP III) was down by £0.5 million reflecting, amongst other factors, a decline in the price of quoted company Italian Wine Brands.

Financing

The Company is currently in a net cash position with effectively all of its £70 million borrowing facility available. The portfolio is very broadly based and provides a very suitable asset base against which to borrow. It is the Company's intention to employ a moderate amount of gearing to enhance returns to shareholders over the long term. The recent past has seen a continuation of the strong flow of realisations and this has kept the balance sheet ungeared. A number of investment opportunities are under consideration which could move the balance sheet back into a modestly geared position over the coming months. The Company's level of outstanding commitments has been increased deliberately in order to make sure that the proceeds of realisations are deployed steadily and broadly across our favoured markets.

Outlook

The last few months have seen an unusual amount of political change, but limited economic consequences of these changes as yet. The private equity market in Europe continues to pursue and make deals in a largely unaltered way, factoring in, as far as possible, the expected changes arising from Brexit or the handover in the US Presidency. The exits from our portfolio show quite clearly the benefits of investing into the lower mid-market of Europe, namely that there is a very wide range of specialised and basically undiscovered businesses which are able to achieve strong growth through concentrating on their particular niche markets. Our investment partners, who are found in every corner of the Continent and further afield, spend much of their energy in the search for such attractive opportunities, usually building deep local networks with company owners, advisers and investors. They also develop or acquire the specific skills and knowledge to implement value creative change in the companies in which they invest. In every case our investments are arranged such that the interests of our investment partners, those of company management and of our shareholders are directly and closely aligned. The combination of deliberative, informed selection followed by highly-motivated, involved, value-creative change is what distinguishes private equity from other forms of investment management and provides the basis of strong long term returns. From here we expect further growth in shareholder value in 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 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

nine months ended 30 September 2015

	(Unaudited)
	Revenue £'000	Capital £'000	Total               £'000
Income
Gains on investments held at fair value	-	16,782	16,782
Exchange gains	-	2,011	2,011
Investment income	5,100	-	5,100
Other income	34	-	34
Total income	5,134	18,793	23,927
Expenditure
Investment management fee - basic fee	(380)	(1,139)	(1,519)
Investment management fee - performance fee	-	(1,293)	(1,293)
Other expenses	(507)	-	(507)
Total expenditure	(887)	(2,432)	(3,319)
Profit before finance costs and taxation	4,247	16,361	20,608
Finance costs	(346)	(1,039)	(1,385)
Profit before taxation	3,901	15,322	19,223
Taxation	(788)	788	-
Profit for period/total comprehensive income	3,113	16,110	19,223
Return per Ordinary Share - Basic	4.32p	22.31p	26.63p
Return per Ordinary Share - Fully diluted	4.20p	21.72p	25.92p

 

F&C Private Equity Trust plc

Statement of Comprehensive Income for the

year ended 31 December 2015

	(Audited)
	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	17,401	17,401
Exchange gains	-	2,072	2,072
Investment income	7,562	-	7,562
Other income	48	-	48
Total income	7,610	19,473	27,083
Expenditure
Investment management fee - basic fee	(509)	(1,528)	(2,037)
Investment management fee - performance fee	-	(1,342)	(1,342)
Other expenses	(696)	-	(696)
Total expenditure	(1,205)	(2,870)	(4,075)
Profit before finance costs and taxation	6,405	16,603	23,008
Finance costs	(448)	(1,345)	(1,793)
Profit before taxation	5,957	15,258	21,215
Taxation	(931)	931	-
Profit for year/total comprehensive income	5,026	16,189	21,215
Return per Ordinary Share - Basic	6.97p	22.44p	29.41p
Return per Ordinary Share - Fully diluted	6.78p	21.85p	28.63p

 

F&C Private Equity Trust plc

Amounts Recognised as Dividends

	Nine months ended 30 September 2016 (unaudited) £'000	Nine months ended 30 September 2015 (unaudited) £'000	Year ended 31 December 2015   (audited) £'000
Final Ordinary Share dividend of 5.45p per share for the year ended 31 December 2014	-	3,939	3,939
Interim Ordinary Share dividend of 5.58p per share for the year ended 31 December 2015	-	-	4,017
Final Ordinary Share dividend of 5.83p per share for the year ended 31 December 2015	4,251	-	-
	4,251	3,939	7,956

 

F&C Private Equity Trust plc

Balance Sheet

	As at 30 September 2016 (unaudited)	As at 30 September 2015 (unaudited)	As at 31 December 2015 (audited)
	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	235,892	231,243	215,711
Current assets
Other receivables	21	26	26
Cash and cash equivalents	32,081	10,890	24,023
	32,102	10,916	24,049
Current liabilities
Other payables	(2,508)	(2,715)	(2,278)
Net current assets	29,594	8,201	21,771
Total assets less current liabilities	265,486	239,444	237,482
Non-current liabilities
Interest-bearing bank loan	(25,361)	(21,299)	(21,357)
Net assets	240,125	218,145	216,125
Equity
Called-up ordinary share capital	739	720	720
Special distributable capital reserve	17,567	15,035	15,040
Special distributable revenue reserve	31,403	31,403	31,403
Capital redemption reserve	1,335	1,335	1,335
Capital reserve	180,065	161,940	158,002
Revenue reserve	9,016	7,712	9,625
Shareholders' funds	240,125	218,145	216,125
Net asset value per Ordinary Share - Basic	324.75p	303.05p	300.25p
Net asset value per Ordinary Share - Fully diluted	324.75p	298.47p	295.74p

 

F&C Private Equity Trust plc

Reconciliation of Movements in Shareholders' Funds

 

	Nine months ended 30 September 2016	Nine months ended 30 September 2015	Year ended 31 December 2015
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Opening shareholders' funds	216,125	203,508	203,508
Issue of Ordinary Shares	2,546	-	-
Cancellation of Ordinary Shares	-	(647)	(642)
Profit for the period/total comprehensive income	25,705	19,223	21,215
Dividends paid	(4,251)	(3,939)	(7,956)
Closing shareholders' funds	240,125	218,145	216,125

 

 

 

 

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 2015.  Earnings for the nine months to 30 September 2016 should not be taken as a guide to the results for the year to 31 December 2016.

2.   Investment management fee:

	Nine months ended 30 September 2016			Nine months ended 30 September 2015			Year ended 31 December 2015
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment management fee  - basic fee	424	1,273	1,697	380	1,139	1,519	509	1,528	2,037
Investment management fee  - performance fee	-	1,508	1,508	-	1,293	1,293	-	1,342	1,342
	424	2,781	3,205	380	2,432	2,812	509	2,870	3,379

3.   Finance costs:

	Nine months ended 30 September 2016			Nine months ended 30 September 2015			Year ended 31 December 2015
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Interest payable on bank loan	313	940	1,253	346	1,039	1,385	448	1,345	1,793

4.   The basic return per Ordinary Share is based on a net profit on ordinary activities after taxation of £25,705,000 (30 September 2015 - £19,223,000; 31 December 2015 - £21,215,000) and on 73,017,623 (30 September 2015 - 72,197,658; 31 December 2015 - 72,143,369) 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 £25,705,000 (30 September 2015 - £19,223,000; 31 December 2015 - £21,215,000) and on 73,941,429 (30 September 2015 - 74,156,814; 31 December 2015 - 74,102,525) 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 £240,125,000 (30 September 2015 - £218,145,000; 31 December 2015 - £216,125,000) and on 73,941,429 (30 September 2015 - 71,982,273; 31 December 2015 - 71,982,273) 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 £240,125,000 (30 September 2015 - £220,691,000; 31 December 2015 - £218,671,000) and on 73,941,429 (30 September 2015 - 73,941,429; 31 December 2015 - 73,941,429) shares, being the number of Ordinary Shares in issue at the period end after conversion of the Ordinary Share warrants.

6.   During the period, the Company issued 1,959,156 Ordinary Shares of 1p each in capital of the Company for a consideration of £2,546,000, payable in cash, 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.  The surplus of cash received for the issue of shares over the par value of such shares is £2,527,000 and is credited to the special distributable capital reserve.  No warrants remain in issue.

7.  The financial information for the nine months ended 30 September 2016, 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 2015, 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

 

END

 

 

QRTUORBRNUAAUAA