TIDMFPEO
RNS Number : 3564X
F&C Private Equity Trust PLC
28 August 2015
To: Stock Exchange For immediate release:
28 August 2015
F&C Private Equity Trust plc
Unaudited results for the half year to 30 June 2015
Financial Highlights
-- NAV total return for the six months of 2.7 per cent.
-- Share price total return for the six months of 1.6 per cent.
-- Semi-annual dividend of 5.58p per Ordinary Share.
-- Annualised dividend yield of 5.2 per cent at the period end.
Chairman's Statement
As at 30 June 2015 the Company's net asset value ('NAV') was
GBP205.1 million giving a fully diluted NAV per share of 279.69p.
Taking into account last year's final dividend of 5.45p per share
paid on 29 May 2015 the NAV total return for the first half of the
year was 2.7 per cent. At the end of the period the Company had
cash of GBP18.6 million. Together with borrowings of GBP34.6
million under the Company's loan facility, net debt was GBP16.0
million, equivalent to a gearing level of 7.2 per cent. The total
of outstanding undrawn commitments at 30 June was GBP64.7 million
and, of this, approximately GBP18 million is to funds where the
investment period has expired.
Currency movements were an adverse factor during the period,
with sterling strengthening against all the major currencies. This
was partially offset by the Company's borrowings being in Euros,
but the net impact for the period was approximately 2.3 per cent of
the NAV per share.
In accordance with the Company's stated dividend policy, the
Board declares a semi-annual dividend of 5.58p per ordinary share,
payable on 6 November 2015 to shareholders on the register on 9
October 2015. For illustrative purposes only, this dividend
represents an annualised yield of 5.2 per cent based on the share
price as at 30 June 2015. I would like to remind shareholders of
our dividend reinvestment plan which can be a convenient and easy
way to build up an existing holding.
The first half of the year has seen a continuation of the strong
exit environment that featured last year. Indeed the total of
realisations for the Company in the first half, at GBP35.7 million,
is approximately 70 per cent above the total at the same point last
year. These realisations have come from every part of the
portfolio; funds, co-investments, secondaries and covering all
geographies and sectors. In general these have been at very
acceptable prices and the decisions to continue investing taken by
our investment partners through the recession are bearing, and
should continue to bear, fruit.
Much of this activity is connected to improved levels of
business and investor confidence and with this comes improvement in
prices. From a buyer's perspective this can pose a challenge.
Pricing across the private equity market has increased considerably
in the last two years or so and this is apparent even in the
European lower mid-market where the great majority of our
investment activity is focused. Apart from confidence it reflects a
banking and 'non-banking' sector with good liquidity and an
appetite to lend as well as substantial fund raising by private
equity funds across the market. Each of these factors acts to push
up prices, especially for companies with uncomplicated growth
'stories' where competition to acquire them can be intense. Our
investment partners have not been conspicuous in paying high prices
and are much more likely to be frustrated in highly competitive
auctions than to secure the deal at an uncomfortably high price
where there is little room for any subsequent underperformance in
the investee company without painful consequences. This is because
of their adherence to an agreed investment policy and required
return commensurate with the relatively high risks involved in
private equity investment.
Despite this environment, it remains the case that in the broad
and inefficient regional lower mid-market of Europe, skilled and
well-connected private equity investors can find and acquire
companies at reasonable prices. The Company's current and future
performance is entirely dependent on your Managers successfully
investing through and alongside such investment partners. Their
dealflow of funds, co-investments and secondaries provides plenty
of evidence that this is happening.
At the Annual General Meeting in May shareholders approved our
proposal to increase the limit for co-investments from 33 per cent
of the Company's total assets at the time of investment to 50 per
cent, with a limit of 5 per cent for any individual direct
co-investment. The current exposure to co-investments stands at
22.5 per cent and we expect that this will increase steadily to
over 30 per cent over the short to medium term. Your Managers have
access to excellent dealflow in co-investments and have
successfully completed dozens of these investments during the
Company's life, providing a strong contribution to performance.
Apart from the direct impact on the performance of successfully
realised co-investments, the insight which your Managers receive
into the valuation creation process at a range of private equity
firms delivers an indirect benefit by improving their selection of
managers and funds.
Mark Tennant
Chairman
Manager's Review
Introduction
As noted in the Chairman's Statement, a striking feature of the
first half of the year has been the strong exit environment which
has resulted in GBP35.7 million of realisations from the portfolio.
In every reporting period we expect the Company to have a healthy
total of realisations because it has a portfolio that is well
diversified by the age of investments and there are always some
investments coming to maturity. The volume of exits relative to the
size of the portfolio fluctuates with the overall market and, in
particular, with the appetite of trade buyers to make deals and of
larger private equity firms to deploy equity capital. The provision
of bank finance or non-bank debt also has a big influence on
buy-out activity which remains the dominant mode of private equity
investment. All of these factors are acting to increase
realisations at present. Despite a recurrence of Eurozone worries
during the period there remains a high level of confidence in the
economic future of Europe and also in the uniquely effective model
of investment provided by private equity.
New Investments
The total amount invested through drawdowns by funds and
co-investments during the first half of the year was GBP19.2
million.
Three fund commitments were made. EUR5 million was committed to
Corpfin IV. This is managed by one of the leading Iberian
mid-market specialists and it is well placed to find good
opportunities in the recovering economies of Spain and Portugal.
EUR4 million was committed to the Milan based Italian mid-market
specialist Aliante 3. The portfolio in this fund has been building
up for three years already and this gives us immediate visibility.
Aliante has a focus on the food and beverage sector where Italy
offers some excellent investment opportunities. Finally, GBP4.8
million was committed to UK mid-market fund RJD Partners III, one
of our longstanding investment partners.
Two new co-investments have been added to the portfolio. GBP4.5
million was invested in Burgess Marine. This was syndicated down to
a hold position of GBP3.0 million giving a 19 per cent holding for
the Company in this Dover based marine engineering services
company. This deal was led by RJD Partners, with whom we have made
several co-investments over the years, and it gives us exposure to
three growing businesses within Burgess Marine: refitting of
commercial and naval vessels; boat building for shallow draft
workboats and wind farm support vessels; and refitting superyachts.
GBP1.3 million was invested in superfoods company, Nutrisure, for a
13 per cent stake. This deal was led by Lonsdale, with whom we have
previously co-invested. Nutrisure is a direct play on the very
strong growth in demand for superfoods, which are defined as foods
that are high in antioxidants, phytonutrients, vitamins, minerals,
enzymes and amino acids. Trading under the brand Naturya, the
company is growing rapidly and Lonsdale has acquired it at a
compelling price.
Drawdowns by the funds in the portfolio have been typically
varied.
In the UK, one of our key investment partners, Inflexion, has
been particularly active. GBP1.4 million was called by its 2010
Fund and 2012 Co-investment Fund for investment in luxury travel
agency Scott Dunn. The premium end of the holiday market is growing
strongly. Inflexion also invested for us through its 2012
Co-investment Fund with GBP1.5 million in Shimtech, a global market
leader in the manufacture of specialist gap management components,
or 'shims', which are essential in the assembly of commercial
aircraft.
In Germany, DBAG VI made two major investments. GBP0.4 million
was called for Gienanth, an iron foundry company specialising in
casting engine blocks for large diesel and gas engines. Another
GBP0.4 million was called for Cleanpart, a provider of engineering
services to the semi-conductor industry. This is a relatively high
tech development of DBAG's preferred investment focus on the
'factories of the factories' of Germany.
Realisations
The Company is in the midst of a strong run of realisations.
These are remarkably broadly spread by sector and geography.
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The largest realisation, of GBP8.6 million, was the sale of the
co-investment in SMD Hydrovision, to Chinese buyer ZhouZou CSR.
This seven year hold achieved 2.1x cost and an IRR of 11 per cent.
Inflexion, the deal leaders, had worked closely with the company to
improve its market position and hence its strategic value, and this
compensated for relatively volatile profits over the holding
period. Another longstanding co-investment, Whittan, the Stirling
Square lead pallet racking systems provider, was sold to European
private equity house Bregal, returning GBP2.7 million, which
covered the cost of the investment. With an economically sensitive
customer base the company had faced challenges in the recession but
had recovered with help from an equity refinancing which acted to
protect the investment.
Several other UK based companies held within the funds have been
sold with excellent returns. Piper Private Equity IV sold Rollover
Holdings, the UK's leading food service hotdog company, to Kerry
Group plc, achieving a 2.5x multiple with proceeds of GBP0.8
million. Inflexion, as already noted, has been very active. Aspen
Pumps was sold by its 2006 Fund, returning GBP0.7 million, which
represents 14x cost and an IRR of 40 per cent. Inflexion also
exited for its 2010 Fund and 2012 Co-investment Fund, two
companies; Sanne and CTC Aviation. Sanne, a trust fund and fund
administration services business based in Jersey, was listed on the
London Stock Exchange, allowing Inflexion to exit 75 per cent of
its holding. Including the value of the remaining holding, the
money multiple and IRR was 3.7x and 80 per cent respectively. CTC
Aviation is an integrated pilot training service provider which has
grown successfully, capitalising on the worldwide shortage of
pilots. The company opened a new training base in the US to
complement its existing facilities in the UK and New Zealand. CTC
was sold to L-3, an aerospace systems and national security
solutions contractor, achieving a multiple of 3.0x cost and an IRR
of 46 per cent. Since the end of the period, Inflexion has achieved
three further realisations of Consumer Champion (formerly National
Accident Helpline), the personal injury claims specialist, with a
multiple of 3.8x and an IRR of 36 per cent, Rhead Group, the
international professional services consultancy, for 1.8x and a 17
per cent IRR and Reward Gateway, the SaaS employee engagement
specialist, for 7.7x and a 59 per cent IRR.
In Continental Europe, there was also a range of exits. The
Company's only Life Science venture capital fund, the Netherlands
based Life Science Partners III, distributed GBP1.7 million, as the
proceeds of the sale of Prosensa, the pharmaceutical company
specialising in RNA modulating therapeutics with potentially ground
breaking applications in certain genetic diseases. In Poland,
Accession Mezzanine II returned GBP0.7 million from the sale of
metallic enhancement company Norican to Nordic private equity house
Altor, achieving just above cost.
In Germany, Capvis III sold Wittur (elevator components) to Bain
Capital returning GBP1.2 million for 3.9x cost and an IRR of 38 per
cent. In the Benelux, Gilde Buyout III has had two realisations.
Bekaert Textiles, a manufacturer of woven and knitted fabrics for
mattresses and bed coverings, was sold returning GBP0.9 million,
6.5x cost and a 49 per cent IRR. Plukon Royale, a poultry meat
processor, was sold, returning GBP1.2 million, 7.8x cost and a 41
per cent IRR. In France, Chequers Capital XV sold Serma, a designer
of embedded electronic systems used in severe environments, to
French PE house Ardian, returning GBP0.5 million, 3.1x cost and a
34 per cent IRR.
In the US, Blue Point Capital II achieved an excellent exit with
the sale of Area Wide Protective (AWP), the provider of outsourced
work zone safety services to utilities, which was sold to
Riverside, achieving a multiple of 11x, an IRR of 51 per cent and
proceeds to the Company of GBP2.9 million.
Valuation Changes
The uplifts in the portfolio were fairly broadly spread. The
Spanish fund N+1 Private Equity II was up by GBP1.7 million
reflecting several uplifts across the portfolio. Blue Point Capital
II was up by GBP1.7 million mainly reflecting the sale of AWP noted
above. Pentech II, the Edinburgh based venture capital fund, was up
by GBP1.1 million as a result of a major uplift in the value of
FanDuel, the global leader in one day fantasy sports, which has
just successfully raised $275 million and now has a valuation in
excess of $1 billion. The two main Inflexion funds, the 2010 Fund
and the 2012 Co-investment Fund, were up by GBP1.2 million and
GBP1.1 million respectively, reflecting the successful exits of
Sanne Group and CTC Aviation. The FSN led Danish co-investment in
housebuilder HusCompagniet was sold to Nordic Private Equity fund
EQT after the end of the period and this resulted in an uplift in
this valuation of GBP1.1 million. The outcome is likely to be an
investment multiple of 3.8x cost with a 46 per cent IRR and the
Company's valuation is just below this. Also in the Nordic region,
the Agilitas co-investment in Recover Nordic, the damage control
business, was uplifted by GBP1.0 million to reflect the company's
progress.
There have been some downgrades. Herkules Private Equity III,
which is heavily exposed to the oil related economy of Norway, was
down by GBP0.7 million following a number of downward adjustments
across the portfolio. Piper Private Equity IV was down by GBP0.3
million mainly because of downgrades in the value of Diet Chef and
clothes retailer Weird Fish.
Currency has again been an adverse factor with sterling
strengthening against all the principal currencies over the first
half of the year. There was a partial offsetting of this through
the Company's borrowings being in Euros, but the net impact was
approximately 2.3 per cent for the six month period.
Financing
The Company's balance sheet has strengthened over the six month
period with a healthy excess of realisations over drawdowns,
leading to a significant reduction in net debt. Debt will rise
again as pending new investments are made. The Company has
considerable capacity to take advantage of both fund and
co-investment opportunities and to buy selected secondaries. It is
likely that the proportion of co-investments will increase steadily
in the future and also that the outstanding undrawn commitments
will increase from the current level which is close to the
historical low. The Company will progressively benefit from the
much lower cost of borrowing under the Royal Bank of Scotland loan
facility compared with the previously held zero dividend preference
shares.
Outlook
The surge in exits that began last year has continued strongly
into the first half of 2015. Current activity levels indicate that
this is being maintained. Fund raising for private equity funds
has, if anything, strengthened further this year with a number of
funds reportedly being 'over subscribed'. The banking and 'shadow
banking' sectors have good liquidity and this is facilitating
increasingly leveraged deal structures. Pricing of new deals has
gone up and although anecdotal evidence suggests that in some
instances pricing is unreasonably high, the deals we have seen
executed by our investment partners do not indicate that they are
chronically over-paying. The co-investment deal flow, which tends
to be at the smaller end of the mid-market, is generally at
attractive prices. The pricing situation needs careful surveillance
and monitoring current and future funds for adherence to pricing
disciplines is important. The macro-economic background in the
Eurozone remains dominated by the periodic Greek crises which are
not helpful for business and consumer confidence across Europe as a
whole, but they do not seem to have adversely affected deal making
activity within the private equity market. There are good grounds
for expecting further respectable appreciation in the value of the
portfolio during the remainder of the year and beyond.
Hamish Mair
Investment Manager
F&C Investment Business Limited
F&C Private Equity Trust plc
Statement of Comprehensive Income for the
half year ended 30 June 2015
Unaudited
Revenue Capital Total
GBP'000 GBP'000 GBP'000
---------------------------------------------- --------- --------- ---------
Income
Gains on investments held at fair value - 1,176 1,176
Exchange gains - 3,266 3,266
Investment income 4,307 - 4,307
Other income 16 - 16
---------------------------------------------- --------- --------- ---------
Total income 4,323 4,442 8,765
---------------------------------------------- --------- --------- ---------
Expenditure
Investment management fee - basic fee (247) (742) (989)
Investment management fee - performance
fee - (973) (973)
Other expenses (340) - (340)
---------------------------------------------- --------- --------- ---------
Total expenditure (587) (1,715) (2,302)
---------------------------------------------- --------- --------- ---------
Profit before finance costs and taxation 3,736 2,727 6,463
Finance costs (232) (697) (929)
---------------------------------------------- --------- --------- ---------
Profit before taxation 3,504 2,030 5,534
Taxation (708) 708 -
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Profit for period/total comprehensive income 2,796 2,738 5,534
Return per Ordinary Share - Basic 3.87p 3.79p 7.66p
---------------------------------------------- --------- --------- ---------
Return per Ordinary Share - Fully diluted 3.77p 3.68p 7.45p
---------------------------------------------- --------- --------- ---------
The total column of this statement represents the Statement of
Comprehensive Income of the Company, prepared in accordance with
IFRS. The supplementary revenue and capital columns are both
prepared under guidance published by the Association of Investment
Companies.
All revenue and capital items in the above statement derive from
continuing operations.
All income is attributable to the equity holders of F&C
Private Equity Trust plc. There are no minority interests.
F&C Private Equity Trust plc
Statement of Comprehensive Income for the
half year ended 30 June 2014
Unaudited
Revenue Capital Total
GBP'000 GBP'000 GBP'000
---------------------------------------------- --------- --------- ---------
Income
Gains on investments held at fair value - 992 992
Exchange gains - 128 128
Investment income 2,220 - 2,220
Other income 11 - 11
---------------------------------------------- --------- --------- ---------
Total income 2,231 1,120 3,351
---------------------------------------------- --------- --------- ---------
Expenditure
Investment management fee - basic fee (258) (774) (1,032)
Investment management fee - performance - - -
fee
Other expenses (301) - (301)
---------------------------------------------- --------- --------- ---------
Total expenditure (559) (774) (1,333)
---------------------------------------------- --------- --------- ---------
Profit before finance costs and taxation 1,672 346 2,018
Finance costs (196) (2,533) (2,729)
---------------------------------------------- --------- --------- ---------
Profit/(loss) before taxation 1,476 (2,187) (711)
Taxation (318) 318 -
Profit/(loss) for period/total comprehensive
income 1,158 (1,869) (711)
Return/(loss) per Ordinary Share - Basic 1.60p (2.58)p (0.98)p
---------------------------------------------- --------- --------- ---------
Return/(loss) per Ordinary Share - Fully
diluted 1.56p (2.52)p (0.96)p
---------------------------------------------- --------- --------- ---------
The total column of this statement represents the Statement of
Comprehensive Income of the Company, prepared in accordance with
IFRS. The supplementary revenue and capital columns are both
prepared under guidance published by the Association of Investment
Companies.
All revenue and capital items in the above statement derive from
continuing operations.
All income is attributable to the equity holders of F&C
Private Equity Trust plc. There are no minority interests.
F&C Private Equity Trust plc
Statement of Comprehensive Income for the
year ended 31 December 2014
Audited
Revenue Capital Total
GBP'000 GBP'000 GBP'000
-------------------------------------------- --------- --------- ---------
Income
Gains on investments held at fair value - 18,588 18,588
Exchange gains - 572 572
Investment income 3,971 - 3,971
Other income 27 - 27
-------------------------------------------- --------- --------- ---------
Total income 3,998 19,160 23,158
-------------------------------------------- --------- --------- ---------
Expenditure
Investment management fee - basic fee (516) (1,548) (2,064)
Investment management fee - performance
fee - (1,085) (1,085)
Other expenses (745) - (745)
-------------------------------------------- --------- --------- ---------
Total expenditure (1,261) (2,633) (3,894)
-------------------------------------------- --------- --------- ---------
Profit before finance costs and taxation 2,737 16,527 19,264
Finance costs (349) (4,854) (5,203)
-------------------------------------------- --------- --------- ---------
Profit before taxation 2,388 11,673 14,061
Taxation (441) 441 -
Profit for year/total comprehensive income 1,947 12,114 14,061
Return per Ordinary Share - Basic 2.69p 16.76p 19.45p
-------------------------------------------- --------- --------- ---------
Return per Ordinary Share - Fully diluted 2.62p 16.32p 18.94p
-------------------------------------------- --------- --------- ---------
The total column of this statement represents the Statement of
Comprehensive Income of the Company, prepared in accordance with
IFRS. The supplementary revenue and capital columns are both
prepared under guidance published by the Association of Investment
Companies.
All revenue and capital items in the above statement derive from
continuing operations.
All income is attributable to the equity holders of F&C
Private Equity Trust plc. There are no minority interests.
F&C Private Equity Trust plc
Amounts Recognised as Dividends
Six months Six months
ended 30 ended 30
June 2015 June 2014
(unaudited) (unaudited)
GBP'000 GBP'000 Year ended
31 December
2014
(audited)
GBP'000
------------------------------------------- ------------- ------------- --------------
Final Ordinary Share dividend of 5.36p
per share for the year ended 31 December
2013 - 3,874 3,874
Interim Ordinary Share dividend of 5.39p
per share for the year ended 31 December
2014 - - 3,896
Final Ordinary Share dividend of 5.45p 3,939 - -
per share for the year ended 31 December
2014
------------------------------------------- ------------- ------------- --------------
3,939 3,874 7,770
------------------------------------------- ------------- ------------- --------------
F&C Private Equity Trust plc
Balance Sheet
As at 30 June As at 30 As at 31
2015 June 2014 December
(unaudited) 2014
(unaudited) (audited)
GBP'000 GBP'000 GBP'000
--------------------------------------- -------------- ------------- -----------
Non-current assets
Investments at fair value through
profit or loss 223,378 233,673 234,414
Subsidiary undertaking - 56 -
--------------------------------------- -------------- ------------- -----------
223,378 233,729 234,414
Current assets
Other receivables 32 36 2,577
Cash and short-term deposits 18,617 3,481 6,946
--------------------------------------- -------------- ------------- -----------
18,649 3,517 9,523
Current liabilities
Other payables (16,533) (835) (18,117)
Amounts due to subsidiary - (43,779) -
Net current assets/(liabilities) 2,116 (41,097) (8,594)
--------------------------------------- -------------- ------------- -----------
Total assets less current liabilities 225,494 192,632 225,820
Non-current liabilities
Interest-bearing bank loan (20,391) - (22,312)
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--------------------------------------- -------------- ------------- -----------
Net assets 205,103 192,632 203,508
--------------------------------------- -------------- ------------- -----------
Equity
Called-up ordinary share capital 723 723 723
Special distributable capital
reserve 15,679 15,679 15,679
Special distributable revenue
reserve 31,403 31,403 31,403
Capital redemption reserve 1,335 1,335 1,335
Capital reserve 148,568 139,682 149,769
Revenue reserve 7,395 3,810 4,599
Shareholders' funds 205,103 192,632 203,508
--------------------------------------- -------------- ------------- -----------
Net asset value per Ordinary
Share - Basic 283.75p 266.50p 281.55p
--------------------------------------- -------------- ------------- -----------
Net asset value per Ordinary
Share - Fully diluted 279.69p 262.90p 277.55p
--------------------------------------- -------------- ------------- -----------
F&C Private Equity Trust plc
Statement of Changes in Equity
Share Special Special Capital Capital Revenue Total
Capital Distributable Distributable Redemption Reserve Reserve
Capital Revenue Reserve
Reserve Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
For the six months ended 30 June 2015 (unaudited)
Net assets at 1 January
2015 723 15,679 31,403 1,335 149,769 4,599 203,508
Profit for the period/total
comprehensive income - - - - 2,738 2,796 5,534
Dividends paid - - - - (3,939) - (3,939)
Net assets at 30 June
2015 723 15,679 31,403 1,335 148,568 7,395 205,103
----------------------------- ----- ------- ------- ------- -------- ------- ---------------
For the six months ended 30 June 2014 (unaudited)
Net assets at 1 January
2014 723 15,679 31,403 1,335 145,425 2,652 197,217
(Loss)/profit for the
period/total comprehensive
income - - - - (1,869) 1,158 (711)
Dividends paid - - - - (3,874) - (3,874)
Net assets at 30 June
2014 723 15,679 31,403 1,335 139,682 3,810 192,632
----------------------------- ----- ------- ------- ------- -------- ------- ---------------
For the year ended 31 December 2014 (audited)
Net assets at 1 January
2014 723 15,679 31,403 1,335 145,425 2,652 197,217
Profit for the year/total
comprehensive income - - - - 12,114 1,947 14,061
Dividends paid - - - - (7,770) - (7,770)
Net assets at 31 December
2014 723 15,679 31,403 1,335 149,769 4,599 203,508
----------------------------- ----- ------- ------- ------- -------- ------- ---------------
F&C Private Equity Trust plc
Cash Flow Statement
Six months Six months Year ended
ended ended
30 June 2015 30 June 2014 31 December
2014
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
------------------------------------- -------------- -------------- -------------
Operating activities
Profit/(loss) before taxation 5,534 (711) 14,061
Gains on disposals of investments (10,292) (3,607) (10,539)
Decrease/(increase) in holding
gains 9,116 2,615 (8,049)
Exchange differences (3,266) (128) (572)
Finance costs 929 2,729 5,203
Increase in other receivables (4) (9) -
Decrease in other payables (206) (1,753) (34)
------------------------------------- -------------- -------------- -------------
Net cash inflow/(outflow)
from operating activities 1,811 (864) 70
------------------------------------- -------------- -------------- -------------
Investing activities
Purchases of investments (19,177) (13,785) (29,114)
Sales of investments 33,938 18,714 48,404
Net cash inflow from investing
activities 14,761 4,929 19,290
------------------------------------- -------------- -------------- -------------
Financing activities
Repayment of bank loans - (7,286) (7,286)
Draw down of bank loans - 4,086 42,461
Amounts paid to subsidiary - - (45,642)
Interest paid (848) (520) (980)
Equity dividends paid (3,939) (3,874) (7,770)
------------------------------------- -------------- -------------- -------------
Net cash outflow from financing
activities (4,787) (7,594) (19,217)
------------------------------------- -------------- -------------- -------------
Net increase/(decrease)
in cash and cash equivalents 11,785 (3,529) 143
Currency (losses)/gains (114) 1 (206)
------------------------------------- -------------- -------------- -------------
Net increase/(decrease)
in cash and cash equivalents 11,671 (3,528) (63)
Opening cash and cash equivalents 6,946 7,009 7,009
------------------------------------- -------------- -------------- -------------
Closing cash and cash equivalents 18,617 3,481 6,946
------------------------------------- -------------- -------------- -------------
Statement of Principal Risks and Uncertainties
The Directors believe that the principal risks and uncertainties
faced by the Company include investment and strategic, external,
regulatory, operational, financial and funding. The Company is also
exposed to risks in relation to its financial instruments. These
risks, and the way in which they are managed, are described in more
detail under the heading Principal Risks and Uncertainties and Risk
Management within the Business Model and Strategy in the Annual
Report for the year ended 31 December 2014. The Company's principal
risks and uncertainties have not changed materially since the date
of that report and are not expected to change materially for the
remaining six months of the Company's financial year.
Statement of Directors' Responsibilities in Respect of the Half
Year Report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements have been prepared
in accordance with IAS 34 'Interim Financial Reporting' and give a
true and fair view of the assets, liabilities, financial position
and profit of the Company;
-- the Chairman's Statement and Manager's Review (together
constituting the Interim Management Report) include a fair review
of the information required by the Disclosure and Transparency
Rules ('DTR') 4.2.7R, being an indication of important events that
have occurred during the first six months of the financial year and
their impact on the financial statements;
-- the Statement of Principal Risks and Uncertainties shown
above is a fair review of the information required by DTR 4.2.7R;
and
-- the condensed set of financial statements include a fair
review of the information required by DTR 4.2.8R, being related
party transactions that have taken place in the first six months of
the financial year and that have materially affected the financial
position or performance of the Company during the period, and any
changes in the related party transactions described in the last
Annual Report that could do so.
On behalf of the Board
Mark Tennant
Chairman
Notes (unaudited)
1. The condensed company financial statements have been prepared
in accordance with International Financial Reporting Standard
('IFRS') IAS 34 'Interim Financial Reporting' and the accounting
policies set out in the statutory accounts for the year ended 31
December 2014. The condensed financial statements do not include
all of the information required for a complete set of IFRS
financial statements and should be read in conjunction with the
financial statements for the year ended 31 December 2014, which
were prepared under full IFRS requirements.
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2. Earnings for the six months to 30 June 2015 should not be
taken as a guide to the results for the year to 31 December
2015.
3. Investment management fee:
Six months to 30 Six months to 30 Year ended 31 December
June 2015 June 2014 2014
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Investment
management
fee 247 742 989 258 774 1,032 516 1,548 2,064
Performance fee - 973 973 - - - - 1,085 1,085
247 1,715 1,962 258 774 1,032 516 2,633 3,149
------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
4. Finance costs:
Six months to 30 Six months to 30 Year ended 31 December
June 2015 June 2014 2014
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
Interest payable
on bank loans
and overdrafts 232 697 929 196 589 785 349 1,047 1,396
Finance costs
attributable to
subsidiary loan - - - - 1,944 1,944 - 3,807 3,807
232 697 929 196 2,533 2,729 349 4,854 5,203
------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
5. The basic return per Ordinary Share is based on a net profit
on ordinary activities after taxation of GBP5,534,000 (30 June 2014
- loss GBP711,000; 31 December 2014 - profit GBP14,061,000) and on
72,282,273 (30 June 2014 - 72,282,273; 31 December 2014 -
72,282,273) shares, being the weighted average number of Ordinary
Shares in issue during the period.
The fully diluted return per Ordinary Share is based on a net
profit on ordinary activities after taxation of GBP5,534,000 (30
June 2014 - loss GBP711,000; 31 December 2014 - profit
GBP14,061,000) and on 74,241,429 (30 June 2014 - 74,241,429; 31
December 2014 - 74,241,429) shares, being the weighted average
number of Ordinary Shares in issue during the period after
conversion of the Ordinary Share warrants.
6. The basic net asset value per Ordinary Share is based on net
assets at the period end of GBP205,103,000 (30 June 2014 -
GBP192,632,000; 31 December 2014 - GBP203,508,000) and on
72,282,273 (30 June 2014 - 72,282,273; 31 December 2014 -
72,282,273) shares, being the number of Ordinary Shares in issue at
the period end.
The fully diluted net asset value per Ordinary Share is based on
net assets at the period end of GBP207,649,000 (30 June 2014 -
GBP195,178,000; 31 December 2014 - GBP206,054,000) and on
74,241,429 (30 June 2014 - 74,241,429; 31 December 2014 -
74,241,429) shares, being the number of Ordinary Shares in issue at
the period end after conversion of the Ordinary Share warrants.
Since the end of the period, the Company has bought back 300,000
Ordinary Shares for cancellation.
7. The fair value measurements for financial assets and
liabilities are categorised into different levels in
the fair value hierarchy based on inputs to valuation techniques
used. The different levels are defined as follows:
Level 1 reflects financial instruments quoted in an active
market.
Level 2 reflects financial instruments whose fair value is
evidenced by comparison with other observable current market
transactions in the same instrument or based on a valuation
technique whose variables includes only data from observable
markets.
Level 3 reflects financial instruments whose fair value is
determined in whole or in part using a valuation technique based on
assumptions that are not supported by prices from observable market
transactions in the same instrument and not based on available
observable market data.
Level Level Level Total
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------- -------- -------- --------
30 June 2015
Financial assets
Investments 406 - 222,972 223,378
30 June 2014
Financial assets
Investments 1,897 - 231,776 233,673
31 December 2014
Financial assets
Investments 560 - 233,854 234,414
There were no transfers between levels in the fair value
hierarchy in the period ended 30 June 2015. Transfers between
levels of the fair value hierarchy are deemed to have occurred at
the date of the event that caused the transfer.
Valuation techniques
Quoted fixed asset investments held are valued at bid prices
which equate to their fair values. Unlisted investments are fair
valued by the Directors. The fair value of a holding is based on
the Company's share of the total net asset value of the fund or
share of the valuation of the co-investment calculated by the lead
private equity manager on a quarterly basis. The lead private
equity manager derives the net asset value of a fund from the fair
value of underlying investments. The fair value of these underlying
investments and the Company's co-investments is calculated using
methodology which is consistent with the International Private
Equity and Venture Capital Valuation Guidelines ('IPEG'). In
accordance with IPEG these investments are generally valued using
an appropriate multiple of maintainable earnings, which has been
derived from comparable multiples of quoted companies or recent
transactions. The F&C private equity team has access to the
underlying valuations used by the lead private equity managers
including multiples and any adjustments. The F&C private equity
team generally values the Company's holdings in line with the lead
managers but may make adjustments where they do not believe the
underlying managers' valuations represent fair value. On a
quarterly basis, the F&C private equity team present the
valuations to the Board. This includes a discussion of the major
assumptions used in the valuations, which focuses on significant
investments and significant changes in the fair value of
investments. If considered appropriate, the Board will approve the
valuations. The fair values of all of the Company's other financial
assets and liabilities are not materially different from their
carrying values in the balance sheet.
Significant unobservable inputs for Level 3 valuations
The Company's unlisted investments are all classified as Level 3
investments. The fair values of the unlisted investments have been
determined principally by reference to earnings multiples, with
adjustments made as appropriate to reflect matters such as the
sizes of the holdings and liquidity. The weighted average earnings
multiple for the portfolio as at 30 June 2015 was 7.9 times EBITDA
(Earnings Before Interest, Tax, Depreciation and Amortisation) (30
June 2014: 7.8 times EBITDA; 31 December 2014: 7.7 times
EBITDA).
The significant unobservable input used in the fair value
measurement categorised within Level 3 of the fair value hierarchy
together with a quantitative sensitivity analysis are shown
below:
Period ended Input Sensitivity Effect on
used* fair value
GBP'000
-------------- --------------------------- ------------ ------------
Weighted average earnings
30 June 2015 multiple 1x 39,816
Weighted average earnings
30 June 2014 multiple 1x 44,572
31 December Weighted average earnings
2014 multiple 1x 44,972
-------------- --------------------------- ------------ ------------
* The sensitivity analysis refers to an amount added or deducted
from the input and the effect this has on the fair value.
The fair value of the Company's unlisted investments are
sensitive to changes in the assumed earnings multiples. The
managers of the underlying funds assume an earnings multiple for
each holding. An increase in the weighted average earnings multiple
would lead to an increase in the fair value of the investment
portfolio and a decrease in the multiple would lead to a decrease
in the fair value.
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