1st Quarter Results

RNS Number : 2345G
F&C Private Equity Trust PLC
25 May 2017
 

 

To: Stock Exchange

For immediate release:


25 May 2017

 

F&C Private Equity Trust plc

Quarterly results for the three months to 31 March 2017 (unaudited)
 

·      Share price total return for the three months of 8.0 per cent for the Ordinary Shares.

·      New co-investments totalling £15 million

·      Positive outlook for remainder of 2017

 

 

 

Manager's Review

 

Introduction

At 31 March 2017 the net asset value ('NAV') of the Company was £259.5 million, giving a fully diluted NAV per ordinary share of 350.99p, virtually unchanged over the quarter. At that time the Company had net cash of £32.0 million. Outstanding undrawn commitments stood at £120.4 million at the end of the period.  Of this £17.2 million is to funds where the investment period has expired and hence only a small proportion of this amount is expected to be drawn.

 

 

New Investments

During the quarter we made two new fund commitments and after the quarter end we made a further two fund commitments. The total of drawdowns and co-investments was £10.7 million for the quarter.

 

After an extended review of US mid-market opportunities we found some fresh investments to add to our modest, but enduring exposure to this important market. $6.0 million was committed to US based manager Graycliff for its fund III. Graycliff, which is a spin out of HSBC's private equity business, specialises in US private companies with enterprise values between $20 million and $100 million. After the quarter end, we committed $4.0 million to Stellex Capital Partners, a primarily US focused fund investing into mid-market distressed and special opportunities. The management team previously worked together for many years within the Carlyle Group.

 

In Europe we have reinforced our exposure to the Nordic region by committing €6.0 million to Finnish fund Vaaka III. This is the second time we have invested with Vaaka into the distinctive, but promising, Finnish private equity market. After the quarter end, we committed €6.0 million to Paris-based leading mid-market specialist Chequers for their fund XVII. We have been an investor in each Chequers fund since its first independent fund in 2002. It has one of the largest and most experienced investment teams in France and their performance record justifies continued support.

 

We have added to the co-investment portfolio in accord with our objective of gradually raising the proportion of the portfolio in this type of direct investment. We invested $5.0 million (£4 million) for 6% of Sigma Electric Manufacturing, a North Carolina based leading manufacturer of metal castings, precision machined components and sub-assemblies for the US low voltage electrical products market. The company's distribution is largely US and its factories are in India. The investment is led by US mid-market managers Argand. The investment has started well with trading comfortably ahead of budget.

 

After the quarter end, two further co-investments have been added. We have invested £6.2 million for 62.7% of Weird Fish, a UK premium life-style clothing brand. The investment is led by Total Capital Partners.  The Weird Fish brand is positioned in the growing active lifestyle segment, serving both men and women and focusing on the 'stable and affluent' 35 - 55 age demographic. Previously owned by Piper Private Equity through its Fund IV, in which we are an investor, the company is well positioned for growth. Also after the quarter end, we invested £5.0 million for 15.9% of TWMA an offshore oil services company involved in drilling waste management solutions. The core of TWMA's business is using a thermomechanical cylindrical mill to process drill cuttings, separating the oil, water and solid powder elements such that the water and powder can be safely discharged below the waterline and the oil can be reused. The company, which is based in Aberdeen, operates internationally both offshore and onshore and is focused on further geographic expansion. The investment is led by Buckthorn, who are specialists in the energy sector. 

 

The funds in our portfolio have been active with a total of £6.7 million drawn for investment. This went into around 15 companies across a range of sectors and geographies. The larger drawdowns include a typically diverse range of companies. Agilitas 2015 Private Equity Fund called £0.7 million for Exemplar, a north of England based, high acuity nursing care provider. Lyceum Capital III called £0.5 million for Timico, a provider of IT hosting, network connectivity and mobile solutions with a particular focus on medium sized companies. Piper Private Equity VI called £0.5 million for Flat Iron Steak Ltd, a restaurant chain. In Germany Capvis IV called £0.3 million for Fels, a manufacturer of cold form metal processing machines used in the automotive sector. In Italy Capvis IV called £0.3 million for Gotha, a developer and manufacturer of cosmetics products. In the Nordic region Summa I called £0.4 million for its first two investments; e-Gain, a climate controlled heating systems for buildings specialist and Sortera, a building waste collection and sorting provider of containers and building bags.

 

Realisations

The total realisations for the quarter amounted to £20.0 million including £0.3 million of income. The largest exit was £7.6 million from the sale of Park Holidays, which completed in February. This Caledonia Investments-led co-investment was highly successful with the company increasing profits by over 50% during the holding period of less than three years. The caravan park holiday sector has proved very robust benefitting from a trend towards 'staycations' and from a general upgrade in the range of facilities available. Including previously received distributions this investment delivered an excellent 2.8x cost and an IRR of 48%. Another of our co-investments, Ticketscript, the cloud based event ticketing Saas company, had a partial exit when it was sold to larger competitor Eventbrite. £0.5 million has been returned on the merger at a valuation of 2.0x cost. We now have Eventbrite stock and there is excellent scope for a further attractive return from here.

 

There was a healthy flow of exits from funds as well. Stirling Square Capital Partners II exited Netherlands-based waste container company ESE through its sale to UK listed company RPC. Our proceeds were £3.3 million, representing 2.8x cost and an IRR of 17%. In France, Chequers Capital XV sold Accelya, provider of IT services to the air transport industry, to strategic buyer Mercator. Our proceeds of the final stage of the sale following a recapitalisation in 2014 are £1.5 million. Altogether the investment returned 11.7x cost and an IRR of 36%. Chequers Capital XVI exited hairdressing chain Provalliance through its sale to the founding Provost family. Proceeds were £0.5 million representing 2.1x cost and an IRR of 19%. Also in France, Ciclad 4 sold topographical software company Geomedia to a management buy-in, returning £0.4 million, representing a return of 3.4x cost and an IRR of 17%. In Italy Progressio II sold Duplomatic, maker of hydraulic valves, pumps and oil pressure activated systems returning £0.8 million representing 2.3x and a 25% IRR. Further afield, in the US, Camden Partners III exited schools assessment provider Questar through its sale to Educational Testing Service. These and several other smaller realisations made for a strong quarter for realisations.

 

Valuation Changes

There were a limited number of significant valuation changes over the quarter. Some of the larger exits have already been incorporated in the previous valuation. Our co-investment in funeral plans business Avalon, is trading very well and has been uplifted by £0.8 million. The new co-investment in Sigma has also been uplifted in line with the manager's valuation. The investment had been held by Argand for six months before the syndication to us and during that period it has made good fundamental progress, sufficient to justify an uplift of £0.8 million. The collection of Italian funds acquired as a secondary has performed well with the exit of Duplomatic noted above, but there were also trading related uplifts for Italian travel business Alpitour, which is held in ILP III and chemicals company Industrie Chimiche Forestali, which is held in Progressio II. Collectively these contributed to an uplift of £0.7 million. Capvis III is uplifted by £0.4 million, reflecting the share price performance of vacuum valves company VAT Group where the fund continues to hold some shares following its recent listing.  Inflexion 2010 is up by £0.3 million due to positive trading by a number of holdings. Camden Partners IV benefited from a recent exit of Communication Education Centres, a prisoners' education service, and is uplifted by £0.3 million.

 

There have been a few downward valuations. Amongst these is a downgrade of £0.2 million for Hutton Collins III, in large part reflecting continuing challenges at Byron Burgers. Our co-investment in Norwegian software company Safran, is down by £0.1 million due to pressure on consulting revenues, many of which are oil and oil services related.

 

 

Financing

The Company ends the first quarter in a strong financial position. Cash balances stand at £57.2 million and after adjusting for the term loan of £25.2 million, the net cash position is £32.0 million. This is equivalent to net cash of 14.1%. The total borrowing facility is £70 million, meaning that the Company has substantial immediately available resources.  Despite the current net cash position, it remains the Company's policy to be fully invested with a modestly geared position. The Company's broad portfolio makes this sustainable over the long term and our expectation is that returns from our investments will comfortably exceed the costs of borrowing thus enhancing shareholders' returns.

 

Outlook

The start of 2017 has seen healthy levels of activity in both new investments and realisations in the Company's portfolio and across the wider market. We expect to add to our stock of co-investments steadily over the year and to invest selectively in both secondary and primary funds. Over recent months the private equity sector has displayed considerable resilience against an economic and political background which has proved unusually unpredictable. Despite this, confidence is high amongst private equity investors and together with company management teams they routinely plan for a range of outcomes which may affect their respective industries and businesses in different ways. With a number of important elections in Europe taking place during 2017 and with the Brexit negotiations now in train, such planning, both long term and contingent is as important as ever. In the private equity sector the close relationship between investors and management and the inherent flexibility and freedom of action which this brings means that companies can evolve and adapt in ways that would challenge public companies. The indications from our investment partners are that they are facing the remainder of 2017 in a positive frame of mind and this in turn gives us confidence that the Company will make further good progress for shareholders.

 

 

Hamish Mair

Investment Manager

F&C Investment Business Limited

 

 

 

 

 

 

 

 

 

 

 

F&C PRIVATE EQUITY TRUST PLC

 

Statement of Comprehensive Income for the

three months ended 31 March 2017 (unaudited)

 

 




Revenue

£'000

Capital

£'000

Total

£'000

 

Income




Gains on investments held at fair value

-

2,556

2,556

Exchange losses

-

(84)

(84)

Investment income

154

-

154

Other income

11

-

11

Total income

165

2,472

2,637





Expenditure




Investment management fee - basic fee

(158)

(475)

(633)

Investment management fee - performance fee

-

(1,390)

(1,390)

Other expenses

(191)

-

(191)

Total expenditure

(349)

(1,865)

(2,214)





(Loss)/profit before finance costs and taxation

(184)

607

423





Finance costs

(104)

(312)

(416)





(Loss)/profit before taxation

(288)

295

7





Taxation

-

-

-





(Loss)/profit for period/total comprehensive income

(288)

295

7





Return per Ordinary Share - Basic

(0.39)p

0.40p

0.01p





Return per Ordinary Share - Fully diluted

(0.39)p

0.40p

0.01p





 

 

 

 

 

 

 

 

 

 

F&C PRIVATE EQUITY TRUST PLC

 

Statement of Comprehensive Income for the

three months ended 31 March 2016 (unaudited)

 

 

 


Revenue

£'000

Capital

£'000

Total

£'000

 

Income




Gains on investments held at fair value

-

8,933

8,933

Exchange losses

-

(1,749)

(1,749)

Investment income

138

-

138

Other income

17

-

17

Total income

155

7,184

7,339





Expenditure




Investment management fee - basic fee

(140)

(419)

(559)

Investment management fee - performance fee

-

(1,030)

(1,030)

Other expenses

(170)

-

(170)

Total expenditure

(310)

(1,449)

(1,759)





(Loss)/profit before finance costs and taxation

(155)

5,735

5,580





Finance costs

(104)

(313)

(417)





(Loss)/profit before taxation

(259)

5,422

5,163





Taxation

-

-

-





(Loss)/profit for period/total comprehensive income

(259)

5,422

5,163





Return per Ordinary Share - Basic

(0.36)p

7.52p

7.16p





Return per Ordinary Share - Fully diluted

(0.35)p

7.33p

6.98p





 

 

 



F&C PRIVATE EQUITY TRUST PLC

 

Statement of Comprehensive Income for the

year ended 31 December 2016 (audited)

 

 




Revenue

£'000

Capital

£'000

Total

£'000

 

Income




Gains on investments held at fair value

-

58,538

58,538

Exchange losses

-

(3,584)

(3,584)

Investment income

1,386

-

1,386

Other income

54

-

54

Total income

1,440

54,954

56,394





Expenditure




Investment management fee - basic fee

(582)

(1,745)

(2,327)

Investment management fee - performance fee

-

(2,024)

(2,024)

Other expenses

(739)

-

(739)

Total expenditure

(1,321)

(3,769)

(5,090)





Profit before finance costs and taxation

119

51,185

51,304





Finance costs

(419)

(1,257)

(1,676)





(Loss)/profit before taxation

(300)

49,928

49,628





Taxation

-

-

-





(Loss)/profit for year/total comprehensive income

(300)

49,928

49,628





Return per Ordinary Share - Basic

(0.41)p

68.16p

67.75p





Return per Ordinary Share - Fully diluted

(0.41)p

67.53p

67.12p





 

 



F&C PRIVATE EQUITY TRUST PLC

 

Balance Sheet

 

 

 


As at 31 March 2017

As at 31 March 2016

As at 31 December 2016


(unaudited)

(unaudited)

(audited)


£'000

£'000

 £'000

Non-current assets




Investments at fair value through profit or loss

232,551

229,321

239,049





Current assets




Other receivables

34

10

26

Cash and cash equivalents

57,213

24,182

48,575


57,247

24,192

48,601





Current liabilities




Other payables

(5,092)

(7,930)

(3,057)

Net current assets

52,155

16,262

45,544

Total assets less current liabilities

284,706

245,583

284,593

Non-current liabilities




Interest-bearing bank loan

(25,176)

(23,086)

(25,070)

Net assets

259,530

222,497

259,523





Equity




Called-up ordinary share capital

739

729

739

Share premium account

2,527

-

2,527

Special distributable capital reserve

15,040

16,240

15,040

Special distributable revenue reserve

31,403

31,403

31,403

Capital redemption reserve

1,335

1,335

1,335

Capital reserve

203,974

163,424

203,679

Revenue reserve

4,512

9,366

4,800

Shareholders' funds

259,530

222,497

259,523





Net asset value per Ordinary Share - Basic

350.99p

305.15p

350.98p

Net asset value per Ordinary Share - Fully diluted

 

350.99p

 

302.72p

 

350.98p

 



F&C PRIVATE EQUITY TRUST PLC

           

Reconciliation of Movements in Shareholders' Funds

 

 

 

 

 

Three months ended 31 March 2017

Three months ended 31 March 2016

Year ended 31 December 2016

 

(unaudited)

(unaudited)

(audited)

 

£'000

£'000

£'000

Opening shareholders' funds

259,523

216,125

216,125

Issue of Ordinary Shares

-

1,209

2,546

Profit for the period/total comprehensive income

7

5,163

49,628

Dividends paid

-

-

(8,776)

Closing shareholders' funds

259,530

222,497

259,523

 

 


Notes (unaudited)

 

1.   The unaudited quarterly results have been prepared on the basis of the accounting policies set out in the statutory accounts of the Company for the year ended 31 December 2016. 

 

2.   Investment management fee:

 

 

 

Three months ended

31 March 2017

 

 

Three months ended

 31 March 2016

 

 

Year ended

31 December 2016

 

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

 

 

 

 

 

 

 

 

 

 

Investment management      
fee - basic fee

 

158

 

475

 

633

 

140

 

419

 

559

 

582

 

1,745

 

2,327

Investment management       fee - performance fee

 

-

 

1,390

 

1,390

 

-

 

1,030

 

1,030

 

-

 

2,024

 

2,024

 

 

158

 

1,865

 

2,023

 

140

 

1,449

 

1,589

 

582

 

3,769

 

4,351

 

 

 

 

 

 

 

 

 

 

 

3.   Finance costs:

 

 

 

Three months ended

31 March 2017

 

 

Three months ended

 31 March 2016

 

 

Year ended

31 December 2016

 

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

 

 

 

 

 

 

 

 

 

 

Interest payable on bank loans

104

312

416

104

313

417

419

1,257

1,676

 

 

 

 

 

 

 

 

 

 

 

4.   The basic return per Ordinary Share is based on a net profit on ordinary activities after taxation of £7,000 (31 March 2016 -£5,163,000; 31 December 2016 -£49,628,000) and on 73,941,429 (31 March 2016 - 72,064,084; 31 December 2016 - 73,249,836) shares, being the weighted average number of Ordinary Shares in issue during the period.

 

The fully diluted return per Ordinary Share is based on a net profit on ordinary activities after taxation of £7,000 (31 March 2016 -£5,163,000; 31 December 2016 -£49,628,000) and on 73,941,429 (31 March 2016 - 73,941,429; 31 December 2016 - 73,941,429) shares, being the weighted average number of Ordinary Shares in issue during the period after conversion of the Ordinary Share warrants.

 

5.   The basic net asset value per Ordinary Share is based on net assets at the period end of £259,530,000 (31 March 2016 - £222,497,000; 31 December 2016 - £259,523,000) and on 73,941,429 (31 March 2016 - 72,912,872; 31 December 2016 - 73,941,429) shares, being the number of Ordinary Shares in issue at the period end.

 

The fully diluted net asset value per Ordinary Share is based on net assets at the period end of £259,530,000 (31 March 2016 - £223,834,000; 31 December 2016 - £259,523,000) and on 73,941,429 (31 March 2016 - 73,941,429; 31 December 2016 - 73,941,429) shares, being the number of Ordinary Shares in issue at the period end after conversion of the Ordinary Share warrants. During the year ended 31 December 2016, the Company issued 1,959,156 Ordinary Shares of 1p each in capital of the Company, following the exercise of subscription rights by holders of a corresponding number of management warrants previously issued by the Company in the capital of the Company.  As at 31 March 2017, no warrants remain in issue (31 March 2016 - 1,959,156; 31 December 2016 - nil).

 

 

6.   The financial information for the three months ended 31 March 2017, which has not been audited or reviewed by the Company's auditor, comprises non-statutory accounts within the meaning of Section 434 of the Companies Act 2006.  Statutory accounts for the year ended 31 December 2016, on which the auditor issued an unqualified report, will be lodged with the Registrar of Companies.  The quarterly report is available on the Company's website www.fcpet.co.uk.

 

 

Legal Entity Identifier: 2138009FW98WZFCGRN66

 

For more information, please contact:

 

Hamish Mair (Investment Manager)

0131 718 1184

Scott McEllen (Company Secretary)

0131 718 1137

hamish.mair@bmogam.com  / scott.mcellen@bmogam.com



 


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