F&C Private Equity Trust has released its interim results up to 30 June 2018 showing high levels of activity in the first six months of the year.
The Net Asset Value (NAV) total return for the six-month period was 1.7 per cent. The discount to NAV per share narrowed to 3.4 per cent as at 30 June 2018, in comparison to 5.1 per cent as at 31 December 2017. The share price total return for the six-month period was 3.6 per cent.
In accordance with the Company’s dividend policy, the Board declares a quarterly dividend of 3.57p per Ordinary Share, payable on 31 October 2018 to shareholders on the register on 5 October 2018. For illustrative purposes, this dividend and the quarterly dividend paid on 31 July 2018 represent an annualised yield of 4.2 per cent based on the share price as at 30 June 2018.
There has been a considerable amount of activity for the Company in the first half of the year, with total new investments of GBP40.6 million and realisations of GBP29.9million.
Over the first half of the year, five primary fund commitments were made, totalling GBP23.0 million, and one secondary fund commitment of GBP3.8 million. Earlier in the year, new fund commitments were made to Verdane Edda (GBP4.3 million), a Nordic fund focusing on technology enabled companies, Apiary Capital Partners I (GBP5.0 million), a new UK fund focusing on the lower mid-market and Volpi Capital I (GBP6.2 million), a Northern Europe focused technology enabled growth fund. More recently two new fund commitments were made to Inflexion Buyout Fund V (GBP4.0 million) and Inflexion Partnership Capital Fund II (GBP3.5 million). A secondary fund commitment of GBP3.8 million was made to NEM Impresse III.
Five new co-investments have been added to the portfolio during the first half of the year. The proportion invested in co-investments is now 37.5 per cent, up from 32.5 per cent at the beginning of the year. An investment of GBP2.2 million has been made, with another GBP1.8 million committed, to Pet Centar, the Croatian based large format pet store chain. Since the initial investment in April, the planned acquisition of the Romanian based business, Animax, has been completed and there has been a drawdown of GBP1.3 million.
A commitment of GBP4.3 million was made for 16.7 per cent of Jollyes, the UK’s number two pet shop chain. Mexican themed US restaurant chain Rosa Mexicano was added to the portfolio with a GBP3.7 million investment for 13.7 per cent of the company. A commitment of GBP6.0 million was made for a 1.8 per cent share in Huws Gray, the North Wales based builders’ merchant, with GBP4.4 million of this invested in May. Most recently a co-investment of GBP4.0 million was made for 7.9 per cent of DMC Canotec, a Lyceum Capital led buyout of one of the UK’s leading Print Managed Solutions providers. In addition to these new deals there was a substantial add on for TWMA, the Aberdeen based oil services company, with GBP2.2 million called on for the acquisition of US based Dynamic Oil Field Services.
Total realisations for the six months were GBP29.9 million, compared with GBP26.8 million at the same point last year. Notable exits were August Equity II’s sale of healthcare company Active Assistance (GBP3.1 million, 4.7x cost, 28 per cent IRR), Argan Capital’s sale of fruit juice company Hortex (GBP2.1 million, 2.0x cost, 9 per cent IRR) and Procuritas Capital IV‘s sale of ice cream machine manufacturer GRAM (Green Magnum) (GBP2.2 million, 6.5x cost, 44 per cent IRR). The largest realisation came from Polish buyout fund Avallon MBO Fund II which sold its first holding, tissue paper company Velvet, to Central Europe Private Equity House Abris. The Company’s share of the proceeds for the realisation is GBP1.7 million, which represents a return of 13.3x cost and an IRR of 67 per cent.
Fund manager Hamish Mair, says: “From our level of portfolio activity, it is clear that the private equity market is very active across Europe and further afield. The recurrent topic of comment is whether pricing levels, which appear to be high historically, will be sustained and whether this poses a longer-term threat to private equity returns. Price rises of this type are usually self-correcting with the first indicator being a reduction in the volume of deals. There is some evidence that this first stage is happening as deal volumes appear to have peaked last year. The headline price at which deals are done is only part of the picture as increasingly managers make add-on acquisitions to their initial ‘platform’ investments usually at lower prices bringing their ‘in price’ down significantly. As we have a portfolio that is well diversified by vintage, a buoyant market with plenty of exits usually provides many opportunities for the value created by our investment partners to be crystallised.”
