Half Yearly Report

RNS Number : 5676Q

Dunedin Enterprise Inv Trust PLC

05 August 2010

 

EMBARGOED - 7AM THURSDAY 5 AUGUST

For release                                                          07.00am                                               5 August 2010

Dunedin Enterprise Investment Trust PLC

Half year ended 30 June 2010

Dunedin Enterprise Investment Trust PLC, the private equity investment trust which specialises in investing in mid-market buyouts, announces its results for the half year ended 30 June 2010.

Financial Highlights:

·     Net asset value per share increased by 6.1% to 432.1p per share

·     New investment of £18.2m in the half year

·     Realisations of £4.4m in the half year

Comparative Performance

Periods to 30 June 2010	Net Asset value*1	Share price	FTSE Small Cap (ex Inv Cos) Index	FTSE All Share (ex Inv Cos) Index
Six months	+6.1	-2.1	-5.3	-8.1
One year	+5.8	-7.8	+16.6	+16.9
Three years	-20.3	-47.1	-43.0	-25.5
Five years	+3.8	-31.1	-23.4	-1.2
Ten years	+4.3	-24.1	-33.5	-16.4

^*1 - taken from 30 April for three, five and ten years

For further information please contact:

Brian Scouler Director Dunedin Capital Partners Limited           0131 225 6699 07811 262 796   [e-mail]

Jane Kirby / Corinna Osborne Directors Equity Dynamics Limited 07825 326 441/ 440 [e-mail] / [e-mail]

Notes to Editors

Dunedin Enterprise Investment Trust PLC ("the Company") is managed by Dunedin Capital Partners Limited ("Dunedin"). Dunedin Capital Partners Limited is an independent private equity company owned by its directors. It specialises in providing equity finance for management buyouts and management buyins with a transaction size of £10m to £75m. It operates throughout the United Kingdom from its offices in Edinburgh and London.  Dunedin Capital Partners is itself the result of a management buyout which took place in 1996.

Dunedin Enterprise's investment objective is to achieve substantial long term growth in its assets through capital gains from its investments.  For more information on Dunedin Enterprise, its portfolio and investment approach, please visit our website www.dunedinenterprise.com.  Investors can buy shares in the company through regular savings and ISA  plans.  For further information, call the Aberdeen Asset Managers helpline on 0500 00 00 40 or visit their website at www.dunedinenterprisetrust.co.uk.

Manager's Review

Overview

In the six months to 30 June 2010, Dunedin Enterprise's unaudited net asset value increased from £122.9m at 31 December 2009 to £130.4m, an increase of 6.1%. The net asset value per share increased from 407.1p to 432.1p, continuing the trend of an improving net asset value from the first quarter.

During the six months to 30 June 2010 the share price of Dunedin Enterprise fell by 2.1% from 266.5p to 261.0p. The FTSE Small Cap Index fell by 5.3% over the same period. Discounts in the listed private equity sector have narrowed in recent times, following over-reaction to previous concerns, but remain high. Dunedin Enterprise's share price stood at a discount of 39.6% to net asset value per share at 30 June 2010.  Cash and near cash balances at 30 June 2010 were £39.8m.  When cash is excluded from net assets the implied discount is 57.0%.

In the six months to 30 June 2010, Dunedin Enterprise invested a total of £18.2m and realised £4.4m from investments.  Realisations in the half year generated a profit of £1.2m over the opening valuations.

As previously advised no interim dividend will be paid. The Board intends to recommend the payment of only one dividend after the year end, which will be determined by the requirements of the UK tax authorities which oblige the Company to retain no more than 15% of eligible income received during the year.

The Company's revolving credit facility expired on 28 April 2010 and the decision was made not to seek new facilities. The Company had not required to use these facilities for several years and financial projections show no need for borrowings in the foreseeable future.

The Company had outstanding commitments to limited partnership funds of £90.6m at 30 June 2010.

Net asset and cash movements in the half year to 30 June 2010

The movement in net asset value is summarised in the table below:-

	£'m
Net asset value at 31 December 2009	122.9
Realised profit over opening valuation	1.2
Unrealised value increases	10.6
Unrealised value decreases	(3.9)
Dividend paid	(0.6)
Other movements	0.2
Net asset value at 30 June 2010	130.4

Cash movements in the half year to 30 June 2010 can be summarised as follows:-

	£'m
Cash and near cash balances at 31 December 2009	53.7
Investments made	(18.2)
Investments realised	4.4
Dividend paid	(0.6)
Operating activities	0.5
Cash and near cash balances at 30 June 2010	39.8

Portfolio movements

In the half year a total of £18.2m was invested by Dunedin Enterprise.

The largest single investment was £9.5m in the secondary buyout of Weldex (International) Offshore Holdings Limited, the largest crawler crane hire company in the UK. Funds managed by Dunedin Capital Partners have taken a majority stake in the company. Weldex is well placed to benefit from the rapid growth in offshore wind farm developments and UK power station construction and decommissioning.

Further investments of £2.7m and £1.3m respectively were made in portfolio companies Capula Group Limited and Enrich Limited.

In addition, there were drawdowns totalling £3.6m by the European Funds programme, which is now well into its investment period.

In the six months to 30 June 2010 a total of £4.4m was realised from investments. The largest of these was £1.9m from the sale of LGC Group Holdings Limited which resulted in an uplift of £0.9m over the 31 December 2009 valuation.

Dunedin Enterprise's investment portfolio comprises:-

—        Dunedin managed funds (including direct investments),

—        third party managed funds

—        listed private equity companies, and

—  legacy technology funds.

	Valuation at 31-12-09 £'m	Additions in half year £'m	Disposals in half year £'m	Realised movement £'m	Unrealised movement £'m	Valuation at 30-6-10 £'m
Dunedin managed	34.7	14.5	(0.9)	0.4	6.7	55.4
Third party managed - Europe	5.2	3.6	(0.5)	-	0.2	8.5
Third party managed - UK	1.0	-	(1.9)	0.9	-	-
Listed private equity	26.0	-	(1.0)	(0.1)	0.1	25.0
Legacy technology funds	2.2	0.1	(0.1)	-	(0.3)	1.9
	69.1	18.2	(4.4)	1.2	6.7	90.8

Unrealised movements in valuation

Unrealised movements in valuation in the period totalled £6.7m. The largest increase within this total was an increase of £2.1m in the valuation of Dunedin Enterprise's investment in OSS Environmental Holdings. OSS, which recycles waste oil into a fuel product, has suffered from volatile earnings in the past, but new market regulations and a steady and increasing oil price have helped improve profitability significantly and the company's prospects are the best they have been in recent years.

Further valuation increases were recorded at CGI, a manufacturer of fire resistant glass, and RSL Steeper, an orthotics and prosthetics supplier. The trading prospects for both companies have improved in recent months.

Unfortunately, the value of the Company's investment in WFEL Holdings has had to be reduced by £2.1m since 31 December 2009. The company, which is a manufacturer of mobile bridges largely for military use, uncovered an accounting error on the recognition of profits on a long term contract, leading to a reduction in reported profits over the last three years. The company remains profitable, however, and its longer term prospects remain good.

Across the rest of the Dunedin managed portfolio, valuations rose as multiples increased and profits started to recover in portfolio companies.  The average earnings multiple applied in the valuation of the Dunedin managed portfolio was 6.7x EBITA and 5.1x EBITDA (31 December 2009: 5.8x and 4.7x respectively).

Average gearing in the portfolio fell from 2.8x EBITA at 31 December 2009 to 2.0x EBITA at 30 June 2010.  The EBITDA gearing multiple fell from 2.3x to 1.5x over the same period.

The total value of the holdings in five European listed private equity companies' shares showed little movement in aggregate over the six month period as euro share price increases were offset by a weakening euro.

Within the investment portfolio, some 36.9% is denominated in euros. All of the Company's money market funds are denominated in sterling. With the expiry of the hedging instruments in the second half of 2009 the Company's policy is to remain unhedged. The impact of the weakening of the euro in the first half of 2010 was a reduction of 2.2% in opening net asset value.

The portfolio is valued in accordance with the International Private Equity and Venture Capital Valuation guidelines.

Interest accruing but not yet payable on loan instruments is not recognised in the income statement or in the investment valuations as there is uncertainty as to eventual receipt.  However, by way of note, the potential accrued interest receivable from portfolio companies where there is currently no provision made against the investment value is £5.2m.  The potential accrued interest from investments where there is a current provision against the valuation is £6.0m.

The principal risks which the Company faces include continued weakness and volatility in the financial markets, currency movements and portfolio companies facing difficult trading conditions.

The Company has significant financial resources and continues to adopt a going concern basis in preparing the interim report and accounts.

European Commission and AIFMD

The European Parliament, Council, and Commission continue to discuss the draft directive on Alternative Investment Fund Managers. The Board and Managers of the Company have been active participants in the debate surrounding these proposals, with a view to promoting the best outcome for listed private equity investment trusts.

Outlook

There is still considerable uncertainty in financial markets, and the banking sector in particular where caution and conservatism are dampening merger and acquisition activity.

Having spent 2009 with their efforts very much directed at protecting value in the investment portfolio and providing a platform for growth for these companies, the Managers' focus has turned towards new investment opportunities and it is encouraging to note the completion of the Company's first new investment for over a year. Whether this is a sign of a sustained upturn in new investment in the UK remains to be seen. In Continental Europe the Funds Programme is making good progress in active markets with continued drawdowns for new investments.

The Company remains well funded and expects increased investment activity this year.

Dunedin Capital Partners Limited

4 August 2010

Ten Largest Investments     

(both held directly and via Dunedin managed funds) by value at 30 June 2010

	Approx.			Percentage
	percentage	Cost of	Directors'	of net
	of equity	investment	valuation	assets
Company name	%	£'000	£'000	%
SWIP Private Equity Fund of Funds II PLC	4.0	15,025	13,234	10.1
Practice Plan Holdings Limited	26.1	10,402	10,805	8.3
Weldex (International) Offshore Holdings Limited	15.1	9,505	9,505	7.3
OSS Environmental Holdings Limited	41.8	5,951	6,639	5.1
etc.venues Group Limited	27.9	3,388	5,941	4.6
WFEL Holdings Limited	23.2	6,870	4,940	3.8
GIMV	0.6	4,794	4,128	3.2
Deutsche Beteiligungs AG	1.9	4,817	4,073	3.1
CGI Group Holdings Limited	41.4	8,509	4,047	3.1
Capula Group Limited	37.5	8,426	4,004	3.0
		77,687	67,316	51.6

Overview of Portfolio

Analysed by category of investment (including cash)

	30 June 2010 %	31 December 2009 %
Dunedin managed	42	28
Third party managed	7	5
Listed private equity	19	21
Legacy technology funds	2	2
Cash	30	44

Analysed by valuation method

	30 June 2010 %	31 December 2009 %
Cost/written down	13	3
Earnings - provision	24	33
Earnings - uplift	35	26
Bid price	28	38

Analysed by geographic location

	30 June 2010 %	31 December 2009 %
UK	66	58
Rest of Europe	29	35
USA	4	6
Rest of World	1	1

Analysed by sector

	30 June 2010 %	31 December 2009 %
Construction and building materials	4	3
Consumer products & services	7	7
Financial services	7	7
Healthcare	4	4
Leisure and hotels	2	2
Industrials	18	28
Pharma, medical, biotech	4	3
Real Estate	2	2
Support services	46	37
Technology	6	7

Analysed by deal type

	30 June 2010 %	31 December 2009 %
Management buyouts/buyins	88	88
Technology	6	7
Life Sciences	4	3
Real Estate	2	2

Analysed by age of investment

	30 June 2010 %	31 December 2009 %
<1 year	17	9
1-3 years	21	22
3-5 years	36	41
>5 years	26	28

Consolidated Income Statement

for the six months ended 30 June 2010

	Unaudited Six months ended	Unaudited Six months ended	Audited Year ended
	30 June 2010	30 June 2009	31 December 2009

	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Investment income	1,242	-	1,242	882	-	882	2,005	-	2,005
Profit/(losses) on investments	-	7,935	7,935	-	(446)	(446)	-	(777)	(777)
Total Income	1,242	7,935	9,177	882	(446)	436	2,005	(777)	1,228
Expenses
Investment management fees	(111)	(334)	(445)	(128)	(384)	(512)	(244)	(732)	(976)
Other expenses	(320)	-	(320)	(325)	-	(325)	(743)	-	(743)
Profit/(loss) before finance costs and tax	811	7,601	8,412	429	(830)	(401)	1,018	(1,509)	(491)
Finance costs	(22)	(66)	(88)	(27)	(80)	(107)	(54)	(160)	(214)
Profit/(loss) before tax	789	7,535	8,324	402	(910)	(508)	964	(1,669)	(705)
Taxation	(279)	112	(167)	(118)	130	12	(238)	250	12
Profit/(loss) for the period	510	7,647	8,157	284	(780)	(496)	726	(1,419)	(693)
Earnings per ordinary share (basic & diluted)	1.7p	25.3p	27.0p	0.9p	(2.6p)	(1.7p)	2.4p	(4.7p)	(2.3p)

The Total column of this statement represents the Income Statement of the Group, prepared in accordance with International Financial Reporting Standards as adopted by the EU. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations.

All income is attributable to the equity shareholders of Dunedin Enterprise Investment Trust PLC.

Consolidated Statement of Changes in Equity

for the six month ended 30 June 2010

Six months ended 30 June 2010 (unaudited)

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital Reserve realised £'000	Capital reserve - unrealised £'000	Revenue account £'000	Total retained earnings £'000	Total equity £'000
At 31 December 2009	7,544	47,600	382	102,651	(41,006)	5,685	67,330	122,856
Profit/(loss) for the half year	-	-	-	(631)	8,278	510	8,157	8,157
Dividends paid	-	-	-	-	-	(603)	(603)	(603)
At 30 June 2010	7,544	47,600	382	102,020	(32,728)	5,592	74,884	130,410

Six months ended 30 June 2009 (unaudited)

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital Reserve realised £'000	Capital reserve - unrealised £'000	Revenue account £'000	Total retained earnings £'000	Total equity £'000
At 31 December 2008	7,544	47,600	382	108,451	(45,387)	12,187	75,251	130,777
Profit/(loss) for the half year	-	-	-	3,801	(4,581)	284	(496)	(496)
Dividends paid	-	-	-	-	-	(7,077)	(7,077)	(7,077)
At 30 June 2009	7,544	47,600	382	112,252	(49,968)	5,394	67,678	123,204

Year ended 31 December 2009 (audited)

	Share capital £'000	Share premium £'000	Capital redemption reserve £'000	Capital Reserve realised £'000	Capital reserve - unrealised £'000	Revenue account £'000	Total retained earnings £'000	Total equity £'000
At 31 December 2008	7,544	47,600	382	108,451	(45,387)	12,187	75,251	130,777
Profit/(loss) for the year	-	-	-	(5,800)	4,381	726	(693)	(693)
Dividends paid	-	-	-	-	-	(7,228)	(7,228)	(7,228)
At 31 December 2009	7,544	47,600	382	102,651	(41,006)	5,685	67,330	122,856

Consolidated Balance Sheet

As at 30 June 2010

	Unaudited 30 June 2010 £'000	Unaudited 30 June 2009 £'000	Audited 31 December 2009 £'000
Non-current assets
Investments held at fair value	128,652	125,914	118,243
Current assets
Other receivables	367	2,235	471
Cash and cash equivalents	1,965	398	4,620
	2,332	2,633	5,091
Current liabilities
Other liabilities	(95)	(199)	(108)
Current tax liabilities	(479)	(434)	(370)
Other financial liabilities	-	(4,710)	-
	(574)	(5,343)	(478)
Net current assets / (liabilities)	1,758	(2,710)	4,613
Net assets	130,410	123,204	122,856
Capital and reserves
Share capital	7,544	7,544	7,544
Share premium	47,600	47,600	47,600
Capital redemption reserve	382	382	382
Capital reserve - realised	102,020	112,252	102,651
Capital reserve - unrealised	(32,728)	(49,968)	(41,006)
Revenue reserve	5,592	5,394	5,685
Total equity	130,410	123,204	122,856
Net asset value per ordinary share (basic and diluted)	432.1p	408.3p	407.1p

Consolidated Cash Flow Statement

for the six months ended 30 June 2010

	Unaudited 30 June 2010 £'000	Unaudited 30 June 2009 £'000	Audited 31 December 2009 £'000
Operating activities
Profit/(loss) before tax	8,324	(508)	(705)
(Gains)/losses on investments	(7,935)	446	777
Interest paid	88	107	214
(Increase)/decrease in debtors	104	(1,893)	(129)
Increase/(decrease) in creditors	(14)	76	(15)
Tax paid	(58)	(901)	(967)
Net cash inflow/(outflow) from operating activities	509	(2,673)	(825)
Servicing of finance
Interest paid	(88)	(107)	(214)
Investing activities
Purchase of investments	(18,212)	(4,219)	(7,050)
Purchase of 'AAA' rated money market funds	(6,509)	(30,460)	(31,672)
Maturity of exchange hedge	-	-	(8,599)
Sale of investments	4,420	8,269	9,443
Sale of 'AAA' rated money market funds	17,828	36,000	50,100
Net cash inflow/(outflow) from investing activities	(2,473)	9,590	12,222
Financing activities
Dividends paid	(603)	(7,077)	(7,228)
Net cash outflow from financing activities	(603)	(7,077)	(7,228)
Net increase/(decrease) in cash and cash equivalents	(2,655)	(267)	3,955
Cash and cash equivalents at the start of the period	4,620	665	665
Net increase/(decrease) in cash and cash equivalents	(2,655)	(267)	3,955
Cash and cash equivalents at the end of the period	1,965	398	4,620

Responsibility statement of the Directors
in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

-        the condensed set of financial statements has been prepared in accordance with
IAS 34 Interim Financial Reporting as adopted by the EU;

-        the half-yearly management report includes a fair review of the information required by:

(a)      DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial period and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b)      DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By Order of the Board
Edward Dawnay
Chairman
4 August 2010

Notes to the Accounts

1.       Unaudited Interim Report

The financial information contained in this report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The financial information for the six months ended 30 June 2010 and 30 June 2009 has not been audited. The information for the year ended 31 December 2009 has been extracted from the latest published audited financial statements. The audited financial statements for the year ended 31 December 2009 have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under the Companies Act 2006.

2.       Basis of Preparation

This interim financial information has been prepared in accordance with IFRSs for interim financial statements (IAS 34 Interim Financial Reporting). The condensed consolidated interim financial statements do not include all of the information required for full annual financial statements.

The same accounting policies, presentation and methods of computation are followed in these financial statements as are applied in the Group's latest annual audited financial statements. No material changes in accounting policies are anticipated in the forthcoming financial statements for the year ended 31 December 2010.

3.       Dividends

	Six months to 30 June 2010 £'000	Six months to 30 June 2009 £'000	Year to 31 December 2009 £'000
Dividends paid in the period	603	7,077	7,228

4.       Earnings per share

	Six months to 30 June 2010 £'00	Six months to 30 June 2009 £'000	Year to 31 December 2009 £'000
Revenue return per ordinary share (p)	1.7	0.9	2.4
Capital return per ordinary share (p)	25.3	(2.6)	(4.7)
Earnings per ordinary share (p)	27.0	(1.7)	(2.3)
Weighted average number of shares	30,177,380	30,177,380	30,177,380

The earnings per share figures are based on the weighted average numbers of shares set out above. Earnings per share is based on the revenue profit/(loss) in the period as shown in the consolidated income statement.

5.       Contingent assets

Discussions are ongoing regarding the recovery of VAT suffered prior to 2001 and payment of interest on a compound basis. The amount and timing of any recovery remains uncertain and accordingly no amount has been provided for in the financial statements.

ENDS

 

END

 

 

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