Aberdeen Private Equity Fund, managed by Alexander Barr (pictured), has announced its interim results for the six-months ended 30 September 2015 during which the company’s NAV per share fell by 1.6% to 125.37p although, including the 2.2p dividend paid in September 2015, the Sterling NAV total return to shareholders was +0.2%. The company says that positive performance from the underlying holdings was offset by a negative currency movement during the period. The board comment that the largely US dollar denominated investment portfolio, and the Company’s US dollar cash holdings, experienced translational losses representing 2.0% of NAV following a weakening in the US dollar (relative to Sterling) over the period. On 30 September 2015 the share price discount to NAV stood at 28.9%.
In terms of portfolio activity, the Manager made one new commitment during the interim reporting period, continuing the re-deployment of the Company’s cash flow into new investments. Montagu V LP is a fund focused on making majority control investments in medium sized businesses headquartered in Northern Europe with an EV of between €100m and €1bn. The board believes that commitments made in 2014, and in the earlier part of 2015, are now bedding down well and that many more interesting businesses are being added to the Company’s underlying investment pool. They say this includes BBI Diagnostics Group, a provider of technologies and products to healthcare and research industries acquired by Exponent Partners III in June, and Enjoy Beer, a craft beer platform created in April by FFL Parallel Fund IV LP.
The company also benefitted from the $1.3bn sale by Gores Capital Partners III of their immunotherapy business, Therakos, to drug manufacturer Mallinckrodt plc in August which resulted in a $2.6m cash flow back to the company. The board say that, post the interim period, Avito, the Company’s largest underlying holding, has been sold by Northzone VI LP portfolio (a 2010 commitment) to the South African conglomerate Naspers. The board say that the Avito exit alone should return more cash to the Company than the initial investment made in Northzone VI LP.
In terms of the underlying funds, the managers say that Northzone VI saw another significant uplift during the period and became the Company’s largest fund holding. This uplift was primarily a result of valuation increases in Avito and iZettle. HIG Bayside Debt & LBO Fund II is a lower-mid market fund specialising in distressed and distressed-for-control transactions in the US. The managers say that the fund’s strong performance over the period was predominantly driven by valuation uplifts in Surgery Partners (which had an IPO at the end of September), Caraustar Industries and Cornerstone Chemical Company. The fund remains active in follow-on investments and ongoing distributions. Apax 8 had an active period with strong uplifts in the underlying portfolio. The most significant gains were seen in EVRY ASA, an IT services company in the Nordic region, GlobalLogic, a software R&D services company based in the US, and Exact Software, a business software solutions provider from the Netherlands. The valuation uplift seen in CCMP Capital Investors III was driven by a write-up in Jetro Cash and Carry. The managers say that the fund is still at an early stage in its investment period having made its first investment in July 2014 and valuation uplifts at this early stage are therefore encouraging.
LVM LP Co-Investment LP relates to the Company’s co-investment in Via Mechanics, which is also part of the Longreach II portfolio. The managers say that Via Mechanics’ performance was strong throughout 2014 and this has continued into 2015. The company’s EBITDA is outperforming budgeted figures and cost reductions in SG&A expenses have improved margins. The company’s co-investment vehicle for Dell (SLP Denali Co Invest LP), and funds Silver Lake Partners III LP, and Oaktree OCM Opportunities Fund, were its three weakest performers for the period. The managers say that Dell, a co-investment alongside Silverlake III, has, in tandem with the broader PC industry, seen weaker PC sales, however the business’ transition into a more rounded enterprise solutions business continues on track. Dell has more recently announced a proposed acquisition of EMC in what the managers say has the potential to be a transformative deal for the enterprise technology industry.
In terms of outlook, the managers say that the global private equity environment has been characterised by fewer yet larger buyout transactions. Sellers continue to command high prices for assets amid high levels of competition, both from trade buyers and the private equity industry. The managers say that, in their view, with deal pricing remaining high, a degree of caution on the overall market is warranted, however they believe that judiciously selected direct assets and GPs’ funds still offer excellent investment opportunities. By remaining appropriately diversified by geography, stage, vintage and underlying sector they believe they can capture potential returns from multiple sources, which include gains from operational restructuring that can be effected well in medium to smaller size private equity funds. They therefore remain optimistic on the outlook for returns from the portfolio and as such are likely to continue to invest at a similar pace to that which has been executed over the last few years.
Aberdeen Private Equity returns weakened by strong US exposure : APEF