Quarterly Report Gresham Private Equity Limited

Transcription

1 PRIVATE EQUITY

2 Gresham Private Equity Co-Investment Fund Quarterly Report 31 March March 2017 Page 1 of 14

3 Gresham Private Equity Co-Investment Fund Contents Fund Overview Portfolio Summary Portfolio Performance Updates Appendices: Financial Reports for the Period Ended 31 March 2017 The information contained in this report is confidential and must not be copied or otherwise conveyed to any person other than the intended recipient. 31 March 2017 Page 2 of 14

4 Fund Overview 31 March 2017 Page 3 of 14

5 Fund Overview The Gresham Private Equity Co-Investment Fund ( the Fund ) raised $ million on 12 August 2004, at which time 15% was paid in by investors, thereby classifying it as a vintage year 2004 fund. The Fund is an unlisted unit trust, co-investing with Gresham Private Equity Funds No. 2a and 2b ( the institutional Funds ), in established Australian and New Zealand businesses, targeting management buy-outs and buy-ins, expansion capital, industry consolidations and public-to-private transactions. The Fund is domiciled in Sydney, Australia, is managed by Gresham Private Equity Limited ( GPE or the Manager ), and the Responsible Entity is Gresham Funds Management Limited. Following approval by the institutional Funds unitholders in April 2017 to extend the life of those funds, the Fund s life has also been extended from 30 June 2018 to 30 April 2022 to align with the termination date of the new Barminco bonds (refer page 10 for further details). As at 31 March 2017, the Fund had drawn down $96.92 million from investors and invested approximately $87.4 million in seven portfolio companies of which six have now been realised, leaving Barminco as the Fund s remaining investment. Under the arrangements agreed with investors, portfolio companies are valued on a quarterly basis based on a fundamental review of the valuation of each portfolio company. These valuations are undertaken ahead of period end in order that the impact of valuations can be reflected in each quarter s nominal unit price. During the financial period, a related corporation of the Manager has had in place contracts in relation to the Manager and all persons who are or have been officers of the Manager, insuring these parties against certain liabilities. The terms of the relevant insurance policies prohibit any other disclosures. At 31 March 2017 ($ million, except per unit data) Total Total committed capital $ Total calls to date $96.92 Total uncalled capital $5.10 Cost of Investments to date $87.43 Distributions to date $31.82 Fair Value of Investments $18.22 Net assets attributable to Unitholders $18.21 Gross IRR on Investment Portfolio (1) (3.0)% Net IRR to investors (realised and unrealised) (2) (9.4)% Net cash on cash IRR (realised) (23.2)% Calls to date per Unit Total net assets attributable to Unitholders Per Unit (2) Paid-in capital to committed capital 0.95 Distribution to calls multiple 0.33 Residual value to calls multiple 0.19 Total value to calls multiple 0.52 (1) Prior to payment of management fees and other non-investment related expenses. Includes amounts earned in respect of investments, including dividends, transaction fees and directors fees. (2) Calculated at 31 March 2017 as if the Fund s assets were realised for their fair value at 31 March March 2017 Page 4 of 14

6 Fair Value of Investments as at 31 March 2017 In order to provide Unitholders with an indication of value for their own internal management purposes, the Manager provides an unaudited fair value of investments, which is determined in line with industry practice using appropriate valuation techniques. This unaudited fair value is also the basis on which the unit prices reported to Unitholders on a monthly basis are calculated. It should be noted, however, that there is no certainty whatsoever that the unaudited fair value will reflect the actual proceeds from the ultimate exit of these investments. Unitholders should be aware that the Fund s investments are illiquid with no certainty as to the timing of exit or valuation on exit. The Manager does not, and will not, give any warranty, guarantee or representation, express or implied, as to the accuracy, relevance or usefulness of its unaudited fair value and does not accept any responsibility for any inaccuracy in the unaudited fair value or in any of the information provided. The Manager accepts no responsibility for any interpretation, opinion or conclusion that may be formed as a result of an examination of the unaudited fair value or other information provided in this report. The unaudited fair value or other information provided may not be relied upon in any way in assuming any contractual or other obligation or liability in relation to the Fund or otherwise. 31 March 2017 Page 5 of 14

7 Portfolio Summary 31 March 2017 Page 6 of 14

8 Portfolio Summary Date of Date of Total Investment Return Total Multiple Holding Gross Investment Initial Final Investment Income Unrealised Investment of Cost Period IRR Exit Route Investment Realisation Industry Stage Cost Received/Realisations Fair Value Return X Yrs % $ $ $ $ Investment Portfolio Summary Unrealised Barminco Aug 2007 Mining MBO 13,877,950 4,485,827 18,215,042 22,700, % TOTAL UNREALISED INVESTMENTS 13,877,950 4,485,827 18,215,042 22,700, % Investment Portfolio Summary Realised APPP Jun 2005 Sep 2008 FMCG MBO 4,834,048 23,228,549-23,228, % Trade sale Witchery Australia Holdings Aug 2006 Oct 2012 Retail MBO 12,503,837 22,914,643-22,914, % Trade sale Noel Leeming Group Aug 2004 Dec 2012 Retail MBO 17,078,901 1,561,963-1,561, (38.3)% Trade sale GEON Nov 2005 Feb 2013 Printing MBO 23,372,293 1,541,797-1,541, nm Secondary sale Tasmanian Walking Co (formerly Awara) Oct 2007 Dec 2013 Tourism MBI 7,565,712 2,211,064-2,211, (18.9)% Trade sale Silk Logistics Apr 2008 June 2015 Logistics MBI 8,196, , , (46.5)% Trade sale TOTAL REALISED INVESTMENTS 73,551,554 51,994,546-51,994, (9.1)% Investment Portfolio Summary - Total TOTAL UNREALISED INVESTMENTS ,485,827 18,215,042 22,700, % TOTAL REALISED INVESTMENTS 73,551,554 51,994,546-51,994, (9.1)% TOTAL/ AVERAGE 87,429,504 56,480,373 18,215,042 74,695, (3.0)% nm not meaningful/measurable 31 March 2017 Page 7 of 14

9 Movement in Fair Value of Portfolio within the Fund Investee Company Fair Value Fair Value 31/12/2016 Realisation Revaluations 31/03/2017 Valuation Methodology $ $ $ $ Barminco 18,215, ,215,042 DCF TOTAL 18,215, ,215, March 2017 Page 8 of 14

10 Portfolio Performance Updates 31 March 2017 Page 9 of 14

11 1.0 Barminco Investment Summary Date of Investment Nature of Business Business Location Deal Type Role GPE manages funds which hold 60.01% of the equity in Barminco. Safety Safety is Barminco s core value and the company is committed to achieving zero harm. Barminco has continued its leading safety performance in the March quarter, with the Rolling 12 Month Lost Time Injury Frequency Rate (LTIFR) currently at Strategy Barminco s strategy focuses on organic growth in the company s core underground hard rock contract mining market in Australia, as well as selective international expansion opportunities and ongoing operational efficiencies. Capital Structure Co-Invest Fund ($ million) August 2007 Enterprise Value at $502.0 acquisition Mining Equity % 9.1% Investment $13.9 Australia Fair Value as at 31 March 2017 $18.2 MBI Board Representation R Casey Lead C Graham (Alternate for R Casey) Barminco progressed the process of refinancing its senior notes during the March quarter. The refinance was successfully completed during April, with the company raising US$350m through the issue of 5-year Senior Secured Notes to Asian and US investors, and entering into a new A$100m revolving credit facility to provide additional liquidity. The coupon on the new Notes is 6.625%, a material improvement on the 9.00% paid under the previous notes. The new Notes also include favourable optional redemption rights, with the ability for Barminco to redeem up to US$125m at 101% of the principal with IPO equity prior to May Valuation The discounted cash flow analysis has been updated using the FY17 latest estimate, together with detailed forecasts for FY18 and FY19 and higher level forecasts for FY The discounted cash flow generates a valuation within an acceptable range of the December 2016 carrying value. Accordingly, the fair value has been maintained at $18.2m. Barminco is currently completing its budgeting and strategic planning process and the DCF will be updated in June to reflect those forecasts, as well as the net impact of the refinancing. Current Trading Revenue (1) EBITDA (1) YTD trading relative to FY16 corresponding period +12.7% -4.8% (1) Based on unaudited management accounts, after major unbudgeted items, with AUMS interest proportionately consolidated. Barminco has recorded solid financial results in YTD FY17, with revenue growing over the prior corresponding period. While the commencement of contracts during the year at Kundana and Rampura Agucha has driven an increase in revenue, it has also negatively impacted EBITDA as new projects typically involve additional costs during the initial months of Barminco operations. The AUMS joint venture in Africa continues to perform very well both operationally and financially, with YTD earnings increasing over the prior corresponding period. 31 March 2017 Page 10 of 14

12 Key Challenges/Initiatives The mining services sector generally remains challenging, with strong competition for new contracts and a cost focus by clients putting pressure on margins. However, continued strengthening of metals prices has led to improved sentiment as well as exploration and project development in Barminco s core markets. Barminco continues to actively target potential new business opportunities throughout Australia and internationally that may arise as a result of these more favourable conditions. The domestic and international new contract pipeline remains strong. Barminco also continues to focus on a range of cost management, productivity and safety initiatives to ensure it delivers excellent quality service and value to clients. The Manager remains focused on positioning Barminco for a value maximising liquidity event for the Fund. 31 March 2017 Page 11 of 14

13 Appendices: Financial Reports for the Period Ended 31 March March 2017 Page 12 of 14

14 Gresham Private Equity Co- Investment Fund Financial Reports for the Period Ended 31 March 2017 Contents Income Statement Balance Sheet 31 March 2017 Page 13 of 14

15 Gresham Private Equity Co-Investment Fund Unaudited income statement for the period ended 31 March 2017 Gresham Private Equity Co-Investment Fund Unaudited balance sheet as at 31 March July 2016 to 31 March 2017 $ Investment Income/(loss) Interest 3,394 Transaction and advisory fees 143,200 Net gain/(loss) on investments at fair value through profit or loss - Other income 43,199 Total investment income/(loss) 189,793 Expenditure Administration and other expenses 27,493 Management fees 363,304 Manager s share of transaction and advisory fees 71,600 Service fees 162,743 Total expenditure 625,140 Net operating profit/(loss) (435,347) 31 March 2017 $ Current assets Cash 205,112 Receivables 61,054 Total current assets 266,166 Non - current assets Investments 18,215,042 Total non - current assets 18,215,042 Total assets 18,481,208 Current liabilities Creditors and accruals 267,188 Total current liabilities 267,188 Total liabilities excluding net assets attributable to unitholders 267,188 Net assets attributable to unitholders 18,214,020 Total liabilities 18,481, March 2017 Page 14 of 14

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