Interim Management Statement

RNS Number : 5692T

Graphite Enterprise Trust PLC

08 December 2011

 



8 December 2011

GRAPHITE ENTERPRISE TRUST PLC

INTERIM MANAGEMENT STATEMENT FOR THE QUARTER

ENDED 31 OCTOBER 2011

Graphite Enterprise Trust PLC ('Graphite Enterprise' or 'the Company') presents its Interim Management Statement for the three months ended 31 October 2011, the third quarter of its financial year.

Unaudited net asset value

In the three months to 31 October 2011 the unaudited net asset value per share fell by 2.6% to 564.8p.  In the first nine months of the Company's financial year, the net asset value per share increased by 5.8%.

The depreciation of the euro against sterling in the period accounted for approximately two thirds of the fall in the quarter or 1.7%. A fall in the reported underlying value of the investment portfolio resulted in a 0.7% reduction and expenses and other items accounted for the remaining 0.2%.

The rise in net asset value per share in the first nine months has principally been the result of realisations achieved at valuations above carrying values and increases in the valuations of unrealised investments. Together these generated an increase of 7.4% in the net asset value per share. This was partially offset by other items totalling 1.6%, reducing the increase in net asset value to 5.8%.

Share price and discount

The share price fell by 3.8% to 377.0p in the quarter, while the Company's benchmark, the FTSE All-Share Index, fell by 5.5%.  The share price was at a discount of 33.3% to the net asset value per share at 31 October 2011, compared with 32.4% at 31 July. 

In the Company's financial year to date the share price has strongly outperformed the Index, rising by 22.4% compared with a fall in the Index of 6.0%. The discount has narrowed from 42.3% at 31 January to 33.3% at 31 October.

Investment portfolio

Investment performance

The underlying value of the portfolio in local currencies fell by £3.2 million or by 0.9% of its opening value in the quarter. The euro fell by 3.4% against sterling, decreasing the sterling value of the portfolio by 2.0% and bringing the total valuation decrease to 2.9%. 

No significant realisations took place in the quarter other than those which had already been reflected in the net asset value at 31 July.

The investment portfolio has been valued using the latest available managers' reports. September valuations covering 61.6% of the portfolio had been received by the cut-off date of 29 November. June valuations were used for the remainder.

Portfolio company valuations have not reflected the falls seen across public equity markets since the middle of the year. Although most private equity managers report quarterly, many only perform a full valuation exercise at the end of June and at the end of December. 

While comparable quoted valuation multiples have fallen since June, the portfolio reported strong growth in earnings and revenue in the twelve months to 30 June and was also paying down debt.  If these trends continue, they would to some extent offset any decline in multiples at the year end.

Proceeds

Proceeds generated by the portfolio in the quarter totalled £7.4 million or 2.1% of its opening value.  The largest cash inflow was £5.4 million from the sale of Phadia by Cinven IV, on which the related net asset value uplift was recognised in the results for the period to 31 July 2011.   A number of smaller and partial disposals generated a further £2.0 million. 

Additions

A total of £18.0 million was invested in the quarter of which £14.4 million was drawn down by funds. This represented 9.5% of opening commitments. A total of 12 new underlying investments were made, of which the two largest were:

-  £2.5 million in Lowell Group, through TDR Capital II Fund.

-  £1.8 million in Primavista, through Activa Capital Fund II.

A secondary interest in Graphite Capital Partners VI was acquired for £2.5 million and the Company invested £1.1 million in the direct portfolio.

Cash and liquid assets

In the three months to 31 October 2011, cash and liquid asset balances fell by £14.8 million from £75.8 million to £61.0 million:

Movement in cash and liquid assets	3 months to	9 months to
£m	31 Oct 2011	31 Oct 2011
Additions	(18.0)	(48.3)
Proceeds generated by the portfolio*	7.4	76.0
Net cash flow (to)/from the investment portfolio	(10.6)	27.7
Non-investment cash flows	(4.2)	(9.9)
Net cash (outflow) / inflow	(14.8)	17.8
Effect of changes in foreign exchange rates	-	(0.3)
Total movement	(14.8)	17.5
Opening cash and liquid assets	75.8	43.5
Closing cash and liquid assets	61.0	61.0
*Including income

Balance sheet and commitments

The summary balance sheet as at 31 October 2011 is set out below:

	31 Oct 2011	% of total	31 Jul 2011	% of total
	£m	assets	£m	assets
Total portfolio	359.3	85.1%	359.2	82.6%
Liquid assets	61.0	14.4%	75.8	17.4%
Other net current assets/(liabilities)	2.0	0.5%	(0.2)	-
Total assets	422.3	100.0%	434.8	100.0%
Equity shareholders' funds	411.8		423.0
Undrawn bank facility	60.0		30.0
Outstanding commitments	137.1		152.5

During the period, Company increased its bank facility from £30 million to £60 million. The additional £30 million was provided by Lloyds Bank Corporate Markets on the same terms as the existing arrangements with The Royal Bank of Scotland.  The bank facility remains undrawn. 

Outstanding commitments fell by £15.4 million or by 10.1% to £137.1 million during the period.  Drawdowns of commitments to funds accounted for £14.4 million of the fall and the aggregate of other movements was a further £1.0 million reduction. 

The level of overcommitment, which is the amount by which commitments exceed cash and near cash, fell by £2.8 million to £74.1 million, equivalent to 17.6% of total assets at 31 October 2011.  If the undrawn bank facility were added to the cash balance, the level of overcommitment would fall further to £14.1 million or 3.3%.

Recent events

The Directors are not aware of any events or transactions, other than as noted above, which have taken place between 31 October 2011 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
Stephen Cavell	020 7825 5306

THE 30 LARGEST UNDERLYING INVESTMENTS

The table below summarises the 30 largest underlying investments, by value, in the Company's portfolio of funds and direct investments as at 31 October 2011. The valuations are gross and are shown as a percentage of the total investment portfolio.

	Entity	Manager	Year of investment	Country	Value as a % of investment portfolio
1	Micheldever
	Distributor and retailer of tyres	Graphite Capital	2006	UK	4.6%
2	Park Holidays UK
	Operator of caravan parks	Graphite Capital	2006	UK	2.3%
3	NES Group
	Provider of recruitment services	Graphite Capital	2006	UK	2.1%
4	U-POL
	Manufacturer and distributor of automotive refinish products	Graphite Capital	2010	UK	1.9%
5	Data Explorers Group
	Provider of information to the global securities lending industry	Bowmark Capital	2007	UK	1.8%
6	Evonik Industries
	Diversified industrial group	CVC	2008	Germany	1.7%
7	London Square
	Developer of residential housing	Graphite Capital	2010	UK	1.5%
8	Tumi
	Manufacturer and retailer of performance luggage and accessories	Doughty Hanson	2004	USA	1.5%
9	Hellermann Tyton
	Manufacturer of high performance cable management products	Doughty Hanson	2006	UK	1.4%
10	Alexander Mann Solutions
	Provider of recruitment process outsourcing	Graphite Capital	2007	UK	1.3%
11	Ziggo
	Operator of cable TV networks	Cinven	2006	Netherlands	1.3%
12	CEVA
	Manufacturer and distributor of animal health products	Euromezzanine	2007	France	1.2%
13	Ceridian
	Provider of human resource and payment processing services	Thomas H Lee Partners	2007	USA	1.1%
14	Algeco Scotsman
	Supplier and operator of modular buildings	TDR Capital	2007	USA	1.1%
15	Salient Surgical Technologies
	Provider of medical technology	n/a	2000	USA	1.1%
16	Spire Healthcare
	Provider of healthcare	Cinven	2007	UK	1.1%
17	Stork
	Diversified engineering group	Candover	2008	Netherlands	1.1%
18	Preh
	Manufacturer of control system devices	Deutsche Beteiligungs	2003	Germany	1.1%
19	TMF Group
	Provider of management and accounting outsourcing services	Doughty Hanson	2008	Netherlands	1.0%
20	Teaching Personnel
	Provider of temporary  staff for the education sector	Graphite Capital	2010	UK	1.0%
21	Parques Reunidos
	Operator of attraction parks	Candover	2007	Spain	1.0%
22	Balta
	Manufacturer of carpets and floor coverings	Doughty Hanson	2004	Belgium	1.0%
23	Avanza Group
	Operator of buses	Doughty Hanson	2007	Spain	0.9%
24	Vue Entertainment
	Operator of cinemas	Doughty Hanson	2010	UK	0.9%
25	Standard Brands
	Manufacturer of domestic fire products	Graphite Capital	2001	UK	0.9%
26	Clyde Bergemann
	Supplier of components for the power generation industry	Deutsche Beteiligungs	2005	Germany	0.9%
27	Avio
	Manufacturer of aerospace engine components	Cinven	2007	Italy	0.9%
28	Norit
	Supplier of water purification technologies	Doughty Hanson	2007	Netherlands	0.8%
29	Lowell Group
	Purchaser of consumer debt	TDR Capital	2011	UK	0.8%
30	Weetabix
	Manufacturer of breakfast cereals	HM Capital	2004	UK	0.7%
	Total of the 30 largest underlying investments				40.0%

Portfolio analyses at 31 October 2011

Portfolio - Investment type

		% of total investment portfolio
Large buy-outs		43.6%
Small and mid-market buy-outs		40.7%
Mezzanine		12.9%
Infrastructure		2.1%
Quoted		0.7%
Total		100.0%

Portfolio - Geographic distribution

		% of total investment portfolio
UK		44.4%
France		13.7%
North America		12.1%
Germany		8.8%
Benelux		6.5%
Spain		4.3%
Scandinavia		2.4%
Other Europe		6.3%
Rest of world		1.5%
Total		100.0%

Portfolio - Year of investment

	Multiple of cost	% of total investment portfolio
2011	1.0x	9.1%
2010	1.1x	15.4%
2009	1.3x	2.5%
2008	1.1x	13.0%
2007	1.3x	25.7%
2006	1.4x	17.9%
2005	1.2x	2.8%
2004	2.3x	7.6%
2003	1.3x	1.0%
2002 and before	0.9x	5.0%
Total	1.2x	100.0%

Portfolio - Sector analysis

		% of total investment portfolio
Consumer services		22.8%
Consumer goods		19.7%
Support services		17.0%
Industrials		13.5%
Financials		10.4%
Health Care		8.1%
Basic materials		4.3%
Technology and telecommunications		4.2%
Total		100.0%

Investment portfolio 3 and 9 months to 31 October 2011

Quarter to 31 October 2011 £ million		Opening value	Additions	Disposals	Gains and losses	Closing value
Investment portfolio		359.2	18.0	(7.4)	(10.5)	359.3

Nine months  to 31 October 2011 £ million			Opening value	Additions	Disposals		Gains and losses	Closing value
Investment portfolio		356.6		48.3	(76.0)	30.4		359.3

31 October 2011 £ million		Third party investments	Graphite investments	Total
Fund investments		255.7	53.3	309.0
Direct investments		27.7	22.6	50.3
Total		283.4	75.9	359.3

Commitments analysis - 31 October 2011

Closing commitments	Original commitment1 £m	Outstanding commitment £m	Average drawdown percentage	% of commitments
Funds in investment period	282.3	116.1	58.9%	84.7%
Funds post investment period	310.7	21.0	93.2%	15.3%
Total	593.0	137.1	76.9%	100.0%

¹ Original commitments are at 31 October 2011 exchange rates

Closing commitments - remaning investment period	% of commitments
> 5 years	n/a
4-5 years	6.5%
3-4 years	1.2%
2-3 years	17.0%
1-2 years	46.9%
<1 year	13.1%
Investment period complete	15.3%
Total	100.0%

Ends

 

END

 

 

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