TIDMSLPE
RNS Number : 6641C
Standard Life Private Eqty Trst PLC
19 June 2019
19 June 2019
STANDARD LIFE PRIVATE EQUITY TRUST PLC
INTERIM RESULTS FOR THE SIX MONTHSED 31 MARCH 2019
INVESTMENT OBJECTIVE
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, a majority of
which will have a European focus.
HIGHLIGHTS
At 31 March 2019:
GBP656.1 million Net Asset Value ("NAV")
426.7 pence NAV per ordinary share
GBP542.7 million Market capitalisation
353.0 pence Share price
GBP419.6 million Outstanding commitments to 59 private equity
fund and co-investment interests
GBP84.6 million Resources available for investment
63.7% of NAV Top 10 private equity managers*
17.3% Discount to net asset value
3.2 pence 2019 second quarter dividend (pay date: 26 July
2019, ex-date: 21 June 2019)
For the six months ended 31 March 2019:
+4.1% Share price total return
+0.4% NAV total return
GBP99.2 million Primary commitments to 5 private equity fund
and co-investment interests
GBP49.5 million Cash realisations / 2.5x cost on realised investments
GBP36.4 million Cash invested in new and existing private companies
* 63.7% represents the percentage of the Company's NAV invested
with the 10 largest private equity fund managers in the
portfolio.
CHAIR'S STATEMENT
At 31 March 2019, the Company's net assets were GBP656.1 million
(30 September 2018: GBP661.4 million). The NAV per ordinary share
fell 0.8% over the six months to 426.7 pence (30 September 2018:
430.2 pence). This decrease in NAV per ordinary share during the
period comprised:
NAV movement (capital only) % of 30 September
2018 NAV
Net realised gains and income
from the Company's portfolio 3.6
Unrealised gains on a constant
exchange rate basis 0.3
Negative exchange rate movements
on the portfolio -2.5
Other items, fees and costs -0.8
Dividends paid during the period -1.4
Total movement in the period -0.8
The Company's performance is driven by the change in valuation
of underlying private companies, primarily driven by improved
trading under the ownership of private equity, and the flow of
realisations as businesses are sold by the managers of funds in the
Company's portfolio. In the six months to 31 March 2019, these
realisations totalled GBP49.5 million compared with GBP75.5 million
during the previous equivalent six months. Against this, GBP36.4
million was drawn down from the Company's resources to fund new and
existing investments. This compares with GBP73.0 million for the
previous equivalent six-month period. The net effect of these cash
flows was that, as at the end of March, the Company had resources
available for investment of GBP84.6 million (30 September 2018:
GBP86.5 million).
In support of the investment strategy, the Manager made four new
fund commitments during the period, comprising the following:
Fund commitment Commitment GBP million
amount (million) equivalent
Triton V EUR30.0 26.4
Altor V EUR35.0 30.7
American Industrial Partners
Capital Fund VII $20.0 15.3
Investindustrial VII EUR25.0 21.5
In addition, pursuant to the Board's decision to include
co-investments in the Company's investment strategy, a EUR6.0
million (GBP5.3 million) commitment was made to Mademoiselle
Desserts alongside IK Investment Partners as the lead manager.
Mademoiselle Desserts is the leading manufacturer of premium frozen
industrial finished and semi-finished pastry in Europe.
As a result of these investment activities, at 31 March 2019,
the Company had total outstanding commitments of GBP419.6 million,
compared with GBP369.3 million at 30 September 2018, while the
portfolio of 59 private equity fund and co-investment interests
were valued at GBP571.2 million (30 September 2018: 55 funds valued
at GBP574.7 million).
After the period-end, as part of active portfolio management and
to improve the quality of the Company's exposure by vintage year,
the Manager sold old commitments to Coller V, Pomona V and Pomona
VI. The Company also made a EUR25.0 million (GBP21.5 million)
commitment to the Seventh Cinven Fund.
In line with the Company's policy of quarterly dividend
payments, the Board has proposed a second quarter dividend for the
year ended 30 September 2019 of 3.2 pence per share (2018: 3.1
pence per share). The second quarter dividend, together with the
first quarter dividend of 3.2 pence per share, totals 6.4 pence per
share (2018: 6.2 pence per share) for the first six months of the
year. The proposed dividend will be paid on 26 July 2019 to
shareholders on the Company's share register at 21 June 2019. The
Board is committed to maintaining the real value of dividends, in
the absence of unforeseen circumstances. The Board believes that
providing a strong, stable dividend is attractive to
shareholders.
The Company's portfolio remains predominantly focused on buyout
managers who have been able historically to generate value through
operational improvements and strategic repositioning, and who the
Manager believes are well placed to do so in the future. Consistent
with the Company's investment strategy, and with Europe continuing
to be an attractive region for private equity investment, the
majority of the Company's portfolio has a European focus.
Nonetheless, the broadening of the Company's investment policy
agreed at the 2017 and 2019 Annual General Meetings has allowed the
Manager to consider a number of opportunities further afield. In
line with this broadening of the investment policy, the Company
made new commitments to American Industrial Partners Capital Fund
VII and Mademoiselle Desserts as described earlier.
The Company's underlying portfolio has broad geographic
diversification with UK-based companies making up 14% of the
Company's portfolio. In general, the UK-based businesses have
continued to perform well despite major political and economic
uncertainty. It is still not possible to predict the ultimate
impact of Brexit, your Board and the Manager continue to monitor
closely ongoing developments and their potential effects on the
Company and its portfolio.
The outlook for the global private equity market remains
competitive, with significant amounts of funds being raised. Absent
any major shocks, the Manager expects the Company to continue
benefitting from strong levels of exit activity. Brexit
notwithstanding, the Company continues also to be exposed to other
emerging risks within the global geopolitical space. The Manager is
alert to such emerging risks as part of its proactive research and
coverage of the private equity market.
The Company is also subject to regulatory changes. The Financial
Reporting Council's (FRC) UK Corporate Governance Code 2018 applies
to accounting periods beginning on or after 1 January 2019. The new
Code places greater emphasis on relationships between companies,
shareholders and stakeholders and the Board will be considering its
response to these new provisions over the coming months.
I am pleased to report that the Company joined the Aberdeen
Standard Investment Trust Share Plan on 1 January 2019 which we
believe will provide improved access to the Company's shares. The
Board remains committed to maintaining capital discipline. Cash
inflows will be invested in a mix of new fund commitments,
co-investments, secondary fund purchases and, when appropriate,
share buy-backs.
Directorate Changes
Retirement of Director
Having served on the Board since 2008, Ed Warner retired as
Chairman on 31 December 2018. The Board wishes to express their
thanks to Ed for his significant contribution to the Company during
his tenure. Following Ed's retirement, I have assumed the role of
Chair of the Board and Chair of the Management Engagement and
Nomination Committees, with Alan Devine appointed as the Company's
Senior Independent Director ("SID"), with effect from 1 January
2019.
Christina McComb, OBE
Chair
18 June 2019
MANAGER'S REVIEW
Shareholders approved changes to the investment objective and
policy at the Annual General Meeting on 22 January 2019. The
principal change was to broaden the Company's remit so as to be
able to invest in co-investments, as further detailed below.
Investment objective
The 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
The principal focus of the Company is to invest in leading
private equity funds and to manage exposure 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 quantum 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 funds whose principal investment focus is listed
equities or in listed direct private equity investment companies or
trusts. These investments may be in sterling or such other
currencies to which the Company has exposure.
The Company will not invest more than 15% of its total assets in
other listed investment companies or trusts.
The investment limits described above are all measured at the
time of investment.
Performance to 31 March 2019
The Company's net assets at 31 March 2019 were 426.7 pence per
share
During the period, the NAV per ordinary share declined 3.5 pence
from 430.2 pence to 426.7 pence. This decrease in NAV was driven by
the following movements:
Pence per share
30 September 2018 NAV 430.2
Realised gains and income from
private equity fund and
co-investment interests 15.8
Unrealised gains on a constant
exchange rate basis 1.3
Unrealised exchange rate losses
on private equity interests -10.6
Other items, fees and costs -3.8
Dividends paid -6.2
31 March 2019 NAV 426.7
59 private equity fund and co-investment interests with a
portfolio value of GBP571.2million
The valuation of the Company's private equity fund and
co-investment interests at the period-end was carried out by the
Manager and has been approved by the Board in accordance with the
accounting policies. In undertaking the valuation, the most recent
valuation prepared by the relevant manager of each fund or
co-investment has been used, adjusted where necessary for
subsequent cash flows. The valuations are prepared in accordance
with the International Private Equity and Venture Capital Valuation
guidelines.
These guidelines require investments to be valued at "fair
value", which is the price at which an orderly transaction would
take place between market participants at the reporting date. In
addition, through its advisory board relationships and contacts
with the relevant managers, the Manager is able to consider the
appropriateness of the valuation methodologies employed.
Of the 59 private equity fund and co-investment interests in
which the Company is invested, 40 fund and co-investment interests,
or 84.1% of the portfolio by value, were valued by their managers
at 31 March 2019. The Manager continues to believe that the use of
such timely valuation information is important. For 10 funds, or
11.3% of the portfolio by value, were valued by their managers at
31 December 2018 and adjusted by their managers for any subsequent
cash flows occurring between that date and 31 March 2019. For the
remaining 9 funds, or 4.6% of the portfolio by value, 3 were based
on the last available valuations from the fund managers at 31
December 2018 and adjusted by the Manager for any subsequent cash
flows occurring between that date and 31 March 2019. The remaining
6 funds were in liquidation.
The Company invested GBP36.4 million into underlying private
companies held by the Company's fund and co-investment
interests
Investment GBPm
Advent International GPE VIII 5.8
-----
CVC Capital Partners VII 5.0
-----
HgCapital 8 4.1
-----
Bridgepoint Europe V 4.1
-----
Altor Fund IV 4.1
-----
Remaining funds 13.3
-----
Total 36.4
-----
The Company received GBP49.5 million of distributions from the
Company's fund and co-investment interests through the exit of
private companies and other partial realisations
Exit activity was driven by the continued appetite for high
quality private companies and the majority of realisations were at
a premium to the last relevant valuation.
Investment GBPm
Montagu IV 8.3
-----
Equistone Partners Europe Fund
IV 6.7
-----
IK VII 6.2
-----
3i Eurofund V 3.9
-----
Terra Firma Capital Partners
III 3.4
-----
Remaining funds 21.0
-----
Total 49.5
-----
Average multiple on realised investments was 2.5 times invested
cost
In the six months to 31 March 2019, the private equity fund and
co-investment interests generated strong returns from their
portfolio of private companies, consistent with prior years. This
long-term performance is underpinned by the quality of the assets
and the value-add delivered by our private equity managers.
Net unrealised losses from fund and co-investment interests were
GBP14.4 million
The movement over the period represented an unrealised valuation
gain on constant currency basis of GBP2.0 million and a foreign
exchange loss of GBP16.4 million. The unrealised gains and losses
include the effect of transfers from the capital unrealised reserve
to the capital realised reserve when investments are realised.
Top five net unrealised gains based on
constant currency
Investment Unrealised Exchange
gain - constant rate
currency Impact
GBPm GBPm
---------------------- -----------
3i Eurofund V 9.4 (1.3)
---------------------- -----------
Charterhouse Capital
Partners VII 5.8 -
---------------------- -----------
Nordic Capital Fund
VIII 3.8 (1.4)
---------------------- -----------
CVC Capital Partners
VI 2.5 (0.8)
---------------------- -----------
Permira V 2.3 (1.0)
---------------------- -----------
Top five net unrealised losses based on
constant currency
Investment Unrealised Exchange
gain - constant rate
currency Impact
GBPm GBPm
----------------- ---------
Montagu IV (5.7) (0.4)
----------------- ---------
Equistone Partners
Europe Fund IV (3.8) (0.4)
----------------- ---------
Equistone Partners
Europe Fund V (3.0) (0.8)
----------------- ---------
IK VII (2.9) (1.2)
----------------- ---------
BC European Capital
IX (2.7) (0.9)
----------------- ---------
Total outstanding commitments of GBP419.6 million to 59 private
equity fund and co-investment interests
Five new primary and co-investment commitments of GBP99.2
million were made in the period to 31 March 2019. The Company
committed to Triton V, Altor V, American Industrial Capital
Partners VII, L.P and Investindustrial VII. In each of these cases,
the Company is backing private equity managers that the Manager
considers 'best in class' and with whom it has deep, long-term
relationships with. All four private equity managers drive
investment returns largely through operational value creation at
the underlying portfolio company level, which will serve the funds
well irrespective of wider market conditions.
Furthermore, the Company made its first co-investment in the
period, following the change in its Investment Objective in January
2019. It co-invested in Mademoiselle Desserts in February 2019
alongside IK Investment Partners. The business, a French
manufacturer of premium frozen pastry, is a European market leader
in a defensive sector, with robust cash flow dynamics and a strong
management team. The Manager believes that co-investing in a
business of such a profile, alongside a high quality private equity
manager like IK, is an attractive investment opportunity at this
point in the cycle.
Commitment details
Manager Fund/Co-investment Date GBPm $/EURm Type Description
--------------------- ------------ ----- -------- -------------- -----------------------
EUR5.0bn fund
focuses on German
October speaking and
Triton Partners Triton V 2018 26.4 EUR30.0 Primary Nordic countries.
--------------------- ------------ ----- -------- -------------- -----------------------
EUR2.5bn fund
investing in
middle market
Altor Equity February segment of Nordic
Partners Altor V 2019 30.7 EUR35.0 Primary region.
--------------------- ------------ ----- -------- -------------- -----------------------
Leading manufacturer
of premium frozen
industrial finished
IK Capital Mademoiselle February and semi-finished
Partners Desserts 2019 5.3 EUR6.0 Co-investment pastry in Europe.
--------------------- ------------ ----- -------- -------------- -----------------------
American Industrial $3.1bn fund focuses
American Partners Capital on underperforming
Industrial Fund VII, industrial businesses
Partners L.P March 2019 15.3 $20.0 Primary in North America.
--------------------- ------------ ----- -------- -------------- -----------------------
EUR2.4bn fund
focuses on European
investments in
Investindustrial the lower-mid
Investindustrial VII March 2019 21.5 EUR25.0 Primary market.
--------------------- ------------ ----- -------- -------------- -----------------------
The Manager continues to estimate that GBP60.0 million of
outstanding commitments will not be drawn by the private equity
funds portfolio.
The outstanding commitments in excess of resources available for
investment plus the undrawn debt facility as a percentage of the
net asset value was 38.9%. The Manager had previously agreed a
long-term target range of 30%-75% with the Directors of the
Company. The Manager has taken a gradual approach in increasing
outstanding commitments over the last few years, highlighting the
prudent approach to over-commitments adopted by the Manager in the
current market environment.
Resources available for investment total GBP84.6m
Over the period, the private equity fund and co-investment
portfolio generated cash inflows of GBP49.5 million from realised
investments, partially offset by new investment activity of GBP36.4
million, resulting in a net movement of GBP13.1 million. After
accounting for dividends paid and exchange rate movements,
resources available for investment were GBP84.6 million at 31 March
2019, down from GBP86.5 million at 30 September 2018.
Analysis of the underlying private company investments
At 31 March 2019, the 59 private equity fund interests were
collectively invested in a total of 493 underlying investments. The
diversification of the underlying investments is set out in the
"Portfolio Review" section of the interim report. Further
information on the ten largest underlying private company
investments, representing 14.5% of the net asset value is shown in
the "Largest 10 Underlying Private Companies" section of the
interim report.
Portfolio construction
Investments in buyout funds through primary commitments and
buyout funds acquired via secondary transactions represent 98% of
the portfolio and demonstrate the core focus on buyouts as the
prime investment strategy for investing in private companies. 2% of
the portfolio was acquired through secondary fund and co-investment
interests.
Geographic exposure
84% of the underlying private companies at 31 March 2019 are
headquartered in Europe and this will likely continue to be the
majority of exposure over the short to medium term, with 13%
headquartered in North America. The underlying private companies in
Europe are weighted towards Northern Europe, with a focus on the
French, Benelux and Scandinavian markets. The portfolio has
historically been deliberately underweight in Southern Europe due
to the relative immaturity and underperformance of its private
equity market compared to other European regions. However, the
Manager considers making commitments to Southern Europe where
attractive opportunities arise.
Sector exposure
The Company's sector diversification is a product of the
underlying investment strategy of the private equity funds and
co-investments, built around their specific sector expertise. In
recent years, healthcare, financials and technology (mature
software businesses) have increased in significance with
consumer-focused and industrial companies retaining their
importance. The portfolio is light in the cyclical sectors of oil
and gas, utilities and mining.
Maturity exposure and portfolio value growth
The maturity exposure highlights the balanced nature of the
underlying private companies. The typical hold period prior to the
exit of a private equity backed company is four to five years. With
36% of the underlying private companies in the five years or older
category, cash generation is therefore expected to remain positive.
Maturity exposure is managed through primary commitments, secondary
transactions and co-investments with the objective of achieving
balanced exposures over vintage years. Less than 1% of the
underlying private companies are exposed to the pre-2007 period and
6% of it is valued below cost.
There is a continual progression in value creation as the
portfolio of private companies matures. The development from 1.0
times cost for the year one vintage through to 2.0 times cost in
the five year plus vintage demonstrates the value creation the
private equity managers achieve through active management. With
realised returns from all exited investments of 2.5 times cost for
the six months to 31 March 2019, the portfolio remains
conservatively valued.
Market Review
Primary investment market
The European and North American private equity markets remain
particularly buoyant, with high levels of activity in fundraising,
new investments and exits, an ongoing trend since the financial
crisis of 2007-8. Many institutional investors have increased their
allocations to private equity on the back of strong performance,
and the expectation is that this will continue relative to a more
muted public market outlook. The high levels of investment
activity, tied to increased private equity allocations, continues
to prompt managers to come back to the fundraising market earlier
and seek to raise ever-larger funds.
In Europe and North America, 2018 buyout activity of $139
billion and $274 billion respectively represents increases of 26%
and 34% over 2017. As such, buyout activity in Europe is at its
highest level since 2007, and in North America 2018 was broadly in
line with 2015 which had the highest activity since 2007.
With respect to fundraising, the best small, mid and large cap
managers are raising new funds rapidly (and being frequently
oversubscribed), notwithstanding significant fund size increases in
many cases. The increasing allocation to private equity by large
institutional investors means that many second-tier and new
managers are also finding success in reaching fundraising targets.
2018 was another record year for buyout fundraising in Europe with
$74.9 billion raised in the period, which was marginally up on the
prior year at $74.6 billion. Conversely, North American fund
raising was less successful with only $136.7 billion raised in
2018, down 31% on prior year.
Notwithstanding the softer fund raising in 2018 in North
America, since 2013 buyout fundraising globally has continued to
outstrip new investment activity over the same period. As a result,
record levels of dry powder (raised capital not yet invested) are
being witnessed across the globe, with North America accounting for
approximately 60% of the aggregate amount. The growth in dry powder
has not been uniform across the different fund size segments,
however. In the mega buyout space, dry powder has seen a rapid
increase. However in the mid-market space, where the Company
typically invests, dry powder growth has been relatively steady.
The capital raised for European and North American private equity
now represents around 3.9 years and 4.8 years of investment
capacity respectively, up from 2.8 years and 3.3 years at December
2015.
Valuations within the European buyout market have coalesced
around 9.0x-10.0x EBITDA since 2008, albeit with some notable
fluctuations due to specific large deals in highly or lowly related
sectors. In 2018, the average purchase price multiple surpassed
10.0x EBITDA. Total debt multiples have shown a gradual increase
since 2009, levelling to just over 5.0x EBITDA from mid-2014, but
have increased again in the last 18 months. Valuations within North
America have crept upwards in recent years, with 2018 averaging at
10.6x EBITDA, albeit Q4 2018 was lower at 10.3x EBITDA. Increasing
debt availability has contributed to higher valuations in North
America - average debt of 5.8x EBITDA is now at its highest level
since 2007. Notwithstanding the higher debt levels, covenants have
tended to loosen over the past few years, as the debt funding
market for buyouts has grown increasingly competitive.
Overall, the Company has seen a steady pace of activity over the
past few years and it is expected that the levels of new investment
and realisation activity will remain robust over 2019 and into
2020. This is driven, in part, by Europe and North America having a
large population of privately-owned businesses and a substantial
number of corporates looking to divest non-core divisions,
providing significant opportunity for private equity managers.
European and North American private equity firms account for the
significant majority of all private equity firms globally. Given
the attractive dynamics in these markets, they will continue to be
the focus of the Company.
Secondary transaction market*
2018 was a record year for the secondary market in terms of deal
volume, with $74 billion of transactions completed. This represents
a 28% increase on volumes transacted in 2017. The key reason for
this growth continues to be a combination of strong pricing and
innovation, which have together unlocked an increasing number of
larger deals. Transactions over $500 million in size accounted for
nearly 60% of the overall deal volume and as a result a high
proportion of the market (around 70%) is concentrated in buyers
managing vehicles with capital greater than $4 billion.
Average pricing in secondary transactions in 2018 declined
modestly from 93% of NAV in 2017 to around 92%. This reflects the
continued supply of 2008 and older vintage funds, which generally
have limited upside and therefore trade at higher discounts to NAV.
There was also an increase in emerging market assets which tend to
be dilutive to overall pricing levels. Stock market volatility in
the fourth quarter of 2018 may also have had an impact.
The trend in average pricing masks the fact that better quality
buyout funds and newer vintages, which are typically the ones
targeted by the Company, often trade at material premia to NAV and
so require the buyer to hold the investment below cost for a period
of time.
Another key factor behind the market growth trend has been the
ability of secondary buyers to raise capital, both through their
own fundraising efforts and with the availability of more leverage.
With many of the bigger secondary managers actively raising capital
in 2019 and targeting ever larger fund sizes, it is estimated that
over $150 billion will be available to invest in secondary
transactions over the near term.
On the innovation side, General Partner-led ("GP-led")
transactions have continued to gain traction and to be adopted
across a wider range of transaction types, size segments and assets
classes. This category of secondary deal grew significantly in 2018
and accounted for $24 billion of volume, equivalent to 32% of the
total market volume. Many of the best-known private equity managers
have used the secondary market to offer liquidity to their
investors. Often these deals allow the existing manager more time
to develop and sell key assets, sometimes with additional capital
and sometimes with adapted incentives.
The level of complexity of some of these GP-led deals has been
challenging for managers, their advisers, secondary buyers and the
existing investors in the funds being restructured. This has led to
the Institutional Limited Partners Association publishing a set of
guidelines on these deals in April 2019. The key recommendations in
this report focus on the need for proper engagement between GPs and
Limited Partners and appropriate levels of disclosure to ensure
fair treatment.
The Manager has remained focused on targeting secondary
interests in high quality private equity funds that would fit well
alongside the Company's existing portfolio of funds, co-investments
and managers. The Manager continues to originate and analyse a
variety of secondary opportunities on behalf of the Company, but
over the course of the last year a number of transactions were
declined due to high price levels. The Manager remains highly
selective in its secondary strategy for the Company given the
current macro and secondary pricing environment.
* Source: market data sourced from Greenhill (January 2019).
PRINCIPAL RISKS AND UNCERTAINTIES
The Board has an ongoing process for identifying, evaluating and
managing the principal risks, emerging risks and uncertainties of
the Company. The principal risks faced by the Company relate to the
Company's investment activities and these are set out below:
-- market risk
-- currency risk
-- over-commitment risk
-- liquidity risk
-- credit risk
-- interest rate risk
-- operating and control environment risk
Information on each of these risks, and an explanation of how
they are managed, is contained in the Company's Annual Report for
the year ended 30 September 2018.
The Company's principal risks, emerging risks and uncertainties
have not changed materially since the date of that Annual Report
and are not expected to change materially for the remaining six
months of the Company's financial year.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the half-yearly
financial report, in accordance with applicable law and
regulations. The Directors confirm that, to the best of their
knowledge:
-- the condensed set of financial statements has been prepared
in accordance with FRS 104 Interim Financial Reporting; and
-- the interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
On behalf of the Board,
Christina McComb
Chair
18 June 2019
FINANCIAL HIGHLIGHTS
Performance (capital only) As at As at
31 March 30 September
2019 2018 % Change
SLPET NAV 426.7p 430.2p -0.8%
---------- -------------- -----------
SLPET share price 353.0p 345.5p +2.2%
---------- -------------- -----------
FTSE All-Share Index(1) 3,978.3 4,127.9 -3.6%
---------- -------------- -----------
MSCI Europe Index(1) 3,011.8 3,145.8 -4.3%
---------- -------------- -----------
Discount (difference between share
price and net asset value) 17.3% 19.7%
---------- -------------- -----------
Performance (total return)(2) Annualised
6 months 1 year 3 years 5 years 10 years Since
% % % % % inception
%(3)
--------
SLPET NAV +0.4% +12.0% +13.6% +13.3% +10.3% +9.8%
--------- ------- -------- -------- --------- -----------
SLPET share price +4.1% +12.7% +24.2% +15.0% +25.8% +9.1%
--------- ------- -------- -------- --------- -----------
FTSE All-Share Index(1) -1.8% +6.4% +9.5% +6.1% +11.1% +5.5%
--------- ------- -------- -------- --------- -----------
MSCI Europe Index (GBP)(1) -3.0% +4.3% +10.8% +6.8% +10.7% +5.7%
--------- ------- -------- -------- --------- -----------
Highs/lows for the six months ended 31 March High Low
2019
Share price (mid) 363.0p 320.0p
------- -------
(1) The Company uses a number of indices as comparator
benchmarks for the Company's performance.
(2) Includes dividends reinvested.
(3) The Company was listed on the London Stock Exchange in May
2001.
CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
For the six months to
31 March 2019
Notes Revenue Capital Total
GBP'000 GBP'000 GBP'000
Total capital gains on investments - 4,166 4,166
Currency losses - (695) (695)
Income 4 4,796 - 4,796
Investment management fee 5 (311) (2,802) (3,113)
Administrative expenses (506) - (506)
Profit before finance costs and
taxation 3,979 669 4,648
Finance costs (86) (316) (402)
Profit before taxation 3,893 353 4,246
Taxation (187) 222 35
Profit after taxation 3,706 575 4,281
-------- -------- --------
Profit per ordinary share 7 2.41p 0.37p 2.78p
-------- -------- --------
For the six months to
31 March 2018
Notes Revenue Capital Total
GBP'000 GBP'000 GBP'000
Total capital gains on investments - 12,681 12,681
Currency losses - (1,061) (1,061)
Income 4 4,033 - 4,033
Investment management fee 5 (288) (2,596) (2,884)
Administrative expenses (527) - (527)
Profit before finance costs and
taxation 3,218 9,024 12,242
Finance costs (161) (315) (476)
Profit before taxation 3,057 8,709 11,766
Taxation (1,503) 155 (1,348)
Profit after taxation 1,554 8,864 10,418
-------- -------- --------
Profit per ordinary share 7 1.01p 5.77p 6.78p
-------- -------- --------
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 period.
CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
As at As at
31 March 30 September
2019 2018
Notes GBP'000 GBP'000
Non-current assets
Investments 8 604,355 603,709
Current assets
Receivables 1,225 1,048
Cash and cash equivalents 51,486 57,441
52,711 58,489
Creditors: amounts falling
due within one year
Payables (954) (835)
--------- -------------
Net current assets 51,757 57,654
Total assets less current
liabilities 656,112 661,363
--------- -------------
Capital and reserves
Called-up share capital 307 307
Share premium account 86,485 86,485
Special reserve 51,503 51,503
Capital redemption reserve 94 94
Capital reserves 517,723 522,974
Revenue reserve - -
Total shareholders' funds 656,112 661,363
--------- -------------
Net asset value per equity
share 9 426.7p 430.2p
The Financial Statements of Standard Life Private Equity Trust
PLC, registered number SC216638 was approved and authorised for
issue by the Board of Directors on 18 June 2019 and were signed on
its behalf by Christina McComb, Chair.
Christina McComb, OBE
Chair
18 June 2018
CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
For the six months ended 31 March 2019
Called-up Share Capital
share premium Special redemption Capital Revenue
capital account reserve reserve reserves reserve Total
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 - - - - 575 3,706 4,281
Dividends paid (5,826) (3,706) (9,532)
Balance at 31
March 2019 307 86,485 51,503 94 517,723 - 656,112
--------- --------- --------- ----------- --------- --------- ---------
For the six months ended 31 March 2018
Called-up Share Capital
share premium Special redemption Capital Revenue
capital account reserve reserve reserves reserve Total
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 - - - - 8,864 1,554 10,418
Dividends paid - - - - - (9,225) (9,225)
Balance at 31
March 2018 307 86,485 51,503 94 457,615 4,181 600,185
--------- --------- --------- ----------- --------- --------- ---------
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
Six months Six months
ended ended
31 March 31 March
2019 2018
GBP'000 GBP'000
Cashflows from operating activities
Net profit before taxation 4,246 11,766
Adjusted for:
Finance costs 402 476
Gains on disposal of investments (19,614) (40,487)
Revaluation of investments 15,447 27,806
Currency losses 695 1,061
Increase in debtors (238) (156)
Increase in creditors 119 36
Tax rebates/(deducted) from
non-UK income 35 (1,348)
Interest paid (341) (412)
Net cash inflow/(outflow) from
operating activities 751 (1,258)
Investing activities
----------- -----------
Purchase of investments (42,914) (87,826)
Disposal of underlying investments
by funds 44,974 73,978
Disposal of quoted investments 1,461 -
----------- -----------
Net cash outflow from investing
activities 3,521 (13,848)
Financing activities
Ordinary dividends paid (9,532) (9,225)
Net cash outflow from financing
activities (9,532) (9,225)
Net decrease in cash and cash
equivalents (5,260) (24,331)
Cash and cash equivalents at
the beginning of the period 57,411 93,648
Currency losses on cash and
cash equivalents (695) (1,061)
Cash and cash equivalents at
the end of the period 51,486 68,256
----------- -----------
Cash and cash equivalents consist
of:
Money market funds 23,649 53,163
Cash and short-term deposits 27,837 15,093
Cash and cash equivalents 51,486 68,256
----------- -----------
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
1 Financial Information
The financial information for the year ended 30 September 2018
within the report is considered non-statutory as defined in
sections 434-436 of the Companies Act 2006. The financial
information for the year ended 30 September 2018 has been extracted
from the published accounts that have been delivered to the
Registrar of Companies and on which the report of the auditor was
unqualified under section 498 of the Companies Act 2006.
The auditor has reviewed the financial information for the six
months ended 31 March 2019 in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. The independent auditor review report is
included at the end of this announcement.
2 Basis of preparation and going concern
The condensed financial statements have been prepared in
accordance with Financial Reporting Standard 104 (Interim Financial
Reporting) and with the Statement of Recommended Practice for
'Financial Statements of Investment Trust Companies and Venture
Capital Trusts'.
In assessing the appropriateness of the adoption of the going
concern assumption as a basis for preparing the financial
statements, the Directors took account of the GBP80 million
committed, syndicated revolving credit facility with a maturity
date in December 2020; the future cash flow projections (including
forecasts in respect of unfunded commitments); the Company's cash
flows during the period; and the Company's net liquid resources at
the period end.
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.
The financial statements for the six months ended 31 March 2019
have been prepared using the same accounting policies as the
preceding annual financial statements.
3 Exchange rates
Rates of exchange to sterling were:
As at As at
30 September
31 March 2019 2018
Euro 1.1605 1.1227
US Dollar 1.3031 1.3041
Canadian
Dollar 1.7408 1.6856
4 Income
Six months Six months
ended ended
31 March 31 March
2019 2018
GBP'000 GBP'000
--------------------------------- ----------- -----------
Income from fund investments 4,498 3,875
Interest from cash balances and
money market funds 298 158
Total income 4,796 4,033
----------- -----------
5 Transactions with the Manager
Six months ended Six months ended
31 March 2019 31 March 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- -------- -------- -------- --------
Investment management
fee 311 2,802 3,113 288 2,596 2,884
-------- -------- -------- -------- -------- --------
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 31 March
2019 amounted to GBP563,000 (30 September 2018: GBP553,000).
6 Dividend on ordinary shares
A dividend of 3.1p per ordinary share, declared as a final
dividend, was paid on 25 January 2019 in respect of the year ended
30 September 2018 (2017: dividend of 6.0p per ordinary share paid
on 31 January 2018).
For the financial period ending 31 March 2019, the first
quarterly dividend of 3.2p per ordinary share was paid on 26 April
2019 (2018: dividend of 3.1p was paid on 27 April 2018). The
announced dividend of 3.2p per share is due to be paid on 26 July
2019 (2018: dividend of 3.1p was paid on 27 July 2018).
7 Earnings per share - basic and diluted
Six months Six months ended
ended
31 March 2019 31 March 2018
p GBP'000 p GBP'000
------------------------- ------ ------------- ----- ------------
The net return per ordinary share is based on the following
figures:
Revenue net return 2.41 3,706 1.01 1,554
Capital net return 0.37 575 5.77 8,864
Total net return 2.78 4,281 6.78 10,418
------ ------------- ----- ------------
Weighted average number of
ordinary shares in issue 153,746,294 153,746,294
8 Investments
Six months
ended Year ended
31 March 30 September
2019 2018
Investments GBP'000 GBP'000
------------------------------------ ----------- -------------
Fair value through profit or
loss:
Opening market value 603,709 505,107
Opening investment holding gains (58,873) (27,841)
----------- -------------
Opening book cost 544,836 477,266
Movements in the period/year:
Additions at cost 42,914 119,678
Secondary purchases - 21,885
Disposal of underlying investments
by funds (44,974) (122,845)
Disposal of quoted investments (1,461) (2,499)
----------- -------------
541,315 493,485
Gains on disposal of underlying
investments 25,248 78,611
Gains/(losses) on disposal of
quoted investments 117 (184)
Losses on liquidation of fund
investments(1) (5,751) (27,076)
Closing book cost 560,929 544,836
Closing investment holding gains 43,426 58,873
Closing market value 604,355 603,709
----------- -------------
(1) Relates to the write off of investments which were already
previously provided for.
The Company invests in six quoted equities as part of its
liquidity management strategy. The figures above relate to both the
Company's unquoted investments in private equity funds and in
quoted investments. The earlier Performance to 31 March 2019
section presents the performance of the Company's principal
activity of investing in private equity fund and co-investment
interests. As a result, the differences between the figures within
the Manager's Review and the note above relate to quoted
investments.
9 Net asset value per ordinary share
As at 31 March As at 30 September
2019 2018
------------------------------ ---------------------- --------------------------------
Basic and diluted:
Ordinary shareholders'
funds GBP656,111,649 GBP661,363,392
Number of ordinary shares
in issue 153,746,294 153,746,294
Net asset value per ordinary
share 426.7p 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.
10 Bank loans
At 31 March 2019, the Company had an GBP80 million (30 September
2018: GBP80 million) committed, multi-currency syndicated revolving
credit facility provided by Citibank and Societe Generale of which
GBPnil (30 September 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.
11 Commitments and contingent liabilities
As at 31 March As at 30 September
2019 2018
GBP'000 GBP'000
---------------------------------- --------------- -------------------
Outstanding calls on investments 419,574 369,275
This represents commitments made to fund and co-investment
interests remaining undrawn.
12 Fair value hierarchy
FRS 104 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 31 March 2019:
Level Level Level
1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair
value through profit or loss
Unquoted investments - - 571,199 571,199
Quoted investments 33,156 - - 33,156
Net fair value 33,156 - 571,199 604,355
As at 30 September 2018
Level Level Level
1 2 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair
value through profit or loss
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
(European Private Equity & Venture Capital Association and
British Private Equity & Venture Capital Association). The
estimate of fair value is normally the latest valuation placed on
an investment by its manager or lead 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 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 an investee 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 31 March 2019, the Company's investments included shares
which were actively traded on recognised stock exchanges, with
their fair value being determined by reference to their quoted bid
prices at the reporting date of GBP33,156,000 (30 September 2018:
GBP29,020,000).
13 Parent undertaking and related party transactions
The ultimate parent undertaking of the Company is Phoenix Group
Holdings. The results for the period from 1 October 2018 to 31
March 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 purpose 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
period ended 31 March 2019, SLAL received dividends from the
Company totalling GBP5,339,000 (31 March 2018: GBP5,167,000).
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 the
Aberdeen Liquidity Fund. The effective date of the merger was 5
October 2018. As at 31 March 2019, the Company was invested in the
Aberdeen Liquidity Funds, managed by Aberdeen Standard Investments
(Lux), who share the same ultimate parent as the Manager. As at 31
March 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 period, the Company received
interest amounting to GBP3,000 (31 March 2018: GBP1,000) on
sterling denominated positions. The Company incurred GBP22,000 (31
March 2018: GBP56,000) interest on euro denominated positions as a
result of negative interest rates. As at 31 March 2019 no interest
was due to the Company on sterling denominated positions (30
September 2018: GBPnil) and there was no interest payable on euro
denominated positions (30 September 2018: GBPnil). No additional
fees are payable to Aberdeen Standard Investments (Lux) as a result
of this investment.
During the period ended 31 March 2019 the Manager charged
management fees totalling GBP3,113,000 (31 March 2018:
GBP2,884,000) to the Company in the normal course of business. The
balance of management fees outstanding at 31 March 2019 was
GBP563,000 (30 September 2018: GBP553,000).
No other related party transactions were undertaken during the
period ended 31 March 2019.
Independent review report to Standard Life Private Equity Trust
plc
Introduction
We have been engaged by Standard Life Private Equity Trust plc
("the Company") to review the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
March 2019 which comprises the Condensed Statement of Comprehensive
Income, Condensed Statement of Financial Position, Condensed
Statement of Changes in Equity, Condensed Statement of Cash Flows
and the related explanatory notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules ("the DTR") of the
United Kingdom's Financial Conduct Authority ("the UK FCA").
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with United Kingdom Accounting
Standards, including Financial Reporting Standard ("FRS") 102 The
Financial Reporting Standard applicable in the UK and Republic of
Ireland (United Kingdom Generally Accepted Accounting Practice).
The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with
FRS 104 Interim Financial Reporting.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
March 2019 is not prepared, in all material respects, in accordance
with FRS 104 Interim Financial Reporting and the DTR of the UK
FCA.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
DTR of the UK FCA and for no other purpose. No person is entitled
to rely on this report unless such a person is a person entitled to
rely upon this report by virtue of and for the purpose of our terms
of engagement or has been expressly authorised to do so by our
prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London
United Kingdom
18 June 2019
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
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.
END
IR LLFIERLITLIA
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