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F&C Private Equity Trust PLC  -  FPEO   

Third Quarter Results and Dividend Announcement

Released 07:00 24-Nov-2017

RNS Number : 4008X
F&C Private Equity Trust PLC
24 November 2017
 

To: Stock Exchange

For immediate release:


24 November 2017

F&C Private Equity Trust plc

LEI: 2138009FW98WZFCGRN66

 

Quarterly results for the three month period ended 30 September 2017

 

·      NAV total return per Ordinary Share for the nine month period ended 30 September 2017 of 4.7 per cent.

 

·      Share price total return per Ordinary Share for the nine month period ended 30 September 2017 of 18.5 per cent.

 

·      A quarterly dividend of 3.55 pence per Ordinary Share payable on 31 January 2018 to shareholders on the register on 5 January 2018.

 

Manager's Review

 

Introduction

 

As at 30 September 2017, the net assets of the Company were £266.9 million, giving a Net Asset Value ("NAV") per share of 360.98p, an increase over the quarter of 1.2%. For the first nine months of the year, the NAV total return is 4.7%. At 30 September, the Company had net cash of £15.5 million. Outstanding undrawn commitments were £126.8 million with approximately £15.7 million of these to funds where the investment period has expired and where we would expect only a small proportion to be drawn.

 

In line with the Company's new dividend policy to pay dividends on a quarterly basis, the first quarterly dividend of 3.55p will be paid on 31 January 2018 to shareholders on the register on 5 January 2018.  The ex-dividend date is 4 January 2018.

 

New Investments

 

There were two new commitments to funds and two new co-investments during the quarter.

 

£6.0 million was committed to Apposite Healthcare II. This fund focuses on UK lower mid market companies in healthcare services, digital health, social care and medical products and has the flexibility to invest up to 30% in Western Europe. The fund is managed by a very experienced team and already has made four investments taking the fund to approximately 20% drawn. €5.0 million has been committed to ArchiMed II, a predominantly European healthcare fund. Both funds were selected following an extensive market mapping exercise looking at opportunities in the healthcare and related sectors in Europe.

 

£3.0 million was committed to Swanton Care Group with an initial investment of £1.4 million. This is a platform investment led by Apposite Capital involved in residential care homes and supported living for people with learning disabilities and autism spectrum disorders. The company already has 23 properties and the plan is to add to this through acquisition during the holding period.

 

£2.8 million was invested in CETA, a specialist insurance broker, which concentrates on the caravan and leisure boat niches. The company has set up a Managing General Agent (MGA) which will allow it to capture more of the value chain in this sector. The investment is led by Kester Capital, the managers of GCP II.

 

Following the quarter-end two more co-investments have been added to the portfolio. £3.0 million has been invested in Walkers, a Leeds based transport and logistics company, which specialises in small pallet loads and operates a distribution hub for one of the large pallet networks. Pallet hubs are being utilised increasingly, in part due to the increase in the popularity of online shopping and the requirement for many small batch deliveries. This investment is led by Total Capital Partners with whom we are invested in two other investments. £4.0 million has been invested in a SEP led specialist software company Dotmatics.  This company provides sophisticated software to the pharmaceutical industry which is primarily used to facilitate research.

 

The total of drawdowns from funds and co-investments during the quarter is £16.5 million. £12.3 million of this was accounted for by drawdowns from the portfolio of funds covering a wide range of new investments and some follow on investment into existing holdings in the co-investment portfolio.

 

The largest drawdown was for TDR Capital II which drew £4.1 million as our share of the capital to create additional value in modular buildings company Algeco Scotsman. As noted above, Apposite Healthcare II has started with a partially invested portfolio of four holdings and £1.2 million was drawn for these.  £0.9 million was called from SEP V, principally for software company, Dotmatics, as described above. £0.5 million was called from Nordic Fund Summa I for its first four investments; Sortera (construction waste bags), eGain (energy saving), Lin Education (digitalisation of learning) and Summa Digital (a combination of three 'big data' analytics companies). Inflexion Enterprise IV has called £0.4 million for three investments; MyPolicy (telematics insurance broker and MGA), Prolabs (optical transceivers for fibreoptics) and Virgin Experience Days.  In the US Blue Point Capital III called £0.4 million for SASE, a provider of various products for the polishing of concrete. There were two follow on investments in co-investments; £0.6 million to Burgess Marine and £0.4 million to David Phillips.

 

Realisations

 

There were realisations totalling £24.2 million and income of £0.9 million in the third quarter. This gives a total for the first nine months of £51.9 million which is approximately a third more than at the same stage in 2016.

 

The largest exit was of £6.2 million when our co-investment in the Stirling Square led security products company 3si was sold in two parts to US private equity house LLR and to a European trade buyer. This was a much longer hold than expected at almost 11 years and during that time the company has had some challenges, which have necessitated a substantial, but ultimately successful, updating of its product range. The net return is 1.9x and an IRR of 9% which, whilst sub optimal, is creditable given the difficulties the company has faced. £1.8 million was distributed by Blue Point Capital III from shoe insole company Ortholite which has been sold to Trilantic North America achieving an excellent 7x investment. The German speaking area of Europe has been especially strong for exits this quarter. The remaining holding in vacuum valves company VAT Holdings, which is now listed, was sold down for Capvis Funds III and IV, together returning £1.4 million. This investment has achieved 5.2x and an IRR of 82%. DBAG V had no less than three exits returning a total of £6.4 million. Formel D (automotive documentation) achieved 4.9x on its sale to 3i. ProXES (process machinery) made 5.5x on its sale to Capvis (our share £0.3 million). Romaco (machinery for pharmaceutical packaging) was partially sold to Chinese engineering group Truking for 2.4x cost. In addition to this DBAG VI returned £1.4 million with the sale of tutoring business Schulerhilfe to Oakley Capital which represented 3.9x cost and an IRR of 51%. In Iberia, N+1 Private Equity II exited Probos, the world's third largest producer of edgebands for the furniture industry by selling to industrial buyer Surtico SE. This returned £1.6 million which was 2.1x cost and an IRR of 18%. In France Chequers Capital XV distributed £0.4 million from the sale of Accleya (IT for the aviation industry) which has been sold to Mercator achieving 11.7x cost and an IRR of 36%.   Lastly £0.8 million came in from TDR Capital II from the sale of MCS Group, which itself had developed out of the US business of property services company VPS. This represented 2.4x cost.

 

Valuation Changes

 

There were a considerable number of uplifts reflecting good underlying progress for a range of companies. The net impact of these has been partially offset by a small number of downgrades.

 

On the upside, we have uplifted Ambio Holdings by £3.2 million. The company, which specialises in producing API (active pharmaceutical ingredient) for a range of generic and patented peptide oriented drugs, has traded very strongly. Chequers Capital XV is uplifted by £0.9 million mainly due to the strong progress of its holding, Store Electronics Systems, which provides electronic shelf labelling systems for the food retail sector. Procuritas Capital IV, one of our principal Nordic exposures, is up by £0.9 million mainly due to further progress by ice cream machinery company Green Magnum. Lyceum Capital III is up by £0.6 million reflecting good progress across a number of holdings. Ciclad 5, one of our longest standing French relationships, is uplifted by £0.6 million mainly due to the exit of Seabird, a financial consultancy focusing on the insurance industry, which has been sold achieving 3.6x cost and an IRR of 52%. SEP IV is up by £0.5 million mainly due to the sale of online luxury retailer Matchesfashion to Apax which completed after the quarter end with an excellent  outcome of 8.3x cost and an IRR of 55%.

 

There was a downgrade in Burgess Marine (£1.2 million) which is in the midst of a reconstruction. Pentech II is down by £0.6 million mainly because the putative merger of FanDuel with US company DraftKings has been blocked by the Federal Trade Commission. PineBridge New Europe II is down by £0.4 million mainly because of the write off of Polish convenience store company Malpka, which has been a problem investment for some time. Schaetti, the specialist adhesives company based in Switzerland has been reduced by £0.4 million to reflect difficult trading and Calucem, the Croatia based specialist cement company is down by £0.3 million due to reduced sales volumes in the refractory market.

 

Financing

 

The Company is in a strong financial position with net cash of £15.5 million at 30 September. There has been minimal impact from exchange rate movements over the quarter. All of our £70 million borrowing facility remains available for new investments. The new quarterly dividend means that a payment of approximately £2.6 million will be made in late January 2018.

 

Outlook

 

There are a number of new funds, co-investments and secondaries at advanced stages of the investment process and these are likely to complete by the year end. There is substantial dealflow in each section and we are constantly assessing opportunities looking for distinctive ways of building shareholder value for the future. In the UK market the Brexit negotiations occupy the minds of many business people to an increasing extent, although it is our view that this has been fully priced into deal values since the Referendum last year. In Continental Europe, the improved economic background has provided some useful support to deal activity and valuations across most of the individual geographies.  The general tenor of the market is of good progress in underlying earnings with a small number of exceptions where company specific issues are being addressed. As always the quality of management and the support received from the private equity lead is critical in handling difficult challenges. This is an area on which we, with our investment partners, place much emphasis.  The price of new deals is generally at the upper end of the historic range but this varies considerably by size and by sector. Private equity managers invest on an absolute return basis and are not obliged to invest if pricing means that their target returns are unlikely to be met. The market is very broad and our portfolio deliberately covers a range of sectors and styles within its mid-market focus and in any given time period our investment partners,  in aggregate, will always find some attractive investments with potential for long term value growth. There are excellent prospects for further growth in shareholder value over the remainder of the year.

 

Hamish Mair

Investment Manager

F&C Investment Business Limited

 

 

 

 

 

 

F&C Private Equity Trust plc

 

Statement of Comprehensive Income for the

nine months ended 30 September 2017

 

 



 

F&C Private Equity Trust plc

 

Statement of Comprehensive Income for the

nine months ended 30 September 2016

 

 

 



F&C Private Equity Trust plc

 

Statement of Comprehensive Income for the

year ended 31 December 2016

 

 

 



F&C Private Equity Trust plc

 

Amounts Recognised as Dividends

 

 

 

 


Nine months ended

30 September 2017 (unaudited)

£'000

Nine months ended

30 September 2016 (unaudited)

£'000

Year

ended

31 December 2016   (audited)

£'000

 

Final Ordinary Share dividend of 5.83p per share for the year ended 31 December 2015

 

-

 

4,251

 

4,251

 

Interim Ordinary Share dividend of 6.12p per share for the year ended 31 December 2016

 

-

 

-

 

4,525

 

Final Ordinary Share dividend of 6.48p per share for the year ended 31 December 2016

 

4,791

 

-

 

-






4,791

4,251

8,776

 

 



F&C Private Equity Trust plc

 

Balance Sheet

 


As at 30 September 2017

(unaudited)

As at 30 September 2016

(unaudited)

As at 31 December

2016

(audited)


£'000

£'000

 £'000

Non-current assets




Investments at fair value through profit or loss

254,423

235,892

239,049





Current assets




Other receivables

166

21

26

Cash and cash equivalents

41,592

32,081

48,575


41,758

32,102

48,601





Current liabilities




Other payables

(3,210)

(2,508)

(3,057)

Net current assets

38,548

29,594

45,544

Total assets less current liabilities

292,971

265,486

284,593

 

Non-current liabilities




Interest-bearing bank loan

(26,057)

(25,361)

(25,070)

Net assets

266,914

240,125

259,523





Equity




Called-up ordinary share capital

739

739

739

Share premium account

2,527

-

2,527

Special distributable capital reserve

15,040

17,567

15,040

Special distributable revenue reserve

31,403

31,403

31,403

Capital redemption reserve

1,335

1,335

1,335

Capital reserve

215,456

180,065

203,679

Revenue reserve

414

9,016

4,800

Shareholders' funds

266,914

240,125

259,523





 

Net asset value per Ordinary Share

 

360.98p

 

324.75p

 

350.98p

 



F&C Private Equity Trust plc

           

Reconciliation of Movements in Shareholders' Funds

 

 

 

 


Nine months ended 30 September 2017

Nine months ended 30 September 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

-

2,546

2,546

Profit for the period/total comprehensive income

12,182

25,705

49,628

Dividends paid

(4,791)

(4,251)

(8,776)

Closing shareholders' funds

266,914

240,125

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.  Earnings for the nine months to 30 September 2017 should not be taken as a guide to the results for the year to 31 December 2017.

 

2.   Investment management fee:


 

 

Nine months ended

30 September 2017

 

 

Nine months ended

30 September 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

479

1,438

1,917

424

1,273

1,697

582

1,745

2,327

Investment management fee  - performance fee

-

2,175

2,175

-

1,508

1,508

-

2,024

2,024












479

3,613

4,092

424

2,781

3,205

582

3,769

4,351











 

3.   Finance costs:


 

 

Nine months ended

30 September 2017

 

 

Nine months ended

30 September 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 loan

 

321

 

964

 

1,285

 

313

 

940

 

1,253

 

419

 

1,257

 

1,676





















 

4.   In accordance with the Company's stated dividend policy, the Board declares a quarterly dividend of 3.55 pence per share payable on 31 January 2018 to shareholders on the register on 5 January 2018.  The ex-dividend date is 4 January 2018. 

 

This payment represents the first quarterly dividend to be paid by the Company.  Previously dividends were paid on a semi-annual basis.  This innovation, which was introduced to regularise the flow of income to shareholders, will result in the payment of dividends in January, April, July and October of each year.

 

5.   The basic return per Ordinary Share is based on a net profit on ordinary activities after taxation of £12,182,000 (30 September 2016 - £25,705,000; 31 December 2016 - £49,628,000) and on 73,941,429 (30 September 2016 - 73,017,623; 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 £12,182,000 (30 September 2016 - £25,705,000; 31 December 2016 - £49,628,000) and on 73,941,429 (30 September 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.

 

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 30 September 2017, no warrants remain in issue (30 September 2016 - nil; 31 December 2016 - nil).

 

6. The net asset value per Ordinary Share is based on net assets at the period end of £266,914,000 (30 September 2016 - £240,125,000; 31 December 2016 - £259,523,000) and on 73,941,429 (30 September 2016 - 73,941,429; 31 December 2016 - 73,941,429) shares, being the number of Ordinary Shares in issue at the period end.

 

7.  The financial information for the nine months ended 30 September 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, have been lodged with the Registrar of Companies. The quarterly report is available on the Company's website www.fcpet.co.uk.

 

 

  For more information, please contact:

 

F&C Investment Business Limited                       0131 718 1000

 

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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Third Quarter Results and Dividend Announcement - RNS