Interim Results
Standard Life Euro Pri Eqty Tst PLC
01 June 2006
1 June 2006
STANDARD LIFE EUROPEAN PRIVATE EQUITY TRUST PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2006
Highlights
• The Company's net asset value per ordinary share ('NAV') rose by 10.8% to
159.0p (30 September 2005 - 143.5p, restated under revised UK GAAP) during
the six months ended 31 March 2006.
• The closing mid-market price of the Company's ordinary shares on 31 March
2006 was 173.0p (30 September 2005 - 156.2p), a rise of 10.8% over the six
month period.
• In line with the Company's dividend policy, the Board has not declared an
interim dividend.
• Private equity is a long-term asset class. Since listing in May 2001, the
Company's NAV and share price have materially out-performed the two most
relevant stock market indices, rising by 61.1% and 73.0% respectively, while
the FTSE All-Share Index and the MSCI Europe Index (sterling adjusted) have
risen by 6.8% and 9.5% respectively.
• As at 31 March 2006 the Company's net assets were £253.1 million (30
September 2005 - £228.3 million, restated under revised UK GAAP). The
Company had interests in 43 private equity funds with a value of £208.8
million (30 September 2005 - 39 funds and £186.6 million) and held £45.4
million in cash and money market balances (30 September 2005 - £42.5
million).
• The valuation of the Company's private equity fund interests reflected a
strong performance, with unrealised gains during the period of £5.0 million
(six months ended 30 September 2005 - £6.1 million).
• Distributions received during the six months totalled £43.6 million (six
months ended 30 September 2005 - £53.3 million), including £23.2 million of
realised gains and income (six months ended 30 September 2005 - £30.4
million). The average return on the Company's acquisition cost of the
realised investments was 2.1 times (six months ended 30 September 2005 - 2.3
times).
• Drawdowns made during the period rose to a record £37.6 million (six
months ended 30 September 2005 - £36.2 million) as new investment activity
remained strong.
• The Company made four new fund commitments during the period totalling
£126.1 million, to Charterhouse Capital Partners VIII (£41.9 million),
Cinven IV (£49.5 million), HgCapital 5 (£20.3 million) and TowerBrook
Investors II (£14.4 million), and made a further fund commitment of £20.9
million to Candover 2005.
Quote from Scott Dobbie, Chairman:-
'In a private equity market of broadening opportunity, the need for vigilance in
fund selection, in which the Manager has an enviable reputation, has become even
more critical and the Board remains confident in prospects for future long-term
growth.'
For further information please contact:-
Peter McKellar of Standard Life Investments (Private Equity) Limited (on 0131
245 0055)
Chairman's Statement
Results and performance
The Company's NAV again showed significant growth, increasing by 10.8% to 159.0p
for the six months ended 31 March 2006. The Company continued to benefit from
the generally improving macro-economic environment in continental Europe, rising
financial markets and, in particular, the strong European private equity market.
As at 31 March 2006 the Company's net assets were £253.1 million (30 September
2005 - £228.3 million, restated under revised UK GAAP).
As I have said in previous statements, private equity returns should be viewed
over a long time horizon. The Company was listed in May 2001 and now has a track
record of almost five years. Over this period the NAV and share price have
materially out-performed the two most relevant stock market indices, increasing
by 61.1% and 73.0% respectively, compared to rises of 6.8% in the FTSE All-Share
Index and 9.5% in the MSCI Europe Index (sterling adjusted).
The closing mid-market price of the Company's ordinary shares on 31 March 2006
was 173.0p (30 September 2005 - 156.2p), a rise of 10.8% over the six month
period. The shares continue to trade at a premium to the disclosed NAV.
In line with the Company's dividend policy, the Board has not declared an
interim dividend.
Valuation
The Company's portfolio of 43 private equity fund interests continued to rise in
value over the period, through a combination of net new investment activity and
unrealised gains. As at 31 March 2006 the value of the portfolio was £208.8
million (30 September 2005 - £186.6 million), of which unrealised gains arising
during the period were £5.0 million (six months ended 30 September 2005 - £6.1
million). This reflects a strong performance, with a majority of the Company's
larger private equity fund interests reporting uplifts. As with the last
financial year this can be attributed principally to better trading and cashflow
generation at many of the underlying investee companies and, to a lesser extent,
rising comparable valuation multiples.
Aggregate cash and money market balances rose marginally at 31 March 2006 to
£45.4 million (30 September 2005 - £42.5 million). This was a result of a
continuing healthy flow of distributions, largely offset by an increase in the
amount of drawdowns, as the Company's new fund commitments rose. At the period
end 82.1% of the Company's gross assets (30 September 2005 - 81.4%) were
invested in private equity assets; this remains one of the highest percentages
for any private equity investment trust.
Exchange rates had a slightly positive impact on NAV over the period, as
sterling depreciated by 2.3% relative to the euro and 2.0% relative to the US
dollar. As at 31 March 2006 the Company had £254.3 million of gross assets, of
which £142.8 million (sterling equivalent) comprised euro denominated assets and
£49.9 million (sterling equivalent) dollar denominated assets (30 September 2005
- £229.3 million, £126.7 million and £44.7 million respectively).
Investment Activity
Late 2005 and early 2006 has been a record period for private equity investment
in Europe. Against this background, deal flow and new investment activity for
the private equity managers of the funds in the Company's portfolio have
remained strong, helped by a wider and deeper set of investment opportunities
and by liquid debt markets. A total of £37.6 million of drawdowns were funded by
the Company during the six month period to 31 March 2006 (six months ended 30
September 2005 - £36.2 million). This was the highest amount drawn in any half
year period since the Company's listing.
As regards cash inflow, the six months ended 31 March 2006 saw the Company
receive £43.6 million of distributions (six months ended 30 September 2005 -
£53.3 million). Although a reduction from the record amount received in the
second half of the last financial year, the six month period witnessed
significant realisation activity, with investments being fully or partially
realised through trade sales, IPOs, secondary buy-outs and re-capitalisations.
This was driven by the strong mergers and acquisitions market and, in the case
of the Company, the attractive maturity profile of the underlying portfolio of
investments.
Of the distributions received, £20.6 million were realised gains and £2.6
million were income (six months ended 30 September 2005 - £28.3 million and £2.1
million respectively). Importantly, the average return on the Company's
acquisition cost of realised investments again exceeded two times, being 2.1
times (six months ended 30 September 2005 - 2.3 times).
Reflecting the active private equity fund raising environment, the Company made
four new fund commitments during the period totalling £126.1 million and a
further fund commitment of £20.9 million to Candover 2005. The four new fund
commitments were £41.9 million to Charterhouse Capital Partners VIII, £49.5
million to Cinven IV, £20.3 million to HgCapital 5 and £14.4 million to
TowerBrook Investors II. All of these funds are buy-out funds and are focused on
Europe, with the exception of TowerBrook Investors II which can invest both in
Europe and North America. The Company has existing investments with managers of
all of these funds, save again for TowerBrook Investors II.
In light of the new fund commitments, the Company's aggregate outstanding
commitments to its private equity fund interests had grown to £297.6 million as
at 31 March 2006 (30 September 2005 - £184.8 million). These commitments can be
expected to be drawn down over the next 3-4 years and will be funded from the
Company's existing cash and money market holdings, distributions received from
the Company's portfolio of private equity fund investments and, if necessary,
the use of bank borrowings. As at 31 March 2006 the Company's £40 million
committed revolving credit facility with The Royal Bank of Scotland plc remained
undrawn.
Outlook
The Company demonstrated solid progress over the six months to 31 March 2006 and
this has continued since the period end. The number and scale of new investment
opportunities for private equity managers in Europe continues to grow. This
broadening of opportunity has been associated with rising valuations and in a
relatively benign debt market calls for increasing vigilance in fund selection.
The Company's Manager has an enviable reputation in this respect and the Board
remains confident in prospects for future long-term growth.
Scott Dobbie CBE
Chairman
INCOME STATEMENT
Six months to 31 March 2006 (unaudited)
Notes Revenue Capital Total
£'000 £'000 £'000
Total capital gains on investments - 26,195 26,195
Currency gains 3 - 20 20
Income 3,270 - 3,270
Investment management fee (101) (911) (1,012)
Administrative expenses (237) - (237)
________ ________ ________
Net return before finance costs and taxation 2,932 25,304 28,236
Interest payable and similar charges (10) (85) (95)
________ ________ ________
Return on ordinary activities before taxation 2,922 25,219 28,141
Taxation on ordinary activities (863) 298 (565)
________ ________ ________
Return on ordinary activities after taxation 2,059 25,517 27,576
________ ________ ________
Return per ordinary share 6 1.30p+ 16.03p 17.33p
________ ________ ________
Six months to 31 March 2005 (unaudited) Notes Revenue Capital Total
(restated) £'000 £'000 £'000
Total capital gains on investments - 22,659 22,659
Currency gains - 51 51
Income 3 3,278 - 3,278
Investment management fee (77) (685) (762)
Administrative expenses (198) - (198)
________ ________ ________
Net return before finance costs and taxation 3,003 22,025 25,028
Interest payable and similar charges (9) (85) (94)
________ ________ ________
Return on ordinary activities before taxation 2,994 21,940 24,934
Taxation on ordinary activities (975) 231 (744)
________ ________ ________
Return on ordinary activities after taxation 2,019 22,171 24,190
________ ________ ________
Return per ordinary share 6 1.27p+ 13.93p 15.20p
________ ________ ________
INCOME STATEMENT
Year ended 30 September 2005 (audited)
(restated)
Notes Revenue Capital Total
£'000 £'000 £'000
Total capital gains on investments - 57,036 57,036
Currency gains - 151 151
Income 3 5,955 - 5,955
Investment management fee (165) (1,482) (1,647)
Administrative expenses (375) - (375)
_________ ________ _________
Net return before finance costs and taxation 5,415 55,705 61,120
Interest payable and similar charges (19) (171) (190)
_________ ________ _________
Return on ordinary activities before taxation 5,396 55,534 60,930
Taxation on ordinary activities (1,707) 496 (1,211)
_________ ________ _________
Return on ordinary activities after taxation 3,689 56,030 59,719
_________ ________ _________
Return per ordinary share 6 2.32p+ 35.21p 37.53p
_________ ________ _________
The total column of this statement represents the profit and loss account of the
Company.
The Company has no recognised gains or losses other than those recognised in the
income statement above.
The financial statements for the year ended 30 September 2005 have been restated
to reflect the changes to accounting policies as set out in the accompanying
notes.
All revenue and capital items in the above statement derive from continuing
operations.
+ Earnings per share - basic and diluted
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the six months to 31 March 2006 Total
£'000
Balance at 30 September 2005 as originally reported 225,483
Restatements (see note 3) 2,865
_________
Balance at 30 September 2005 (restated) 228,348
Total recognised gains and losses 27,576
Dividends paid (2,865)
_________
Balance at 31 March 2006 253,059
_________
For the six months to 31 March 2005 Total
£'000
Balance at 30 September 2004 as originally reported 168,629
Restatements (see note 3) 1,910
_________
Balance at 30 September 2004 (restated) 170,539
Total recognised gains and losses 24,190
Dividends paid (1,910)
_________
Balance at 31 March 2005 (restated) 192,819
_________
For the year to 30 September 2005 Total
£'000
Balance at 30 September 2004 as originally reported 168,629
Restatements (see note 3) 1,910
_________
Balance at 30 September 2004 (restated) 170,539
Total recognised gains and losses 59,719
Dividends paid (1,910)
_________
Balance at 30 September 2005 (restated) 228,348
_________
BALANCE SHEET
(unaudited) (audited)
At 31 March At 31 March At 30 September
2006 2005 2005
£'000 £'000 £'000
(restated) (restated)
Fixed assets
Investments at fair value through profit or loss 245,773 191,659 227,014
Current assets
Debtors 126 71 87
Cash and short term deposits 8,400 2,414 2,152
________ ________ ________
8,526 2,485 2,239
Creditors: amounts falling due within one year (1,240) (1,325) (905)
________ ________ ________
Net current assets 7,286 1,160 1,334
________ ________ ________
Total assets less current liabilities 253,059 192,819 228,348
Creditors: amounts falling due after more than one year - - -
________ ________ ________
Total net assets 253,059 192,819 228,348
________ ________ ________
Capital and reserves
Called up share capital 319 319 319
Share premium 77,775 77,775 77,775
Special reserve 79,148 79,148 79,148
Capital redemption reserve 1 1 1
Capital reserve - realised 80,094 32,367 60,107
Capital reserve - unrealised 11,371 (278) 5,841
Revenue reserve 4,316 3,452 5,122
________ ________ ________
Total equity shareholders' funds 253,024 192,784 228,313
Total non-equity shareholders' funds 35 35 35
________ ________ ________
Total shareholders' funds 253,059 192,819 228,348
________ ________ ________
Net asset value per equity share 159.0p 121.1p 143.5p
CASHFLOW STATEMENT
(unaudited) (audited)
6 months to 6 months to Year to
30 September
31 March 31 March 2005
2006 2005
£'000 £'000 £'000
Revenue before finance costs and taxation 2,932 3,003 5,415
Increase in accrued income (47) (11) (22)
Decrease in other debtors 8 11 6
Increase/(decrease) in creditors 154 88 (2)
Irrecoverable tax deducted from non - UK income (140) (77) (88)
Expenses charged to capital reserve - realised (911) (685) (1,482)
________ ________ ________
Net cash outflow from operating activities 1,996 2,329 3,827
________ ________ ________
Net cash outflow from servicing of finance (95) (144) (238)
________ ________ ________
Net cash outflow from taxation (244) (121) (909)
________ ________ ________
Financial investment
Purchase of investments (53,416) (40,113) (110,777)
Disposal of investments 60,852 42,080 111,766
________ ________ ________
Net cash inflow from financial investment 7,436 1,967 989
________ ________ ________
Ordinary dividend paid (2,865) (1,910) (1,910)
________ ________ ________
Net cash inflow before financing 6,228 2,121 1,759
Net cash outflow from financing - - -
________ ________ ________
Increase in cash and cash equivalents 6,228 2,121 1,759
________ ________ ________
Reconciliation of net cash flow to movement in net funds
Increase in cash as above 6,228 2,121 1,759
Currency movements 20 51 151
________ ________ ________
Movement in net funds in the period 6,248 2,172 1,910
Opening net funds 2,152 242 242
________ ________ ________
Closing net funds 8,400 2,414 2,152
________ ________ ________
Represented by:
Cash and short term deposits 8,400 2,414 2,152
________ ________ ________
Notes:
1. Standard Life European Private Equity Trust PLC is an investment
company managed by Standard Life Investments (Private Equity) Limited the
ordinary shares of which are admitted to listing by the UK Listing Authority and
to trading on the London Stock Exchange. It seeks to conduct its affairs so as
to continue to qualify as an investment trust under section 842 of the Income
and Corporation Taxes Act 1988. The Board is wholly independent of the Manager
and The Standard Life Assurance Company.
2. Accounting policies
(a) Basis of preparation and going concern - The financial statements have
been prepared under the historical cost convention as modified to include the
revaluation of investments and in accordance with applicable UK Accounting
Standards and with the Statement of Recommended Practice 'Financial Statements
of Investment Trust Companies' (issued January 2003 and revised in December
2005). They have also been prepared on the assumption that approval as an
investment trust will continue to be granted. The financial statements have been
prepared on a going concern basis.
The implementation of the 2005 Statement of Recommended Practice '
Financial Statements of Investment Trust Companies' (SORP) has resulted in
changes in the presentation of total returns. Previously the revenue column of
the Statement of Total Return was deemed to be the profit and loss account of
the Company. An Income Statement is now presented, which still shows
information on capital and revenue returns, although it is the total return
column which represents the profit and loss account of the Company.
The financial statements, and the net asset value per share figures, have
been prepared in accordance with UK Generally Accepted Accounting Principles ('
UK GAAP'). The new Financial Reporting Standards, issued as part of the
programme to converge UK GAAP with International Financial Reporting Standards
(IFRS), were applicable for the accounting period ended 31 March 2006 and the
financial statements for the twelve months ended 30 September 2005 and the six
months ended 31 March 2005 have also been restated (see notes 3 and 4). The main
change arising from these revisions to UK GAAP, in relation to the Company's
financial statements, is that dividends to shareholders declared after the
balance sheet date are now shown in the period of payment rather than in the
reporting period. Dividends were previously recognised in the Statement of Total
Return (now Income Statement). These are now dealt with as an appropriation of
equity and are taken directly through equity in the Reconciliation of Movements
in Shareholders' Funds.
FRS 22 'Earnings per Share' and FRS 23 'The Effects of Changes in Foreign
Exchange Rates' have both been adopted in full, but have had no impact on the
results for the period and no prior year adjustment has been required. FRS 25 '
Financial Instruments: Disclosure and Presentation' has been adopted and the
financial statements reflect the revised disclosures. The Directors consider the
Company's functional currency to be sterling, as the Company is registered in
Scotland, the Company's shareholders are predominantly based in the UK and the
Company is subject to the UK's regulatory environment.
(b) Revenue, expenses and interest payable - Dividends from quoted investments
are included in revenue by reference to the date on which the price is marked
ex-dividend. Interest on quoted investments and other interest receivable are
dealt with on an accruals basis. Income from unquoted investments is included
when the right to receipt is established. All expenses are charged to revenue,
except where they directly relate to the acquisition or disposal of an
investment or the maintenance or enhancement of its value, in which case they
are added to the cost of the investment or deducted from the sale proceeds.
(c) Investments - Investments are designated upon initial recognition as
fair value through profit or loss. Investments are recognised as at the date of
commitment to the fund and de-recognised when the fund is wound up. Subsequent
to initial recognition, investments are valued at fair value as detailed below.
Gains and losses arising from changes in fair value are included in net profit
or loss for the period as a capital item in the income statement and are
ultimately recognised in the unrealised reserve.
Unquoted - Unquoted investments are stated at the Directors' estimate
of fair value and follow the recommendations of the European Private Equity &
Venture Capital Association ('EVCA'). This is normally the latest valuation
placed on a fund by its manager, adjusted if necessary for cash flows between
the Company and the fund occurring between the fund manager's valuation date and
the Company's balance sheet date. The valuation policies used by the manager in
undertaking that valuation will generally be in line with the recommendations of
either the British Venture Capital Association ('BVCA') or the EVCA. However,
the valuation adopted by the Company may depart from the valuation prepared by
the manager of the fund if, in the opinion of the Company's Manager, an upward
adjustment is not prudent. A downward adjustment may also be made if the
Company's Manager receives relevant information which has not been notified to
it by the manager of the fund or if the Company's Manager forms a more cautious
view than that held by the manager of the fund.
The Income Statement reflects the total capital gains, both realised and
unrealised. Due to the valuation of the private equity fund interests held by
the Company being performed at the fund level, and not at the underlying
investment level, and net realised gains only being recognised following
transactions advised by the underlying fund manager, the amounts which are
accounted for in the movement in unrealised appreciation/depreciation on
unquoted investments relate to the difference between the book cost and
valuation of the fund investments.
Quoted - Quoted investments are valued at a bid price, discounted, where
applicable, to recognise any restriction on sale or lack of liquidity.
(d) Dividends payable - Interim and final dividends are recognised in the
period in which they are paid.
(e) Realised capital reserve - Gains or losses on investments realised in
the year that have been recognised in the Income Statement are transferred to
the realised capital reserve. In addition, any prior unrealised gains or losses
on such investments are transferred from the unrealised capital reserve to the
realised capital reserve on the disposal of the investment.
(f) Unrealised capital reserve - Increases and decreases in the fair value
of investments are recognised in the Income Statement and are then transferred
to the unrealised capital reserve.
(g) Deferred taxation - Deferred taxation is recognised in respect of
all temporary differences that have originated but not reversed at the balance
sheet date where transactions or events that result in an obligation to pay more
or a right to pay less tax in future have occurred at the balance sheet date
measured on an undiscounted basis and based on enacted tax rates. This is
subject to deferred tax assets only being recognised if it is considered more
likely than not that there will be suitable profits from which the future
reversal of the underlying temporary differences can be deducted. Temporary
differences are differences arising between the Company's taxable profits and
its results as stated in the accounts which are capable of reversal in one or
more subsequent periods.
Due to the Company's status as an investment trust company, and the
intention to continue meeting the conditions required to obtain approval in the
foreseeable future, the Company has not provided deferred tax on any capital
gains and losses arising on the revaluation or disposal of investments.
(h) Overseas currencies - Overseas assets and liabilities are
translated at the exchange rates prevailing at the Company's balance sheet date.
Gains or losses on the re-translation of investments held at the year end are
accounted for through the unrealised capital reserve. Gains and losses on the
translation of overseas currency balances held at the year end are accounted for
through the realised capital reserve.
Rates of exchange to sterling were:
As at As at As at
31 March 2006 31 March 2005 30 September 2005
Euro 1.4334 1.4540 1.4674
US dollar 1.7346 1.8896 1.7691
Transactions in overseas currencies are translated at the exchange rate
prevailing on the date of the transaction.
3. Income
Six months ended Six months ended Year ended
31 March 31 March 30 September
2006 2005 2005
£'000 £'000 £'000
Income from unquoted investments 2,567 2,977 5,131
_______ _______ _______
Other income
Interest from AAA rated money
market funds 672 247 669
Deposit interest 27 47 146
Other income 4 7 9
_______ _______ _______
703 301 824
_______ _______ _______
Total income 3,270 3,278 5,955
_______ _______ _______
4. Reconciliation of Balance Sheets
As at As at As at
31 March 30 September 30 September
2005 2005 2004
£'000 £'000 £'000
Net assets as previously reported 192,819 225,483 168,629
Reversal of provision of final
dividend - 2,865 1,910
_______ _______ _______
Restated net assets 192,819 228,348 170,539
_______ _______ _______
5. Reconciliation of Income Statement
Six months ended Year ended
31 March 2005 30 September 2005
£'000 £'000
Total transfer to reserves as
previously reported in the Statement
of Total Return (now called the
Income Statement) 2,019 824
Add: previously reported 2005
dividends on ordinary shares - 2,865
_______ _______
Restated total transfer to reserves 2,019 3,689
_______ _______
6. The number of ordinary shares in issue as at 31 March 2006 was
159,150,000 (30 September 2005 - 159,150,000). The return per ordinary share is
based on the weighted average number of ordinary shares in issue.
7. There will be no interim dividend for the six months ended 31 March
2006.
8. The financial information for the six months ended 31 March 2006 and 31
March 2005 comprises non-statutory accounts within the meaning of Section 240 of
the Companies Act 1985. The financial information for the year ended 30
September 2005 has been extracted from published accounts that have been
delivered to the Registrar of Companies and on which the report of the auditors
was unqualified.
9. The interim report and accounts will be posted to shareholders and
copies will be available from the Manager - Standard Life Investments (Private
Equity) Limited, 1 George Street, Edinburgh EH2 2LL.
for Standard Life European Private Equity Trust PLC,
Edinburgh Fund Managers plc, SECRETARY
END
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