TIDMDNE
RNS Number : 4566H
Dunedin Enterprise Inv Trust PLC
25 March 2020
25 March 2020
Dunedin Enterprise Investment Trust PLC ("the Company")
Year ended 31 December 2019
Dunedin Enterprise Investment Trust PLC, the private equity
investment trust, announces its results for the year ended 31
December 2019.
Financial Highlights :
-- Share price total return of 23.6% in the year to 31 December 2019
-- Net asset value total return of 14.4% in the year to 31 December 2019
-- Realisations of GBP8.9m in the year
-- GBP5.2m returned via B shares in June 2019
-- Final dividend of 5.0 p per share proposed for the year ended 31 December 2019
-- Realisation of Kingsbridge post year end
Comparative Total Return Performance
FTSE
Small Cap
(ex Inv
Year to 31 December Net Asset Cos)
2019 value Share price Index
--------------------- ---------- ------------ -----------
One year 14.4% 23.6% 17.7%
Three years 50.8% 134.7% 17.3%
Five years 54.8% 117.1% 49.1%
Ten years 113.0% 227.2% 182.2%
For further information please contact:
Graeme Murray Corinna Osborne / Emily Weston
Dunedin LLP Equity Dynamics
0131 225 6699 07825 326 440 / 07825326442
0131 718 2310 corinna@equitydynamics.co.uk
07813 138367 emily@equitydynamics.co.uk
Chairman's Statement
In the year to 31 December 2019 your Company's net asset value
total return was 14.4%, generated principally from valuation
uplifts.
The relative share price performance was pleasing with a total
return to shareholders of 23.6%. This was boosted by a return of
capital to shareholders of 25p per share in June and the payment of
a 2.0p dividend.
The Company's net asset value per share increased from 412.9p to
444.4p during the year after taking account of the return of
capital and dividends. Since 2012, following the change of
investment policy, a total of GBP115m has been returned to
shareholders.
The discount at which the shares trade was 15.4% at the end of
the year, based on a net asset value per share of 444.4p and a
share price of 376p.
The share price has suffered during the very severe dislocation
in the stock market resulting from the coronavirus; the share price
at the date of this statement was 255p.
Portfolio
No new investments were made during the year. There were
follow-on investments made in GPS, CitySprint and EV. During the
year a recapitalisation was undertaken at both FRA and Kingsbridge
which resulted in proceeds being distributed to Dunedin Enterprise.
There were two realisations from the Realza portfolio - Litalsa and
Quimi Romar.
Overall the trading performance of our portfolio companies has
been strong during the year. Unrealised valuation increases of
GBP24.9m were partially offset by decreases of GBP12.8m. Valuation
uplifts were achieved by FRA, RED, GPS, U-POL, Formaplex and EV,
all of which are trading well as a result of strong organic growth.
The most significant valuation reduction in the year to 31 December
2019 was the decline of GBP6.4m in the value of the holding in
CitySprint.
Following the successful realisation of our investment in
Kingsbridge (the provider of insurance services to contractors) in
March this year, we have re-valued this investment as at 31
December 2019 at GBP10.4m being the expected proceeds from the
sale. This represents an uplift of GBP5.7m during the year after
also taking account of the return of GBP3.2m on a re-financing in
February 2019. The investment was originally made in May 2016 at a
cost of GBP4.2m. Although the transaction includes a two year
earn-out which may generate further proceeds for the Company, no
value has been placed on this. Completion of the transaction is
subject to regulatory approval.
Commitments & Liquidity
At the year end the Company had outstanding commitments to
limited partnership funds of GBP22.2m, which consisted of GBP21.5m
to Dunedin managed funds and GBP0.7m to Realza, the one remaining
European fund. Assuming these funds are held to maturity, it is
estimated that only some GBP12.2m of this total outstanding
commitment will be drawn over the remaining life of the funds.
The investment periods of all funds to which the Company has
made a commitment have now ended. In future we are only required to
meet drawdowns for follow-on investments, management fees and
ongoing expenses during the remainder of the life of the funds.
At 31 December 2019 the Company held cash balances of GBP12.3m.
In addition, we renewed our revolving credit facility at the lower
level of GBP5m; this was undrawn at 31 December 2019 and is
available until 31 May 2020. The Board and the Manager keep the
cash and commitment position under regular review. It is the
Board's intention to extend the revolving credit facility by a
further year.
B Share Scheme
Shareholders received a return of capital via the B Share Scheme
during the year, representing GBP5.2m or 25p per share following
the re-financings at FRA and Kingsbridge, and the realisation of
Litalsa.
This was achieved by way of the issue of 25 B Shares of 1p for
every one ordinary share held. The B shares were immediately
redeemed and proceeds of GBP5.2m were distributed to shareholders
on 26 June 2019.
Dividends
It is proposed that a final dividend of 5.0p per share be paid
on 15 May 2020. This will distribute to shareholders the net profit
generated by the Company during 2019.
Board
In view of his other commitments, Michael Meyer Jensen has
decided not to stand for re-election at the Annual General Meeting
on 6 May 2020. We are grateful to him for his significant
contribution and wish him well for the future.
Outlook
Although the uncertainty created by the spread of the
coronavirus will continue to cause significant dislocation, the
extent of this remains unpredictable. Our portfolio companies are
making contingency plans wherever possible to address this
threat.
Although the UK has formally left the EU there remains
significant uncertainty regarding the ongoing relationship that the
UK will have with the EU. While the Board does not expect there to
be any significant impact from Brexit on the operations of the
Company itself, each of our portfolio companies are preparing for
the likely outcomes as Brexit negotiations continue.
More generally, the Board welcomes the continued strong trading
performance of a number of portfolio companies during the year
under review. We also welcome the returns which have been delivered
for shareholders by the underlying investment performance of the
portfolio and the return of capital. We will continue to return
capital to shareholders whenever practicable following realisations
of investments.
Duncan Budge
Chairman
25 March 2020
Manager's Review
The total net asset return to shareholders in the year to 31
December 2019 was 14.4%. This is stated after taking account of a
final dividend for 2018 of 2p (paid in May 2019) and a B share
redemption equivalent in total of 25p (paid in June 2019).
The net asset value per share in the year to 31 December 2019
increased from 412.9p to 444.4p.
The Company's net asset value increased from GBP85.2m to
GBP91.7m over the year. As detailed below this movement is stated
following a dividend payment of GBP0.4m and capital of GBP5.2m
returned to shareholders via the issue and redemption of B shares
in June 2019.
GBPm
-------------------------------------------------- ------
Net asset value at 1 January 2019 85.2
Unrealised value increases 24.9
Unrealised value decreases (12.8)
Realised gain over opening valuation (0.8)
Net income and capital movements 0.8
-------------------------------------------------- ------
Net asset value prior to shareholder distribution 97.3
Dividends paid to shareholders (0.4)
B share redemption (5.2)
Net asset value at 31 December 2019 91.7
-------------------------------------------------- ------
Portfolio Composition
The investment portfolio can be analysed as shown in the table
below.
Valuation
at Valuation at
1 January Additions Disposals Realised Unrealised 31 December
2019 in year in year movement movement 2019
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
Dunedin managed 64.8 2.7 (3.4) (0.8) 12.6 75.9
Third party managed 10.5 0.1 (5.5) - (0.5) 4.6
--------------------- ---------- --------- --------- --------- ---------- ------------
Investment portfolio 75.3 2.8 (8.9) (0.8) 12.1 80.5
AAA rated money
market funds 2.1 12.9 (6.4) - - 8.6
--------------------- ---------- --------- --------- --------- ---------- ------------
77.4 15.7 (15.3) (0.8) 12.1 89.1
--------------------- ---------- --------- --------- --------- ---------- ------------
Investment Activity
In the year to 31 December 2019 a total of GBP2.8m was invested
in portfolio companies. An investment of GBP1.0m was made in GPS,
the market leader in payment processing technology, to facilitate
further investment in GPS's payments processing platform. A further
GBP0.7m was invested in CitySprint, the same day courier, to
provide working capital support as the company faced increased
competition in a low growth market. There was also a follow-on
investment of GBP0.3m made in EV, the provider of high performance
ruggedised video cameras for the oil and gas industry, to support
the ongoing development of EV's camera fleet.
A further GBP0.8m was drawn down by Dunedin and third-party
managed funds to meet management fees and ongoing expenses.
Realisations
In the year to 31 December 2019 a total of GBP8.9m was realised
from the portfolio of investments.
In January 2019 Litalsa, an investment held within the Realza
portfolio, was realised. Litalsa is a leading independent provider
of printing and varnishing services for metal can and closure
manufacturers in Spain. Total proceeds from the sale amounted to
GBP3.9m (EUR4.5m). The original cost of the investment in Litalsa
was GBP1.4m (EUR1.9m) and, over its life, a total of GBP3.9m
(EUR4.5m) will have been received by Dunedin Enterprise
representing a 2.9 times return.
In August 2019, there was a further realisation from the Realza
portfolio, Quimi Romar, the manufacturer of household cleaning and
personal care products. Proceeds of GBP1.5m (EUR1.6m) were received
which represent a return of 1.2 times original cost.
During the year there were two re-financings undertaken at
portfolio companies following a period of strong trading. In
January 2019 a re-financing of FRA, the provider of forensic
accounting, data analytics and e discovery expertise, was
completed. A total of GBP1.8m was received by Dunedin Enterprise
consisting of GBP1.1m capital and GBP0.7m income. In February 2019
a re-financing of Kingsbridge, the provider of insurance services
to contractors, was completed. A total of GBP3.2m was received by
Dunedin Enterprise consisting of GBP2.3m capital and GBP0.9m
income.
After the year end in February 2020 a further re-financing of
FRA was completed. A total of GBP4.0m was received by Dunedin
Enterprise, consisting of GBP3.5m capital and GBP0.5m income.
Following a successful realisation of the investment in
Kingsbridge (the provider of insurance services to contractors) in
March this year, this investment has been re-valued as at 31
December 2019 at GBP10.4m being the expected proceeds from the
sale. This represents an uplift of GBP5.7m during the year after
also taking account of the return of GBP3.2m on a re-financing in
February 2019. The investment was originally made in May 2016 at a
cost of GBP4.2m. Although the transaction includes a two year
earn-out which may generate further proceeds for the Company, no
value has been placed on this. Completion of the transaction is
subject to regulatory approval.
Unrealised valuation uplifts
In the year to 31 December 2019 there were valuation uplifts
generated from the following investments: FRA (GBP6.7m),
Kingsbridge (GBP5.7m), RED (GBP4.8m), GPS (GBP2.8m), U-POL
(GBP2.3m), Formaplex (GBP1.9m) and EV (GBP1.2m).
FRA has achieved a 49% increase in maintainable EBITDA
(maintainable EBITDA being EBITDA for the last twelve months
adjusted for exceptional items) in the year. The company continues
to experience a strong demand for its services with a robust
pipeline of new projects. During 2019 FRA opened an office in
Stockholm further expanding its global footprint.
Red, the supplier of SAP software experts on both a contract and
permanent basis, has performed strongly in the year with a 59%
increase in maintainable EBITDA. The contracting division continues
to perform well in the UK, Germany and US markets. New business
written in the current year is 18% up on the same period last
year.
As noted above Kingsbridge was realised following the year end
generating an uplift of GBP5.7m during the year.
During the year GPS showed significant growth in both revenue
and maintainable EBITDA. Record levels of new business have been
achieved and the global reach of the business has increased with
expansion into both Singapore and Australia. The strong trading
performance has allowed GPS to be valued on a revenue basis,
whereas previously the investment was valued at cost.
U-Pol, the manufacturer of automotive refinish products
including body fillers, coatings, aerosols, polishing compounds and
components, has achieved an 18% increase in maintainable EBITDA
during the year. Performance in the year has been boosted by a new
UK sales team and sales to two significant US retailers.
Formaplex, the provider of tooling and lightweight components,
has seen profits recover strongly in the year. This has been
achieved by winning new contracts in the components division and
improved cost control. The sales pipeline is strong with more than
90% of 2019/20 sales covered by confirmed orders. The improved
maintainable EBTDA has allowed Formaplex to be valued on an
earnings basis rather than a net assets basis.
Unrealised valuation reductions
The most significant valuation reduction in the year to 31
December 2019 was at CitySprint (GBP6.4m). There were also
valuation reductions at Incremental (GBP1.5m) and Hawksford
(GBP1.1m).
CitySprint, the same day courier, experienced difficult trading
during 2019 due to increased competition in a low growth market and
the loss of a significant customer. This has impacted maintainable
EBITDA which reduced by 43% in the year. Both the company's new
management team and the institutional investors are proactively
taking steps to manage costs within the business and return
CitySprint to historic levels of profitability.
Revenue at Incremental has shown an increase during the year.
However, there has been accelerated investment in both billable and
non-billable staff to support future growth in the business. A
provision has been made against this investment reflecting the
higher cost base in the business and fall in profitability. The
pipeline of new business is strong and the focus in 2020 is to
convert the order pipeline into billable work.
Hawksford continues to progress but has suffered from
exceptional costs of change which has impacted valuation. These
costs are not expected to continue.
Cash and commitments
The Company had outstanding commitments to limited partnership
funds of GBP22.2m. The outstanding commitment position consisted of
GBP21.5m to Dunedin managed funds and GBP0.7m to Realza, the one
remaining European fund. Assuming these funds are held to maturity,
it is estimated that only some GBP12.2m of this total outstanding
commitment will be drawn over the remaining life of the funds.
The original investment periods of all funds to which the
Company has made a commitment have now ended. In future the Company
will only be required to meet drawdowns for follow-on investments,
management fees and expenses during the remainder of the life of
the funds.
The Company has a revolving credit facility with Lloyds Bank of
GBP5m which was undrawn at 31 December 2019 and is available until
31 May 2020. The Board and the Manager keep the cash and commitment
position under regular review. It is the Board's intention to
extend the revolving credit facility by a further year.
Coronavirus
The coronavirus is creating significant disruption around the
world which, to varying degrees, will have an impact on each of the
portfolio companies. Your Manager has representation on the Board
of each portfolio company. Regular contact is being maintained with
the portfolio companies to understand the impact of the coronavirus
on their trading and financial stability. Each portfolio company is
developing a contingency plan to mitigate the impact of the
coronavirus. These contingency plans will evolve as the impact of
the coronavirus becomes clearer. It is not possible at the date of
this Manager's Review to fully assess the impact of the coronavirus
on the portfolio companies.
Brexit
Your Manager has a representative on the Board of each Dunedin
managed portfolio company. The board of each portfolio company
meets regularly and continues to assess the impact of Brexit on
their business, developing contingency plans to mitigate a variety
of Brexit scenarios. These plans are kept under constant review as
the outcome of the Brexit negotiations evolve.
Valuations and Gearing
The average earnings multiple applied in the valuation of the
Dunedin managed portfolio was 9.1x EBITDA (2018: 9.6x). These
multiples continue to be applied to maintainable profits.
Within the Dunedin managed portfolio, the weighted average
gearing of the companies was 2.8x EBITDA (2018: 2.7x).
Analysing the portfolio gearing in more detail, the percentage
of investment value represented by different gearing levels was as
follows:
Less than 1 x EBITDA 33%
Between 1 and 2 x EBITDA -%
Between 2 and 3 x EBITDA 18%
More than 3 x EBITDA 49%
Of the total acquisition debt in the Dunedin managed portfolio
companies the scheduled repayments are spread as follows:
Less than one year 15%
Between one and two years 13%
Between two and three years 3%
More than three years 69%
Fund Analysis
The chart below analyses the investment portfolio by investment
fund vehicle.
Dunedin Buyout Fund II 47%
Dunedin Buyout Fund III 45%
Equity Harvest Fund 3%
Third Party managed 5%
Portfolio Analysis
Detailed below is an analysis of the investment portfolio by
geographic location as at 31 December 2019.
UK 95%
Rest of Europe 5%
Sector Analysis
The investment portfolio of the Company is broadly diversified.
At 31 December 2019 the largest sector exposure of 44% remains to
the diverse Support Services sector.
Automotive 3%
Consumer products & services 2%
Financial services 34%
Industrials 17%
Support services 44%
Valuation Method
Cost 17%
Earnings - uplift 47%
Revenue - uplift 11%
Assets basis 13%
Exit value 12%
Year of Investment
In the vintage year chart below, current value is allocated to
the year in which either Dunedin Enterprise or the third-party
manager first invested in each portfolio company.
<1 year -%
1-3 years 33%
3-5 years 14%
>5 years 53%
Dunedin LLP
25 March 2020
Ten Largest Investments
(both held directly and via Dunedin managed funds) by value at
31 December 2019
Approx. Percentage
percentage Cost of Directors' of net
of equity investment valuation assets
Company name % GBP'000 GBP'000 %
-------------- ----------- ----------- ----------- -----------
FRA 5.4 4,894 18,398 20.1
Kingsbridge 12.4 1,852 10,373 11.3
GPS 8.5 7,338 10,148 11.1
Hawksford 17.8 6,746 10,067 11.0
Red 20.1 9,665 9,316 10.2
Weldex 15.1 9,505 9,198 10.0
U-POL 5.0 5,657 5,944 6.5
Realza 8.9 4,289 4,372 4.8
EV 10.6 8,321 3,643 4.0
Formaplex 19.4 3,235 3,607 3.9
61,502 85,066 92.9
-------------- ----------- ----------- ----------- -----------
Income Statement
2019 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment income 1,390 - 1,390 778 - 778
Gains on investments - 11,293 11,293 - 6,269 6,269
---------------------------- --------- ------- -------- ----------- --------- ---------
Total income 1,390 11,293 12,683 778 6,269 7,047
Expenses
Investment management fee (15) (46) (61) (49) (148) (197)
Other expenses (390) (39) (429) (448) (113) (561)
---------------------------- --------- ------- -------- ----------- --------- ---------
Profit before finance costs
and tax 985 11,208 12,193 281 6,008 6,289
Finance costs (27) (80) (107) (66) (197) (263)
---------------------------- --------- ------- -------- ----------- --------- ---------
Profit before tax 958 11,128 12,086 215 5,811 6,026
Taxation (25) 25 - (38) 38 -
---------------------------- --------- ------- -------- ----------- --------- ---------
Profit for the year 933 11,153 12,086 177 5,849 6,026
---------------------------- --------- ------- -------- ----------- --------- ---------
Basic return per ordinary
share
(basic & diluted) 4.52p 54.02p 58.54p 0.86p 28.33p 29.19p
The total column of this statement represents the Income
Statement of the Group, prepared in accordance with International
Financial Reporting Standards as adopted by the EU. The
supplementary revenue and capital columns are both prepared under
guidance published by the Association of Investment Companies. All
items in the above statement derive from continuing operations.
All income is attributable to the equity shareholders of Dunedin
Enterprise Investment Trust PLC.
Statement of Changes in Equity
for the year ended 31 December 2019
Year ended 31 December 2019
Capital Capital Capital Special Total
Share redemption Reserve reserve Distributable Revenue retained Total
capital reserve realised - Reserve account earnings equity
GBP'000 GBP'000 GBP'000 unrealised GBP'000 GBP'000 GBP'000 GBP'000
GBP'000
-------------- ---------- ------------ ---------- ------------ -------------- ---------- ---------- ----------
At 31
December
2018 5,161 23,409 58,063 (13,030) 6,312 5,320 56,665 85,235
Profit for
the year - - 2,000 9,153 - 933 12,086 12,086
B shares
issued
during the
year 5,161 (5,161) - - - - - -
B shares
redeemed
during
the year (5,161) 5,161 - - (5,161) - (5,161) (5,161)
Dividends
paid - - - - - (413) (413) (413)
-------------- ---------- ------------ ---------- ------------ -------------- ---------- ---------- ----------
At 31
December
2019 5,161 23,409 60,063 (3,877) 1,151 5,840 63,177 91,747
-------------- ---------- ------------ ---------- ------------ -------------- ---------- ---------- ----------
Year ended 31 December 2018
Capital Capital Capital Special Total
Share redemption Reserve reserve Distributable Revenue retained Total
capital reserve realised - Reserve account earnings equity
GBP'000 GBP'000 GBP'000 unrealised GBP'000 GBP'000 GBP'000 GBP'000
GBP'000
-------------- ---------- ------------ ---------- ------------ -------------- ---------- ---------- ----------
At 31
December
2017 5,161 23,409 57,936 (18,752) 26,956 6,278 72,418 100,988
Profit for
the year - - 127 5,722 - 177 6,026 6,026
B shares
issued
during the
year 20,644 (20,644) - - - - - -
B shares
redeemed
during
the year (20,644) 20,644 - - (20,644) - (20,644) (20,644)
Dividends
paid - - - - - (1,135) (1,135) (1,135)
-------------- ---------- ------------ ---------- ------------ -------------- ---------- ---------- ----------
At 31
December
2018 5,161 23,409 58,063 (13,030) 6,312 5,320 56,665 85,235
-------------- ---------- ------------ ---------- ------------ -------------- ---------- ---------- ----------
Balance Sheet
As at 31 December 2019
31 December 31 December
2019 2018
GBP'000 GBP'000
------------------------------------------- ------------ ------------
Non-current assets
Investments held at fair value 89,105 77,431
Current assets
Other receivables 1,073 4,242
Cash and cash equivalents 3,735 3,645
------------------------------------------- ------------ ------------
4,808 7,887
Current liabilities
Other liabilities (2,166) (83)
Net assets 91,747 85,235
------------------------------------------- ------------ ------------
Capital and reserves
Share capital 5,161 5,161
Capital redemption reserve 23,409 23,409
Capital reserve - realised 60,063 58,063
Capital reserve - unrealised (3,877) (13,030)
Special distributable reserve 1,151 6,312
Revenue reserve 5,840 5,320
------------------------------------------- ------------ ------------
Total equity 91,747 85,235
------------------------------------------- ------------ ------------
Net asset value per ordinary share (basic
and diluted) 444.4p 412.9p
Cash Flow Statement
for the year ended 31 December 2019
31 December 31 December
2019 2018
GBP'000 GBP'000
-------------------------------------------- ------------ ------------
Cash flows from operating activities
Profit
Adjustments for: 12,086 6,026
Gains on investments (11,293) (6,269)
Interest paid 107 263
Decrease/(increase) in debtors 4,658 (4,699)
Increase in creditors 594 1,398
Net cash from operating activities 6,152 (3,281)
Cash flows from investing activities
Purchase of investments (2,696) (13,942)
Drawdown from subsidiary (112) (162)
Purchase of 'AAA' rated money market funds (12,862) (47)
Sale of investments 3,401 11,251
Distribution from subsidiary 5,480 1,014
Sale of 'AAA' rated money market funds 6,410 21,413
-------------------------------------------- ------------ ------------
Net cash used in investing activities (379) 19,527
Cash flows from financing activities
Redemption of B shares (5,161) (20,644)
Dividends paid (413) (1,135)
Interest paid (107) (263)
-------------------------------------------- ------------ ------------
(5,681) (22,042)
Net increase/(decrease) in cash and cash
equivalents 92 (5,796)
Cash and cash equivalents at 1 January 3,645 9,441
Effect of exchange rate fluctuations on (2) -
cash held
Cash and cash equivalents at 31 December 3,735 3,645
-------------------------------------------- ------------ ------------
Statement of Directors' Responsibilities in respect of the
Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report
and the Group and Parent Company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent
Company financial statements for each financial year. Under that
law they have elected to prepare the financial statements in
accordance with IFRSs as adopted by the EU and applicable law.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of their profit or
loss for that period. In preparing these financial statements, the
Directors are required to:
- select suitable accounting policies and then apply them
consistently;
- make judgments and estimates that are reasonable and
prudent;
- state whether they have been prepared in accordance with IFRSs
as adopted by the EU;
- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so. As explained in note 3, the
Directors do not believe that it is appropriate to prepare these
financial statements on a going concern basis.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Company and enable them to
ensure that its financial statements comply with the Companies Act
2006. They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors' Report,
Directors' Remuneration Report and Corporate Governance Statement
that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the
annual financial report
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the company taken as a whole; and
- the Strategic Report and Directors' Report includes a fair
review of the development and performance of the business and the
position of the Company, together with a description of the
principal risks and uncertainties that it faces.
We consider the annual report and accounts taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position and
performance, business model and strategy.
Duncan Budge
Chairman
25 March 2020
Notes to the Accounts
1. Preliminary Results
The financial information contained in this report does not
constitute the Company's statutory accounts for the years ended 31
December 2019 or 2018. The financial information for 2018 is
derived from the statutory accounts for 2018 which have been
delivered to the Registrar of Companies. The auditor has reported
on those accounts. Their report was (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498(2) or (3) of
the Companies Act 2006. The audit of the statutory accounts for the
year ended 31 December 2019 is not yet complete. These accounts
will be finalised on the basis of the financial information
presented by the Directors in this preliminary announcement and
will be delivered to the Registrar of Companies following the
Company's annual general meeting.
2. Going Concern
The financial information for 2018 and 2019 has not been
prepared on a going concern basis, since the Company's current
objective is to conduct an orderly realisation of the investment
portfolio and return cash to shareholders. Following the Director's
assessment, no adjustments were deemed necessary to the investment
valuations or other assets and liabilities included in the
financial information as a consequence of the change in the basis
of preparation.
3. Dividends
Year to 31 Year to 31
December December
2019 2018
GBP'000 GBP'000
Dividends paid in the year 413 1,135
------------ ------------
A final dividend of 5.0p per share for the year ended 31
December 2019 is proposed and if approved, will be paid on 15 May
2020 to shareholders on the register at close of business on 24
April 2020. The ex-dividend date is 23 April 2020.
4. Earnings per share
Year to Year to
31 December 31 December
2019 2018
Revenue return per ordinary share
(p) 4.52 0.86
Capital return per ordinary share
(p) 54.02 28.33
Earnings per ordinary share (p) 58.54 29.19
Weighted average number of shares 20,644,062 20,644,062
The earnings per share figures are based on the weighted average
numbers of shares set out above. Earnings per share is based on the
revenue profit in the period as shown in the consolidated income
statement.
References to page numbers and notes in the disclosures below
are to page numbers and notes to the annual report and accounts of
the Company for the year ended 31 December 2019.
5. Principal Risks and Uncertainties (Strategic Report page 25)
The principal risks and uncertainties identified by the Board
which might affect the Company's business model and future
performance, and the steps taken with a view to their mitigation,
are as follows:
Coronavirus: the profitability of the Company's investments is
adversely impacted due to an adverse economic impact on the UK and
world economy from the Coronavirus. Mitigation: A representative of
your Manager, Dunedin LLP, sits on the Board of each portfolio
company. These companies hold regular board meetings at which the
financial position of the company is monitored. Between board
meetings there is an ongoing dialogue between the Manager and the
senior management of the portfolio company. Each portfolio company
monitors all risks pertinent to their businesses including the
coronavirus, the potential impact these risks may have on their
businesses, and develop contingency plans where appropriate. The
Board and Manager keep under regular review the liquidity available
to the Company, including bank facilities, required to meet the
expected outstanding commitments that will be drawn and the ongoing
expenses of the Company. The Board are satisfied that the liquidity
position of the Company is sufficiently strong to
mitigate the threat.
Brexit: the profitability of the Company's investments is
adversely impacted due to an adverse economic impact on the UK
economy for a no-deal Brexit and restricted access to European
markets. Mitigation: Brexit has been an ongoing board agenda item
for all our portfolio companies. Each portfolio company has
developed plans to cater for a variety of outcomes from the Brexit
negotiations. These plans will be continually revisited as the
course of the Brexit negotiations becomes clearer.
Investment and liquidity risk: the Company's investments are in
small and medium-sized unquoted companies, which by their nature
entail a higher level of risk and lower liquidity than investments
in large quoted companies. Mitigation: the Manager aims to limit
the risk attaching to the portfolio as a whole by closely
monitoring individual holdings, including the appointment of
investor directors to the board of portfolio companies. The Board
reviews the portfolio, including the schedule of projected exits,
with the Manager on a regular basis with a view to ensuring that
the orderly realisation process is progressing.
Portfolio concentration risk: following the adoption of the
Company's revised investment policy in May 2016 the portfolio will
become more concentrated as investments are realised and cash is
returned to shareholders. This will increase the proportionate
impact of changes in the value of individual investments on the
value of the Company as a whole. The Directors' valuation of the
Company's investments represents their best assessment of the fair
value of the investments as at the valuation date and the amounts
eventually realised from such investments may be more or less than
the Directors' valuation. Mitigation: the Directors and Manager
keep the changing composition of the portfolio under review and
focus closely on those holdings which represent the largest
proportion of total value.
Financial risk: most of the Company's investments involve a
medium to long term commitment and many are relatively illiquid.
Mitigation: the Directors consider it appropriate to finance the
Company's activities through borrowing on a short-term basis.
Accordingly, the Board seeks to ensure that the availability of
cash reserves and bank borrowings match the forecast cash flows of
the Company both on a base and stress case basis given the level of
undraw commitments to limited partnership funds.
Economic risk: events such as economic recession or general
fluctuations in stock markets and interest rates may affect the
valuation of portfolio companies and their ability to access
adequate financial resources, as well as affecting the Company's
own share price and discount to net asset value. Mitigation: the
Company invests in a diversified portfolio of investments spanning
various sectors and maintains access to sufficient cash reserves to
be able to provide additional funding to portfolio companies should
this become necessary.
Credit risk: the Company holds a number of financial instruments
and cash deposits and is dependent on counterparties discharging
their commitment. Mitigation: the Directors review the
creditworthiness of the counterparties to these investments and
cash deposits and seek to ensure there is no undue concentration of
credit risk with any one party.
Currency risk: the Company is exposed to currency risk as a
result of investing in companies and funds denominated in euros.
The sterling value of these investments can be influenced by
movements in foreign currency exchange rates. Mitigation: Currency
risk is monitored by the Manager on an ongoing basis and on a
quarterly basis by the Board.
Internal control risk: the Company's assets could be at risk in
the absence of an appropriate internal control regime. Mitigation:
the Board regularly reviews the system of internal controls, both
financial and non-financial, operated by the Company and the
Manager. These include controls designed to ensure that the
Company's assets are safeguarded and that proper accounting records
are maintained.
6. Related Party Transactions (Notes to the Accounts page 63, note 21)
The Company has investments in Dunedin Buyout Fund II LP,
Dunedin Buyout Fund III LP, Dunedin Fund of Funds LP and Equity
Harvest Fund LP. Each of these limited partnerships are managed by
Dunedin. The Company has paid a management fee of GBP0.6m (2018:
GBP0.7m) in respect of these limited partnerships. The total
investment management fee payable by the Company to the Manager is
therefore GBP0.7m (2018: GBP0.9m).
Since the Company began investing in Dunedin Buyout Funds ("the
Funds") executives of the Manager have been entitled to participate
in a carried interest scheme via the Funds. Performance conditions
are applied whereby any gains achieved through the carried interest
scheme associated with the Funds are conditional upon a certain
minimum return having been generated for the limited partner
investors. Additionally, within Dunedin Buyout Fund II LP and
Dunedin Buyout Fund III LP the economic interest of the Manager is
aligned with that of the limited partner investors by co-investing
in this fund.
As at 31 December 2019 there is a provision made within
Investments for carried interest of GBP8.0m (2018: GBP5.1m)
relating to Dunedin Buyout Fund III LP and GBP1.4m (2018: GBP1.4m)
relating to Equity Harvest Fund LP. Current executives of the
Manager are entitled to 85% of the carried interest in Dunedin
Buyout Fund III LP and 14% in Equity Harvest Fund LP.
ENDS
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR KKQBBOBKDBNB
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March 25, 2020 03:00 ET (07:00 GMT)
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