A Mexican themed restaurant, a Welsh builders’ merchant, T-shirts seller Weird Fish and the UK’s second biggest pet store chain are among the eclectic band of investments held within F&C Private Equity Trust (FPEO).
And while the six months to 30 June was muted in net asset value (NAV) growth terms, investment manager Hamish Mair (pictured below) expects the second half ‘will see further growth in NAV’ aided by continued growth in co-investments.
Today’s results show the quarterly dividend paying trust delivered a share price total return of 3.6%, with net asset value per share flat at 356.17p (2017: 356.81p). However, fund manager Mair insists that ‘taking into account the recent and developing exits in our portfolio, as well as the fundamental progress of our investments, we expect that the second half of the year will see further growth in NAV.’
NEW PET PROJECTS
Encouragingly, total realisations in the half amounted to £29.9m, up from £26.8m in the comparable period of 2017; the managers are expecting realisation proceeds to top £50m for the full year according to the experts at Stifel.
Yet this was also a busy period for new investments with F&C Private Equity investing a total of £40.6m, up from £31.6m a year earlier. Co-investments continue to increase and now speak for almost 40% of the portfolio.
‘Your company has a naturally dynamic portfolio which is essential to maintain excellent exposure to a range of investments across sectors and geographies led by our investment partners,’ insists the chairman, Mark Tennant.
Besides commitments to a number of funds, including its latest involvement in the successful Inflexion funds franchise, the trust added Mexican themed US restaurant chain Rosa Mexicano to its portfolio, investing £3.7m for a 13.7% stake, backed DMC Canotec, a leading Canon photocopiers distributor, and injected further funds into Aberdeen-based oil services outfit TWMA.
F&C Private Equity also invested alongside Inflexion in North Wales based builders’ merchant Huws Gray.
Interestingly, F&C Private Equity committed additional capital to Pet Centar, a Croatia-based pet store chain which has acquired Romania-based Animax and is about to snap up Slovenia’s Mr Pet too. Money was also put to work with Jollyes, the UK’s number two pet shop chain behind listed rival Pets at Home (PETS).
Discussing the Jollyes transaction, Mair explains: ‘This deal led by Kester Capital has some similarities to the Pet Centar investment in that it is also a play on the increased spend on pets, however there is also a strong professionalisation aspect to the investment thesis with a new but highly experienced management team coming in to enhance the UK number two pet shop chain.’
Probably bad news for Pets at Home, a business beset by competitors on all sides.
HAVE PE PRICES PEAKED?
In his outlook statement, Mair explains: ‘From our level of portfolio activity, it is clear that the private equity market is very active across Europe and further afield. The recurrent topic of comment is whether pricing levels, which appear to be high historically, will be sustained and whether this poses a longer-term threat to private equity returns.
'Price rises of this type are usually self-correcting with the first indicator being a reduction in the volume of deals. There is some evidence that this first stage is happening as deal volumes appear to have peaked last year.’
'As we have a portfolio that is well diversified by vintage a buoyant market with plenty of exits usually provides many opportunities for the value created by our investment partners to be crystallised.'
