5th Jun 2007 07:01
Standard Life Euro Pri Eqty Tst PLC05 June 2007 5 June 2007 STANDARD LIFE EUROPEAN PRIVATE EQUITY TRUST PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2007 Highlights • The Company's net asset value per ordinary share ("NAV") rose by 12.7% to 205.3p (30 September 2006 - 182.1p). • The closing mid-market price of the Company's ordinary shares on 31 March 2007 was 240.8p (30 September 2006 - 183.5p), a rise of 31.2% over the six month period. • In line with the Company's dividend policy, the Board has not declared an interim dividend. • Private equity is a long term asset class. Over the five year period from 1 April 2002 the Company's NAV and share price have materially out-performed the two most relevant stock market indices, rising by 118.4% and 183.3% respectively, while the FTSE All-Share Index and the MSCI Europe Index (sterling adjusted) have risen by 28.4% and 32.8% respectively. • As at 31 March 2007 the Company's net assets were £326.7 million (30 September 2006 - £289.8 million). The Company had interests in 47 private equity funds with a value of £279.9 million (30 September 2006 - 43 funds and £239.3 million) and held £48.9 million in cash and money market balances (30 September 2006 - £52.1 million). • Distributions received during the period totalled £69.3 million (six months ended 30 September 2006 - £46.7 million), including £39.5 million of realised gains and income (six months ended 30 September 2006 - £27.9 million). The average return on the Company's acquisition cost of realised investments was 2.3 times (six months ended 30 September 2006 - 2.5 times). • The valuation of the Company's private equity fund interests reflected a positive performance, with unrealised gains during the period of £3.7 million (six months ended 30 September 2006 - £11.6 million). • In light of the continuing growth in the European private equity market the Company funded a record £66.8 million of draw downs (six months ended 30 September 2006 - £37.7 million). • The Company made four new fund commitments totalling £113.0 million during the period, to Apax Europe VII, Coller International Partners V, CVC Tandem and Terra Firma Capital Partners III. Quote from Scott Dobbie, Chairman:- "Against a background of increasing competition in the European private equityasset class and rising deal and fund sizes, the skills of portfolioconstruction, selection and the ability to access the best managers and fundsare at a premium: in this the Manager has an enviable track record." CHAIRMAN'S STATEMENT Results and performance The Company performed well in the six months ended 31 March 2007, with its netasset value per ordinary share ('NAV') rising by 12.7% to 205.3p. The strongportfolio of assets benefited from rising financial markets, positivemacro-economic fundamentals across most of Europe and a robust European privateequity market. As at 31 March 2007 the Company's net assets were £326.7 million(30 September 2006 - £289.8 million). On a fully diluted basis, assumingconversion of the relevant outstanding founder A shares, the Company's NAV at 31March 2007 was 202.1p. Despite some recent public expressions to the contrary, the Company's Board andManager believe that private equity returns should properly be viewed over along time horizon. The Company was listed in May 2001. Over the five year periodfrom 1 April 2002 the Company's NAV and share price have materiallyout-performed the two most relevant stock market indices, increasing by 118.4%and 183.3% respectively, compared to rises of 28.4% in the FTSE All-Share Indexand 32.8% in the MSCI Europe index (sterling adjusted). The closing mid-market price of the Company's ordinary shares on 31 March 2007was 240.8p (30 September 2006 - 183.5p), a rise of 31.2% over the six monthperiod. Throughout the period the Company's shares continued to trade at apremium to the published NAV. In line with the Company's dividend policy, the Board has not declared aninterim dividend. Valuation As at 31 March 2007 the Company's portfolio comprised 47 private equity fundinterests, of which 20 fund interests represented 84.3% by value of theportfolio. The Board believes that this pattern of exposure provides an optimumbalance between diversification and concentration in an asset class thattraditionally has demonstrated a high dispersion of return between differentmanagers and funds. During the six month period the portfolio continued to rise in value through acombination of net new investment activity and unrealised gains. As at 31 March2007 the value of portfolio was £279.9 million (30 September 2006 - £239.3million), of which unrealised gains arising during the period were £3.7 million(six months ended 30 September 2006 - £11.6 million). This reflected a positiveperformance, attributable principally to good trading and cashflow generation atmany of the underlying investee companies and rising comparable valuationmultiples. Aggregate cash and money market balances fell marginally over the period to£48.9 million at 31 March 2007 (30 September 2006 - £52.1 million). This was theresult of a healthy flow of distributions, offset by record draw downs and thepayment of the final dividend for the last financial year. At the period end,the percentage of the Company's gross assets invested in private equity assetshad risen to 85.1% (30 September 2006 - 82.1%); this remains one of the highestproportions within the private equity investment trust asset class. Exchange rates had a slightly negative impact on NAV over the period, assterling appreciated by 5.0% relative to the US dollar and depreciated by 0.1%relative to the euro. As at 31 March 2007 the Company had £329.1 million ofgross assets, of which £200.7 million (sterling equivalent) comprised eurodenominated assets and £52.1 million (sterling equivalent) dollar denominatedassets (30 September 2006 - £291.6 million, £166.0 million and £46.5 millionrespectively). Investment activity The level of European private equity investment rose again, with a total of€107.8 billion of transactions completed in the six month period to 31 March2007, compared to €68.5 billion in the comparable six month period last year and€156.7 billion in the year ended 30 September 2006. Buy-out activity nowdominates the market and average deal sizes continue to increase. In light ofthis the Company funded a record £66.8 million of draw downs in the six monthperiod to 31 March 2007 (six months ended 30 September 2006 - £37.7 million). As for cash inflow, the six month period saw the Company receive £69.3 millionof distributions (six months ended 30 September 2006 - £46.7 million). TheCompany benefited from significant realisations across the portfolio, with bothlarge and small investments being fully or partially realised. This was againdriven by the strong mergers and acquisitions market and the attractive maturityprofile of the Company's portfolio. Over 33% of the Company's underlyingportfolio of investments at 31 March 2007 were made in the years 2001-04,against a background of relatively weaker corporate earnings, lower multiplesand less competition. Of the distributions received, £34.5 million were realised gains and £5.0million were income (six months ended 30 September 2006 - £24.6 million and £3.3million respectively). The average return on the Company's acquisition cost ofrealised investments again exceeded two times, being 2.3 times (six months ended30 September 2006 - 2.5 times). Early 2007 saw the beginning of a new fund raising cycle, with some of themanagers who last raised funds in 2004 returning to the market. During the sixmonth period the Company made four new fund commitments totalling £113.0million. These were £40.7 million to Apax Europe VII, £20.4 million to CollerInternational Partners V, £28.8 million to CVC Tandem and £23.1 million to TerraFirma Capital Partners III. All of these funds are buy-out funds and are focusedon Europe, save for Coller International Partners V which specialises insecondary private equity investments in Europe and North America. The Companyhas existing investments with the managers of all of these funds, with theexception of Terra Firma Capital Partners III, although, in this case, theManager has been monitoring and reviewing Terra Firma's progress for a number ofyears. In light of the new fund commitments made and draw downs funded, the Company'saggregate outstanding commitments to its private equity fund interests increasedto £353.3 million as at 31 March 2007 (30 September 2006 - £307.7 million).These commitments can be expected to be drawn down over the next 3-4 years andwill be funded from the Company's existing cash and money market holdings,distributions received from the Company's private equity fund interests and, ifnecessary, the use of bank borrowings. During the period the Company enteredinto a new five year £60 million revolving credit facility with The Royal Bankof Scotland plc and at the period end this facility was undrawn. Profile of private equity industry Recent years have seen a significant increase in the number and size of privateequity transactions undertaken in Europe. This has prompted much public debateabout the European private equity market, its role in the capital markets andmore generally in society. Arising from this there have been calls for greaterdisclosure and governance by private equity funds and managers. There has been little debate about broadening the access to the asset class.With the experience of six years in the Company, the Board believes that thebenefits, particularly of corporate structure, reporting and governance,provided by private equity investment trusts listed on the London Stock Exchangehave not been fully recognised and that they offer appropriate vehicles forretail and small institutional investors to obtain exposure to, and informationon, the private equity market. Outlook The Company delivered a good performance in the six months to 31 March 2007 andthis has continued post the period end. Against a background of increasingcompetition in the European private equity asset class and rising deal and fundsizes, the skills of portfolio construction, selection and the ability to accessthe best managers and funds are at a premium: in this the Manager has anenviable track record. Further, in the current pricing and debt environment theManager is aware of the balance between over-committing the Company andmaximising investment returns. Scott Dobbie CBEChairman INCOME STATEMENT (unaudited) Six months to 31 March 2007 Revenue Capital Total £'000 £'000 £'000 Total capital gains on investments - 37,596 37,596Currency gains - 4 4Income 6,186 - 6,186Investment management fee (128) (1,154) (1,282)Administrative expenses (295) - (295) ________ ________ ________Return before finance costs and taxation 5,763 36,446 42,209 Interest payable and similar charges (11) (100) (111) ________ ________ ________Return on ordinary activities before taxation 5,752 36,346 42,098 Taxation on ordinary activities (1,746) 377 (1,369) ________ ________ ________Return on ordinary activities after taxation 4,006 36,723 40,729 ________ ________ ________Return per ordinary share 2.52p 23.07p 25.59p ________ ________ ________Diluted return per ordinary share 2.48p 22.74p 25.22p ________ ________ ________ _________________________________________________________________________________ (unaudited) Six months to 31 March 2006 Revenue Capital Total £'000 £'000 £'000 Total capital gains on investments - 26,195 26,195Currency gains - 20 20Income 3,270 - 3,270Investment management fee (101) (911) (1,012)Administrative expenses (237) - (237) ________ ________ ________Return before finance costs and taxation 2,932 25,304 28,236 Interest payable and similar charges (10) (85) (95) ________ ________ ________Return on ordinary activities before taxation 2,922 25,219 28,141 Taxation on ordinary activities (863) 298 (565) ________ ________ ________Return on ordinary activities after taxation 2,059 25,517 27,576 ________ ________ ________Diluted return per ordinary share 1.30p* 16.03p* 17.33p* ________ ________ ________ _________________________________________________________________________________ (audited) Year ended 30 September 2006 Revenue Capital Total £'000 £'000 £'000 Total capital gains on investments - 61,117 61,117Currency losses - (172) (172)Income 7,636 - 7,636Investment management fee (215) (1,934) (2,149)Administrative expenses (476) - (476) ________ ________ ________Return before finance costs and taxation 6,945 59,011 65,956 Interest payable and similar charges (19) (171) (190) ________ ________ ________Return on ordinary activities before taxation 6,926 58,840 65,766 Taxation on ordinary activities (2,078) 631 (1,447) ________ ________ ________Return on ordinary activities after taxation 4,848 59,471 64,319 ________ ________ ________Return per ordinary share 3.05p 37.36p 40.41p ________ ________ ________Diluted return per ordinary share 3.01p 36.90p 39.91p ________ ________ ________ The total column of this statement represents the profit and loss account of theCompany. The Company has no recognised gains or losses other than those recognised in theincome statement above. All revenue and capital items in the above statement derive from continuingoperations. * Earnings per share - undiluted and diluted. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS For the period ended 31 March 2007 Share Capital Capital Capital Share premium Special redemption reserve reserve Revenue capital reserve reserve reserve realised unrealised reserve Total £'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 and losses - - - - 33,055 3,668 4,006 40,729Dividends paid - - - - - - (3,820) (3,820) ______ ______ ______ ______ ______ ______ ______ ______Balance at 31 March 2007 354 77,775 79,148 1 136,289 25,853 7,921 326,711 ______ ______ ______ ______ ______ ______ ______ ______ For the period ended 31 March2006Balance at 30 September 2005 354 77,775 79,148 1 60,107 5,841 5,122 228,348Total recognised gains and losses - - - - 19,987 5,530 2,059 27,576Dividends paid - - - - - - (2,865) (2,865) ______ ______ ______ ______ ______ ______ ______ ______Balance at 31 March 2006 354 77,775 79,148 1 80,094 11,371 4,316 253,059 ______ ______ ______ ______ ______ ______ ______ ______ For the year ended 30 September 2006Balance at 30 September 2005 354 77,775 79,148 1 60,107 5,841 5,122 228,348Total recognised gains and losses - - - - 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 (unaudited) (unaudited) (audited) As at As at As at 31 March 2007 31 March 2006 30 September 2006 £'000 £'000 £'000Non-current assetsInvestments at fair value through profit or loss 279,909 208,784 239,288 Current assetsInvestments at fair value through profit or loss 40,935 36,989 44,387Debtors 224 126 189Cash and short term deposits 8,011 8,400 7,700 ________ ________ ________ 49,170 45,515 52,276 Creditors: amounts falling due within one year (2,368) (1,240) (1,762) ________ ________ ________Net current assets 46,802 44,275 50,514 ________ ________ ________Net assets 326,711 253,059 289,802 ________ ________ ________Capital and reservesCalled up share capital 354 354 354Share premium 77,775 77,775 77,775Special reserve 79,148 79,148 79,148Capital redemption reserve 1 1 1Capital reserve - realised 136,289 80,094 103,234Capital reserve - unrealised 25,853 11,371 22,185Revenue reserve 7,291 4,316 7,105 ________ ________ ________Total shareholders' funds 326,711 253,059 289,802 ________ ________ ________Analysis of shareholders' fundsEquity interests (ordinary shares) 326,676 253,024 289,767Non-equity interests (founder shares) 35 35 35 ________ ________ ________ 326,711 253,059 289,802 ________ ________ ________Net asset value per equity share 205.3p 159.0p 182.1p ________ ________ ________Net asset value per equity share - diluted 202.1p 159.0p 179.6p ________ ________ ________ CASHFLOW STATEMENT (unaudited) (unaudited) (audited) Six months to Six months to Year to 31 March 2007 31 March 2006 30 September 2006 £'000 £'000 £'000Revenue before finance costs and taxation 42,209 28,236 65,956Adjusted for:Realised gains on investments (33,928) (20,665) (44,801)Fund investments wound up - - 28Unrealised gains on investments (3,668) (5,530) (16,344)Currency losses/(gains) (4) (20) 172Increase in accrued income (50) (47) (89)Decrease/(increase) in other debtors 15 8 (13)Increase in creditors 129 154 275Tax deducted from non - UK income (29) (140) (155)NET CASH INFLOW FROM OPERATING ACTIVITIES 4,674 1,996 5,029 NET CASH OUTFLOW FROM SERVICING OF FINANCE (152) (95) (142) NET CASH OUTFLOW FROM TAXATION (860) (244) (758) FINANCIAL INVESTMENTPurchase of investments (114,149) (53,416) (127,697)Disposal of investments 114,614 60,852 132,153NET CASH INFLOW FROM FINANCIAL INVESTMENT 465 7,436 4,456 ORDINARY DIVIDEND PAID (3,820) (2,865) (2,865) ________ ________ ________NET CASH INFLOW BEFORE FINANCING 307 6,228 5,720NET CASH OUTFLOW FROM FINANCING - - - ________ ________ ________INCREASE IN CASH AND CASH EQUIVALENTS 307 6,228 5,720 ________ ________ ________ RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS Increase in cash as above 307 6,228 5,720Currency gains/(losses) 4 20 (172) ________ ________ ________MOVEMENT IN NET FUNDS IN THE PERIOD 311 6,248 5,548Opening net funds 7,700 2,152 2,152 ________ ________ ________CLOSING NET FUNDS 8,011 8,400 7,700 ________ ________ ________REPRESENTED BY:Cash and short term deposits 8,011 8,400 7,700 ________ ________ ________ Notes: 1. Standard Life European Private Equity Trust PLC is an investment companymanaged by Standard Life Investments (Private Equity) Limited, the ordinaryshares of which are admitted to listing by the UK Listing Authority and totrading on the London Stock Exchange. It seeks to conduct its affairs so as tocontinue to qualify as an investment trust under section 842 of the Income andCorporation Taxes Act 1988. The Board is wholly independent of the Manager andStandard Life plc. 2. Accounting policies (a) Basis of preparation and going concern - The financial statements have beenprepared 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. The financial statements, and the net asset value per share figures, have beenprepared in accordance with UK Generally Accepted Accounting Principles ('UKGAAP'). (b) Revenue, expenses and finance cost - Dividends from quoted investments areincluded in revenue by reference to the date on which the price is markedex-dividend. Interest on quoted investments and other interest receivable aredealt with on an effective yield basis. Income from unquoted investments isincluded when the right to receipt is established. All expenses are accountedfor on an accruals basis. Expenses are charged through the Income Statement,except as follows: (i) transaction costs incurred on the purchase and disposalof investments are recognised as a capital item in the Income Statement; and(ii) the Company charges 90% of the investment management fees and finance coststo capital, in accordance with the Board's expected long-term split of returnsbetween capital gains and income from the Company's investment portfolio. (c) Investments at fair value through profit or loss - Investments have beendesignated upon initial recognition as fair value through the profit or loss.Investments are recognised as at the date of commitment to the fund and removedwhen the fund is wound up. Subsequent to initial recognition, investments arevalued at fair value as detailed below. Gains and losses arising from changesin fair value are included in net profit or loss for the period as a capitalitem in the Income Statement and are ultimately recognised in the unrealisedreserve. Unquoted - Unquoted investments are stated at the Directors' estimateof fair value and follow the recommendations of the EVCA and BVCA. This isnormally the latest valuation placed on a fund by its manager, adjusted ifnecessary for cashflows between the Company and the fund occurring between thefund manager's valuation date and the Company's balance sheet date. Thevaluation policies used by the manager in undertaking that valuation willgenerally be in line with the recommendations of the joint publication from theBVCA and the EVCA, 'International Private Equity and Venture Capital ValuationGuidelines' ("the Guidelines"). However, the valuation adopted by the Company may depart from thevaluation prepared by the manager of the fund if, in the opinion of theCompany's Manager, an upward adjustment is not prudent. A downward adjustmentmay also be made if the Company's Manager receives relevant information whichhas not been notified to it by the manager of the fund or if the Company'sManager forms a more cautious view than that held by the manager of 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 prices, discounted, whereapplicable, to recognise any restriction on sale or lack of liquidity. (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 to therealised 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 ofall temporary differences that have originated but not reversed at the balancesheet date where transactions or events that result in an obligation to pay moreor a right to pay less tax in future have occurred at the balance sheet datemeasured 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 the intention tocontinue meeting the conditions required to obtain approval in the foreseeablefuture, the Company has not provided deferred tax on any capital gains andlosses arising on the revaluation or disposal of investments. (h) Overseas currencies - Overseas assets and liabilities aretranslated at the exchange rates prevailing at the Company's balance sheet date.Gains or losses on the re-translation of investments held at the period/yearend are accounted for through the unrealised capital reserve. Gains and losseson the translation of overseas currency balances held at the period/year end areaccounted for through the realised capital reserve. Rates of exchange to sterling were: As at As at As at 31 March 2007 31 March 2006 30 September 2006Euro 1.4735 1.4334 1.4746US dollar 1.9614 1.7346 1.8680 Transactions in overseas currencies are translated at the exchange rateprevailing on the date of the transaction. 3. Income Six months ended Six months ended Year ended 31 March 31 March 30 September 2007 2006 2006 £'000 £'000 £'000 Income from unquoted investments 4,992 2,567 5,896 _______ _______ _______ Other income Interest from AAA rated money market funds 1,126 672 1,550Deposit interest 62 27 186Other income 6 4 4 _______ _______ _______ 1,194 703 1,740 _______ _______ _______Total income 6,186 3,270 7,636 _______ _______ _______ 4. The number of ordinary shares in issue as at 31 March 2007 was159,150,000 (30 September 2006 - 159,150,000). The return per ordinary share isbased on the weighted average number of ordinary shares in issue. 5. There will be no interim dividend for the six months ended 31 March 2007. 6. The financial information for the six months ended 31 March 2007 and 31March 2006 comprises non-statutory accounts within the meaning of Section 240 ofthe Companies Act 1985. The financial information for the year ended 30September 2006 has been extracted from published accounts that have beendelivered to the Registrar of Companies and on which the report of the auditorswas unqualified. The interim accounts have been prepared on the same basis asthe annual accounts. 7. The interim report and accounts will be posted to shareholders andcopies will be available from the Manager - Standard Life Investments (PrivateEquity) Limited, 1 George Street, Edinburgh EH2 2LL. for Standard Life European Private Equity Trust PLC,Edinburgh Fund Managers plc, SECRETARY END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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