REG - Dunedin Enterprise - Annual Financial Report
22/03/2024 07:00
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RNS Number : 8595H Dunedin Enterprise Inv Trust PLC 22 March 2024
22 March 2024
For release 22 March 2024
Dunedin Enterprise Investment Trust PLC ("the Company")
Year ended 31 December 2023
Dunedin Enterprise Investment Trust PLC, the private equity investment trust,
announces its results for the year ended 31 December 2023.
Financial Highlights:
· Share price total return of 6.8% in the year to 31 December 2023
· Net asset value total return of 3.6% in the year to 31 December 2023
· Realisations of £10.5m in the year
· Interim dividend of 10.0p per share paid in January 2024
· Total of £146.5m has been returned to shareholders since the
decision to wind-up the Trust in 2016 making a total of £203.5m since 2012
Comparative Total Return Performance
Year to 31 December 2023 Net Asset value Share price FTSE
Small Cap
(ex Inv Cos)
Index
One year 3.6% 6.8% 10.4%
Three years 76.1% 85.1% 19.8%
Five years 90.1% 108.0% 43.3%
Ten years 155.9% 207.7% 76.6%
For further information please contact:
Graeme Murray
Dunedin LLP
07813 138367
Chairman's Statement
Duncan Budge, Chairman
The total return in the year to 31 December 2023 was 3.6% and 6.8% in terms of
net asset value per share and share price respectively.
Your Company's net asset value per share decreased from 627.1p to 624.8p in
the year. This is stated after allowing for dividends per share paid in the
year of 25p, totalling £1.4m.
The share price of 510.5p at 31 December 2023 represented a discount of 18.3%
to the net asset value of 624.8p per share.
The net asset value decreased over the year from £34.5m to £34.4m.
Portfolio
During the year a total of £10.5m was realised from the investment portfolio.
The realisations of Premier Hytemp, the manufacturer and supplier of
engineered metal products, and Weldex, the crawler crane hire business,
generated proceeds of £5.0m and £4.6m respectively.
The earn-out from RED, the provider of SAP contract and permanent staff,
generated proceeds of £4.6m.
A sale of the roll-over investment in Hawksford, the provider of investment
related services, generated proceeds of £0.7m.
Unrealised valuation increases of £1.1m were offset by decreases of £1.3m. A
valuation uplift was achieved at EV, offset by a reduction in the valuation of
FRA. Further details are provided in the Manager's Review. The realisation
of all investments in Dunedin Buyout Fund II, means that your Company only has
two investments remaining: Dunedin Buyout Fund III and Realza with only five
underlying portfolio companies.
Cash, Commitments & Liquidity
The original investment periods of all limited partnership funds to which the
Company has made a commitment have now ended. In future the Company is only
required to meet drawdowns for follow-on investments, management fees and
expenses during the remainder of the life of the funds.
At 31 December 2023 the Company held cash and near cash equivalents amounting
to £26.5m. There are outstanding commitments to limited partnership funds of
£7.6m at 31 December 2023, consisting of £6.9m to Dunedin Buyout Fund III
and £0.7m to Realza.
Dividends
An interim dividend of 10.0p was paid in January 2024. There is no final
dividend being proposed.
Outlook / Future of the Company
It may be instructive at this point to look back to 2011, when a new policy
was approved by shareholders to distribute the proceeds of all realisations.
Subsequently in 2016 this was taken a stage further with the Board
recommending and the shareholders approving a policy of winding down the
portfolio in an orderly manner in order to maximise returns for
shareholders. Since 2012 we have distributed £203.5m to our shareholders,
reducing the net asset value of the company to £34.4m at the end of 2023.
I am pleased that shareholders have benefited over this period from the
Company's performance. The total return in net asset value per share since
May 2016 has been 165.1% and, in terms of share price, 266.3%. This
compares with increases of 59.5% and 60.7% in the FTSE Small Cap and the FTSE
All-Share Indices.
We have always sought to achieve distributions to shareholders in the most
efficient and cost-effective manner, initially by way of capital distributions
to the extent allowed by our capital reserve. Subsequently, we have done so by
way of tender offers. The most recent tender offer executed in 2022
distributed £41m to shareholders.
We are now in a position where we have net assets of £34.4m, comprising
primarily an investment portfolio of £7.5m and cash (or equivalents)
amounting to £26.5m. We have outstanding commitments to funds in which we
are investors of £7.6m. We are reviewing the optimum way of returning further
value to our shareholders. One of the options open to us is to place the
Company into a members' voluntary liquidation, as we flagged in November last
year at the time of the sale of our investment in Premier Hytemp. We recognise
that shareholders value the flexibility of maintaining the Company's listed
status which would be lost once we enter the liquidation process. Our
conclusion is that we should keep this option closely under review while
seeking to sell as many of our remaining investments as possible. We have only
five underlying portfolio company investments remaining.
At the forefront of our mind, when deciding whether to carry out further
tenders, is that these tend to be relatively expensive to execute,
particularly for smaller amounts of capital. Also, in our experience, many
individual shareholders (who constitute either directly or indirectly a large
proportion of our share register) tend not to participate in tenders. It may
also be the case that those shareholders who hold their shares through ISAs or
other vehicles may encounter problems with continuing to hold their shares in
this way once the Company loses its listed status following the start of the
liquidation process.
The Board continues to work closely with its advisers on the options available
and the optimum timing. We will, of course, keep shareholders closely
informed about our future plans once these become more certain.
Duncan Budge
Chairman
22 March 2024
Manager's Review
The total net assets return for the year, after taking account of dividends
and capital returned to shareholders, was 3.6%.
Following dividend payments totalling £1.4m, the Company's net asset value
decreased from £34.5m to £34.4m over the year.
£m
Net asset value at 1 January 2023 34.5
Unrealised value increases 1.1
Unrealised value decreases (1.3)
Realised gain over opening valuation 0.7
Net income and capital movements 0.8
Net asset value prior to shareholder distributions 35.8
Dividends paid to shareholders (1.4)
Net asset value at 31 December 2023 34.4
Portfolio Composition
The investment portfolio can be analysed as shown in the table below.
Valuation at Additions Disposals Realised Unrealised Valuation at
1 January in year in year movement movement 31 December
2023 £'m £'m £'m £'m 2023(1)
£'m £'m
Dunedin managed 14.1 0.3 (10.5) 0.7 (0.3) 4.3
Third-party managed (Realza) 2.8 0.3 - - 0.1 3.2
Investment portfolio 16.9 0.6 (10.5) 0.7 (0.2) 7.5
AAA rated money market funds 11.6 15.9 (10.3) - - 17.2
28.5 16.5 (20.8) 0.7 (0.2) 24.7
1 in addition the Company held net current assets of £9.7m
Realisations
In the year to 31 December 2023 a total of £10.5m was realised from the
investment portfolio.
In September 2023 Weldex, the crawler crane hire business, was realised.
Proceeds generated from the sale amounted to £4.6m compared to a valuation of
£6.6m at 31 December 2022.
In November 2023 Premier Hytemp, the manufacturer and supplier of engineered
metal products, was realised in a secondary sale to Souter Investments.
Proceeds generated from the realisation amounted to £5.0m, an uplift of
£2.1m compared to the valuation at 31 December 2022.
In December 2023 the roll-over investment in Hawksford, the provider of
corporate, private client and funds services, was realised. The investment
was sold to Star Capital, the majority investor, generating proceeds of £0.7m
compared to a valuation of £nil at 31 December 2022.
In addition, proceeds of £4.6m were received during the year from the RED
earn-out. This compares to an effective valuation categorised as a debtor at
31 December 2022 of £4.0m.
Valuation movements
In the year to 31 December 2023 valuation uplifts amounted to £1.1m The
majority of this uplift was generated from EV, the provider of
high-performance video cameras and other visualisation technology used in the
oil and gas industry. The maintainable EBITDA has increased by 24% in the
year. This performance follows a sustained increase in the oil price.
In addition, there was a release of the provision for carried interest in
Dunedin Buyout Fund III LP amounting to £0.4m.
In the year to 31 December 2023 there was a valuation reduction of £1.3m.
The valuation reduction was at FRA, the forensic accounting, data analytics
and e-discovery business. In line with many professional service firms
trading has not progressed as expected. With staffing levels maintained to
accommodate future growth, maintainable EBITDA decreased in the year.
Cash and commitments
The Company had outstanding commitments to limited partnership funds of
£7.6m, consisting of £6.9m to Dunedin Buyout Fund III and £0.7m to Realza,
the one remaining European fund.
The original investment periods of all funds to which the Company has made a
commitment have now ended. In future the Company is only required to meet
drawdowns for follow-on investments, management fees and expenses during the
remainder of the life of the funds.
Dunedin LLP
22 March 2024
Total return of investments
at 31 December 2023
Company name Original Realised Directors Total
cost of to date*(1) Valuation(*2) return
investment £'000 £'000 £'000
£'000
Realza 11,545 14,551 3,208 17,759
FRA 6,035 5,504 2,854 8,358
EV 8,321 - 2,591 2,591
Thredd 8,220 18,203 - 18,203
34,121 38,258 8,653 46,911
*(1) - dividends and capital
*(2) - excludes carried interest provision of £1.5m
Income Statement
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment income 629 - 629 4,951 - 4,951
Gains on investments - 1,052 1,052 - 4,514 4,514
Total income 629 1,052 1,681 4,951 4,514 9,465
Expenses
Investment management fee (13) (40) (53) (35) (105) (140)
Other expenses (370) (10) (380) (380) (13) (393)
Profit before finance costs and tax 246 1,002 1,248 4,536 4,396 8,932
Finance costs - - - - - -
Profit before tax 246 1,002 1,248 4,536 4,396 8,932
Taxation (77) 77 - (37) 37 -
Profit for the year 169 1,079 1,248 4,499 4,433 8,932
Basic return per ordinary share
(basic & diluted) 3.08p 19.59p 22.67p 36.46p 35.92p 72.38p
The total column of this statement represents the Income Statement of the
Group, prepared in accordance with UK-adopted International Accounting
Standards. The supplementary revenue and capital columns are both prepared
under guidance published by the Association of Investment Companies. All items
in the above statement derive from continuing operations.
All income is attributable to the equity shareholders of Dunedin Enterprise
Investment Trust PLC.
Statement of Changes in Equity
for the year ended 31 December 2023
Year ended 31 December 2023
Capital Capital Capital Special Total
Share redemption Reserve reserve - Distributable Revenue retained earnings Total
capital reserve Realised * unrealised Reserve account £'000 equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 December 2022 1,376 3,149 33,947 (18,220) 9,594 4,672 29,993 34,518
Profit for the year - - (8,425) 9,514 (10) 169 1,248 1,248
Dividends paid - - - - - (1,376) (1,376) (1,376)
At 31 December 2023 1,376 3,149 25,522 (8,706) 9,584 3,465 29,865 34,390
Year ended 31 December 2022
Capital Capital Capital Special Total
Share redemption Reserve reserve - Distributable Revenue retained earnings Total
capital reserve Realised * unrealised Reserve account £'000 equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 December 2021 3,284 1,241 19,721 (8,378) 51,001 6,544 68,888 73,413
Profit for the year - - 14,276 (9,842) - 4,499 8,933 8,933
Purchase and cancellation of shares (1,908) 1,908 (50) - (41,407) - (41,457) (41,457)
Dividends paid - - - - - (6,371) (6,371) (6,371)
At 31 December 2022 1,376 3,149 33,947 (18,220) 9,594 4,672 29,993 34,518
Balance Sheet
As at 31 December 2023
31 December 31 December
2023 2022
£'000 £'000
Non-current assets
Investments held at fair value 24,685 28,487
Current assets
Other receivables 445 5,375
Cash and cash equivalents 9,331 778
9,776 6,153
Current liabilities
Other liabilities (71) (122)
Net assets 34,390 34,518
Capital and reserves
Share capital 1,376 1,376
Capital redemption reserve 3,149 3,149
Capital reserve - realised 25,522 33,947
Capital reserve - unrealised (8,706) (18,220)
Special distributable reserve 9,584 9,594
Revenue reserve 3,465 4,672
Total equity 34,390 34,518
Net asset value per ordinary share (basic and diluted) 624.8p 627.1p
Cash Flow Statement
for the year ended 31 December 2023
31 December 31 December
2023 2022
£'000 £'000
Cash flows from operating activities
Profit before tax 1,248 8,932
Adjustments for:
(Gains) on investments (1,052) (4,514)
Decrease / (increase) in debtors 909 (1,058)
(Decrease) / increase in creditors (50) 34
Net cash inflow from operating activities 1,055 3,394
Cash flows from investing activities
Purchase of investments (340) (430)
Drawdown from subsidiary (347) (75)
Purchase of 'AAA' rated money market funds (15,848) (28,422)
Sale of investments 15,109 30,007
Distribution from subsidiary - 2,900
Sale of 'AAA' rated money market funds 10,300 28,615
Net cash inflows from investing activities 8,874 32,595
Cash flows from financing activities
Tender offer - (41,456)
Dividends paid (1,376) (6,371)
Net cash outflows from financing activities (1,376) (47,827)
Net increase / (decrease) in cash and cash equivalents 8,553 (11,838)
Cash and cash equivalents at 1 January 778 12,616
Cash and cash equivalents at 31 December 9,331 778
Statement of Directors' Responsibilities in respect of the Annual Report and
the Financial Statements
The Directors are responsible for preparing the Annual Report and financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law they have elected to prepare the financial
statements in accordance with UK-adopted international accounting standards
and applicable law.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of its profit or loss for that period. In preparing
these financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgments and estimates that are reasonable and prudent;
- state whether they have been prepared in accordance with UK-adopted
international accounting standards;
- assess the Company's ability to continue as a going concern, disclosing,
as applicable, matters related to going concern; and
- use the going concern basis of accounting unless they either intend to
liquidate the Company or to cease operations, or have no realistic alternative
but to do so. As explained in note 2, the Directors do not believe that it
is appropriate to prepare these financial statements on a going concern basis.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that its financial statements comply with the Companies
Act 2006. They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the Company and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors' Remuneration
Report and Corporate Governance Statement that complies with that law and
those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the annual financial
report
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
- the Strategic Report and Directors' Report includes a fair review of the
development and performance of the business and the position of the Company,
together with a description of the principal risks and uncertainties that it
faces.
We consider the annual report and financial statements taken as a whole, is
fair, balanced and understandable and provides the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
Duncan Budge
Chairman
22 March 2024
Notes to the Accounts
1. Preliminary Results
The financial information contained in this report does not constitute the
Company's statutory accounts for the years ended 31 December 2023 or 2022. The
financial information for 2022 is derived from the statutory accounts for 2022
which have been delivered to the Registrar of Companies. The auditor has
reported on those accounts. Their report was (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act 2006. The audit of
the statutory accounts for the year ended 31 December 2023 is not yet
complete. These accounts will be finalised on the basis of the financial
information presented by the Directors in this preliminary announcement and
will be delivered to the Registrar of Companies following the Company's annual
general meeting.
2. Going Concern
The financial information for 2022 and 2023 has not been prepared on a going
concern basis, since the Company's current objective is to conduct an orderly
realisation of the investment portfolio and return cash to shareholders.
Following the Director's assessment, no adjustments were deemed necessary to
the investment valuations or other assets and liabilities included in the
financial information as a consequence of the change in the basis of
preparation.
3. Dividends
Year to 31 Year to 31
December December
2023 2022
£'000 £'000
Dividends paid in the year 1,376 6,371
A dividend of 10.0p per share for the year ended 31 December 2023 was paid to
shareholders on 19 January 2024.
4. Earnings per share
Year to Year to
31 December 31 December
2023 2022
Revenue return per ordinary share (p) 3.08 36.46
Capital return per ordinary share (p) 19.59 35.92
Earnings per ordinary share (p) 22.67 72.38
Weighted average number of shares 5,504,274 12,342,190
The earnings per share figures are based on the weighted average numbers of
shares set out above. Earnings per share is based on the revenue profit in
the period as shown in the consolidated income statement.
References to page numbers and notes in the disclosures below are to page
numbers and notes to the annual report and accounts of the Company for the
year ended 31 December 2023.
5. Principal Risks and Uncertainties (Strategic Report page
13)
The principal risks and uncertainties identified by the Board which might
affect the Company's business model and future performance, and the steps
taken with a view to their mitigation, are as follows:
Investment and liquidity risk: the Company's investments are in small and
medium-sized unquoted companies, which by their nature entail a higher level
of risk and lower liquidity than investments in large quoted
companies. Mitigation: the Manager aims to limit the risk attaching to the
portfolio as a whole by closely monitoring individual holdings, including the
appointment of investor directors to the board of portfolio companies. The
Board reviews the portfolio, including the schedule of projected exits, with
the Manager on a regular basis with a view to ensuring that the orderly
realisation process is progressing.
No change in overall risk in year
Portfolio concentration risk: following the adoption of the Company's revised
investment policy in May 2016 the portfolio will become more concentrated as
investments are realised and cash is returned to shareholders. This will
increase the proportionate impact of changes in the value of individual
investments on the value of the Company as a whole. The Directors' valuation
of the Company's investments represents their best assessment of the fair
value of the investments as at the valuation date and the amounts eventually
realised from such investments may be more or less than the Directors'
valuation. Mitigation: the Directors and Manager keep the changing
composition of the portfolio under review and focus closely on those holdings
which represent the largest proportion of total value.
Increase in overall risk in year
Financial risk: most of the Company's investments involve a medium to long
term commitment and many are relatively illiquid. Mitigation: the Directors
consider it appropriate to finance the Company's activities through borrowing
on a short-term basis. Accordingly, the Board seeks to ensure that the
availability of cash reserves and bank borrowings match the forecast cash
flows of the Company both on a base and stress case basis given the level of
undraw commitments to limited partnership funds.
No change in overall risk in year
Economic risk: events such as economic recession or general fluctuations in
stock markets and interest rates may affect the valuation of portfolio
companies and their ability to access adequate financial resources, as well as
affecting the Company's own share price and discount to net asset value. An
economic risk is the conflicts in Ukraine and the Middle East.
Mitigation: the Company invests in a diversified portfolio of investments
spanning various sectors and maintains access to sufficient cash reserves to
be able to provide additional funding to portfolio companies should this
become necessary. The Manager and board of each portfolio company is keeping
under review the impact of the conflicts in Ukraine and the Middle East and
developing contingency plans/mitigating actions where appropriate.
No change in overall risk in year
Credit risk: the Company holds a number of financial instruments and cash
deposits and is dependent on counterparties discharging their
commitment. Mitigation: the Directors review the creditworthiness of the
counterparties to these investments and cash deposits and seek to ensure there
is no undue concentration of credit risk with any one party.
No change in overall risk in year
Currency risk: the Company is exposed to currency risk as a result of
investing in companies who transact in foreign currencies and funds
denominated in euros. The sterling value of these investments can be
influenced by movements in foreign currency exchange
rates. Mitigation: Currency risk is monitored by the Manager on an ongoing
basis and on a quarterly basis by the Board.
No change in overall risk in year
Internal control risk: the Company's assets could be at risk in the absence
of an appropriate internal control regime. Mitigation: the Board regularly
reviews the system of internal controls, both financial and non-financial,
operated by the Company and the Manager. These include controls designed to
ensure that the Company's assets are safeguarded and that proper accounting
records are maintained.
No change in overall risk in year
6. Related Party Transactions (Notes to the Accounts page 50,
note 20)
The Company has investments in Dunedin Buyout Fund II LP, Dunedin Buyout Fund
III LP and Dunedin Fund of Funds LP. Each of these limited partnerships are
managed by Dunedin. The Company has paid a management fee
of £0.2m (2022: £0.4m) in respect of these limited partnerships. The
total investment management fee payable by the Company to the Manager is
therefore £0.3m (2022: £0.6m).
Since the Company began investing in Dunedin Buyout Funds ("the Funds")
executives of the Manager have been entitled to participate in a carried
interest scheme via the Funds. Performance conditions are applied whereby any
gains achieved through the carried interest scheme associated with the Funds
are conditional upon a certain minimum return having been generated for the
limited partner investors. Additionally, within Dunedin Buyout Fund II LP and
Dunedin Buyout Fund III LP the economic interest of the Manager is aligned
with that of the limited partner investors by co-investing in this fund.
As at 31 December 2023 there is a provision made within Investments for
carried interest of £1.1m (2022: £1.4m) relating to Dunedin Buyout Fund
III LP. Current executives of the Manager are entitled to 42% of the carried
interest in Dunedin Buyout Fund III LP.
ENDS
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