3rd Quarter Results

RNS Number : 2268U

F&C Private Equity Trust PLC

29 November 2013

 



To: Stock Exchange	For immediate release:
	29 November 2013

F&C Private Equity Trust plc

Quarterly results for the three months to 30 September 2013

·      Share price total return for the quarter of 2.7 per cent for the Ordinary Shares.

·      NAV total return for the quarter of 0.7 per cent for the Ordinary Shares.

Manager's Review

Introduction

As at 30 September 2013 the Company's net asset value ('NAV') was £193.5 million giving a fully diluted NAV per share of 264.07p, an increase over the quarter of 0.7 per cent. There were a number of significant realisations during the quarter and a number of encouraging valuation uplifts. However, there was a significant adverse contribution from currency movements during the quarter, amounting to 2.4 per cent of the NAV per share. As previously announced, an interim dividend of 5.22p per share was paid on 1 November 2013.

The Company had net cash of £6.4 million at the end of the period. Taking into account the accrued liability for the Zero Dividend Preference Shares of £40.9 million, this gives total net debt of £34.5 million, equivalent to a gearing level of 15.1 per cent. Since the quarter end there have been some new investments, described in detail below and, together with the payment of the interim dividend, this has led to the utilisation of the revolving credit facility for the first time since it was put in place in February 2012. At the time of writing, £3.3 million of the £50 million facility is drawn. The amount borrowed has been drawn down in Euros. The Company's total outstanding undrawn commitments at 30 September were £64.8 million of which £19 million are to funds whose investment period has expired. During the quarter, combined realisations and income totalled £9.4 million and drawdowns from funds and co-investments totalled £11.6 million.

New Investments

No new commitments to private equity funds were made during the quarter. Three new co-investments were added and another one has completed since the end of the period.

£2.7 million was invested for a 7.2 per cent stake in Recover Nordic, a Norway based but Nordic-area focused provider of damage control services, mainly to insurance companies. Typical situations of involvement for the company are weather related incidents where there has been a flooding, burst pipe or collapsed roof. This investment was led by Agilitas, an emerging manager whose principals we have known for many years.

We also invested £1.3 million for a stake of just under 20 per cent in Safran, a Norwegian specialist software company which provides planning software to the oil and gas and aerospace and defence industries. This investment was lead by Stavanger based boutique private equity manager Progressus.

£3.0 million was invested for a 6.7 per cent stake in Harrington Brooks, a provider of debt advice, debt management plans and individual voluntary arrangements and other related services. This investment was lead by our long-standing partner RJD Partners. This Manchester-based company is one of the market leaders in debt management and it is growing strongly.

Since the quarter end we have invested £3.0 million for an 11.2 per cent stake in Meter Provida Limited, the UK market leading distributor of gas meters to different tiers of the energy industry. There is a pending demand for smart meters which will add significantly to the company's business in the coming years. This deal was lead by emerging manager Total Capital Partners, which provides both debt and equity to growth companies.

Within existing fund commitments, drawdowns of £5.1 million were made during the quarter. The more notable ones once again demonstrate the sectoral and geographic spread of the portfolio, a key area of strength.

August Equity Partners III called £0.7 million for an investment in Minerva Education, a London based schools group. Minerva Education consists of Eaton Square School Group ('ESS') and Ravenstone School. ESS has sites in Chelsea, Pimlico, Belgravia and Knightsbridge and currently has over 650 pupils on the roll. Ravenstone School offers pre-prep and prep education from two locations in South Kensington and Marble Arch with over 100 pupils on the roll.

Lyceum Capital III called £0.6 million for investment in two different companies. £0.2 million went into Curocare, a UK provider of non-secure hospital and residential support for adults with learning disabilities operating nine units in total. It is expected that more will be added and further investment will be drawn as required. £0.4 million of the drawdown went towards an investment in Isotrak, an operator in the vehicle telematics industry providing vehicle tracking and fleet management software for businesses with large fleets of heavy goods and light commercial vehicles.

Further afield, the Company's first Poland only fund, Avallon MBO II, drew £0.5 million for its first two investments.  These are Velvet Care, the former Polish subsidiary of toilet tissue and paper towels company Kimberly Clark, and ORE, a leading developer and provider of purchasing software solutions.

Realisations

There were a number of significant realisations during the quarter with total distributions, including income,  of £9.4 million, bringing the year-to-date total to £28.4 million. The largest exit was that of fund administration company IPES, which was sold to Silverfleet. The deal had been agreed some time ago but required regulatory approval to complete. RJD Partners led this deal and the return to the Company was £1.9 million, representing a 3.1x investment multiple and a 26 per cent IRR. HusCompagniet, the Danish housebuilder, where the deal is led by FSN, is trading very well with order intake and backlog at an all time high. This has principally been due to gains in market share in Denmark and growth into neighbouring markets such as Sweden and Germany. Cash generation has been strong. In a deal led by FSN, the company returned some capital to investors through selling the preference share element of the investment to a third party investor. This yielded £1.3 million to the Company but we retain all of the equity holding and the potential for future upside. Growth Capital II distributed £0.9 million from the sale of Glasgow-based software and services company Amor to Lockheed Martin. For an integrated capital deal consisting of both debt and equity, the return of 3.6x and an IRR of 37 per cent is excellent. Warburg Pincus IX distributed £1.0 million during the quarter with £0.9 million relating to the sale of ophthalmic products company Bausch and Lomb which achieved an investment multiple of 3.5x and an IRR of 17 per cent. Lastly, TDR Capital II distributed £0.8 million following the sell-down of its position in modular building rental business Algeco Scotsman.

Valuation Changes

The overall net result for the quarter is a slight uplift in value. There were a number of encouraging uplifts and a smaller number of lesser downgrades. Unfortunately, however, there was a significant adverse contribution to the NAV per share of approximately 2.4 per cent from currency weaknesses. Both the euro and the US dollar weakened against sterling over the period - by 2.5 per cent and 6.3 per cent respectively.

The largest single uplift was £5.4 million, from venture capital fund SEP III, following the sale of a small part of its stake in flight search-engine business Skyscanner to US venture capitalist Sequoia. If, in due course, the remainder of the company is sold at a similar or higher level it will prove to be a spectacular success. More conventionally sized uplifts are associated with realisations which happened before or immediately after the quarter end. Growth Capital II was up by £0.6 million as a result of the sale of Amor referred to above, Primary Capital III was uplifted by £0.6 million reflecting a partial realisation from Leisure Pass Group, the visitor attractions passes and systems company, and Alchemy Special Opportunities Fund was up by £0.4 million reflecting the strong post-flotation progress of the share price of Countrywide and the locking in of this gain through a sale in the market late in the quarter.

A welcome development has been the return of uplifts in the Iberian element of the portfolio, with N+1 Private Equity Fund II announcing the sale of Mivisa, the manufacturer of tin can packaging to Crown Holdings of the US, achieving a 2.3x multiple, a 35 per cent IRR and an associated uplift of £0.4 million, and Portobello Capital II making several trading based uplifts collectively totalling £0.3 million. There was also an encouraging development in Italian fund Alto Capital II which has announced the sale of Italian coffee machine manufacturer Rancilio, which resulted in an uplift of £0.4 million.

In terms of downgrades, Life Science Partners III was devalued by £1.1 million principally because its recently-floated holding, Prosensa, has seen a sharp share price fall following disappointing phase III results for its lead product Drisapersen (therapy for Duchenne muscular dystrophy). With its partner GSK it will be continuing to progress this product, but in the short term this is a significant blow. The Nordic region has been generally positive but this quarter Procuritas Capital IV was down by £0.6 million due to poor performance of two holdings. One of the portfolio's older holdings, Candover 2005, was down by £0.4 million mainly due to weaker trading in Dutch technical services business Stork.

Financing

At the end of the period the Company had net cash of £6.4 million and the full £50 million of the revolving credit facility available. Since the quarter end we have funded both the interim dividend and the Meter Provida Limited co-investment, as well as 'ordinary' drawdowns, such that we have utilised £3.3 million of the facility. The rate of drawdown can be expected to tail off over the next few months as the older funds' investment periods progressively expire and the newer commitments, which are smaller, invest steadily as market conditions allow. The co-investment component of the portfolio is being deliberately increased and we will continue with this strategy whilst managing the Company's resources prudently. It is our expectation that we will build surplus cash as we progress through 2014 and that this, combined with some of the borrowing facility, can be used to redeem the Zero Dividend Preference Shares in December 2014.

Outlook

The Company has a very broad portfolio and this historically has proved to be a key strength. Most of the portfolio is invested in European mid-market buyout funds and, accordingly, the conditions in the various European private equity and debt markets are important. The general picture is of modest growth and recovering confidence with this being more evident in the north of the Continent rather than the south. There are always examples which disprove such generalisations and this quarter has included several. The principal commodity on which we rely is the human capital of our investment partners and it is in assessing this that most of our effort is expended. In recent years very few managers have avoided portfolio difficulties completely and there has been a consequent process of differentiation taking place between the successful and the others. It is vital that we comprehensively and fairly judge each fund and its managers before allocating capital to new funds and co-investments. Our belief is that to sustain premium rather than average returns it is also important that emerging managers, who may prove to be the champions of the future, are also selectively backed.

Hamish Mair

Investment Manager

F&C Investment Business Limited

F&C Private Equity Trust plc

Consolidated Statement of Comprehensive Income for the

nine months ended 30 September 2013

	(Unaudited)
	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	14,783	14,783
Exchange losses	-	(28)	(28)
Investment income	1,659	-	1,659
Other income	32	-	32
Total income	1,691	14,755	16,446
Expenditure
Investment management fee	(383)	(1,149)	(1,532)
Other expenses	(526)	-	(526)
Total expenditure	(909)	(1,149)	(2,058)
Profit before finance costs and taxation	782	13,606	14,388
Finance costs	(205)	(3,324)	(3,529)
Profit before taxation	577	10,282	10,859
Taxation	(150)	150	-
Profit for period/total comprehensive income	427	10,432	10,859
Return per Ordinary Share - Basic	0.59p	14.43p	15.02p
Return per Ordinary Share - Fully diluted	0.58p	14.05p	14.63p
Return per Restricted Voting Share - Basic	(0.01)p	0.01p	-

F&C PRIVATE EQUITY TRUST PLC

Consolidated Statement of Comprehensive Income for the

nine months ended 30 September 2012

	(Unaudited)
	Revenue £'000	Capital £'000	Total               £'000
Income
Gains on investments held at fair value	-	8,588	8,588
Exchange gains	-	187	187
Investment income	2,733	-	2,733
Other income	15	-	15
Total income	2,748	8,775	11,523
Expenditure
Investment management fee	(364)	(1,093)	(1,457)
Other expenses	(617)	-	(617)
Total expenditure	(981)	(1,093)	(2,074)
Profit before finance costs and taxation	1,767	7,682	9,449
Finance costs	(218)	(3,133)	(3,351)
Profit before taxation	1,549	4,549	6,098
Taxation	(439)	431	(8)
Profit for period/total comprehensive income	1,110	4,980	6,090
Return per Ordinary Share - Basic	0.84p	7.70p	8.54p
Return per Ordinary Share - Fully diluted	0.82p	7.50p	8.32p
Return per Restricted Voting Share - Basic	0.75p	(0.88)p	(0.13)p

F&C Private Equity Trust plc

Consolidated Statement of Comprehensive Income for the

year ended 31 December 2012

	(Audited)
	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments held at fair value	-	15,178	15,178
Exchange gains	-	176	176
Investment income	4,044	-	4,044
Other income	25	-	25
Total income	4,069	15,354	19,423
Expenditure
Investment management fee	(487)	(1,462)	(1,949)
Other expenses	(866)	-	(866)
Total expenditure	(1,353)	(1,462)	(2,815)
Profit before finance costs and taxation	2,716	13,892	16,608
Finance costs	(283)	(4,198)	(4,481)
Profit before taxation	2,433	9,694	12,127
Taxation	(615)	622	7
Profit for year/total comprehensive income	1,818	10,316	12,134
Return per Ordinary Share - Basic	1.81p	15.08p	16.89p
Return per Ordinary Share - Fully diluted	1.76p	14.68p	16.44p
Return per Restricted Voting Share - Basic	0.76p	(0.87)p	(0.11)p

F&C Private Equity Trust plc

Amounts Recognised as Dividends

	Nine months ended 30 September 2013 (unaudited) £'000	Nine months ended 30 September 2012 (unaudited) £'000	Year ended 31 December 2012   (audited) £'000
Final Ordinary Share dividend of 0.80p per share for the year ended 31 December 2011	-	578	578
Interim Ordinary Share dividend of 4.96p per share for the year ended 31 December 2012	-	-	3,585
Final Ordinary Share dividend of 5.07p per share for the year ended 31 December 2012	3,665	-	-
	3,665	578	4,163

On 27 January 2012 a special dividend of 1.60p per Restricted Voting Share was paid. The total amount paid was £1,073,000.

On 28 September 2012 a special dividend of 3.30p per Restricted Voting Share was paid. The total amount paid was £2,214,000.

On 14 February 2013 a final Restricted Voting Shares dividend of 1.675p per Restricted Voting Share was paid. The total amount paid was £1,124,000.

F&C Private Equity Trust plc

Consolidated Balance Sheet

	As at 30 September 2013 (unaudited)	As at 30 September 2012 (unaudited)	As at 31 December 2012 (audited)
	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	229,003	212,449	213,662
Current assets
Other receivables	350	477	464
Cash and short-term deposits	6,434	10,745	12,931
	6,784	11,222	13,395
Current liabilities
Other payables	(1,406)	(1,398)	(1,453)
Net current assets	5,378	9,824	11,942
Total assets less current liabilities	234,381	222,273	225,604
Non-current liabilities
Zero dividend preference shares	(40,880)	(37,301)	(38,173)
Net assets	193,501	184,972	187,431
Equity
Called-up ordinary share capital	723	1,394	1,394
Special distributable capital reserve	15,679	15,679	15,679
Special distributable revenue reserve	31,403	32,527	32,527
Capital redemption reserve	1,335	664	664
Capital reserve	141,968	133,450	135,201
Revenue reserve	2,393	1,258	1,966
Shareholders' funds	193,501	184,972	187,431
Net asset value per Ordinary Share - Basic	267.70p	254.37p	257.75p
Net asset value per Ordinary Share - Fully diluted	264.07p	251.08p	254.38p
Net asset value per Restricted Voting Share - Basic	n/a	1.66p	1.67p

F&C Private Equity Trust plc

Reconciliation of Movements in Shareholders' Funds

 

	Nine months ended 30 September 2013	Nine months ended 30 September 2012	Year ended 31 December 2012
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Opening shareholders' funds	187,431	182,747	182,747
Profit for the period/total comprehensive income	10,859	6,090	12,134
Dividends paid (Ordinary Shares)	(3,665)	(578)	(4,163)
Special dividends paid (Restricted Shares)	(1,124)	(3,287)	(3,287)
Closing shareholders' funds	193,501	184,972	187,431

 

 

 

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 Group for the year ended 31 December 2012.

2.   Earnings for the nine months to 30 September 2013 should not be taken as a guide to the results for the year to 31 December 2013.

3.   Investment management fee:

	Nine months ended 30 September 2013			Nine months ended 30 September 2012			Year ended 31 December 2012
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Investment management fee	383	1,149	1,532	364	1,093	1,457	487	1,462	1,949
	383	1,149	1,532	364	1,093	1,457	487	1,462	1,949

4.   Finance costs:

	Nine months ended 30 September 2013			Nine months ended 30 September 2012			Year ended 31 December 2012
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Interest payable on bank loans and overdrafts	205	617	822	218	654	872	283	847	1,130
Finance costs attributable to ZDP Shares	-	2,707	2,707	-	2,479	2,479	-	3,351	3,351
	205	3,324	3,529	218	3,133	3,351	283	4,198	4,481

5.   The basic return per Ordinary Share is based on a net return on ordinary activities after taxation of £10,859,000 (30 September 2012 - £6,175,000; 31 December 2012 - £12,207,000) and on 72,282,273 (30 September 2012 - 72,282,273; 31 December 2012 - 72,282,273) 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 return on ordinary activities after taxation of £10,859,000 (30 September 2012 - £6,175,000; 31 December 2012 - £12,207,000) and on 74,241,429 (30 September 2012 - 74,241,429; 31 December 2012 - 74,241,429) shares, being the weighted average number of Ordinary Shares in issue during the period after conversion of the Ordinary Share warrants.

The basic return per Restricted Voting Share is based on a net loss on ordinary activities after taxation of £nil (30 September 2012 - loss £85,000; 31 December 2012 - loss £73,000) and on 67,084,807 (30 September 2012 - 67,084,807; 31 December 2012 - 67,084,807) shares, being the weighted average number of Restricted Voting Shares in issue during the period.

6.  Zero Dividend Preference Shares

The Zero Dividend Preference Shares ('ZDP Shares') of F&C Private Equity Zeros plc were issued on 14 December 2009 at 100p per share and redeem on 15 December 2014 at 152.14p per share, an effective rate of 8.75 per cent per annum.

The fair value of the ZDP Shares at 30 September 2013 was £43,350,000 based on the quoted price of 144.50p per ZDP Share.

	Number of ZDP Shares	Amount due to ZDP shareholders £'000
As at 31 December 2012	30,000,000	38,173
ZDP Shares finance cost	-	2,707
As at 30 September 2013	30,000,000	40,880

7. The basic net asset value per Ordinary Share is based on net assets at the period end of £193,501,000 (30 September 2012 - £183,861,000; 31 December 2012 - £186,308,000) and on 72,282,273 (30 September 2012 - 72,282,273; 31 December 2012 - 72,282,273) 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 £196,047,000 (30 September 2012 - £186,407,000; 31 December 2012 - £188,854,000) and on 74,241,429 (30 September 2012 - 74,241,429; 31 December 2012 - 74,241,429) shares, being the number of Ordinary Shares in issue at the period end after conversion of the Ordinary Share warrants.

8.   Following the payment of the final Restricted Voting Shares dividend of 1.675p per share on 14 February 2013, the Restricted Voting Pool has no assets or liabilities. The Restricted Voting Shares were converted and re-designated as Deferred Shares on 14 February 2013 and the Deferred Shares were bought back by the Company and cancelled on that date.  On 15 February 2013 the admission of the Restricted Voting Shares to the Official List of the UKLA and trading on the London Stock Exchange's Main Market were cancelled.  The Company therefore no longer has any Restricted Voting Shares in issue.

9.  The financial information for the nine months ended 30 September 2013, which has not been audited or reviewed by the Company's auditors, comprises non-statutory accounts within the meaning of Section 434 of the Companies Act 2006.  Statutory accounts for the year ended 31 December 2012, on which the auditors issued an unqualified report, have been lodged with the Registrar of Companies. The quarterly report is available at the Company's website www.fcpet.co.uk.

For more information, please contact:

Hamish Mair (Investment  Manager)	0131 718 1184 [e-mail]
Gordon Hay Smith (Company Secretary)	0131 718 1018 [e-mail]

 

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