Interim Management Statement 30 April 2012

RNS Number : 1089F
Graphite Enterprise Trust PLC
11 June 2012
 



11 June 2012

     GRAPHITE ENTERPRISE TRUST PLC

 

INTERIM MANAGEMENT STATEMENT

QUARTER ENDED 30 APRIL 2012

 

Graphite Enterprise Trust PLC ('Graphite Enterprise' or 'the Company') presents its Interim Management Statement for the quarter ended 30 April 2012.

 

Unaudited net asset value

 

In the three months to 30 April 2012 the unaudited net asset value per share rose by 2.6% from 569.4p to 584.2p.

 

The increase in the underlying value of the investment portfolio, which represented 89.7% of total assets at the quarter end, generated a 4.6% increase in net asset value in the period. This was partially offset by the depreciation of the euro against sterling, which accounted for a fall of 1.2%, and by expenses and other items which reduced the net asset value by 0.8%.

 

These results do not include the effect of the proposed dividend of 5.0p per share (£3.6 million in total) which will be recorded in the second quarter if approved at the forthcoming Annual General Meeting.

 

Share price and discount

 

The share price rose by 14.0% to 407.0p in the quarter. This was substantially greater than the increase of 1.8% in the Company's benchmark, the FTSE All-Share Index.  The share price was at a discount of 30.3% to the net asset value per share at 30 April 2012. 

 

Since the end of April, equity markets have experienced sharp falls, due in particular to renewed concerns over the eurozone.  In that period, the Company's share price has fallen by 6.9% and at 8 June 2011 was at 379.0p, a discount of 35.1% to the net asset value at 30 April.  In the same period the FTSE All-Share Index has fallen by 5.4%.

 

In the financial year to date, the share price has therefore increased by 6.2%, compared with a 3.8% fall in the Index.  This continues the trend of the previous financial year, during which the share price rose by 15.9% while the Index fell by 3.7%.

 

Investment portfolio

 

Investment performance

The portfolio has started the year well.  The underlying value of the portfolio in local currencies increased by £19.2 million or by 5.1% of its opening value in the quarter. This compares with 12.0% underlying growth for the financial year to January 2012.

 

The euro fell in value by 1.8% against sterling, leading to a fall in the sterling value of the portfolio of 1.3%.  The net portfolio valuation increase was therefore 3.8%. 

 

Performance was driven by valuation uplifts achieved on full and partial realisations from the portfolio. These included the following:

 

 

Company

Manager

Year of investment

Size ranking at 31 Jan 2012

Exit type

Data Explorers

Bowmark *

2007

6th

Trade sale

Ziggo

Cinven

2006

10th

IPO (partial)

Tumi

Doughty Hanson

2004

11th

IPO (partial)

Weetabix

Lion Capital

2004

19th

Trade sale (partial)

Formula 1

CVC

2006

49th

Financial sale (partial)

 

* The Company made a co-investment in Data Explorers alongside Bowmark Capital Partners III.

 

Some of these transactions closed after the quarter end but valuations have been updated to reflect uplifts achieved.

 

The average multiple of cost achieved on the full exits was 2.9x and the average uplift against the previous carrying value was 66%. We have been pleased to see that managers continue to achieve profitable disposals despite the prevailing economic uncertainty.

 

The investment portfolio has been valued using the latest available managers' reports. March valuations covering 69.2% of the portfolio had been received by the cut-off date of 1 June and December valuations were used for the remainder. As usual, adjustments have been made in a small number of cases to reflect post period end events.

 

Proceeds

Proceeds generated by the portfolio in the quarter totalled £17.3 million or 4.6% of its opening value. This represents a slowdown on the average rate for last year of 6.7% per quarter, which was enhanced by the disposal for four of the five largest investments during the year.  The largest cash inflow was of £8.7 million from the disposal of the investment in Data Explorers. 

 

Further proceeds totalling £3.0 million have been received since the quarter end, including proceeds from some of the transactions listed above.

 

Additions

A total of £16.0 million was invested in the quarter, substantially all of which was drawn down by funds. This was in line with our expected run-rate for drawdowns of existing commitments and was similar to the rates of investment seen in the third and fourth quarters of last year.

 

The largest drawdown was of £5.5 million to finance the purchase of National Fostering Agency ("NFA") by Graphite funds.  This was in addition to £3.0 million already invested in NFA in January 2012.

 

A total of seven new underlying investments were made in the quarter in addition to NFA, none of which was individually large enough to be included in the Company's 30 largest investments.

 

Since the period end, co-investments in CPA Global (alongside Cinven, £2.5 million) and Spheros (alongside Deutsche Beteiligungs, £2.0 million) have been completed. After including drawdowns by funds, a total of £6.6 million has been invested in the portfolio since the end of April.

 

No secondary purchases of fund interests have been completed in the current financial year, although we continue to look at a number of opportunities.


Cash and liquid assets

 

In the three months to 30 April 2012, the portfolio was marginally cash generative. However, after taking account of other net outflows, cash and liquid asset balances fell by £0.8 million to £43.3 million:

 

Movement in liquid assets

3 months to

£m

30 Apr 2012

Additions

(16.0)

Proceeds generated by the portfolio*

17.3

Net cash flow from the investment portfolio

1.3

Non-investment cash flows

(2.1)

Net cash outflow

(0.8)

Effect of changes in foreign exchange rates

-

Total movement

(0.8)

Opening cash and liquid assets

44.1

Closing cash and liquid assets

43.3



*Including income


 

Balance sheet and commitments

 

The summary balance sheet and commitment position as at 30 April 2012 are set out below:

 


30 April 2012
£m

% of total assets

31 Jan 2012
£m

% of total assets

Total portfolio

390.7

89.7%

377.7

89.2%

Cash and liquid assets

43.3

9.9%

44.1

10.4%

Other net current assets

1.8

0.4%

1.8

0.4%

Total assets

435.8

100.0%

423.6

100.0%

Equity shareholders' funds

426.0


415.2


Undrawn bank facility

60.0


60.0


Total liquidity 1

103.3


104.1


Outstanding commitments

125.5


142.8


Overcommitment 2

22.2


38.6


Overcommitment as % of total assets

5.1%


9.1%


 

1. Total liquidity is cash and liquid assets plus undrawn borrowing facilities.

2. Overcommitment is outstanding commitments less total liquidity.

 

Outstanding commitments fell by £17.3 million to £125.5 million during the period, mainly as a result of drawdowns.  No new commitments have been made in the current financial year although we are reviewing a number of opportunities and expect commitments to rise in the near term.

 

Recent events

 

The Directors are not aware of any events or transactions, other than as noted above, which have taken place between 30 April 2012 and the date of publication of this statement which have had a material effect on the financial position of the company.

 

Not audited or reviewed

This information has not been audited or reviewed by the Company's auditors.

 

For further information please contact:

 

Tim Spence

020 7825 5358

Emma Osborne

020 7825 5357

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THE 30 LARGEST UNDERLYING COMPANIES

The table below summarises the 30 largest underlying companies by value in the Company's portfolio of funds and direct investments, as at 30 April 2012. The valuations are gross and are shown as a percentage of the total investment portfolio.

 


Entity

 

Manager

Year of investment

Country

Value as  % of portfolio

1

Micheldever






Distributor and retailer of tyres

Graphite Capital

2006

UK

3.7%

2

NES Group






Provider of recruitment services

Graphite Capital

2006

UK

2.2%

3

National Fostering Agency






Provider of foster care services

Graphite Capital

2012

UK

2.2%

4

Park Holidays UK






Operator of caravan parks

Graphite Capital

2006

UK

2.1%

5

U-POL






Manufacturer and distributor of automotive refinishing products

Graphite Capital

2010

UK

1.8%

6

Tumi






Manufacturer and retailer of luggage and accessories

Doughty Hanson

2004

USA

1.7%

7

Ziggo +






Operator of cable TV networks

Cinven

2006

Netherlands

1.6%

8

Alexander Mann Solutions






Provider of recruitment process outsourcing

Graphite Capital

2007

UK

1.5%

9

Stork






Provider of technical engineering services

Candover

2008

Netherlands

1.5%

10

Parques Reunidos






Operator of attraction parks

Candover

2007

Spain

1.5%

11

Evonik Industries






Manufacturer of specialty chemicals

CVC

2008

Germany

1.5%

12

Weetabix * +






Manufacturer of breakfast cereals

Lion Capital

2004

UK

1.4%

13

London Square






Developer of residential housing

 

Graphite Capital

2010

UK

1.3%

14

Hellermann Tyton






Manufacturer of cable management products

Doughty Hanson

2006

UK

1.3%

15

Avio






Manufacturer of aerospace engine components

Cinven

2007

Italy

1.2%

16

Spire Health Club






Provider of healthcare

Cinven

2007

UK

1.1%

17

CEVA






Manufacturer and distributor of animal health products

Euromezzanine

2007

France

1.1%

18

Ceridian *






Provider of payment processing services

Thomas H Lee Partners

2007

USA

1.0%

19

StarBev +






Manufacturer of alcoholic  beverages

CVC

2009

Czech Republic

1.0%

20

Teaching Personnel






Provider of temporary staff for the education sector

Graphite Capital

2010

UK

0.9%

21

Preh *






Manufacturer automotive of control system devices

Deutsche Beteiligungs

2003

Germany

0.9%

22

Acromas






Provider of financial, motoring and travel services

CVC / Charterhouse

2007

UK

0.9%

23

Dominion Gases






Supplier of specialist gases to the oil and gas industries

Graphite Capital

2007

UK

0.9%

24

Coperion






Provider of mechanical engineering services

Deutsche Beteiligungs

2007

Germany

0.9%

25

TMF






Provider of management and accounting outsourcing services

Doughty Hanson

2008

Netherlands

0.9%

26

Avanza Group






Operator of buses

Doughty Hanson

2007

Spain

0.8%

27

Willowbrook Healthcare






Operator of care homes for the elderly

 

Graphite Capital

2008

UK

0.8%

28

Algeco Scotsman






Supplier and operator of modular buildings

TDR Capital

2007

USA

0.8%

29

Vue Entertainment *






Operator of cinemas

Doughty Hanson

2010

UK

0.8%

30

Formula One Group +






Owner and manager of sports media rights

CVC

2006

UK

0.7%








Total of the 30 largest underlying investments



40.0%

 

* Held both through a fund and directly as a co-investment.

+ Proceeds from full or partial disposal received after the quarter end, or awaited at date of reporting.

 

 

 

 



 

Portfolio analyses at 30 April 2012

 

Portfolio - Investment type



% of total portfolio

Large buy-outs


48.0%

Small and mid-market buy-outs


40.7%

Mezzanine


10.3%

Quoted


0.7%

Infrastructure


0.3%

Total


100.0%

 

Portfolio - Geographic distribution *



% of total portfolio

UK


45.6%

France


12.8%

North America


11.1%

Germany


8.7%

Benelux


6.8%

Spain


4.6%

Scandinavia


2.8%

Other Europe


6.4%

Rest of world


1.2%

Total


100.0%

NB: total continental Europe


42.1%

* Location of headquarters of underlying companies in the portfolio. Does not necessarily reflect countries to which companies have economic exposure.

 

 

Portfolio - Year of investment


 

Multiple of cost

 

Primary portfolio

 

Secondary portfolio

 

Total

portfolio

2012

1.0x

3.7%

0.2%

3.9%

2011

1.1x

10.2%

0.2%

10.4%

2010

1.1x

14.4%

0.6%

15.0%

2009

2.0x

3.0%

0.4%

3.4%

2008

1.1x

11.2%

1.4%

12.6%

2007

1.4x

20.9%

4.6%

25.5%

2006

1.3x

14.3%

3.1%

17.4%

2005

1.1x

0.8%

1.0%

1.8%

2004

2.7x

5.4%

0.1%

5.5%

2003 and before

0.7x

4.2%

0.3%

4.5%

Total

1.3x

88.1%

11.9%

100.0%

 

 

 

 

Portfolio - Sector analysis



% of total portfolio

Business services


19.3%

Consumer goods and services


15.4%

Industrials


14.9%

Healthcare and education


11.2%

Leisure


10.3%

Financials


8.2%

Automotive supplies


7.5%

Media


5.3%

Technology and telecommunications


4.6%

Basic materials


3.3%

Total


100.0%

 

 

Movement in the portfolio

 

Quarter to 30 April 2012

£ million

Opening value

Additions

Disposals

Underlying gains and losses

Currency movement

Closing value

Investment portfolio

377.7

16.0

(17.3)

19.2

(4.9)

390.7

 

 

Portfolio - Graphite and third party investments

 

30 April 2012

£ million


Third party investments

Graphite investments

 

Total

Fund investments


281.6

63.2

344.8

Direct investments


24.0

21.9

45.9

Total portfolio


305.6

85.1

390.7

Graphite investments




21.8%

Third party fund investments




72.1%

Third party co-investments




6.1%

 

 



 

Commitments analysis

 

Commitments at 30 April 2012

Original commitment1

£m

Outstanding commitment

£m

Average drawdown percentage

 

% of commitments

Funds in investment period

320.1

98.2

69.3%

78.2%

Funds post investment period

350.6

27.3

92.2%

21.8%

Total

670.7

125.5

81.3%

100.0%

1 Original commitments are at 30 April 2012 exchange rates

 

 

Commitments at 30 April 2012 - remaining investment period

% of commitments

> 5 years

6.5%

4-5 years

12.0%

3-4 years

1.3%

2-3 years

16.0%

1-2 years

34.4%

<1 year

8.0%

Investment period complete

21.8%

Total

100.0%

 



 

Notes

 

Graphite Enterprise Trust PLC

 

Graphite Enterprise is a London listed investment trust, managed by Graphite Capital. It aims to provide shareholders with long term capital growth through investment in unquoted companies. To achieve this, the Company invests in private equity funds and also directly in private equity-backed companies.

 

Graphite Enterprise primarily invests in buy-outs of mature companies in established European private equity markets. Investments in UK-based mid-market companies are made through funds managed by Graphite Capital, which will typically represent 20-25% of the portfolio. Investments in other sectors of the UK market and in overseas markets are made through third party funds selected by Graphite Capital. Shareholders gain exposure to a diversified portfolio in which Graphite Capital directly manages many of the largest investments.

 

The Company has been listed on the London Stock Exchange for 31 years and has invested exclusively in private equity and been managed by Graphite Capital throughout its life. In that time, the Company has generated a return of more than 24 times the amount subscribed. The net asset value per share has outperformed the FTSE All-Share Index in 17 out of the last 20 financial years.

 

www.graphite-enterprise.com 

 

Graphite Capital

 

Graphite Capital is one of the UK's leading mid-market private equity firms with over £1.2 billion of funds under management and a 31-year history.  Graphite Capital manages both direct investments in portfolio companies and private equity fund investments.  Direct investments account for more than two-thirds of funds under management while third party private equity funds and co-investments account for the remainder. 

 

Graphite Capital's direct investments focus on buy-outs of companies valued at between £25 million and £200 million in the UK.  These investments are made through limited life funds which have a global institutional investor base.  The team has invested in over 100 portfolio companies since 1991 of which two thirds have been realised generating an annualised rate of return of over 35%.

 

Graphite Capital's fund investments and co-investments are made exclusively through Graphite Enterprise Trust PLC.  The focus is on established managers with strong track records operating in mature markets, with the aim of building long term relationships.  Since 1989 the team has invested in more than 60 funds and almost 30 co-investments. The net return on realised funds and co-investments is twice the amount invested.

 

Graphite Capital operates from a single office in London with separate teams focusing on direct and fund investments. As it has a long experience both of managing its own funds and investing in third party funds and co-investments, Graphite Capital has an unusually broad perspective when assessing new investment opportunities.

 

www.graphitecapital.com 

 


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