TIDMDNE
RNS Number : 0725U
Dunedin Enterprise Inv Trust PLC
24 March 2023
24 March 2023
For release 24 March 2023
Dunedin Enterprise Investment Trust PLC ("the Company")
Year ended 31 December 2022
Dunedin Enterprise Investment Trust PLC, the private equity
investment trust, announces its results for the year ended 31
December 2022.
Financial Highlights :
-- Share price total return of 18.5% in the year to 31 December 2022
-- Net asset value total return of 21.7% in the year to 31 December 2022
-- Realisations of GBP36.9m in the year
-- GBP41m returned via tender offer in November 2022
-- Interim dividend paid of 34.0p per share
-- Final dividend of 25.0p per share proposed for the year ended 31 December 2022
-- Total of GBP145.1m has been returned to shareholders since
the decision to wind-up the Trust in 2016
Comparative Total Return Performance
FTSE
Small Cap
(ex Inv
Net Asset Cos)
Year to 31 December 2022 value Share price Index
-------------------------- ---------- ------------ -----------
One year 21.7% 18.5% -17.3%
Three years 60.4% 58.1% 10.3%
Five years 95.2% 113.9% 11.9%
Ten years 148.4% 209.4% 130.3%
For further information please contact:
Graeme Murray
Dunedin LLP
07813 138367
Chairman's Statement
Duncan Budge, Chairman
I am pleased to report further progress in terms of performance
and the return of cash to shareholders.
The total return in the year to 31 December 202 2 was 21.7 % and
18.5 % in terms of net asset value per share and share price
respectively.
Your Company's net asset value per share increased from 558.8 p
to 627.1 p in the year. This is stated after allowing for dividends
per share paid in the year of 48.5p, totalling GBP6.4m .
The share price of 509 p at 31 December 202 2 represented a
discount of 1 8.8 % to the net asset value of 627.1 p per share.
The share price currently stands at 562.5p.
In November 202 2 a tender offer returned GBP 41 m to
shareholders. In total GBP 47.4 m was returned to shareholders this
year. Since shareholders approved the decision to implement a
managed wind-down of the Trust in May 2016 a total of GBP 145.1 m
has been returned to shareholders.
Your Company's net asset value decreased over the year from
GBP73.4m to GBP34.5m.
Portfolio
During the year a total of GBP36.9m was realised from the
investment portfolio.
The investment in RED, the provider of SAP contract and
permanent staff, was realised generating proceeds of GBP24.1m and a
return of 2.2x original cost. The transaction included an earn-out
arrangement which is dependent upon RED achieving profit targets in
the year to 31 March 2023. The earn-out has been valued at GBP4.0m
at 31 December 2022.
The realisation of Incremental, the market-leading IT services
platform, was completed in March 2022, generating proceeds of
GBP9.1m and a return of 2.4x original cost.
In January 2022 the remaining investment in CitySprint, the same
day courier, was realised, generating GBP1.5m.
In November 2022 Realza returned GBP2.9m following the sale of
Dolz, a manufacturer of water pumps for the automotive
industry.
Unrealised valuation increases of GBP 5 .3m were offset by
decreases of GBP 6.0 m. Valuation uplifts were achieved at Premier
Hytemp and FRA , offset by a reduction in the valuation of GPS .
Further details are provided in the Manager's Review.
Cash, Commitments & Liquidity
The original investment periods of all funds to which the
Company has made a commitment have now ended. In future the Company
is only required to meet drawdowns for follow-on investments,
management fees and expenses during the remainder of the life of
the funds.
At 31 December 202 2 the Company held cash and near cash
equivalents amounting to GBP 12 .4m. There are outstanding
commitments to limited partnership funds of GBP9. 6 m at 31
December 202 2 , consisting of GBP8.9m to Dunedin managed funds and
GBP0.7m to Realza.
Tender offer
A tender offer was approved by shareholders in November 20 22
for 58.1 % of the issued share capital at a 1. 0 % discount to the
net asset value at 30 September 202 2 . Under the tender offer GBP
41 m was returned to shareholders.
Dividends
An interim dividend of 34 .0p was paid in November 202 2 . It is
proposed that a final dividend of 25.0p per share be paid on 19 May
202 3.
Outlook
The Board acknowledges the importance of monitoring the
Company's costs as the wind-down progresses and will continue to
keep under review the options available to the Company. However, in
view of the Company's remaining investments and after discussions
with the Manager and the Company's advisers, the Board does not
currently anticipate putting formal proposals to Shareholders for a
members' voluntary liquidation of the Company in the short term
while the wind-down continues.
Furthermore, the Board considers maintaining the Company's
listed status to be important during this stage of the wind-down,
as many Shareholders would be unable to hold the Shares, or be
greatly inconvenienced by holding them, if they could not be traded
on the London Stock Exchange.
As the wind-down progresses, the Board will continue to assess
whether the Company's current arrangements remain in the interests
of Shareholders as a whole and will, of course, continue to keep
Shareholders informed as to the future of the Company.
Duncan Budge
Chairman
24 March 2023
Manager's Review
The total net assets return for the year, after taking account
of dividends and capital returned to shareholders, was 21.7 %.
The Company's net asset value decreased from GBP7 3.4 m to GBP
34.5 m over the year. As detailed below this movement is stated
following dividend payments totalling GBP 6.4 m and capital of GBP
41.5 m returned to shareholders via a tender offer in November 202
2 .
GBPm
--------------------------------------------------- ------
Net asset value at 1 January 2022 73.4
Unrealised value increases 5.3
Unrealised value decreases (6.0)
Realised gain over opening valuation 5.2
Net income and capital movements 4.5
--------------------------------------------------- ------
Net asset value prior to shareholder distributions 82.4
Dividends paid to shareholders (6.4)
Tender offer (41.5)
--------------------------------------------------- ------
Net asset value at 31 December 2022 34.5
--------------------------------------------------- ------
Portfolio Composition
The investment portfolio can be analysed as shown in the table
below.
Valuation Valuation
at at
1 January Additions Disposals Realised Unrealised 31 December
2022 in year in year movement movement 2022(1)
GBP'm GBP'm GBP'm GBP'm GBP'm GBP'm
--------------------- ---------- --------- --------- --------- ---------- ------------
Dunedin managed 43.6 0.4 (34.0) 5.3 (1.2) 14.1
Third-party managed 5.2 0.1 (2.9) (0.1) 0.5 2.8
--------------------- ---------- --------- --------- --------- ---------- ------------
Investment portfolio 48.8 0.5 (36.9) 5.2 (0.7) 16.9
AAA rated money
market funds 11.8 28.4 (28.6) - - 11.6
--------------------- ---------- --------- --------- --------- ---------- ------------
60.6 28.9 (65.5) 5.2 (0.7) 28.5
--------------------- ---------- --------- --------- --------- ---------- ------------
(1) in addition the Company held net current assets of GBP 6.0
m
Realisations
In the year to 31 December 202 2 a total of GBP3 6.9 m was
realised from the investment portfolio.
In October 2022 the investment in RED, the provider of SAP
contract and permanent staff was realised in a secondary management
buy-out to AEA SBPE. The investment in RED was valued at GBP20.7m
at 31 December 2021. Proceeds from the sale amounted to GBP24.1m,
consisting of capital of GBP20.1m and income of GBP4.0m. The
investment in RED has generated cash proceeds of GBP25.5m,
representing a return of 2.2x original cost. Additionally, there
are future potential proceeds from an earn-out arrangement which
are dependent upon RED achieving profit targets in the year to 31
March 2023. The potential earn-out proceeds are valued at GBP4.0m
at 31 December 2022.
In March 2022 Incremental, the market-leading IT services
platform which designs, implements and supports clients with
ERP/CRM systems and cloud infrastructure, was realised by a trade
sale to Telefonica. Proceeds from the realisation amounted to
GBP9.1m, consisting of capital of GBP8.4m and income of GBP0.7m.
The investment in Incremental was valued at GBP6.0m at 31 December
2021 and has generated a return of 2.4x original cost.
In January 2022 the remaining investment in CitySprint, the same
day courier, was realised delivering proceeds of GBP1.5m. Total
proceeds from the original investment totalled GBP21.3m and
generated a 2.1x return on cost of GBP9.8m.
In November 2022 the remaining European fund, Realza, returned
GBP2.9m following the sale of Dolz, a manufacturer of water pumps
for the automotive industry.
Investment activity
A further GBP0. 5 m was drawn down by Dunedin and third-party
managed funds to meet management fees and ongoing expenses.
Unrealised valuation uplifts
In the year to 31 December 202 2 there were valuation uplifts
generated from the following investments: Premier (GBP 1.2 m) and
FRA (GBP 0.7 m) .
Premier Hytemp, the provider of highly engineered components to
the oil and gas industry, has experienced a recovery in
profitability following an increase in margins both in the UK and
Singapore. As the market outlook improves the company is tendering
for some significant contracts. The investment continues to be
valued on a discounted net assets basis.
Trading at FRA, the forensic accounting, data analytics and
e-discovery business, was impacted by COVID but has recovered
during 2022, albeit not as yet to the levels seen pre-COVID. The
uplift in valuation reflects the improved trading position.
In addition, there was a release of the provision for carried
interest in Dunedin Buyout Fund III LP amounting to GBP 2.8 m. The
majority of this movement was a result of carried interest released
on the sale of Incremental .
Unrealised valuation reductions
In the year to 31 December 202 2 there w as a valuation
reduction at GPS of GBP5.9m .
A partial sale of GPS, a market leader in payment processing
technology, was achieved in December 2021 generating a cash return
of 2.2x original cost. In the year the revenue of GPS has continued
to increase by 18%. However, since December 2021 the valuation
multiples applied to fintech companies have suffered a significant
downturn. This has resulted in no value being attributed to the
remaining investment.
Cash and commitments
The Company had outstanding commitments to limited partnership
funds of GBP9. 6 m, consisting of GBP8.9m to Dunedin managed funds
and GBP0.7m to Realza, the one remaining European fund.
The original investment periods of all funds to which the
Company has made a commitment have now ended. In future the Company
is only required to meet drawdowns for follow-on investments,
management fees and expenses during the remainder of the life of
the funds.
Valuations and Gearing
The average earnings multiple applied in the valuation of the
Dunedin managed portfolio was 8.3 x EBITDA (202 1 : 9. 7 x). These
multiples continue to be applied to maintainable profits.
Within the Dunedin managed portfolio, the weighted average
gearing of the companies was 4.1 x EBITDA (202 1 : 3.3 x).
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 - %
Between 1 and 2 x EBITDA 32 %
Between 2 and 3 x EBITDA - %
More than 3 x EBITDA 68 %
Fund Analysis
The chart below analyses the investment portfolio by investment
fund vehicle.
Dunedin Buyout Fund II 57 %
Dunedin Buyout Fund III 27 %
Realza 16%
Portfolio Analysis
Detailed below is an analysis of the head office of the
investment portfolio companies by geographic location as at 31
December 2022.
UK 85 %
Rest of Europe 15 %
Sector Analysis
Consumer products & services 14 %
Industrials 27 %
Support services 59 %
Valuation Method
Earnings - provision 10 %
Earnings - uplift 38 %
Assets basis 52 %
Dunedin LLP
24 March 2023
Total return of investments
at 31 December 2022
Original
cost of Realised Directors Total
investment to date*(1) Valuation(*2) return
Company name GBP'000 GBP'000 GBP'000 GBP'000
--------------- ----------------- ------------ -------------- --------
Weldex 9,505 119 6,612 6,731
--------------- ----------------- ------------ -------------- --------
FRA 6,035 5,504 4,132 9,636
--------------- ----------------- ------------ -------------- --------
Premier Hytemp 10,136 178 2,917 3,095
--------------- ----------------- ------------ -------------- --------
Realza 11,545 14,551 2,773 17,324
--------------- ----------------- ------------ -------------- --------
EV 8,321 - 1,921 1,921
--------------- ----------------- ------------ -------------- --------
GPS 8,220 18,203 - 18,203
--------------- ----------------- ------------ -------------- --------
Hawksford 6,910 7,087 - 7,087
--------------- ----------------- ------------ -------------- --------
60,672 45,642 18,355 63,997
--------------- ----------------- ------------ -------------- --------
*(1) - dividends and capital
*(2) - excludes carried interest provision of GBP1.5m
Income Statement
2022 2021
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment income 4,951 - 4,951 4,800 - 4,800
Gains on investments - 4,514 4,514 - 23,408 23,408
---------------------------- ------- ------- ------- ------- ------- -------
Total income 4,951 4,514 9,465 4,800 23,408 28,208
Expenses
Investment management fee (35) (105) (140) (29) (88) (117)
Other expenses (380) (13) (393) (384) (23) (407)
---------------------------- ------- ------- ------- ------- ------- -------
Profit before finance costs
and tax 4,536 4,396 8,932 4,387 23,297 27,684
Finance costs - - - (10) (32) (42)
---------------------------- ------- ------- ------- ------- ------- -------
Profit before tax 4,536 4,396 8,932 4,377 23,265 27,642
Taxation (37) 37 - 272 70 342
---------------------------- ------- ------- ------- ------- ------- -------
Profit for the year 4,499 4,433 8,932 4,649 23,335 27,984
---------------------------- ------- ------- ------- ------- ------- -------
Basic return per ordinary
share
(basic & diluted) 36.46p 35.92p 72.38p 26.56p 133.33p 159.89p
The total column of this statement represents the Income
Statement of the Group, prepared in accordance with UK-adopted
International Accounting Standards. 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 2022
Year ended 31 December 2022
Capital Capital Capital Special Total
Share redemption Reserve reserve Distributable Revenue retained Total
capital reserve Realised - Reserve account earnings equity
GBP'000 GBP'000 * unrealised GBP'000 GBP'000 GBP'000 GBP'000
GBP'000 GBP'000
-------------- ---------- ---------- ------------ -------------- ---------- ----------
At 31
December
2021 3,284 1,241 19,721 (8,378) 51,001 6,544 68,888 73,413
Profit for
the year - - 14,276 (9,842) - 4,499 8,933 8,933
Purchase and
cancellation
of shares (1,908) 1,908 (50) - (41,407) - (41,457) (41,457)
Dividends
paid - - - - - (6,371) (6,371) (6,371)
-------------- ---------- ------------ ---------- ------------ -------------- ---------- ---------- ----------
At 31
December
2022 1,376 3,149 33,947 (18,220) 9,594 4,672 29,993 34,518
-------------- ---------- ------------ ---------- ------------ -------------- ---------- ---------- ----------
* included in the profit for the year is GBP4.0m relating to the
deferred consideration on the sale of RED which will not qualify as
distributable profit until receipt
Year ended 31 December 2021
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
2020 4,525 49,850 30,600 (16,357) 1,151 5,153 20,547 74,922
Profit for
the year - - 15,356 7,979 - 4,649 27,984 27,984
Cancellation
of capital
redemption
reserve - (49,850) - - 49,850 - 49,850 -
Purchase and
cancellation
of shares (1,241) 1,241 (26,235) - - - (26,235) (26,235)
Dividends
paid - - - - - (3,258) (3,258) (3,258)
-------------- ---------- ------------ ---------- ------------ -------------- ---------- ---------- ----------
At 31
December
2021 3,284 1,241 19,721 (8,378) 51,001 6,544 68,888 73,413
-------------- ---------- ------------ ---------- ------------ -------------- ---------- ---------- ----------
Balance Sheet
As at 31 December 2022
31 December 31 December
2022 2021
GBP'000 GBP'000
------------------------------------------- ------------ ------------
Non-current assets
Investments held at fair value 28,487 60,588
Current assets
Other receivables 5,375 297
Cash and cash equivalents 778 12,616
------------------------------------------- ------------ ------------
6,153 12,913
Current liabilities
Other liabilities (122) (88)
Net assets 34,518 73,413
------------------------------------------- ------------ ------------
Capital and reserves
Share capital 1,376 3,284
Capital redemption reserve 3,149 1,241
Capital reserve - realised 33,947 19,721
Capital reserve - unrealised (18,220) (8,378)
Special distributable reserve 9,594 51,001
Revenue reserve 4,672 6,544
------------------------------------------- ------------ ------------
Total equity 34,518 73,413
------------------------------------------- ------------ ------------
Net asset value per ordinary share (basic
and diluted) 627.1p 558.8p
Cash Flow Statement
for the year ended 31 December 2022
31 December 31 December
2022 2021
GBP'000 GBP'000
--------------------------------------------- ------------ ------------
Cash flows from operating activities
Profit before tax
Adjustments for: 8,932 27,642
(Gains) on investments (4,514) (23,408)
Interest paid - 42
(Increase) / decrease in debtors (1,058) 760
Increase / (decrease) in creditors 34 (2,183)
Net cash inflow from operating activities 3,394 2,853
Cash flows from investing activities
Purchase of investments (430) (1,550)
Drawdown from subsidiary (75) (79)
Purchase of 'AAA' rated money market funds (28,422) (6,213)
Sale of investments 30,007 38,547
Distribution from subsidiary 2,900 -
Sale of 'AAA' rated money market funds 28,615 8,100
--------------------------------------------- ------------ ------------
Net cash inflows from investing activities 32,595 38,805
Tax
Tax recovered - 342
Cash flows from financing activities
Tender offer (41,456) (26,235)
Dividends paid (6,371) (3,258)
Interest paid - (42)
--------------------------------------------- ------------ ------------
Net cash outflows from financing activities (47,827) (29,535)
Net (decrease)/increase in cash and cash
equivalents (11,838) 12,465
Cash and cash equivalents at 1 January 12,616 151
Cash and cash equivalents at 31 December 778 12,616
--------------------------------------------- ------------ ------------
Statement of Directors' Responsibilities in respect of the
Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report
and financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law they have
elected to prepare the financial statements in accordance with
UK-adopted international accounting standards 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 its 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 UK-adopted international accounting standards;
-- 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 2, 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 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
are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error,
and 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; 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 financial statements 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
24 March 2023
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 2022 or 2021. The financial information for 2021 is
derived from the statutory accounts for 2021 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 2022 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 2021 and 2022 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
2022 2021
GBP'000 GBP'000
Dividends paid in the year 6,371 3,258
---------- ----------
A final dividend of 25.0p per share for the year ended 31
December 2022 is proposed and if approved, will be paid on 19 May
2023 to shareholders on the register at close of business on 21
April 2023. The ex-dividend date is 20 April 2023.
4. Earnings per share
Year to Year to
31 December 31 December
2022 2021
Revenue return per ordinary share
(p) 36.46 26.56
Capital return per ordinary share
(p) 35.92 133.33
Earnings per ordinary share (p) 72.38 159.89
Weighted average number of shares 12,342,190 17,501,856
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 2022.
5. Principal Risks and Uncertainties (Strategic Report page 19)
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:
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.
No change in overall risk in year
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.
Increase in overall risk in year
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.
No change in overall risk in year
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. An economic risk
is the conflict in Ukraine. 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. The Manager and board of each portfolio company is
keeping under review the impact of the conflict in Ukraine and
developing contingency plans/mitigating actions where
appropriate.
No change in overall risk in year
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.
No change in overall risk in year
Currency risk: the Company is exposed to currency risk as a
result of investing in companies who transact in foreign currencies
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.
No change in overall risk in year
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.
No change in overall risk in year
6. Related Party Transactions (Notes to the Accounts page 57, note 22)
The Company has investments in Dunedin Buyout Fund II LP,
Dunedin Buyout Fund III LP and Dunedin Fund of Funds LP. Each of
these limited partnerships are managed by Dunedin. The Company has
paid a management fee of GBP0.4m (2021: GBP0.6m) in respect of
these limited partnerships. The total investment management fee
payable by the Company to the Manager is therefore GBP0.6m (2021:
GBP0.7m).
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 2022 there is a provision made within
Investments for carried interest of GBP1.4m (2021: GBP4.3m)
relating to Dunedin Buyout Fund III LP. Current executives of the
Manager are entitled to 42% of the carried interest in Dunedin
Buyout Fund III LP.
ENDS
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