Investment Trust Insider - Opening the door to investment trusts

Register to get unlimited access to our investor forum and all editorial content, including our e-zine and weekly email. Registration is free and only takes a minute.

Near-record exit valuations boost Princess Private Equity

Near-record exit valuations boost Princess Private Equity

Princess Private Equity (PEYS) has benefited from exits at near-record valuation multiples over the past year but believes it can still acquire new investments at good value.

In its full-year results to 31 December 2017, the company reported a net asset value total return of 11.2%, while the share price rose 29.6%, pushing it to a premium over the year.

However, in the year-to-date the share price has fallen 6.6% in sterling terms and the £611 million company now trades on a discount of 7%.

Three companies made the most significant impact to the portfolio over the year. Shares in VAT Group, a producer of high-end vacuum valves, soared 70.1% on the back of expansion into semiconductors.

In January this year, Princess fully realised its investment in the company for a return of six times invested capital and a return of 74%.

Benelux-based discount retailer Action has continued its growth story and added to Princess’ returns, adding 244 new stores last year to take numbers to 1,100.

Partners Group, which manages the trust, said the company had increased earnings ‘due to strong revenue growth and the company’s focus on achieving cost efficiency’.

Princess is not the only private equity fund to be attracted by Action, with 3i Group (III) holding the £2 billion non-food retailer in its fund for the past six years.

Form Technologies, which manufactures engineers metal components, has increased earnings ‘by a reduction in overheads from the successful implementation of a lean manufacturing initiative launched during 2017’, said the managers.

The trust invested a total of €117.2 million (£102.7 million) over the year, including a €12.3 million stake in Civica, a specialist software provider for public sector organisations and businesses in highly-regulated sectors.

‘The company has a broadly diversified customer base,’ said the managers.

Civica also has a ‘leading and defensible market position’ along with recurring revenues from multi-year contracts.

The fund also ploughed €11 million into United States Infrastructure Corporation, a provider of underground utility locating services. Again, the managers cited long-term customer contracts that ‘provide stability and visibility into future cashflows’.

‘Partners Group will work closely with the management team on value creation initiatives to enhance operations through investments in technology and data management, expanding service offerings in adjacent markets, as well as growing the company both organically and through select acquisitions,’ said the managers.

The third largest investment was in software and services provider CPA Global. The fund invested a further €10.3 million in the company, in which it has been a debt investor since 2013.

The managers said the exit environment ‘remains favourable’

‘In 2017, we continued to see quality assets trade for near-record multiples,’ they said.

However, there were still ‘opportunities with value creation potential’ as ‘outperformance can only be achieved by having a value creation-focused investment process, from sourcing, through due diligence, and continuing during ownership’.

The fund will continue to look for investments with ‘the potential to build resilient market leaders at a reasonable price’.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.