28th Nov 2007 07:00
Standard Life Euro Pri Eqty Tst PLC28 November 2007 28 November 2007 STANDARD LIFE EUROPEAN PRIVATE EQUITY TRUST PLC RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2007 Highlights • The Company's net asset value per ordinary share ("NAV") rose by 32.5% to 241.3p (diluted NAV - 237.7p) during the year ended 30 September 2007 (30 September 2006 - undiluted NAV 182.1p; diluted NAV 179.6p). • The closing mid-market price of the Company's ordinary shares on 30 September 2007 was 226.5p (30 September 2006 - 183.5p), an increase of 23.4% over the year. • The Board is recommending a final dividend of 3.5p per ordinary share (year ended 30 September 2006 - 2.4p). • Private equity is a long-term asset class. For the five years ended 30 September 2007 the Company's NAV and share price have both materially out-performed the two most relevant stock market indices, increasing by 167.2% and 176.2% respectively, compared to rises of 84.1% in the FTSE All-Share Index and 110.4% in the MSCI Europe Index (sterling adjusted). • As at 30 September 2007 the Company's net assets were £385.7 million (30 September 2006 - £289.8 million). The Company had interests in 48 private equity funds with a value of £322.6 million (30 September 2006 - 43 funds and £239.3 million). • The valuation of the Company's private equity fund interests reflected a positive performance, with unrealised gains during the year of £5.1 million (year ended 30 September 2006 - £16.6 million). • The Company received a record £156.5 million of distributions during the year (year ended 30 September 2006 - £90.3 million), including £97.2 million of net realised gains and income (year ended 30 September 2006 - £51.1 million). Distributions represented an average multiple of 2.6 times the acquisition cost of realised investments (year ended 30 September 2006 - 2.3 times). • Draw downs made during the year were also a record at £137.6 million (year ended 30 September 2006 - £75.3 million). • During the year the Company made significant new fund commitments, with £191.7 million committed to six funds (year ended 30 September 2006 - £200.5 million committed to six funds). Quote from Scott Dobbie, Chairman:- "The recent setback to credit markets makes it likely that the European privateequity market will enter a quieter period for draw downs and distributions andthat debt levels will be lower. The Board nevertheless believes that the mid tolarge sized buy-out segment, the Company's principal area of focus, willcontinue to offer a wide range of opportunities and that the managers of thefunds in which the Company invests have the skills and resources to generatesignificant value." For further information please contact:- Peter McKellar of Standard Life Investments (Private Equity) Limited (on 0131 245 0055) Chairman's Statement Results and performance I am pleased to be able to report for the third consecutive financial year atotal return on net assets to shareholders of more than 28.0%. For the yearended 30 September 2007 the Company's NAV grew strongly, increasing by 32.5% to241.3p (diluted NAV - 237.7p) (30 September 2006 - undiluted NAV 182.1p; dilutedNAV 179.6p). The increase was principally due to positive trading at most of theunderlying investee companies and, for much of the financial year, a strongmarket for realisations. As at 30 September 2007 the Company's net assets were£385.7 million (30 September 2006 - £289.8 million). The closing mid-market price of the Company's ordinary shares on 30 September2007 was 226.5p (30 September 2006 - 183.5p), an increase of 23.4% over theyear. Notwithstanding the turbulence and reduced liquidity in credit marketsduring summer 2007, and the consequential impact on listed equity markets, theCompany's shares traded at a premium to the disclosed NAV for virtually all ofthe year. Private equity is a long-term asset class and should be assessed overappropriate time periods. For the five years ended 30 September 2007 theCompany's NAV and share price have both materially out-performed the two mostrelevant stock market indices, increasing by 167.2% and 176.2% respectively,compared to rises of 84.1% in the FTSE All-Share Index and 110.4% in the MSCIEurope Index (sterling adjusted). The Company's NAV and share price have alsomaterially out-performed these indices over the period from the Company'slisting in May 2001 and over the three years ended 30 September 2007. The Company's practice is to pay a final dividend marginally in excess of theminimum required to maintain investment trust status. The income received by theCompany during the year allows the Board to recommend a final dividend of 3.5pper ordinary share. This is an increase of 45.8% on the 2.4p final dividenddeclared for the prior financial year. Subject to shareholder approval, thisdividend will be paid on 1 February 2008 to shareholders on the Company's shareregister as at 4 January 2008. Valuation The value of the Company's portfolio of 48 private equity fund interests roseover the year through a combination of net new investment activity andunrealised gains. As at 30 September 2007 the value of the portfolio was £322.6million (30 September 2006 - £239.3 million), of which unrealised gains arisingduring the year were £5.1 million (year ended 30 September 2006 - £16.6million). Once again a majority, by value, of the Company's private equity fundinterests reported unrealised gains for the year. Aggregate cash and money market balances rose to £64.2 million as at 30September 2007 (30 September 2006 - £52.1 million). All of the increase occurredin the second half of the Company's financial year and was the result of somesignificant realisations of underlying investments. The strong flow ofdistributions during the year was largely offset by a material uplift in theamount of draw downs, as the Company's fund commitments increased and activitylevels were high. At the year end 83.3% of the Company's gross assets (30September 2006 - 82.1%) was invested in private equity assets. Exchange rates had a marginally positive impact on NAV over the year, assterling depreciated by 2.8% relative to the euro and appreciated by 9.1%relative to the US dollar. As at 30 September 2007 the Company had £387.2million of gross assets, of which £271.6 million (sterling equivalent) comprisedeuro denominated assets and £54.1 million (sterling equivalent) dollardenominated assets (30 September 2006 - £291.6 million (gross assets), £166.0million (euro denominated) and £46.5 million (dollar denominated)). Investment activity The first nine months of 2007 saw record levels of activity in the Europeanprivate equity market, with €160.0 billion of transactions undertaken (ninemonths ended 30 September 2006 - €124.6 billion). Following the credit marketturbulence during summer 2007, however, activity levels have fallen across theEuropean buy-out industry, with the most significant impact being on largerpotential transactions. For the year ended 30 September 2007 the Company funded£137.6 million of draw downs. This was materially higher than the previousyear's total of £75.3 million and was the highest amount drawn in any year sincethe Company's listing. The Company also received a record £156.5 million of distributions during theyear (year ended 30 September 2006 - £90.3 million). Realisation activity wasdriven by the growth in the private equity, debt, and mergers and acquisitionsmarkets. Of the distributions received, £89.1 million represented net realisedgains and £8.1 million was income (year ended 30 September 2006 - £45.2 millionand £5.9 million respectively). The average return on the Company's acquisitioncost of realised investments was 2.6 times (year ended 30 September 2006 - 2.3times), significantly exceeding the average for the Company since listing of 2.1times. Six new fund commitments totalling £191.7 million were made during the year,reflecting the strong fund raising environment and the return to the market,with new funds, of a number of managers with whom the Company has previouslyinvested. These new fund commitments were:- • £41.9 million to Apax Europe VII,• £41.9 million to Barclays Private Equity European Fund III,• £19.6 million to Coller International Partners V,• £29.7 million to CVC Tandem,• £34.9 million to Industri Kapital 2007, and• £23.7 million to Terra Firma Capital Partners III All of these funds are buy-out funds and are predominantly focused on Europe,with the exception of Coller International Partners V which specialises inglobal secondary private equity opportunities. In terms of manager and portfoliocontinuity, Apax Europe VII is the seventh Apax fund, CVC Tandem is the fourthCVC fund and Barclays Private Equity European Fund III is the third Barclaysfund in which the Company has invested. Notwithstanding record draw downs, the new fund commitments resulted in theCompany's aggregate outstanding commitments rising to £366.0 million as at 30September 2007 (30 September 2006 - £307.7 million). These commitments will befunded from the Company's existing cash and money market holdings, distributionsreceived from the portfolio of fund investments and, if necessary, the use ofbank borrowings. As at 30 September 2007 the Company's new £60 million committedrevolving credit facility with The Royal Bank of Scotland plc remained undrawn.Of the Company's outstanding fund commitments as at 30 September 2007 95.3% hadbeen outstanding for less than 3 years, reflecting the activity and growth inthe European private equity market in recent years. The Board Mark Tyndall's principal business interests have become more demanding of histime and, to the regret of his colleagues, he has decided to retire from theBoard after the forthcoming Annual General Meeting. Mark, who has served as aDirector since the Company's listing in May 2001, has wide experience ofinvestment management and has made a significant contribution to all aspects ofthe Company's business. The Board will miss his wise counsel and I would like,on behalf of shareholders, to thank Mark for all he has done for the Company andto wish him well for the future. SL Capital Partners LLP At an Extraordinary General Meeting held on 24 September 2007, shareholdersconsented to changes to the Company's Articles of Association to facilitate aproposed re-organisation of the Company's Manager. On 1 October 2007 theCompany's Manager became SL Capital Partners LLP. This did not involve anysignificant change to the terms of the investment management agreement, or,critically, to the team of individuals that manages the Company. Outlook The Company has operated for much of the period since listing in 2001 in anenvironment sympathetic to private equity. Against this background, the Managerhas performed strongly, both in absolute and relative terms. The recent setbackto credit markets makes it likely that the European private equity market willenter a quieter period for draw downs and distributions and that debt levelswill be lower. The Board nevertheless believes that the mid to large sizedbuy-out segment, the Company's principal area of focus, will continue to offer awide range of opportunities and that the managers of the funds in which theCompany invests have the skills and resources to generate significant value. TheBoard remains confident that the Company will continue to deliver attractivereturns. Scott Dobbie CBEChairman INCOME STATEMENT (audited)for the year ended 30 September 2007 Revenue Capital Total £'000 £'000 £'000 GAINS ON INVESTMENTS - 94,094 94,094Currency losses on cash balances - (56) (56)Income from investments 10,781 - 10,781Investment management fee (280) (2,517) (2,797)Administrative expenses (475) - (475) __________ __________ __________ NET RETURN ON ORDINARY ACTIVITIESBEFORE FINANCE COSTS AND TAXATION 10,026 91,521 101,547Finance Costs (30) (273) (303) __________ __________ __________ NET RETURN ON ORDINARY ACTIVITIESBEFORE TAXATION 9,996 91,248 101,244Taxation (3,022) 837 (2,185) __________ __________ __________ NET RETURN ON ORDINARY ACTIVITIESAFTER TAXATION 6,974 92,085 99,059 __________ __________ __________NET RETURN PER ORDINARY SHARE 4.38p 57.80p 62.18 __________ __________ __________DILUTED NET RETURN PER ORDINARY SHARE 4.31p 56.85p 61.16p __________ __________ __________ The total column of this statement represents the profit and loss account of theCompany. All revenue and capital items in the above statement derive from continuingoperations. No operations were acquired or discontinued in the period. A Statement of Total Recognised Gains and Losses has not been prepared as allgains and losses are recognised in the Income Statement. The dividend which has been recommended based on this Income Statement is 3.50p(2006 2.40p) INCOME STATEMENT (audited)for the year ended 30 September 2006 Revenue Capital Total £'000 £'000 £'000GAINS ON INVESTMENTS - 61,117 61,117 Currency losses on cash balances - (172) (172)Income from investments 7,636 - 7,636Investment management fee (215) (1,934) (2,149)Administrative expenses (476) - (476) __________ __________ __________ NET RETURN ON ORDINARY ACTIVITIESBEFORE FINANCE COSTS AND TAXATION 6,945 59,011 65,956Finance Costs (19) (171) (190) __________ __________ __________ NET RETURN ON ORDINARY ACTIVITIESBEFORE TAXATION 6,926 58,840 65,766Taxation (2,078) 631 (1,447) __________ __________ __________ NET RETURN ON ORDINARY ACTIVITIESAFTER TAXATION 4,848 59,471 64,319 __________ __________ __________NET RETURN PER ORDINARY SHARE 3.05p 37.36p 40.41p __________ __________ __________DILUTED NET RETURN PER ORDINARY SHARE 3.01p 36.90p 39.91p __________ __________ __________ RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (audited) For the year ended 30 September 2007 Capital Capital Capital Share Share Special redemption reserve reserve Revenue capital premium reserve reserve - Realised - reserve Total Unrealised £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Balance at 30 September 2006 354 77,775 79,148 1 103,234 22,185 7,105 289,802Total recognised gains - - - - 86,363 5,722 6,974 99,059Conversion of founder A shares - 665 - 1 - - - 666Dividends paid - - - - - - (3,820) (3,820) ______ ______ ______ _________ ________ ________ ______ ______Balance at 30 September 2007 354 78,440 79,148 2 189,597 27,907 10,259 385,707 ______ ______ ______ _________ ________ ________ ______ ______ For the year ended 30 September 2006 Capital Capital Capital Share Share Special redemption reserve reserve Revenue capital premium reserve reserve - Realised - reserve Total Unrealised £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Balance at 30 September 2005 354 77,775 79,148 1 60,107 5,841 5,122 228,348Total recognised gains - - - - 43,127 16,344 4,848 64,319Dividends paid - - - - - - (2,865) (2,865) ______ ______ ______ _________ ________ ________ ______ ______Balance at 30 September 2006 354 77,775 79,148 1 103,234 22,185 7,105 289,802 ______ ______ ______ _________ ________ ________ ______ ______ BALANCE SHEET (audited)as at 30 September 2007 2006 £'000 £'000 £'000 £'000NON-CURRENT ASSETSInvestments at fair value through profit or loss 322,633 239,288 CURRENT ASSETSInvestments at fair value through profit or loss 56,645 44,387Debtors 292 189Cash and short term deposits 7,599 7,700 ________ ________ 64,536 52,276 CREDITORS: AMOUNTS FALLINGDUE WITHIN ONE YEAR (1,462) (1,762) ________ ________NET CURRENT ASSETS 63,074 50,514 ________ ________TOTAL ASSETS LESS CURRENT LIABILITIES 385,707 289,802 ________ ________ CAPITAL AND RESERVESCalled up share capital 354 354Share premium 78,440 77,775Special reserve 79,148 79,148Capital redemption reserve 2 1Capital reserve - realised 189,597 103,234Capital reserve - unrealised 27,907 22,185Revenue reserve 10,259 7,105 ________ ________TOTAL SHAREHOLDERS' FUNDS 385,707 289,802 ________ ________ ANALYSIS OF SHAREHOLDERS' FUNDSEquity interests (ordinary shares) 385,672 289,767Non-equity interests (founder shares) 35 35 ________ ________ 385,707 289,802 ________ ________NET ASSET VALUE PER EQUITY SHARE 241.3p 182.1p ________ ________ CASHFLOW STATEMENT (audited)for the year ended 30 September 2007 2006 £'000 £'000 £'000 £'000 NET CASH INFLOWFROM OPERATING ACTIVITIES 7,461 5,029 NET CASH OUTFLOWFROM SERVICING OF FINANCE (342) (142) NET CASH OUTFLOW FROM TAXATION (2,501) (758) FINANCIAL INVESTMENTPurchase of investments (266,564) (127,697)Disposal of investments 265,055 132,153 ________ ________NET CASH (OUTFLOW)/INFLOW (1,509) 4,456FROM FINANCIAL INVESTMENTS ORDINARY DIVIDENDS PAID (3,820) (2,865) ________ ________ NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING (711) 5,720 NET CASH INFLOW FROM FINANCINGNet proceeds of issue of ordinary shares 666 - ________ ________ (DECREASE)/INCREASE IN CASH (45) 5,720 ________ ________ RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS(Decrease)/increase in cash as above (45) 5,720Currency movements (56) (172) ________ ________MOVEMENT IN NET FUNDS IN THE PERIOD (101) 5,548Opening net funds 7,700 2,152 ________ ________CLOSING NET FUNDS 7,599 7,700 ________ ________REPRESENTED BY:Cash and short term deposits 7,599 7,700 ________ ________ Notes:- 1. Standard Life European Private Equity Trust PLC is an investment companymanaged by SL Capital Partners LLP (formerly Standard Life Investments (PrivateEquity) Limited) the ordinary shares of which are admitted to listing by the UKListing Authority and to trading on the London Stock Exchange. It seeks toconduct its affairs so as to continue to qualify as an investment trust undersection 842 of the Income and Corporation Taxes Act 1988. The Board is whollyindependent of the Manager and Standard Life plc. 2. Accounting policies (a) Basis of preparation and going concern - The financial statements havebeen prepared under the historical cost convention as modified to include therevaluation of investments and in accordance with applicable UK AccountingStandards and with the Statement of Recommended Practice 'Financial Statementsof Investment Trust Companies' (issued January 2003 and revised in December2005). They have also been prepared on the assumption that approval as aninvestment trust will continue to be granted. The financial statements have beenprepared on a going concern basis. (b) Revenue, expenses and interest payable - Dividends from quotedinvestments are included in revenue by reference to the date on which the priceis marked ex-dividend. Interest on quoted investments and other interestreceivable are dealt with on an accruals basis. Income from unquotedinvestments is included when the right to receipt is established. All expensesare accounted for on an accruals basis. Expenses are charged through the RevenueAccount except as follows: - transaction costs incurred on the purchase and disposal of investments arerecognised as a capital item in the Income Statement; and - the Company charges 90% of investment management fees and finance costs tocapital, in accordance with the Board's expected long term split of returnsbetween capital gains and income from the investment portfolio of the Company. (c) Investments - Investments have been designated upon initial recognitionas fair value through the profit or loss. Investments are recognised as at thedate of commitment to the fund and removed when the fund is wound up. Subsequentto initial recognition, investments are valued at fair value as detailed below.Gains and losses arising from changes in fair value are included in net profitor loss for the period as a capital item in the Income Statement and areultimately recognised in the unrealised reserve. Unquoted - Unquoted investments are stated at the Directors' estimateof fair value and follow the recommendations of the European Private Equity &Venture Capital Association ('EVCA') and British Private Equity and VentureCapital Association ('BVCA'). This is normally the latest valuation placed on afund by its manager, adjusted if necessary for cash flows between the Companyand the fund occurring between the fund manager's valuation date and theCompany's balance sheet date. The valuation policies used by the manager inundertaking that valuation will generally be in line with the joint publicationfrom the BVCA and EVCA, 'International Private Equity and Venture CapitalValuation Guidelines' ('the guidelines'). However, the valuation adopted by theCompany may depart from the valuation prepared by the manager of the fund if, inthe opinion of the Company's Manager, an upward adjustment is not prudent. Adownward adjustment may also be made if the Company's Manager receives relevantinformation which has not been notified to it by the manager of the fund or ifthe Company's Manager forms a more cautious view than that held by the managerof the fund. The Income Statement reflects the total capital gains, both realised andunrealised. Due to the valuation of the private equity fund interests held bythe Company being performed at the fund level, and not at the underlyinginvestment level, and net realised gains only being recognised followingtransactions advised by the underlying fund manager, the amounts which areaccounted for in the movement in unrealised appreciation/depreciation onunquoted investments relate to the difference between the book cost andvaluation of the fund investments. Quoted - Quoted investments are valued at bid price discounted, whereapplicable, to recognise any restriction on sale. (d) Dividends payable - Interim and final dividends are recognised in theperiod in which they are paid. (e) Realised capital reserve - Gains or losses on investments realised inthe year that have been recognised in the Income Statement are transferred tothe realised capital reserve. In addition, any prior unrealised gains or losseson such investments are transferred from the unrealised capital reserve torealised capital reserve on disposal of the investment. (f) Unrealised capital reserve - Increases and decreases in the fair valueof investments are recognised in the Income Statement and are then transferredto the unrealised capital reserve. (g) Deferred taxation - Deferred taxation is recognised in respect of alltemporary differences that have originated, but not reversed, at the balancesheet date, where transactions or events that result in an obligation to paymore or a right to pay less tax in future have occurred at the balance sheetdate, measured on an undiscounted basis and based on enacted tax rates. This issubject to deferred tax assets only being recognised if it is considered morelikely than not that there will be suitable profits from which the futurereversal of the underlying temporary differences can be deducted. Temporarydifferences are differences arising between the Company's taxable profits andits results as stated in the accounts which are capable of reversal in one ormore subsequent periods. Due to the Company's status as an investment trust company, and theintention to continue meeting the conditions required to obtain approval in theforeseeable future, the Company has not provided deferred tax on any capitalgains and losses arising on the revaluation or disposal of investments. (h) Overseas currencies - Overseas assets and liabilities are translated atthe exchange rate prevailing at the Company's balance sheet date. Gains orlosses on re-translation of investments held at the year end are accounted forthrough the unrealised capital reserve. Gains and losses on the translation ofoverseas currency balances held at the year end are accounted for through therealised capital reserve. Rates of exchange to sterling as at 30 September were: 2007 2006Euro 1.4326 1.4746US dollar 2.0374 1.8680 Transactions in overseas currency are translated at the exchange rate prevailingon the date of transaction. Year to Year to 30 September 2007 30 September 2006 £'000 £'0003 Income Income from investments Income from unquoted investments 8,174 5,896 Income from 'AAA' rated money market funds 2,497 1,550 ________ ________ 10,671 7,446 ________ ________ Other income Interest receivable on cash 108 186 Other income 2 4 ________ ________ 10,781 7,636 ________ ________ 4. The number of ordinary shares in issue as at 30 September 2007 was159,822,567 (30 September 2006 - 159,150,000). The return per ordinary share isbased on the weighted average number of ordinary shares in issue. 5. The Directors recommend that a final dividend of 3.5p (2006 - 2.4p) perordinary share be paid on 1 February 2008 to shareholders on the Company's shareregister as at the close of business on 4 January 2008. The ex-dividend datefor the final dividend is 2 January 2008. 6. The financial information for the year ended 30 September 2007 comprisesnon-statutory accounts within the meaning of Section 240 of the Companies Act1985. The financial information for the year ended 30 September 2006 has beenextracted from published accounts that have been delivered to the Registrar ofCompanies and on which the report of the auditors was unqualified. Thestatutory accounts for the year ended 30 September 2007 contain an unqualifiedaudit report and will be delivered to the Registrar of Companies following theCompany's Annual General Meeting, which will be held at The Balmoral Hotel, 1Princes Street, Edinburgh EH2 2EQ on 28 January 2008 at 12.30pm. 7. The report and accounts for the year ended 30 September 2007 will beposted to shareholders on 20 December 2007 and copies will be available from theCompany Secretary - Edinburgh Fund Managers plc, Donaldson House, 97 HaymarketTerrace, Edinburgh EH12 5HD. for Standard Life European Private Equity Trust PLC,Edinburgh Fund Managers plc,Company Secretary END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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