Latest manager commentary
An update from investment manager, Alan Gauld
29 June 2021
We are pleased with the performance of SLPET following the pandemic-related declines seen in early 2020. During the quarter to 31 March 2021, the portfolio value increased 9.0% on a constant currency basis (4.8% including FX movements).
This movement was driven by a number of underlying portfolio company exits, at premium valuations. For example, the average valuation uplift upon exit during the quarter was 63.1%. In addition, the value of the unrealised portfolio also increased, due to the resilient trading performance of the underlying companies and a general increase in valuation multiples (due to an uplift in listed market comparables in the quarter).
This means that, in the first six months of FY21, the portfolio grew 22.9% in constant currency (16.9% including FX movements). Furthermore, in the last twelve months, the portfolio has grown 48.1% (in constant currency), a strong performance given the context of the global pandemic and various enforced lockdowns.
Discrete performance (%)
|FTSE All-Share Index||26.7||(18.5)||6.4||1.2||22.0|
Past performance is not a guide to future results.
The high level of exit activity seen in the second half of 2020 has continued into 2021. Due to the demand for quality private equity-backed assets, we have seen strong IPO activity across the trust’s portfolio. Examples include Moonpig (UK-based online gifting business, 1.5% of portfolio value1), Dr Martens (leading consumer footwear brand, 1.3% of portfolio value1) and Allegro (Poland’s leading online marketplace, 0.9% of portfolio value1). Typically these listings have been at material valuation uplifts.
As well as exit activity in the public market, we have also seen a number of sale agreements announced over the past months, including underlying portfolio companies such as Calypso (a provider of capital markets software solutions to the financial sector), Signature Foods (chilled convenience food) and Faerch Group (circular food packaging).
Taken together, distributions received for the first 6 months of the financial year were £92.7m, including £47.0m received from the portfolio during the latest quarter to 31 March 2021. This strong exit activity is continuing the trend seen in the last financial year, when the £140.7m of distributions received in the year to 30 September was the second highest annual total for SLPET since its inception in 2001.
The Company made a number of new investments during the first 6 months of FY21. Firstly, SLPET made new primary fund commitments into Triton Smaller Mid-Cap II (€25m), PAI Mid-Market I (€25m) and IK Small Cap III (€25m). These are fund strategies focused on the European lower mid-market alongside core managers with whom we have a long-term relationship.
In terms of secondaries, the Company completed a transaction in April 2021, acquiring original commitments of €3.0m and €8.0m to Capiton IV and Capiton V, respectively. Caption is a manager focused on the DACH lower mid-market and, whilst a new relationship for SLPET, is a manager we have known for over a decade.
SLPET has been active on the co-investment side, completing three transactions so far in FY21. It made a €9.9m co-investment into North American Science Associates, Inc. (NAMSA), a clinical research organisation specialised in providing services to medical device companies. The co-investment was made alongside ArchiMed, NAMSA’s lead investor. The Company also made a €9.0m co-investment into Funecap, a vertically integrated funeral services and crematoria provider headquartered in France. The co-investment was made alongside sponsor Latour Capital. Finally, it completed a €8.5m co-investment through the Nordic Capital WH1 Beta vehicle, into a company in the technology space which cannot yet be named (due to confidentiality restrictions).
The pipeline is very strong right now, particularly in primary funds and co-investments. Therefore we expect SLPET to be active in terms of new investments in the second half of the year.
The underlying portfolio has remained resolute during the global pandemic and has performed strongly. It has shown resilient trading performance, with average LTM revenue and EBITDA growth of 2.1% and 6.6% respectively (at 31 March 2021), despite this incorporating a full twelve months of the global pandemic and several periods of lockdown. The portfolio consists of 486 private companies, largely within the European mid-market and spread across different countries, sectors and vintages. At 31 March 2021, only 14 companies equated to or more than 1% of the portfolio, with the largest single underlying company exposure being 3.9% (Action).
Since the emergence of global pandemic, we have conducted a quarterly Covid-19 impact analysis of the top 100 companies by value (equating to 64.1% of portfolio value1 at 31 March 2021). Assessment of the companies is based on guidance from the private equity managers in addition to analysis conducted by Aberdeen Standard Investments. We estimate that only two companies (combined 1% of NAV) of the top 100 have been materially disrupted by the global pandemic. One is a Travel & Leisure business and the other operates in the Industrial sector. None of the top 50 companies by value are expected to see high or permanent impact from Covid-19 and several have been beneficiaries.
At 31 March 2021, the Company had cash and cash equivalents of £62.5m. The Company has an undrawn £200m syndicated revolving credit facility, provided by Citi, Societe Generale and State Street Bank International that expires in December 2024.
SLPET actively runs an over-commitment strategy and has done so for more than 20 years. The Company had total outstanding commitments of £462.9m as at 31 March 2021, with an overcommitment ratio of 22.9%, below the long-term target range of 30-75%. The Manager believes that around £46.6m of the Company’s outstanding commitments are unlikely to be drawn. The current position is prudent and we expect the ratio to increase in the second half of the year as new investments enter the portfolio.
We are delighted by SLPET’s strong performance over the last twelve months, during the global pandemic. We are pleased with recent new investment activity, particularly around co-investments. The Company’s balance sheet is in a relatively strong position and, with investment pipeline further building, we feel that SLPET is well positioned to take advantage of opportunities across the remainder of 2021 and beyond.
1 Portfolio value at 31 March 2021< />
Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.
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Issued by Aberdeen Asset Managers Limited which is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Registered Office: 10 Queen’s Terrace, Aberdeen AB10 1XL. Registered in Scotland No. 108419. An investment trust should be considered only as part of a balanced portfolio. Under no circumstances should this information be considered as an offer or solicitation to deal in investments. You should obtain specific professional advice before making any investment decision.