Aberdeen Private Equity has announced its annual results for the year ended 31 March 2016. During the year the fund’s NAV per share increased by 4.6% to 133.33p and, including the 2.2p dividend paid in September 2015, shareholders received a NAV total return of 6.6% (2015: 18.2%). The company says that NAV performance was driven by both the underlying investment portfolio and favourable currency movements. Specifically the portfolio, which retains its bias to US dollar denominated assets, experienced translational gains (in respect of the sterling NAV) following a strengthening in the US dollar versus sterling over the period. During the period the company provided a share price total return of 2.3% (2015: 15.5%). This reflects a widening of the discount over the period from 30.8% to 34.1% (no shares were repurchased during the year). The board is recommending a dividend of 2.2p for the year (2015: 2.2p) and it says that, in the absence of unforeseen circumstances, it expects the company to be able pay at least the same level of dividend for the financial year to 31 March 2017. A continuation vote will take place at this year’s AGM in September.
In terms of NAV performance, the company says that this been generated from a wide range of investment vintages. The Northzone VI fund was the largest contributor with a positive impact from Avito which was marked up in the six month period prior to exit. The fund also saw other holdings being marked up. Northzone was one of the first new investments made by the investment management team following the manager change in 2009 and the company says that this exit has meant that distributions from this fund are already now greater than the amount paid into it. The Silver Lake Partners III Fund, the HIG Bayside Debt & LBO Fund, and the Thoma Bravo IX Fund were committed to between 2007 and 2008, and the company says that these have also helped drive performance with valuation increases from their remaining underlying investments. In terms of detractors, a number of funds saw negative returns for the period, and these included Pine Brook Capital Partners and MatlinPatterson Global Opportunities Partners III, which saw the values of some of their public equity investments fall in value.
The managers say that they have seen continuing momentum from the company’s co-investment portfolio and that Via Mechanics, in particular, has performed well. They say that Via Mechanics recorded figures ahead of budget which allowed it to complete a dividend recapitalisation during the period. They also say that Alain Afflelou was marked up by Lion Capital based on a returning of momentum in overall group sales and that Dell and Hillman Group (where the company invests alongside Silver Lake and CCMP respectively) have also continued to perform to plan.
In terms of portfolio activity, the company says that the manager has been active redeploying the Company’s strong cash flow into new investments and four new fund commitments were made: Montagu V (a Northern European buyout fund), MML Capital Partners VI (a fund focused on the UK, US and French lower mid-market), Latour Capital II (a French lower-mid market fund) and Wisequity IV (an Italian lower mid-market fund). In addition to this the company made two new co-investments: Achilles (a supply chain management business) and Hampshire Trust Bank (a UK based ‘challenger’ bank). The Company also disposed of its interest in Resonant Music 1 LP. The Resonant fund invested in original music scores and was no longer deemed a core holding. The sale took place at marginally above the last received NAV and was non-dilutive. Since the year end, the Company has also committed to an additional two funds: Northzone VIII (a Nordic focused Venture Capital Fund) and MTS Health Partners IV (a US lower mid-market healthcare fund). The managers say that, in addition to these new primary investments, underlying activity levels have been high, with a number of new companies added to the portfolio via the underlying funds and that there has also been 46 full or partial exits, from these funds. At the end of March 2016, 77.1% of the Company’s NAV was invested in 29 PE funds and 5.8% in six co-investments. The company says that these 29 PE funds invest across a wide range of sectors, geographies and market capitalisations, providing exposure in aggregate to 338 underlying companies.
The company says that the most significant event within the underlying portfolio was the exit by the Northzone VI fund of its holding of Avito, a Russian classified advertising business. This was a full cash exit, at a significant multiple to its original cost. Avito had been for some time the Company’s largest underlying holding, and this disposal led to the company receiving €10.9m.
In terms of outlook, the company’s board say that whilst it has continued to see elevated pricing levels at the larger end of the deal spectrum, the average purchase price multiple for smaller privately owned companies remains relatively attractive. It also says that this has been one of the reasons behind the strategy of adding investments to the portfolio such as Latour Capital and Wisequity, and the new co-investments. The board say that PE dry powder, in aggregate, remains at record highs and that this may help to underpin current levels of deal pricing. However, they say that with large proven PE managers continuing to be able to raise significant amounts of new commitments from their Limited Partners, there appears to be continuing strong appetite for this asset class.
Aberdeen Private Equity performance driven by underlying investments and currency movements : APEF