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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Abrdn Private Equity Opportunities Trust Plc | LSE:SLPE | London | Ordinary Share | Ordinary Shares |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 512.00 | 508.00 | 512.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMSLPE
RNS Number : 2154Z
Standard Life Private Eqty Trst PLC
09 January 2020
STANDARD LIFE PRIVATE EQUITY TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE YEARED 30 SEPTEMBER 2019
KEY HIGHLIGHTS
Hot Features
Premium
* NAV performance - The NAV total return ("NAV TR") for
the year was 10.5% versus 2.7% for the FTSE All-Share
index and in line with the Company's annualised NAV
TR since inception of 10.2%.
* Underlying portfolio performance - The portfolio
continues to generate strong realisations, with
distributions and income generated in the year of
GBP138.1m. Exits were realised at an average premium
of over 20% to the last relevant valuation. The
underlying portfolio exhibited strong average revenue
and EBITDA growth in the year of over 10%.
* New commitments - 2019 was an active year for new
commitments, with a number of the Company's core
private equity managers returning to the fundraising
market. In total, eight primary fund commitments,
three secondary fund commitments and one
co-investment were completed amounting to GBP188m
* Introduction of co-investments - In January 2019 the
investment objective was broadened to include the
ability to invest in co-investments. The Company's
first co-investment was made in Mademoiselle Desserts,
a leading European manufacturer of premium frozen
pastries.
* Active management - Interests in 17 mature secondary
and buyout funds were sold where there was deemed to
be limited upside for a total consideration of
GBP29.9m.
* Outstanding commitments - Total outstanding
commitments of GBP450.3m (2018: GBP369.3m). The
over-commitment ratio has increased to 42.6%.
* Revolving credit facility - Since the year end the
Board has agreed an expansion of this facility to
GBP100m and has extended the expiry date to December
2024.
FINANCIAL HIGHLIGHTS
Investment objective
The Company's investment objective is to achieve long-term total returns through holding a diversified portfolio of private equity funds and direct investments into private companies alongside private equity managers ("co-investments"), a majority of which will have a European focus.
Our strategy
Standard Life Private Equity Trust plc (the "Company" or "SLPET") provides investors with exposure to a diversified portfolio of leading private companies, primarily through investments into private equity funds. We achieve this by partnering with the best private equity managers to build an appropriately diversified portfolio by country, industry sector, maturity and number of underlying investments.
Headlines for the year ended 30 September 2019
2019 2018
Net Asset Value per ordinary share
("NAV") 461.9p 430.2p
Share price 352.0p 345.5p
Net Assets GBP710.1m GBP661.4m
Market cap GBP541.2m GBP531.2m
NAV total return(1) 10.5% 13.3%
Total shareholder return(1) 5.7% 5.8%
Dividend for the year
(including fourth quarterly dividend
of 3.2p) 12.8p 12.4p
Dividend Yield(1,2) 3.6% 3.6%
Discount to net asset value(1) 23.8% 19.7%
Ongoing Charges Ratio(1) 1.09% 1.10%
(1) Alternative Performance Measures ("APMs"). Explanations of APM's and other terms can be found in the glossary of terms & definitions set out below.
(2) As at 30 September 2019, based on full year dividend of 12.8p.
STRATEGIC REPORT
CHAIR'S STATEMENT
I am pleased to report that during my first year as Chair of Standard Life Private Equity Trust plc the Company has continued to deliver positive returns to its shareholders, with increases in both the Net Asset Value ("NAV") total return and the dividend for the year.
Performance
For the year ended 30 September 2019, the Company's NAV total return was 10.5%. The total shareholder return was 5.7%. For comparison, the return on the FTSE All-Share Index was 2.7% in the same period.
While we are required to report on the performance of the Company over the last 12 months, the Board also recognises that our private equity investment strategy needs to be viewed on a longer-term basis. Investments that the Company makes within the portfolio will take a number of years to mature to the point where they might realise a return and so, as a Board, we are also focused on the trends of the longer-term performance of the portfolio. The table below shows that the Company has consistently provided better returns than the broad UK stock market.
Total returns to 30 September 2019 1 year 3 years 5 years 10 years Share price 5.7% 47.6% 81.2% 290.0% NAV 10.5% 44.9% 103.2% 231.5% FTSE All-Share Index 2.7% 21.7% 38.9% 121.0%
Source: Refinitiv Datastream
A review of the Company's performance, market background and investment activity during the year under review, as well as the Manager's investment outlook, are provided in the Manager's Report set out below.
Investments & realisation activity
During the year, the Company made commitments totalling GBP188.0m (2018: GBP117.0m) into its unquoted portfolio. Funds were committed to eight new primary investments, three secondaries and the Company's first co-investment. The Company received GBP138.1m of realisations and associated income in the year (2018: GBP128.1m). The realised return from the ongoing investment operations of the Company's core portfolio equated to a solid 2.2 times cost (2018: 2.9 times cost). Outstanding commitments at the year end amounted to GBP450.3m (2018: GBP369.3m).
Dividends
The Company has paid three quarterly dividends of 3.2p per share and the Board has announced a fourth quarterly dividend of 3.2p per share. This will be paid on 24 January 2020 to Shareholders on the register on 20 December 2019 and will make a total dividend for the year to 30 September 2019 of 12.8p per share. This represents an increase of 3.2% on the 12.4p paid for the year to 30 September 2018 and compares to the increase in the Retail Price Index ("RPI") of 2.4% in the year to September 2019.
The Board's current dividend policy was introduced in September 2014 and since then the annual dividend per share has risen from 5p to 12.8p. The Board believes that providing a strong, stable dividend is attractive to shareholders and therefore, in the absence of unforeseen circumstances, it is committed to maintaining the real value of this enhanced dividend.
Key performance indicators ("KPIs")
During the year, the Board reviewed and revised the KPIs by which performance of the Manager is measured in order better to align the KPIs with the interests of shareholders. The KPIs are as follows:
* Net asset value total return relative to the
Company's comparator index, the FTSE All-Share Index.
* Total shareholder return relative to the Company's
comparator index.
* Discount or premium of the ordinary share price to
the net asset value per share of the Company in
absolute terms and compared to the discounts of the
close peers on a rolling 12 month basis.
* Ongoing charges ratio.
These measures encapsulate the key variables that the Board considers are the most important to current and prospective shareholders. More detail on the Company's performance with respect to the KPIs is set out below.
Discount
The discount of the Company's share price to its net asset value ranged between 6.4% to 24.8% during the year, and averaged 17.6%, which is in line with the average of the close peer group. The Board does not have a stated discount control policy. However, the Board and Manager monitor the discount on a regular basis to ensure that the discount is not an outlier versus those of other investment companies with a similar investment approach.
Bank facility
Since the year end, the Board has increased the Company's GBP80m syndicated multi-currency revolving credit facility with Citibank and Société Générale to GBP100m and has extended the expiry date to December 2024. The facility is currently undrawn (2018: GBPnil).
Environmental, social & governance ("ESG")
The Board is strongly committed to responsible and sustainable investing and closely monitors the Manager's commitment to ESG factors. The Board supports the Manager's declaration that it invests in accordance with the Principles of Responsible Investment and is pleased to note that its activities in this field have been recognised with a silver award in the Private Equity Exchange & Awards. More detail on the Manager's credentials are set out below.
Investment manager
The Board believes that the appointment of SL Capital Partners LLP as Investment Manager continues to be in the long-term interests of shareholders. This conclusion has been reached on the basis of the strength of the returns that the Manager has delivered for the Company and being confident that the process by which these returns have been generated remains appropriate for the objectives of the Company and that this process continues to be applied by the Manager.
Since the year end, the Board has agreed with the Manager to some changes in the investment team looking after the Company. The Board is pleased to announce that Alan Gauld will become the lead manager with immediate effect. Alan has been part of the team responsible for the Company since 2017. He has been a member of the private equity team at the Manager for the last 10 years and, in that time, has worked across numerous fund investments, both primary and secondary, as well as co-investments. Alan will be supported by Patrick Knechtli and Mark Nicolson, respectively Head of Secondaries and Head of Primaries at Aberdeen Standard Investments. Our previous lead manager, Merrick McKay, has taken on a wider role within Aberdeen Standard Investments as Head of European Private Equity. The Board wishes Merrick all the best in that role.
Board
This is my first report as Chair of the Board as I assumed the role upon the retirement of Ed Warner on 31 December 2018. The Board has recently reviewed its succession plan and concluded that the Board currently has an appropriate mix of skills and experience but will keep this position under regular review.
AGM and manager's presentation
In order to encourage greater access for, and attendance by, shareholders the Board has agreed in future to alternate its annual general meetings between Edinburgh and London, and to include a presentation by the Manager. Accordingly, the next Annual General Meeting of the Company will be held at the offices of the Investment Manager, Bow Bells House, 1 Bread Street, London EC4M 9HH on Monday, 24 February 2020. The Notice of Annual General Meeting can be found in the Annual Report. I should like to encourage shareholders to attend and the Board looks forward to welcoming you to the Meeting.
Future reporting dates
Following consultation with the Manager and the Company's Broker, the Board has reviewed its valuation cycle and will release its annual report to 30 September in January each year, with the Company's AGM taking place in March from 2021. The Board has agreed to this change in order to ensure that the Annual Report contains the latest available valuations at 30 September each year from the managers of its investments. The Company's Quarterly Update to 31 December will be issued in April each year, rather than March as has previously been the case.
As a result of this change to reporting, and to ensure that shareholders continue to receive regular dividends from the Company in April, July, October and January each year, the Board will move to the payment of four interim dividends rather than three quarterly dividends and a final dividend, as the latter is subject to shareholder approval. The Board will seek shareholder approval for its dividend policy at the AGM in February 2020 and at each AGM in future.
Outlook
Against a backdrop of political and macroeconomic uncertainty, it is notable that global equity markets remained relatively steady during 2019. However macroeconomic risks, such as US-China tensions and Brexit, continue to have the potential to impact returns.
The ongoing success of private equity has attracted more capital to the asset class. The Board recognises that the current market is very competitive, with uninvested capital or 'dry powder' reaching record levels. This clearly has implications for pricing and average private equity returns in the future.
Despite this backdrop, it is worth remembering that the private equity industry has consistently outperformed the listed markets throughout economic cycles. The number of private companies continues to grow, in stark contrast to the decline in publicly listed businesses. Your Board believes that the Company's investment strategy, with its focus on the mid-market (where relatively less dry powder is accumulating compared to the larger end of the market) and its broad diversification (by underlying sector, geography and maturity) continues to provide an attractive opportunity for shareholders. The Company's focus on private equity managers with differentiated investment sourcing and value creation capabilities should also help to mitigate pricing pressures.
As always, the Board will monitor the market closely and maintain a close dialogue with the Manager on the topics of portfolio construction and management.
Christina McComb
Chair
8 January 2019
STRATEGIC REPORT
COMPANY DETAILS
Standard Life Private Equity Trust provides exposure to:
* An appropriately diversified portfolio of leading
private companies
* A carefully selected range of private equity managers,
built from years of established relationships and
proprietary research
* Investments principally focused on European
mid-market private companies
With the objective of delivering strong, long-term total returns for Shareholders through a combination of capital growth and a progressive dividend.
The Strategic Report provides shareholders with details of the Company's strategy and business model, as well as the principal risks and challenges the Company has faced during the year under review.
The Board is responsible for the stewardship of the Company, including overall strategy, investment policy, borrowings, dividends, corporate governance procedures and risk management. Biographies of the directors can be found in the Annual Report.
The Board has contractually delegated the management of the investment portfolio to the Manager, SL Capital Partners LLP ("SL Capital" or "the Manager"). SL Capital is part of Aberdeen Standard Investments. A summary of the terms of the Investment Management Agreement is contained in the Directors' Report in the Annual Report.
Investment objective
The Company's investment objective is to achieve long-term total returns through holding a diversified portfolio of private equity funds and direct investments into private companies alongside private equity managers ("co-investments"), a majority of which will have a European focus.
Investment policy & guidelines
The principal focus of the Company is to invest in leading private equity funds through the primary and secondary funds markets. The Company's policy is to maintain a broadly diversified portfolio by country, industry sector, maturity and number of underlying investments. In terms of geographic exposure, a majority of the Company's portfolio will have a European focus. The objective is for the portfolio to comprise around 50 "active" private equity fund investments; this excludes funds that have recently been raised, but have not yet started investing, and funds that are close to or being wound up. The Company may also invest up to 20% of its assets in co-investments.
The Company may also hold direct private equity investments or quoted securities as a result of distributions in specie from its portfolio of fund investments. The Company's policy is normally to dispose of such assets where they are held on an unrestricted basis. This is in addition to the 20% that can be held in co-investments.
To maximise the proportion of invested assets, it is the Company's policy to follow an over-commitment strategy by making commitments which exceed its uninvested capital. In making such commitments, the Manager, together with the Board, will take into account the uninvested capital, the value and timing of expected and projected cashflows to and from the portfolio and, from time to time, may use borrowings to meet drawdowns. The Company's maximum borrowing capacity, defined in its articles of association, is an amount equal to the aggregate of the amount paid up on the issued share capital of the Company and the amount standing to the credit of the reserves of the Company. However, it is expected that borrowings would not normally exceed 30% of the Company's net assets at the time of drawdown.
The Company's non-sterling currency exposure is principally to the euro and US dollar. The Company does not seek to hedge this exposure into sterling, although any borrowings in euros and other currencies in which the Company is invested would have such a hedging effect.
Cash held pending investment is invested in short-dated government bonds, money-market instruments, bank deposits or other similar investments. Cash held pending investment may also be invested in other listed investment companies or trusts.
The Company will not invest more than 15% of its total assets in such listed equities.
The investment limits described above are all measured at the time of investment.
Strategy implementation
Aberdeen Standard Investments is one of the largest investors in private equity funds in Europe. One of the key strengths of the investment team is their extensive fund and direct deal experience, which gives the Manager greater insight into the strategies, processes and disciplines of the funds invested in and allows better qualitative judgements to be made.
The investment strategy employed by the Manager in meeting the investment objective involves a detailed and rigorous screening and due diligence process to identify and then evaluate the best private equity fund offerings.
The private equity asset class has historically exhibited a wide dispersion of returns generated by fund investments and the Manager believes that appropriate portfolio construction and manager selection is vital to optimise investment performance. The Manager focuses predominantly on investing in the European mid-market space where it has a long track record. The number of potential investment opportunities in that segment is vast and the Manager continues to build a roster of blue chip, private equity firms which has been developed from years of strong relationships and proprietary research. In that regard, the objective is for the Company's portfolio to comprise around 50 "active" private equity fund investments at any one time.
Key performance indicators ("KPIs")
As set out in the Chair's Statement, the Board reviewed and revised the KPIs by which the Manager is measured. The Company's performance against each of its KPIs is set out below:
* Net asset value total return ("NAV TSR") relative to
the Company's comparator index - The chart in the
Annual Report shows a comparison of the annualised
total returns of the share price and NAV with that of
the FTSE All-Share Index over various time frames. We
are happy to report that the Company has delivered
returns in excess of the wider UK market over all
time frames.
* Total shareholder return ("TSR") relative to the
Company's comparator index - The TSR has also
outperformed the comparator index. In the current
year however, it has underperformed the NAV, which
has led to a widening of the discount.
* Discount or premium of the ordinary share price to
the net asset value per share of the Company in
absolute terms and compared to the discounts of the
close peers on a rolling 12 month basis - The average
discount for the year is in line with the average
discount of the close peer group of other private
equity investment trusts. However, the volatility of
the Company's discount is wider than that of the
average of its peers.
Narrowest Widest (discount) Average
Year to 30 (discount) / Narrowest premium (%)
September / Greatest premium (%)
2019 (%)
Standard Life
Private
Equity Trust (6.4) (24.8) (17.6)
Close peer group
average (11.2) (25.0) (17.6)
Source: Aberdeen Standard Investments & Refinitiv.
* Ongoing charges ratio ("OCR") - The OCR narrowed to
1.10% in 2018 and again in 2019 to 1.09%. The OCR
increased in 2017 as a result of the termination of
the previous incentive fee arrangement on 30
September 2016. Following the end of the incentive
fee period, the management fee arrangement was
changed to a flat fee of 0.95%.
Principal risks & uncertainties
The Board has in place a process to assess and monitor the operating and control environment risks of the Company. The principal risks faced by the Company relate to the Company's investment activities and these are set out below.
* The Company has no appetite for risk exposure that
could result in poor long-term investment performance,
loss of reputation, regulatory fines or penalties, or
breach of regulations and loan covenants.
* It has a very low tolerance for financing risk which
could prevent the Company from meeting its financial
obligations.
* In the pursuit of its Investment Objective, the
Company is willing to accept risks that may result in
shorter-term fluctuations in investment performance.
* The Board considers its risk appetite in relation to
each principal risk and monitors this on an ongoing
basis. Where a risk is approaching or is outside the
tolerance level, the Board will consider taking
action to manage the risk. At present the Board
considers the risks to be managed within acceptable
levels.
Risk Definition Tolerance Update / Mitigation
Market a) Pricing risk Medium a) This is mitigated by the Company
having a diversified and rolling
The Company is at risk portfolio of fund investments
of the economic cycle and co-investments.
impacting listed financial
markets and hence potentially b) The Manager monitors the Company's
affecting the pricing exposure to foreign currencies
of underlying investments and reports to the Board on a
and timing of exits. regular basis. It is not the Company's
policy to hedge foreign currency
b) Currency risk risk. The Company's non-sterling
currency exposure is primarily
The Company has a material to the euro and the US dollar.
proportion of its investments
and cash balances in During the year sterling appreciated
currencies other than against the euro by 0.7%m whilst
sterling and is therefore depreciating by 5% against the
sensitive to movements US dollar.
in foreign exchange
rates.
Liquidity The risk that the Company Low The Company manages its liquid
is unable to meet short-term investments to ensure that sufficient
financial demands. cash is available to meet contractual
commitments and also seeks to
have cash available to meet other
short-term needs. Additional short-term
flexibility is achieved through
the use of the revolving multi-currency
loan facility.
Liquidity risk is monitored by
the Manager on an ongoing basis
and by the Board on a regular
basis.
As at 30 September 2019, the Company
had GBP67.7m of resources available
for investment and GBP80.0m of
an undrawn revolving credit facility.
As set out in the Chair's statement,
subsequent to the year end, the
Company's revolving credit facility
was increased to GBP100m.
Credit The exposure to loss Low The Company places funds with
from failure of a counterparty authorised deposit takers from
to deliver securities time to time and, therefore, is
or cash for acquisitions potentially at risk from the failure
or disposals of investments of such institution.
or to repay deposits.
At the year end the Company had
GBP66.3m in money-market funds,
cash and short-term deposits.
The Company's money-market funds
are held in two Aberdeen Standard
Investments (Lux) Liquidity funds,
as well as in a Société
Générale money-market
fund. The Aberdeen Standard Investments
(Lux) Liquidity fund is rated
'AAA' by Standard and Poors, while
Société Générale
and BNP Paribas Securities Services
S.A. are rated 'A' and 'A+' by
Standard and Poors respectively.
The credit quality of the counterparties
is kept under regular review.
Should the credit quality or the
financial position of these financial
institutions deteriorate significantly,
the Manager would move cash balances
to other institutions.
Investment The risk that the Manager Medium The Manager undertakes detailed
selection makes decisions to due diligence prior to investing
invest in funds and in, or divesting, any fund or
/ or co-investments co-investment. It has an experienced
that are not accretive team which monitors market activity
to the Company's NAV closely. The Manager has long-established
over the long term. relationships with the third party
fund managers in the Company's
portfolio which, in almost all
cases, have been built up over
10 years or more.
Over-commitment The risk that the Company Medium The Company makes commitments
is unable to settle to private equity funds, which
outstanding commitments are typically drawn over three
to fund investments. to five years. Hence the Company
will tolerate a degree of over-commitment
risk in order to deliver long-term
investment performance.
In order to mitigate this risk,
the Manager will monitor and ensure
that the Company has appropriate
levels of resources, whether through
resources available for investment
or revolving credit facility,
relative to the levels of over-commitment.
In addition, the Manager will
also forecast and assess the maturity
of the underlying portfolio to
determine likely levels of distributions
in the near term.
Furthermore the Manager will track
the over-commitment ratio and
ensure that it sits within the
range, agreed with the Board,
of 30% to 75% at any given time.
Currently the Company has GBP450.3m
(2018: GBP369.3m) of outstanding
commitments, with GBP62.0m (2018:
GBP60.0m) expected not to be drawn,
and an over-commitment ratio of
42.6% (2018: 30.7%).
Operational The risk of loss or Low From a governance viewpoint, the
missed opportunity Board meets with the Manager a
resulting from a regulatory minimum of five times each year
failure or a failure to discuss all matters relating
relating to people, to the Company. This includes
processes or systems. the various facets of operational
risk.
The Manager has a defined set
of formal procedures relating
to investment decision making,
investment allocation, portfolio
construction, valuations and portfolio
monitoring.
The Manager uses and stores information
relating to the Company on a system
tailored to the private equity
industry and the wider Alternatives
asset class. The system is subject
to a robust set of controls including
segregation of duties and "four
eyes" checks.
The Manager conducts internal
audit exercises which cover operational
factors that impact the Company.
Interest The Company will be Low The majority of its financial
rate affected by interest assets are investments in private
rate changes as it equity funds which are non-interest
holds some interest bearing.
bearing financial assets
and liabilities.
The financial risk management objectives and policies of the Company are contained in note 19 to the financial statements.
Review of performance
An outline of the performance, market background, investment activity and portfolio during the year under review and the performance over the longer term, as well as the investment outlook, are provided in the Highlights, Chair's Statement, and Manager's Review. Details of the Company's investments can be found in the Annual Report.
Viability statement
In accordance with Provision C.2.2 of the UK Corporate Governance Code revised in April 2016 and Principle 21 of the AIC Code of Corporate Governance revised in July 2016, the Board has assessed the Company's prospects for a five year period. The Board considers five years to be an appropriate period for an investment trust company with a portfolio of private equity investments and is based on the financial position of the Company as detailed in the Chair's Statement, and the Manager's Review in this Annual Report and Financial Statements.
In determining this time period the directors considered the nature of the Company's commitments and the Company's associated cash flows. Generally the private equity funds and co-investments in which the Company invests call monies over a five year period, whilst they are making investments, and these drawdowns should be offset by the more mature funds and co-investments, which are realising their investments and distributing cash back to the Company. The Manager presents the Board with a comprehensive review of the Company's detailed cash flow model on a regular basis, including projections for up to five years ahead depending on the expected life of the commitments. This analysis takes account of the most up to date information provided by the underlying managers, together with the Manager's current expectations in terms of market activity and performance.
In addition, following the year end, the Board increased and extended the Company's syndicated multi-currency revolving credit facility with Citibank and Société Generale to GBP100m until December 2024. The facility is currently undrawn (2018: GBPnil). The Board believes that this will provide additional funding capital if required.
The directors have also carried out an assessment of the principal risks as set out above and discussed in note 19 to the financial statements that are facing the Company over the period of the review. These include those that would threaten its business model, future performance, solvency or liquidity such as over-commitment and market risks. By having a portfolio of fund investments, diversified by manager, vintage year, sector and geography, by assessing market and economic risks as decisions are made on new commitments, and by monitoring the Company's cash flows together with the Manager, the directors believe the Company is well placed to take advantage of economic cycles. The directors are also aware of the Company's indirect exposure to ongoing risks through underlying funds. These are continually assessed by the Manager monitoring the underlying managers themselves and by participation on fund advisory boards.
Based on the results of this analysis, and the ongoing ability to adjust the portfolio, the directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five year period following the date of this report.
Social, Community, Employee Responsibilities & Environmental Policy
The Company has no employees. The portfolio is managed by the Manager and all activities are contracted out to third party service providers. There are, therefore, no disclosures to be made in respect of employees. The Board is strongly committed to responsible and sustainable investment and closely monitors the Manager's commitment to ESG factors. More details on the Manager's ESG credentials can be found below.
Gender representation
At 30 September 2019, there were three male directors and two female directors on the Board. The Board's approach to diversity is set out in the report from the Nominations Committee in the Annual Report.
Going Concern
The Board considered its obligation to satisfy itself as to the appropriateness of the adoption of the going concern assumption as a basis for preparing the financial statements, taking into account; the GBP80 million committed, syndicated revolving credit facility with a maturity date of 31 December 2020; the future cash flow projections, and that the Company had net resources available for investment at the year-end. The Board ratified the conclusion of the Audit Committee that the adoption of the going concern basis was appropriate.
The directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they have adopted the going concern basis in preparing the financial statements.
MANAGER'S REPORT
Private equity
The private equity asset class has grown materially in recent years, driven by increased demand from investors as they seek to diversify portfolios, reduce risk and enhance returns. This has been mirrored by a noticeable shift in the attitude in the boards of companies, who are increasingly electing to stay private for longer or de-listing from public markets.
The vast majority of capital invested in private equity is raised and managed via limited partnership structures, where investors make relatively long-term commitments and have more limited liquidity options relative to public markets. Investors typically expect higher returns from private equity to compensate for this illiquidity. Private equity managers aim to achieve those returns by having a more active role in the management of their investee companies and by applying specific operational and financial skill sets as part of a well-defined value creation plan.
Accessing private equity
The private equity asset class has historically been funded in large part by institutional investors, such as pension funds, endowment and insurance companies. These investors typically have longer-term investment horizons and are able to invest millions of pounds / dollars / euros in a single commitment or investment. Closed-ended investment trusts provide a means for smaller institutional investors and private individuals to gain exposure to this asset class.
SLPET is indirectly invested in a diverse range of companies managed by leading private equity managers. In total, the portfolio has exposure to around 400 underlying companies. The selection of the managers, their funds and the direct investments is the result of years of proprietary research and relationship building by the Manager.
The portfolio consists of three types of investment:
* Primary investment: SLPET commits to investing up to
a predetermined amount in a new private equity fund.
The committed capital will generally be drawn over a
three to five year period as investments in
underlying private companies are made. Proceeds are
then returned to SLPET when the underlying companies
are sold, typically over a four to five year holding
period. Over 80% of the portfolio is currently
invested in this way.
* Secondary investment: A negotiated agreement to
transfer the beneficial ownership of a fund
commitment to a new investor, with the prior approval
of the manager of the fund. Typically this would
occur at a point where the fund has already utilised
most of its investment commitments. The price paid in
this type of transaction will reflect the commitments
being assumed by the new investor and the age profile
and quality of the underlying portfolio.
* Co-investment: the Company makes direct investments
into private companies alongside other private equity
managers. In the case of SLPET, this will be
alongside private equity managers with which the
Company has already invested or other private equity
managers based on due diligence.
Portfolio construction
The Manager adopts a dynamic approach to portfolio construction, taking into account changes in the SLPET portfolio and the wider market environment. SLPET's focus is predominantly on investing in European mid-market companies. In recent years, SLPET has increased its exposure to North American mid-market companies, driven by access to attractive investment opportunities and the associated diversification benefits. In order to gain access to the best quality private equity managers, the majority of the portfolio is invested via primary investments. As it takes time for the commitments to these primary investments to be drawn down and invested into portfolio companies, the Manager employs an "over commitment" strategy. This ensures the portfolio is as fully invested as possible, but requires careful management of the cash and loan facilities available to meet the obligations to fund outstanding commitments.
In addition to primary investments, the Manager purchases private equity fund interests in the secondary market in order to fill gaps in the portfolio and gain exposure to new managers. Since the expansion of the strategy in January 2019, the Manager also participates in co-investments for the Company. Secondaries and co-investments have a complementary investment profile, helping to deploy cash more quickly and also typically exhibiting shorter holding periods, thereby reducing the overall average duration of SLPET's portfolio and, in most cases, generating higher IRRs. Co-investments sourced by the Manager also typically have no fees or carried interest payable, further enhancing the potential cash returns received by SLPET. The Manager may also sell interests via the secondary market for relative value, portfolio construction or liquidity reasons.
Overview of the Manager
SLPET is managed by the Aberdeen Standard Investments' ("ASI") private equity team which is based in Europe and in the US. The team is one of the largest investors in private equity funds and co-investments in Europe. A key strength of the investment team is their extensive fund and direct deal experience, which gives the Manager greater insight into the strategies, processes and disciplines of the funds invested in and allows better qualitative judgements to be made.
Investment Years managing Advisory Board Commitments Private Equity
Professionals SLPET seats held over made AUM
time
41 18 >400 1,000 >GBP12bn
Responsible investment - Environmental, Social & Governance ("ESG")
ASI has been UN PRI for over 10 years and has recently been awarded a PRI rating of A+. It has a central ESG and Stewardship team consisting of 20 people and is active in ESG industry involvement (PRI, ICGN, ACGA, Eurosif, UKSIF, VBDO, UN Global Compact, CDP, EITI, TCFD, 30% Club). The central ESG and Stewardship team works alongside the private equity team to ensure best practice in ESG efforts.
In addition, the Manager's private equity team has its own ESG representatives, headed by the Company's lead manager, Alan Gauld, and supported by the Private Equity ESG Committee. The Committee is responsible for driving forward private equity ESG initiatives and monitoring progress by the Manager. The Committee meets on a quarterly basis and has representation from across the private equity team and the ESG and Stewardship team.
The Manager has its own ESG policy for private equity and has incorporated ESG considerations into investment activity over the last decade. Each new investment made on behalf of the Company this year was subject to full operational due diligence and specific due diligence around ESG. In addition, we have ensured that all primary fund commitments in the year are subject to legal protections relating to socially responsible investing ("SRI").
No primary or secondary fund opportunities were declined solely on ESG grounds during the year, however an advanced co-investment opportunity in the Healthcare space was rejected due to ESG concerns around pricing practices, given the relatively high level of revenue and margin generated from customers in the public sector. During the year the Manager worked with several of the Company's private equity managers regarding ESG. For example, the Manager specifically worked with one of the Company's North America-based private equity managers to help the firm further develop and refine its ESG capabilities, particularly around ESG reporting frameworks.
The Manager recently concluded its 5th annual Private Equity ESG survey. This exercise allows the Manager to monitor responsible investment progress in its portfolio and intervene when there is underperformance in relation to a private equity manager's approach. The survey was sent out to 176 private equity firms, including the Company's core private equity managers. On the back of the results, the Manager has no significant concerns around the ESG focus of the Company's core portfolio. The 2019 ESG survey will be made available to investors upon request.
Finally, the Manager's focus on ESG in the year was recognised with a 'Silver Award' for Best ESG Private Equity Firm at the 10th edition of the Private Equity Exchange & Awards. We are delighted to be recognised by the European private equity market as amongst the leaders in ESG.
Borrowing facilities
Throughout the year SLPET had access to an GBP80m syndicated multi-currency revolving credit facility with Citibank and Société Générale. Since the year end the Board has agreed an expansion of this facility to GBP100m and has extended the expiry date to December 2024. The facility was undrawn at the year end (2018: GBPnil). The interest rate on this facility is LIBOR plus 1.50%, rising to 1.70% depending on utilisation, and the commitment fee payable on non-utilisation is 0.7% per annum. During the year we incurred GBP683k in fees and interest for the revolving credit facility. Notwithstanding the lack of utilisation of the facility, it is a valuable tool for managing SLPET's resources available for investment and will look to use this opportunistically in the future.
Financial Summary
Annualised
Performance (total return)(1) 1 year 3 years 5 years 10 years Since
% % % % inception(2)
%
SLPET NAV 10.5 13.2 15.2 12.7 10.2
SLPET share price 5.7 13.8 12.6 14.6 8.9
FTSE All-Share Index 2.7 6.8 6.8 8.3 5.6
Highs/Lows for the year ended 30 September 2019 High Low
Share price 385.1p 320.0p
(1) Includes dividends reinvested.
(2) The Company was listed on the London Stock Exchange in May 2001.
Ten Year Historical Record
Summary financial information
NAV and share price as at 30 September Net NAV NAV Share Discount to
assets (undiluted) (diluted) price diluted NAV
GBPm p p p %
2010 315.2 195.3 193.3 113.75 (41.2)
2011 369.4 228.7 225.9 134.00 (40.7)
2012 369.7 227.6 224.9 162.38 (27.8)
2013 401.2 244.2 243.4 198.00 (18.6)
2014 409.1 257.4 257.4 230.00 (10.6)
2015 438.7 281.6 281.6 214.00 (24.0)
2016 532.6 346.4 346.4 267.25 (22.8)
2017 599.0 389.6 389.6 341.50 (12.3)
2018 661.4 430.2 430.2 345.50 (19.7)
2019 710.1 461.9 461.9 352.00 (23.8)
Performance and NAV Total shareholder return Dividend Dividend per Ongoing Charges Ratio
dividends. total return % paid(1) ordinary %
Year to 30 September % GBPm share p
2010 18.4 1.4 0.1 0.20 1.02
2011 17.0 18.0 0.2 1.30 1.02
2012 0.1 22.4 1.0 2.00 0.97
2013 9.1 23.4 1.3 5.00 0.99
2014 7.7 19.1 8.2 5.00 0.96
2015 11.9 (4.0) 10.6 5.25 0.98
2016 24.8 27.9 8.2 5.40 0.99
2017 14.9 31.9 14.8 12.00 1.14(2)
2018 13.3 5.8 18.8 12.40 1.10
2019 10.5 5.7 19.4 12.80 1.09
Fund manager as a Fund investments as a
% of net assets % of net assets
Investment exposure as at 30 September Top 5 Top 10 Top 10 Top 20 Top 30
% % % % %
2010 62.1 96.4 67.9 101.0 116.2
2011 57.9 89.1 69.0 95.4 106.8
2012 51.2 80.2 63.5 87.4 97.9
2013 44.9 68.4 51.7 76.5 86.8
2014 43.2 65.0 52.9 74.0 82.7
2015 42.4 65.2 48.6 71.4 80.2
2016 39.7 65.0 45.9 68.3 78.8
2017 38.5 58.9 47.7 73.7 81.6
2018 39.5 63.6 48.4 76.3 85.2
2019 42.7 67.9 53.9 78.8 86.4
Source: The Manager & Refinitiv
(1) Represents the cash dividends paid during the year.
(2) The incentive fee arrangement ended on 30 September 2016. Following the end of the incentive fee period, a single management fee of 0.95% per annum of the NAV of the Company replaced the previous management and incentive fees.
Sector Review
Private equity market review
Over recent years there has been a marked shift towards the private equity asset class (buyouts, growth and venture capital), resulting in assets under management ('AuM') growing to a record high of c.$3.4 trillion globally. In the US for example, the number of PE-backed companies increased by 106% between 2006 to 2017 around 4,000 to over 8,000. In contrast, according to the McKinsey Global Private Markets Review 2019, the number of US publicly traded firms fell by 16% over the same time period to around 4,300 (and by 46% since 1996). Investors who invested in private equity through and after the global financial crisis have generally achieved strong returns, driving further interest in, and growth of, the market. Whilst the total market value is at a high relative to historical levels, it remains relatively small in comparison with traditional asset classes.
Private market activity
Total transaction values in 2018 broke post-financial crisis levels in both Europe and North America, driven by the large/mega-cap segment (deals of over EUR1bn). The first half of 2019 saw subdued levels of activity, particularly when compared with the same period in 2018. The large/mega-cap segment was also significantly down across both markets on the 2018 peak but ahead of the level of activity in the second half of 2018 in Europe and broadly in line with long-term, post-crisis levels.
Exit activity has remained buoyant over the last 10 years. Activity peaked in 2014/15 as private equity managers took advantage of a relatively stable market backdrop to realise their remaining pre-crisis portfolios. Trade acquirers, taking advantage of cheap corporate debt and pricing-in synergies, have been particularly active in recent years, consistently representing the majority of exit value. The first six months of 2019 saw a reduction in exit activity, possibly as buyers became more cautious in anticipation of a potential economic slowdown.
Fundraising and dry powder
In recent years, we have seen increased levels of capital attracted to the private equity asset class. This is due to a combination of long-term outperformance compared to public markets, high levels of cash distributions relative to historical trends and the search for strong returns in an expected low-growth environment. This has led to a fundraising environment at its most buoyant since the global financial crisis in 2008. The best performing managers across all size segments are continuing to attract capital and are raising new funds relatively easily.
The strong fundraising environment has led to record levels of dry powder. The US buyout market currently has around $410bn of uninvested capital committed, or over double the amount when compared to Europe. In both the US and Europe, the increase in dry powder has been primarily driven by larger funds (above $5bn in size). In contrast, mid-market levels remain relatively consistent on both sides of the Atlantic. The Company's core focus remains in the mid-market segment.
Entry pricing and leverage
Overall, pricing levels remain relatively high when compared to the 10 year averages. Mid-market transactions are taking place at an average of around 9x EBITDA in Europe which represents a significant discount to the larger European buyout space, which saw an average entry multiple of 11x EBITDA in 2018. Average multiples in the large/mega-cap segment have consistently exceeded 10x EBITDA since 2014. The trend is similar in the US market.
Leverage multiples have also edged higher since 2009 due to improved debt availability. However, "covenant-lite" structures are becoming increasingly common and equity as a percentage of enterprise value remains high compared to pre-crisis levels. These factors are expected to provide managers with a greater level of capital structure resilience and flexibility if there were short-term trading challenges or an economic downturn. We view this as one of the industry's key lessons learned from the last financial crisis.
Secondary investment market
The development of the secondary market, whereby positions in established funds are bought and sold, has accelerated in recent years, with a combination of strong pricing, buoyant fund-raising and innovation in deal types
driving record levels of deal volume.
According to figures from Greenhill, deal volumes for the first half of 2019 were around $42 billion, up 56% on the same period last year. Strong momentum has continued into the second half of 2019, such that deal volumes for the full year are expected to exceed the record level of $74bn achieved in 2018. Activity levels have been boosted notably by an increase in larger deals (those of over $1 billion) and the growth in manager-led transactions, which include liquidity offerings, fund restructurings and spin-out deals.
Average pricing for secondary deals in the first half of 2019 declined to 89% of NAV, largely due to an increase in the amount of mature fund positions which tend to trade at higher discounts. That being said, funds managed by high quality or well-known managers continue to command strong pricing, often at or above NAV.
Co-investment market
The co-investment market has continued to grow driven by a shift in investor demand towards more direct private equity products. Whilst co-investments can add single company concentration and therefore risk, appropriately sized investments can be accretive to performance. Investors are attracted to co-investment by its core advantages relative to fund investment; having greater control of investment selection and the lower level of fees.
Performance
Performance Summary
* NAV performance - The NAV total return ("NAV TR") for
the year was 10.5% versus 2.7% for the FTSE All-Share
index and in line with the Company's NAV TR since
inception of 10.2%.
* Underlying portfolio performance - The portfolio
continues to generate strong realisations, with
distributions and income generated in the year of
GBP138.1m. Exits were realised at an average premium
of over 20% to the last relevant valuation. The
underlying portfolio exhibited strong average revenue
and EBITDA growth in the year of over 10%.
* New commitments - 2019 was an active year for new
commitments, with a number of the Company's core
private equity managers returning to the fundraising
market. In total, eight primary fund commitments,
three secondary fund commitments and one
co-investment were completed.
* Introduction of co-investments - In January 2019 the
investment objective of SLPET was broadened to
include the ability to invest in co-investments. The
Company's first co-investment was made in
Mademoiselle Desserts, a leading European
manufacturer of premium frozen pastries.
* Active management - SLPET sold interests in 17 mature
secondary and buyout funds where there was deemed to
be limited upside for a total consideration of
GBP29.9m.
* Outstanding commitments - Total outstanding
commitments of GBP450.3m (2018: GBP369.3m). The
over-commitment ratio has increased to 42.6%.
* Revolving credit facility - Since the year end the
Board has agreed an expansion of this facility to
GBP100m and has extended the expiry date to December
2024.
NAV performance
The NAV TR for the year was 10.5% versus 2.7% for the FTSE All-Share index and in line with the Company's annualized NAV TR since inception of 10.2% per annum. The underlying portfolio exhibits strong average revenue and EBITDA growth in the year of over 10%.
Underlying performance
The increase in value of the unquoted portfolio on a per share basis was 47.0p. This was made up of net unrealised gains at constant FX of 43.0p, net realised gains and income of 6.9p and net unrealised FX losses of 2.9p.
Notable contributors to the unrealised gains included 3i Eurofund V, Permira V and Advent GPE VIII which together accounted for 21.6p of the NAV increase. Action, as the Company's single largest underlying company at 7.7% of NAV, continued to grow strongly in the year and was a key contributor to unrealised gains in the period via 3i Eurofund V. Conversely, at a fund level, unrealised value decreases were seen at Equistone V and Montagu IV, which together contributed to a NAV reduction of 7.1p.
Material contributors to realised gains were CVC V, Permira V, IK VII, Equistone IV and Montagu IV, which together accounted for 22.6p of the NAV increase, where companies such as Transnorm, Nemera, Parex and TeamViewer were fully or partially sold for strong returns above prior carrying values. Realised losses amounted to a NAV reduction of 4.8p.
During the year, sterling appreciated against the euro by 0.7%, whilst depreciating against US dollar, by 5.5%. This had a negative impact on the Company's NAV. The sterling/euro exchange rate at 30 September 2019 was GBP1/EUR1.1227 and the sterling/dollar exchange rate was GBP1/$1.3041. The combined effect of foreign exchange movements on the valuation of the unquoted portfolio over the year was to reduce the NAV per share by 2.9p (0.6%).
We, and the Board, do not believe it is appropriate for the Company to undertake any financial hedging of its foreign exchange exposure, given the irregularity in size and timing of individual cash flows to and from its fund investments and co-investments. Any cash balances and bank indebtedness are held in sterling, euro and US dollars, broadly in proportion to the currency of the Company's outstanding fund commitments.
Drawdowns
During the year GBP81.6m was invested through SLPET's portfolio of funds into existing and new underlying companies. Drawdowns were used to invest into a diverse set of predominantly European companies, with notably large new investments in Mehiläinen via CVC Fund VII (a leading provider of healthcare and care services in Finland), Mobility Holdings via Hg 8 (leading European B2B fleet leasing company) and Ginefiv via Investindustrial Growth (leading Spanish fertility clinics). For each of these portfolio companies the value creation plan typically includes the internationalisation of the company, the introduction of new products, undertaking a 'buy and build' acquisition strategy, and / or professionalisation of the company's management team, processes and reporting.
Distributions
Exit activity from the private equity funds was driven by the continued strong market appetite for high quality private companies, both from trade / strategic buyers (for example, Honeywell's acquisition of Transnorm from IK VII) and other private equity firms (Astorg's acquisition of Nemera from Montagu IV). IPO has been less prominent as an exit route during the year, although we note the successful listing of TeamViewer (Permira V) on the Frankfurt stock exchange, one of the largest software IPOs in European history. The majority of portfolio company realisations were at a significant premium to the last relevant valuation, typically in the region of 20%+. This average premium paid at exit has persisted since 2010. Case studies of two of the largest distributions in the year, Transnorm and Nemera, are included in the Annual Report.
Commitments
In total, eight primary fund commitments, three secondary fund commitments and one co-investment were completed during the year as a number of the Company's core private equity managers returned to the fundraising market. The total value of new and recycled commitments in addition to exposure acquired amounted to GBP188.0m, whilst fund drawdowns were GBP81.6m. The total outstanding commitments at financial year end were GBP450.3m (2018: GBP369.3m).
The over-commitment ratio has increased to its current level of 42.6% but still remains at the lower end of our long-term target range of 30%-75%, highlighting the prudent approach to over-commitment we have adopted in the current market environment. We take additional comfort from the maturity profile of the underlying portfolio, where approximately 50% of the portfolio, by value, has been held for four or more years. We expect that the value in many of these mature positions is likely to be realised in the near term, which will provide further funding for existing commitments. In addition, we estimate that around GBP62.0m of the reported outstanding commitments are unlikely to be drawn down, driven by the nature of private equity investing. We also estimate that around GBP48m is currently held by underlying funds as credit facilities and we expect that this amount will be drawn from the Company within the next 12 months.
Primary investment activity
During the year, GBP122.6m was committed to new private equity primary funds focused on Europe, GBP24.7m to two North American funds, and GBP21.4m to a global investment strategy. All new commitments were with core private equity managers with whom the Manager has deep relationships and has tracked over the long term.
The value of primary commitments made in the year is ahead of prior years. This is largely due to a number of the Company's core private equity managers returning to the market to fundraise at the same time. Consequently, we expect that the Company will commit less capital to primary funds in FY20.
Fund Amount Description Rationale for investing
committed
(GBPm)
-------------------- ----------- ------------------------------- -------------------------------------------
Altor V 30.7 EUR2.5bn fund investing Strong position in the Nordic
in companies operating mid-market with an ability
in the mid-market segment to create value by driving
of the Nordic region. operational change in its
underlying portfolio companies.
-------------------- ----------- ------------------------------- -------------------------------------------
Triton V 26.4 EUR5.0bn fund focused Long-standing, value-focused
on predominantly mid-market investor that can pivot its
companies based in German strategy depending on the
speaking and Nordic market cycle and create operational
countries. value in its companies via
its own in-house consultancy
group.
-------------------- ----------- ------------------------------- -------------------------------------------
IK IX 22.4 A EUR2.5bn fund investing Long-standing mid-market
in investor with deep sector
Northern Europe based expertise, strong networks
mid-market companies. in its chosen geographies
and an investment strategy
honed over 30 years.
-------------------- ----------- ------------------------------- -------------------------------------------
Cinven 7 21.6 A EUR10.0bn fund focused Deep networks and sector
primarily on upper mid-market knowledge built over 25 years
European companies. as an independent firm and
an investment strategy that
focuses on building 'recession-resilient'
portfolios.
-------------------- ----------- ------------------------------- -------------------------------------------
Advent GPE 21.4 A EUR17.5bn fund investing Global private equity manager
IX in upper mid-market with deep sector coverage,
companies across the experienced investment and
globe. operational teams and persistent
top quartile performance
across cycles.
-------------------- ----------- ------------------------------- -------------------------------------------
Investindustrial 21.5 EUR2.4bn fund focused The leading mid-market private
VII on European companies equity manager focused on
in the mid-market, with Southern Europe.
a Southern European
weighting.
-------------------- ----------- ------------------------------- -------------------------------------------
American Industrial 15.3 $3.1bn fund focused Industrial sector specialist
Partners Fund on underperforming industrial with proven ability to drive
VII businesses in North operational change in its
America. underlying portfolio companies.
-------------------- ----------- ------------------------------- -------------------------------------------
Great Hill 9.4 A $2.5bn fund focused Technology-specialist, growth-focused
Partners VII primarily on mid-market investor with a track record
tech-enabled North American built over 20 years. Incorporated
companies. lessons learned from the
global financial crisis to
further strengthen its performance.
Secondary investment activity
During the year, the Company acquired GBP47.6m of exposure through buying established funds in the secondary market. In addition to offering attractive investment returns, secondaries are also used to fill gaps in the SLPET portfolio, to gain access to new managers, and as an efficient means of redeploying sale proceeds from underlying portfolio company sales.
Whereas most of SLPET's previous secondary investments have comprised purchases of single interests in funds (as was also the case for the recent 3i Eurofund V purchase), this was the first time that SLPET has acquired a portfolio of fund interests managed by different buyout firms. Furthermore, the Vitruvian Continuation Vehicle transaction was the first fund restructuring in which the Company has participated. With the continued increase in size and quality of general partner-led secondaries such as the Vitruvian transaction, we would anticipate this area will offer further attractive opportunities for SLPET in the coming months and years.
As part of its active portfolio management and to improve its exposure by vintage year, in early 2019 SLPET launched a process to sell interests in 17 mature secondary and buyout funds where there was deemed to be limited upside. The sale was structured in two tranches, with the secondary fund interests sold to one buyer in June 2019 and the buyout fund interests sold to another buyer in September 2019. In aggregate, the agreed sale price was equivalent to a 5% discount to the 31 December 2018 valuation (GBP49.7m), adjusted for subsequent cash flows. These fund interests held outstanding commitments of GBP32.6m as at 31 December 2018 which have since been released.
During the year we also raised GBP33.3m from the sale of listed positions. The net realised and unrealised gains, including dividend receipts, from the quoted portfolio amounted to 2.0p per share (2018: 0.2p). The remaining positions, which represented 1.6% of net assets at the year end, were sold in the first two months following the end of the financial year.
Investment Exposure Description Rationale for investing
acquired(1)
GBPm
---------------- ------------- --------------------------- ---------------------------------------
3i Eurofund 6.6 Acquisition of a single Strong conviction around
V interest in 3i Eurofund the prospects of the key
V, a EUR5.0bn European remaining underlying company
mid-market buyout fund. (Action), which has potential
to further expand its store
footprint and create additional
value.
---------------- ------------- --------------------------- ---------------------------------------
Vitruvian 19.0 Restructuring of Vitruvian A growth-focused buyout fund
Continuation Investment Partnership with a strong technology
Vehicle I, a EUR925m European sector angle and attractive
mid-market buyout fund. value creation potential
across the underlying portfolio
of 5 companies.
---------------- ------------- --------------------------- ---------------------------------------
Portfolio 22.0 Acquisition of a portfolio An attractive portfolio offering
of buyout of four both early liquidity from
fund interests fund interests where the mature interests and
the majority of exposure longer term value accretion
was to IK VII & VIII from the younger exposure,
(both existing funds as well as being highly complementary
held by SLPET). The to the Company's existing
other two interests holdings.
acquired were in Gilde
IV and Steadfast III.
(1) Exposure acquired equals purchase price plus any unfunded commitment.
Co-investment activity
In January 2019 the investment objective of SLPET was broadened to include the ability to invest in co-investments, thereby benefitting from ASI's long track record of successful investing in this strategy.
The type of co-investments targeted by the Manager for SLPET are those that have a complementary investment profile to the Company's existing underlying assets. They help the Company deploy cash more quickly and also typically exhibit shorter investment periods than funds. Co-investments also give the Manager more control over asset selection, allowing it to actively increase the Company's exposure to certain sectors or geographic regions, or example. Importantly, co-investments sourced by the Manager typically have no, or reduced, fees and carried interest payable to the lead private equity manager, further enhancing the cash returns received by the Company.
The Company's first co-investment was made alongside the lead manager IK Investment Partners, and is a commitment to invest up to EUR6m in Mademoiselle Desserts, a leading European manufacturer of premium frozen pastries. At the year-end EUR4m / GBP3.5m had been invested and the business is trading to plan.
Outlook
Current macroeconomic risks to private equity returns include US-China tensions, Brexit and the threat of a recession. Private equity is subject to the same risks as the wider market but has shown resilience versus other asset classes in the past and has consistently outperformed the listed markets throughout economic cycles. We expect this relationship to persist into the future.
We remain confident that private equity markets offer continued opportunity for value creation. Private equity managers are proving to be astute stewards of a diverse spectrum of companies, and market forces mean that these assets can, and likely will, stay in private hands for longer (as the number of publicly-listed companies continues to shrink). The best private equity managers can support the growth and development of emerging small and mid-market companies, whether that is in terms of ESG, digitalisation, operational improvement, professionalisation, innovation or internationalisation.
We recognise that the private equity market is currently very competitive due to the record levels of dry powder. Asset-price inflation is a significant factor when considering new investments in today's market. However, the weight of capital continues to flow primarily into those managers focused at the large and mega-cap end of the market, pushing up valuations in that segment to what we consider to be relatively expensive levels and making it harder to generate outsized returns.
By contrast, the Company continues to focus on the mid-market segment in Europe, which is not accumulating dry powder at the same rate as the large / mega-cap space. Furthermore, the mid-market remains a deep and fragmented pool of investment opportunities with greater potential for sensible pricing and more rapid value creation. We continue to believe that strong, attractive returns will be driven by mid-market private equity managers that exhibit differentiated deal sourcing and value creation capabilities.
SL Capital Partners
8 January 2020
Portfolio construction - Geographic exposure
At the year end, 86% of underlying private companies were headquartered in Europe and this will continue to be the case over the short to medium term, with the balance mainly headquartered in North America.
We believe that the portfolio is diversified and well positioned to mitigate a potential deterioration in macroeconomic conditions. Brexit, for example, has the potential to impact growth in the Company's underlying portfolio but we note that UK-headquartered companies amount to only 17% of the portfolio and most of these businesses have pan-European or globally diversified revenue bases.
The portfolio remains skewed towards Northern Europe. SLPET has historically been underweight in Southern Europe due to the relative immaturity and underperformance of its private equity market compared to other European regions. However, over recent years the private equity market dynamics have improved and we have increased our exposure to the region. Consequently, we have made two primary fund commitments to Southern European-focused funds (Investindustrial Growth and Investindustrial VII), totalling EUR50m. We also continue to selectively increase our North American mid-market exposure via recent commitments to American Industrial Partners VII and Great Hill Partners VII, which will modestly grow the Company's exposure to the region as we move forward.
Portfolio construction - Sector exposure
Over recent years the portfolio has shifted towards resilient and defensive areas, such as Information Technology and Healthcare. 2019 has seen a continuation in this trend as private equity managers begin positioning their portfolio for potentially more volatile macroeconomic conditions. Whilst Industrials remain a signi(1)cant part of the portfolio, it is worth noting that its weighting has declined from 22% to 17% during the year.
Consumer Discretionary and Staples remain a significant part of the portfolio at a combined 35%, broadly in line with prior year. This weighting represents the size of the sector in Europe more generally whilst also representing the success that private equity managers have had, and continue to have, in this area.
Maturity analysis
With 50% of the underlying portfolio having been held for four years or more, near-term realisations and distributions are expected to remain strong. While the make-up of the portfolio in terms of vintages is largely unchanged from last year, it is encouraging to note that the valuations of the older vintages have improved significantly. In 2018, investments of over 5 years were valued at 1.9 times cost, whereas today the (1)gure is 2.9 times cost. The figure is skewed by exceptionally strong investment performance in Action (3i Eurofund V), TeamViewer and Dr. Martens (both Permira V), to name a few. We have also seen material upward valuations on the 4 and 5 year portions of the portfolio compared to last year.
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 are required to prepare the financial statements in accordance with UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.
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 judgements and estimates that are reasonable and
prudent;
* state whether applicable UK accounting standards have
been followed, subject to any material departures
disclosed and explained in the financial statements;
* 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.
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 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.
Christina McComb
Chair
8 January 2020
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2019
For the year ended For the year ended
30 September 2019 30 September 2018
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total capital gains on investments 9 - 69,845 69,845 - 82,383 82,383
Currency gains 15 - 340 340 - 972 972
Income 2 6,686 - 6,686 6,955 - 6,955
Investment management fee 3 (646) (5,817) (6,463) (599) (5,388) (5,987)
Administrative expenses 4 (997) - (997) (996) - (996)
Profit before finance costs and taxation 5,043 64,368 69,411 5,360 77,967 83,327
Finance costs 5 (186) (615) (801) (279) (632) (911)
Profit before taxation 4,857 63,753 68,610 5,081 77,335 82,416
Taxation 6 (651) 133 (518) (1,744) 456 (1,288)
Profit after taxation 4,206 63,886 68,092 3,337 77,791 81,128
Earnings per share - basic and diluted 8 2.74p 41.55p 44.29p 2.17p 50.60p 52.77p
The Total column of this statement represents the profit and loss account of the Company.
There are no items of other comprehensive income, therefore this statement is the single Statement of Comprehensive Income of the Company.
All revenue and capital items in the above statement are derived from continuing operations.
No operations were acquired or discontinued in the year.
The dividend which has been recommended based on this Statement of Comprehensive Income is 12.80p (2018: 12.40p) per ordinary share.
The accompanying notes form an integral part of these financial statements.
STATEMENT OF FINANCIAL POSITION
As at 30 September 2019
As at As at
30 September 2019 30 September 2018
Notes GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Investments 9 638,733 603,709
Receivables falling due after one year 10 15,173 -
653,906 603,709
Current assets
Receivables 11 10,640 1,048
Cash and cash equivalents 66,315 57,441
76,955 58,489
Creditors: amounts falling due within one year
Payables 12 (20,778) (835)
Net current assets 56,177 57,654
Total assets less current liabilities 710,083 661,363
Capital and reserves
Called-up share capital 14 307 307
Share premium account 15 86,485 86,485
Special reserve 15 51,503 51,503
Capital redemption reserve 15 94 94
Capital reserves 15 571,694 522,974
Revenue reserve 15 - -
Total shareholders' funds 710,083 661,363
Net asset value per equity share 16 461.9p 430.2p
The accompanying notes form an integral part of these financial statements.
The financial statements of Standard Life Private Equity Trust plc, registered number SC216638 were approved and authorised for issue by the Board of Directors on 8 January 2020 and were signed on its behalf by Christina McComb, Chair.
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2019
Notes Called-up Share Special Capital Capital Revenue Total
share premium reserve redemption reserves reserve
capital account reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 October 2018 307 86,485 51,503 94 522,974 - 661,363
Profit after taxation - - - - 63,886 4,206 68,092
Dividends paid 7 - - - - (15,166) (4,206) (19,372)
Balance at 30 September
2019 14,15 307 86,485 51,503 94 571,694 - 710,083
For the year ended 30 September 2018
Notes Called-up Share Special Capital Capital Revenue Total
share premium reserve redemption reserves reserve
capital account reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 October 2017 307 86,485 51,503 94 448,751 11,852 598,992
Profit after taxation - - - - 77,791 3,337 81,128
Dividends paid 7 - - - - (3,568) (15,189) (18,757)
Balance at 30 September
2018 14,15 307 86,485 51,503 94 522,974 - 661,363
The accompanying notes form an integral part of these financial statements.
STATEMENT OF CASH FLOWS
For the year ended For the year ended
30 September 2019 30 September 2018
Notes GBP'000 GBP'000 GBP'000 GBP'000
Cashflows from operating activities
Profit before taxation 68,610 82,416
Adjusted for:
Finance costs 5 801 911
Gains on disposal of investments 9 (7,833) (51,351)
Revaluation of investments 9 (62,012) (31,032)
Currency gains 15 (340) (972)
Increase in debtors (251) (362)
Increase in creditors 442 215
Tax deducted from non-UK income 6 (518) (1,288)
Interest paid (712) (770)
Net cash outflow from operating activities (1,813) (2,233)
Investing activities
Purchase of investments (111,431) (141,533) Disposal of capital proceeds by funds 110,695 122,845 Disposal of quoted investments 30,455 2,499 Net cash inflow / (outflow) from investing activities 29,719 (16,189) Financing activities Ordinary dividends paid 7 (19,372) (18,757) Net cash outflow from financing activities (19,372) (18,757) Net increase / (decrease) in cash and cash equivalents 8,534 (37,179) Cash and cash equivalents at the beginning of the year 57,441 93,648 Currency gains on cash and cash equivalents 340 972 Cash and cash equivalents at the end of the year 66,315 57,441 Cash and cash equivalents consist of: Money-market funds 12,773 50,115 Cash and short-term deposits 53,542 7,326 Cash and cash equivalents 66,315 57,441
The accompanying notes form an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting Policies
(a) Basis of accounting
The financial statements have been prepared in accordance with the Companies Act 2006, Financial Reporting Standard 102 and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP'), issued in November 2014 and updated in February 2018 with consequential amendments. They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements have been prepared on a going concern basis. The directors believe that this is appropriate for the reasons outlined in the Directors' Report of the Annual Report. The principal accounting policies adopted are set out below. These policies have been applied consistently throughout the current and prior year.
Rounding is applied to the disclosures in these financial statements, where considered relevant.
(b) Revenue, expenses and finance costs
Dividends from quoted investments are included in revenue by reference to the date on which the investment is quoted ex-dividend. Other interest receivable is dealt with on an accruals basis. Dividends and income from unquoted investments are included when the right to receipt is established, which is the notice value date. Dividends are accounted for as revenue in the Statement of Comprehensive Income.
All expenses are accounted for on an accruals basis. Expenses are charged through the revenue account of the Statement of Comprehensive Income except as follows:
* transaction costs incurred on the purchase and
disposal of investments are recognised as a capital
item in the Statement of Comprehensive Income;
* the Company charges 90% of investment management fees
and finance costs to capital, in accordance with the
Board's expected long-term split of returns between
capital gains and income from the Company's
investment portfolio. Bank interest expense has
arisen as a consequence of negative interest rates on
Euro cash balances and has been charged wholly to
revenue.
(c) Investments
Investments have been designated upon initial recognition as fair value through profit or loss. On the date of making a legal commitment to invest in a fund or co-investment, such commitment is recorded and disclosed. When funds are drawn in respect of such a commitment, the resulting investment is recognised in the financial statements. The investment is removed when it is realised or when the investment is wound up. Subsequent to initial recognition, investments are valued at fair value as detailed below. Gains and losses arising from changes in fair value are included as a capital item in the Statement of Comprehensive Income and are ultimately recognised in the capital reserves.
Unquoted investments are stated at the directors' estimate of fair value and follow the recommendations of the European Private Equity & Venture Capital Association ("EVCA") and British Private Equity & Venture Capital Association ("BVCA"). The estimate of fair value is normally the latest valuation placed on an investment by its manager as at the Statement of Financial Position date. The valuation policies used by the manager in undertaking that valuation will generally be in line with the joint publication from the EVCA and the BVCA, 'International Private Equity and Venture Capital Valuation guidelines'. Where formal valuations are not completed as at the Statement of Financial Position date, the last available valuation from the manager is adjusted for any subsequent cash flows occurring between the valuation date and the Statement of Financial Position date. The Company's Manager may further adjust such valuations to reflect any changes in circumstances from the manager's last formal valuation date to arrive at the estimate of fair value.
For quoted investments, which were actively traded on recognised stock exchanges, fair value is determined by reference to their quoted bid prices on the relevant exchange as at the close of business on the last trading day of the Company's financial year.
(d) Dividends payable - Interim and final dividends are recognised in the period in which they are paid. Scrip dividends are recognised in the period in which shares are issued.
(e) Capital and reserves
Share premium - The share premium account represents the premium above nominal value received by the Company on issuing shares net of issue costs.
Special reserve - Court approval was given on 27 September 2001 for 50% of the initial premium arising on the issue of the ordinary share capital to be cancelled and transferred to a special reserve. The reserve is a distributable reserve and may be applied in any manner as a distribution, other than by way of a dividend.
Capital redemption reserve - this reserve is used to record the amount equivalent to the nominal value of any of the Company's own shares purchased and cancelled in order to maintain the Company's capital.
Capital reserves:
Capital reserve - gains/(losses) on disposal - Represents gains or losses on investments realised in the period that have been recognised in the Statement of Comprehensive Income, in addition to the transfer of any previously recognised unrealised gains or losses on investments within "Capital reserve - revaluation" upon disposal. This reserve also represents other accumulated capital related items and expenditure such as management fees, finance costs and other currency gains/losses from non-investment activity.
Capital reserve - revaluation - Represents increases and decreases in the fair value of investments that have been recognised in the Statement of Comprehensive Income during the period.
Revenue reserve - The revenue reserve represents accumulated revenue profits retained by the Company that have not currently been distributed to shareholders as a dividend.
The revenue and capital realised reserves represent the amount of the Company's reserves distributable by way of dividend.
(f) Taxation
i) Current taxation - Provision for corporation tax is made at the current rate on the excess of taxable income net of any allowable deductions. In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital in the Statement of Comprehensive Income is the "marginal basis". Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue column of the Statement of Comprehensive Income, then no tax relief is transferred to the capital column. Withholding tax suffered on income from overseas investments is taken to the revenue column of the Statement of Comprehensive Income.
ii) Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the Statement of Financial Position date, where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the Statement of Financial Position date, measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the financial statements which are capable of reversal in one or more subsequent periods.
Due to the Company's status as an investment trust company, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
(g) Foreign currency translation, functional and presentation currency
Foreign currency translation - Transactions in foreign currencies are converted to sterling at the exchange rate ruling at the date of the transaction. Overseas assets and liabilities are translated at the exchange rate prevailing at the Company's Statement of Financial Position date. Gains or losses on translation of investments held at the year-end are accounted for through the Statement of Comprehensive Income and transferred to capital reserves. Gains or losses on the translation of overseas currency balances held at the year-end are also accounted for through the Statement of Comprehensive Income and transferred to capital reserves.
Functional and presentation currency - For the purposes of the financial statements, the results and financial position of the Company is expressed in sterling, which is the functional and the presentation currency of the Company and the presentation currency of the Company.
Rates of exchange to sterling at 30 September were:
2019 2018
Canadian dollar 1.6316 1.6856
Euro 1.1304 1.1227
US dollar 1.2323 1.3041
Transactions in overseas currency are translated at the exchange rate prevailing on the date of transaction.
The Company's investments are made in a number of currencies. However, the Board considers the Company's functional currency to be sterling. In arriving at this conclusion, the Board considers that the shares of the Company are listed on the London Stock Exchange. The Company is regulated in the United Kingdom, principally having its shareholder base in the United Kingdom, pays dividends as well as expenses in sterling.
(h) Cash and cash equivalents - Cash comprises bank balances and cash held by the Company. Cash equivalents comprise money-market funds which are used by the Company to provide additional short-term liquidity. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
(i) Debtors - Debtors are recognised initially at fair value. They are subsequently measured at amortised cost using the effective interest method, less the appropriate allowances for estimated irrecoverable amounts.
(j) Creditors - Creditors are recognised initially at fair value. They are subsequently stated at amortised cost using the effective interest method.
(k) Segmental reporting - The Directors are of the opinion that the Company is engaged in a single segment of business activity, being investment business. Consequently, no business segmental analysis is provided.
(l) Judgements and key sources of estimation uncertainty - The preparation of financial statements requires the Company to make estimates and assumptions and exercise judgements in applying the accounting policies that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses arising during the year. Estimates and judgements are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The area where estimates and assumptions have the most significant effect on the amounts recognised in the financial statements is the determination of fair value of unquoted investments, as disclosed in note 1(c).
2. Income Year to Year to
30 September 2019 30 September 2018
GBP'000 GBP'000
Income from fund investments 5,251 6,305
Income from quoted investments 806 248
Interest from cash balances and money-market funds 629 402
Total income 6,686 6,955
3. Investment management fees Year to 30 September 2019 Year to 30 September 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management fee 646 5,817 6,463 599 5,388 5,987
The Manager to the Company is SL Capital Partners LLP. In order to comply with the Alternative Investment Fund Managers Directive, the Company appointed SL Capital Partners LLP as its Alternative Investment Fund Manager from 1 July 2014.
The investment management fee payable to the Manager is 0.95% per annum of the NAV of the Company. The investment management fee is allocated 90% to the realised capital reserve and 10% to the revenue account. The management agreement between the Company and the Manager is terminable by either party on twelve months written notice.
Investment management fees due to the Manager as at 30 September 2019 amounted to GBP799,000 (2018: GBP553,000).
4. Administrative expenses Year to Year to
30 September 2019 30 September 2018
GBP'000 GBP'000
Directors' fees 243 237
Employer's National Insurance 27 26
Secretarial and administration fees 202 189
Marketing/advertising 178 197
Depositary fees 84 106
Fees and subscriptions 59 37
Auditor's remuneration - statutory audit 33 32
- interim review 11 32
Professional and consultancy fees 37 70
Auditor's remuneration - interim review 13 12
Legal fees 8 7
Other expenses 115 83
Total 997 996
Irrecoverable VAT has been shown under the relevant expense line.
On 1 January 2019 the Company appointed IQ EQ Administration Services (UK) Ltd as its Administrator replacing BNP Paribas Securities S.A.. The current year administration figures are in respect of services provided by both BNP Paribas Securities S.A. and IQ EQ Administration Services (UK) Ltd. The administration fee payable to IQ EQ Administration Services (UK) Ltd. is adjusted annually in line with the retail price index ("RPI"). The prior year figures are in respect of the services provided only by BNP Paribas Securities S.A.. The administration agreement is terminable by the Company on three months' notice.
As of 6 September 2019, the secretarial agreement with Maven Capital Partners UK LLP was terminated. Aberdeen Asset Management PLC has assumed responsibility for the provision of the company secretarial services to the Company from that date. The agreement with Aberdeen Asset Management PLC is terminable by the Company on six months' notice.
The emoluments paid to the directors during the year can be found in the Directors' Remuneration Report in the Annual Report.
5. Finance costs Year to 30 September 2019 Year to 30 September 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Bank loan commitment fee 56 504 560 56 504 560
Bank interest expense* 118 - 118 209 - 209
Bank loan arrangement fee 12 111 123 14 128 142
Total 186 615 801 279 632 911
* Bank interest expense includes negative interest on euro-denominated money-market funds.
6. Taxation Year to Year to
30 September 2019 30 September 2018
GBP'000 GBP'000
(a) Analysis of the tax charge throughout the year
Overseas withholding tax 518 1,288
Year to 30 September 2019 Year to 30 September 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(b) Factors affecting the total tax charge for the
year
Return before taxation 4,857 63,753 68,610 5,081 77,335 82,416
The tax assessed for the year is different from the standard rate of corporation tax in the UK. The differences are explained below.
Year to 30 September 2019 Year to 30 September 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Return multiplied by the effective rate of
corporation
tax in the UK - 19.0% (2018: 19.0%) 923 12,113 13,036 965 14,694 15,659
Non-taxable capital gains on investments(1) - (13,271) (13,271) - (15,653) (15,653)
Non-taxable currency gains - (65) (65) - (185) (185)
Non-taxable income (790) - (790) (509) - (509)
Overseas withholding tax 518 - 518 1,288 - 1,288
Surplus management expenses and loan relationship
deficits not relieved - 1,090 1,090 - 688 688
Total tax charge/(credit) for the year 651 (133) 518 1,744 (456) 1,288
(1) The Company carries on business as an investment trust company with respect to sections 1158-1159 of the Corporation Tax Act 2010. As such any capital gains are exempt from UK taxation.
(c) Factors that may affect future tax charges
At the year-end there is a potential deferred tax asset of GBP2,134,000 (2018: GBP1,315,000) in relation to excess management expenses carried forward. The deferred tax asset is unrecognised at the year-end in line with the Company's stated accounting policy.
Changes to the UK corporation tax rates were substantially enacted as part of Finance Bill 2015 (on 26 October 2015) and Finance Bill 2016 (on 7 September 2016). These include reductions to the main rate to reduce the rate to 19% from 1 April 2017 and to 17% from 1 April 2020. Deferred taxes at the Statement of Financial Position date have been measured at these enacted rates and reflected in these financial statements.
7. Dividend on ordinary shares Year to Year to
30 September 2019 30 September 2018
GBP'000 GBP'000
Amount recognised as a distribution to equity holders in the year:
2018 third quarterly dividend of 3.10p (2017: nil) per ordinary share paid 4,766 -
on 26 October 2018
2018 final dividend of 3.10p (2017: 6.00p) per ordinary share paid on 25
January 2019 (2018:
paid on 31 January 2018) 4,766 9,225
2019 first quarterly dividend of 3.20p (2018: 3.10p) per ordinary share
paid on 26 April 2019
(2018: paid on 27 April 2018) 4,920 4,766
2019 second quarterly dividend of 3.20p (2018: 3.10p) per ordinary share
paid on 26 July 2019
(2018: paid on 27 July 2018) 4,920 4,766
Total 19,372 18,757
Set out below are the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of sections 1158-1159 of the Corporation Tax Act 2010 are considered. The total revenue and capital profits available for distribution by way of a dividend for the year is GBP68,092,000 (2018: GBP81,128,000).
Year to Year to
30 September 2019 30 September 2018
GBP'000 GBP'000
2019 first quarterly dividend of 3.20p (2018: 3.10p) per ordinary share
paid on 26 April 2019
(2018: paid on 27 April 2018) 4,920 4,766
2019 second quarterly dividend of 3.20p (2018: 3.10p) per ordinary share
paid on 26 July 2019
(2018: paid on 27 July 2018) 4,920 4,766
2019 third quarterly dividend of 3.20p (2018: 3.10p) per ordinary share
paid on 25 October
2019 (2018: paid on 26 October 2018) 4,920 4,766
2019 fourth quarterly dividend of 3.20p per ordinary share (2018 final
dividend: 3.10p per
ordinary share) due to be paid on 24 January 2020 (2018: paid on 25
January 2019). 4,920 4,766
Total 19,680 19,064
8. Earnings per share - basic and diluted Year to 30 September 2019 Year to 30 September 2018
p GBP'000 p GBP'000
The net return per ordinary share is based on the
following figures:
Revenue net return 2.74 4,206 2.17 3,337
Capital net return 41.55 63,886 50.60 77,791
Total net return 44.29 68,092 52.77 81,128
Weighted average number of ordinary shares in issue: 153,746,294 153,746,294
There are no diluting elements to the earnings per share calculation in 2019 (2018: none).
9. Investments 30 September 2019 30 September 2018
Quoted Unquoted Total Quoted Unquoted Total
Investments Investments Investments Investments
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fair value through profit or
loss:
Opening market value 29,020 574,689 603,709 1,399 503,708 505,107
Opening investment holding
losses/(gains) 26 (58,899) (58,873) 310 (28,151) (27,841)
Opening book cost 29,046 515,790 544,836 1,709 475,557 477,266
Movements in the year:
Additions at cost 13,352 81,568 94,920 30,020 89,658 119,678
Secondary purchases - 36,063 36,063 - 21,885 21,885
Disposal of capital proceeds by
funds - (132,541) (132,541) - (122,845) (122,845)
Disposal of quoted investments (33,263) - (33,263) (2,499) - (2,499)
9,135 500,880 510,015 29,230 464,255 493,485
Gains on disposal of underlying
investments - 11,600 11,600 - 78,611 78,611
Gains/(losses) on disposal of
quoted
investments 1,984 - 1,984 (184) - (184)
Losses on liquidation of fund
investments(1) - (5,751) (5,751) - (27,076) (27,076)
Closing book cost 11,119 506,729 517,848 29,046 515,790 544,836
Closing investment holding
gains/(losses) 316 120,569 120,885 (26) 58,899 58,873
Closing market value 11,435 627,298 638,733 29,020 574,689 603,709
(1) Relates to the write off of investments which were previously already provided for.
30 September 2019 30 September 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains / (losses) on investments held at
fair value through profit or loss based on
historical costs 1,984 5,849 7,833 (184) 51,535 51,351
Losses / (gains) recognised as unrealised in
previous years in respect of distributed
capital proceeds or disposals of investments 387 (7,612) (7,225) 310 7,458 7,768
Gains / (losses) on distributions
of capital proceeds or disposal of
investments based on the carrying
value at the previous balance sheet date 2,371 (1,763) 608 126 58,993 59,119
Net movement in unrealised investment
(losses) / gains (45) 69,282 69,237 (26) 23,290 23,264
Total capital gains on investments held at
fair value through profit or loss 2,326 67,519 69,845 100 82,283 82,383
Transaction costs
During the year expenses were incurred in acquiring or disposing of investments. These have been expensed through capital and are included within capital gains on investments in the Statement of Comprehensive Income. The total costs were as follows:
30 September 2019 30 September 2018
GBP'000 GBP'000
Purchases 156 285
Sales - 1
156 286
10. Receivables falling due after one year 30 September 2019 30 September 2018
GBP'000 GBP'000
Amounts falling due after one year:
Investments receivable 15,173 -
Total 15,173 -
GBP15,173,000 of the receivables falling due after one year and GBP6,674,000 of the investments receivable per note 11 relate to future proceeds which are due from secondary sales of fund investments during the period. Under the terms of the transaction, the proceeds of sale are to be received at an agreed future date.
11. Receivables 30 September 2019 30 September 2018
GBP'000 GBP'000
Amounts falling due within one year:
Investments receivable 9,550 -
Interest receivable 679 493
Unamortised loan arrangement fees 154 277
Corporation tax recoverable 202 200
Prepayments 55 78
Withholding tax recoverable - -
Total 10,640 1,048
12. Payables 30 September 2019 30 September 2018
GBP'000 GBP'000
Amounts falling due within one year: 19,552 -
Investments payable(1)
Management fee 799 553
Bank interest(2) 11 63
Secretarial and administration fee 26 38
Accruals and deferred income 390 181
Total 20,778 835
(1) The investments payable balance relates to the future payment due for the secondary acquisition of fund investments during the period.
(2) Bank interest payable includes negative interest on euro-denominated money-market funds.
13. Bank loans
At 30 September 2019, the Company had an GBP80 million (2018: GBP80 million) committed, multi-currency syndicated revolving credit facility provided by Citi and Societe Generale of which GBPnil (2018: GBPnil) had been drawn down. The facility expires on 31 December 2020. The interest rate on this facility is LIBOR plus 1.50%, rising to 1.70% depending on utilisation and the commitment fee payable on non-utilisation is 0.7% per annum.
Since the year end, the Board has increased the Company's borrowing facility, with Citibank and Société Generale, to GBP100m and has extended the expiry date to December 2024.
14. Called-up share capital 30 September 2019 30 September 2018
GBP'000 GBP'000
Issued and fully paid:
Ordinary shares of 0.2p
Opening balance of 153,746,294 (2018: 153,746,294) ordinary shares 307 307
Closing balance of 153,746,294 (2018: 153,746,294) ordinary shares 307 307
The Company may buy back its own shares where it is judged to be beneficial to shareholders, taking into account the discount between the Company's NAV and the share price, and the supply and demand for the Company's shares in the open market.
No shares were bought back during the year (2018: nil).
15. Reserves Capital reserves
Share Special Capital Gains/ Revaluation Revenue
premium reserve redemption (losses) on reserve
account reserve disposal
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening balances at 1 October 2018 86,485 51,503 94 464,101 58,873 -
Gains on disposal of investments - - - 7,833 - -
Management fee charged to capital - - - (5,817) - -
Finance costs charged to capital - - - (615) - -
Tax relief on management fee and finance - - - 133 - -
costs above
Currency gains - - - 340 - -
Revaluation of investments - - - - 62,012 -
Return after taxation - - - - - 4,206
Dividends during the year - - - (15,166) - (4,206)
Closing balances at 30 September 2019 86,485 51,503 94 450,809 120,885 -
The revenue and capital reserve - gain/loss on disposal represent the amounts of the Company's reserve distributable by way of dividend.
16. Net asset value per equity share 30 September 2019 30 September 2018 Basic and diluted: Ordinary shareholders' funds GBP710,082,563 GBP661,363,392 Number of ordinary shares in issue 153,746,294 153,746,294 Net asset value per ordinary share 461.9p 430.2p
The net asset value per ordinary share and the ordinary shareholders' funds are calculated in accordance with the Company's articles of association.
There are no diluting elements to the net asset value per equity share calculation in 2019 (2018: none).
17. Commitments and contingent liabilities 30 September 2019 30 September 2018
GBP'000 GBP'000
Outstanding calls on investments 450,272 369,275
This represents commitments made to fund and co-investment interests remaining undrawn.
18. Parent undertaking and related party transactions
The ultimate parent undertaking of the Company is Phoenix Group Holdings. The results for the year from 1 October 2018 to 30 September 2019 are incorporated into the group financial statements of Phoenix Group Holdings, which will be available to download from the website www.thephoenixgroup.com.
Standard Life Assurance Limited ("SLAL", which is 100% owned by Phoenix Group Holdings), and the Company have entered into a relationship agreement which provides that, for so long as SLAL and its associates exercise, or control the exercise of, 30% or more of the voting rights of the Company, SLAL and its associates, will not seek to enter into any transaction or arrangement with the Company which is not conducted at arm's length and on normal commercial terms, take any action that would have the effect of preventing the Company from carrying on an independent business as its main activity, or from complying with its obligations under the Listing Rules or propose or procure the proposal of any shareholder resolution which is intended or appears to be intended to circumvent the proper application of the Listing Rules. During the year ended 30 September 2019, SLAL received dividends from the Company totalling GBP10,850,000 (2018: GBP10,568,000).
As at 30 September 2018, the Company was invested in the Standard Life Investments Liquidity Funds. During an Extraordinary General Meeting held on 21 September 2018, a resolution was passed to merge the Standard Life Investments Liquidity Funds into Aberdeen Liquidity Funds. The effective date of the merger was 5 October 2018. As at 30 September 2019, the Company was invested in the Aberdeen Liquidity Funds, managed by Aberdeen Standard Investments (Lux), which share the same ultimate parent as the Manager. As at 30 September 2019 the Company had invested GBP600,000 in the Aberdeen Liquidity Funds (30 September 2018: GBP14,163,000) which are included within cash and cash equivalents in the Statement of Financial Position. During the year, the Company received interest amounting to GBP5,000 (2018: GBP3,000) on sterling denominated positions. The Company incurred GBP22,000 (2018: GBP91,000) interest on euro-denominated positions as a result of negative interest rates. As at 30 September 2019 no interest was due to the Company on sterling-denominated positions (2018: GBPnil) and there was no interest payable on euro-denominated positions (2018: GBPnil). No additional fees are payable to Aberdeen Standard Investments (Lux) as a result of this investment.
During the year ended 30 September 2019 the Manager charged management fees totalling GBP6,463,000 (2018: GBP5,987,000) to the Company in the normal course of business. The balance of management fees outstanding at 30 September 2019 was GBP799,000 (2018: GBP553,000).
No other related party transactions were undertaken during the year ended 30 September 2019.
19. Risk management, financial assets and liabilities
Financial assets and liabilities
The Company's financial instruments comprise fund and other investments, money-market funds, cash balances, debtors and creditors that arise from its operations. The assets and liabilities are managed with the overall objective of achieving long-term total returns for shareholders.
Summary of financial assets and financial liabilities by category
The carrying amounts of the Company's financial assets and financial liabilities, as recognised at the Statement of Financial Position date of the reporting periods under review, are categorised as follows:
30 September 2019 30 September 2018
GBP'000 GBP'000
Financial assets
Financial assets at fair value through profit or loss:
Fixed asset investments - designated as such on initial recognition 638,733 603,709
Financial assets measured at amortised cost:
Receivables falling due after one year 15,173 -
Debtors (accrued income and other debtors) 10,640 1,048
Money-market funds, cash and short-term deposits 66,315 57,441
730,861 662,198
Financial liabilities
Measured at amortised cost:
Creditors: amounts falling due within one year 19,552 -
Accruals 1,226 835
20,778 835
Fair values of financial assets and financial liabilities
The carrying value of the current assets and liabilities is deemed to be fair value due to the short-term nature of the instruments and/or the instruments bearing interest at the market rates.
Risk management
The directors manage investment risk principally through setting an investment policy and by contracting management of the Company's investments to an investment manager under terms which incorporate appropriate duties and restrictions and by monitoring performance in relation to these. The Company's investments are in private equity funds, typically unquoted limited partnerships and co-investments. These are valued by their managers generally in line with the EVCA and the BVCA guidelines, which provide for a fair value basis of valuation. The funds may hold investments that have become quoted or the co-investment may become quoted and these will be valued at the appropriate listed price, subject to any discount for marketability restrictions.
As explained in the Company's investment policy, risk is spread by investing across a range of countries and industrial sectors, thereby reducing excessive exposure to particular areas. The Manager's investment review and monitoring process is used to identify and, where possible, reduce risk of loss of value in the Company's investments.
The Company's investing activities expose it to various types of risk that are associated with the financial instruments and markets in which it invests. The most important types of financial risk to which the Company is exposed are market risk, over-commitment risk, liquidity risk, credit risk and interest rate risk.
The nature and extent of the financial instruments outstanding at the Statement of Financial Position date and the risk management policies employed by the Company are discussed below.
Market risk
a) Price risk
The Company is at risk of the economic cycle impacting the listed financial markets and hence potentially affecting the pricing of new underlying investments, the valuation of existing underlying investments and the price and timing of exits. By having a diversified and rolling portfolio of investments the Company is well placed to take advantage of economic cycles.
100% of the Company's investments are held at fair value. The valuation methodology employed by the managers of these unquoted investments may include the application of EBITDA ratios derived from listed companies with similar characteristics. Therefore, the value of the Company's portfolio is indirectly affected by price movements on listed financial exchanges. A 10% increase in the valuation of investments at 30 September 2019 would have increased the net assets attributable to the Company's shareholders and the total return for the year by GBP63,873,000 (2018: GBP60,371,000); a 10% change in the opposite direction would have decreased the net assets attributable to the Company's shareholders and the total return for the year by an equivalent amount. Due to the private nature of the underlying companies in which the Company's funds are invested, it is not possible for the Company to pinpoint the effect to the Company's net assets of changes to the EBITDA ratios of listed markets any more accurately.
b) Currency risk
The Company makes fund commitments in currencies other than sterling and, accordingly, a significant proportion of its investments and cash balances are in currencies other than sterling. In addition, the Company's syndicated revolving credit facility is a multi-currency facility. Therefore, the Company's net asset value is sensitive to movements in foreign exchange rates.
The Company's syndicated revolving credit facility is a multi-currency facility. As at 30 September 2019, the facility is undrawn (2018: undrawn) and therefore there is no impact to the Company's NAV from foreign exchange rate movements. When the facility is drawn to fund investments, it is typically drawn in the currency of the investment and would therefore provide a notional hedging effect to the Company's foreign exchange exposure.
The Manager monitors the Company's exposure to foreign currencies and reports to the Board on a regular basis. It is not the Company's policy to hedge foreign currency risk. It is expected that the majority of the Company's commitments and investments will be denominated in euros. Accordingly, the majority of the Company's liquidity and any indebtedness is usually held in that currency. No currency swaps or forwards were used during the year.
The table below sets out the Company's currency exposure.
30 September 2019 30 September 2018
Local Sterling Local Sterling
Currency Equivalent Currency Equivalent
'000 GBP'000 '000 GBP'000
Fixed asset investments:
Canadian dollar 2,265 1,388 16,502 9,790
Euro 617,067 545,908 565,872 504,028
Sterling 49,211 49,211 39,891 39,891
US dollar 52,035 42,226 65,203 50,000
Money-market funds, cash and short-term deposits:
Canadian dollar 5,103 3,128 - -
Euro 49,324 43,636 33,048 29,436
Sterling 4,711 4,711 9,071 9,071
US dollar 18,287 14,840 24,691 18,934
Investment receivable:
Euro 13,128 11,614 - -
Sterling 335 335 - -
US dollar 3,973 3,224
Other debtors and creditors:
Canadian dollar 4,462 2,735
Euro (22,148) (19,594) (71) (63)
Sterling 52 52 (149) (149)
US dollar 8,218 6,669 554 425
Total 710,083 661,363
Outstanding commitments:
Euro 430,257 380,641 326,280 290,622
Sterling 17,456 17,456 24,140 24,140
US dollar 64,295 52,175 71,088 54,513
Total 450,272 369,275
c) Currency sensitivity
During the year ended 30 September 2019 sterling appreciated by 0.7% relative to the euro (2018: depreciated 1.1%) and depreciated by 5.5% relative to the US dollar (2018: appreciated 2.8%).
To highlight the sensitivity to currency movements, if the value of sterling had weakened against both of the above currencies by 10% compared to the exchange rates at 30 September 2019, the capital gain would have increased for the year by GBP71,845,000 (2018: increase of GBP67,988,000); a 10% change in the opposite direction would have decreased the capital gain for the year by GBP58,783,000 (2018: GBP55,653,000).
The calculations above are based on the portfolio valuation and cash and loan balances as at the respective Statement of Financial Position dates and are not necessarily representative of the year as a whole.
Based on similar assumptions, the amount of outstanding commitments would have increased by GBP43,282,000 at the year-end (2018: GBP38,348,000), a 10% change in the opposite direction would have decreased the amount of outstanding commitments by GBP39,347,000 (2018: GBP31,376,000).
Liquidity risk
The Company has significant investments in unquoted investments which are relatively illiquid. As a result, the Company may not be able to quickly liquidate its investments in these funds at an amount close to their fair value in order to meet its liquidity requirements, including the need to meet outstanding undrawn commitments. The Company manages its liquid investments to ensure sufficient cash is available to meet contractual commitments and also seeks to have cash available to meet other short-term financial needs. Short-term flexibility is achieved, where necessary, through the use of the syndicated revolving multi-currency loan facility. Liquidity risk is monitored by the Manager on an ongoing basis and by the Board on a regular basis. Current liabilities, as disclosed in note 12, all fall due within one year and the loan facility, as described in note 13, remains undrawn.
Credit risk
Credit risk is the exposure to loss from failure of a counterparty to deliver securities or cash for acquisitions or disposals of investments or to repay deposits. The Company places funds with authorised deposit takers from time to time and, therefore, is potentially at risk from the failure of any such institution. At the year-end, the Company's financial assets exposed to credit risk amounted to the following:
30 September 2019 30 September 2018
GBP'000 GBP'000
Money-market funds, cash and short-term deposits 66,315 57,441
Investments receivable 15,173 -
81,487 57,441
The Company's cash is held by BNP Paribas Securities Services S.A., which is rated 'A' by Standard and Poors. The Company's money-market funds are held in two Aberdeen Standard Investments (Lux) Liquidity funds as well as in Société Générale money-market funds. The Aberdeen Standard Investments (Lux) Liquidity fund is rated 'AAA' by Standard and Poors, while Société Générale and BNP Paribas Securities Services S.A., is rated 'A' and 'A+' by Standard and Poors respectively. Should the credit quality or the financial position of either bank deteriorate significantly, the Manager would move the cash balances to another institution.
As at 30 September 2019, GBP15,173,000 of the receivables falling due after one year and GBP6,674,000 of the investments receivable per note 11 relate to future proceeds which are due from the secondary sale of fund investments during the period. Under the terms of the transaction, the proceeds of sale are to be received at an agreed future date.
The Manager considers the credit risk associated with these balances to be in line with those arising from the normal course of business. To date, the buyer has met the payment profile outlined and agreed in the contractually binding sales and purchase agreement. The Manager continues to monitor market developments which may affect this assessment.
Interest rate risk
The Company will be affected by interest rate changes as it holds some interest bearing financial assets and liabilities which are shown in the table below, however, the majority of its financial assets are investments in private equity investments which are non-interest bearing. Interest rate movements may affect the level of income receivable on money-market funds and cash deposits and interest payable on the Company's variable rate borrowings. The possible effects on the cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions. Derivative contracts are not used to hedge against any exposure to interest rate risk.
Interest risk profile
The interest rate risk profile of the portfolio of financial assets and liabilities at the Statement of Financial Position date was as follows:
30 September 2019 30 September 2018
Weighted average Weighted average
interest rate interest rate
% %
GBP'000 GBP'000
Floating rate
Financial assets: Money-market funds, cash and
short-term deposits 0.04 66,315 0.71 57,441
The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The weighted average interest rate on the bank balances is based on the interest rate payable, weighted by the total value of the balances. The weighted average period for which interest rates are fixed on the bank balances is 31.0 days (2018: 31.0 days). The loan facility, as disclosed on note 13, remains undrawn.
Interest rate sensitivity
An increase of 1% in interest rates would have decreased the net assets attributable to the Company's shareholders and decreased the total gain for the year ended 30 September 2019 by GBP2,000 (2018: GBP5,000). A decrease of 1% would have increased the net assets attributable to the Company's shareholders and increased the total gain for the year ended 30 September 2019 by an equivalent amount. The calculations are based on the interest paid and received during the year.
20. Fair Value hierarchy
FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following classifications:
* Level 1: The unadjusted quoted price in an active
market for identical assets or liabilities that the
entity can access at the measurement date.
* Level 2: Inputs other than quoted prices included
within Level 1 that are observable (i.e., developed
using market data) for the asset or liability, either
directly or indirectly.
* Level 3: Inputs are unobservable (i.e., for which
market data is unavailable) for the asset or
liability.
The Company's financial assets and liabilities, measured at fair value in the Statement of Financial Position, are grouped into the following fair value hierarchy at 30 September 2019:
Financial assets at fair value through profit or loss Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Unquoted investments - - 627,298 627,298
Quoted investments 11,435 - - 11,435
Net fair value 11,435 - 627,298 638,733
As at 30 September 2018
Financial assets at fair value through profit or loss Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Unquoted investments - - 574,689 574,689
Quoted investments 29,020 - - 29,020
Net fair value 29,020 - 574,689 603,709
Unquoted investments
Unquoted investments are stated at the directors' estimate of fair value and follow the recommendations of the EVCA and the BVCA. The estimate of fair value is normally the latest valuation placed on an investment by its manager as at the Statement of Financial Position date. The valuation policies used by the manager in undertaking that valuation will generally be in line with the joint publication from the EVCA and the BVCA, 'International Private Equity and Venture Capital Valuation guidelines'. Fair value can be calculated by the manager of the investment in a number of ways. In general, the managers with whom the Company invests adopt a valuation approach which applies an appropriate comparable listed company multiple to a private company's earnings or by reference to recent transactions. Where formal valuations are not completed as at the Statement of Financial Position date, the last available valuation from the manager is adjusted for any subsequent cash flows occurring between the valuation date and the Statement of Financial Position date. The Company's Manager may further adjust such valuations to reflect any changes in circumstances from the last manager's formal valuation date to arrive at the estimate of fair value.
Quoted investments
At 30 September 2019, the Company's investments included shares which were actively traded on recognised stock exchanges, with their fair value of GBP11,435,000 being determined by reference to their quoted bid prices as at the close of business on the last trading day of the Company's financial year (2018: GBP29,020,000).
Securities Financing Transactions (SFT)
The Company has not, in the year to 30 September 2019 (2018: none) participated in any repurchase transactions, securities lending or borrowing, buy-sell back transactions, margin lending transactions or total return swap transactions (collectively called SFT). As such, it has no disclosure to make in satisfaction to the EU regulations on transparency of SFT.
21. Post balance sheet events
Since the year end, the Board has increased the Company's borrowing facility, with its existing lenders, Citibank and Société Générale, to GBP100m and has extended the expiry date to December 2024.
22. Additional notes
This Annual Financial Report does not constitute the Company's statutory accounts for the years ended 30 September 2019 or 2018 but is derived from those accounts. The statutory accounts for the year ended 30 September 2018 have been delivered to the Registrar of Companies and those for 2019 will be delivered in due course. The statutory accounts for the years ended 30 September 2018 and 30 September 2019 received an audit report which was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not include a statement under either section 498(2) or 498(3) of the Companies Act 2006.
The statutory accounts for the financial year ended 30 September 2019 have been approved and audited but will not be filed with the Registrar of Companies until after the Company's Annual General Meeting which will be held on 24 February 2020 at 12:30pm at the offices of Aberdeen Standard Investments, Bow Bells House, 1 Bread Street, London, EC4M 9HH. The Annual Report will be posted to Shareholders in due course and copies will be available from the Manager or by download from the Company's webpage at https://www.slpet.co.uk.
Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise and may be affected by exchange rate movements. Investors may not get back the amount they originally invested.
Glossary of Terms & Definitions
Alternative Performance Measures
Alternative performance measures ("APMs") are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes FRS 102 and the AIC SORP. The directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies. The APMs used by the Company are marked with an * in this glossary and the underlying data used to calculate them is provided.
Buy-out fund
A fund which acquires controlling stakes in established private companies.
Co-investment
An investment made directly into a private company alongside other private equity managers.
Commitment
The amount committed by the Company to a fund investment, whether or not such amount has been advanced in whole or in part by or repaid in whole or in part to the Company (see also Over-commitment).
Comparator Index
A market index against which the overall performance of the Company can be assessed. The manager does not manage the portfolio with direct reference to any index or its constituents.
Discount / Premium*
The amount by which the market price per share is lower (discount) or higher (premium) than the net asset value per share of an investment trust. The discount or premium is normally expressed as a percentage of the net asset value per share.
2019 2018
Share price (p) 352.0 345.5
Net Asset Value per share (p) 461.9 430.2
(Discount) / Premium (%) (23.8) (19.7)
Dividend yield*
The annual dividend per ordinary share divided by the share price, expressed as a percentage.
2019 2018
Dividend per share (p) 12.8 12.4
Share price (p) 352.0 345.5
Dividend yield (%) 3.6 3.6
Distribution
A return that an investor in a private equity fund receives. Within the Annual Report and Financial Statements, the terms "cash realisations" and "distributions" are used interchangeably, the figure being derived as follows: proceeds from disposal of underlying investments by funds, plus income from those fund investments less overseas withholding tax suffered.
Drawdown
A portion of a commitment which is called to pay for an investment.
Dry power
Capital committed by investors to private equity funds that has yet to be invested.
EBITDA
Earnings before interest expense, taxes, depreciation and amortisation.
Enterprise value ("EV")
The value of the financial instruments representing ownership interests in a company plus the net financial debt of the company.
High-conviction
Refers to an approach whereby investments are concentrated in a limited number of positions.
IPO
Initial Public Offering, the first sale of stock by a private company to the public market.
Liquid resources
Assets that are easily convertible to cash a, or close to, their current value.
Net Asset Value (NAV)
The value of total assets less liabilities. Liabilities for this purpose include current and long-term liabilities. The net asset value divided by the number of shares in issue produces the net asset value per share.
NAV total return*
NAV total return shows how the NAV has performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. This involves reinvesting the net dividend into the NAV at the end of the quarter in which the shares go ex-dividend. Returns are calculated to each quarter end in the year and then the total return for the year is derived from the product of these individual returns.
NAV per Dividend per
share (p) share (p)
30 Sep 18 430.2
31 Dec 18 428.2 3.1
31 Mar 19 426.7 3.1
30 Jun 19 452.8 3.2
30 Sep 19 461.9 3.2
NAV total return 10.5%
Ongoing charges ratio*
Management fees and all other recurring operating expenses that are payable by the Company excluding the costs of purchasing and selling investments, incentive fee, finance costs, taxation, non-recurring costs, and costs of share buy-back transactions, expressed as a percentage of the average NAV during the period. Ongoing charges and performance-related fees of the Company's underlying investments are excluded. The ongoing charges ratio has been calculated in accordance with guidance issued by the Association of Investment Companies ("AIC").
2019 2018
GBP000s GBP000s
Investment management fee 6,456 5,987
Administrative expenses 996 996
Ongoing charges 7,452 6,983
Average net assets 684,226 630,177
Ongoing charges ratio 1.09% 1.10%
Over-commitment
Where the aggregate commitments to invest by the Company exceed the sum of its resources available for investment plus the value of any undrawn loan facilities.
Over-commitment ratio*
Outstanding commitments less resources available for investment and the value of undrawn loan facilities divided by net assets.
Note As at 30 As at 30
September 2019 September 2018
GBP000s GBP000s
Undrawn Commitments 17 450,272 369,275
Less resources available
for investment (67,748) (86,461)
Less undrawn loan facility 13 (80,000) (80,000)
Net outstanding commitments 302,524 202,814
Net assets 710,083 661,363
Over-commitment ratio 42.6% 30.7%
Primary investment / primary funds
The managers of private equity funds look to raise fresh capital to invest, typically every five years, and the Company commits to investing in such funds. The capital committed to a fund will generally be drawn over a five year period as investments in private companies are made.
Resources available for investment
This corresponds to the Company's assets that are not invested in funds or co-investments. The amount includes
cash and cash equivalents, quoted investments and short-term investment receivables and payables as follows:
Note As at 30 September As at 30 September
2019 2018
Cash and cash equivalents 66,315 57,441
Quoted investments 9 11,435 29,020
Investment receivables 11 9,550 -
Investment payables 12 (19,552) -
Resources available for investment 67,748 86,461
Roll forward
The latest fund valuation calculated on a bottom-up valuation basis adjusted for any subsequent cash movements up to the reporting date and updated for exchange rates at the reporting date.
Secondary transaction / secondary funds
The purchase or sale of a commitment to a fund or collection of fund interests in the market. Once a private equity fund is raised, new investors are not typically permitted into the fund. However, an existing investor may exit by selling their interest to another investor. The Company can negotiate to acquire such an interest as a secondary buyer. Within the Annual Report and Financial Statements, the terms "Secondary transaction" and "Secondary investment" are used interchangeably.
Share buy-back transaction
The repurchase by the Company of its own shares in order to reduce the number of shares on the market. This is often used by investment trusts to narrow the discount to NAV.
Total shareholder return*
The theoretical return derived from reinvesting each dividend in additional shares in the Company on the day that the share price goes ex-dividend.
Date Share Dividend per
price (p) share (p)
30 Sep 18 345.5
20 Dec 18 325.0 3.1
21 Mar 19 360.5 3.2
20 Jun 19 336.0 3.2
19 Sep 19 353.0 3.2
30 Sep 19 352.0
Total shareholder return 5.7%
Vintage year
Refers to the year in which the first influx of investment capital is delivered to a fund. This marks the moment when capital is committed.
For Standard Life Private Equity Trust plc
Aberdeen Asset Management PLC, Company Secretary
For further information please contact:
James Thorneley,
Global Head of Media Relations, Aberdeen Standard Investments
Tel: 0131 372 2200
Evan Bruce-Gardyne
Client Director, Investment Trusts, Aberdeen Standard Investments
Tel: 0131 372 2200
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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