Final Results
`Pantheon International Participations PLC (PIP)
Preliminary Announcement of Results for the year ended 30 June 2008
CHAIRMAN'S STATEMENT
I am pleased to report an increase of 20.6% in PIP's NAV per share in the
financial year to 30th June 2008. However, the ordinary share price fell by
18.3% as the discount widened to 32.4% from 0.2% at the beginning of the year.
In part, this was due to the market's increasing concerns over the effect of
recent equity market volatility on private equity valuations and the current
uncertain outlook for corporate profits.
Our net assets rose by £125.8 million to £736.1 million during the year, mainly
as a result of an uplift in the value of investments. This performance was
aided by currency movements, in particular, the strengthening of the euro which
appreciated 15.0% against sterling, resulting in a £31m increase in the
sterling value of the private equity portfolio.
INVESTMENT ACTIVITY
The lack of availability of debt and an increase in investor uncertainty has
resulted in reduced activity levels in the market. These conditions contributed
to a reduction in distributions and, to a lesser degree, a slower rate of new
investment achieved through our primary programme in the second half of the
year. In the year, PIP invested £272.5 million in underlying private equity
assets. Of this amount, £145.4m was paid to meet investment calls arising from
PIP's primary portfolio and £127.1m was applied to the secondary portfolio to
complete 13 new secondary purchases and to pay further calls. The total amount
of cash distributed to PIP as a result of investment realisations during the
year was £133.0 million. Of this amount, £51.3m came from the primary portfolio
with £81.7m arising from the secondary portfolio.
PRIMARY COMMITMENTS
Despite the challenging market conditions, the fundraising environment remained
active. During tough economic periods, the dispersion of performance in private
equity funds tends to increase. Pantheon's relationships with top tier private
equity fund managers helps to ensure that PIP gains access to top quality funds
worldwide - a factor that is critical to achieving good performance.
PIP committed a total of £237.0 million to primary funds, encompassing 13
Europe-focused funds (£161.0m), 22 US-focused funds (£72.5m) and one
Israeli-focused fund (£3.5m). In addition, PIP continued to invest in Asia via
Pantheon's Asian fund of funds, which committed to 15 new funds during the
year.
SECONDARY COMMITMENTS AND CO-INVESTMENTS
PIP committed £112.5 million to 13 secondary transactions to purchase existing
interests in private equity funds. More than half of the value of these
transactions was buyout focused, with the remainder focused on venture capital
and special situations.
In recent times, changes in investor strategy and the rebalancing of portfolios
have been the most common reasons for sales. However, the debt market
correction is increasing deal flow from investors seeking liquidity. The large
flow of capital into the private equity market prior to the credit crisis
should increase the supply of attractive opportunities.
PIP committed £6.9m to 4 direct co-investments as part of its strategy to
deploy additional capital selectively alongside top tier managers.
MARKET REVIEW AND PROSPECTS
Since August last year, the market has been increasingly characterised by the
lack of available debt financing following the "credit crunch" and a weaker
economic outlook. The inexpensive loans offered to buyout firms over the past
few years are no longer readily available, particularly at the larger end of
the market. As a result, in the second half of the financial year, we have seen
in the buyout market a reduction in large transactions, secondary buyout
activity and debt recapitalisations. Relatively speaking, the investment
activity of venture capital firms has been less affected due to their lesser
reliance on debt. However, both venture capital and buyout firms have been
impacted by the slowing of the IPO and M&A markets, reducing exit opportunities
and subsequent fund distributions.
As a result of the debt market correction, fears have mounted over possible
knock-on effects to the wider economy, and in particular corporate profits.
Early warning signs of recession and rising inflation rates have taken their
toll on investor sentiment, with falls of around 13% and 9% in the FTSE All
Share and MSCI World Indices respectively over PIP's reporting period. Most
buyout assets are valued by comparison to listed companies, and because of the
reporting time lag, the impact of falls in the valuation multiples of listed
companies on private equity valuations remains to be seen. It would not be
surprising if in certain circumstances some portfolio companies, especially
those acquired on higher purchase multiples, or with reduced earnings or high
levels of debt, experience pressure on valuations in the near term.
Consequently, the outlook for returns in the buyout market is lower than the
returns of the recent past. However, weak markets which may have a negative
impact on valuations in the short term, can also present attractive investment
opportunities. Lower valuations tend to provide circumstances where private
equity managers can purchase good quality assets at attractive prices.
The diversification of PIP's portfolio across buyout, venture and special
situations sectors, and across all major geographical regions of the private
equity industry, should help mitigate any difficulties experienced by specific
companies or sectors in the current economic conditions. As always, it is
important for investors in private equity to ensure that they select the
managers that are able to continue to deliver superior performance across the
market cycle. Pantheon's strategy is to focus on managers that can demonstrate
clear value creation. Much of this value creation is centered on greater
efficiency and building scale in middle market businesses. The ability of PIP
to benefit from Pantheon's truly global expertise and experience places it well
for superior performance over the long term.
CAPITAL STRUCTURE AND FINANCING
As planned, during the year PIP increased by £30m the total amount of "standby"
commitments under which institutional investors have agreed to subscribe, if
called upon by PIP to do so, for new redeemable shares. This brings the total
aggregate amount under these "standby" agreements to £150m.
As at 30th June 2008, PIP had utilised £70m of its £150m available bank loan
facility during the year to facilitate the execution of its investment
strategy. At the end of August, the Company had utilised a further £34m.
In the coming quarters it is likely that calls will exceed distributions. While
we have substantial facilities available to us, as referred to above, to meet
the calls, it remains a key objective to continue to secure resources to enable
PIP not only to fund outstanding commitments but also to commit to new
investments. Until there is a full recovery in the level of distributions, PIP
will suspend its new fund commitment programme to ensure that any cash
resources not needed to finance outstanding commitments, can be applied to
prioritising secondary activity.
ANNUAL GENERAL MEETING AND PRESENTATION
The Annual General Meeting of the Company will take place at 12 noon on 25th
November 2008 at Pantheon's office. Pantheon will give a presentation on the
progress of PIP's portfolio. Both the Directors and Pantheon look forward to
meeting shareholders informally after the meeting.
TOM BARTLAM
Chairman
25 September 2008
INCOME STATEMENT (unaudited)
For the year ended 30 June
2008 2007
Revenue Capital Total* Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments at - 137,351 137,351 - 77,537 77,537
fair value through
profit or loss**
Currency gains/(losses) - 310 310 - (625) (625)
on cash and borrowings
Investment income (Note 4,787 - 4,787 7,179 - 7,179
1)
Investment management (9,768) (3,660) (13,428) (7,189) (1,607) (8,796)
fees
Other expenses (900) (454) (1,354) (1,152) (617) (1,769)
Return on ordinary (5,881) 133,547 127,666 (1,162) 74,688 73,526
activities before
financing costs and tax
Interest payable and (2,199) - (2,199) (1,487) - (1,487)
similar charges/finance
costs
Return on ordinary (8,080) 133,547 125,467 (2,649) 74,688 72,039
activities before tax
Tax on ordinary 609 (275) 334 - (1,297) (1,297)
activities
Return on ordinary (7,471) 133,272 125,801 (2,649) 73,391 70,742
activities after tax
for the financial year
Return per ordinary and (11.25)p 200.73p 189.48p (4.76)p 131.89p 127.13p
redeemable share
All revenue and capital items in the above statement relate to continuing
operations.
No operations were acquired or discontinued during the year.
* The total column of this statement represents the Company's profit and loss
statement prepared in accordance with UK Accounting Standards. The
supplementary revenue return and capital columns are prepared under guidance
published by the Association of Investment Companies.
** Includes currency movements on investments.
There were no recognised gains or losses other than those passing through the
income statement.
RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS (unaudited)
Share Share Capital Capital Capital Special Revenue Total
capital premium reserve- reserve- reserve
redemption realised unrealised reserve
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Movement for
the year
ended 30 June
2008
Opening 25,428 183,139 26 187,543 131,745 99,861 (17,481) 610,261
equity
shareholders'
funds
Return for - - - 39,961 93,311 - (7,471) 125,801
the year
Expenses - 43 - - - - - 43
relating to
issue of
Ordinary
shares
written back
Closing 25,428 183,182 26 227,504 225,056 99,861 (24,952) 736,105
Equity
shareholders
funds
Movement for
the year
ended 30 June
2007
Opening 18,024 91,971 26 151,664 94,233 99,897 (14,832) 440,983
equity
shareholders'
funds
Return for - - - 35,879 37,512 - (2,649) 70,742
the year
Issue of 7,404 92,599 - - - - - 100,003
Ordinary
shares
Expenses - (1,431) - - - - - (1,431)
relating to
issue of
Ordinary
shares
Additional - - - - - (36) - (36)
costs of
redemption of
Redeemable
shares
Closing 25,428 183,139 26 187,543 131,745 99,861 (17,481) 610,261
Equity
shareholders
funds
BALANCE SHEET (unaudited)
As at 30 As at 30
June 2008 June 2007
£'000 £'000
Fixed assets
Investments at fair value through profit 806,485 595,994*
or loss
Current assets
Debtors 927 2,018
Cash at bank 8,801 17,010
9,728 19,028
Creditors - amounts falling due within one
year
Other creditors 7,888 4,761
Bank loan 69,966 -
Bank overdraft 2,254 -
80,108 4,761
Net current assets (70,380) 14,267
Total assets less current liabilities 736,105 610,261
Capital and reserves
Called-up share capital 25,428 25,428
Share premium account 183,182 183,139
Capital redemption reserve 26 26
Capital reserve - realised gains 227,504 187,543
Capital reserve - unrealised gains 225,056 131,745
Special reserve 99,861 99,861
Revenue reserve (24,952) (17,481)
Total equity shareholders' funds 736,105 610,261
* Includes fixed interest investments held for cash management purposes
As at As at
30 June 2008 30 June 2007
Number of Ordinary 67p shares 37,521,013 37,521,013
in issue
Number of Redeemable 1p shares 28,871,255 28,871,255
in issue
Net asset value per share - 1108.7p 919.2p
ordinary and redeemable
CASHFLOW STATEMENT (unaudited)
Year ended Year ended
30 June 2008 30 June 2007
£'000 £'000
Cash flow from operating activities
Investment income received 4,814 7,107
Deposit and other interest received 210 12
Investment management fees paid (9,198) (6,372)
Secretarial fees paid (102) (109)
Other cash payments (2,022) (2,169)
Net cash (outflow) from operating (6,298) (1,531)
activities
Returns on investments and servicing
of finance
Revolving credit facility and (471) (571)
overdraft interest paid
Loan commitment and arrangement fees (552) (1,071)
paid
Redeemable share commitment fees paid (654) (477)
Net cash (outflow) from returns on (1,677) (2,119)
investment and servicing of finance
Taxation
Net taxation refund/(charge) 498 (1,230)
Net cash inflow/(outflow) from 498 (1,230)
taxation
Capital expenditure and financial
investment
Purchases of investments (280,170) (224,262)
Purchases of government securities (23,455) (251,677)
Disposals of investments 136,172 149,337
Disposals of government securities 94,152 243,503
Realised currency (losses) (94) (152)
Net cash (outflow) from capital (73,395) (83,251)
expenditure and financial investment
Net cash (outflow) before financing (80,872) (88,131)
Financing
Proceeds from issue of Ordinary - 100,003
shares
Written back/costs of Ordinary shares 43 (968)
issue
Costs to redeem Redeemable shares - (36)
Drawdown of loan 69,966 10,211
Repayment of loan - (10,211)
Realised currency (losses)/gains on (594) 75
repayment of revolving credit
facility
Net cash inflow/(outflow) from 69,415 99,074
financing
(Decrease)/increase in cash (11,457) 10,943
NOTE 1 - INCOME FROM INVESTMENTS
As at 30 As at 30
June 2008 June 2007
£'000 £'000
Income from investments
Unfranked dividends 3,037 6,312
Interest from US fixed interest - 37
investments
Interest from UK fixed interest 1,540 763
investments
Interest from European fixed interest - 55
investments
4,577 7,167
Other income
Deposit interest 210 10
Exchange differences on income - 2
210 12
Total income 4,787 7,179
Total income comprises:
Dividends 3,037 6,312
Interest 1,750 865
Exchange differences on income - 2
4,787 7,179
Analysis of income from investments
Listed overseas - 92
Listed UK 1,540 763
Unlisted 3,037 6,312
4,577 7,167
These accounts have been prepared using the most recently published accounting
standards and policies.
All investments held by the Company are classified as 'fair value through
profit or loss'. For investments actively traded in organised financial
markets, fair value is generally determined by reference to Stock Exchange
quoted market bid prices at the close of business on the balance sheet date.
For investments that are not actively traded on organised financial markets,
fair value is determined using reliable valuation techniques as described in
detail in the Company's last Annual Report.
The Directors do not recommend a dividend for the year ended 30 June 2008
(2007: Nil).
The above financial information does not constitute statutory accounts as
defined in Section 240 of the Companies Act 1985. The comparative financial
information for the year ended 30 June 2007 is taken from the full accounts,
which have been delivered to the Registrar of Companies and contained an
unqualified audit report and did not include a reference to any matters to
which the auditors drew attention by way of emphasis without qualifying the
report and did not contain statements under S.237(2) or (3) of the Companies
Act 1985. Statutory financial statements for the year ended 30 June 2008 have
not yet been approved, audited or filed and will be delivered to the Registrar
of Companies following the Annual General Meeting.
For further information please contact:
Rhoddy Swire, Director of Pantheon International Participations PLC - 020 7484
6200
Alastair Bruce, Pantheon Ventures Limited - 020 7484 6200
Andrew Lebus, Pantheon Ventures Limited - 020 7484 6200
Email: contactus@pipplc.com
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