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Strong NAV growth from abrdn Private Equity Opportunities despite challenging backdrop

Abrdn Private Equity Opportunities (APEO) announced its annual results for the year ended 30 September 2022. Key takeaways are as follows:

  • APEO has shown strong annual Net Asset Value growth in spite of the difficult backdrop in both the global economy and financial markets. Its NAV total return for the year to 30 September 2022 was 14.1% versus -4.0% for the All-Share Index (APEO’s comparator index). A large part of this performance relates to the record realisation activity that APEO has seen during the year. The valuation of the underlying portfolio increased by 10.5% during the period (excluding foreign exchange movements).
  • The deterioration in public market sentiment during the year led to share price pressures across the private equity sector during 2022. APEO was not immune to this – its share price total return was -15.1% during the year, underperforming the -4.0% total return from the All-Share.
  • As a result of the contrast between the share price and NAV performance during the year, the share price discount to NAV at 30 September 2022 widened to 45.6%. The discount ranged between 11.2% and 46.7% during the year, and averaged 28.0%, which was slightly narrower than the 29.9% average of its close peer group.
  • APEO made twelve new primary investments, nine new direct co-investments and two new secondary investments during the year. Direct co-investment has continued to grow as a proportion of the portfolio and has now reached a portfolio of 22 underlying companies and 19.1% of NAV.
  • APEO’s portfolio generated record levels of realisations (distributions and secondary sales) during the year under review, with distributions of £210.2m (30 September 2021: £197.6m). The realised return from the ongoing investment operations of APEO’s core portfolio equated to 2.2 times cost (2021: 2.8 times cost). In addition, APEO received an additional £15.7m (2021: £1.1m) from proceeds from secondary sales relating to two fund positions.
  • The manager focused on reinvesting distributions into new investment opportunities during the year, amounting to total drawdowns of £253.6m (2021: £184.2m).
  • Outstanding commitments at the year-end amounted to £678.9m (2021: £557.1m). The overcommitment ratio of 42.8% at year-end (2021: 32.5%) was at the lower end of APEO’s target range (30-75%).
  • APEO had cash and cash equivalents of £30.3m (2021: £29.7m) at year-end. APEO also had £138.0m remaining undrawn on its £200.0m revolving credit facility at 30 September 2022 (2021: £200.0m undrawn). Following year-end, the revolving credit facility was increased to £300.0m in size and extended in duration by a year (to December 2025).
  • Realisations from underlying funds came at an average uplift of 20% when compared with the unrealised valuation two quarters prior, therefore driving valuation increases. Notable exits in the portfolio were General Life (European fertility clinic group), Benvic (European developer and producer of thermoplastic solutions) and Sbanken (Norwegian online bank).
  • The portfolio of private companies continues to perform well, with the top 50 largest underlying portfolio companies by value showing average revenue and EBITDA growth of 23% and 24% respectively in the twelve months to 30 September 2022.
  • That has helped drive the resilient valuation performance in the unrealised book, in spite of declining listed market comparable multiples. We are particularly pleased about progress in APEO’s co-investment portfolio, which has seen a valuation uplift of 51.8% on a constant currency basis during the year.
  • The war in Ukraine had a minimal direct impact on APEO during the year. The trust has no Russian, Belarussian or Ukrainian headquartered businesses in its portfolio of 655 separate underlying companies. Through discussions with the underlying private equity managers, APEO estimates that revenues from these countries accounted for less than 1% of aggregate underlying portfolio company revenues at the start of the financial year, and have declined further since then.
  • Following a sustained period of growth, APEO was rewarded with a promotion to the FTSE 250 Index for the first time in its history.

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