CT PRIVATE EQUITY TRUST PLC

Earnings Release • Nov 22, 2019

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RNS Number : 2767U

BMO Private Equity Trust PLC

22 November 2019

To: Stock Exchange	For immediate release:
	22 November 2019

BMO Private Equity Trust PLC

Quarterly results for the three months to 30 September 2019 (unaudited)

·      Share price total return for the three months of 3.4 per cent for the Ordinary Shares

·      Net asset value of 390.81p per Ordinary Share reflecting a total return for the three months of 1.7 per cent for the Ordinary Shares

·      Quarterly dividend of 3.87p per Ordinary Share to be paid on 31 January 2020

Introduction

As at 30 September 2019, the net assets of the Company were £289.0 million giving a net asset value ("NAV") per share of 390.81p and a total return over the quarter of 1.7%. For the first nine months of the year, the NAV total return was 4.1%. With the discount reducing from 17.9% at 31 December 2018 to 7.6% at 30 September 2019 the share price total return for this nine-month period was an impressive 17.6%.  At 30 September 2019 the Company had net debt of £27.5 million. Outstanding undrawn commitments were £124.1 million with approximately £17.5 million of these to funds where the investment period has expired and where we would expect only a small proportion to be drawn.

The next quarterly dividend of 3.87p per share will be paid on 31 January 2020 to shareholders on the register on 10 January 2020. The ex-dividend date is 9 January 2020.

New Investments

There were no new investments in the third quarter. A substantial 'follow-on' investment of £3.0 million was made into oil services company Ashtead Technology. This was to enable our investor group, led by energy specialists Buckthorn, to buy-out a large minority shareholder. Ashtead has made good progress recently as demand for its subsea monitoring equipment has picked up.

After the quarter end we completed a co-investment of £4.1 million into Amethyst Radiotherapy. This is a chain of radiotherapy clinics located across Europe from Poland to France. The investment is led by The Rohatyn Group, who specialise in Central and Eastern Europe. The investment case centres on a significant expansion of the number of clinics across Europe. Advances in medical science mean that radiotherapy clinics with the latest equipment are in strong demand. Also, in our co-investment portfolio £0.3 million was added to RGI, the Italy based provider of software for the insurance sector, which has made an acquisition of a complementary business operating in German speaking Europe.

The funds in our portfolio have been active in building out their portfolios. The larger drawdowns are quite diverse by geography and industrial sector. In the UK August Equity Partners IV called £0.6 million for Esland (residential care for young people with special needs). Piper Private Equity VI called £0.3 million for Mous Products (tech accessories). In Germany Bencis V called £0.4 million for Gebhardt-Stahl (steel reinforcement profiles for the HVAC systems and PVCu window frames). DBAG VII called £0.5 million for Kraft&Bauer (fire extinguishing systems for tooling machinery). In the Nordic region the funds have also been active. Procuritas Capital VI called £0.4 million for Temporary Space (temporary accommodation for schools, health centres and offices). Summa I called £0.3 million for LOGEX Group (data analytics software to improve healthcare outcomes). Vaaka Partners Buyout Fund III called £0.3 million for Lyyti (Finnish market leader for event management software). In the USA Stellex called £0.3 million for the combined investment in ship repair companies MHI and Vigor. MHI was an existing Stellex investment that has been merged with and sold into Vigor. The Carlyle Group has backed the deal and assumed the leadership position. 

Total drawdowns and co-investments in the third quarter were £11.2 million bringing the total for the year to date to £39.2 million. This is approximately 25% below the cumulative investments by this stage last year.

Realisations

Realisations and income received for the quarter was £6.4 million giving a total for the year of £31.8 million.

It has been a fairly quiet quarter with no large exits from the co-investment portfolio. There were several smaller realisations from across the fund's portfolio.  In the UK Horizon Capital (formerly Lyceum) made a partial exit of media company AgriBriefing through a refinancing returning £0.7 million, 1.5x cost. Inflexion 2010 Fund sold agricultural laboratory testing services business Cawood Scientific to Waterland Private Equity returning £0.4 million or 2.8x cost and 43% IRR. Venture capital fund SEP IV sold cloud storage and document collaboration business Workshare to trade buyer Litera Microsystems returning £0.2 million, 2.0x cost, 11% IRR.

In France, as previously reported, Chequers Capital XV exited thermal solutions and temperature measurement systems for cables company Thermocoax returning £0.7 million, 2.7x cost. In Germany DBAG VI sold specialised films for consumer goods packaging business Infiana to financial buyer Pamplona returning £0.4 million, 2.1x cost, 25% IRR. Lastly and, most significantly, in the USA Blue Point Capital III sold The Hilsinger Company, a global supplier of optical accessories and products, returning £1.1 million, 3.7x cost, 28% IRR.

Valuation Changes

There were a number of valuation changes in both directions this quarter. The largest positive (£1.4 million) was from our co-investment in Croatia based large format pet retailer Pet Network (TRG Pluto) which has traded strongly. There was another uplift of £1.3 million from the receipt, after the quarter end, of a deferred consideration relating to our previous holding in fishing tackle company Fox. This was sold by Nextwave to Mayfair Partners in 2015 with the deal including the potential for the vendors to benefit from a subsequent sale. Mayfair have now sold Fox to a strategic buyer in the US and that has triggered a deferred payment of £1.3 million. As we were carrying this entitlement at nil value it is an effective uplift of the full amount. Elsewhere in the portfolio there has been good progress with an uplift of £0.8 million from TDR II mainly driven by the movement in the share price of Williams Scotsman, the modular buildings company. Volpi Capital I is up by £0.7 million reflecting good progress in its portfolio. In Spain Corpfin Capital IV is up by £0.7 million reflecting actual and imminent realisations within a strongly performing portfolio. Astorg VI also has a performing portfolio and is uplifted by £0.6 million. August Equity Partners IV is doing well and a broadly-based uplift totalled £0.5 million.

There were a few setbacks in valuations. Avalon, the funeral plans provider, faces a difficult market which is down, at least in part, in response to some regulatory changes which will see the FCA start regulating the sale of funeral plans. In the longer term this should benefit Avalon but in the short term it has necessitated a downgrade of £2.1 million. Our holding in clothing company Weird Fish has been struggling against a very soft market and this is downgraded by £1.4 million. Our US based restaurant chain Rosa Mexicano has experienced poor trading and has been written down by £1.0 million. Following the quarter end Rosa Mexicano has been refinanced.

Financing

The Company has a large amount of headroom on its borrowing facility with the term loan of €25 million (£20.9 million) fully drawn and £9.7 million of the £75 million revolving credit facility drawn giving £66 million available subject to covenant compliance. With net debt of £27.5 million, or just under 10% of NAV, this is a useful amount of gearing which should enhance shareholder returns. It looks likely that the total proceeds from realisations for 2019 will be some way below the record total for 2018. This quarter is unusual of late in that there was no net effect from currency movements.

Outlook

Activity within the private equity market internationally remains at healthy levels albeit below 2018 levels. This is backed by on going appetite for the asset class and strong fund raising. New deals are being initiated in all markets in near record volumes. The very strong market for exits which has characterised the last three years is showing some signs of catching its breath. The trading performance of the portfolio is robust with a limited number of sector or company specific areas of concern. The price of new deals remains high by historic standards driven in part by the considerable amounts of private equity commitments and abundant cheap debt. Despite this the lower mid market in Europe remains relatively less expensive and continues to be a good hunting ground for our value-oriented investment partners. The heterogenous nature of our dealflow also continues. At this stage in the year, there is considerable scope to build further shareholder value.

Hamish Mair

Investment Manager

BMO Investment Business Limited

BMO PRIVATE EQUITY TRUST PLC

Statement of Comprehensive Income for the

nine months ended 30 September 2019 (unaudited)

	Revenue £'000	Capital £'000	Total £'000
##### Income
Gains on investments held at fair value	-	13,081	13,081
Exchange gains	-	588	588
Investment income	3,010	-	3,010
Other income	56	-	56
##### Total income	3,066	13,669	16,735
##### Expenditure
Investment management fee - basic fee	(206)	(1,858)	(2,064)
Investment management fee - performance fee	-	(1,289)	(1,289)
Other expenses	(619)	-	(619)
##### Total expenditure	(825)	(3,147)	(3,972)
Profit before finance costs and taxation	2,241	10,522	12,763
Finance costs	(132)	(1,190)	(1,322)
Profit before taxation	2,109	9,332	11,441
Taxation	(401)	401	-
Profit for period/total comprehensive income	1,708	9,733	11,441
Return per Ordinary Share	2.31p	13.16p	15.47p

BMO PRIVATE EQUITY TRUST PLC

Statement of Comprehensive Income for the

nine months ended 30 September 2018 (unaudited)

	Revenue £'000	Capital £'000	Total £'000
##### Income
Gains on investments held at fair value	-	20,913	20,913
Exchange gains	-	216	216
Investment income	944	-	944
Other income	49	-	49
##### Total income	993	21,129	22,122
##### Expenditure
Investment management fee - basic fee	(486)	(1,457)	(1,943)
Investment management fee - performance fee	-	(2,123)	(2,123)
Other expenses	(582)	-	(582)
##### Total expenditure	(1,068)	(3,580)	(4,648)
(Loss)/profit before finance costs and taxation	(75)	17,549	17,474
Finance costs	(320)	(958)	(1,278)
(Loss)/profit before taxation	(395)	16,591	16,196
Taxation	-	-	-
(Loss)/profit for period/total comprehensive income	(395)	16,591	16,196
Return per Ordinary Share	(0.53)p	22.44p	21.91p

BMO PRIVATE EQUITY TRUST PLC

Statement of Comprehensive Income for the

year ended 31 December 2018 (audited)

	Revenue £'000	Capital £'000	Total £'000
##### Income
Gains on investments held at fair value	-	36,966	36,966
Exchange gains	-	35	35
Investment income	2,340	-	2,340
Other income	81	-	81
##### Total income	2,421	37,001	39,422
##### Expenditure
Investment management fee - basic fee	(660)	(1,980)	(2,640)
Investment management fee - performance fee	-	(2,277)	(2,277)
Other expenses	(760)	-	(760)
##### Total expenditure	(1,420)	(4,257)	(5,677)
Profit before finance costs and taxation	1,001	32,744	33,745
Finance costs	(428)	(1,286)	(1,714)
Profit before taxation	573	31,458	32,031
Taxation	(109)	109	-
Profit for year/total comprehensive income	464	31,567	32,031
Return per Ordinary Share	0.63p	42.69p	43.32p

BMO PRIVATE EQUITY TRUST PLC

Balance Sheet

	As at 30 September 2019	As at 30 September 2018	As at 31 December 2018
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	318,825	278,914	295,242
Current assets
Other receivables	21	23	142
Cash and cash equivalents	3,188	23,239	21,335
	3,209	23,262	21,477
Current liabilities
Other payables	(2,389)	(3,179)	(4,267)
Interest-bearing bank loan	(9,732)	-	(26,821)
	(12,121)	(3,179)	(31,088)
Net current (liabilities)/assets	(8,912)	20,083	(9,611)
Total assets less current liabilities	309,913	298,997	285,631
##### Non-current liabilities
Interest-bearing bank loan	(20,945)	(26,561)	-
Net assets	288,968	272,436	285,631
Equity
Called-up ordinary share capital	739	739	739
Share premium account	2,527	2,527	2,527
Special distributable capital reserve	15,040	15,040	15,040
Special distributable revenue reserve	31,403	31,403	31,403
Capital redemption reserve	1,335	1,335	1,335
Capital reserve	237,924	221,787	234,587
Revenue reserve	-	(395)	-
## Shareholders' funds	288,968	272,436	285,631
Net asset value per Ordinary Share	390.81p	368.45p	386.29p

BMO PRIVATE EQUITY TRUST PLC

Reconciliation of Movements in Shareholders' Funds

	### Nine months ended ### 30 September ### 2019	### Nine months ended ### 30 September 2018	### Year ### ended ### 31 December 2018
	### (unaudited)	### (unaudited)	### (audited)
	### £'000	### £'000	### £'000
### Opening shareholders' funds	### 285,631	### 264,144	### 264,144
### Profit for the period/total ### comprehensive income	11,441	16,196	### 32,031
### Dividends paid	### (8,104)	### (7,904)	### (10,544)
### Closing shareholders' funds	288,968	### 272,436	### 285,631

Notes (unaudited)

1.   The unaudited quarterly results have been prepared on the basis of the accounting policies set out in the statutory accounts of the Company for the year ended 31 December 2018.  Earnings for the nine months to 30 September 2019 should not be taken as a guide to the results for the year to 31 December 2019.

During the year to 31 December 2018, the management fee and bank loan interest were allocated 75 per cent to capital and 25 per cent to revenue.  In accordance with the Board's expected long term split of returns in the form of capital gains and income, with effect from 1 January 2019 the allocation basis has been revised to 90 per cent to capital and 10 per cent to revenue.

2.   Investment management fee:

	### Nine months ended ### 30 September 2019                               (unaudited)			### Nine months ended ### 30 September 2018                              (unaudited)			### Year ended ### 31 December 2018                                  (audited)
	### Revenue ### £'000	### Capital ### £'000	### Total ### £'000	### Revenue ### £'000	### Capital ### £'000	### Total ### £'000	### Revenue ### £'000	### Capital ### £'000	### Total ### £'000
### Investment management       fee - basic fee	206	1,858	2,064	486	1,457	1,943	660	1,980	2,640
### Investment management       fee - performance fee	-	1,289	1,289	-	2,123	2,123	-	2,277	2,277
	206	3,147	3,353	486	3,580	4,066	660	4,257	4,917

3.   Finance costs:

	### Nine months ended ### 30 September 2019                              (unaudited)			### Nine months ended ###  30 September 2018                              (unaudited)			### Year ended ### 31 December 2018                                  (audited)
	### Revenue ### £'000	### Capital ### £'000	### Total ### £'000	### Revenue ### £'000	### Capital ### £'000	### Total ### £'000	### Revenue ### £'000	### Capital ### £'000	### Total ### £'000
### Interest payable on bank loans	### 132	### 1,190	### 1,322	### 320	### 958	### 1,278	### 428	### 1,286	### 1,714

4.   Returns and net asset values

	###        Nine months ended ### 30 September 2019                         (unaudited)	###   Nine months ended ###  30 September 2018                   (unaudited)	###                 Year ended ### 31 December 2018                       (audited)
### The returns and net asset values per share are based on the following figures:
### Revenue Return	### £1,708,000	### (£395,000)	### £464,000
### Capital Return	### £9,733,000	### £16,591,000	### £31,567,000
### Net assets attributable to shareholders	### £288,968,000	### £272,436,000	### £285,631,000
### Number of shares in issue at end of period	### 73,941,429	### 73,941,429	### 73,941,429
### Weighted average number of shares in issue during the year	### 73,941,429	### 73,941,429	### 73,941,429

5.   The financial information for the nine months ended 30 September 2019, which has not been audited or reviewed by the Company's auditor, comprises non-statutory accounts within the meaning of Section 434 of the Companies Act 2006.  Statutory accounts for the year ended 31 December 2018, on which the auditor issued an unqualified report, have been lodged with the Registrar of Companies.  The quarterly report is available on the Company's website www.bmoprivateequitytrust.com

Legal Entity Identifier: 2138009FW98WZFCGRN66

For more information, please contact:

Hamish Mair (Investment Manager)	0131 718 1184
Scott McEllen (Company Secretary)	0131 718 1137
hamish.mair@bmogam.com  / scott.mcellen@bmogam.com

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