CT Private Equity Trust PLC

Quarterly results for the three months ended 30 September 2023 (unaudited)

·    Net asset value of 696.30p per Ordinary Share reflecting a total return for the three months of 3.3 per cent for the Ordinary Shares

·    Share price total return for the three-month period of 0.4%.

·    Total quarterly dividends of 20.97p per Ordinary Share year to date representing an increase of 10.5% from the same period last year.

o  Quarterly dividend of 6.95p paid on 31 July 2023

o  Quarterly dividend of 7.01p paid on 31 October 2023

o  Quarterly dividend of 7.01p to be paid on 31 January 2024

·    Dividend yield of 5.9 per cent based on the period end share price (1).

·    As at 30 September 2023 net debt was £74.5 million equivalent to a gearing level of 12.8%.

(1)      Calculated as dividends of 6.79p paid on 28 April 2023, 6.95p paid on 31 July 2023, 7.01p paid on 31 October 2023 and 7.01p payable on 31 January 2024, divided by the Company's share price of 468.00p as at 30 September 2023.

Manager's Review

Introduction

As at 30 September 2023 the net assets of the Company were £507.2 million giving a Net Asset Value ("NAV") per share of 696.30p which taking account of the dividend of 6.95p paid on 31 July 2023 gives a total return for the third quarter of +3.3% and for the first nine months of 0.9%. This valuation is, as usual, largely composed of 30 June valuations with around 11% of valuations struck at 30 September 2023. The pound has been weaker against most major currencies over the quarter and this has increased NAV by approximately 1.3% during the three month period. In the year to date there has been minimal impact of currency.

The share price total return over the quarter was 0.4%. The discount to NAV at the latest practicable date, 23 November 2023, is 33.2% which compares with 32.8% as at 30 September 2023.

At 30 September 2023 the Company had net debt of £74.5 million. The outstanding undrawn commitments were £215 million of which £27 million was to funds where the investment period had expired.

A dividend of 7.01p was paid on 31 October 2023. In accordance with the Company's dividend policy the next dividend will be 7.01p which will be paid on 31 January 2024 to shareholders on the register on 5 January 2024 with an ex-dividend date of 4 January 2024.

New Investments

During the quarter we made three new commitments to funds and two co-investments.

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

£10 million was committed to Inflexion Partnership Capital III, the latest in the series of funds from this key relationship. The latest fund is focused on European mid-market minority buyout.

$5 million was committed to Purpose Brands, a US consumer franchise co-investment fund. The fund is managed by American based Level 5 Capital Partners, an emerging manager focused on consumer franchise businesses.

Our dealflow of co-investments remains strong with two new co-investments made during the quarter.

The first co-investment is an Industrial Internet of Things (IIoT) software company which provides software solutions primarily for manufacturing processes. ?5.2 million has been invested.

Utimaco is a Germany based company providing mission critical professional cybersecurity and data intelligence solutions for critical infrastructures. ?6.0 million has been invested.

The funds in the portfolio continue to build out their portfolios with new investments. The larger individual investments are as follows; Magnesium Capital 1, the energy transition fund drew £0.9 million for SCADA (software and control systems for the renewables sector) and Inpower (e-boilers for district and industrial heating), Hg Saturn 3 drew £1.5 million for Access (enterprise software) and IFS/Workwave (field service management software). In the US Corsair Capital VI called £0.8 million for Hungerush (all in one point of sale and restaurant management platform).

There were add on acquisitions to three co-investments; £0.9 million for Startraq where Farthest Gate, a London based provider of parking, permitting and licensing software for local authorities has been acquired, £0.8 million for 1Med which has acquired Evamed, a French medical device focused clinical research organisation (CRO) based in Caen and £0.5 million for funeral homes company San Siro for prospective acquisitions.

The total of new co-investments and drawdowns for funds and existing co-investments in the quarter was £24.1 million. Of this approximately half is for fund drawdowns and half for co-investments. Total new investment for 2023 to date is £98.7 million which is c.40% up on the same period in 2022.

Realisations

Although there has been a slowdown in exits by the third quarter, there were several notable realisations in the portfolio.

We have completed the sell down of energy services company Ashtead Technology, which is now listed, with a final £5.5 million realised. This brings total proceeds to £20 million representing 2.5x cost and an IRR of 19%. This investment was led by Buckthorn with whom we have three other co-investments.

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.

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%.

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. 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%.

In total realisations for the quarter were £14.1 million which is slightly down on Q2. This brings realisations in 2023 to date to £53.9 million which is just over 30% down on the same period in 2022.

Valuation Changes

There were many valuation movements this quarter. Most of these were upwards and they were quite well balanced between the funds and co-investment elements of the portfolio.

The largest individual uplift was for Italian investment company Aliante Equity 3 (+£3.1 million) which has benefitted from a revised third-party valuation, good progress in the portfolio and debt reduction. August Equity IV and August Equity V were up by £2.1 million and £1.0 million respectively. Our holding in US fund Graycliff IV was up by £1.8 million reflecting good fundamental progress across its portfolio. Amongst the co-investment portfolio there were uplifts for TWMA (+£1.8 million), Utimaco (+£1.6 million), Jollyes (+£1.5 million) and Coretrax (+£1.3 million). With the exception of Utimaco, these are mature holdings well on the way towards exit.

Financing

The Company has maintained a strong investment programme throughout the year which has turned out to exceed the total proceeds from realisations for the year to date. This results in a net increase in debt with net debt standing at £74.5 million at 30 September 2023. This equates to gearing of 12.8%, which is well within our usual comfort range. The Company retains considerable headroom in its borrowing facility. Our £116.7 million facility is due to be renewed or extended by June 2024 and we have already commenced discussions with the lenders on this topic.

Capital Allocation

The Company aims to maintain a fully invested portfolio and to provide a strong dividend. The dividend which is 4% of NAV and is paid at the same or higher levels is substantial and has grown in tandem with NAV since the Company introduced this policy in 2012.  We believe that a growing and largely predictable dividend is highly appreciated by our shareholders and we intend to direct and manage the Company with the long term growth of the dividend as a high priority.

The Company, in common with the rest of the Private Equity investment trust sector, trades on a substantial discount to NAV. Whilst the realisations from our portfolio have consistently been at a substantial premium to previous carrying value, usually well above 30%, this proof of the conservative nature of the valuations does not seem to have had any bearing on the share ratings which one could argue represent a 'double discount' to ultimate value.

The Company routinely takes buy-back powers and has used these sparingly when necessary over the years. A purchase of a loose line of stock by the Company is usually in the interests of all shareholders acting to stabilise the share price. At a substantial discount to NAV this also immediately enhances NAV per share. This is a one-off benefit, but it does act to reduce the asset base of the Company potentially permanently and the capital used for buy-backs cannot subsequently be used for longer term multi-year investments nor to fund the dividend or to repay debt. The importance of the dividend has been mentioned above.

The long-term annualised return from investments is substantial and these returns should be compared with the return from a share buy-back using the same capital. The last 149 exits from the Company, which gave proceeds of £318 million, from 2020 to 30 September 2023 have produced an average return of 3.6x cost and an IRR of 27%, a strong annual return over a median holding period of 5.6 years. Whilst the past is not necessarily a guide to the future, these statistics provide some idea of the opportunity cost of using this capital for buy-backs. These factors, namely the protection of a growing dividend, the potential returns of new investments and the immediate enhancement of NAV from buy-backs at a discount are carefully considered by the Company's directors and management on a tactical and strategic basis when determining the use of the Company's precious capital.

It is worth recording that the Company has recently underwritten the purchase of its own shares in the recent past when a loose line of stock was in the market. On that occasion it was not ultimately necessary for the shares to be bought back. It should also be noted that the Company's substantial dividend policy was initiated more than a decade ago as a means of allowing our shareholders to benefit from the steady flow of realisations that the Company achieves without the need to sell any of their shareholdings. Many shareholders choose to reinvest their dividends back into the shares which, as the Company routinely observes, is a good way of building up a larger shareholding over time.

Outlook

The private equity sector internationally has gone through an adjustment phase this year. Inflation and interest rates have been high and there is either sluggish growth or mild recession in most of our target markets. The banking environment is somewhat tighter than previously and some highly rated sectors no longer command very high prices unconditionally. The international environment is volatile with the external shock risk elevated. It is therefore taking longer for deals to be confirmed with buyers and sellers starting off with differing price expectations. That all said, business confidence is robust and there remain healthy levels of turnover in private companies. Our dealflow of investable companies is excellent. The exit boom of recent years is now past and we are returning to more 'normal' conditions. The Company's portfolio is fundamentally sound, conservatively valued and deriving strength through its comprehensive diversification whilst having plenty of meaningful holdings in companies with potential for superior returns. As we approach the end of 2023 the prospects for further returns for shareholders in line with our long-term growth trend is good. Your Company was recently named as Private Equity and Growth Capital Investment Trust of the year by Investment Week.

Hamish Mair

Investment Manager

Columbia Threadneedle Investment Business Limited

Portfolio Summary

Portfolio Holdings

Total Private Equity Funds - USA

CT PRIVATE EQUITY TRUST PLC

Statement of Comprehensive Income for the

nine months ended 30 September 2023 (unaudited)

CT PRIVATE EQUITY TRUST PLC

Statement of Comprehensive Income for the

nine months ended 30 September 2022 (unaudited)

CT PRIVATE EQUITY TRUST PLC

Statement of Comprehensive Income for the

year ended 31 December 2022 (audited)

CT PRIVATE EQUITY TRUST PLC

Balance Sheet

CT PRIVATE EQUITY TRUST PLC

Reconciliation of Movements in Shareholders' Funds

Notes (unaudited)

1.     The unaudited quarterly results have been prepared on the basis of the accounting policies set out in the statutory accounts of the Company for the year ended 31 December 2022.  Earnings for the nine months to 30 September 2023 should not be taken as a guide to the results for the year to 31 December 2023.

2.     Investment management fee:

3.     Finance costs:

4.     Returns and net asset values

5.     The financial information for the nine months ended 30 September 2023, which has not been audited or reviewed by the Company's auditor, comprises non-statutory accounts within the meaning of Section 434 of the Companies Act 2006.  Statutory accounts for the year ended 31 December 2022, on which the auditor issued an unqualified report, have been lodged with the Registrar of Companies.  The quarterly report is available on the Company's website www.ctprivateequitytrust.com

Legal Entity Identifier: 2138009FW98WZFCGRN66

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