Interim Results
Dunedin Enterprise Inv Trust PLC
15 December 2005
For release 07.00am 15 December 2005
Dunedin Enterprise Investment Trust PLC ('Dunedin Enterprise' or 'the Trust')
Interim Results for six months ended 31 October 2005
Dunedin Enterprise Investment Trust PLC, the private equity investment trust
which specialises in the provision of private equity for management buyouts,
management buyins and growing businesses, announces its interim results for the
six months ended 31 October 2005.
Highlights for the period:
• Net asset value per share up by 8.5% to 451.3p per share
• Share price up by 18.8% to 411p
• New investments of £14 million
• Interim dividend of 2.0p per share, up 5%
• Realisations of £10 million
• 10 largest investments account for 61.7% of net assets
Comparative Performance
Periods to 31 October 2005 FTSE Small Cap FTSE All Share
(ex Inv Cos) (ex Inv Cos)
Net asset value Share price Index Index
Six months +8.5%* +18.8% +6.2% +11.0%
One year +18.5%* +42.7% +14.3% +15.7%
Three years +58.3% +84.3% +66.9% +36.8%
Five years +7.6% +14.6% -8.4% -13.4%
Ten years +105.8% +119.8% +54.0% +53.7%
* these net asset values have been calculated using net asset values restated to
reflect changes in UK GAAP. See notes 2 and 3 to the accounts for the impact of
these changes and further details of the adjustments that have been made.
Highlights since the period end:
• Davenham Group flotation in November realised £11.2 million, a return of
31% over five years
• Acquisition of Sand Aire Private Equity by Dunedin Capital Partners in
November
• Inclusion in the FTSE All Share Index effective 19 December 2005
Edward Dawnay, Chairman of Dunedin Enterprise Investment Trust PLC, commented:
'The portfolio continues to perform satisfactorily and there is a prospect of
further realisations in the second half of the year. Following the acquisition
of Sand Aire Private Equity, your Manager now has an investment team in London
which will enhance its ability to source new transactions.'
For further information please contact
Ross Marshall Peter Binns/Chris Steele
Chief Executive Binns & Co PR Ltd
Dunedin Capital Partners 020 7786 9600
0131 225 6699
07768 794 180
ross.marshall@dunedin.com
Notes to Editors
Dunedin Enterprise Investment Trust PLC is managed by Dunedin Capital Partners
Limited. Dunedin Capital Partners Limited is an independent private equity
company owned by its directors. The company specialises in providing equity
finance for management buyouts, management buyins and growing businesses with a
transaction size of £10 - 50 million. 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 primary 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 the website www.dunedin.com.
Investors can buy shares in the company through regular savings, PEP/ISA and
pension plans. For further information, call the Aberdeen Asset Managers
helpline on 0800 028 6789 or visit the website at
www.dunedinenterprisetrust.co.uk.com.
Manager's Review
Overview
The results for the six months to 31 October 2005 represent further progress for
Dunedin Enterprise Investment Trust.
Continued momentum was achieved in building net asset value and the investment
focus remained at the lower-end of the mid-market, with investments in
management buyins and buyouts with a transaction size of between £10 million and
£50 million.
The unaudited net asset value attributable to ordinary shareholders at 31
October 2005 was £137.0 million compared to £126.3 million at 30 April 2005.
Net asset value per share increased by 8.5% in the six months to 31 October 2005
from 415.9p to 451.3p per ordinary share. The increase of 8.5% compares to an
increase of 6.2% in the FTSE Small Cap Index (ex investment companies) over the
same period. During the same six month period, the share price of Dunedin
Enterprise rose from 346p to 411p, an 18.8% increase.
In the half year, Dunedin Enterprise invested £14.0 million in two new
investments and six follow-on investments. Disposals by Dunedin Enterprise
during the half year realised £10.0 million and produced a gain of £2.0 million
over valuations at 30 April 2005, a 25% uplift.
Following the half year, Davenham achieved a successful AIM listing on 22
November 2005. Dunedin Enterprise realised £11.2 million on listing and
retained a 10% interest in the company.
Investments
In June 2005, Dunedin Enterprise invested £7.0 million in the £27.0 million
management buyout of ZVC Group ('Zenith'). Zenith is a niche provider of
bespoke fleet management services, normally to companies with car fleets of
between 250 and 1,500 cars. The company has a strong service culture, combined
with a focus on the effective use of information technology, allowing it to
develop a blue chip client base including Asda, DuPont, Ernst & Young,
Persimmon, Remploy and BUPA.
In September 2005, Dunedin Enterprise invested £3.8 million in the management
buyout of Practice Plan. Practice Plan is one of the UK's leading providers of
independent payment schemes to dental practices. The company is involved in the
creation and facilitation of healthcare maintenance schemes for healthcare
professionals. These are principally aimed at the dental sector but are also
targeted at vets and opticians.
A further £3.2 million was invested in existing portfolio companies.
Dunedin Enterprise has made a commitment to two limited partnership funds in the
half year. A £5.0 million commitment has been made to LGV5 a mid market UK
buyout fund managed by Legal & General Ventures. This affords Dunedin
Enterprise exposure to transactions at the upper end of UK mid market buyouts.
The Company has also made a £10.0 million commitment to the Sand Aire Equity
Harvest Fund which is expected to be drawndown over the next four years. This
fund was formerly managed by Sand Aire Private Equity, which was purchased by
your Manager, Dunedin Capital Partners, in November 2005. The Sand Aire Equity
Harvest Fund provides capital to enable owner-managers to develop their existing
businesses without losing control, while creating opportunities for them to
unlock the wealth they have built into their companies.
Realisations
Hayley Conference Centres, the provider of conference facilities, was sold
during the half year generating £3.9 million. This investment was acquired as
part of the Group Trust portfolio and Dunedin Enterprise has received capital
and income of £4.9 million in return for £2.0 million invested. This represents
a total multiple of 2.4 and an annual return of 27%.
Two further portfolio companies were realised which were originally purchased as
part of the Group Trust portfolio. Trident Components, the component designer
and manufacturer for the automotive industry, and Cheynet, the manufacturer of
narrow elastic fibres, were sold in the half year realising £2.6 million and
£1.1 million respectively. This compares to valuations of £2.4 million and £0.8
million respectively at 30 April 2005.
A further £2.4 million was realised from portfolio companies through loan stock
repayments, preference share redemptions and other smaller disposals.
In November 2005, Davenham, the provider of niche short term lending products,
listed on AIM. Dunedin Enterprise made an investment of £4.9 million in
Davenham in June 2000. During the period to listing Dunedin Enterprise has
received £13.6 million in capital and income proceeds and continues to hold a
quoted shareholding which, valued at the November listing price of £2.54,
equates to £6.5 million. This represents a money multiple of 4.1 times and a
return of 31% over five years. As at 31 October 2005, your Managers have valued
the investment in Davenham based on the cash received subsequent to the period
end plus the value of the stock received less a discount of 25%.
Results for the six months to 31 October 2005
The movement in net asset value is summarised in the table below:
£'m
Net asset value at 30 April 2005 126.3
Unrealised valuation increases 14.8
Unrealised valuation decreases (5.2)
Realised profit over opening valuation 2.0
Other capital movements (0.9)
Net asset value at 31 October 2005 137.0
The valuation of the portfolio is in accordance with the International Private
Equity and Venture Capital Valuation Guidelines and revised UK GAAP
requirements.
The weighted average price earnings multiple used to value the portfolio at 31
October 2005 was 8.3 (30 April 2005: 7.7), a discount of 43% to the FTSE All
Share price earnings multiple of 14.5 on that date (30 April 2005: 49% discount
to the FTSE All Share multiple of 15.0).
The majority of the unrealised valuation increases arise from four portfolio
companies. An exit valuation placed on Davenham has given rise to an uplift of
£3.5 million. A combination of debt reduction and positive movements in price
earnings ratios have led to valuation increases at Caledonian (£3.2 million),
Letts Filofax (£1.9 million) and CGI (£1.6 million).
Trading below plan at two portfolio companies accounts for £4.0 million of the
unrealised valuation decreases. Your Manager is taking active steps to achieve
a return of value to these investments.
Dividend
The interim dividend has been increased by 5% to 2.0p per ordinary share. This
will be paid on 31 January 2006 to shareholders on the register at close of
business on 23 December 2005. The ex-dividend date is 21 December 2005.
Outlook
Investors continue to look to increase their exposure to the Private Equity
Sector with its impressive long term performance record. Underlying portfolios
have continued to deliver strong returns and given a relatively stable economic
environment this should continue during 2006. In general terms it has been a
seller's market for some two years. Buying quality businesses at a competitive
price has been a harder process. There is little to suggest that this state of
affairs will alter in the coming year.
The portfolio continues to perform satisfactorily and there is a prospect of
further realisations in the second half of the year. Following the acquisition
of Sand Aire Private Equity, your Manager now has a larger team in London which
will enhance its ability to source new investment opportunities.
For more information on Dunedin Enterprise, its portfolio and investment
approach, please visit the website www.dunedin.com.
Dunedin Capital Partners Limited
14 December 2005
Ten Largest Investments
by value at 31 October 2005
Company name Approx. Cost of Directors' Percentage of
percentage investment valuation net assets
of equity £'000 £'000 %
%*
Letts Filofax Group Limited 41.1 345 17,358 12.7
Davenham Group Holdings Limited 34.4** 4,960 16,093 11.7
Caledonian Building Systems Limited 32.4 3,808 12,702 9.3
CGI Group Limited 37.9 5,941 8,012 5.8
ZVC Group Limited 18.3 6,980 6,980 5.1
Dunedin Buyout Fund LP 13.0 3,164 6,193 4.5
New Horizons (Childcare) Holdings Limited 27.8 5,870 5,870 4.3
Portman Holdings Limited 16.8 2,266 4,232 3.1
Practice Plan Group (Holdings) Limited 22.9 3,800 3,800 2.8
ABI (UK) Group Limited 18.5 185 3,284 2.4
37,319 84,524 61.7
* 'Approx. percentage of equity' relates to ordinary share capital of the
relevant company and assumes full exercise of outstanding options, warrants and
conversion rights.
** Equity percentage prior to listing.
Overview of Portfolio
Analysed by valuation basis
31 October 30 April
2005 2005
A Price of recent investment 22% 21%
B Earnings multiple 54% 72%
C Imminent sale price 19% 4%
D Net assets 5% 3%
Analysed by industry sector
31 October 30 April
2005 2005
A Construction and building materials 21% 19%
B Consumer products and services 18% 21%
C Financial services 18% 18%
D Healthcare 8% 8%
E Leisure and hotels 9% 11%
F Specialist manufacturing 4% 8%
G Support services 22% 15%
Analysed by deal type
31 October 30 April
2005 2005
A Management buyouts/buyins 82% 81%
B Buyout funds 13% 13%
C Technology funds 3% 3%
D Other 2% 3%
Analysed by age of investment
31 October 30 April
2005 2005
A <1 year 17% 14%
B 1-3 years 33% 19%
C 3-5 years 10% 44%
D >5 years 40% 23%
Statement of Total Return
for the six months ended 31 October 2005
Unaudited Restated unaudited Restated audited
Six months ended 31 October 2005 Six months ended 31 October 2004 Year ended 30 April 2005
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains and loses on
investments - 11,597 11,597 - 10,890 10,890 - 20,350 20,350
held at fair value
Income 2,931 - 2,931 1,953 - 1,953 5,224 - 5,224
Investment management
charges (361) (917) (1,278) (304) (887) (1,191) (636) (1,799) (2,435)
Other expenses (242) - (242) (211) - (211) (498) - (498)
Net return before finance
costs 2,328 10,680 13,008 1,438 10,003 11,441 4,090 18,551 22,641
and taxation
Interest payable and similar (27) (81) (108) (31) (95) (126) (62) (185) (247)
charges
Return on ordinary
activities 2,301 10,599 12,900 1,407 9,908 11,315 4,028 18,366 22,394
before taxation
Tax on ordinary activities (296) 296 - (362) 362 - (1,117) 1,117 -
Return attributable to
equity 2,005 10,895 12,900 1,045 10,270 11,315 2,911 19,483 22,394
shareholders
Earnings per ordinary share
Basic and diluted 42.5p 36.8p 73.2p
The total column of this statement represents the profit and loss account of the
Company.
All items in the above statement derive from continuing operations.
Statement of Changes in Equity
for the six months ended 31 October 2005
Unaudited six months ended 31 October 2005
Share Capital Capital Capital
Share premium redemption reserve - reserve - Revenue Total
capital account reserve realised unrealised account equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening balance (restated) 7,592 47,600 334 51,709 14,459 4,609 126,303
Profit for the period - - - (5,544) 16,439 2,005 12,900
attributable
Dividends declared - - - - - (2,156) (2,156)
Closing balance 7,592 47,600 334 46,165 30,898 4,458 137,047
Unaudited six months ended 31 October 2004
Share Capital Capital Capital
Share premium redemption reserve - reserve - Revenue Total
capital account reserve realised unrealised account equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening balance (restated) 7,680 47,600 246 42,123 5,772 4,324 107,745
Profit for the period - - - 3,990 6,280 1,045 11,315
attributable
Dividends declared - - - - - (2,058) (2,058)
Closing balance (restated) 7,680 47,600 246 46,113 12,052 3,311 117,002
Audited year ended 30 April 2005
Share Capital Capital Capital
Share premium redemption reserve - reserve - Revenue Total
capital account reserve realised unrealised account equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening balance (restated) 7,680 47,600 246 42,123 5,772 4,324 107,745
Profit for the period - - - 10,796 8,687 2,911 22,394
attributable
Dividends declared - - - - - (2,626) (2,626)
Purchase of own shares (88) - 88 (1,210) - - (1,210)
Closing balance (restated) 7,592 47,600 334 51,709 14,459 4,609 126,303
Balance Sheet
as at 31 October 2005
Restated Restated
Unaudited unaudited audited
31 October 31 October 30 April
2005 2004 2005
£'000 £'000 £'000
Non-current assets
Investments held at fair value
Fixed asset investments 131,840 113,110 121,197
Current assets
Trade and other receivables 274 185 179
Cash and cash equivalents 4,978 5,165 5,025
5,252 5,350 5,204
Current liabilities
Trade and other payables (45) (39) (98)
Non-current liabilities - (1,419) -
Net assets 137,047 117,002 126,303
Capital and reserves
Called up share capital 7,592 7,680 7,592
Share premium 47,600 47,600 47,600
Capital redemption reserve 334 246 334
Capital reserve - realised 46,165 46,113 51,709
Capital reserve - unrealised 30,898 12,052 14,459
Revenue reserve 4,458 3,311 4,609
Total equity 137,047 117,002 126,303
Net asset value per share 451.3p 380.8p 415.9p
Cash Flow Statement
for the six months ended 31 October 2005
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
31 October 2005 31 October 2004 30 April 2005
£'000 £'000 £'000 £'000 £'000 £'000
Net cash inflow from operating activities 1,263 715 2,443
Servicing of finance
Interest paid (108) (126) (247)
Financing
Purchase of investments (13,994) (4,507) (22,126)
Purchase of 'AAA' rated money market funds (5,655) (9,587) (17,326)
Sale of investments 10,003 13,669 36,499
Sale of 'AAA' rated money market funds 10,600 2,000 6,000
Net cash inflow from financial investment 954 1,575 3,047
Equity dividends paid (2,156) (2,049) (2,626)
Net cash (outflow)/inflow (47) 115 2,617
Financing
Purchase of ordinary shares - - (1,210)
Currency loan - - (1,432)
(Decrease)/increase in cash at bank (47) 115 (25)
Notes to the Accounts
1. Accounting basis and policies
a. Accounting convention
The accounts have been prepared under the historical cost convention, modified
to include the revaluation of investments and in accordance with applicable
Accounting Standards and with the Statement of Recommended Practice ('SORP') for
Investment Trust Companies.
b. Associated undertakings
Those private equity investments that may be termed associated undertakings are
carried at fair value in accordance with the Company's normal policy and are not
equity accounted as required by the Companies Act 1985. The Directors consider
that, as these investments are held as part of the Company's portfolio with a
view to the ultimate realisation of capital gains, equity accounting would not
give a true and fair view of the Company's interests in these investments. The
quantification of the effect of this departure is not practicable. The policy to
continue to investment account is specifically permitted under FRS 9 'Associates
and Joint Ventures', where venture capital entities hold investments as part of
a portfolio.
c. Investment income
Dividends receivable on quoted equity shares are brought into account on the
ex-dividend basis. Dividends receivable on equity shares where no ex-dividend
date is applicable are brought into account when the Group's right to receive
payment is established. Interest income is accounted for on an effective yield
basis except where there is uncertainty as to whether the interest will be
received. Franked investment income is reported net of tax credits in accordance
with FRS 16 'Current Tax'.
d. Management and finance expenses
The accounting method for management fees (inclusive of any irrecoverable VAT
thereon) and finance expenses is to charge 75% to capital. This represents the
capital element of the Board's expected long term return from the portfolio.
e. Investments
The Trust's investments are all classified as investments and are designated at
fair value through profit or loss. Gains and losses on realisation are dealt
with through the statement of total return and taken to realised reserve. The
difference between the fair value of investments and cost is shown as an
unrealised gain or loss in the statement of total return and taken to unrealised
capital reserve.
Investments are valued by the Directors, as advised by the Investment Manager,
at fair value according to the following rules and also with appropriate regard
to UK GAAP and the International Private Equity and Venture Capital Valuation
Guidelines.
All unquoted investments are valued according to one of the following bases:
i) price of recent transaction,
ii) earnings multiple,
iii) open market value, or
iv) net assets.
Investments are only valued at the price of a recent transaction for a limited
period after the date of acquisition, otherwise investments are valued on one of
the other bases detailed above. Generally the earnings multiple basis of
valuation will be used. When valuing on an earnings multiple basis, fully taxed
maintainable earnings are multiplied by an appropriate price/earnings multiple.
This is normally related to a comparable quoted sector with adjustments made for
risks and earnings growth prospects of the underlying company.
A marketability discount, in the range of 10% to 30% is applied to the
investment valuation, based on the likely timing of exit and the influence over
that exit.
When investments have obtained an exit (either by listing or trade sale) after
the valuation date but before finalisation of the relevant accounts (interim or
final), the valuation is based on the exit valuation.
Listed investments are valued at bid price.
2. Major differences under the revised requirements of UK GAAP
The following adjustments have been made to the Company's financial statements,
arising from the revised requirements of UK GAAP.
Adjustments to comparative balance sheets:
(i) Dividends are not recognised as a liability in the balance sheet until
declared. Therefore the final dividends accrued in respect of the year ended 30
April 2004 and the interim dividend in respect of the six month period ended 31
October 2004 have been eliminated from their respective balance sheets and are
now included in the statement of changes in equity in the periods in which they
were declared. All comparatives have been restated accordingly.
(ii) Listed investments which were previously reported at mid-market value are
now shown at bid price.
3. Reconciliation of net assets and profit
The analysis below shows a reconciliation of net assets and profit as reported
under UK GAAP to the revised net assets and profit under the current UK GAAP
requirements.
Reconciliation of profit attributable to equity shareholders Six months to 31 Year to 30
October 2004 April 2005
£'000 £'000
Profit after tax as previously stated 1,045 2,911
Capital return after tax as previously stated 9,964 19,394
Removal of discount on listed financial investments 306 89
Profit after tax restated 11,315 22,394
Reconciliation of equity 30 April 2004 31 October 2004 30 April 2005
£'000 £'000 £'000
Total equity as previously stated 105,687 116,112 124,058
Removal of discount on listed financial investments - 306 89
Dividend recognition 2,058 584 2,156
Total equity restated 107,745 117,002 126,303
4. Dividends
Six months to 31 Six months to 31 Year to 30
October 2005 October 2004 April 2005
£'000 £'000 £'000
Dividends declared in the period 2,156 2,058 2,626
The Directors have proposed a dividend of 2.0p per share for the half year to 31
October 2005, this equates to £607,399.
5. Earnings per share
Six months to 31 Six months to 31 Year to 30
October 2005 October 2004 April 2005
Revenue return per ordinary share 6.6p 3.4p 9.5p
Capital return per ordinary share 35.9p 33.4p 63.7p
Earnings per ordinary share (basic and diluted) 42.5p 36.8p 73.2p
Weighted average number of shares 30,369,943 30,721,941 30,597,536
6. Financial Statements
The financial statements set out above do not constitute the Trust's statutory
accounts for the six months ended 31 October 2005 or 31 October 2004. The
unrevised financial information for the year ended 30 April 2005 has been
extracted from the Annual Report and Accounts of the Company which have been
filed with the Registrar of Companies. The auditors' report on those accounts
was unqualified.
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