News Column

F&C Private Equity Trust Hit By Sterling Strength In First Half

August 29, 2014

Samuel Agini

LONDON (Alliance News) - F&C Private Equity Trust PLC Friday reported a net asset value total return of negative 0.3% for the six months ended June 30, with the trust pinning the blame on the strengthening of sterling.

In a statement, the trust reported an adverse currency movement of 2.7%.

The trust's NAV was GBP192.6 million at the end of June, giving a fully diluted NAV per share of 262.90 pence, compared to 269.07p on December 31. Including last year's final dividend of 5.36p per share paid on May 30, 2014 gives the NAV total return for the first half.

The trust's ordinary shares were Friday quoted up 1.3% at 219.50p.

Its share price total return for the six months was 9.1% for the ordinary shares.

"The first half of the year saw a steady flow of realisations within the portfolio with some encouraging signs of renewed exit activity in markets such as France and Spain where there has been a recent dearth of exits," Chairman Mark Tennant said in a statement.

Tennant said the trust has in the UK seen exits achieved not only to other private equity firms and to trade, but also through the stockmarket.

"This broadening of activity is a sign of a healthy market where recovery is in general well established," Tennant said. "The market has also benefited from more amenable banking conditions and the increased prominence of alternative debt providers to buy-outs, such as unitranche funds."

He said the background environment helped the trust to secure its new five-year loan facility of about GBP70 million at the end of the first half.

The board has previously said it wants to use some of the facility to at least partially fund the pending redemption of the trust's zero dividend preference shares on December 15, 2014. At the end of June, the ZDP Share price was 150.125 pence, representing a premium of 2.9% over the NAV per ZDP Share of 145.93 pence

According to Tennant, the trust's underlying portfolio is in "good shape". The managers have added to the co-investment component of the portfolio, increasing exposure to 17.5% from 11.8% over the last twelve months. The trust has a medium-term aim of building that to about 25%.

The chairman also said the trust's investment partners have been active in deploying funds in a range of companies across Europe on its behalf.

"They are investing carefully and judiciously and the average price of new deals acquired is significantly below the average for the private equity market as a whole and the European mid-market in particular. As acquisition price is one of the most influential factors in the success of a buy-out, this is an encouraging sign," Tennant said.

He added that the managers, F&C Investment Business Ltd, are seeing a good flow of new fund propositions in the trust's core area of the European mid-market, and they expect to commit to several more funds by the end of 2014.

"Additionally, the dealflow of co-investments and secondaries is good and they expect to add further to both categories as the year progresses," Tennant said.

"The only frustration during the first half of the year is that sterling has strengthened noticeably against other major currencies, and this has meant that we are showing a slight decline in the NAV rather than an increase," he added.

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Source: Alliance News

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