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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| F&C Private Equity Trust | LSE:FPEO | London | Ordinary Share | GB0030738271 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 336.00 | 331.00 | 337.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
TIDMFPEO
RNS Number : 9471O
F&C Private Equity Trust PLC
25 August 2017
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To: Stock Exchange For immediate release:
25 August 2017
F&C Private Equity Trust plc
LEI: 2138009FW98WZFCGRN66
Unaudited results for the half year to 30 June 2017
Financial Highlights
-- Share price total return for the six months of 18.2 per cent for the Ordinary Shares. -- NAV total return for the six months of 3.5 per cent for the Ordinary Shares. -- Semi-annual dividend of 6.92p per Ordinary Share. -- Annualised dividend yield of 4.0 per cent at the period end.
Chairman's Statement
With a net asset value ("NAV") total return for the six-month period ended 30 June of 2017 of 3.5%, I am pleased to report a further period of good investment performance for the Company. In addition, with the share price discount having fallen to 3.9% at 30 June 2017 from 15.8% at 31 December 2016, the share price total return for the period is an impressive 18.2%. This compares to a total return of 5.5% for the FTSE All Share Index for the same period.
As at 30 June 2017, the Company had cash of GBP34.2 million. With borrowings of GBP25.9 million under the Company's loan facility, net cash was GBP8.3 million, equivalent to a gearing level of -3.2 per cent. The total of outstanding undrawn commitments at 30 June 2017 was GBP126.7 million and, of this, approximately GBP17 million is to funds where the investment period has expired.
In accordance with the Company's stated dividend policy, the Board declares a semi-annual dividend of 6.92p per ordinary share, payable on 3 November 2017 to shareholders on the register on 13 October 2017. For illustrative purposes only, this dividend represents an annualised yield of 4.0 per cent based on the share price as at 30 June 2017. I would like to remind shareholders of our dividend re-investment plan, which can be a convenient and easy way to build up an existing holding.
Since 2012 your company has paid a substantial dividend from realised capital profits allowing shareholders to participate, to some degree, directly in the proceeds of the steady stream of private equity realisations which the Company achieves. This policy has been well received by shareholders and we are fully committed to maintaining this general approach for the foreseeable future. One further enhancement which the Board has decided to implement is for the Company to move from a semi-annual dividend to a quarterly dividend. This innovation will act to regularise the flow of income to shareholders for whom this is important.
The level of the annual dividend under the current dividend policy will be maintained and, until such time as a bigger quarterly dividend is paid based on the Company's net asset value, the minimum quarterly dividend will be 3.46p (being 50 per cent of the highest semi-annual dividend previously paid). In order to be able to pay dividends every three months all quarterly dividends will be paid as interim dividends. The quarterly dividends will be payable in respect of the quarters ended 31 March, 30 June, 30 September and 31 December and are expected to be paid in the following July, October, January and April respectively. The first quarterly dividend will be in respect of the three months ending 30 September 2017 and is expected to be paid in January 2018. As shareholders will no longer have an opportunity to approve a final dividend at each Annual General Meeting, shareholders will be asked to approve the Company's dividend policy at the AGM.
Your Company has begun the year well with an impressive total of realisations at GBP26.8 million. New investment either through funds drawing down or co-investments totalled GBP31.6 million and this is refreshing the portfolio and redeploying the proceeds of realisations building a foundation for future value growth.
Mark Tennant
Chairman
Manager's Review
Introduction
2017 continues the trend of recent years with healthy levels of portfolio turnover and in general good fundamental progress in the trading of underlying companies. Investor confidence is good but there is a background concern, in certain quarters, about the price of some new private equity deals with those who maintain traditional required returns for private equity finding it difficult to be fully competitive. However, the mid-market, in which we invest, is very broad and investors with deal sources which are largely proprietary seem capable of acquiring companies at prices, where we are confident that there are excellent prospects of returns commensurate with the substantial risks which private equity naturally entails.
New Investments
In the first half we have made commitments to five new private equity funds. One fund has been added after the end of the period. There have been three new co-investments with one more after the half-year end.
All the new commitments so far this year have been to funds in Europe or North America. After carefully reviewing a large number of opportunities we have augmented our modest but enduring exposure to the US market through two new fund commitments. $6 million has been committed to Graycliff Private Equity Partners III, managed by a team which was formerly part of HSBC's private equity business and which specialises in lower mid-market US buyouts. Secondly we have committed $4 million to Stellex, a US focused fund, which invests in distressed and operational turnaround situations. The team managing this fund were formerly part of the Carlyle Group. We have made one US based co-investment with GBP4 million ($5 million) invested in Sigma Electric Manufacturing. Headquartered in North Carolina but with most of its manufacturing facilities in India it supplies components and sub-assemblies to the US low voltage electrical products market.
We have refreshed our large and important European portfolio with a mixture of new and long established relationships. In the Nordic region, we have committed EUR6 million to Vaaka III. This fund focuses on mid-market buy-outs in Finland, a distinctive and attractive market. This is the second fund from this manager which we have backed. In France, we have committed EUR6 million to the leading French mid-market specialist Chequers Capital for their fund XVII. We have invested with Chequers since 2002. After a period of careful review of the Central and Eastern European private equity market we have committed EUR5 million to ARX CEE IV, a Czech Republic based mid-market investor, which was originally a spin out from DBAG.
Two UK based co-investments have been added. GBP6.2 million was invested for 62.7% of Weird Fish in a deal led by Total Capital Partners. Weird Fish is a premium lifestyle clothing brand focusing on the 35 - 55 age group in the 'stable and affluent' category. This investment was previously owned by Piper Private Equity who have positioned the company for growth. In the oil services sector we have invested GBP5 million for 15.9% of TWMA. This Aberdeen based company is involved in drilling waste management services. The company mainly operates offshore where its thermomechanical cylindrical mills extract and separate the oil, water and solid from drill cuttings before reuse or safe discharge into the sea. Using these facilities can make a major contribution towards lowering the overall cost of production for oil companies which remains a key focus for them.
After the quarter end we have committed GBP6 million to the UK based healthcare specialist fund Apposite Capital II. We have been tracking this management team for some time and after an extensive review of healthcare opportunities across Europe have chosen to back them. In addition to the fund commitment we have co-invested with Apposite in Swanton, a specialist residential care and supported living provider. We have invested GBP3 million initially for 6.9%, (5.9% fully diluted), but as part of the investment thesis is to acquire additional businesses it is likely that our equity commitment will ultimately be up to double this amount. In Swanton we are already acquainted with some of the senior management through a previous successful co-investment in this sector; Lifeways.
The funds in our portfolio have been active making new investments across the breadth of the European mid market. Some of the larger and more recent ones are noted below.
Earlier in the year Agilitas 2015 Private Equity Fund called GBP0.7 million for Exemplar, a north of England based high acuity nursing care provider. Lyceum Capital III called GBP0.5 million for Timico, a provider of IT hosting, network connectivity and mobile solutions focused on medium sized companies. Piper Private Equity VI called GBP0.5 million for Flat Iron Steak Ltd, a restaurant chain.
In the last quarter, in the UK, August Equity Partners IV called GBP0.7 million for Genesis Dental, its initial platform of 11 dental practices from which a rollup is planned. FPE II called GBP0.6 million for the combined acquisition of Maastech and SGL which will create a platform in the digital media workflow automation, video asset management and archiving area. The main customers are broadcasters. In the venture capital area SEP V has called GBP0.7 million for its first investment in Lovecrafts, an online retailer of crafting materials.
In France Astorg VI has invested GBP0.8 million in Autoform, a software company with applications in automotive design. In the Nordic region Procuritas V has called GBP0.4 million for the acquisition of Danish design furniture companies Scandinavian Design International and Sofakompagniet ApS. Procuritas Capital VI has called GBP0.4 million for investment in DSI, a Danish company which designs and manufactures plate freezers which are used for the rapid freezing of, for example, fish and dog food. In German speaking Europe Capvis IV called GBP0.4 million for Wer liefert Was, a B2B trading platform.
During the second quarter our US exposure was augmented with the first drawdowns of Graycliff Private Equity Partners III where GBP1.6 million was invested in the fund's first five companies and Stellex, where GBP0.8 million was invested in their first three platforms.
The total capital invested through drawdowns from funds and by co-investments in the first six months is GBP31.6 million.
Realisations
The largest realisation in the first half was the previously announced sale of Park Holidays UK. This Caledonia Investments led deal completed in February and returned GBP7.6 million, which including earlier distributions, represented 2.8x cost and an IRR of 48%. From the funds there have been a number of notable exits. Stirling Square Capital Partners II's sale of Netherlands based waste container company ESE which was sold to UK listed company RPC returned GBP3.3 million (2.8x cost, 17% IRR). Chequers Capital XV sold Accelya, a French based IT services provider in the air transport sector to strategic buyer Mercator. The final stage of this sale returned GBP1.5 million giving a very strong overall result (11.7x cost, 36% IRR). In Italy Progressio II sold Duplomatic, maker of hydraulic valves, pumps and oil pressure activated systems returning GBP0.8 million (2.3x cost, 25% IRR).
The realisations have continued into the second quarter. There were several small and medium sized exits covering a wide variety of sectors and geographies. Our longstanding holding in the Candover 2005 fund distributed GBP0.8 million in cash and GBP0.4 million in shares in Spanish water and amusement parks company Parques Reunidos. These shares will be sold down in due course. This effectively brings to an end the Candover 2005 Fund. Capvis III made a further distribution of GBP0.7 million as more of its residual holding in Swiss vacuum valves business VAT was sold down. To date this investment has made 5.3x cost with three quarters realised. DBAG V sold FDG, a supplier of non-food consumer goods to French supermarkets, to a French financial buyer. This returned GBP0.5 million, equivalent to 2.3x cost. Portobello Fund III has exited most of their holding in Vitalia, its elderly care home company, through a sale to CVC, and GBP0.6 million has been distributed. There were a number of other smaller realisations including the sale of Weird Fish by Piper Private Equity IV where the Company, through Total Capital Partners, was the buyer as noted above. GBP0.4 million came in from Piper.
Valuation Changes
There were a number of noteworthy changes in valuation over the first half of the year. Our co-investment portfolio has contributed significantly. Avalon, the funeral plans business where Lonsdale Partners are in the lead, has performed well and has been uplifted by GBP3.8 million based upon a modest multiple of embedded value. Our co-investment in Ambio Holdings, the peptide oriented manufacturer of Active Pharmaceutical Ingredient for the generic and patented drug sector has traded strongly and is uplifted by GBP2.1 million. There were also uplifts for our co-investments in 3Si (security products) and Collingwood Insurance Group of GBP0.8 million and GBP0.2 million respectively.
DBAG V is up by GBP2.0 million reflecting not only the completed exit of FDG noted above but also the agreed sales of three other holdings. Formel D (documentation and services for the automotive sector) was sold to 3i achieving 5.5x cost. ProXES (process machinery) was sold to Capvis also achieving 5.5x cost. Romaco (packaging machinery for the pharmaceutical industry) has agreed a staged exit to Chinese listed company Truking which will result in a return of 2.4x cost. DBAG VI is up by GBP0.5 million continuing an extraordinary run of successes for this manager with the agreed sale of school tutoring company Schulerhilfe as the main contributor.
Our new investment in US fund Graycliff Private Equity Partners III comes with an immediate uplift of GBP0.6 million reflecting the strong trading of its initial portfolio. Blue Point Capital III is up by GBP0.6 million reflecting strong trading of various holdings and the imminent sale of shoe insole company Ortholite.
There were some downgrades in the first half. The most serious is GBP1.7 million for Burgess Marine, the south coast based marine engineering business where the deal is led by RJD Partners. The company's core market of commercial ship repairs has proved difficult, in part, due to competition from east coast yards where there has been a dearth of oil related work and who have deployed their capacity in Burgess' traditional ferry and mainstream commercial markets. The anticipated naval work is also moderately late. A major restructuring facilitated by a refinancing is now underway. There was a downgrade of GBP0.6 million for Argan Capital, mainly due to a weaker share price of its now listed holding in Swedish assisted living business Humana. Lastly Byron Burger, which has traded weakly, has been the main contributor to a downgrade of GBP0.3 million for Hutton Collins III.
Financing
The Company ended the half year with a net cash position of GBP8.3 million. There is ample capacity for new investments and we expect a number of co-investments and a couple of medium sized secondary deals to complete over the next few months. There are a handful of co-investments which look likely to be sold in the short term and this will boost the company's resources. Effectively all of the borrowing facility of GBP70 million is available. The proportion of co-investments has increased to over 30% for the first time.
Outlook
The first half of the year has been encouraging in that the fundamental performance of companies in the portfolio has been generally good and there remain healthy levels of activity across all our main markets. There is no doubt that experienced private equity managers with mature portfolios are taking advantage of current conditions to secure exits and many of the recently raised private equity funds, aided by a liquid banking sector, as well as trade buyers have facilitated this objective. It is pertinent to question whether in these circumstances it remains possible for private equity managers to find new deals at attractive prices. The perils of buying through a highly competitive auction process are well known to our investment partners and increasingly mid-market players source deals outside auctions through their own carefully created networks. In many of the European countries the private equity market is remarkably deep as the adoption of private equity for financing the growth of smaller and medium sized companies increases and accordingly the new deals entering our portfolio appear to be at historically reasonable prices, as are our new co-investments. Notwithstanding some unpredicted events in the political arena in the developed markets, confidence levels amongst investors and business people remain high. On this basis we expect that the portfolio will deliver more growth for shareholders in the second half of the year.
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 2017
Unaudited
Revenue Capital Total
GBP'000 GBP'000 GBP'000
----------------------------------------- --------- --------- ---------
Income
Gains on investments held at fair
value - 14,509 14,509
Exchange losses - (761) (761)
Investment income 151 - 151
Other income 23 - 23
----------------------------------------- --------- --------- ---------
Total income 174 13,748 13,922
----------------------------------------- --------- --------- ---------
Expenditure
Investment management fee - basic
fee (317) (951) (1,268)
Investment management fee - performance
fee - (2,325) (2,325)
Other expenses (388) - (388)
----------------------------------------- --------- --------- ---------
Total expenditure (705) (3,276) (3,981)
----------------------------------------- --------- --------- ---------
(Loss)/profit before finance costs
and taxation (531) 10,472 9,941
Finance costs (211) (632) (843)
----------------------------------------- --------- --------- ---------
(Loss)/profit before taxation (742) 9,840 9,098
Taxation - - -
(Loss)/profit for period/total
comprehensive income (742) 9,840 9,098
Return per Ordinary Share - Basic (1.01)p 13.31p 12.30p
----------------------------------------- --------- --------- ---------
Return per Ordinary Share - Fully
diluted (1.01)p 13.31p 12.30p
----------------------------------------- --------- --------- ---------
The total column is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.
F&C Private Equity Trust plc
Statement of Comprehensive Income for the
half year ended 30 June 2016
Unaudited
Revenue Capital Total
GBP'000 GBP'000 GBP'000
----------------------------------------- --------- --------- ---------
Income
Gains on investments held at fair
value - 23,983 23,983
Exchange losses - (2,928) (2,928)
Investment income 345 - 345
Other income 32 - 32
----------------------------------------- --------- --------- ---------
Total income 377 21,055 21,432
----------------------------------------- --------- --------- ---------
Expenditure
Investment management fee - basic
fee (277) (832) (1,109)
Investment management fee - performance
fee - (1,331) (1,331)
Other expenses (355) - (355)
----------------------------------------- --------- --------- ---------
Total expenditure (632) (2,163) (2,795)
----------------------------------------- --------- --------- ---------
(Loss)/profit before finance costs
and taxation (255) 18,892 18,637
Finance costs (206) (618) (824)
----------------------------------------- --------- --------- ---------
(Loss)/profit before taxation (461) 18,274 17,813
Taxation - - -
(Loss)/profit for period/total
comprehensive income (461) 18,274 17,813
Return per Ordinary Share - Basic (0.64)p 25.19p 24.55p
----------------------------------------- --------- --------- ---------
Return per Ordinary Share - Fully
diluted (0.62)p 24.71p 24.09p
----------------------------------------- --------- --------- ---------
The total column is the profit
and loss account of the Company.
All revenue and capital items
in the above statement derive
from continuing operations.
F&C Private Equity Trust plc
Statement of Comprehensive Income for the
year ended 31 December 2016
Audited
Revenue Capital Total
GBP'000 GBP'000 GBP'000
-------------------------------------------- --------- --------- ---------
Income
Gains on investments held at fair
value - 58,538 58,538
Exchange losses - (3,584) (3,584)
Investment income 1,386 - 1,386
Other income 54 - 54
-------------------------------------------- --------- --------- ---------
Total income 1,440 54,954 56,394
-------------------------------------------- --------- --------- ---------
Expenditure
Investment management fee - basic
fee (582) (1,745) (2,327)
Investment management fee - performance
fee - (2,024) (2,024)
Other expenses (739) - (739)
-------------------------------------------- --------- --------- ---------
Total expenditure (1,321) (3,769) (5,090)
-------------------------------------------- --------- --------- ---------
Profit before finance costs and
taxation 119 51,185 51,304
Finance costs (419) (1,257) (1,676)
-------------------------------------------- --------- --------- ---------
(Loss)/profit before taxation (300) 49,928 49,628
Taxation - - -
(Loss)/profit for year/total comprehensive
income (300) 49,928 49,628
Return per Ordinary Share - Basic (0.41)p 68.16p 67.75p
-------------------------------------------- --------- --------- ---------
Return per Ordinary Share - Fully
diluted (0.41)p 67.53p 67.12p
-------------------------------------------- --------- --------- ---------
The total column is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.
F&C Private Equity Trust plc
Amounts Recognised as Dividends
Six months Six months
ended 30 ended 30
June 2017 June 2016
(unaudited) (unaudited)
GBP'000 GBP'000 Year ended
31 December
2016
(audited)
GBP'000
---------------------------------- ------------- ------------- --------------
Final Ordinary Share dividend
of 5.83p per share for the year
ended 31 December 2015 - 4,251 4,251
Interim Ordinary Share dividend
of 6.12p per share for the year
ended 31 December 2016 - - 4,525
Final Ordinary Share dividend 4,791 - -
of 6.48p per share for the year
ended 31 December 2016
---------------------------------- ------------- ------------- --------------
4,791 4,251 8,776
---------------------------------- ------------- ------------- --------------
F&C Private Equity Trust plc
Balance Sheet
As at 30 As at As at 31
June 2017 30 June December
2016 (unaudited) 2016
(unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------- ------------- ------------------ -----------
Non-current assets
Investments at fair
value through profit
or loss 258,801 240,194 239,049
Current assets
Other receivables 88 13 26
Cash and cash equivalents 34,195 18,596 48,575
---------------------------- ------------- ------------------ -----------
34,283 18,609 48,601
Current liabilities
Other payables (3,342) (2,285) (3,057)
Net current assets 30,941 16,324 45,544
---------------------------- ------------- ------------------ -----------
Total assets less current
liabilities 289,742 256,518 284,593
Non-current liabilities
Interest-bearing bank
loan (25,912) (24,285) (25,070)
---------------------------- ------------- ------------------ -----------
Net assets 263,830 232,233 259,523
---------------------------- ------------- ------------------ -----------
Equity
Called-up ordinary share
capital 739 739 739
Share premium account 2,527 - 2,527
Special distributable
capital reserve 15,040 17,567 15,040
Special distributable
revenue reserve 31,403 31,403 31,403
Capital redemption reserve 1,335 1,335 1,335
Capital reserve 212,786 172,025 203,679
Revenue reserve - 9,164 4,800
Shareholders' funds 263,830 232,233 259,523
---------------------------- ------------- ------------------ -----------
Net asset value per
Ordinary Share 356.81p 314.08p 350.98p
---------------------------- ------------- ------------------ -----------
F&C Private Equity Trust plc
Statement of Changes in Equity
Share Share Special Special Capital Capital Revenue Total
Capital Premium Distributable Distributable Redemption Reserve Reserve
Account Capital Revenue Reserve
Reserve Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
For the six months ended 30 June 2017 (unaudited)
Net assets at
1 January 2017 739 2,527 15,040 31,403 1,335 203,679 4,800 259,523
Profit/(loss)
for the period/total
comprehensive
income - - - - - 9,840 (742) 9,098
Dividends paid - - - - - (733) (4,058) (4,791)
Net assets at
30 June 2017 739 2,527 15,040 31,403 1,335 212,786 - 263,830
--------------- ---- ------ ------- ------- ------ -------- --------
For the six months ended 30 June 2016 (unaudited)
Net assets at
1 January 2016 720 - 15,040 31,403 1,335 158,002 9,625 216,125
Issue of Ordinary
Shares 19 - 2,527 - - - - 2,546
Profit/(loss)
for the period/total
comprehensive
income - - - - - 18,274 (461) 17,813
Dividends paid - - - - - (4,251) - (4,251)
Net assets at
30 June 2016 739 - 17,567 31,403 1,335 172,025 9,164 232,233
--------------- ---- ------- ------- ------ -------- ------ --------
For the year ended 31 December 2016 (audited)
Net assets at
1 January 2016 720 - 15,040 31,403 1,335 158,002 9,625 216,125
Issue of Ordinary
Shares 19 2,527 - - - - - 2,546
Profit/(loss)
for the year/total
comprehensive
income - - - - - 49,928 (300) 49,628
Dividends paid - - - - - (4,251) (4,525) (8,776)
Net assets at
31 December 2016 739 2,527 15,040 31,403 1,335 203,679 4,800 259,523
------------------- ---- ------ ------- ------- ------ -------- ------ --------
F&C Private Equity Trust plc
Cash Flow Statement
Six months Six months Year ended
ended ended
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
GBP000 GBP000 GBP000
-------------------------------- ------------- ------------- -------------
Operating activities
Profit before taxation 9,098 17,813 49,628
Gains on disposals
of investments (12,756) (4,479) (33,421)
Increase in holding
gains (1,753) (19,504) (25,117)
Exchange differences 761 2,928 3,584
Interest income (23) (32) (54)
Interest received 23 32 54
Investment income (151) (345) (1,386)
Dividends received 151 345 1,386
Finance costs 843 824 1,676
(Increase)/decrease
in other receivables (62) 13 -
Increase in other
payables 285 11 778
-------------------------------- ------------- ------------- -------------
Net cash outflow from
operating activities (3,584) (2,394) (2,872)
-------------------------------- ------------- ------------- -------------
Investing activities
Purchases of investments (31,622) (19,257) (32,797)
Sales of investments 26,379 18,757 67,997
Net cash (outflow)/inflow
from investing activities (5,243) (500) 35,200
-------------------------------- ------------- ------------- -------------
Financing activities
Shares issued - 2,546 2,546
Interest paid (735) (720) (1,459)
Equity dividends paid (4,791) (4,251) (8,776)
-------------------------------- ------------- ------------- -------------
Net cash outflow from
financing activities (5,526) (2,425) (7,689)
-------------------------------- ------------- ------------- -------------
Net (decrease)/increase
in cash and cash equivalents (14,353) (5,319) 24,639
Currency losses (27) (108) (87)
-------------------------------- ------------- ------------- -------------
Net (decrease)/increase
in cash and cash equivalents (14,380) (5,427) 24,552
Opening cash and cash
equivalents 48,575 24,023 24,023
-------------------------------- ------------- ------------- -------------
Closing cash and cash
equivalents 34,195 18,596 48,575
-------------------------------- ------------- ------------- -------------
Statement of Principal Risks and Uncertainties
The Directors believe that the principal risks and uncertainties faced by the Company include investment, 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, Strategy and Policies Section in the Annual Report for the year ended 31 December 2016. 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 on a going concern basis in accordance with International Financial Reporting Standard ('IFRS') IAS 34 'Interim Financial Reporting' and, except as described below, the accounting policies set out in the statutory accounts for the year ended 31 December 2016. The condensed financial statements do not include all of the information and disclosures 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 2016, which were prepared under full IFRS requirements.
2. Earnings for the six months to 30 June 2017 should not be taken as a guide to the results for the year to 31 December 2017.
3. Investment management fee:
Six months to Six months to Year ended 31
30 June 2017 30 June 2016 December 2016
(unaudited) (audited)
(unaudited)
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 - basic
fee 317 951 1,268 277 832 1,109 582 1,745 2,327
Investment
management
fee - performance
fee - 2,325 2,325 - 1,331 1,331 - 2,024 2,024
317 3,276 3,593 277 2,163 2,440 582 3,769 4,351
------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
4. Finance costs:
Six months to Six months to Year ended 31
30 June 2017 30 June 2016 December 2016
(unaudited) (audited)
(unaudited)
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 211 632 843 206 618 824 419 1,257 1,676
5. The basic return per Ordinary Share is based on a net profit on ordinary activities after taxation of GBP9,098,000 (30 June 2016 - GBP17,813,000; 31 December 2016 - GBP49,628,000) and on 73,941,429 (30 June 2016 - 72,550,643; 31 December 2016 - 73,249,836) shares, being the weighted average number of Ordinary Shares in issue during the period.
The fully diluted return per Ordinary Share is based on a net profit on ordinary activities after taxation of GBP9,098,000 (30 June 2016 - GBP17,813,000; 31 December 2016 - GBP49,628,000) and on 73,941,429 (30 June 2016 - 73,941,429; 31 December 2016 - 73,941,429) shares, being the weighted average number of Ordinary Shares in issue during the period after conversion of the Ordinary Share warrants.
During the year ended 31 December 2016, the Company issued 1,959,156 Ordinary Shares of 1p each in the capital of the Company, following the exercise of subscription rights by holders of a corresponding number of management warrants previously issued by the Company in the capital of the Company. As at 30 June 2017, no warrants remain in issue (30 June 2016 - nil; 31 December 2016 - nil).
6. The net asset value per Ordinary Share is based on net assets at the period end of GBP263,830,000 (30 June 2016 - GBP232,233,000; 31 December 2016 - GBP259,523,000) and on 73,941,429 (30 June 2016 - 73,941,429; 31 December 2016 - 73,941,429) shares, being the number of Ordinary Shares in issue at the period end.
7. The 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 2017
Financial assets 1,083 - 257,718 258,801
Investments
Financial liabilities
Interest-bearing bank loan - (26,405) - (26,405)
30 June 2016
Financial assets 231 - 239,963 240,194
Investments
Financial liabilities
Interest-bearing bank loan - (24,990) - (24,990)
31 December 2016
Financial assets
Investments 544 - 238,505 239,049
Financial liabilities
Interest-bearing bank loan - (25,674) - (25,674)
There were no transfers between levels in the fair value hierarchy in the period ended 30 June 2017. 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. When fair values of publicly traded equities are based on quoted market prices in an active market without any adjustments, the investments are included within Level 1 of the hierarchy. The Company invests primarily in private equity funds and co-investments via limited partnerships or similar fund structures. Such vehicles are mostly unquoted and in turn invest in unquoted securities. 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 interest-bearing bank loan is recognised in the Balance Sheet at amortised cost in accordance with IFRS. The fair value of the loan is based on indicative break costs. 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 2017 was 8.0 times EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) (30 June 2016: 7.9 times EBITDA; 31 December 2016: 8.4 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
used* on fair
value
GBP'000
-------------- --------------------------- ------------ ---------
30 June Weighted average earnings
2017 multiple 1x 49,561
30 June Weighted average earnings
2016 multiple 1x 46,147
31 December Weighted average earnings
2016 multiple 1x 43,365
-------------- --------------------------- ------------ ---------
* 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.
The following table shows a reconciliation of all movements in the fair value of financial instruments categorised within Level 3 between the beginning and the end of the period:
30 June 30 June 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
--------------------------- --------- --------- ------------
Balance at beginning of
period 238,505 215,405 215,405
Purchases 31,052 19,257 32,797
Sales (25,809) (18,757) (67,997)
Gains on disposal 12,756 4,479 33,421
In specie distribution (570) (88) (418)
Increase in holding gains 1,784 19,667 25,297
--------------------------- --------- --------- ------------
Balance at end of period 257,718 239,963 238,505
--------------------------- --------- --------- ------------
8. In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council. They have considered the current cash position of the Company, the availability of the Company's loan facility and compliance with its covenants. They have also considered forecast cash flows, especially those relating to capital commitments and realisations.
As at 30 June 2017, the Company had outstanding undrawn commitments of GBP126.7 million. Of this amount, approximately GBP17.0 million is to funds where the investment period has expired and the Manager would expect very little of this to be drawn. Of the outstanding undrawn commitments remaining within their investment periods, the Manager would expect that a significant amount will not be drawn before these periods expire.
Based on this information the Directors believe the Company has the ability to meet its financial obligations as they fall due for a period of at least twelve months from the date of approval of the accounts. Accordingly, the accounts have been prepared on a going concern basis.
9. These are not statutory accounts in terms of Section 434 of the Companies Act 2006 and have not been audited or reviewed by the Company's auditors. The information for the year ended 31 December 2016 has been extracted from the latest published financial statements which received an unqualified audit report and have been filed with the Registrar of Companies. No statutory accounts in respect of any period after 31 December 2016 have been reported on by the Company's auditors or delivered to the Registrar of Companies. The Half-Year Report is available at the Company's website address, www.fcpet.co.uk.
For more information, please contact:
Hamish Mair (Fund Manager) 0131 718 1184
hamish.mair@bmogam.com
Scott McEllen (Company 0131 718 1137
Secretary) scott.mcellen@bmogam.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BUGDIRUDBGRS
(END) Dow Jones Newswires
August 25, 2017 02:00 ET (06:00 GMT)
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