Final Results
PANTHEON INTERNATIONAL PARTICIPATIONS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
CHAIRMAN'S STATEMENT
The year to 30 June 2002 has been marked by uncertainty and diminishing
investor confidence in stock markets worldwide. Against this background, the
Company saw a 19.1% decline in its Net Asset Value (NAV) per share. This
compares with the 14.8% decline in the FTSE All-Share Total Return index over
the same period. At 30 June the Company's share price was 486.5p, a reduction
of 15.2%, while the price of Participating Loan Notes (PLNs) decreased by 11.0%
to 525.0p. This price performance, while in proportion to the overall market
decline during the year, resulted in a narrowing of the discount to NAV on the
ordinary shares at the year end to 10.2% from 14.2% at 30 June 2001. As has
been the norm, no dividend or PLN interest payment has been recommended for the
year, in line with the Company's objective of maximising capital growth for
shareholders over the long term.
Although the Company's performance during the 12 months to 30 June 2002 has
fallen short of the FTSE All-Share Total Return index, performance over the
longer term remains impressive. NAV per share has increased by 64.9% over five
years compared with growth of 14.75% in the FTSE All-Share Total Return index,
while over three years, the Company has enjoyed growth of 33.5% in NAV per
share as against a fall of 19.2% in the FTSE All- Share Total Return index.
The Company is characterised by the broad diversification of its portfolio of
underlying investments: geographically, sectorally, by size and by vintage. As
a result, the risk of concentrated exposure to any one phase of a cycle within
particular markets is mitigated. This structural diversification, allied to
discriminating selection of fund managers, underpins the Company's long-term
performance. Although in the year to 30 June 2002 the private equity portfolio
showed a decline from its opening value, the Company's returns from private
equity investment since inception are in excess of 24% per annum.
Since the Company embarked on its strategic new fund programme in May 2000, the
proportion of less mature funds in the portfolio has increased. This factor, in
conjunction with the much reduced levels of merger and acquisition activity and
flotations seen since 2000, and the inherently cyclical nature of the private
equity market, resulted in a decline in the number of realisations in
comparison with the immediate past. This is in line with the expectations I
expressed in last year's Statement. Realisations from the portfolio totalled £
33.1 million during the year.
The rate of new private equity fund raising worldwide has declined
significantly during the year. The Company has continued to take a cautious and
highly selective approach to investment. In total, the Company made commitments
of £32.5 million to 12 new funds under its strategic investment programme in
the year to 30 June 2002.
By contrast, and as anticipated by the Board, the flow of potential
opportunities for secondary investments has continued to increase. This
increase is a reflection both of the rapid expansion of the global private
equity fund universe between 1997 and 2000 and of current market conditions,
which have forced a number of investors to reconsider their exposure to private
equity. As in the primary market, the Company has maintained a cautious and
highly selective approach to secondary acquisitions, completing the purchase of
16 secondary interests totalling £20.4 million including unfunded commitments
during the course of the year.
I am pleased to report that, following the year end, the Board announced that
it has signed agreements for the purchase of two portfolios of secondary
interests. These comprise a total of 37 fund interests, predominantly in US and
European buyout funds. Completion of the purchase of each interest is
conditional on obtaining transfer consents. The total purchase price for these
interests is in the region of £60 million (representing a discount to net asset
value), and is subject to adjustment for recent cash flows between the fund and
the vendors. The Company is purchasing these portfolios in conjunction with the
Pantheon Global Secondary Fund in accordance with the co-investment agreement
that exists between the two vehicles.
The Company's investment activity during the year resulted in the addition of
26 fund holdings, further broadening the spread of the underlying portfolio,
which at the year end comprised interests in more than 2,700 individual
companies worldwide across the full spectrum of industrial and commercial
sectors. The Company's exposure to quoted companies, including those contained
within underlying private equity funds, constitutes less than 10% of the
portfolio by value.
The Board, based on its previous experience, considers that it is important for
the Company, as a long-term investor, to maintain a consistent investment
strategy over time. We are particularly pleased to have significantly increased
the new fund programme so that the managers that have been selected can exploit
the current uncertainties in the market.
MARKET PROSPECTS
Private equity fund raisings have fluctuated over recent months and, in some
markets, private equity investment has continued to slow in pace during 2002.
This deceleration is a continuation of the decline that commenced two years ago
after the NASDAQ collapse, and has since been exacerbated by the economic
slowdown in the USA and its global impact. However, in the USA and in Europe,
these developments have represented a return to long-term trends for those
markets after the high levels of fund raising and the accelerated pace of
investment seen in the recent past. Furthermore, there are indications that
entry pricing for new investments has declined. While this is encouraging for
new investment prospects, the Board expects investment activity to remain
moderate in the short term as fund managers wait for prices to fall further.
The Board believes that the Company's strategy of top-tier new fund selection
and the judicious purchase of secondaries provides grounds for believing that
it can continue to outperform the FTSE All-Share index over the long term, as
it has over its 15-year life to date.
STRUCTURE AND FINANCING
The Company has continued to benefit from its flexible and cash-efficient
financing structure. During the course of the year, access to substantial
additional standby financing was secured through an arrangement which further
underlines the benefits of its capital structure. Two UK institutions and their
clients have committed to subscribe for PLNs up to a total value of £100
million. The Company may call for these commitments to be subscribed at any
time during the lifetime of the subscription agreements, of which one is set at
five years and the others are open-ended, lasting for a minimum of three years.
The Company, which intends to call on these subscription commitments only when
other sources of funding have been used, will pay the investors a fee of 0.5%
per annum on undrawn commitments.
In addition, the Company increased the size of its loan facilities with The
Royal Bank of Scotland PLC from £32 million to £70 million during the year.
These facilities are intended to enable the Company to maximise the proportion
of its assets invested in private equity while retaining the capacity to
finance secondary purchases or meet calls on outstanding commitments as they
arise.
The Company issued £22.7 million in new PLNs in August 2002 as part of the
funding for the purchases of the two secondary portfolios agreed after the year
end and referred to earlier as well as issuing a total of £34.9 million in new
PLNs in the year. The ability to issue PLNs from time to time continues to
provide significant advantages for the Company, enabling it to pursue both its
strategic primary fund investment programme and its opportunistic approach to
secondary acquisitions while maintaining cash efficiency.
ANNUAL GENERAL MEETING AND PRESENTATION
The Company will hold its Annual General Meeting at 12 noon on 21 November 2002
in the Manager's offices at Norfolk House. As in previous years, the Board has
arranged a presentation to explain the progress of the Company in more detail.
The Directors and Managers look forward to the opportunity of meeting
shareholders informally after the presentation.
L. G. Stopford Sackville
Chairman
27 September 2002
STATEMENT OF TOTAL RETURN
(*incorporating the revenue account)
1 July 2001 to 1 July 2000 to
30 June 2002 30 June 2001
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on - (38,897) (38,897) - 25,803 25,803
investments
Currency (losses)/gains - (304) (304) - 391 391
Income (Note) 785 - 785 1,535 - 1,535
Investment management (3,231) - (3,231) (2,930) - (2,930)
fee
Other expenses (1,484) (166) (1,650) (771) (946) (1,717)
Capital reorganisation - - - - 47 47
costs
Return on ordinary (3,930) (39,367) (43,297) (2,166) 25,295 23,129
activities before
financing costs and tax
Interest payable - - - (121) - (121)
Revaluation of - 10,922 10,922 - (7,049) (7,049)
participating loan notes
**
Return on ordinary (3,930) (28,445) (32,375) (2,287) 18,246 15,959
activities before tax
Tax on ordinary - (41) (41) (200) (267) (467)
activities
Return on ordinary (3,930) (28,486) (32,416) (2,487) 17,979 15,492
activities after tax for
the financial year
transferred (from)/to
reserves
1 July 2001 to 1 July 2000 to
30 June 2002 30 June 2001
pence pence pence pence pence pence
Return per ordinary
share
- basic (19.52) (141.52) (161.04) (13.89) 100.40 86.51
- diluted ††††89.82 77.40
* The revenue column of this statement is the revenue account of the Company.
** The revaluation of the Participating Loan Notes during the year comprises a
reduction in the value of the PLN's of £15,416,000 relating to the movement in
the value of the Company's assets, offset by the effect of the final warrant
exercise which has led to a reduction in this movement of £4,494,000. (2001:
Increase in the value of the Participating Loan Notes of £7,497,000, offset by
the effect of the warrant exercise on 31 October 2000, leading to a reduction
in the movement of £448,000).
†In accordance with Financial Reporting Standard No.14 Earnings per Share,
returns per share which are not dilutive have not been shown.
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued in the year.
Note: Income for the year ended 30 June 2002 was made up of dividends and
interest received from shares and securities of £634,000 (2001: £1,364,000),
interest of £151,000 (2001: £169,000) and other income of nil (2001: £2,000).
BALANCE SHEET
As at 30 As at 30
June 2002 June 2001
£'000 £'000
Fixed assets
Investments 194,619 202,394
Investments in subsidiary undertaking 1 1
194,620 202,395
Current assets
Debtors 1,663 2,648
Cash at bank 1,153 1,663
2,816 4,311
Creditors - amounts falling due within one 1,081 583
year
Net current assets 1,735 3,728
Total assets less current liabilities 196,355 206,123
Creditors - amounts falling due after more
than one year
79,406 65,441
Capital and reserves
Called-up share capital 14,467 12,082
Share premium account 6,785 487
Capital reserve - realised 90,791 70,293
Capital reserve - unrealised 9,111 58,095
Revenue reserve (4,205) (275)
Total equity shareholders' funds 116,949 140,682
Amounts attributable to shareholders and 196,355 206,123
participating loan note holders
As at As at
30 June 2002 30 June 2001
Number of ordinary 67p 21,592,356 18,031,567
shares in issue
Number of warrants in - 4,811,912
issue
Number of participating 14,910,981 9,931,032
loan notes (PLNs) in
issue
Net asset value per
share:
- basic 541.6p 780.2p
- fully diluted 541.6p* 669.1p
Adjusted redemption 532.5p 659.0p
value of participating
loan notes
* As a result of the final warrant exercise on 19 November 2001, all
outstanding warrants were converted into ordinary shares and PLNs. At 30 June
2002 there was no dilutive effect on the Company's basic net asset value per
ordinary share.
CASHFLOW STATEMENT
Year ended Year ended
30 June 2002 30 June 2001
£'000 £'000
Cash flow from operating activities
Investment income received 632 1,405
Deposit interest received 151 173
Investment management fees paid (2,674) (3,030)
Secretarial fees paid (94) (99)
Other cash payments (1,577) (3,819)
Net cash outflow from operating (3,562) (5,370)
activities
Returns on investments and servicing of
finance
PLN interest paid - (245)
Net cash outflow from returns on - (245)
investment and servicing of finance
Taxation
Tax recovered 894 44
Capital expenditure and financial
investment
Purchases of investments (48,069) (74,538)
Purchases of government securities (106,057) (120,318)
Disposals of investments 34,204 72,595
Disposals of government securities 88,801 122,836
Realised currency (losses)/gains (126) 109
Net cash (outflow)/inflow from capital
expenditure
and financial investment (31,247) 684
Equity dividends paid - (354)
Net cash outflow before financing (33,915) (5,241)
Financing
Proceeds of warrant conversion 12,029 1,067
Proceeds from issue of PLNs 31,760 -
Payments to redeem PLNs (10,000) -
Costs of issue of PLNs (218) (91)
Net cash inflow from financing 33,571 976
Decrease in cash (344) (4,265)
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 2001 is taken from the full accounts,
which have been delivered to the Registrar of Companies and contained an
unqualified audit 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 2002 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
Email: contactus@pipplc.com
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