CT Private Equity Trust PLC

LEI: 2138009FW98WZFCGRN66

Preliminary Announcement for the Year Ended 31 December 2023

CT Private Equity Trust PLC today announces its unaudited financial results for the year ended 31 December 2023.

Financial Highlights

·    Share price total return for the year of 17.6 per cent for the Ordinary Shares.*

·      NAV of 702.50 pence per Ordinary Share reflecting a total return for the year of 2.8 per cent.*

·      Total quarterly dividends for the year of 27.98 pence per Ordinary Share.  Quarterly dividend of 7.01 pence per Ordinary Share to be paid on 30 April 2024.

·      Dividend yield of 6.0 per cent based on the year-end share price.*

·      25-year anniversary - gain of 11.6 times the original investment over the 25-year period. Significantly outperforming the stock market for the same period (FTSE All-Share 2.4 times).

*see Alternative Performance Measures

Chairman's Statement

Fellow Shareholders,

This report is for the year ended 31 December 2023.  The NAV per share at the year-end was 702.50p (2022: 710.65p).  Taking account of the dividends received by Shareholders during this year your Company achieved a net asset value ("NAV") total return of 2.8 per cent.

The share price at the year-end was 468.00p per share (2022: 423.00p).  During the year the share price discount narrowed from 40.5 per cent as at 31 December 2022 to 33.4 per cent as at 31 December 2023.  As a consequence, the share price total return for the year was an impressive 17.6 per cent.  This compares to a total return from the FTSE All-Share Index for 2023 of 7.9 per cent.

During the year the Company made new investments, either through funds or as co-investments, totalling £110.9 million. Realisations and associated income totalled £61.8 million. Outstanding undrawn commitments at the year-end were £209.3 million of which £26.4 million was to funds where the investment period had expired.

Approximately 86 per cent of the valuation by value is based on 31 December 2023 valuations and 14 per cent on September 2023 valuations.

The Company's performance fee arrangements contain a hurdle rate, calculated over rolling three-year periods, of an IRR of 8.0 per cent per annum. The annual IRR of the NAV for the three-year period ended 31 December 2023 was 17.8 per cent and, consequently, a performance fee of £4.8 million is payable to the Manager, in respect of 2023. This is the eleventh consecutive year that a performance fee has been payable, demonstrating consistent performance and providing Shareholders with an attractive total return, which includes capital growth and an above average dividend yield.

Dividends

Since 2012 your Company has paid a substantial dividend from realised profits allowing Shareholders to participate, to some degree, directly in the proceeds of the steady stream of private equity realisations which the Company achieves. This policy is well received by Shareholders and provides for a steadily growing dividend with downside protection. Your Board is fully committed to maintaining this general approach for the foreseeable future.

The Company's quarterly dividends are payable in respect of the quarters ended 31 March, 30 June, 30 September and 31 December and are paid in the following July, October, January and April respectively. As Shareholders do not have an opportunity to approve a final dividend at each Annual General Meeting, Shareholders are asked to approve the Company's dividend policy at the forthcoming Annual General Meeting.

In accordance with the Company's stated dividend policy, the Board recommends a further quarterly dividend of 7.01 pence per Ordinary Share, payable on 30 April 2024 to Shareholders on the register on 12 April 2024 and an ex-dividend date of 11 April 2024. Total dividends paid for the year therefore amount to 27.98 pence per Ordinary Share equivalent to a dividend yield of 6.0 per cent at the year-end.

Financing

To reflect the growth in the size of the Company, following the year end, during February 2024, the Company entered into a revised loan agreement with RBSI and State Street. 

The revised loan agreement increased the €25 million term loan with RBSI to €60 million and retained the revolving credit facility with RBSI and State Street at £95 million.  The term of the agreement, which was due to expire in June 2024, was extended to February 2027.

The Board is pleased to have secured this larger facility which allows the Company to maintain a moderately but flexibly geared structure with the ability to draw borrowings in multiple currencies.

Share Buybacks

At the Annual General Meeting ("AGM") held on 23 May 2023, the Board sought and received from Shareholders the authority to buyback up to 14.99% of the Company's share capital. Buybacks can only be made at a cost which is below the prevailing net asset value and, in the opinion of Directors, would be in the interests of Shareholders as a whole.

During December 2023 the Company bought back 92,000 of its ordinary shares to be held in treasury. The discount at which these shares were bought back was 33%.  This was in addition to 1,096,491 shares bought back during 2022.

These shares are held in treasury to allow the Company to re-issue them quickly and cost effectively. At last year's AGM the Board sought and received the authority from Shareholders to re-issue treasury shares or issue new shares, subject to limitations on the number and price. Treasury shares can only be re-issued and new shares issued at a price which would not dilute the NAV of existing Shareholders.

The Board seeks renewal of these buyback and reissuance authorities at the AGM to be held on 29 May 2024.

Directorate Change

The Board recognises the value in both attracting fresh talent and the maintenance of continuity and accordingly a plan has been developed to ensure an orderly succession as Directors retire.

As part of this plan, David Shaw retired from the Board at the conclusion of the Company's Annual General Meeting held on 23 May 2023.

Following a thorough selection process, which included the services of a search company, Craig Armour was appointed to the Board with effect from 19 December 2023.

Until 2021 Craig was an investment partner at Edinburgh Partners where his roles included head of European portfolios and the manager of The European Investment Trust PLC. Previously, he was a senior investment director at Lloyds Development Capital, a partner at Penta Capital, and a corporate financier at Noble Grossart. Craig is a member of the Institute of Chartered Accountants of Scotland.

As a further part of this plan, Elizabeth Kennedy will retire from the Board at the conclusion of the Company's 2024 Annual General Meeting to be held on 29 May 2024.

Elizabeth has served as a Director since July 2007 and since 2009 she has Chaired the Company's Audit Committee with great diligence and commitment.  I wish to place on record the Board's appreciation for her support and guidance throughout her tenure and to thank Elizabeth for her significant contribution to the Company's success.

Following her retirement, Craig Armour will be appointed Chair of the Audit Committee.

Annual General Meeting

The Annual General Meeting ("AGM") will be held at 12 noon on 29 May 2024 at the offices of Columbia Threadneedle Investments, Cannon Place, Cannon Street, London EC4N 6AG. This will be followed by a presentation by Hamish Mair, the Company's Investment Manager on the Company and its investment portfolio.

For Shareholders who are unable to attend the meeting, any questions they may have regarding the resolutions proposed at the AGM or the performance of the Company can be directed to a dedicated email account, [email protected], by Wednesday 22 May 2024. The Board will endeavour to ensure that questions received by such date will be addressed at the meeting.  The meeting will be recorded and will be available to view on the Company's website, ctprivateequitytrust.com, shortly thereafter. All Shareholders that cannot attend in person are encouraged to complete and submit their Form of Proxy or Form of Direction in advance of the meeting to ensure that their votes will count.

25 Year Anniversary

Your Company was established on 22 March 1999 and so has just passed its 25^th Anniversary. The returns to shareholders over that period, described in detail in the Investment Manager's review, have been excellent, far outpacing the stock market in general. These prove the case for long term investment in private equity and I would like to thank our shareholders for their patient support and commitment. It is notable and commendable that the management of the Company has been constant over the first quarter century.

 Review and Outlook

As expected 2023 has turned out to be a year of adjustment. Despite this the Company's portfolio has proved resilient and we delivered a positive total return in NAV and good growth in dividends The economic challenges which are presented by higher inflation and interest rates were anticipated in last year's report and this has clearly affected the investment environment for private equity internationally.  As described in the Investment Manager's review your company's portfolio has coped well with these challenges. This is based on strong underlying fundamentals for our investee companies which have recorded impressive growth in revenues and profits over the year, tempered by a slight softening in valuation multiples.

The strong flow of exits which has characterised recent years has moderated significantly.  Given that our exits are on average achieved at a significant premium to recent carrying value, it is no surprise that our NAV has made relatively modest progress compared to years when realisations were much higher.

The slowdown in realisations flows from the macroeconomic situation. The increase in interest rates, which is accompanied by a noticeable tightening of the credit markets, results in one of the key elements of management buy-outs - i.e. debt - becoming more difficult to arrange with a consequent slow down in deal-making. Although the stock of private equity committed capital remains very healthy, it usually requires to be deployed alongside a similar or greater quantum of debt. This equity remains available and 'in the system' and will be deployed steadily over the coming years as debt availability improves.

Whilst investors' long term enthusiasm for private equity remains intact, fresh commitments to private equity funds have decreased in most markets this year. This is in part due to the 'denominator effect' where substantial deployments in recent years now represent larger than expected components of overall portfolios which have not grown as quickly as projected. This is currently being corrected via a reduction or hiatus of new commitments to private equity until equilibrium is regained.

This moderation in activity resulting from higher priced and scarcer debt, reduced fresh equity commitments and more caution in general, is not without benefits for your Company. The flow of investment opportunities that your managers appraise remains very strong reflecting the breadth of the mid-market universe we address and the depth of our networks in these markets internationally. As we look forward into 2024 the combination of our steadily maturing portfolio and our newly extended and enlarged borrowing capacity leaves your Company in good stead to deliver further gains to shareholders whilst laying the foundations for future growth.

Richard Gray

Chairman

Investment Manager's Review

Introduction

The principal feature of 2023 has been a slowdown in activity in private equity markets internationally. This comes after a number of very strong and active years and therefore a year of adjustment is not unexpected. The most obvious manifestation of this has been in a decrease in realisations by just over 50% compared with last year, which was a strong, but not record breaking year, for exits. The reasons for this are not difficult to understand, with inflation at the highest level for decades, interest rates having risen sharply and most of the major economies in which we invest experiencing sluggish growth or mild recession. Private Equity as we have often emphasised is a resilient asset class with a unique mode of investment with alignment, incentivisation and active involvement as its hallmarks.  This means that growth can be achieved even when the economic background is challenging, especially where we are investing in companies in niche sectors with secular growth in their end markets.  However, private equity-backed companies are not completely immune from the pressures brought about by a challenging macro-economic background. Your portfolio made progress this year despite these pressures. The portfolio is very well diversified and as we have often noted this is a deliberate policy designed to reduce risk and provide protection and growth under a wide range of circumstances.

New Investments

There have been many investment opportunities presented to us this year. We are highly selective backing both those managers which have already delivered for us and carefully choosing new managers with the necessary skills and track record to succeed. Our new investments this year cover both categories.

We have committed to twelve new private equity funds this year. These are diverse by manager and geography. They have different investment styles and sector preferences; but they are all mid-market funds. We maintain our belief that investing in the mid-market of the UK and Europe, and selectively in North America, allows us and our investment partners to buy companies in an innately inefficient market which offers superior returns compared with buying larger, better known companies which are usually offered in heavily intermediated processes.

In the UK, we committed £8 million to Kester Capital III a UK focussed lower mid-market buyout manager which we have backed before in two previous funds and in several co-investments.

We also committed £8 million to Axiom I, a debut mid-market enterprise software fund, where we know the principals from earlier in their careers.

We committed €5 million to Magnesium Capital I, a European energy transition fund, led by an emerging manager with which we have co-invested before.

We have backed funds with a European or global focus.

€5 million has been committed to Hg Mercury 4, a lower mid-market software and services fund investing in Europe and North America. This is the second Hg-managed fund to which we have committed.

£10 million was committed to Inflexion Partnership Capital III, the latest in the series of funds from this key relationship. The latest fund is focussed on European mid-market minority investments. The Company has backed the first two iterations of this fund series which are performing strongly.

We have reinforced our exposure to European country or regional funds.

€8 million has been committed to Wise Equity VI, the latest fund by one of the leading Italian mid-market buyout managers. We have invested in previous Wise Equity-managed funds as secondary investors from other managed funds.

€10 million has been committed to Montefiore Expansion Fund following our previous commitments to Montefiore Fund IV and Fund V. The manager, Montefiore, has elected to split its fund series in two and the Company has elected to invest in the lower mid-market fund, which will make investments in companies with enterprise value of between €25 million and €100 million in the service sector mainly in France.

€4.0 million was committed to Aurica IV, a Spanish lower mid-market growth equity fund. We have been tracking Aurica for several years following its spin-out to become an independent firm.

€2.7 million has been committed to KKA Fund II, the lower mid-market German emerging manager.

In North America we have made three new commitments.

$8 million has been committed to MidOcean VI, a US mid-market buyout fund whom we have backed through one of our other funds before.

CAD 10 million has been committed to Torquest VI, one of the leading Canadian mid-market buyout funds.

$10 million was committed in total to Level 5 Fund II ($5 million) and Purpose Brands ($5 million), a US consumer franchise fund and co-investment fund, based in Atlanta, Georgia. The funds are managed by US-based Level 5 Capital Partners, an emerging manager focussed on consumer franchise businesses.

The funds element of the portfolio has been active throughout the year making new investments.

In the UK, SEP VI called £1.1 million for its first two investments; Cresset, the software business focussed on the design of small molecules for drug discovery, and Pelion, an internet of things connectivity business.

Kester Capital called £0.7 million for MAP Patient, the leader in market access consulting services to the pharmaceutical and biotech sectors aiming to accelerate patient access to ground-breaking medicines, devices and diagnostics.

In different sectors, Piper Equity called £0.6 million from its Fund VII for jewellery company Monica Vinader, as it continues with this investment having previously invested from Fund VI. Piper VII also called £0.5 million for tourist excursion company Rabbie's Trail Burners and £0.6 million for investment in Ancient & Brave, a natural supplements and wellness company.

Inflexion VI called £0.7 million for a follow-on investment in K2 the IT recruitment specialist, which acquired a US company which focuses on enterprise integrations. It also called £0.7 million for Steripack, the contract manufacturing services provider for medical devices.

Magnesium Capital I (the UK-based manager, pan-European fund) called £1.7 million immediately following closing to invest in Embriq, the software and IT managed services provider for utilities and data intensive industries. A further £0.6 million was called for SCADA, the software and control systems provider for renewables energy plants, and £0.4 million for Inopower, the provider of e-boilers used in district and industrial heating.

Apposite Healthcare III called £1.2 million for various follow-ons, the largest being £0.8 million in Riverdale, the UK dentistry provider.

Hg Saturn 3 drew £1.5 million for Access, the provider of enterprise resource planning software and £1.1 million across the year for IFS/Workwave, the provider of field service management software.

In Germany, DBAG VIII called £0.5 million for Metalworks which designs and manufactures high quality fashion accessories such as belt buckles, fasteners and studs for luxury fashion brands.

France-based Montefiore V called £1.5 million throughout the year for eleven companies in its portfolio. The largest amounts were £0.4 million for Generix, the industrial software provider, and £0.3 million for additional investment in CCGM, a group of oncology clinics mainly focussed on radiotherapy treatment.

Volpi III called £2.0 million mainly for investment in Cyclomedia, the Netherlands-based geospatial data company, in which we are also a co-investor.

There was notable activity in the Nordic region with Summa III calling £0.5 million for Velsera, which is the combination of three health-tech companies focussed on healthcare data analytics. Procuritas VII called £1.8 million for Werksta, We Select and Nordic Biomarker. £1.0 million was for Werksta, the automotive repair shop chain which the Company previously had exposure to in Procuritas Fund V. We Select is a digital recruitment firm which integrates social media to its platform and Nordic Biomarker produces advanced reagents for IVD coagulation analysers which tests blood for abnormalities. Nordic-based Verdane XI called £0.9 million for Apoteka, Fashion Cloud, Urban Sports Club and Ebertlang. The largest amounts were for Apoteka, a fulfilment provider to the largest online pharmacy in Denmark and Fashion Cloud, a B2B software company for the apparel and footwear industry.

Spanish fund Corpfin V called £1.3 million to fund three investments, including £0.3 million for residential property management business Mediterráneo, £0.3 million for roadside assistance company Gruas Fuentes and £0.6 million for the English language school for children Kids&Us. All investments had been funded by the fund's bridging facility at closing earlier in 2023. The Company had previously been an investor in Kids&Us through Corpfin Fund IV.

In the US, Level 5 Capital Partners II & Purpose Brands drew £4.6 million across both funds for four investments, KidStrong, Restore, GoDog and 2U Laundry. The fund had invested in these following the first close and we invested via the second close, giving us full visibility into the performance of the assets thus far. Level 5 concentrates on consumer-focussed franchise growth investments.

US financial services and technology focused fund Corsair Capital VI called £2.2 million for HungerRush. HungerRush is the all in one point of sale and restaurant management platform.

Lastly, US-based Mid Ocean VI called £0.5 million for Smith Systems, a leading B2B workplace safety training platform which amongst other activities provides driver safety training for commercial fleets.

We have added no fewer than 10 co-investments to the portfolio during 2023.

We have invested $2.4 million in the MVM-led life sciences company GT Medical. This company has developed an innovative brain cancer treatment consisting of bioresorbable tiles with embedded radioactive caesium seeds. This is thought to extend life and promote recovery.

We have also invested £4.1 million (80% of our expected investment in the business) in LeadVenture, a leading SaaS provider of digital retailing, digital storefronts, e-commerce, proprietary data and vertical ERP dealer management software. The company's customers are in the non-auto sector such as RVs, agriculture machinery and transportation. The lead for the investment is San Francisco-based True Wind Capital.

£2.7 million has been invested (£5.0 million commitment) in Cardo, a Wales based provider of repair, maintenance and upgrading services mainly to the social housing sector. Much of the impetus comes from the transition of this housing stock to become more energy efficient and sustainable. The deal is led by Buckthorn, with which we have co-invested with several times and who specialise in energy transition investments.

£3.6 million has been invested alongside August Equity in StarTraq, a provider of software to police forces and local authorities allowing them to efficiently issue and process speeding tickets. The technology has an increasing range of applications with, for example, the capability of capturing accurately on camera drivers who are using handheld mobile phones whilst driving. The company also has a large untapped market opportunity internationally where it already has a small foothold.

In addition, we have also invested £1.2 million alongside August Equity in OneTouch, a market leading software provider serving the social care market. This software allows carers to meet client requirements more efficiently and the care companies themselves to manage their staff productively in what is a closely regulated sector.

€8.4 million has been invested in the Volpi led co-investment in Cyclomedia. Volpi has been invested in this Netherlands headquartered provider of intelligent street-level geospatial data and information solutions company since 2018 and we are increasing our exposure to this high performing asset. Cyclomedia's client base includes local municipalities who require comprehensive, accessible and digitally formatted information on properties within their areas, mainly for the purposes of local taxation and rates. From its Northern European base, the company has begun a process of expansion internationally and Volpi believe that there is considerable further growth to be achieved.

$8.0 million has been invested in Asbury Carbons, a US-based producer of milled graphite products with a diverse range of industrial applications. The investment is led by New York-based Mill Rock Capital and Asbury is an intriguing opportunity to revitalise a long-established company with operational improvements and product extensions.

€5.2 million has been invested in Braincube, an Industrial Internet-of-Things ("IIoT") software company based in France which provides software solutions primarily for continuous manufacturing processes. The lead on the investment is our longstanding partner SEP.

€6.0 million has been invested in Utimaco, a Germany-based company providing mission-critical professional cybersecurity and data intelligence solutions for critical infrastructures.

€3.1 million was invested (€4.0 million committed) to co-investment Educa Edtech, a Spanish e-learning business which provides self-paced courses including master's degrees. The business is international with a major presence in Spanish speaking countries. The company has an unrivalled portfolio of course content in an accessible online format and is expected to benefit from the growth in the e-learning market which is around 14% per annum. The deal is led by Aurica and is to some extent a 'stapled' deal which we have access to by virtue of our commitment to the fund, noted above.

Realisations

Notwithstanding the slowdown, there have been many realisations across the portfolio.

We have completed the sell down of energy services company Ashtead Technology, which is now listed, with £12.9 million realised during the year. This brings total proceeds to £19.9 million representing 2.5x cost and an IRR of 19%. This investment was led by Buckthorn with which we have three other co-investments.

Kester Capital II returned £2.7 million (4.8x, 60% IRR) from the sale of Vixio, the leader in the provision of regulator and compliance intelligence to the payments market. Kester Capital also returned £1.0 million from the redemption of loan notes in insurance company ATEC, which is performing strongly.

Our longstanding partner Inflexion has had a series of exits across its range of funds. £1.6 million was returned from travel company Scott Dunn where the holding period coincided with a crisis for the industry due to the pandemic (1.4x, 4% IRR). £1.1 million came in from the sale of software services company Mobica, where Inflexion's Partnership Capital Fund I made an excellent return (5.6x, 29% IRR). £0.7 million was returned from international foreign exchange specialist Global Reach Group (3.1x, 19% IRR). Inflexion also exited the social media and influencer marketing agency Goat returning £0.4 million (3.9x, 78% IRR). Other notable exits include the sale by Inflexion 2012 Co-investment Fund of the specialist design engineering services company PDMS which sells to the oil and gas sector, returning £0.7 million. Inflexion also sold Chambers, the legal directory and rankings business, and returned a combined £1.1m (4.7x cost and 31% IRR) from their buyout funds IV and V.

As noted above Piper exited jewellery company Monica Vinader returning £0.4 million in a sale to Bridgepoint (2.1x, 11% IRR). Piper have continued in the investment alongside Bridgepoint in Piper VII.

Volpi have sold Medinet, the insourced solutions provider to the healthcare sector, returning £1.7 million (3.2x cost, 18% IRR).

We have received the final tranche from the sale of the RJD led investment in apprenticeship and training company Babington, which was £0.7 million, bringing the final return to 0.9x cost.

The Agilitas 2015 Fund has had a good exit with the sale of Hydro International, the water services company to CRH plc. This realised £2.1 million representing 3.1x cost.

The flow of realisations has continued in continental Europe.

In Spain, Corpfin IV returned £2.5 million from the sale of care company Grupo 5 (6.1x, 51% IRR) and £3.7 million for Kids&Us (5.4x, 50%), the English language school for children. Corpfin re-invested in Kids&Us from a later fund, and we therefore have maintained an exposure to this company.

There have been a number of exits from our French-managed funds. Chequers XVI exited Paris-based landfill site operator Environnement Conseil Travaux (ECT) returning £0.8 million and Italy-based Bozzetto, the provider of speciality chemicals for the textiles industry, returning £0.5 million (4.3x cost, 28% IRR). Chequers XVII sold premium zips business Riri returning £1.2 million (2.4x, 34% IRR) and Italian HVAC equipment provider MTA, returning £0.7 million (3.2x cost, 40% IRR). Also in France, Ciclad 4 exited wine drums company H&A Location returning £0.7 million with an excellent return of c.8x cost. Ciclad 5 has sold specialist vehicle axle manufacturer Paillard (1.8x cost, 10% IRR) and has refinanced Edeis (engineering project management) returning an aggregate £0.7 million. ArchiMed II returned £1.0 million principally from the sale of gene therapy company Polyplus. This represented 4.6x cost and an IRR of 75%.

In Germany, DBAG's various funds have achieved several exits. £0.4 million came in from speciality chemicals producer Heytex (1.2x cost). £1.0 million was returned from Italian company Pmflex, a leading European manufacturer of electrical installation conduits (2.3x, 65% IRR). DBAG also sold prison phone communications company Telio returning £0.5 million. DBAG VII also sold Cloudflight, the IT services provider focussed on digitalisation and cloud-based transformation, returning £1.1 million (4.4x cost, 52% IRR).

In Central Europe, ARX exited electro-mechanical engineering company TES in the sale to a consortium including Avallon noted above. This returned £1.2 million (2.7x, 40% IRR).

In Finland, workplace booth company Framery is staging a strong post-COVID recovery and has been refinanced returning £0.3 million. Summa II, the Nordic sustainable fund returned £0.5 million from the sale of construction sector software company Infobric which returned 3.8x cost and an IRR of 36%. Summa I exited Kiona, the building control system software for energy optimisation, returning £0.4 million (1.8x, 12% IRR) as well as selling Norsk Gjenvinning via a continuation vehicle returning £0.3 million (2.1x cost, 14% IRR).

£1.2 million was returned from the Italian Portfolio, which was acquired as a secondary some years ago, with Progressio II exiting Garda Plast, the manufacturer of plastic PET preforms for the soft drinks and water industry, at 1.5x cost.

Co-investment in insurance company ATEC, led by Kester Capital, is performing strongly and returned £0.7 million from the redemption of loan notes.

Capvis IV has exited Visable, the e-commerce B2B digital platform business to Alibaba International Digital Commerce returning £0.7 million (2.0x cost, 11% IRR).

The total of realisations in 2023 was £61.8 million which is approximately half of the amount realised in 2022 and 62% down on the peak year of 2021.

Looking at last year's exits in more detail. There were 51 exits in the year. The average multiple of cost achieved on exit was 3.0x with an average IRR achieved of 22%. The average holding period was 6.8 years. The average uplift on exit was 31% with the companies valued on average at 2.4x cost immediately prior to exit. The average uplift on exit expressed as a percentage is very much in line with prior years, but the average exit multiple is lower with the average exit multiple over the last four years, when there were 196 exits, being 3.6x cost.

There are some subtle differences in the type of exits with 60% of exits in 2023 being to other private equity sponsors and 40% to trade buyers. This is a slightly higher amount of private equity sponsor exits than the average of the last four years when it was typically below 60%. There were no exits by IPO in 2023. Of the exits to other PE houses, nearly a quarter of the value returned (22%) was from so-called continuation vehicles where the lead manager continues to lead the deal within a fresh fund or vehicle with some continuing and some new investors. Continuation vehicles accounted for 13% of all value returned in 2023 having accounted for zero in 2022.

Whilst these statistics indicate that exits are numerous and at good values, the reduced overall volume and the appearance of continuation vehicles implies that they are harder to achieve. This is entirely consistent with our experience in the market.

Valuation Changes

There have been many valuation movements during the year in both directions with a modest net positive trend. This is very much in line with the feeling expressed by our investment partners about the business environment - i.e. one of modest but definite improvement.

The large movements are provided by our co-investment portfolio which now accounts for 44.6% of the portfolio.

The largest positive movement this year was the £9.2 million uplift in the Kester led pet shop chain Jollyes which, after the year end, agreed a sale to TDR Capital. The proceeds of the exit are expected to be received imminently and amount to c.£18.9 million. This is an excellent outcome and depending on the timing of the proceeds, represents c.3.9x cost and a net IRR of c.29%. EBITDA has doubled since the company was acquired in 2018 with the number of its large format pet retail stores growing from 60 at the time of acquisition to over 100.

The niche insurance company ATEC, managed by Kester, was the second largest write-up in the year, a £2.8 million uplift due to strong new business volumes coupled with robust renewal rates across all product lines.

There was another large uplift in the consumer sector with clothing company Weird Fish, uplifted by £2.1 million. The company had a strong finish to the year. They recently appointed a new CEO with substantial experience in this industry and an ambitious growth plan is being implemented.

Other notable uplifts this year are largely from the co-investment portfolio and cover both long-established holdings and more recently made investments. Cyberhawk, the unmanned aerial vehicle (drone) inspection and software company, is up by £2.8 million. Cardo, the social housing refurbishment company, is up by £2.2 million. Cyclomedia, the geospatial data company, is up by £1.7 million. Contained Air Solutions, the microbiological safety cabinets manufacturer, has agreed to two complementary acquisitions and experienced stronger trading in recent months resulting in an uplift of £1.4 million.

Amongst the funds portfolio there have been notable uplifts from Magnesium Capital I (+£2.7 million due to very strong trading in the initial three companies), August Equity V (+£2.5 million), August Equity IV (+£2.4 million) and Graycliff IV (+£2.4 million due to the excellent trading of EMC, the manufacturer of electrical equipment which was sold shortly after year end).

The downgrades were also dominated by the co-investment portfolio. The largest write-down was from Ambio, the producer of active pharmaceutical ingredient for peptide-based pharmaceuticals, which has been written down by £4.7 million over the year due to a sharp reduction reflecting recent poor performance partially resulting from a serious fire. Bulgaria-based electric bike company, Leader96, is down by £4.2 million, reflecting weak trading, which is affecting the whole electric bike sector. Accuvein, the vein visualisation medical devices company, has been reduced by £3.4 million reflecting a lower valuation multiple applied by lead manager MVM. Avalon, the funeral plans co-investment led by Lonsdale, has been written down by £2.1 million as the market remains depressed with a recovery to previous levels of demand now considered unlikely. Since regulation was taken over by the FCA in 2022, the funeral plans sector has operated amidst significant uncertainty. Amongst the funds portfolio, Corsair VI is down £0.9 million due to weaker trading in HungerRush, the point-of-sale software provider to the restaurant industry. In Europe, DBAG VI is down by £0.5 million, impacted by a fire at Siblitz and a serious patent related fine at Polytech.

As the above commentary proves there are considerable risks involved in private equity investment but there are also clear benefits of maintaining a well-diversified portfolio which tends to cushion the inevitable shocks.

Financing

The principal development relating to the Company's financing is that the borrowing facility, which was due to expire on 24 June 2024, has been renewed and expanded giving valuable additional headroom and increasing the borrowing capacity to reflect the increase in the asset base since the facility was agreed nearly five years ago. The term loan element of the facility has been increased from €25 million to €60 million and the revolving credit facility remains at £95 million. This gives an increase of around a quarter in the borrowing capacity. The term loan is provided by RBSI and the revolving credit facility is split £55 million from RBSI and £40 million from State Street. Although the margins are slightly higher, we have negotiated an improvement in the covenants. The new arrangements will last until February 2027 - i.e. three years. As part of the agreement there is the option for us to ask for an extra year's extension to the facility. We also have the right to ask for an extension in the RCF by up to £30 million. Neither of these options are guaranteed but as they are built into the documentation, they should be straightforward to action should the banks agree in the future.

At the end of 2023 the net debt of the Company was £87.2 million which was comfortably within the limits of the borrowing capacity and represented gearing of 14.6%. At the time of writing on 15 March 2024, net debt is £99.2 million, or c.16.6% gearing. This is at the upper end of the normal range - we have rarely exceeded 20%. Following the receipt of the Jollyes proceeds, it should reduce to around £80 million or c.13.4% gearing.

The increase in debt over recent months is a consequence of a significant slowdown in realisations whilst continuing with an active programme of new investments. The renewal and expansion of the borrowing arrangements proceeded smoothly and is now in place allowing the Company and its shareholders to be fully invested and to continue to benefit from gearing, one of the key advantages of the investment trust structure.

25 Year Anniversary

Having been established on 22 March 1999, the Company has recently celebrated its 25th anniversary. Over the life of the Company, it has delivered to Shareholders an excellent return.

An investor investing £100 at the inception of the Company and re-investing dividends, would now have £978. This is a share price total return of 878% or 9.6% per annum. The NAV total return over the same period is 1,158% with an annualised return of 10.7%. The gains accumulated since the start of the Company equate to 11.6x the original investment.

By comparison the stock market, as represented by the FTSE All Share index, has provided a total return of 244% with an annualised return of 5.1%.  A total gain of approximately 2.4x an investment made in March 1999.

These statistics demonstrate the long-term benefits of investing in a well-diversified private equity portfolio.

Conclusion

2023 has been a year of adjustment where the natural progress of the portfolio has been tempered by pressures across the portfolio arising from higher interest rates and the return of high inflation. These factors have created varying degrees of pressure for portfolio companies whose managements guided and supported by their private equity partners have generally coped well. Most of the investee companies have long term growth characteristics which underpin their individual investment theses which remain largely intact.

Following three very strong years of gains considerably aided by a large flow of exits, 2023 has been characterised, unsurprisingly, by lower volumes of exits. Exits require the buyers to have adequate risk equity, debt and confidence and an incentive to deal promptly. Whilst there is no shortage of equity available, debt has been harder to come by and is much higher in price. Business and investor confidence has been more subdued, especially from around mid-year - as we have seen at many times during the Company's 25-year history, caution tends to slowdown deal doing. The combination of these factors has manifested themselves as a reduction in deal activity with exits proving harder to achieve, pricing being moderated and delays pushing out exits or indeed cancelling them.

Outlook

In recent months there appears to have been some signs of improvement with many of our investment partners and the underlying companies expressing confidence about the year ahead. Our own pipeline of funds and co-investments dealflow remains very robust with no shortage of attractive opportunities to invest shareholders' capital. These factors all bode well as the Company celebrates 25 years of delivering strongly for shareholders and embarks on its next quarter century.

Hamish Mair

Investment Manager

CT Investment Business Limited

Portfolio Summary

Portfolio Holdings

Private Equity Funds - USA

CT Private Equity Trust PLC

Statement of Comprehensive Income for the

year ended 31 December 2023

CT Private Equity Trust PLC

Statement of Comprehensive Income for the

year ended 31 December 2022

CT Private Equity Trust PLC

Balance Sheet

CT Private Equity Trust PLC

Statement of Changes in Equity

CT Private Equity Trust PLC

Statement of Cash Flows

Notes (unaudited)

1.             The unaudited financial results, which were approved by the Board on 2 April 2024, have been prepared in accordance with UK adopted international accounting standards. Where presentation guidance set out in the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" ('SORP') issued by the Association of Investment Companies is consistent with the requirements of international accounting standards, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.  The Directors have assessed Going Concern and consider it the appropriate basis for the figures presented in the announcement.

The accounting policies adopted are consistent with those of the previous financial year.

Standards issued but not yet effective

There are no standards or amendments to standards not yet effective that are relevant to the Company and should be disclosed.

2.             Returns per Ordinary Share are based on the following weighted average number of shares in issue during the year: 72,838,637 (2022: 73,342,303)

The net asset value per Ordinary Share is based on the following number of shares in issue at the year-end: 72,752,938 (2022: 72,844,938)

During the year ended 31 December 2023, the Company issued nil Ordinary Shares.  During the previous year ended 31 December 2022, the Company issued nil Ordinary Shares. During the year ended 31 December 2023, the Company bought back 92,000 Ordinary Shares to be held in treasury. During the previous year ended 31 December 2022, the Company bought back 1,096,491 Ordinary Shares to be held in treasury.

3.             The Board has proposed an interim dividend of 7.01 pence per Ordinary Share, payable on 30 April 2024 to those Shareholders on the register on 12 April 2024 with an ex-dividend date of 11 April 2024.

4.             This results announcement is based on the Company's unaudited financial statements for the year ended 31 December 2023 which have been prepared in accordance with UK adopted international accounting standards.     

5.             This announcement is not the Company's statutory accounts.  The full audited accounts for the year ended 31 December 2022, which were unqualified and had no emphasis of matters, have been lodged with the Registrar of Companies.  The statutory accounts for the year to 31 December 2023 (on which the audit report has not yet been signed) will be delivered to the Registrar of Companies following the Company's Annual General Meeting which will be held at Cannon Place, 78 Cannon Street Street, London, EC4N 6AG on 29 May 2024 at 12 noon.

6.             The Annual Report and Accounts for the year will be sent to Shareholders and will be available for inspection at the Company's registered office, Quartermile 4, 7a Nightingale Way, Edinburgh, EH3 9EG and the Company's website www.ctprivateequitytrust.com. The Company intends to issue a subsequent annual financial report announcement.

  For more information, please contact:

Appendix: Alternative Performance Measures

The Company uses the following Alternative Performance Measures ('APMs'):

Discount (or premium) - If the share price of an Investment Trust is less than its Net Asset Value per share, the shares are trading at a discount.  If the share price is greater than the Net Asset Value per share, the shares are trading at a premium.

Dividend Yield - The dividends declared for the year divided by the share price at the year end. 

Gearing - This is the ratio of the borrowings less cash of the Company to its total assets less current liabilities (excluding borrowings and cash).  Borrowings may include: preference shares; debentures; overdrafts and short and long-term loans from banks; and derivative contracts.  If the Company has cash assets, these may be assumed either to net off against borrowings, giving a "net" or "effective" gearing percentage, or to be used to buy investments, giving a "gross" or "fully invested" gearing figure.  Where cash assets exceed borrowings, the Company is described as having "net cash". 

Ongoing Charges - All operating costs expected to be incurred in future and that are payable by the Company expressed as a proportion of the average Net Assets of the Company over the reporting year.  The costs of buying and selling investments are excluded, as are interest costs, taxation, performance fees, non-recurring costs and the costs of buying back or issuing Ordinary Shares.  Ongoing charges of the Company's underlying investments are also excluded.

Total Return - The return to Shareholders calculated on a per share basis by adding dividends paid in the period to the increase or decrease in the Share Price or NAV. The dividends are assumed to have been reinvested in the form of Ordinary Shares or Net Assets.