Final Results
PANTHEON INTERNATIONAL PARTICIPATIONS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
CHAIRMAN'S STATEMENT
Performance
Pantheon International Participations PLC's (PIP's) performance has been
reassuringly solid during the year to 30th June 2003. The Net Asset Value of
the Company increased by 1.0% to 546.8p per share, compared to a fall in the
FTSE All- Share Total Return index of 9.7% over the same period. This
performance has been achieved against a background of geopolitical and economic
uncertainty and a 7.5% decline in the US Dollar against Sterling over the year,
which affected some three-fifths of underlying assets (denominated in US
dollars).
General stock market trends were more closely reflected in PIP's share price,
down 8.1% over the year to 447.0p at 30th June, while the price of
participating loan notes (PLNs) declined 11.9% to 462.5p. As is usual, and in
line with the Company's aim of maximising capital growth over the long term, no
dividend or PLN interest payment has been recommended for the year.
PIP's performance over the longer term remains impressive. Over ten years, it
has enjoyed growth of 130.4% in NAV per share, while NAV growth over five years
stands at 34.8%. In comparison, over ten and five years respectively, the FTSE
ALL-Share Total Return index saw a 90.7% increase and a fall of 17.85%.
PIP's average returns from private equity investment since inception stood at
22.6% per annum at the year end.
Investment Activity
Secondary investment activity
Market conditions notwithstanding, PIP has enjoyed an active year, committing a
total of £119.1 million to new investments. The bulk of this total, £88.6
million including unfunded commitments, was for the purchase of 58 secondary
interests. This increase in the pace of secondary investment reflects more
realistic pricing expectations and a significant increase in the range and
quality of secondary investment opportunities available.
Almost 59% (£69.7 million) of PIP's new commitments during the year have
already been called, resulting in substantial asset growth; indeed,
approximately 30% of the Company's current investment assets have been acquired
during the past year at what I believe to be a favourable point in the
valuation cycle.
Primary investment activity
The market for primary private equity investment was less consistent as a
result both of a more uncertain outlook for earnings for most of 2002 and the
anxiety caused by the prospect of Middle East conflict in the first quarter of
2003. Against this background, PIP has maintained a moderate pace of primary
investment through its strategic new funds programme, committing a total of £
30.5 million to 10 funds for investment in the United States and in Western
European markets. These included a number of limited access funds, testifying
to the Company's ability, via Pantheon, the Manager, to gain access to highly
sought-after opportunities. As these new funds are invested, they will continue
to add to the diversity of the underlying portfolio which, at the year end,
included interests in more than 3,000 individual companies worldwide operating
across the full spectrum of industrial and commercial sectors.
Realisations
The lack of earnings visibility which suppressed investment activity has also
contributed to a difficult exit environment for private equity managers. The
public markets have effectively remained closed to new issues of venture-backed
companies while corporations, compelled by competitive pressures and tight
finances to refocus on core activities, are currently devoting more attention
to divestment than acquisitions.
Distributions
Distributions during the year totalled £40.4 million, a strong performance,
which testifies both to the resilience of the portfolio and the motivation of
the Company's underlying managers to achieve liquidity for their investors even
in a difficult environment. More than 60% of distributions were generated by
assets acquired in secondary purchases.
Structure and Financing
PIP has continued to benefit from its flexible and cash-efficient financing
structure. The Board uses borrowing facilities to manage cash flows more
flexibly. At the year end, the Company's net assets of £221 million were
represented by long-term capital in the form of £118.1 million of ordinary
shareholders' funds and £102.9 million of PLNs. Of the £70 million loan
facilities available, the Company had drawn £20.4 million at the year end.
Although PLNs are carried on the Company's balance sheet as a debt instrument,
the Board is mindful that the redemption value of PLNs moves in line with the
value of ordinary shares and that the timing of redemption is at the discretion
of the Company. Accordingly, the Board regards PLNs as equity-like capital and
does not consider that they are gearing in the conventional sense. Given that
PIP can capitalise on an active secondary market to grow its assets, the Board
is continuously exploring opportunities to raise capital to finance future
purchases. PIP raised £22.7 million in August 2002 in a PLN issue used as part
of the funding for two major secondary purchases. This year, the Company will
embark on a further issue of PLNs and, if appropriate, of ordinary shares. The
PLN issue, which will be spread over several tranches, is structured to
minimise cash inefficiency while enabling PIP both to fulfil its obligations to
uncalled funds and to take advantage of the opportunistic market for secondary
interests.
The Board
Since my Interim statement, we have welcomed two new Directors to the PIP
Board, Tom Bartlam and Sandy Thomson, both of whom have abundant investment
experience that will be a valuable addition to the existing strengths of the
Board. Both new Directors will be seeking appointment at the AGM. Having
reached the age of 70, I will be retiring from the Board at the AGM and I am
delighted to say that Ewen Macpherson, who has been a member of your Board
since 1998, has agreed to become the Company's Chairman.
Market Prospects
I am optimistic about the outlook for the coming year. Prospects for growth in
the US economy are improving, although a degree of global uncertainty remains
and the process of market adjustment is not yet complete. Our experience is
that private equity managers create their best value during difficult periods
when, as at present, reduced valuations and diminished competition combine to
produce an attractive environment for new investments.
A rediscovered aversion to risk on the part of investors is again prompting a
`flight to quality' in the private equity fund market. As a result, demand for
funds from management teams of proven ability is likely to outstrip supply
while levels of fund raising remain modest in comparison with recent years.
Access could therefore once again become a hurdle for investors. PIP's Manager,
Pantheon, has an established position and reputation that ensure it is well
placed to access the top quality funds.
Expectations that investment holding periods would continue to lengthen have
proved correct, and there are few indications of any immediate improvement in
the environment for realisations. Such conditions demand more conservative
balance sheet structures and force private equity managers to focus closely on
the operations and competitive position of their investee businesses. There has
been a return to the practice of structuring investments and funding companies
without the expectation of short-term exits. In parallel, mechanisms such as
recapitalisations and secondary buyouts are playing an increasingly important
part in the private equity life cycle.
Since early 2000, PIP has deployed more than £175 million in the secondary
market. This addition of relatively mature assets is expected to accelerate
distributions to the Company in the medium term. The Manager believes that
opportunities in the secondary market will be even greater in coming years.
PIP's co-investment agreements with Pantheon's closed-end funds will enable the
Company to participate across the full secondary market spectrum.
PIP is unique among private equity investment trusts in having global access to
top quality private equity funds through both primary and secondary fund
programmes. I am optimistic that PIP will have the opportunity to grow its
assets significantly in the coming years as secondary transactions become an
increasingly established feature of the private equity market. Your Board is
fully committed to growth and to raising PIP's market profile amongst stock
market investors. Using appropriate financing sources, PIP expects to be able
to take advantage of the significant increase in investment opportunities
expected in the coming year.
Annual General Meeting and Presentation
The Annual General Meeting of the Company will take place at 12 noon on 20th
November 2003 at the Manager's offices in Norfolk House. As in previous years,
the Board has arranged for the Manager to give a presentation to explain the
progress of the Company in more detail. The Directors and Managers look forward
to meeting shareholders informally after the presentation.
L. G. Stopford Sackville
Chairman
14 October 2003
STATEMENT OF TOTAL RETURN (unaudited)
(*incorporating the revenue account)
1 July 2002 to 1 July 2001 to
30 June 2003 30 June 2002
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on - 6,758 6,758 - (38,897) (38,897)
investments
Currency gains/(losses) - 770 770 - (304) (304)
Income (Note) 512 - 512 785 - 785
Investment management (3,608) - (3,608) (3,231) - (3,231)
fee
Other expenses (641) (264) (905) (1,111) (166) (1,277)
Return on ordinary (3,737) 7,264 3,527 (3,557) (39,367) (42,924)
activities before
financing costs and tax
Interest payable and (993) - (993) (373) - (373)
similar charges
Revaluation of - (769) (769) - 10,922 10,922
participating loan notes
**
Return on ordinary (4,730) 6,495 1,765 (3,930) (28,445) (32,375)
activities before tax
Tax on ordinary - (146) (146) - (41) (41)
activities
Return on ordinary (4,730) 6,349 1,619 (3,930) (28,486) (32,416)
activities after tax for
the financial year
transferred (from)/to
reserves
1 July 2002 to 1 July 2001 to
30 June 2003 30 June 2002
pence pence pence pence pence pence
Return per ordinary
share
- basic and diluted †(21.91) 29.40 7.49 (19.52) (141.52) (161.04)
* The revenue column of this statement is the revenue account of the Company.
** The revaluation of the Participating Loan Notes during the previous year
comprised a reduction in the value of the PLNs 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 led to a reduction in this movement of £4,494,000.
†In accordance with Financial Reporting Standard No.14 Earnings per Share,
diluted returns per share are not shown unless they are less than the basic
return per share.
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued in the year.
These accounts have been prepared using the accounting standards and policies
adopted at the previous year end.
Note: Income for the year ended 30 June 2003 was made up of dividends and
interest received from shares and securities of £463,000 (2002: £634,000), and
other interest of £49,000 (2002: £151,000).
BALANCE SHEET (unaudited)
As at 30 As at 30
June 2003 June 2002
£'000 £'000
Fixed assets
Investments 240,992 194,619
Investment in subsidiary undertaking 1 1
240,993 194,620
Current assets
Debtors 1,240 1,663
Cash at bank 416 1,153
1,656 2,816
Creditors - amounts falling due within one 21,705 1,081
year
Net current (liabilities)/assets (20,049) 1,735
Total assets less current liabilities 220,944 196,355
Creditors - amounts falling due after more
than one year
Participating Loan Notes 102,883 79,406
Capital and reserves
Called-up share capital 14,467 14,467
Share premium account 6,278 6,785
Capital reserve - realised 101,037 90,791
Capital reserve - unrealised 5,214 9,111
Revenue reserve (8,935) (4,205)
Total equity shareholders' funds 118,061 116,949
Amounts attributable to shareholders and 220,944 196,355
participating loan note holders
As at As at
30 June 2003 30 June
2002
Number of ordinary 67p 21,592,356 21,592,356
shares in issue
Number of participating 19,175,179 14,910,981
loan notes (PLNs) in
issue
Net asset value per
share:
- basic and diluted * 546.8p 541.6p
Adjusted redemption 536.5p 532.5p
value of participating
loan notes
* At 30 June 2003 and 30 June 2002 there was no dilutive effect on the
Company's basic NAV per share.
CASHFLOW STATEMENT (unaudited)
Year ended Year ended
30 June 2003 30 June 2002
£'000 £'000
Cash flow from operating activities
Investment income received 462 632
Deposit interest received 61 151
Investment management fees paid (3,470) (2,674)
Secretarial fees paid (120) (94)
Other cash payments (936) (1,331)
Net cash outflow from operating (4,003) (3,316)
activities
Returns on investments and servicing of
finance
Revolving credit facility and overdraft (218) (28)
interest paid
Loan commitment and arrangement fees paid (202) (218)
PLN commitment fees paid (525) -
Net cash outflow from returns on (945) (246)
investment and servicing of finance
Taxation
Withholding tax suffered on limited (146) -
partnership distributions
Tax recovered 486 894
Net cash inflow from taxation 340 894
Capital expenditure and financial
investment
Purchases of investments (95,889) (48,069)
Purchases of government securities (27,340) (106,057)
Disposals of investments 40,063 34,204
Disposals of government securities 43,705 88,801
Realised currency losses (51) (126)
Net cash outflow from capital expenditure (39,512) (31,247)
and financial investment
Net cash outflow before financing (44,120) (33,915)
Financing
Proceeds of warrant conversion - 12,029
Proceeds from issue of PLNs 22,708 31,760
Payments to redeem PLNs - (10,000)
Costs of issue of PLNs (507) (218)
Drawdown of bank revolving credit 20,798 -
facility
Realised currency gains on repayment of 51 -
revolving credit facility
Net cash inflow from financing 43,050 33,571
Decrease in cash (1,070) (344)
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 2002 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 2003 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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