Interim Results
Standard Life Euro Pri Eqty Tst PLC
02 June 2003
2 June 2003
STANDARD LIFE EUROPEAN PRIVATE EQUITY TRUST PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2003
Highlights
• The six months ended 31 March 2003 continued to be a period of
uncertainty for listed markets and at a macro-economic and geo-political level;
against such a background, the Company has continued to make progress. As at 31
March 2003 the Company's net asset value per ordinary share ('NAV') was 93.1p, a
3.1% increase over the NAV of 90.3p as at 30 September 2002, and the Company's
net assets were £148.2 million (30 September 2002 - £143.8 million). The closing
mid-market price of the Company's ordinary shares on 31 March 2003 was 76.5p (30
September 2002 - 82.0p).
• The Company's NAV has materially out-performed the two relevant
major stock market indices. Since the Company's listing on 29 May 2001, the
Company's NAV has fallen by 5.7%, compared to falls of 39.2% in the FTSE
All-Share index and 41.9% in the MSCI Europe index (sterling adjusted).
• In line with the Company's dividend policy, the Board has not
declared an interim dividend.
• As at 31 March 2003 the Company had interests in 31 private equity
funds with a value of £106.1 million (30 September 2002 - £86.7 million) and
held £42.1 million in cash and other net assets (30 September 2002 - £57.1
million).
• During the period the Company benefited from the 9.0% appreciation
of the euro against sterling. The closing euro/sterling foreign exchange rate on
31 March 2003 was £1/€1.4485 (30 September 2002 - £1/€1.5913). As at 31 March
2003 the Company had £94.1 million (sterling equivalent) of euro denominated
assets (30 September 2002 - £100.4 million (sterling equivalent).
• Draw downs made during the period totalled £24.6 million (year ended
30 September 2002 - £36.0 million). Most fund managers are reporting an active
deal flow for new investments, driven in many cases by corporate vendors wishing
to degear or focus on increasing shareholder value.
• Distributions received during the period totalled £5.0 million (year
ended 30 September 2002 - £15.6 million), of which £0.3 million was realised
gains and £0.8 million was income (year ended 30 September 2002 - £3.9 million
and £1.2 million respectively). The quantum of realisations was small reflecting
the difficult European mergers and acquisitions market.
Quote from Scott Dobbie CBE, Chairman:-
'There has been a healthy level of new private equity activity in the buy-out
segment of the market, with managers making an increasing number of new
investments at prices that are attractive from an historic perspective.
Distributions from the Company's private equity fund investments during the
period to 31 March 2003 were slower than anticipated. This position is unlikely
to change until listed markets and the macro-economic environment show signs of
improvement. Despite such weakness, it is nevertheless encouraging to see that
where the Company has been able to achieve realisations since listing, these
have been at a healthy premium to the acquisition cost of the underlying
investments.'
For further information please contact:-
Jonny Maxwell/ Peter McKellar of Standard Life Investments (Private Equity)
Limited (on 0131 245 0055)
Chairman's Statement
Results and performance
The six months ended 31 March 2003 continued to be a period of uncertainty for
listed markets and at a macro-economic and geo-political level. There are
concerns that the European economic recovery is weak and that corporate earnings
will disappoint in the short-term. Against such a background, the Company has
continued to make progress. As at 31 March 2003 the Company's net asset value
per ordinary share ('NAV') was 93.1p, a 3.1% increase over the NAV of 90.3p as
at 30 September 2002.
In line with the Company's dividend policy, the Board has not declared an
interim dividend.
It is useful to compare the change in the NAV with the movement in the two
relevant major stock market indices in the period since the Company's listing on
29 May 2001. The Company's NAV has fallen by 5.7% over this period, compared to
falls of 39.2% in the FTSE All-Share index and 41.9% in the MSCI Europe index
(sterling adjusted). The Company's out-performance continues to be attributable
to the focus of the portfolio on traditional buy-out, as opposed to venture
capital, funds and the ongoing benefit arising from the Company's holdings of
cash and money market instruments.
The closing mid-market price of the Company's ordinary shares on 31 March 2003
was 76.5p (30 September 2002 - 82.0p).
Valuation and cash flow
In undertaking the valuation of the Company's private equity fund interests, the
Company uses the most recent valuation of each fund prepared by the relevant
fund manager, adjusted where necessary for subsequent cash flows. Of the 31 fund
interests held by the Company, 25 of the funds, equating to 90% of the portfolio
by value, were valued by their respective fund managers as at 31 March 2003 and
99% of the portfolio by value was valued no earlier than 31 December 2002. The
Board believes that such timeliness is important in ensuring the accuracy of the
Company's NAV, particularly in such times of market volatility.
The closing value of the Company's portfolio of private equity fund interests
was £106.1 million as at 31 March 2003 (30 September 2002 - £86.7 million). The
movement in the unrealised value of the portfolio over the period was a decrease
of £1.2 million. This reflected a number of specific write-downs and write-ups
made by fund managers to particular underlying investments in their respective
funds and a £4.1 million unrealised foreign exchange gain on the portfolio. It
was pleasing to see that many of the fund managers reported neutral or
increasing valuations for their funds, reflecting the strength of the Company
being invested principally in the buy-out segment of the private equity market.
The aggregate cash and money market holdings held by the Company were £43.0
million as at 31 March 2003 (30 September 2002 - £60.6 million). The decline in
cash and money market holdings over the period reflected £19.6 million of net
investment made by the Company, partially offset by a £3.6 million unrealised
foreign exchange gain. The Company's ongoing investment programme will see such
monies invested over the next twelve to eighteen months.
During the period the Company benefited from the 9.0% appreciation of the euro
against sterling. The closing euro/sterling foreign exchange rate as at 31 March
2003 was £1/€1.4485 (30 September 2002 - £1/€1.5913). As at 31 March 2003, the
Company had £149.2 million of gross assets, of which £94.1 million (sterling
equivalent) comprised euro denominated assets (30 September 2002 - £147.5
million and £100.4 million (sterling equivalent) respectively).
Distributions, draw downs and commitments
The period under review saw a healthy level of new private equity activity,
continuing the trend of the second half of the last financial year. Most fund
managers are reporting an active deal flow for new investments, driven in many
cases by corporate vendors wishing to degear or focus on increasing shareholder
value. This trend is encouraging, particularly since the investments being made
appear to be at lower prices than those paid in recent years. In the six months
ended 31 March 2003 £24.6 million was drawn down by the Company's portfolio of
fund interests. This compares to £8.8 million and £27.2 million in the first and
second halves respectively of the last financial year.
The portfolio generated £5.0 million of distributions in the period to 31 March
2003, of which £0.3 million was realised gains and £0.8 million was income. The
quantum of distributions received by the Company was small reflecting the
difficult mergers and acquisitions market in Europe. Much of the money received
came from underlying investments being releveraged by the relevant fund manager
or being sold via a secondary buy-out to another private equity manager.
As at 31 March 2003 the Company had interests in a total of 327 underlying
investments through its portfolio of private equity fund interests (30 September
2002 - 300 underlying investments). The Board continues to believe that such
diversification is a strength.
No new commitments were made during the period. This is in line with the
Company's strategy that, having made aggregate new commitments of £215.9 million
to private equity funds since the Company's listing in May 2001 and having met
the Board's target for over-commitment to maximise the return for shareholders,
the pace of new commitments will be significantly slower. The Company's
aggregate outstanding commitments to its existing 31 private equity fund
interests were £175.3 million as at 31 March 2003 (30 September 2002 - £191.0
million). These commitments can be expected to be drawn down over the next 3-4
years.
The outstanding commitments will be funded primarily from the Company's existing
cash and money market holdings and, importantly, from distributions received
over the next 3-4 years from the Company's portfolio of private equity fund
interests. In addition, the Company has negotiated a £40 million five year
committed revolving credit facility with The Royal Bank of Scotland plc. This
facility, as foreshadowed in the Company's listing particulars, will be used to
fund any short-term cash flow requirements of the Company.
Investor relations
The Manager and the Company's broker have been working over the last year to
widen the shareholder base, both within the United Kingdom and continental
Europe. The Board is pleased to record the addition to the share register of a
number of new institutional shareholders, some of whom have significant
knowledge of the European private equity market.
Outlook
Private equity activity in the buy-out segment of the market is robust with
managers making an increasing number of new investments at prices that are
attractive from an historic perspective. This level of activity indicates that
the Company will move towards being fully invested on a cash basis over the next
twelve to eighteen months. Against a background of a more difficult fund raising
environment for private equity funds and a lack of corporate acquirers for
potential new investments, the Manager believes that there is not a significant
overhang of private equity capital to fund European buy-outs.
Distributions from fund investments during the period to 31 March 2003 were
slower than anticipated. This position is unlikely to change until listed
markets and the macro-economic environment show signs of improvement. When this
occurs it can be expected that there will be a revival in the European mergers
and acquisitions market and an uplift in the sale of private equity investments
to corporate acquirers. Despite such weakness, it is nevertheless encouraging to
see that where the Company has been able to achieve realisations since listing,
these have been at a healthy premium to the acquisition cost of the underlying
investments.
Scott Dobbie CBE
Chairman
STATEMENT OF TOTAL RETURN
for the 6 months to 31 March 2003 (unaudited)
Revenue Capital Total
£'000 £'000 £'000
Net realised gains on unquoted investments - 279 279
Net realised gains on AAA money market funds - 1,144 1,144
Net unrealised depreciation on unquoted investments - (1,250) (1,250)
Net unrealised appreciation on AAA money market funds - 3,538 3,538
TOTAL CAPITAL GAINS ON INVESTMENTS - 3,711 3,711
Currency gains on cash balances - 137 137
Income from unquoted investments 705 - 705
Income from AAA money market funds 775 - 775
Interest receivable 89 - 89
Investment management fee (59) (532) (591)
Administrative expenses (127) - (127)
RETURN ON ORDINARY ACTIVITIES BEFORE TAXATION 1,383 3,316 4,699
Taxation (416) 160 (256)
RETURN ON ORDINARY ACTIVITIES AFTER TAXATION 967 3,476 4,443
Dividends payable in respect of ordinary shares - - -
TRANSFER TO RESERVES 967 3,476 4,443
RETURN PER ORDINARY SHARE 0.61p+ 2.18p 2.79p
DIVIDEND PER ORDINARY SHARE -
STATEMENT OF TOTAL RETURN
for the 6 months to 31 March 2002 (unaudited)
Revenue Capital Total
£'000 £'000 £'000
Net realised gains on unquoted investments - 1,009 1,009
Net realised losses on AAA money market funds - (55) (55)
Net unrealised depreciation on unquoted investments - (933) (933)
Net unrealised depreciation on AAA money market funds - (1,688) (1,688)
TOTAL CAPITAL LOSSES ON INVESTMENTS - (1,667) (1,667)
Currency losses on cash balances - (17) (17)
Income from investments 159 - 159
Income from AAA money market funds 1,399 - 1,399
Interest receivable 45 - 45
Investment management fee (33) (297) (330)
Administrative expenses (153) - (153)
RETURN ON ORDINARY ACTIVITIES BEFORE TAXATION 1,417 (1,981) (564)
Taxation (416) 80 (336)
RETURN ON ORDINARY ACTIVITIES AFTER TAXATION 1,001 (1,901) (900)
Dividend payable in respect of ordinary shares - - -
TRANSFER TO/(FROM) RESERVES 1,001 (1,901) (900)
RETURN PER ORDINARY SHARE 0.63p+ (1.19p) (0.56p)
DIVIDEND PER ORDINARY SHARE -
STATEMENT OF TOTAL RETURN
for the year ended 30 September 2002 (audited)
Revenue Capital Total
£'000 £'000 £'000
Net realised gains on unquoted investments - 3,931 3,931
Net realised gains on AAA money market funds - 183 183
Net unrealised depreciation on unquoted investments - (10,537) (10,537)
Net unrealised appreciation on AAA money market funds - 92 92
TOTAL CAPITAL LOSSES ON INVESTMENTS (6,331) (6,331)
Currency losses on cash balances - (121) (121)
Income from unquoted investments 1,212 - 1,212
Income from AAA money market funds 2,543 - 2,543
Interest receivable 73 - 73
Investment management fee (82) (741) (823)
Administrative expenses (291) - (291)
RETURN ON ORDINARY ACTIVITIES BEFORE TAXATION 3,455 (7,193) (3,738)
Taxation (1,037) 223 (814)
RETURN ON ORDINARY ACTIVITIES AFTER TAXATION 2,418 (6,970) (4,552)
Dividend payable in respect of ordinary shares (1,910) - (1,910)
TRANSFER TO/(FROM) RESERVES 508 (6,970) (6,462)
RETURN PER ORDINARY SHARE 1.51p+ (4.36p) (2.85p)
DIVIDEND PER ORDINARY SHARE 1.20p
The revenue column of this statement represents the revenue account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations.
+ Earnings per share - basic and diluted
BALANCE SHEET
(unaudited) (audited)
At 31 March At 31 March At 30 September
2003 2002 2003
£'000 £'000 £'000
FIXED ASSETS
Unquoted investments 106,138 76,593 86,691
AAA money market funds 42,077 73,515 60,171
148,215 150,108 146,862
CURRENT ASSETS
Debtors 140 203 191
Cash and short term deposits 878 1,325 463
1,018 1,528 654
CREDITORS: Amounts falling due within one year (984) (1,654) (3,710)
NET CURRENT ASSETS/(LIABILITIES) 34 (126) (3,056)
TOTAL ASSETS LESS CURRENT LIABILITIES 148,249 149,982 143,806
CREDITORS: Amounts falling due after more than one year - (303) -
148,249 149,679 143,806
CAPITAL AND RESERVES
Called up share capital - equity 319 319 319
Other reserves 147,895 149,325 143,452
TOTAL EQUITY SHAREHOLDERS' FUNDS 148,214 149,644 143,771
TOTAL NON-EQUITY SHAREHOLDERS' FUNDS 35 35 35
TOTAL SHAREHOLDERS' FUNDS 148,249 149,679 143,806
NET ASSET VALUE PER EQUITY SHARE 93.1p 93.8p 90.3p
CASHFLOW STATEMENT
(unaudited) (audited)
6 months to 6 months to Year to 30
31 March 2003 31 March 2002 September 2002
£'000 £'000 £'000
Net revenue on ordinary activities before taxation 1,383 1,417 3,455
Decrease in accrued income 75 96 120
(Increase)/decrease in other debtors (23) 4 (8)
Increase/(decrease) in creditors 22 (7) 101
Fees charged to capital reserve (532) (297) (741)
NET CASH INFLOW FROM OPERATING ACTIVITIES 925 1,213 2,927
NET CASH OUTFLOW FROM TAXATION (607) (275) (519)
FINANCIAL INVESTMENT
Purchase of investments (33,256) (84,084) (111,559)
Sale of investments 35,614 82,907 108,965
NET CASH INFLOW/(OUTFLOW) FROM FINANCIAL INVESTMENT 2,358 (1,177) (2,594)
ORDINARY DIVIDENDS PAID (1,910) (720) (720)
NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING 766 (959) (906)
FINANCING
Buyback of ordinary shares (185) - (504)
Expenses of share buyback - - (3)
Expenses of issue (303) (302) (606)
NET CASH OUTFLOW FROM FINANCING (488) (302) (1,113)
INCREASE/(DECREASE) IN CASH 278 (1,261) (2,019)
Opening cash 463 2,603 2,603
Currency movement 137 (17) (121)
Increase/(decrease) in cash 278 (1,261) (2,019)
Closing cash 878 1,325 463
Notes:
1. Standard Life European Private Equity Trust PLC is an investment
company managed by Standard Life Investments (Private Equity) Limited the
ordinary shares of which are admitted to listing by the UK Listing Authority and
to trading on the London Stock Exchange. It seeks to conduct its affairs so as
to continue to qualify as an investment trust under section 842 of the Income
and Corporation Taxes Act 1988. The Board is wholly independent of the Manager
and The Standard Life Assurance Company.
2. The accounts have been prepared under the historical cost convention,
modified to include the revaluation of fixed asset investments. The accounts
have been prepared in accordance with applicable accounting standards and the
Statement of Recommended Practice 'Financial Statements of Investment Trust
Companies' issued in January 2003 on the assumption that approval as an
investment trust will continue to be granted. The accounting policies used for
the year ended 30 September 2002 have been consistently applied in the interim
accounts.
3. Rates of exchange to sterling as at 31 March 2003 were: €1.4485 &
US$1.5806 (30 September 2002 - €1.5913 & US$1.5726 and 31 March 2002 - €1.6323 &
US$1.4240).
4. The number of ordinary shares in issue as at 31 March 2003 was
159,150,000 (30 September 2002 - 159,150,000). The return per ordinary share is
based on the weighted average number of ordinary shares in issue.
5. No interim dividend has been declared.
6. The financial information for the year ended 30 September 2002 has
been extracted from the report and accounts of the Company which have been filed
with the Registrar of Companies. The independent auditors' report on those
accounts was unqualified.
The statement of total return, balance sheet and cashflow statement
do not represent full accounts in accordance with section 240 of the Companies
Act 1985.
7. The interim report and accounts will be posted to shareholders and
copies will be available from the Manager - Standard Life Investments (Private
Equity) Limited, 1 George Street, Edinburgh EH2 2LL.
for Standard Life European Private Equity Trust PLC,
Edinburgh Fund Managers plc, SECRETARY
END
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