F&C Private Equity reports that its net assets at the year-end were £216m giving a fully diluted net asset value (‘NAV’) per Ordinary Share of 295.74p. Taking into account dividends paid during the year which total 11.03p, the NAV total return was 10.7 per cent. This compares to a total return from the FTSE-All-Share Index for the year of 1.0 per cent. The Ordinary Share price total return for the year was 16.4 per cent and the share price at the year-end was 241.75p, representing a discount to the NAV of 18.3 per cent.
An interim dividend of 5.58p per Ordinary Share was paid on 6 November 2015. In accordance with the Company’s stated dividend policy, the Board recommends a final dividend of 5.83p per Ordinary Share, payable on 31 May 2016 to shareholders on the register on 6 May 2016. The total dividend for the year amounts to 11.41p per Ordinary Share equivalent to a dividend yield of 4.7 per cent at the year end.
During the year the company made new investments either through funds or as co-investments, totalling £35.3m. Realisations and associated income totalled £78.9m, a new record for the Company. At the year-end the Company had a net cash position of £2.7m. Outstanding undrawn commitments at the year-end were £56.0m of which £17.0m was to funds where the investment period has expired.
In the UK the largest exit was the £8.3m from our co-investment in marine engineering company SMD Hydrovision (2.1x, 11 per cent IRR) which was sold by Inflexion to Chinese buyer CSR ZhouZou. This market leading manufacturer of work class remote operated vehicles (WROVs) was held for seven years, which was longer than planned but during this time its market position improved and this facilitated the exit. They also exited the Stirling Square led co-investment in pallet racking systems company Whittan. This company had a challenging time during the recession with an economically sensitive retail customer base, but after a refinancing the final exit recovered the cost of the investment of £2.7m.
From the funds there were a number of significant exits. August Equity Partners II sold Funeral Service Partners (FSP) to its own successor Fund III returning £2.3m (2.4x, 17 per cent IRR). Primary Capital III sold Pacific Direct, a toiletries and hospitality accessories provider, to ADA Cosmetics of Germany returning £1.1m (3.2x, 17 per cent IRR). Amongst our small portfolio of venture capital funds Pentech II sold cloud based software company Maxymiser to Oracle returning £0.7m.
In Germany Capvis III sold elevator components company Wittur to Bain Capital returning £1.2m (3.9x, 38 per cent IRR). In the Benelux, Life Science Partners III distributed £1.7m from the sale of Prosensa, a pharmaceutical company specialising in RNA modulating therapeutics. Gilde Buyout III sold poultry meat processor Plukon Royale returning £1.2m (7.8x, 41 per cent IRR) and conveyor belts company Ammeraal Beltech returning £0.8m (5.7x, 44 per cent IRR). In France Chequers Capital XV sold Serma, a designer of embedded electronic systems used in severe environments to French PE house Ardian returning £0.5m (3.1x, 34 per cent IRR) and Cenexi, a contract manufacturer of pharmaceuticals to Cathay Capital returning £0.6m (4.5x, 24 per cent IRR). Ciclad 4 sold OMIA, a producer of surface treatment lines for the automotive and industrial sectors to Naxicap returning £0.6m (3.6x, 21 per cent IRR). In Spain N+1 Private Equity II sold security electronics company Teltronic returning £1.6m (6x, 68 per cent IRR). In the Nordics our FSN led co-investment in Danish house-builder HusCompagniet was sold to Nordic PE house EQT Capital returning £3.9m (3.8x, 46 per cent IRR). Herkules Private Equity III sold coffee shop chain Espresso House returning £1.4m (5.7x, 80 per cent IRR). In the USA their longstanding mid-market partners Blue Point Capital II achieved a remarkable exit with the sale of work zone safety services company Area Wide Protection (AWP) to Riverside, returning £2.9m (11x, 51 per cent IRR).
In the fourth quarter there were a further twelve full realisations of holdings in the funds in which F&C Private equity is invested, a number of other partial realisations and one exit of a co-investment.
A co-investment in angling equipment and accessories company Fox International, which was led by Next Wave, was sold to private equity group Mayfair Partners, after only 15 months. Net of carried interest and all costs, they received £4.0m, representing 2.5x and an IRR of 105 per cent. There remains a possibility of further proceeds through a deferred consideration depending on the performance of the new deal.
Inflexion have had an exceptionally successful year with no fewer than eight exits. Two of these were in the final quarter. Holiday company, On the Beach was exited via IPO achieving 3.6x and an 84 per cent IRR. FPEO’s share across two funds was £1.3m. Secondly their TV shopping company Ideal Shopping was sold to Blackstone achieving 2.6x and an IRR of 25 per cent with their share at £1.1m.
TDR Capital II exited debt collection agency Lowell returning £1.4m (2.6x, 35 per cent IRR). Piper Private Equity IV, specialists in consumer brands, had two exits returning a combined £1.5m through the sale of Diet Chef (0.5x) and Rug Co (1.8x).
In the UK F&C Private Equity benefited from some significant partial realisations. The largest of these was £3.0m from flight search engine, Skyscanner, where SEP III has sold down less than a fifth of their holding. The company has also been refinanced. The extraordinary progress of this investment makes it our largest look through investment by some margin at over £15m. Primary Capital III refinanced stationery chain Paperchase, returning £1.0m and also refinanced Leisure Pass Group returning £0.7m. Park Holidays, is performing well and has paid back £0.5m by way of dividend following a debt refinancing.
Further afield Spanish Fund N+1 Private Equity II sold on street parking company EYSA to Portobello Fund III (also in the portfolio) returning £1.2m (2.1x, 55 per cent IRR). In Asia AIF Capital Asia III sold pharmaceuticals company Famy with proceeds of £0.8m (3.3x, 22 per cent IRR). GCP Capital Partners Europe II sold Bermuda based insurance company Ironshore to Hong Kong listed company Fosun returning £0.6m (1.7x, 22 per cent).
The largest uplift was for venture capital fund SEP III, which was up by £5.3m. This was largely attributed to the positive developments at Skyscanner. A number of other funds have also done well, in most cases due to a combination of good exits and respectable profits progression for remaining portfolio companies. Inflexion has had an excellent year and our holdings in their 2010 Fund and 2012 Co-investment Fund are up by £2.7m and £1.8m respectively. In Continental Europe strong performers included DBAG V (+£2.2m), N+1 Private Equity II (+£1.7m) and Procuritas Capital IV (+£1.5m). In the USA BluePoint Capital II was also up significantly (+£1.7m).
In the co-investment portfolio significant contributors this year were HusCompagniet (+£1.4m), French cold sterilisation company Ionisos (+£1.2m) and SMD Hydrovision (+£0.7m).
There were some downgrades. A number of the larger individual ones had a common origin in the difficulties being experienced in the Oil Services sector due to the steep decline in the oil price. Candover 2008, which has one holding, oil services company Expro was down by £1.3m and Candover 2005 was down by £0.7m for the same reason. Stirling Square Capital Partners II was down by £1.2m mainly reflecting a reduction in value for SAR, a provider of waste management services to the oil and gas sector. A co-investment in Norwegian based software company Safran was down by £1.0m, as its core customer base in the offshore oil sector is decreasing faster than its newer defence related customer base is growing. Lastly, PineBridge New Europe II is down by £0.7m reflecting more conventional portfolio problems with weak trading of key companies.
FPEO : F&C Private Equity benefits from record realisations