Interim Results
EMBARGOED UNTIL 07:00 AM, TUESDAY 10 JUNE 2003
ELECTRA INVESTMENT TRUST PLC
Interim Results for six months ended 31 March 2003
Highlights
* Net asset value per share of £7.02 as at 31 March 2003 (30 September 2002:
£7.64 per share)
* NAV outperformance relative to FTSE All Share Index (Electra -20.4% versus
Index -32.1%) in the 12 months to March 2003 (6 month performance: Electra
-8.2% versus Index -3.7%)
* Improvement in operational performance by most companies in portfolio over 6
months
* Net asset value per share at 31 May 2003 of £7.18**
Sir Brian Williamson, Chairman, said:
'Most of the larger companies in the portfolio achieved an improvement in
operational performance over the six months and reduced borrowings or otherwise
improved their financial position.Your Board believes this is a respectable
performance in very testing conditions.
'The weakening economic outlook and the build up to the war in Iraq had a
significant impact upon investment activity in the six months to 31 March 2003.
'Although the climate for realisations continues to remain challenging, as a
result of weak stock markets and uncertain economic conditions, the Investment
Manager continues to seek opportunities to realise investments for full value
and raise liquidity from the portfolio. Your Board believes that opportunities
for realisations at satisfactory prices will re-present themselves as markets
improve and the economic outlook strengthens.
'The Board's continuing priority is to ensure that the target of returning a
further £350 million to shareholders is met as quickly as market conditions
permit.'
For further information:
Sir Brian Williamson, Chairman, Electra Investment Trust PLC 020 7831 6464
Hugh Mumford, Chief Executive, Electra Partners Limited 020 7831 6464
Nick Miles, M: Communications 020 7153 1535
Notes to Editors:
Electra - Background to Recent Changes
Since the listing of Electra in 1976, the Company has specialised in investing
in the private equity market. This arose from the belief that superior returns
could be generated from investing in private equity through the structure of an
investment trust.
Between 1976 and 2002 Electra invested over £3,000 million in private equity
investments and, inclusive of a capital injection of £32 million, Electra's
assets grew from £58 million in February 1976 to £1,145 million by 30 September
1998, the financial year end immediately preceding the hostile takeover bid for
Electra in 1999. This bid failed when shareholders voted in favour of a scheme
which involved the controlled realisation of the portfolio over a five year
period. New investment was restricted to existing portfolio companies.
Since the start of the realisation programme in March 1999, Electra has
returned £945 million to shareholders leaving a residual portfolio valued at
£647 million at 31 March 2003. This compares with the stock market value of
Electra of £975 million immediately before the announcement of the takeover
bid. Over the four year period £400 million has been invested and £1.3 billion
has been realised from the portfolio.
Shareholders approved proposals in June 2001 which retained the emphasis on
realising investments but made provision for Electra to continue as an
investment vehicle. This achieved the objective of catering for those
shareholders who wished to retain an exposure to private equity through a
shareholding in Electra.
This more flexible investment strategy provided for at least two-thirds of
future cash flow to be returned to shareholders with the balance to be invested
in private equity investments. In June 2001 the Board then anticipated, subject
to market conditions, that not less than £500 million would be returned over
the next three years of which £150 million was returned through the tender
offer in 2001.
Dependent on maintaining appropriate levels of gearing, the balance of cash
flow will be invested in follow-on investments to protect or enhance the value
of existing investments, in investment funds managed by Electra Partners and in
other private equity investment opportunities generated by Electra Partners.
**The unaudited net asset value at 31 May 2003 is calculated on the basis of
the net asset value at 31 March 2003 adjusted to reflect the purchases and
sales of investments, currency movements and mid market values on that day in
respect of listed investments and unlisted investments where these are valued
by reference to quoted prices.
Chairman's Statement
Results
At 31 March 2003 Electra's net asset value was £7.02 per share compared to
£7.64 per share at 30 September 2002, a decline of 8.1% over the period by
comparison with the FTSE All-Share Index which declined by 3.7%. Over the
twelve months to 31 March 2003 the net asset value declined by 20.4% whilst the
FTSE All-Share Index fell by 32.1%.
Most of the larger companies in the portfolio achieved an improvement in
operational performance over the six months and reduced borrowings or otherwise
improved their financial position. Your Board believes this is a respectable
performance in very testing conditions.
Realisations and Investments
The weakening economic outlook and the build up to the war in Iraq had a
significant impact upon investment activity in the six months to 31 March 2003.
Realisations of investments totalled £33 million over the period by comparison
with £75 million in the previous six months. Purchases of investments, all in
existing portfolio companies or made under existing commitments to limited
partnership funds, amounted to £23 million compared with £64 million over the
six months to 30 September 2002.[DEL::DEL]
Although the climate for realisations continues to remain challenging, as a
result of weak stock markets and uncertain economic conditions, the Investment
Manager continues to seek opportunities to realise investments for full value
and raise liquidity from the portfolio. Your Board believes that opportunities
for realisations at satisfactory prices will re-present themselves as markets
improve and the economic outlook strengthens.
Further Returns of Capital
The Board is committed to ensuring that further returns of capital are made to
shareholders, consistent with the approved investment strategy. As described
above, weaker economic conditions have resulted in delays to realisations with
a consequential impact on the Company's ability to fund capital returns. The
Board expects to apply the bulk of future realisation proceeds to reduce the
Company's gearing and to finance further returns of capital to shareholders.
Having regard to the progress to date of the investment strategy, and despite
the uncertainty regarding realisations in current market conditions, the
Board's continuing priority is to ensure that the target of returning a further
£350 million to shareholders is met as quickly as market conditions permit.
Sir Brian Williamson
Chairman 9 June 2003
Portfolio Analysis
Summary of Changes to Overall Portfolio
Six months ended 31 March 2003 2002
£'000 £'000
Opening valuation 691,727 759,891
Investments 23,102 52,711
Realisations (33,066) (61,713)
Changes in valuation (34,494) 44,905
Closing valuation 647,269 795,794
At 31 March 2003 Electra's investment portfolio was valued at £647 million
compared to £692 million at 30 September 2002. The decrease in value of
£45 million was due to realisations from the portfolio exceeding investment by
£10 million and a net reduction in the valuation of portfolio investments of
£35 million.
At 31 March 2003, 76% of the portfolio was invested in the UK and Continental
Europe, 19% in the USA, 4% in the Far East and India and 1% in South America.
Outlook
As expected, the level of capital calls from the existing portfolio fell
significantly in the six months to 31 March 2003, in the light of the level of
restructuring of investments which took place in the previous financial year.
While good progress in terms of operating portfolio and debt repayments
continues to be made by the portfolio as a whole, the level of realisations
continues to be affected by existing market conditions. The maturing profile of
the portfolio however, will allow a significant increase in the level of
realisations when market conditions improve.
Portfolio
Investments
During the six months to 31 March 2003, total investments made by Electra
amounted to £23 million. This represented a substantial decrease compared to
the corresponding period in 2002 when an amount of £53 million was invested.
The decrease in investment was due principally to a reduced demand from the
existing portfolio for further investment.
Of the investments made in the first six months of the current year, £13.4
million was invested in the existing portfolio and £9.7 million was invested
under previous commitments made to private equity funds, including £1.6 million
to Electra Partners' European Fund.
Investments made in existing portfolio companies included £8.5 million in
Vendcrown to support the expansion of the business. The business of Vendcrown
has grown rapidly on the back of increasing insurance premiums. A further £3.1
million was invested in Energy Power Resources to enable it to acquire control
of Fibrowatt, a company engaged in the production of power from renewable
energy sources.
The amount available for new investment was limited by Electra's current
investment policy which allows only one third of proceeds from realisations to
be invested, subject to maintaining appropriate levels of bank borrowings.
Realisations
Realisations from the portfolio for the six month period amounted to £33
million compared to £62 million in the corresponding period in 2002. The level
of realisations continued to be affected by external factors including the
continuing fall in the stock market and uncertain economic conditions
generally. Realisations included £19.5 million from the sale of unlisted
securities, £5.2 million from the sale of listed securities, £5.4 million from
the refinancing of portfolio companies and £3.0 million of proceeds from
private equity funds.
During the period Electra received £7.1 million from the sale of Sporting
Index, £4.0 million from the sale of Avon and £3.3 million from the partial
sale of the US investment in OMNA Medical Partners. A refinancing of Electra's
investment in Allflex was completed in March 2003, resulting in total cash
proceeds to Electra of £10.4 million. Of this amount £5.4 million represented
repayment of capital and £5 million represented payment of accrued interest.
During the period Electra received £1.6 million from Electra Partners' European
Fund following the sale of its investment in Tom Cobleigh. This compared to an
investment of £1.0 million made one year earlier.
Performance
During the six month period thecapital value of the portfolio declined by £34.5
million or 5.0%. £23.2 million was provided against the direct investment
portfolio and the balance of £11.3 million arose from the fall in value of
private equity funds in which Electra had an indirect investment as a limited
partner. The majority of the companies in the investment portfolio continued to
make good progress in terms of operating results particularly amongst the
larger investments. Because of the current uncertainties in the economic
environment, this positive progress has not yet been reflected in increased
valuations of individual investments to any significant degree. Increases in
valuation were made to Electra's investments in Inchcape Shipping Services and
Leiner, which were increased by £9.6 million and £6.2 million respectively.
This increase recognises the success of the restructuring of these companies
which took place in the previous financial year.
Largest Valuation Changes
Increase / (decrease)
Company £'000 %
__________________________________________________________
Inchcape Shipping Services 9,639 67.3
Leiner Health Products 6,218 27.9
HLF Group (Heath Lambert) (16,080) (54.0)
Agricola Group (7,315) (49.7)
Esporta (5,440) (20.9)
__________________________________________________________
The performance of the portfolio was adversely affected by specific provisions
made against three investments, namely HLF Group, Agricola Group and Esporta.
HLF Group which was written up in 2002 in anticipation of an exit was written
down by 54% in light of the current lack of exit opportunities. Agricola Group
which supplies animal feed was written down by 50% to reflect much tougher
trading conditions. A provision of £5.4 million was made against Esporta,
acquired last year as partial consideration for the sale of Invicta, as a
result of a reduction in the multiple used to value the investment. As
mentioned previously, the valuation of the private equity funds in which Electra
has an interest declined in the six month period by £11.3 million, mainly
as a result of a reduction in valuation of funds with an exposure to South America.
Consolidated Statement of Total Return (unaudited)
(incorporating the Revenue Account)
For the six months ended 31 March Revenue Capital 2003 Revenue Capital 2002
£'000 £'000 Total £'000 £'000 Total
£'000 £'000
Gains /(losses) on
investments:
Realised - 4,133 4,133 - 5,041 5,041
Unrealised - (38,645) (38,645) - 32,611 32,611
Losses on revaluation of
foreign currencies:
Realised - (71) (71) - (246) (246)
Unrealised - (3,625) (3,625) - (4,767) (4,767)
- (38,208) (38,208) - 32,639 32,639
Income of the investment 9,875 - 9,875 10,096 - 10,096
trust
Net (expenses) of subsidiary (335) - (335) (83) - (83)
undertakings
Priority profit share paid to (4,910) - (4,910) (5,572) - (5,572)
general partners
Other expenses (895) - (895) (1,238) - (1,238)
Reversal of income accruals (2,431) - (2,431) (3,844) - (3,844)
Net Return before Finance
Costs and Taxation 1,304 (38,208) (36,904) (641) 32,639 31,998
Interest payable and similar (3,214) - (3,214) (3,678) - (3,678)
charges
Return on Ordinary Activities
before Taxation and Return to
Shareholders (1,910) (38,208) (40,118) (4,319) 32,639 28,320
Exchange differences arising (37) (509) (546) 261 5,260 5,521
on consolidation
Net Transfers (from)/to
Reserves for the Period (1,947) (38,717) (40,664) (4,058) 37,899 33,841
Return to Shareholders per (2.99p) (59.35p) (62.34p) (6.22p) 58.10p 51.88p
Ordinary Share
The amounts dealt with in the Consolidated Statement of Total Return are all
derived from continuing activities.
2003 2002
Number of Ordinary Shares in issue at 31 March 65,231,533 65,231,533
Consolidated Balance Sheet (unaudited)
*Restated
As at 31 March 2003 As at 31 March 2002
£'000 £'000 £'000 £'000
Fixed Assets
Investments:
Unlisted 632,806 774,340
Listed 14,463 21,454
647,269 795,794
Current Assets
Debtors 29,664 34,275
Investments 830 1,768
Cash at bank and in hand 10,566 18,637
41,060 54,680
Current Liabilities
Creditors: amounts falling due 6,437 8,243
within one year
Net Current Assets 34,623 46,437
Total Assets less Current 681,892 842,231
Liabilities
Creditors: amounts falling due
after more than one year 202,466 244,125
Provision for liabilities and 21,760 23,155
charges
Net Assets 457,666 574,951
Capital and Reserves
Called-up share capital 16,308 16,308
Share premium 24,147 24,147
Capital redemption reserve 26,967 26,967
Realised capital profits 540,559 675,649
Unrealised capital losses (140,751) (162,281)
Revenue reserves (9,564) (5,839)
441,358 558,643
Total Equity Shareholders' Funds 457,666 574,951
Net asset value per ordinary share 701.60p 881.40p
of 25p
Reconciliation of Total Shareholders' Funds (unaudited)
For the six months ended 31 March 2003 2002
£'000 £'000
Total Return (40,118) 28,320
Exchange differences arising on (546) 5,521
consolidation
Movements in Total Shareholders' (40,664) 33,841
Funds
Total Shareholders' Funds at 1 498,330 541,110
October
Total Shareholders' Funds at 31 457,666 574,951
March
*Electra has historically deducted amounts due under incentive schemes from
investments. These amounts have now been re-classified under Provision for
liabilities and charges. This treatment is considered to be more appropriate in
view of the substance of these schemes. There is no effect on the net assets of
the Group from this re-classification. The prior year figures have been
restated accordingly. This treatment is consistent with that adopted in the 30
September 2002 Accounts.
Provision for Liabilities and Charges
31 March 2003 31 March 2002
£'000 £'000
________________________________________________________________________
Amount due under incentive schemes 21,760 23,155
________________________________________________________________________
Consolidated Cash Flow Statement (unaudited)
For the six months ended 31 March £'000 2003 £'000 2002
£'000 £'000
Operating Activities
UK dividend income 358 451
Unfranked investment income 6,525 2,590
Interest income 102 152
Other income 148 146
Expenses (8,494) (5,606)
Net Cash Outflow from Operating (1,361) (2,267)
Activities
Returns on Investments and (3,667) (3,614)
Servicing of Finance
Interest paid
Net Cash Outflow from Returns on (3,667) (3,614)
Investments and Servicing of
Finance
Capital Expenditure and Financial
Investment
Purchases of investments (23,102) (52,714)
Sales of investments 33,065 67,553
Net Cash Inflow from Capital 9,963 14,839
Expenditure and Financial
Investment
Net Cash Inflow before Management 4,935 8,958
of Liquid Resources and Financing
Management of Liquid Resources 5,715 (12,326)
Financing
Bank loans drawn 27,000 29,000 Bank loans repaid (37,528) (29,018) Loans (paid)/received (213) 4,739
Net Cash (Outflow)/Inflow from (10,741) 4,721
Financing
(Decrease)/Increase in Cash in the (91) 1,353
Period
Reconciliation of Net Cash Flow to
Movement in Net Debt
(Decrease)/Increase in cash in the (91) 1,353
period
Cash outflow from debt financing 10,528 18
Cash (inflow)/outflow from change
in liquid resources (5,715) 12,326
4,813 12,344
Change in Net Debt Resulting from 4,722 13,697
Cash Flows
Translations difference (3,695) (5,012)
Movement in Net Debt 1,027 8,685
Net debt brought forward (192,927) (234,173)
Net Debt Carried Forward (191,900) (225,488)
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