Half Yearly Report

RNS Number : 1347H

Electra Private Equity PLC

24 May 2011

 

ELECTRA PRIVATE EQUITY PLC

Unaudited Results for Half Year ended 31 March 2011

The information contained in this announcement is restricted and is not for release, publication, or distribution, directly or indirectly, nor does it constitute an offer of securities for sale in the United States, Canada, Japan, Australia or New Zealand.

References in this announcement to Electra Private Equity PLC and its subsidiaries have been abbreviated to 'Electra' or the 'Company'. References to Electra Partners LLP and EQM Capital LLP (manager of Electra's money market investments) have been abbreviated to 'Electra Partners'.

Financial Highlights

NAV per share up 6.9% to 2,193p (diluted) as a result of solid trading performance in the portfolio
(NAV per share up 15.4% over the year)

Unaudited NAV per share at 16 May 2011 of 2,202p (diluted)

NAV per share (diluted) plus special dividends up 57.7% over five years. Annualised return on equity of 9.7% (diluted) for the five years

Share price up 21.6% against 7.0% for the FTSE All-Share Index

Outperformance over 10 years: NAV up 128.0% (diluted) and share price up 83.3% against 13.1% for FTSE All-Share

£100 million Convertible Bond issue successfully completed in December 2010

Net liquid resources of £137 million (£28 million cash, £275 million liquidity funds and bank borrowings of £166 million)

Outstanding commitments to third party funds of £87 million which the Manager expects will be substantially funded from realisation proceeds received from third party funds

Investment capacity of over £300 million

Portfolio

£73 million invested (£43 million after disposals and refinancing in April 2011)

£82 million realised

£67 million of net valuation increases

Largest individual gains: Allflex (£14.5 million), BDR Thermea (£10.7 million)

Commenting on the results, Colette Bowe, Chairman of Electra Private Equity, said:

"Electra's portfolio has shown considerable resilience during the downturn. Electra Partners has extensive experience of investing through a number of economic cycles and as the UK economy starts to recover, the Board believes these attributes, together with our increased investment capacity, will enable Electra to benefit from new investment opportunities and continue to achieve attractive returns for shareholders."

Commenting on the private equity market, Hugh Mumford, Managing Partner of Electra Partners, said:

"The current portfolio is performing well. We believe the period ahead will present Electra with excellent investment opportunities in view of issues faced by many UK businesses in raising capital in the current economic climate. Our increased investment resources have already been put to good use and with some £300 million available to invest, we have the capacity to take advantage of opportunities as they arise."

For further information

For Colette Bowe & Hugh Mumford: Nick Miles, M: Communications      020 7920 2321

Monique Dumas, Investor Relations Partner, Electra Partners LLP         020 7214 4200

Performance Summary

All information is at 31 March 2011 and is unaudited.

At 31 March 2011 the NAV per share was 2,193p (diluted) and 2,288p (basic). At 16 May 2011 the NAV per share (diluted) was 2,202p and 2,299p (basic).

Performance excluding special dividends:

	6 months	One year	Five years	10 years
NAV per share (diluted)	6.9%	15.4%	54.7%	128.0%
NAV per share (basic)	11.6%	20.4%	61.4%	137.9%
Share price	21.6%	24.0%	27.6%	83.3%
FTSE All-Share Index	7.0%	5.4%	0.7%	13.1%

Diluted and Basic NAV

As a result of the issue of £100 million 5% Subordinated Convertible Bonds ('Bonds') in December 2010, Electra is required to report both a basic and diluted net asset value per share. During the six months to 31 March 2011 a total of 22 Bonds were converted into 1,073 ordinary shares. Accordingly, the diluted net asset value per share assumes the issue at 31 March 2011 of a further 4,876,976 ordinary shares on the basis of the conversion terms of the Bonds.

Calculation of NAV

At 31 March 2011

The calculation of the unaudited net asset value per share at 31 March 2011 has been affected by the issue of the Bonds. Electra is required to prepare accounts and report in accordance with the Companies Act 2006 and International Financial Reporting Standards (IFRS). Under IFRS, the Bonds are a compound financial instrument which contains both a liability and an equity component. Of the £100 million raised, £23 million of the Bonds was accounted for as an equity component with the balance accounted for as debt at 31 March 2011. Further details of the accounting treatment of the Bonds are set out later in this Half Year Statement.

At 16 May 2011

The unaudited net asset value per share at 16 May 2011 was calculated on the basis of the net asset value at 31 March 2011 adjusted to reflect the purchases and sales of investments, currency movements and bid values on that day in respect of listed investments.

Return on Equity

Return on Equity is the internal rate of return based on the difference between the opening and closing net asset value plus any dividend paid in the period.  The annualised return on equity for the five years ended 31 March 2011 was 9.7% (diluted) and 10.6% (basic).

The Half Year Report for the six months ended 31 March 2011 will be available on the Company's website www.electraequity.com shortly.

Chairman's Statement

Overview

In my statement for the year to 30 September 2010 I reported an excellent portfolio performance culminating in a record net asset value per share. Electra has continued to make good progress in the six months to 31 March 2011 and current trading of our portfolio companies is strong. As a consequence, valuations have been increased enabling Electra to report another rise in net asset value. In addition, Electra's investment capacity was considerably strengthened as a result of the successful £100 million Convertible Bond issue.

Results

Electra's diluted net asset value per share was 2,193p at 31 March 2011, up 6.9% over the six months and up 15.4% over the year. The FTSE All-Share Index increased by 7.0% and 5.4% respectively.

Over the five years to 31 March 2011, the diluted net asset value per share, inclusive of special dividends, increased by 57.7% and Electra achieved an annualised return on equity of 9.7% on a diluted basis.

Electra's share price increased by 21.6% over the six months to 31 March 2011 and by 83.3% over ten years, while the FTSE All-Share Index increased by 13.1% over ten years.

Investment Activity

In the six months to 31 March 2011 Electra Partners considered over 50 new investment opportunities and invested a total of £73 million in the period compared to £45 million in the previous six months. Of the deals completed, £26 million was in respect of Daler-Rowney, one of the world's largest suppliers of fine art materials, and £37 million was in respect of Sentinel Performance Solutions, the European market leader in the supply of treatment products for hot water systems. Shortly after 31 March 2011, the investment in Daler-Rowney was reduced to £17 million following an investment by the Electra Partners Club 2007 fund. In addition, the investment in Sentinel was reduced after 31 March 2011 to £16 million following the securing of medium-term banking finance.

During the six months £82 million was received from the sale of investments, an increase from the £50 million realised in the previous six months. Of the £82 million, £54 million related to the investment in Rio Trens Corporation, details of which were in my last statement.

Convertible Bond Issue and Liquidity

In December 2010 Electra issued £100 million of 5% Subordinated Convertible Bonds through a placing and open offer for the purpose of expanding the capital base of the Company and enhancing the operational flexibility of debt facilities.

Following receipt of the Bond proceeds, at 31 March 2011 Electra had net liquid resources of £137 million giving an investment capacity of over £300 million.

Board Changes

As reported in my last statement, Kate Barker joined the Board in November 2010. Kate was, until May 2010, a member of the Monetary Policy Committee of the Bank of England, on which she served for three terms, and brings a wealth of experience and political expertise to the Board. Geoffrey Cullinan, who was appointed a Director in January 2011, was a Director of Bain & Company from 1997 to 2005 and was the founder and leader of their private equity business in Europe. He was formerly Chief Executive of Hamleys plc and Senior Non-executive Director of Datamonitor PLC.

Ron Armstrong and Peter Williams both retired as Directors at the Annual General Meeting held in February 2011.

Lucinda Webber, who has been a Director since 2007, was appointed Senior Independent Director and Chairman of the Remuneration and Nomination Committee in March 2011.

Outlook

Electra's portfolio has shown considerable resilience during the downturn. Electra Partners has extensive experience of investing through a number of economic cycles, a strong market position and a flexible approach to structuring transactions. As the UK economy starts to recover, the Board believes these attributes, together with our increased investment capacity, will enable Electra to benefit from new investment opportunities and continue to achieve attractive returns for shareholders.

Dr Colette Bowe

23 May 2011

Objective and Investment Policy

Electra has been quoted on the London Stock Exchange since 1976. Electra is managed as an HM Revenue and Customs approved investment trust, and invests primarily in the private equity mid-market.

The business and affairs of Electra are managed on an exclusive and fully discretionary basis by Electra Partners, an independent private equity fund manager with over 25 years experience in the mid-market.

Electra's objective is to achieve a rate of return on equity of between 10-15% per year over the long term by investing in a portfolio of private equity assets.

Electra Partners aims to achieve this target rate of return on behalf of Electra by utilising a flexible investment strategy and:

- exploiting a track record of successful private equity investment;

- utilising the proven skills of its management team with a strong record of deal flow generation and long-term presence in the private equity market;

- targeting private equity opportunities (including direct investment, fund investments and secondary buyouts of portfolios and funds) so that the perceived risks associated with such investments are justified by expected returns;

- investing in a number of value creating transactions with a balanced risk profile across a broad range of investment sectors through a variety of financial instruments; and

- actively managing its capital position and levels of gearing in light of prevailing economic conditions.

The investment focus is principally on Western Europe, with the majority of investments made in the United Kingdom where Electra Partners has historically been most active. There is an emphasis on areas where Electra Partners has specific knowledge and expertise. In circumstances where Electra Partners feels that there is merit in gaining exposure to countries and sectors outside its network and expertise, consideration is given to investing in specific funds managed by third parties or co-investing with private equity managers with whom it has developed a relationship.

In implementing Electra's flexible investment strategy, Electra Partners typically targets investments at a cost of £20 million to £75 million in companies with an enterprise value of £50 million to £200 million.

Electra Partners attempts to mitigate risk through portfolio diversification. Investments will therefore be made across a broad range of sectors and industries and not more than 15% of Electra's net asset value, at the time of investment, will be invested in any single investment. If Electra acquires a portfolio of companies in a single transaction, this limitation shall be applied individually to each of the underlying companies purchased and not to the portfolio as a whole.

Electra has a policy to maintain total gearing below 40% of its total assets.

Unless required to do so to maintain Electra's investment trust status, it is the policy of the Directors not to pay dividends.

The Manager

As at 31 March 2011, Electra Partners had funds under management of £1.2 billion on behalf of Electra and other clients. Over the last 20 years Electra Partners has invested in excess of £3 billion in private equity investments, accumulating considerable expertise and building a strong track record.

The majority of Electra Partners' senior management have worked together for 20 years. They are supported by the investment team who average over 17 years in private equity, and are backed by a 24-strong team skilled in finance, compliance, investor relations and marketing.

Alex Fortescue joined Electra Partners in April 2011 as Chief Investment Partner. He has extensive private equity experience having worked at Apax for over ten years, most recently as Global Head of their Retail and Consumer Group.

Senior Management Team		Years of private equity experience
Hugh Mumford	Managing Partner	29
Tim Syder	Deputy Managing Partner	25
David Symondson	Deputy Managing Partner	26
Alex Fortescue	Chief Investment Partner	13
Rhian Davies	Partner	17
Philip Dyke	Partner	37
Steve Ozin	Partner	21
Investment Team		Years of private equity experience
Alex Cooper-Evans	Investment Partner	16
Ian Dyke	Investment Partner	12
Charles Elkington	Investment Partner	16
Nigel Elsley	Investment Partner	20
Roger Isaac	Investment Partner	23
John Martin	Investment Manager	8
Sarah Williams	Investment Manager	8
Peter Carnwath	Portfolio Manager	28
Oliver Huntsman	Portfolio Manager	27
John Levack	Portfolio Manager	20

Portfolio Overview

As at 31 March 2011 Electra's portfolio consisted of investments in companies and other investment vehicles (the "investment portfolio") valued at £792 million. At that date, the Company had net liquid resources of £137 million, comprising £28 million cash, £275 million liquidity funds, and borrowings under its multi-currency facility of £166 million.

The investment portfolio consisted primarily of direct investments in unlisted and listed companies together with investments in funds where investments are held in limited partnerships managed by other private equity managers acquired either at the establishment of the limited partnership fund or subsequently as a secondary investment. Electra will normally invest in unlisted companies but may invest in listed companies when the management team, which Electra wishes to support, operates through a listed vehicle. Listed investments may also be held where they arise from previously unlisted investments and continue to generate the returns required under Electra's investment objectives. Investments in funds are made principally to gain exposure to geographic areas outside the UK and which, because of the relationship with the fund manager, are likely to generate co-investment opportunities for Electra.

As at 31 March	2011	2010
	£m	£m
Direct Investments *
- unlisted	572	462
- listed	112	121
Funds	108	88
Investment portfolio	792	671

* Includes secondaries and excludes accrued income of £40,188,000 (2010: £26,704,000)

At 31 March 2011 Electra held direct investments in 58 companies with an aggregate value of £684 million and investments in 21 funds with an aggregate value of £108 million.

The top ten and twenty investments account for 51% and 71% respectively of the investment portfolio.

Geographically, 60% of the investment portfolio was situated in the UK, 32% in Continental Europe, 3% was based in the USA and 5% in Asia and elsewhere.

Valuation Basis of Investment Portfolio - £572m

(Includes direct unlisted investments and secondaries)

	31 Mar 2011	31 Mar 2010
	%	%
Earnings basis	67	60
Recent cost / listed price	12	22
Yield basis	10	11
Sale / loan value	5	3
Other basis	6	4

Age Analysis of Investment Portfolio - £572m

(Includes direct unlisted investments and secondaries)

	31 Mar 2011	31 Mar 2010
	%	%
Less than 1 year old	14	26
1 - 2 years	25	13
2 - 3 years	12	42
Over 3 years	49	19

Classification and Distribution of the Investment Portfolio

	31 Mar 2011	31 Mar 2010
	%	%
Agricultural	11	14
Building and construction	7	6
Healthcare	9	12
Listed private equity funds	3	4
Non-cyclical consumer goods	17	11
Other	2	3
Oil & Gas	1	-
Private Equity Funds	14	13
Property Investment	14	15
Speciality engineering	5	7
Speciality Finance	13	10
Software and computing	4	4
Transport	-	1

Investment Review

The six month period to 31 March 2011 saw continued growth in the investment portfolio with a consequent increase in the diluted net asset value from 2,050p at 30 September 2010 to 2,193p at 31 March 2011. In general, the portfolio made sound all round progress despite the weakness in the UK and European economies as a whole.

Analysis of Movement in Net Asset Value

	£m
30 September 2010 Opening NAV	725
Income	18
FX loss on loans	(3)
Priority profit share	(8)
Other expenses	(1)
Derivative value moment	1
Finance costs	(8)
Net capital gain on investments	67
Issue of Convertible Bond	23
Provisions/payments	(5)
31 March 2011 Closing NAV	809

The changes during the six months are given in the table below together with comparative figures.

Portfolio Movement (excluding cash)

	6 months to 31 Mar 2011 £m	6 months to 31 Mar 2010 £m	6 months to 31 Mar 2009 £m
Opening investment portfolio	734	547	505
Investments	73	138	62
Realisations	(82)	(75)	(18)
Net capital increase/(decrease)	67	61	(79)
Closing investment portfolio*	792	671	470

* Excludes accrued income on the investment portfolio of £40m (2010: £27m, 2009: £8m)

During the six month period to 31 March 2011 the investment portfolio rose from £734 million to £792 million, an increase of £58 million resulting from net appreciation of £67 million and an excess of realisations from the portfolio over new investment of £9 million.

Investment

In the six months to 31 March 2011 investments totalled £73 million compared to £138 million in the corresponding period of the previous year. While actual investment was therefore lower than the comparative six month period last year, investment activity in terms of dealflow showed some improvement.

New investment in the six month period included Sentinel Performance Solutions and Daler-Rowney. Electra invested £36.8 million for a significant position in Sentinel which supplies products to increase the performance and efficiency of residential heating and hot water systems. Sentinel has a strong market position and has good opportunities for growth from both new products and the geographic expansion of sales. Daler-Rowney, in which Electra invested £26.2 million, again for a significant position, is the world's third largest supplier of fine art materials. Daler-Rowney has a strong management team, good defensive characteristics in the business and significant opportunities to expand through consolidation in its marketplace. After 31 March 2011 the investment in Sentinel was reduced to £15.9 million following the securing of medium-term bank finance and the investment in Daler-Rowney was reduced to £17.4 million following an investment by Electra Partners Club 2007. This co-investment vehicle, also managed by Electra Partners, is of benefit to Electra as it enables the Company to participate in investments where a control position is held between Electra and the co-investment vehicle.

As well as these two new investments a further £8 million was called down by private equity funds in which Electra is a limited partner. At 31 March 2011 Electra had commitments to third party funds of £87 million which we expect will be funded substantially from realisation proceeds received from third party funds.

Realisations

Total realisations for the six months amounted to £82 million which included £54 million in respect of Rio Trens Corporation. As previously reported, this sale marked the successful conclusion of a deal where the original investment was made in 1996 and a substantial restructuring has taken place over the past few years. The period also saw the redemption of the Baxi mezzanine position with proceeds of £11.4 million being received against a cost two years earlier of £3.5 million. £10.2 million was received from the sale of two companies from Electra's portfolio of secondary holdings - investments where Electra acquired an existing limited partnership interest in a private equity fund. In addition, a further £6.6 million was received from other private equity funds during the period.

Performance

Over the six months to 31 March 2011 the valuation of Electra's investment portfolio increased in capital terms by £67.4 million. In addition, the portfolio generated income of £17.3 million. Including income, the portfolio achieved a return of £84.7 million, an 11.0% return in the half year.

Of the capital increases of £67 million, £59 million resulted from unrealised appreciation in respect of the direct unlisted portfolio. Of this amount, £34 million reflected an increase in profitability of portfolio companies, £12 million reflected a net increase in earnings multiples and changes in yield with the balance from corporate activity including debt repayment. A further £8 million of gains arose from an increase of £12 million in the value of private equity funds and secondaries offset by a £4 million reduction from listed investments.

Exclusive of accrued income, the largest individual gain in the six month period related to Allflex where continuing strong profit growth produced an uplift in value of £14.5 million. BDR Thermea also continued to perform strongly following the recent merger with £10.7 million being added to the value at the half year. Elsewhere notable gains were also recorded in respect of Capital Safety and esure to reflect positive profit performance and Promontoria to take account of further restructuring of its property portfolio.

Largest Valuation Changes

Company	Valuation at 31 Mar 2011 £m	Valuation  Increase/(Decrease) £m	Change %
Increases
Allflex	86.4	14.5	20.1
BDR Thermea	61.8	10.7	20.9
Esure	39.8	4.4	12.4
Promontoria	39.0	4.0	11.4
Decreases
Moser Baer	5.7	(3.8)	(39.8)

Prospects

The current portfolio is performing well. We believe the period ahead will present Electra with excellent investment opportunities in view of issues faced by many UK businesses in raising capital in the current economic climate. Our increased investment resources have already been put to good use and with some £300 million available to invest, we have the capacity to take advantage of opportunities as they arise.

Hugh Mumford

Managing Partner

Electra Partners LLP

23 May 2011

Key New Investments and Realisations

Investments

Sentinel Performance Solutions

Location: UK

Equity Ownership: 50%

Valuation: £36,816,000

Cost: £36,816,000

Valuation based on price of recent transaction

In February 2011 Electra acquired Sentinel Performance Solutions for £43 million in an equity only transaction. Sentinel is based in Runcorn and supplies treatment products to improve the performance and efficiency of residential heating and hot water systems. Formerly part of GE, Sentinel was bought out in 2005 by The Riverside Company. Since then the company has shown a strong track record in new product development and has developed its market-leading positions in the UK, France, Germany and Italy. Sentinel currently has approximately £17 million of turnover and around 50 employees.

With regulation and energy efficiency targets as the key drivers, the strategy will be to grow the company organically, through greater market penetration in Europe and new product development, and by acquisition.

Electra subsequently sold one third of its investment in Sentinel to the Electra Partners Club 2007 fund, and after 31 March 2011 the remaining investment was refinanced with £21 million of medium term banking finance leaving Electra with a £15.9 million net investment in Sentinel.

Daler-Rowney

Location: International

Equity Ownership: 61.7%

Valuation: £26,170,000

Cost: £26,170,000

Valuation based on price of recent transaction

Electra invested £26.2 million in the buyout of Daler-Rowney in March 2011. Daler-Rowney is one of the largest suppliers of fine art materials in the world with a comprehensive product range including artists' paints, brushes, papers and canvases which meet the needs of beginner, amateur, student and professional artists. The company manufactures its products in the UK and the Dominican Republic and exports to over 90 countries worldwide.

The fine art materials market is a niche market with high barriers to entry around products, brands and supply chain complexity. Daler-Rowney owns a number of strong heritage brands which command high levels of consumer loyalty. The business strategy is based on further developing market share in established core markets in the US and Continental Europe and on increasing penetration in other markets; this will be achieved through continued investment in sales infrastructure and product development.

In April 2011 Electra sold one third of its investment in Daler-Rowney to the Electra Partners Club 2007 fund, leaving Electra with a £17.4 million investment in the company.

Realisations

Rio Trens Corporation

In 1998 Electra first invested in Rio Trens Corporation ('RTC') which has an investment in a Brazilian transportation company operating 159 trains on a 225km network serving 89 stations. Electra invested US$25 million in the company between 1998 and 2000.

Following a series of financial and operational difficulties the investment was written off by Electra in 2000. Subsequently, changes were made to the management and during the last year Electra invested a further £17.3 million to aid the company's ongoing investment programme to improve the network and capacity.

With the forthcoming World Cup and Olympics in Brazil, the concession attracted interest and Electra accepted an offer for its shareholding in RTC in November 2010, receiving £54 million of proceeds.

Key Direct Unlisted Investments

Company	Fair Value of holding at 30 Sept 2010 £'000	Net purchases/(sales) £'000	Performance in period £'000	Fair Value of holding at 31 Mar 2011 £'000	Cost of holding at 31 Mar 2011 £'000
Allflex Holdings	71,924	-	14,486	86,410	40,482
Animal identification tags
BDR Thermea	62,500	(11,370)	10,705	61,835	44,347
Heating products
esure	35,376	-	4,376	39,752	29,733
Motor and home insurance
Promontoria	36,304	(1,333)	4,004	38,975	15,146
Property holding company
Sentinel Performance Solutions	-	36,816	-	36,816	36,816
Heating system treatment products
Premier Asset Management	31,823	-	-	31,823	55,785
Investment management
Daler-Rowney	-	26,170	-	26,170	26,170
Fine art materials supplier
Nuaire	20,146	-	2,624	22,770	23,138
Ventilation systems manufacturer
Capital Safety Group	17,919	8	3,629	21,556	17,594
Specialist safety equipment
Lil-lets Group	21,149	-	-	21,149	21,412
Feminine hygiene products
Labco	15,444	233	3,371	19,048	24,189
Medical diagnostics
Pine	15,000	282	993	16,275	14,500
Nursury school finance
CPA Global	13,901	-	2,355	16,256	13,901
Patent renewals management
Volution (Vent-Axia)	15,840	-	-	15,840	15,840
Fan manufacturer
CH-Pharma	13,873	-	-	13,873	5,300
Contract pharmaceuticals manufacturer
Kalle	11,088	(27)	1,976	13,037	9,004
Food casings
Amtico	12,375	51	(51)	12,375	22,326
Luxury flooring manufacturer
SAV Credit	12,000	-	(200)	11,800	24,198
Credit card operator
Sub total	406,662	50,830	48,268	505,760	439,881
Other investments (29)	115,215	(61,805)	12,654	66,064
Total Direct Unlisted Investments*	521,877	(10,975)	60,922	571,824

* Includes secondaries and excludes funds, liquidity funds and accrued income

Key Direct Listed Investments

Company	Fair Value of holding at 30 Sept 2010 £'000	Net purchases/(sales) £'000	Performance in period £'000	Fair Value of holding at 31 Mar 2011 £'000	Cost of holding at 31 Mar 2011 £'000
London & Stamford Property	33,561	-	3,564	37,125	30,195
Property holding company
Zensar Technologies	23,971	-	(1,413)	22,558	4,211
Software
Dinamia	12,245	2	6	12,253	15,048
Spanish private equity
Sub total	69,777	2	2,157	71,936	49,454
Other investments (8)	46,258	-	(6,117)	40,141
Total Direct Listed Investments *	116,035	2	(3,960)	112,077

* Excludes accrued income

Key Fund Investments

	Fair Value of holding at 30 Sept 2010 £'000	Net purchases/(sales) £'000	Performance in period £'000	Fair Value of holding at 31 Mar 2011 £'000	Cost of holding at 31 Mar 2011 £'000
Funds (21)	95,686	1,813	10,539	108,038	113,547

The three largest funds were Cognetas Fund II LP, Sinergo Con Imprenditori and Duke Street Capital VI No1 Limited Partnership, which accounted for 55% of the total value. The 21 funds held a total of 138 investments.

Large Private Equity Investments

Allflex Holdings

Location: International

Equity Ownership: 33.0%

Valuation: £86,410,000

Cost: £40,482,000

Valuation based on multiple of earnings

In 1998 Electra invested £23.1 million in the US$160 million buyout of Allflex. Allflex is the world's leading manufacturer and distributor of plastic and electronic animal identification tags ("Rfid") with factories in France, Brazil and China. In August 2007 the business was refinanced with Electra retaining a significant ongoing holding in the business.

In the year ended 31 December 2010, Allflex generated sales of $222.1 million (2009: $187.4 million).

The business showed strong growth in 2010 as a result of increased sales of electronic tags, both in Europe, where new sheep identification legislation has been implemented, and in New Zealand. A number of small complementary acquisitions have been completed in the last 18 months.

BDR Thermea

Location: International

Equity Ownership: 6.0%

Valuation: £61,835,000

Cost: £44,347,000

Valuation based on multiple of earnings

In 2004 Electra re-invested £14.9 million in the buyout of Baxi Group. Through this investment Electra maintained an exposure to a business considered to have good long term growth potential.

In October 2009 Baxi combined with De Dietrich Remeha Group to create a leading player in the European heating market. The combined group, now known as BDR Thermea, is active in 70 countries with around 6,300 employees and an annual turnover of nearly €1.8 billion.  BDR Thermea is progressing well, despite economic conditions, with synergies beginning to be realised.  In January 2011 the group refinanced its existing debt facilities, which allowed the repayment of £11.5 million of mezzanine debt held by Electra.

esure

Location: UK

Equity Ownership: 7.0%

Valuation: £39,752,000

Accrued income: £720,000

Cost: £29,733,000

Valuation based on multiple of net assets (esure) / earnings (Gocompare)

In February 2010 Electra invested £30 million in the management buyout of esure from Lloyds Banking Group, led by Peter Wood, founder and CEO of esure. The transaction was unleveraged and the total value was in excess of £185 million.

Founded in 2000 as a joint venture between the then Halifax plc and Peter Wood (who previously founded Direct Line at RBS), esure is now one of the UK's leading motor insurers, offering car, home, pet and travel insurance over the internet and by phone through the esure and Sheilas' Wheels brands. esure also has a 50% interest in Gocompare, the internet aggregator.

The motor insurance market has faced a number of challenges in recent years, including an increase in personal injury claims and unusually bad weather in January and December 2010, but there are now clear signs that market conditions are improving with significant premium increases reported in 2010. This, together with management's actions, is expected to have a positive impact on underwriting performance and overall profitability in 2011.

Promontoria

Location: Germany

Equity Ownership: 10.7%

Valuation: £38,975,000

Accrued income: £847,000

Cost: £15,146,000

Valuation based at a discount to the rental or expected disposal value

Promontoria is an unleveraged investment company which owns 100 retail properties situated throughout the major towns and cities in Germany, of which 83 are leased to the discount chain Deutsche Woolworth.
 
The company has continued to progress over the past six months. Its major tenant, Deutsche Woolworth, has been significantly restructured and as a result demonstrated a healthy level of profits combined with a strong balance sheet. The development of certain vacated properties is progressing well and circa 43,000 m² of retail space has been leased to third parties over the past 12 months.
 
Promontoria is valued on the basis of its underlying assets - either on a 7.5% actual yield (supported by a recent DTZ valuation) or on a discount (10-15%) to the expected proceeds arising on realisation or development.

Premier Asset Management

Location: UK

Equity Ownership: 73.7%

Valuation: £31,823,000

Accrued income: £3,066,000

Cost: £55,785,000

Valuation based on multiple of earnings

Premier is a retail fund manager distributing funds through IFAs as well as other discretionary and advisory channels. Electra backed Premier in 2007 and in 2009 made a further investment of £23.6 million in order to support the acquisition of two OEICs from Aberdeen Asset Management.

This acquisition has allowed Premier to capture cost synergies through the integration of fund management and administration onto a single platform. Further investment in systems this year will strengthen the company's operations and achieve some additional cost savings.

Looking to the future, the company is well positioned for organic growth based on its IFA market positioning and distribution infrastructure, as well as the long-term growth nature of the retail investment market. The company's strategy is to accelerate organic growth by selective recruitment and by making further acquisitions.

At 31 March 2011 Premier had funds under management of £2.4 billion (30 September 2010: £2.5 billion).

Nuaire

Location: UK and France

Equity ownership 38.8%

Valuation: £22,770,000

Cost: £23,138,000

Valuation based on multiple of earnings

In April 2007, Electra led the £83 million management buyout of Nuaire. Nuaire is the leading UK based manufacturer and distributor of ventilation equipment for commercial and residential applications, with factories in Caerphilly, South Wales and St Brisson-sur-Loire, France.

Nuaire had encouraging half year trading, delivering profits ahead of budget and of the prior year period, however the market remains competitive. Nuaire's management continue to review all aspects of the business with the objective of maintaining and growing profitability.

Capital Safety Group

Location: International

Equity Ownership: 10%

Valuation: £21,556,000

Accrued income: £4,892,000

Cost: £17,594,000

Valuation based on multiple of earnings

Electra originally invested in the buyout of Capital Safety Group ('CSG') in 1998 and Electra's initial investment was predicated on transforming the business from one with a regional focus into an international brand.

CSG manufactures harnesses, lifelines and anchors for people working at height in a wide range of end user sectors including manufacturing, construction, oil and gas, and utilities. Following the sale of the investment in 2007, Electra reinvested in the business to benefit from the continued growth forecast in the fall protection market and complementary acquisitions.

In the year ended 31 March 2011 the business generated turnover of $246 million (2010: $199 million). As a result of the significant increase in turnover, following a recovery in the majority of its end markets, EBITDA increased to $65 million (2010: $50 million). The company continues to focus on winning market share and cost control, as well as attacking new markets such as wind power.

In addition, a number of small acquisitions have been completed in adjacent markets and the Group is reviewing a number of other acquisition targets.

Lil-lets Group

Location: UK and South Africa

Equity Ownership: 61.7%

Valuation: £21,149,000

Accrued income: £16,510,000

Cost: £21,412,000

Valuation based on multiple of earnings

In 2006 Electra invested in the management buyout of Lil-lets from Accantia. Lil-lets is best known for its branded non-applicator tampons and has operations in the UK and South Africa.

In the UK the company has focused on promotional activity, on strengthening its sales team and on improving distribution in order to protect its market share. This defensive strategy has been largely successful over the past two years. Having recently appointed a new CEO, the company is now focusing on its brand and consumer marketing strategies as well as new product development to drive sales growth and to maximise profitability.

After four years of continuous growth, the South African market is becoming challenging with high commodity prices squeezing household incomes. Nevertheless South Africa remains a growth market in which Lil-lets is a leader and the company continues to benefit from product and operating cost improvements and is targeting entry into a number of sub-Saharan markets.

Group net sales in the year to 31 December 2010 were £38.6 million (2009: £37.7 million).

Labco

Location: Europe

Equity Ownership: 4.6%

Valuation: £19,048,000

Cost: £24,189,000

Valuation based on multiple of earnings

In July 2008, Electra invested €30 million in the circa €150 million equity capital increase by Labco SAS.

Labco is Europe's largest private network of clinical laboratories. Labco has a presence in six European countries with over 400 senior chemists or doctors and 0.5 million tests are performed per day for 15,000 referring physicians serving 10 million patients each year.

Trading in the year to 2010 was in line with expectations with revenue marginally above 2009 at circa €430 million. While the market remains challenging in the face of European wide austerity measures, the company saw testing volumes increasing in key markets in Q4. In January 2011 Labco successfully issued a €500 million high yield bond, refinancing its bank facilities and providing additional funding lines. This will further support Labco's acquisition strategy as it participates in the European consolidation of the diagnostic laboratory market.

PINE

Location: UK

Equity Ownership: 98.6%

Valuation: £16,275,000

Cost: £14,500,000

Valuation represents a combination of property investment value and a multiple of earnings

PINE is made up of a nursery school operating business and a portfolio of nursery schools let on index-linked leases to nursery school operators who are ranked in the top ten in the UK.

The rental income from the investment portfolio has grown strongly in line with RPI over the past year and both occupancy levels and revenues continue to increase in the operating business.

Half Year Management Report

Current and Future Development

A review of the main features of the six months to 31 March 2011 is contained in the Chairman's Statement, the Portfolio Overview and Investment Review which are on pages 3 to 4 and 7 to 10.

Performance

A detailed review of performance during the six months to 31 March 2011 is contained in the Portfolio Overview and Investment Review on pages 7 to 10.

Risk Management

As Electra is focused on investment in private equity assets, Electra Partners aims to limit the risk attaching to the portfolio as a whole by careful selection of investments and by a spread of holdings in terms of overall portfolio analysis, age and geographic split in accordance with Electra's Objective and Investment Policy.

The principal risks faced by Electra include Market Price Risk, Credit Risk, Interest Rate Risk, Liquidity Risk and Foreign Currency Risk as set out in Note 17 in the Notes to the Accounts of Electra's Report and Accounts for the year ended 30 September 2010. In addition Electra is also focused on Macroeconomic Risks, Gearing Risks of Zero Dividend Preference shares, Long-Term Strategic Risk, Government Policy and Regulation Risk, Investment Risks, Valuation Risk and Operational Risk as set out in the Report of the Directors of Electra's Report and Accounts for the year ended 30 September 2010. Additional risks which arose in the six months to 31 March 2011 relate to the Gearing Risks of the Subordinated Convertible Bonds.

Gearing Risks of Subordinated Convertible Bonds ('Bonds')

In December 2010 Electra issued £100 million of 5% Subordinated Convertible Bonds. The principal gearing risk of these Bonds is that they rank prior to the Company's ordinary shares until final redemption in 2017 unless they are converted into ordinary shares. Secondary risks relate to whether the cost and terms of this gearing are appropriate. The Board regularly monitors and reviews the impact of the Bonds and their cost to the Company.  

Forward-looking Statement

Certain statements in this Half Year Report are forward-looking. Although Electra believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. Electra undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

Responsibility Statement

The Directors confirm to the best of their knowledge that:

a) the financial statements have been prepared in accordance with IAS 34 as adopted by the European Union; and

b) the Half Year Management Report includes a fair review of the information required by the FSA's Disclosure and Transparency Rules (4.2.7R and 4.2.8R).

By order of the Board of Directors

Dr Colette Bowe

23 May 2011

Independent Review Report

To Electra Private Equity PLC

Introduction

We have been engaged by the Company to review the financial statements in the Half Year Financial Report for the six months ended 31 March 2011, which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity, Consolidated Balance Sheet, Consolidated Cash Flow Statement and related Notes. We have read the other information contained in the Half Year Financial Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the financial statements.

Directors' responsibilities

The Half Year Financial Report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Half Year Financial Report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The financial statements included in this Half Year Financial Report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the financial statements in the Half Year Financial Report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the financial statements in the Half Year Financial Report for the six months ended 31 March 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP
Chartered Accountants
London

23 May 2011

Notes:

(a) The maintenance and integrity of the Electra Private Equity PLC website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the Half Year Financial Report since it was initially presented on the website.

(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Consolidated Income Statement (unaudited)

	For the six months ended 31 March			2011			2010
		Revenue	Capital	Total	Revenue	Capital	Total
Note		£'000	£'000	£'000	£'000	£'000	£'000
	Profit on investments: Investment income/net gain	17,338	68,130	85,468	19,121	57,606	76,727
	(Losses)/Profit on revaluation of foreign currencies	-	(3,914)	(3,914)	-	4,892	4,892
		17,338	64,216	81,554	19,121	62,498	81,619
	Other Income	234	-	234	234	-	234
	Incentive schemes	-	(5,243)	(5,243)	-	(4,155)	(4,155)
	Priority profit share	(8,112)	-	(8,112)	(6,396)	-	(6,396)
	Other expenses	(1,188)	-	(1,188)	(1,803)	-	(1,803)
	Net Profit  before Finance Costs and Taxation	8,272	58,973	67,245	11,156	58,343	69,499
	Movement on fair value of derivatives	934	-	934	(958)	-	(958)
	Other finance costs	(6,034)	(1,705)	(7,739)	(3,954)	(1,546)	(5,500)
	Profit on Ordinary Activities before Taxation	3,172	57,268	60,440	6,244	56,797	63,041
	Taxation credit	-	65	65	1,613	189	1,802
	Profit on Ordinary Activities after Taxation attributable to owners of the parent	3,172	57,333	60,505	7,857	56,986	64,843
3	Basic Earnings per Ordinary Share	8.98p	162.24p	171.22p	22.23p	161.26p	183.49p
3	Diluted Earnings per Ordinary Share	7.89p	142.56p	150.45p	22.23p	161.26p	183.49p

The 'Total' columns of this statement represent the Group's Income Statement prepared in accordance with International Financial Reporting Standards adopted by the EU ("IFRS"). The supplementary Revenue and Capital columns are both prepared under guidance published by the Association of Investment Companies.

The amounts dealt with in the Consolidated Income Statement are all derived from continuing activities.

Consolidated Statement of Comprehensive Income (unaudited)

	For the six months ended 31 March			2011	2010
				£'000	£'000
	Profit for the period			60,505	64,843
	Other comprehensive profit for the period, net of tax
	Exchange differences arising on consolidation			459	(1,305)
	Total Comprehensive Income for the period			60,964	63,538
	Total Comprehensive Income attributable to owners of the parent			60,964	63,538

Consolidated Statement of Changes in Equity (unaudited)

	For the six months ended 31 March 2011	Called-up Share capital	Share premium	Capital redemption reserve	Other reserves	Translation reserve	Realised capital profits/ (losses)	Unrealised capital profits/ (losses)	Revenue reserves	Total Shareholdes' Funds
Note		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
6	Total equity at 1 October 2010	8,835	24,147	34,440	-	(3,936)	810,981	(175,434)	25,498	724,531
	Profit/ (loss) for the period	-	-	-	-	-	(14,825)	72,158	3,172	60,505
6	Exchange differences arising on consolidation	-	-	-	-	459	-	-	-	459
6	Convertible Bond issue	-	-	-	23,046	-	-	-	-	23,046
6	Conversion of Convertible Bond	-	22	-	-	-	-	-	-	22
	Total Equity attributable to the owners of the parent at   31 March 2011	8,835	24,169	34,440	23,046	(3,477)	796,156	(103,276)	28,670	808,563

Consolidated Statement of Changes in Equity (unaudited)

	For the six months ended 31 March 2010	Called-up Share capital	Share premium	Capital redemption reserve	Other reserves	Translation reserve	Realised capital profits/ (losses)	Unrealised capital profits/ (losses)	Revenue reserves	Total Shareholders' Funds
Note		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
6	Total equity at 1 October 2009	8,835	24,147	34,440	-	(3,375)	780,882	(260,916)	23,940	607,953
	Profit/ (loss) for the period	-	-	-	-	-	4,528	52,458	7,857	64,843
6	Exchange differences arising on consolidation	-	-	-	-	(1,305)	-	-	-	(1,305)
	Total Equity attributable to the owners of the parent at 31 March 2010	8,835	24,147	34,440	-	(4,680)	785,410	(208,458)	31,797	671,491

Consolidated Balance Sheet (unaudited)

			As at 31 March 2011		(Audited) As at 30 September 2010		As at 31 March 2010
Note		£'000	£'000	£'000	£'000	£'000	£'000
	Non-Current Assets
	Investments held at fair value:
	Unlisted and listed		831,974		765,801		698,008
	Other investments		275,153		174,889		154,044
			1,107,127		940,690		852,052
	Current Assets
	Trade and other receivables	3,237		2,576		2,837
	Current tax asset	600		51		51
	Cash and cash equivalents	27,928		36,947		62,099
		31,765		39,574		64,987
	Current Liabilities
	Current tax liability	99		158		-
	Derivative financial instrument	614		1,549		1,347
	Trade and other payables	6,021		4,918		4,469
		6,734		6,625		5,816
	Net Current Assets		25,031		32,949		59,171
	Total Assets less Current Liabilities		1,132,158		973,639		911,223
	Non-Current Liabilities
	Zero Dividend Preference Shares	51,265		49,560		47,899
	Bank loans	166,008		163,945		168,212
	Deferred tax liability	176		245		-
4	Convertible Bond	73,919		-		-
	Provisions for liabilities and charges	32,227		35,358		23,621
			323,595		249,108		239,732
	Net Assets		808,563		724,531		671,491
	Capital and Reserves
5	Called up share capital		8,835		8,835		8,835
6	Share premium	24,169		24,147		24,147
6	Capital redemption reserve	34,440		34,440		34,440
6	Other reserves	23,046		-		-
6	Translation reserve	(3,477)		(3,936)		(4,680)
6	Realised capital profits	796,156		810,981		785,410
6	Unrealised capital losses	(103,276)		(175,434)		(208,458)
6	Revenue reserve	28,670		25,498		31,797
			799,728		715,696		662,656
	Equity attributable to owners of the parent		808,563		724,531		671,491
7	Basic Net Asset Value per Ordinary Share		2,287.97p		2,050.25p		1,900.16p
7	Diluted Net Asset Value per Ordinary Share		2,192.63p		2,050.25p		1,900.16p
	Ordinary Shares in issue		35,339,760		35,338,687		35,338,687

The notes on pages 26 to 31 are an integral part of the financial statements.

Consolidated Cash Flow Statement (unaudited)

For the six months ended 31 March		2011		2010
	£'000	£'000	£'000	£'000
Operating activities
Purchase of investments	(72,923)		(83,130)
Purchase of other investments	(251,200)		(55,000)
Amounts paid under incentive schemes	(8,374)		(1,380)
Sales of investments	82,574		34,590
Sales of other investments	151,000		131,000
Dividends and distributions received	1,629		674
Other investment income received	7,810		5,219
Interest income received	86		113
Other income received	148		148
Expenses paid	(11,845)		(8,570)
Taxation (expense)/refund	(660)		1,203
Net Cash (Outflow)/Inflow from Operating Activities		(101,755)		24,867
Financing Activities
Bank loans drawn	5,049		-
Bank loans repaid	(5,203)		-
Issue of additional Zero Dividend Preference shares	-		4,459
Issue of Convertible Bond	96,290		-
Finance costs paid	(3,686)		(3,495)
Net Cash Inflow from Financing Activities		92,450		964
Changes in cash and cash equivalents		(9,305)		25,831
Cash and cash equivalents at 1 October		36,947		36,500
Translation difference		286		(232)
Cash and Cash Equivalents at 31 March		27,928		62,099

Notes to the Accounts

1  Basis of Accounting

The Half Year Report is unaudited and does not constitute financial statements within the meaning of Section 434 of the Companies Act 2006.

The statutory accounts for the year ended 30 September 2010, which were prepared in accordance with International Financial Reporting Standards, as endorsed by the European Union ("IFRS") and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, have been delivered to the Registrar of Companies. The Auditor's opinion on those accounts was unqualified and did not contain a statement made under Section 498(2) or Section 498(3) of the Companies Act 2006.

The financial information comprises the Consolidated Balance Sheets as at 31 March 2011, 30 September 2010 and 31 March 2010 and for the periods ended 31 March 2011 and 31 March 2010, the related Consolidated Statement of Income, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity, Consolidated Cashflow Statement and the related notes hereinafter referred to as "financial information".

The financial information has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority, the principal accounting policies and key estimates set out in the Annual Report for the year ended 30 September 2010 which is available on Electra's website (www.electraequity.com). The financial statements are prepared in accordance with IAS 34.

The financial statements have been prepared on a going concern basis and under the historical cost basis of accounting, modified to include the revaluation of certain assets at fair value.

Application of new standards

At the balance sheet date, the Company has adopted all Standards and IFRIC interpretations that were either issued, or which become effective, during the year. None of the standards adopted below had any significant impact on the Group's accounts:

- IFRS 1 (revised) First time adoption

- IFRS 3 (revised) Business Combinations

- IAS 27 (revised) Consolidated and separate financial statements

At the date of authorisation of these financial statements, the IASB and the IFRIC have issued the following standards, amendments and interpretations to be applied to financial statements with periods commencing on or after the following dates:

- IAS 24 (revised) Related Party Disclosures (effective for financial periods beginning on or after 1 January 2011, subject to EU endorsement). Revises the definition of related parties.

- IFRS 9 Financial instruments: Classification (effective for financial periods beginning on or after 1 January 2013). Standard addresses the classification and measurement of financial assets in the form of debt instrument or equity.

- IFRS 7 (amendments) Financial Instruments: Disclosures (effective for financial periods beginning on or after 1 January 2011, subject to EU endorsement). Amendments include multiple clarifications related to the disclosures of financial instruments.

- IAS 34 (amendments) Interim Financial Reporting (effective for financial periods beginning on or after 1 January 2011, subject to EU endorsement). Greater emphasis on disclosure involving significant events and transactions.

The Directors do not anticipate that the adoption of these standards and interpretations will have any significant impact on the financial statements other than to require some additional disclosures.

2  Segmental Analysis

The chief operating decision-maker has been identified as Electra Partners. Electra Partners reviews the Group's internal reporting in order to assess performance and allocate resources. Electra Partners has determined the operating segments based on these reports. Electra Partners considers the business as a single operating segment.

3  Earnings per Share

	Basic earnings per share		Diluted earnings per share
	2011	2010	2011	2010
	p	p	p	p
Revenue return per ordinary share	8.98	22.23	7.89	22.23
Capital return per ordinary share	162.24	161.26	142.56	161.26
Earnings per ordinary share	171.22	183.49	150.45	183.49

The calculation of revenue return per share is based on the revenue profit attributable to shareholders of £3,172,000 (2010: profit of £7,857,000) on a weighted average number of 35,338,867 (basic) and 40,215,842 (diluted) (2010: 35,338,687 basic and diluted) ordinary shares of 25p each in issue. The calculation of capital return per ordinary share is based on the capital profit attributable to ordinary shareholders of £57,333,000 (2010: profit of £56,986,000) on a weighted average number of 35,338,867 (basic) and 40,215,842 (diluted) (2010: 35,338,687 basic and diluted) ordinary shares of 25p each in issue.

4  Convertible Bond

	At 29 December 2010	Costs	Bond net of costs	Finance Charge	Bond Conversion	At 31 March 2011
	£'000	£'000	£'000	£'000	£'000	£'000
Fair value of debt (debt cashflows discounted at 9.9%)	76,066	(2,822)	73,244	697	(22)	73,919
Fair value of equity component	23,934	(888)	23,046	-	-	23,046
5% coupon payable	-	-	-	1,260	-	* 1,260
Issue of ordinary shares	-	-	-	-	22	22
Total Bond issue	100,000	(3,710)	96,290	1,957	-	98,247

* Included in trade and other payables

On 29 December 2010 Electra issued £100 million of 5% Subordinated Convertible Bonds due 29 December 2017 at an issue price of 100 per cent and with an initial conversion price of 2,050p. Bondholders may convert their bonds into ordinary shares of the Company from 7 February 2011 up to and including the date falling seven business days prior to 29 December 2017. The conversion price of 2,050p will be adjusted to deal with certain events which would otherwise dilute the conversion of bondholders. These events include dividends paid to ordinary shareholders, share rights and share related securities issued to shareholders, issue of other securities to shareholders, demergers and other events detailed in the Prospectus for the Bond.

The Bond, in accordance with IFRS, has been treated as a compound financial instrument that contains both a liability and an equity component. The economic effect of issuing the instrument is substantially the same as issuing both a debt instrument with an obligation to payment of interest and principal (assuming it is not converted) and an equity instrument (a written call option granting the holder the right for a specified period of time to convert into a fixed number of ordinary shares). The proceeds from issuing Convertible Bonds are split on Electra's balance sheet into its constituent parts of debt and equity in accordance with the requirement of IFRS.

The fair value of the debt element of the bond has been calculated by using a market rate of interest for a similar borrowing that does not include an equity component or a conversion option. The rate used for these purposes was 9.9%, which using discounted cash flow, gives a fair value for the debt component of £73.2 million after deducting the pro rata costs of issue of £2.8 million. The fair value of the equity element is calculated by deducting the fair value of debt from the issue value of the Bond after deducting the pro rata costs of £0.9 million.

Finance costs are taken to the Income Statement and are calculated as the yield to maturity of the fair value of the debt component of the Bond. On conversion the value of the Bonds converted will be debited to long term liabilities. The nominal value of the ordinary shares issued on conversion will be credited to share capital and the balance representing the excess of conversion proceeds over nominal value of the shares will be credited to the share premium account.

5  Share Capital

	2011	2010
	£'000	£'000
Allotted, called-up and fully paid 35,339,760 (2010:35,338,687) ordinary shares of 25p each	8,835	8,835

During the six months ended 31 March 2011, 22 Subordinated Convertible Bonds were converted into 1,073 ordinary shares.

6  Capital and Reserves

For the six months ended 31 March 2011	Called-up Share capital	Share premium	Capital redemption reserve	Other reserves	Translation reserve	Realised capital profits/ (losses)	Unrealised capital profits/ (losses)	Revenue reserves	Total Shareholders' Funds
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Opening balance at 1 October 2010	8,835	24,147	34,440	-	(3,936)	810,981	(175,434)	25,498	724,531
Net revenue transferred to reserves	-	-	-	-	-	-	-	3,172	3,172
Net profits on realisation of investments during the period	-	-	-	-	-	307	-	-	307
Financing costs	-	-	-	-	-	(1,705)	-	-	(1,705)
Increase in value of non-current investments	-	-	-	-	-	-	67,823	-	67,823
Increase in incentive provisions	-	-	-	-	-	-	(5,243)	-	(5,243)
Gains and losses on foreign currencies	-	-	-	-	459	(1,697)	(2,217)	-	(3,455)
Net fees	-	-	-	-	-	-	-	-	-
Unrealised net appreciation at 1 October 2010 on investments sold during the period	-	-	-	-	-	(11,795)	11,795	-	-
Tax liabilities on capital	-	-	-	-	-	65	-	-	65
Convertible Bond issue	-	-	-	23,046	-	-	-	-	23,046
Conversion of Convertible Bond	-	22	-	-	-	-	-	-	22
At 31 March 2011	8,835	24,169	34,440	23,046	(3,477)	796,156	(103,276)	28,670	808,563

For the six months ended 31 March 2010	Called-up Share capital	Share premium	Capital redemption reserve	Other reserves	Translation reserve	Realised capital profits/ (losses)	Unrealised capital profits/ (losses)	Revenue reserves	Total Shareholders' Funds
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Opening balance at 1 October 2009	8,835	24,147	34,440	-	(3,375)	780,882	(260,916)	23,940	607,953
Net revenue transferred to reserves	-	-	-	-	-	-	-	7,857	7,857
Net profits on realisation of investments during the period	-	-	-	-	-	213	-	-	213
Increase in value of non-current investments	-	-	-	-	-	-	59,124	-	59,124
Increase in incentive provisions	-	-	-	-	-	-	(4,155)	-	(4,155)
Gains and losses on foreign currencies	-	-	-	-	-	3,372	1,520	-	4,892
Exchange differences arising on consolidation	-	-	-	-	(1,305)		-		(1,305)
Unrealised net appreciation at 1 October 2009 on investments sold during the period	-	-	-	-	-	754	(4,031)	-	(3,277)
Tax liabilities on capital	-	-	-	-	-	189	-	-	189
At 31 March 2010	8,835	24,147	34,440	-	(4,680)	785,410	(208,458)	31,797	671,491

7  Net Asset Value per Ordinary Share

On 29 December 2010 Electra issued £100 million of 5% Subordinated Convertible Bonds at an issue price of 100 per cent and an initial conversion price of 2,050p. Bondholders may convert their Bonds into ordinary shares of the Company from 7 February 2011 up to and including the date falling seven business days prior to 29 December 2017. As detailed in Note 4 - Convertible Bond, the Bond has been treated as a compound financial instrument containing both a liability and an equity component.

For the purpose of deriving the diluted net asset value per ordinary share full conversion is assumed, debiting the long term liabilities and increasing the number of ordinary shares in issue by 4,876,976 to 40,216,736 ordinary shares.

8  Related Party Transactions

Certain members of Electra Partners (the "participants") are entitled under various limited partnership agreements to benefit from carried interest and co-investment arrangements. Under these schemes the participants invest in every new investment made by Electra up to 31 March 2006. In return the participants receive a percentage of the total capital and revenue profits made on each investment. The participants do not receive any profits until Electra has received back its initial investment. During the six months ended 31 March 2011 the participants received £3,784,000 (31 March 2010: £418,000) and are entitled to receive £nil (31 March 2010: £nil) under these schemes and had provisional entitlements of £12,883,000 (31 March 2010: £10,414,000). The participants are entitled to a percentage of the incremental value of unlisted investments held at 31 March 1995, subject to Electra having received in total proceeds equal to the valuation of those investments as at 31 March 1995 and a preferred return.

During the six months ended 31 March 2011 the participants received £nil (31 March 2010: £962,000) under the scheme and had provisional entitlements of £66,000 (31 March 2010: £72,000).

Following approval at the Extraordinary General Meeting held on 12 October 2006 the participants entered two new schemes. The participants are entitled to receive a percentage of the incremental value of certain investments held at 31 March 2006 following Electra receiving total proceeds equal to the operating value and a preferred return, after deduction of related priority profit share ("PPS"). During the six months ended 31 March 2011 the participants received £4,589,000 (31 March 2010: £nil) and had provisional entitlements of £14,719,000 (31 March 2010: £12,633,000) under this scheme. The second scheme entered into under the new arrangements requires the participants to invest in every new investment made by Electra since 1 April 2006. On a pooled basis participants receive a percentage of the total capital and revenue profits once Electra has received back its initial investment, a preferred return and a related priority profit share. During the six months ended 31 March 2011 the participants had provisional entitlements of  £787,000 (31 March 2010: £nil). Following the same methodology new pools commenced for deals starting 1 October 2009. During the six months ended 31 March 2011 the participants had provisional entitlements of £3,772,000 (2010: £nil).

Members of Electra Partners, the Manager, are entitled to incentives based on the performance of investments in Electra. Under the arrangements relating to the management of the listed portfolio, certain executives of Electra Partners will receive bonuses over a one year period if the listed portfolio outperforms a composite index.

No Directors of Electra participate in the above schemes.

During the year ended 30 September 2007 Electra Partners exercised its option to cancel all priority profit share reductions by paying Electra the equivalent of the net present value of the remaining expected priority profit share reductions. An amount of £1.1 million will be payable over the period to October 2011. The amount was approved by a qualified independent third party.

In November 2007, Electra entered into a co-investment agreement with Electra Partners Club 2007 LP ("Club"), a fund managed by Electra Partners LLP. The co-investment agreement requires Electra to co-invest at the ratio of 2:1 in all Electra Partners investments in private equity opportunities in Western Europe where the combined investment of Electra and the Club would represent a controlling stake and where the combined equity investment is between £25 million to £75 million. Both parties will invest on the same terms and conditions. The agreement allows for variations to these arrangements in certain prescribed circumstances. For example, where investment would compromise Electra's ability to qualify as an Investment Trust or where the Club would exceed certain concentration ratios. Investments that arise from interests that Electra already held prior to the establishment of the Club are unaffected by these sharing arrangements. These arrangements will expire in May 2013.

Information for Shareholders

Electra News via Email

If you would like to receive notice of announcements or shareholder communications via email, please visit our website at www.electraequity.com and click on the "Register for Email Alerts" logo in the top right hand corner. Registering for email alerts will not stop you receiving annual reports or any other documents you are entitled to through the post.

Share Price Information

The Company's share price can be found on the Company's website www.electraequity.com.

LPEQ - Listed Private Equity

Increasing awareness and understanding of listed private equity through research and information

Electra is a founder member of LPEQ (formerly iPEIT), a group of private equity investment trusts and similar vehicles listed on the London Stock Exchange and other major European stock markets, formed to raise awareness and increase understanding of what listed private equity is and how it enables all investors - not just institutions - to invest in private equity.

LPEQ provides information on private equity in general, and the listed sector in particular, undertaking and publishing research and working to improve levels of knowledge about private equity among investors and their advisers.

For further information visit www.lpeq.com.

Contact Details

Board of Directors

Colette Bowe  Chairman

Kate Barker

Geoffrey Cullinan

Roger Perkin

Michael Walton

Lucinda Webber

Telephone [phone]

www.electraequity.com

Secretary

Frostrow Capital LLP

25 Southampton Buildings

London WC2A 1AL

Telephone [phone]

Registered Office

Paternoster House

65 St Paul's Churchyard

London EC4M 8AB

Company number

303062

Manager

Electra Partners LLP

Paternoster House

65 St Paul's Churchyard

London EC4M 8AB

Telephone [phone]

www.electrapartners.com

Investor Relations

Monique Dumas

Telephone [phone]

Registered Independent Auditors

PricewaterhouseCoopers LLP

Chartered Accountants &

Statutory Auditors

7 More London Riverside

London SE1 2RT

Stockbroker

J.P. Morgan Cazenove

Financial Advisor

Evercore Partners

10 Hill Street

London W1J 5NQ

Registrar and Transfer Office

Equiniti Limited

Aspect House

Spencer Road

Lancing

West Sussex BN99 6DA

Telephone (UK) 0871 384 2351 *

Textel/Hard of hearing line (UK) 0871 384 2255 *

Telephone (Overseas) [phone]

* Calls to these numbers are charged at 8p per minute from a BT landline. Other telephony providers' costs may vary.

 

END

 

 

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