Preliminary Results

Dunedin Enterprise Inv Trust PLC 28 February 2008 For release 07.00am 28 February 2008 Dunedin Enterprise Investment Trust PLC Preliminary Results for the period ended 31 December 2007 Dunedin Enterprise Investment Trust PLC ('the Company'), the private equity investment trust which specialises in investing in mid-market buyouts announces its preliminary results for the period ended 31 December 2007. Financial Highlights: • Net asset value per share decreased by 2.3% to 529.5p per share • Total net assets now £159.9m • Final dividend of 6.0p, making a total dividend for the period of 7.5p • Realisations totaling £22.7m • Investment of £35.6m Comparative Performance Apr 2007 to Apr 2005 to Apr 2003 to Apr 1998 Dec 2007 Dec 2007 Dec 2007 to Dec 2007 % % % % Net asset value per ordinary share -2.3 27.2 71.2 58.7 Share price -10.0 20.2 90.3 50.6 FTSE Small Cap Index -23.1 10.0 67.6 16.3 FTSE All Share Index -2.1 36.6 72.7 17.0 Index For further information please contact: Ross Marshall Jane Kirby Chief Executive Officer Director Director Dunedin Capital Partners Limited Equity Dynamics 0131 225 6699 07825 326 441/0 07768 794 180 - ross.marshall@dunedin.com jane@equitydynamics.co.uk Notes to Editors Dunedin Enterprise Investment Trust PLC is managed by Dunedin Capital Partners Limited ('Dunedin'). Dunedin is an independent private equity company owned by its directors. The company specialises in providing equity finance for management buyouts and management buyins with a transaction size of £10m - £75m. It operates throughout the United Kingdom from its offices in Edinburgh and London. Dunedin 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 0500 00 40 00 or visit the website at www.dunedinenterprisetrust.co.uk. Chairman's Statement The change in the year end of the Company to 31 December has resulted in the generation of rather more information than shareholders might normally anticipate. You will have recently received the half year report for the six months to 31 October 2007 and this report covers that period plus the additional two months to 31 December 2007. During the eight month period to 31 December 2007, net assets decreased by 2.3% from £163.7m to £159.9m. Inclusive of dividends paid during the year, Dunedin Enterprise achieved a total return of -0.7%. Over the same period, the benchmark index, the FTSE Small Cap, fell by 23.1%. The share price of the Company has decreased from 462p to 415.75p over the same period, a fall of 10.0%, and as at the date of this statement was 436p. The discount of the share price to net asset value has increased over the period from 14.7% to 21.5%. The Board is recommending a final dividend of 6.0p per share making a total dividend of 7.5p per share for the eight month period. This equates to an annualised dividend of 11.25p (10.7p for the year to 30 April 2007). Portfolio The portfolio at 31 December 2007 consisted of investments made by Dunedin, directly or through its managed funds (38%), third party managed funds (27%) and cash or near cash (35%). At the year end, Dunedin Enterprise had outstanding commitments of £68.2m to limited partnership funds, and cash or near cash resources of £55.4m. In addition the Company had undrawn banking facilities of £39.0m. During the eight months under review a total of £35.6m was invested; £19.6m was invested by Dunedin or in Dunedin managed funds and £16.0m was invested in third party managed funds, principally European quoted private equity funds. Disposals amounted to £22.7m in aggregate. A detailed account is contained in the Manager's Review. Dividends In the past I have warned shareholders not to assume that dividends would rise without interruption and indeed the dividend was cut in 2004. The way in which private equity transactions are now more commonly structured often means that yield is rolled up and paid when investment in the underlying company is ultimately sold. The level of dividend in future will therefore become more unpredictable. VAT exemption on management fees There is little to add to what shareholders were told at the time of the half year report in December 2007. As stated then, and on the basis of the information currently available, the eventual benefit to Dunedin Enterprise is not likely to exceed 1.5% of the present net asset value. Management fees are now exempt from VAT. Board composition Willie Haughey has indicated to the Board that he will step down at the AGM in May 2008 due to onerous business commitments. The Board wishes to express their gratitude for his contribution over the past four years. Outlook The economic outlook for 2008 is an uncertain one. The sub-prime lending crisis in the US has radically altered economic sentiment worldwide and the commercial outlook for many businesses. Private equity thrives on change and times of economic disruption or transformation. The mid-market is continuing to prove a more resilient source of new deals and exits than the larger buyout market. The relationship with lenders in this sector of the market, and the debt multiples offered, are currently satisfactory. Dunedin continues to source investment opportunities and the Company has significant funds to take advantage of attractively priced opportunities. Edward Dawnay, Chairman 27 February 2008 Manager's Review Shareholders will be aware that the Company has changed its year end from 30 April to 31 December. The eight month period to 31 December 2007 represents the transitional period in adopting the new financial year end. The Company's net asset value decreased from £163.7m to £159.9m during the eight months to 31 December 2007. This decrease in net assets is explained by:- £'m Net asset value at 1 May 2007 163.7 Unrealised value increases 13.4 Unrealised value decreases (18.8) Realised profit over opening valuation 2.5 Other revenue and capital movements 1.7 Dividends paid to shareholders (2.6) Net asset value at 31 December 2007 159.9 Portfolio Composition Dunedin Enterprise makes investments in unquoted companies: • directly and through funds managed by Dunedin, and • through funds managed by other private equity managers. The investment portfolio can be analysed as follows:- Valuation at Additions Disposals in Realised Unrealised Valuation 1 May 2007 in period period Movement Movement 31 December 2007 £'m £'m £'m £'m £'m £'m Directly and funds managed by Dunedin 66.2 19.6 (19.0) 1.7 (6.4) 62.1 Third party managed 28.4 16.0 (3.7) 0.8 1.0 42.5 94.6 35.6 (22.7) 2.5 (5.4) 104.6 New Investment Activity A total of £35.6 million was invested in the eight months to 31 December 2007. New investments made directly or through Dunedin managed funds totalled £19.6m. As discussed in the Interim Report, £9.3m was invested in Practice Plan, the independent dental plans business. This followed the recapitalisation of Practice Plan in May 2007 and enabled the Company to re-invest in the business in the form of high yielding loan stock. In June 2007, £2.6m was invested in Fernau Avionics, a world-leading designer and manufacturer of navigational aids to the civil and military aviation markets. A total of £3.3m was invested in Gissings Advisory Services ('GAS') in November 2007. GAS provides consultancy advice on flexible benefits, private medical insurance, life assurance, permanent health insurance, occupational health and employee wellness. In December 2007, £3.1m was invested in Formaplex which provides a rapid turnaround service to engineering and product development customers servicing the automotive (including UK based Formula 1 teams), white goods, marine, telecoms and medical sectors. Investment in European listed private equity companies continued with a total of £15.6m invested in three existing portfolio companies, GIMV, CapMan and Deutsche Beteiligungs ('DBAG') and one new company, Dinamia Capital Privado. A further £0.4m was drawn down by third party managed limited partnership funds. Investment disposals A total of £22.7m was received from investments disposed of during the eight month period. As previously discussed in the Interim Report, Zenith and Central Scotland Finance were disposed of generating £11.0m and £1.4m respectively. The recapitalisation of Practice Plan generated proceeds of £6.6m. Realisations from third party managed funds generated a total of £3.7m. These proceeds were generated principally by the LGV4 and LGV5 Private Equity Funds. Within these funds there were full exits from Kingfield Heath and South Lakeland Caravans and a partial exit from Verna Group. Unrealised movements in valuation Strong trading performances at OSS Environmental and Gardner Aerospace have led to valuation uplifts of £4.8m and £2.4m respectively. Both companies encountered difficult trading conditions in recent years but have returned to profitability, resulting in a write back in value. An investment was made in Capula in 2006 and this is the first year that the company has been valued on an earnings basis, leading to a valuation uplift of £1.2m. Adverse trading conditions have affected New Horizons and RSL Steeper. This has resulted in reductions in value of £1.3m and £3.4m respectively over the eight month period. The valuations of CGI and Practice Plan have also been adversely affected by lower price earnings multiples at the period end. As a result the valuations of CGI and Practice Plan have been reduced by £5.1m and £3.5m respectively. Within third party managed funds there has been a 5% increase in the valuation of the investments held by SWIP Private Equity Fund of Funds. This has contributed to a valuation increase of £2.0m. The share price of both DBAG and Dinamia has been adversely affected by the general stock market downturn contributing to valuation decreases of £0.7m and £1.1m respectively. Overall the valuation of Euro denominated investments have increased by £2.9m from currency movements in the period. There has been a further £2.4m uplift in the valuation of other limited partnership funds driven by potential exits at a number of the underlying portfolio companies. The managers of these funds anticipate that these exits will be achieved in the first half of 2008. Euro denominated investments The total exposure of the Company to Euro denominated investments is €51.1m. This currency position was hedged in October 2007. In the period to 31 December 2007 a charge of £1.8m has been made to the capital account following a fall in the value of Sterling against the Euro. The value of the hedge position is compensated for by an equal and opposite currency valuation movement in the Euro denominated investments over the same period (included in the £2.9m above). Geographic distribution At 31 December 2007, 79% of the investment portfolio of £104.6m was based in the UK, with 15% in Continental Europe and 6% elsewhere. The increasing exposure to Europe follows the investment in European quoted private equity funds. 31 December 2007 30 April 2007 % % UK 79 87 Europe 15 8 USA 5 4 Rest of World 1 1 Sector Analysis The investment portfolio of the Company is broadly diversified. At 31 December 2007 the largest exposure of 37% was to the Support Services sector, a diverse sector in itself. 31 December 2007 30 April 2007 % % Construction & building materials 9 15 Consumer goods & services 3 2 Financial services 5 2 Healthcare 6 8 Leisure & hotels 7 8 Industrials 21 12 Real estate 1 - Support services 37 42 Technology 8 8 Pharmaceutical, medical, biotech 3 3 Deal type The portfolio of investments continues to be predominantly weighted towards MBO/ MBI's. 31 December 2007 30 April 2007 % % MBO/MBI 88 89 Technology 8 8 Life Sciences 3 3 Real estate 1 - Valuation method The movement in valuation methodology applied to the portfolio reflects the realisation of Zenith during the period and the increased investment in quoted stocks. 31 December 2007 30 April 2007 % % Cost/written down 34 34 Earnings 31 32 Sales price 3 13 Bid price 32 21 Year of investment In the vintage year chart below, value is allocated to the year in which either Dunedin Enterprise or the third party manager first invested in each portfolio company. 31 December 2007 30 April 2007 % % Less than one year 13 21 One to three years 40 40 Three to five years 19 11 Greater than five years 28 28 Dunedin Capital Partners Limited 27 February 2008 Ten Largest Investments (both held directly and via Dunedin managed funds) by value at 31 December 2007 -------------------------------------------------------------------------------- Company name Percentage Percentage Cost of Directors' of net of equity investment valuation assets % £'000 £'000 % -------------------------------------------------------------------------------- SWIP Private Equity Fund of Fund II PLC 4.3 15,025 17,058 10.7 Practice Plan Group (Holdings) Limited 26.2 9,514 11,727 7.3 Capula Group Limited 35.5 8,289 9,509 5.9 CGI Group Limited 37.9 5,941 8,645 5.4 WFEL Holdings Limited 24.2 6,400 6,400 4.0 GIMV 0.6 4,971 4,839 3.0 CapMan plc 2.5 4,852 4,795 3.0 OSS Environmental Holdings Limited 49.0 6,184 4,774 3.0 Deutsche Beteiligungs AG 1.9 4,999 4,362 2.7 Gardner Group Limited 23.7 5,644 3,977 2.5 -------------------------------------------------------------------------------- 71,819 76,086 47.5 -------------------------------------------------------------------------------- Dunedin Enterprise Investment Trust PLC Preliminary Results for the period ended 31 December 2007 Income Statement for the period ended 31 December 2007 -------------------------------------------------------------------------------- Audited Audited Period ended 31 Year ended 30 December 2007 April 2007 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 -------------------------------------------------------------------------------- Gains/(losses) on investments - (2,834) (2,834) - 12,337 12,337 Income 4,325 - 4,325 6,036 - 6,036 Investment management fee (297) (890) (1,187) (461) (1,263) (1,724) Other expenses (400) - (400) (536) - (536) -------------------------------------------------------------------------------- Net return before finance costs and tax 3,628 (3,724) (96) 5,039 11,074 16,113 Interest payable and similar charges (33) (100) (133) (54) (164) (218) -------------------------------------------------------------------------------- Return on ordinary activities before tax 3,595 (3,824) (229) 4,985 10,910 15,895 Tax on ordinary activities (1,079) 154 (925) (1,258) 1,946 688 -------------------------------------------------------------------------------- Return attributable to equity shareholders 2,516 (3,670) (1,154) 3,727 12,856 16,583 -------------------------------------------------------------------------------- Basic return per ordinary share (3.8p) 54.8p -------------------------------------------------------------------------------- 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. Reconciliation of movements in shareholders' funds for the period ended 31 December 2007 Audited period ended 31 December 2007 Share Capital Share premium redemption Capital Revenue Total capital account reserve reserves Account equity £'000 £'000 £'000 £'000 £'000 £'000 -------------------------------------------------------------------------------- At 30 April 2007 7,552 47,600 374 101,757 6,434 163,717 Net return on ordinary activities - - - (3,670) 2,516 (1,154) Dividends paid - - - - (2,598) (2,598) Purchase an cancellation of shares 1) - 1 (18) - (18) -------------------------------------------------------------------------------- At 31 December 2007 7,551 47,600 375 98,069 6,352 159,947 -------------------------------------------------------------------------------- Audited year ended 30 April 2007 -------------------------------------------------------------------------------- Share Capital Share premium redemption Capital Revenue Total capital account reserve reserves Account equity £'000 £'000 £'000 £'000 £'000 £'000 -------------------------------------------------------------------------------- At 30 April 2006 7,592 47,600 334 89,576 6,202 151,304 Net return on ordinary activities - - - 12,856 3,727 16,583 Dividends paid - - - - (3,495) (3,495) Purchase of own shares (40) - 40 (675) - (675) -------------------------------------------------------------------------------- At 30 April 2007 7,552 47,600 374 101,757 6,434 163,717 -------------------------------------------------------------------------------- Balance Sheet as at 31 December 2007 -------------------------------------------------------------------------------- Audited Audited 31 December 30 April 2007 2007 £'000 £'000 -------------------------------------------------------------------------------- Investments held at fair value through profit or loss 129,049 133,222 Current assets Debtors 249 772 Cash at bank 31,047 34,282 -------------------------------------------------------------------------------- 31,296 35,054 Current liabilities Creditors: amounts falling due within one year (398) (4,559) -------------------------------------------------------------------------------- Net assets 159,947 163,717 -------------------------------------------------------------------------------- Capital and reserves Called up share capital 7,551 7,552 Share premium 47,600 47,600 Capital redemption reserve 375 374 Capital reserve - realised 112,586 104,274 Capital reserve - unrealised (14,517) (2,517) Revenue reserve 6,352 6,434 -------------------------------------------------------------------------------- Total equity shareholders' funds 159,947 163,717 -------------------------------------------------------------------------------- Net asset value per share 529.5p 541.9p Cash Flow Statement for the period ended 31 December 2007 -------------------------------------------------------------------------------- Audited Audited Period ended Year ended 31 December 30 April 2007 2007 £'000 £'000 £'000 £'000 -------------------------------------------------------------------------------- Net cash inflow from operating 2,457 4,055 activities Financial Investment Purchase of investments (39,845) (39,057) Purchase of 'AAA' rated money market (65,950) (25,252) funds Sale of investments 22,700 27,625 Sale of 'AAA' rated money market funds 80,152 64,928 -------------------------------------------------------------------------------- Net cash inflow / (outflow) from financial (2,943) 28,244 investment Equity dividends paid (2,598) (3,495) -------------------------------------------------------------------------------- Net cash inflow / (outflow) before financing (3,084) 28,804 Financing Interest paid (133) (218) Purchase of ordinary shares (18) (675) -------------------------------------------------------------------------------- Increase / (decrease) in cash for the period (3,235) 27,911 -------------------------------------------------------------------------------- Reconciliation of net cash flow to movements in net funds Increase / (decrease) in cash as above (3,235) 27,911 Cash at bank and in hand at beginning of period 34,282 6,371 -------------------------------------------------------------------------------- Cash at bank and in hand at end of period 31,047 34,282 -------------------------------------------------------------------------------- Reconciliation of revenue return before tax to net cash flow 3,628 5,039 from operating activities (Increase)/decrease in debtors (164) 111 Increase/(decrease) in creditors (117) 168 Management fees charged to capital (890) (1,383) Arrangement fees - 120 -------------------------------------------------------------------------------- Net cash inflow from operating activities 2,457 4,055 -------------------------------------------------------------------------------- Notes 1.The financial statements for the period ended 31 December 2007 have been prepared on the basis of the accounting policies which are consistent with those set out in the Company's Annual Financial Statements at 30 April 2007. 2. Dividends -------------------------------------------------------------------------------- Period to Year to 31 December 30 April 2007 2007 £'000 £'000 -------------------------------------------------------------------------------- Dividends paid in the period 2,598 3,495 -------------------------------------------------------------------------------- A final dividend of 6.0p, which together with the interim of 1.5p already paid, makes a total of 7.5p for the eight month period compared to 10.7p for the pervious year. If approved, the recommended final dividend will be paid on 16 May 2008 to shareholders on the register at close of business on 18 April 2008. The ex-dividend date is 16 April 2008. 3. Earnings per share -------------------------------------------------------------------------------- Period to Year to 31 December 30 April 2007 2007 -------------------------------------------------------------------------------- Revenue return per ordinary share (p) 8.3 12.3 Capital return per ordinary share (p) (12.1) 42.5 -------------------------------------------------------------------------------- Earnings per ordinary share (p) (3.8) 54.8 -------------------------------------------------------------------------------- Weighted average number of shares 30,208,874 30,266,370 -------------------------------------------------------------------------------- The earnings per share figures are based on the weighted average numbers of shares set out above. 4. Share Buy Backs -------------------------------------------------------------------------------- Period to Year to 31 December 30 April 2007 2007 -------------------------------------------------------------------------------- Number of shares bought back 4,228 161,000 -------------------------------------------------------------------------------- Average price per share 411.9p 419.4p -------------------------------------------------------------------------------- Total cost including expenses 17,503 675,270 -------------------------------------------------------------------------------- Number of shares in issue at the end of the period 30,204,715 30,208,943 -------------------------------------------------------------------------------- All shares bought back were subsequently cancelled. 5. Financial Information The financial information set out above does not constitute the Company's statutory accounts for the period ended 31 December 2007. The financial information for the year ended 30 April 2007 is derived from the statutory accounts for the year ended 30 April 2007 which have been delivered to the Registrar of Companies. The Auditors have reported on the accounts for the year ended 30 April 2007, their report was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. The statutory accounts for the period ended 31 December 2007 will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. 6. None of the views expressed in this document should be construed as advice to buy or sell a particular investment. This information is provided by RNS The company news service from the London Stock Exchange

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