Preliminary results for year

RNS Number : 4895D

Standard Life Euro Pri Eqty Tst PLC

03 December 2009

 



3 December 2009

STANDARD LIFE EUROPEAN PRIVATE EQUITY TRUST PLC

RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2009

Highlights

• For the financial year ended 30 September 2009 the Company's undiluted net asset value per ordinary share ("NAV") fell 29.8% to 164.9p (diluted NAV - 163.4p). 

• The Company can report a better performance for the second half of the Company's financial year, with pro-forma NAV, adjusted for the sale of fund interests, falling 1.5% from 167.5p (diluted - 167.5p) as at 31 March 2009 to 164.9p (diluted - 163.4p) as at 30 September 2009. 

• The closing mid-market price of the Company's ordinary shares on 30 September 2009 was 112.25p, a fall of 30.3% over the year and a discount of 31.3% to the diluted NAV. 

• As a result of the decline in distributions and income received by the Company, the Board is recommending a final dividend of 0.1p per ordinary share for the financial year. 

• As previously announced, to improve the Company's liquidity position and to better balance the quantum and profile of its outstanding commitments the Company disposed of all or part of 11 private equity fund interests during the year. The Company received net proceeds of £48.3 million from the disposal of these private equity fund interests and was released from £169.7 million of outstanding commitments. 

• As at 30 September 2009 the Company's net assets were £265.6 million. The Company had interests in 41 private equity funds with a value of £293.1 million. In preparing the Company's year end valuation, 84.1% by value of the portfolio was valued as at 30 September 2009.

• Reflecting the slow down in the private equity market, distributions totalled £19.5 million and the Company funded £48.3 million of draw downs during the year. As at 30 September 2009 the Company's net indebtedness was £27.3 million.

• The Company made no new fund commitments during the year and had £227.8 million of outstanding commitments as at 30 September 2009.

Quote from Scott Dobbie, Chairman:-

" The last few months have shown signs of recovery in the major continental European economies which are the focus of much of the Company's activities. Private equity managers are indicating a slight uplift in new investment activity, notwithstanding continuing difficulty in obtaining debt finance, and increased attention to preparing investments for exit over the next 12-18 months. Against this background, the Board believes that the Company is strongly positioned to benefit from any upturn."

For further information please contact:-

Peter McKellar of SL Capital Partners LLP (on 0131 245 0055)

  Chairman's Statement

Results and performance

The year to 30 September 2009 was an extremely challenging one for listed private equity companies. During the year private equity asset values were affected by volatility in the comparable listed multiples used for valuation purposes, share price discounts to net asset values fluctuated, often wildly, according to changing investor sentiment, and cash flow uncertainties were generated by currency movements and a significant decline in realisation activity. Against such a background, the Manager took prompt steps to reduce the Company's market exposure by selling some fund interests and releasing outstanding commitments, at prices which, in aggregate, the Board believes were higher than could subsequently have been obtained. Your Company has, in the view of the Board, ended the financial year in a much stronger position than it was at the start.

For the year ended 30 September 2009 the Company's net asset value per ordinary share ("NAV") fell by 29.8% to 164.9p (diluted NAV - 163.4p), from 234.8p as at 30 September 2008 (diluted NAV - 231.4p). Once again the result conceals different underlying performance in each half of the financial year. The significant fall in listed markets in late 2008 and early 2009 had a material impact on the value of the Company's portfolio and NAV in the first half, while, excluding the losses on the sale of private equity fund interests, the NAV declined marginally in the second half.  

The closing mid-market price of the Company's ordinary shares on 30 September 2009 was 112.25p, compared to 161.0p a year earlier. The Company's share price fell markedly during the year resulting in a widening of the discount to NAV, however, by the end of the financial year the share price had risen and the discount to NAV had narrowed. These movements were similar to those experienced by many of the Company's peers.

The Company's practice has been to pay a dividend marginally in excess of the minimum required to maintain investment trust status. As a result of the significant decline in private equity realisations, and thus a lack of distributions and income received by the Company, the Board is recommending a final dividend of 0.1p per ordinary share for the financial year. Subject to shareholder approval at the forthcoming annual general meeting, this dividend will be paid on 29 January 2010 to shareholders on the Company's share register as at 4 January 2010. In line with the practice adopted last year, shareholders will have the opportunity to elect to receive the final dividend in the form of ordinary shares. A circular and an election form are enclosed with the Company's annual report and accounts. 

Private equity is a long-term asset class and the Board continues to believe that performance must be assessed over appropriate time periods. For the five years ended 30 September 2009 the Company's NAV total return and share price total return have generated strong performance, increasing by 64.0% and 26.2% respectively, compared to increases of 38.4% in the FTSE All-Share Index and 18.9% in the MSCI Europe Index (in euros) on a total return basis. The Company's NAV total return and share price total return have also performed in line with or better than these indices over the period from the Company's listing in May 2001. 

Valuation 

As at 30 September 2009 the Company's portfolio had reduced to 41 private equity fund interests from 49 fund interests a year earlier. Against a background of the upheaval in financial markets and the recessionary economic environment, the portfolio fell in value during the year. As at 30 September 2009 the value of the portfolio was £293.1 million, of which net unrealised losses during the year were £70.8 million. The net unrealised losses comprised £112.7 million of unrealised losses on a constant exchange rate basis, partially offset by £41.9 million of favourable exchange rate movements. 

As for the net unrealised losses on a constant exchange rate basis, a majority of the movement arose from the fall in comparable listed valuation multiples in the period to March 2009. Since then the rise in comparable listed valuation multiples has been partially offset by earnings weakness at some underlying investee companies. The unrealised foreign exchange gain was as a result of sterling depreciating by 13.8% relative to the euro and by 10.3% relative to the US dollar during the year. Of the Company's gross assets of £295.6 million as at 30 September 2009, £212.3 million (sterling equivalent) comprised euro denominated assets and £55.4 million (sterling equivalent) dollar denominated assets.

Given the current macro-economic and trading environment, particular care has been taken to ensure that the 30 September 2009 valuation is timely. Around 84.1% by value of the private equity funds held by the Company were valued by the relevant fund manager as at 30 September 2009.  In undertaking their valuations the fund managers of the relevant funds have followed the International Private Equity and Venture Capital Valuation Guidelines. These guidelines have been in place for nearly five years and the primary valuation methodology for valuing underlying investments is to use comparable listed valuation multiples. As a consequence, market volatility is an important element in any private equity valuation.  

As at 30 September 2009 the Company's net indebtedness was £27.3 million, which compares to £36.4 million as at 30 September 2008. The fall over the year largely reflected the proceeds received from the sale of some private equity fund interests, reduced by a net cash outflow of £28.8 million from draw downs paid less distributions received.  

Investment activity and the disposal of fund interests

The last year has seen a fall in the value of private equity transactions concluded in Europe, as the impact of the recessionary economic environment, declining financial markets and a limited availability of debt has constrained the completion of transactions. The value of buy-out transactions completed in the European private equity market during the year ended 30 September 2009 was €20.0 billion (2007 and 2008 - €214.0 billion and €92.0 billion respectively). Where transactions were concluded, the quantum and proportion of debt provided was smaller and debt packages were negotiated with single or small groups of banks, rather than large banking syndicates.  

The decline in financial markets and mergers and acquisitions activity resulted in a low for distributions received by the Company of £19.5 million; of the distributions received, £13.6 million represented net realised gains and £1.3 million income. Similarly, the Company funded only £48.3 million of draw downs during the year, a reduction of £106.9 million from the previous financial year.

During the year the Company made no new fund commitments. This reflected the Board's and the Manager's cautious outlook on the European private equity market and the Company's liquidity position. As previously announced, to improve the Company's liquidity position and to better balance the quantum and profile of its outstanding commitments, the Company disposed of all or part of 11 private equity fund interests and made an election to cap its exposure to one fund interest. The disposals and election were undertaken on a selective basis and against the background of agreed objectives. The Company received net proceeds of £48.3 million from the disposals and election, incurred an aggregate loss on disposal to the last relevant valuations of £43.6 million and was released from £169.7 million of outstanding commitments. The Board and the Manager believe that the decisive action undertaken has improved substantially the Company's liquidity position. 

The Company's aggregate outstanding commitments were £227.8 million as at 30 September 2009. The majority of these commitments can be expected to be drawn down over the next 3-4 years and, in the first instance, will be funded from the Company's existing cash, distributions received from the portfolio of fund investments and the use of the Company's £100 million revolving credit term facility, which was increased and renewed in November 2008. A number of the private equity funds held by the Company, however, have completed their respective investment periods and any future draw downs are likely to be limited. Accordingly, the Manager believes that between £15 - 25 million of the Company's existing outstanding commitments are unlikely to be drawn 

  Outlook

The last few months have shown signs of recovery in the major continental European economies which are the focus of much of the Company's activities. Private equity managers are indicating a slight uplift in new investment activity, notwithstanding continuing difficulty in obtaining debt finance, and increased attention to preparing investments for exit over the next 12-18 months. Against this background, the Board believes that the Company, with its financial position strengthened during the past year and its exposure to proven private equity expertise, is strongly positioned to benefit from any upturn.

Scott Dobbie CBE

Chairman

  INCOME STATEMENT (audited)

for the year ended 30 September 2009

	Revenue	Capital	Total
	£000	£000	£000
Losses on investments	-	(100,733)	(100,733)
Currency losses	-	(4,938)	(4,938)
Income from investments	1,363	-	1,363
Interest receivable and other income	86	-	86
Investment management fee	(220)	(1,984)	(2,204)
Administrative expenses	(580)	(7)	(587)
	_________	_________	_________
NET RETURN ON ORDINARY ACTIVITIES BEFORE FINANCE COSTS AND TAXATION	649	(107,662)	(107,013)
Finance costs	(250)	(2,247)	(2,497)
	_________	_________	_________
NET RETURN ON ORDINARY ACTIVITIES BEFORE TAXATION	399	(109,909)	(109,510)
Taxation	(88)	21	(67)
	_________	_________	_________
NET RETURN ON ORDINARY ACTIVITIES AFTER TAXATION	311	(109,888)	(109,577)
	_________	_________	_________
NET RETURN PER ORDINARY SHARE	0.19p	(68.43p)	(68.24p)
	_________	_________	_________
DILUTED NET RETURN PER ORDINARY SHARE	0.19p	(68.43p)	(68.24p)
	_________	_________	_________

The "Total" column of this statement represents the profit and loss account of the Company. 

All revenue and capital items in the above statement derive from continuing operations. 

No operations were acquired or discontinued in the year. 

A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement.

The dividend which has been recommended based on this Income Statement is 0.10p (2008 - 0.70p) per ordinary share. 

  INCOME STATEMENT (audited)

for the year ended 30 September 2008

		Revenue	Capital	Total
		£000	£000	£000
Losses on investments		-	(3,774)	(3,774)
Currency gains		-	448	448
Income from investments		2,676	-	2,676
Interest receivable and other income		243	-	243
Investment management fee		(325)	(2,929)	(3,254)
Administrative expenses		(526)	-	(526)
		_________	_________	_________
NET RETURN ON ORDINARY ACTIVITIES BEFORE FINANCE COSTS AND TAXATION		2,070	(6,255)	(4,185)
Finance costs		(50)	(449)	(499)
		_________	_________	_________
NET RETURN ON ORDINARY ACTIVITIES BEFORE TAXATION		2,020	(6,704)	(4,684)
Taxation		(594)	586	(8)
		_________	_________	_________
NET RETURN ON ORDINARY ACTIVITIES
		1,426	(6,118)	(4,692)
		_________	_________	_________
NET RETURN PER ORDINARY SHARE AFTER TAXATION		0.89p	(3.82p)	(2.93p)
		_________	_________	_________
DILUTED NET RETURN PER ORDINARY SHARE		0.88p	(3.78p)	(2.90p)
		_________	_________	_________

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (audited)

For the year ended 30 September 2009

					Capital
		Share	Share	Special	redemption	Capital	Revenue
		capital	premium	reserve	reserve	reserve	reserve	Total
		£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2008		354	78,535	79,148	2	211,386	6,088	375,513
Total recognised (losses)/gains		-	-	-	-	(109,888)	311	(109,577)
Conversion of founder A shares		-	256	-	1	-	-	257
Scrip Issue of ordinary shares		2	565	-	-	-	-	567
Dividends paid		-	-	-	-	-	(1,119)	(1,119)
		______	_______	______	_______	________	_______	_______
Balance at 30 September 2009		356	79,356	79,148	3	(101,498)	5,280	265,641
		______	_______	______	_______	________	_______	_______

For the year ended 30 September 2008

					Capital
		Share	Share	Special	redemption	Capital	Revenue
		capital	premium	reserve	reserve	reserve	reserve	Total
		£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2007		354	78,440	79,148	2	217,504	10,259	385,707
Total recognised (losses)/gains		-	-	-	-	(6,118)	1,426	(4,692)
Conversion of founder A shares		-	95	-	-	-	-	95
Dividends paid		-	-	-	-	-	(5,597)	(5,597)
		______	_______	______	_______	________	_______	_______
Balance at 30 September 2008		354	78,535	79,148	2	(211,386)	6,088	375,513
		______	_______	______	_______	________	_______	_______

BALANCE SHEET (audited)

		As at		As at
		30 September		30 September
		2009		2008
		£000	£000	£000	£000
NON-CURRENT ASSETS
Investments at fair value through profit or loss			293,106		412,084
CURRENT ASSETS
Debtors		161		288
Cash and short term deposits		2,378		3,289
		_________		_________
		2,539		3,577
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR		(30,004)		(40,148)
		_________		_________
NET CURRENT LIABILITIES			(27,465)		(36,571)
			_________		_________
TOTAL ASSETS LESS CURRENT LIABILITIES			265,641		375,513
			_________		_________
CAPITAL AND RESERVES
Called up share capital			356		354
Share premium			79,356		78,535
Special reserve			79,148		79,148
Capital redemption reserve			3		2
Capital reserve			101,498		211,386
Revenue reserve			5,280		6,088
			_________		_________
TOTAL SHAREHOLDERS' FUNDS			265,641		375,513
ANALYSIS OF SHAREHOLDERS' FUNDS
Equity interests (ordinary shares)			265,607		375,478
Non-equity interests (founder shares)			34		35
			_________		_________
			265,641		375,513
			_________		_________
NET ASSET VALUE PER EQUITY SHARE			164.9p		234.8p

   CASHFLOW STATEMENT (audited)

			For the year		For the year
			ended 30 September		ended 30 September
			2009		2008
			£'000	£'000	£'000	£'000
NET CASH OUTFLOW FROM OPERATING ACTIVITIES				(1,521)		(1,344)
NET CASH OUTFLOW
FROM SERVICING OF FINANCE				(2,656)		(282)
NET CASH INFLOW/(OUTFLOW) FROM TAXATION				274		(772)
FINANCIAL INVESTMENT
Purchase of investments			(48,296)		(180,763)
Disposal of underlying investments by funds			18,193		144,183
Disposal of fund investments by way of secondary sales			48,348		-
NET CASH INFLOW/(OUTFLOW) FROM FINANCIAL INVESTMENTS				18,245		(36,580)
ORDINARY DIVIDENDS PAID				(547)		(5,597)
NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING				13,795		(44,575)
Net proceeds on issue of ordinary shares			252		95
Bank loans (repaid)/drawn down			(10,020)		40,000
NET CASH (OUTFLOW)/INFLOW FROM FINANCING				(9,768)		40,095
INCREASE/(DECREASE) IN CASH				4,027		(4,480)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Increase/(decrease) in cash as above				4,027		(4,480)
Repayment/(drawdown) of loan				10,020		(40,000)
Currency movements				(4,938)		448
MOVEMENT IN NET DEBT IN THE PERIOD				9,109		(44,032)
Opening net debt				(36,433)		7,599
CLOSING NET DEBT				(27,324)		(36,433)
REPRESENTED BY:
Cash and short term deposits				2,378		3,289
Loans				(29,702)		(39,722)
				(27,324)		(36,433)

Notes:

1.      Standard Life European Private Equity Trust PLC is an investment company managed by SL Capital Partners LLP, 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 Standard Life plc.

 

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 2009). 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 financial statements, and the net asset value per equity share figures, have been prepared in accordance with UK Generally Accepted Accounting Principles (“UK GAAP”). 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 enviroment.

(b)     Revenue, expenses and finance cost

         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 effective interest rate basis. Dividends and income from unquoted investments is included when the right to receipt is established. All expenses are accounted for on an accruals basis. Expenses are charged through the revenue account of the Income Statement except as follows:

-        transaction costs incurred on the purchase and disposal of investments are recognised as a capital item in the Income Statement; and

 -       the Company charges 90% of investment management fees and finance costs to capital, in accordance with the Board’s expected long-term split of returns between capital gains and income from the Company’s investment portfolio.

(c)     Investments

         Investments have been designated upon initial recognition as fair value through the profit or loss. Investments are recognised as at the date of the commitment to the fund and removed 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 investments are stated at the Directors’ estimate of fair value and follow the recommendations of the EVCA and the BVCA. The estimate of fair value is normally the latest valuation placed on a fund by its manager as at the balance sheet date. The valuation policies used by the manager in undertaking that valuation will generally be in line with the joint publication from the BVCA and the EVCA, ‘International Private Equity and Venture Capital Valuation guidelines’. Where formal valuations are not completed as at the balance sheet date the valuation from the fund manager is adjusted for any subsequent cash flows occurring between the valuation date and the balance sheet date. The Company’s Manager may further adjust such valuations to reflect any changes in circumstances from the last managers formal valuation date to arrive at the estimate of fair value.

(d)     Dividends payable - Interim and final dividends are recognised in the period in which they are paid. Scrip dividends are recognised in the period in which shares are issued.

(e)     Capital reserve – Gains or losses on investments realised in the year that have been recognised in the Income Statement are transferred to the capital reserve – “gains/(losses) on disposal”. In addition, any prior unrealised gains or losses on such investments are transferred from the capital reserve – “revaluation” to the capital reserve - “gains/(losses) on disposal” on the disposal of the investment. Increases and decreases in the fair value of investments are recognised in the Income Statement and are then transferred to the capital reserve – “revaluation”.

(f)     Taxation

i)       Current taxation – Provision for corporation tax is made at the current rate on the excess of taxable income net of any allowable deductions.

ii)      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.

(g)     Overseas currencies - Overseas assets and liabilities are translated at the exchange rate prevailing at the Company’s balance sheet date. Gains or losses on the translation of investments held at the year end are accounted for through the unrealised capital reserve. Gains or 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 as at 30 September were:

 

	2009	2008
Euro	1.0942	1.2690
US dollar	1.5993	1.7825
Transactions in overseas currency are translated at the exchange rate prevailing on the date of transaction.

 

.

		Year to	Year to
		30 September 2009	30 September 2008
		£'000	£'000
3.	Income
	Income from investments
	Income from unquoted investments	1,363	1,690
	Income from 'AAA' rated money market funds	-	988
		____________	____________
		1,363	2,678
	Interest receivable and other income
	Interest receivable on cash	71	243
	Other income	15	-
		____________	____________
	Total income	1,449	2,921
		____________	____________

 

4.      The number of ordinary shares in issue as at 30 September 2009 was 161,066,017 (30 September 2008 – 159,922,567). The return per ordinary share is based on the weighted average number of ordinary shares in issue.

 

5.      The Directors recommend that a final dividend of 0.10p (2008 – 0.70p) per ordinary share be paid on 29 January 2010 to shareholders on the Company’s share register as at the close of business on 4 January 2010. The ex-dividend date for the final dividend is 30 December 2009.

 

6.      The financial information for the year ended 30 September 2009 comprises non-statutory accounts within the meaning of Section 240 of the Companies Act 1985. The financial information for the year ended 30 September 2008 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. The statutory accounts for the year ended 30 September 2009 contain an unqualified audit report and will be delivered to the Registrar of Companies following the Company’s Annual General Meeting, which will be held at The Balmoral Hotel, 1 Princes Street, Edinburgh EH2 2EQ on 27 January 2010 at 12.30pm.

 

7.      The report and accounts for the year ended 30 September 2009 will be posted to shareholders in mid-December 2009 and copies will be available from the Company Secretary – Aberdeen Asset Management PLC, 40 Princes Street, Edinburgh EH2 2BY.

 

for Standard Life European Private Equity Trust PLC,

Aberdeen Asset Management PLC Company Secretary

END

 

 

 

END

 

 

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