Standard Life European Private Equity Trust has announced its interim results for the six-months ended 31 March 2016. During the period, the trust has provided an NAV total return of 11.3%, whilst the NAV per ordinary share rose 10.2% to 310.2p (30 September 2015 – 281.6p). The company says that the increase in NAV included 10.4% of net realised gains and income from the Company’s portfolio of 47 private equity fund interests (reflecting a strong exit environment), 5.1% of unrealised losses on a constant exchange rate basis, 5.8% of positive exchange rate movements on the portfolio (thereby reversing some of the negative foreign exchange impacts seen during the last two years) and payment of a final dividend of 3.5p per ordinary share for the year ended 30 September 2015. An interim dividend of 1.80p has been declared and the board say it is their intention, subject to unforeseen circumstances, to maintain, at least, the real value of last year’s 5.25p dividend for the full year. In contrast to the performance of the trust’s NAV, the company’s share price fell by 4.7% over the period and the trust finished the period trading at a 34.2% discount to NAV. This compares to an increase in the FTSE All-Share Index over this period of 1.8%, and a decrease in the MSCI Europe Index (in euros) of 3.2%. The share price has risen since the period end and at 25 May 2016 was 224.0p, representing a 27.8% discount to the NAV at 31 March 2016.
In terms of portfolio activity, the trust says that, as a result of strong exit activity, reflecting the maturity of its portfolio, the trust received £80.4m of distributions and funded £34.4m of drawdowns during the period, generating a net cash inflow from portfolio activities of £46.0m. The trust made one new fund commitment during the period of €45.0m to Advent International GPE VIII. In addition, the Company undertook one secondary fund purchase of an original commitment of $60.0m to TowerBrook Investors III for £19.1m, which the managers say was equivalent to a discount of 6.1% to the 30 September 2015 valuation of the fund. Since the period end, the trust says that it has received £9.7m of distributions and funded £3.5m of drawdowns. It has also made a new fund commitment of €26.0m to the Sixth Cinven Fund.
In terms of outstanding commitments, as at 31 March 2016 the trust had £271.5m of outstanding commitments but the manager believes that up to £55m of these are unlikely to be drawn. As at 31 March 2016 the trust had liquid resources of £94.0m, comprising a cash balance of £54.6m and £39.4m invested at value (£39.4m at cost) in UK and European equity index tracker funds. The trust has an undrawn £80m syndicated revolving credit facility, which expires in December 2020.
In terms of outlook, the board say that, overall, the European private equity market remains competitive with a significant amount of capital having been raised, however, the funds in the trust’s portfolio are predominately focused on the mid and large segments of the buy-out market where historically managers have been able to generate value through operational improvements and strategic repositioning. They say that the managers of many of the funds in the Company’s portfolio continue to report positive earnings growth across their portfolio companies. They also say that the trust continues to benefit from strong levels of exit activity across the portfolio and, subject to exogenous shocks, the Manager would expect this to continue over the course of the year. They believe that these strong levels of exit activity should result in further realised and unrealised gains being generated enabling the trust to continue to build on its performance.
Standard Life European Private Equity’s benefits from strong exit environment : SEP