Interim Results

Electra Private Equity PLC 08 June 2006 EMBARGOED UNTIL 07:00 AM, THURSDAY 8 JUNE 2006 ELECTRA PRIVATE EQUITY PLC (Formerly Electra Investment Trust PLC) Announcement of Interim Results for six months ended 31 March 2006 • Continued growth in net asset value - up 18.4% over 6 months to 1,417p per share at 31 March 2006 - Unaudited net asset value per share at 31 May 2006 of 1,393p • Share price outperformance relative to FTSE All-Share Index - Electra rose by 17.2% versus an Index increase of 11.0% over 6 months • Busy 6 months of investment activity - £60m invested and £176m realised • £109 million invested over 12 months to 31 March 2006 and outstanding commitments to invest of £75m at 31 March 2006. Commenting on the Interim Results, Sir Brian Williamson, Chairman, said: 'The strong performance achieved by Electra during the year ended 30 September 2005 continued for the six months to 31 March 2006 with significant growth in net asset value and a good share price performance. The Board is finalising a review of Electra's investment strategy and the terms of its management arrangements with Electra Partners. The Board expects to be in a position to present proposals arising from this review to shareholders shortly. Electra continues to perform well and has had an excellent six months. The Board believes that Electra, with its organisation and position in the marketplace, will be able to continue to deliver an attractive return to shareholders.' For further information: Sir Brian Williamson, Chairman, Electra Private Equity PLC 020 7306 3883 Hugh Mumford, Chief Executive, Electra Partners Limited 020 7214 4200 Nick Miles, M: Communications 020 7153 1535 Net Asset Value Per Share 31 March 2006 30 September 2005 31 May 2006 -------------------------------------------- ----------------- ----------- Net asset value per share 1,417.42p 1,197.22p* 1,392.88p Increase since 30 September 2005 18.4% ** Increase in FTSE All-Share Index since 30 September 2005 11.0% * As restated for IFRS as explained in the Basis of Accounting. ** After payment of special dividend of 20p per share The unaudited net asset value per share at 31 May 2006 was calculated on the basis of the net asset value at 31 March 2006 adjusted to reflect the purchases and sales of investments, currency movements and bid values on that day in respect of listed investments. A copy of the Chairman's Statement, Investment Manager's Review and the Interim Announcement are attached. Chairman's Statement The strong performance achieved by Electra during the year ended 30 September 2005 continued for the six months to 31 March 2006 with significant growth in net asset value and a good share price performance. Over the six months the net asset value per share has increased by 18.4%, from 1197p to 1417p. In December 2005 Electra announced the intention to pay a special dividend of 20p per share which was paid in March 2006. Together with the special dividend, Electra achieved a total return to shareholders of 20.2% for the six months. Over the same period the share price increased by 17.2% while the FTSE All-Share Index increased by 11.0%. The six months was a busy investment period and £60 million was invested. In the twelve months to 31 March 2006, £109 million was invested and there were outstanding commitments to invest of £75 million at 31 March 2006. Realisations also continued at a significant level with proceeds from investments amounting to £176 million in the six months and £344 million for the twelve months to 31 March 2006. The six months saw new investments in SAV Credit and Bizspace Unit Trust, as well as a further investment in Capital Safety Group. The most significant realisation in the six months was that of Inchcape Shipping Services. Full details of the investment activity for the six months are included in the Investment Manager's Review. Change of Name Following approval at the Annual General Meeting in February 2006 Electra changed its name to Electra Private Equity PLC to emphasise Electra's focus on investing in private equity. On-Market Purchases of Shares Under the general authority granted by shareholders, Electra made on-market purchases of 2.8 million shares in the six months at an aggregate cost of £36.1 million representing an average price of £12.83 per share. International Financial Reporting Standards ('IFRS') Under IFRS the special dividend of 20p per share, paid to shareholders on 10 March 2006, has been charged to the Revenue Account in respect of the six month accounting period to 31 March 2006 in which the dividend was paid. An appropriate adjustment has been made to the comparative figures for the year ended 30 September 2005 which had, under the previous accounting standard, included this amount. Further details are given in the Financial Statements. Board of Directors During the last six months the Nomination Committee has continued its search for new Directors of Electra. We now have a short list of candidates and I hope these appointments will be completed by the end of the year. Investment Strategy and Investment Management Arrangements The Board is finalising a review of Electra's investment strategy and the terms of its management arrangements with Electra Partners. The Board expects to be in a position to present proposals arising from this review to shareholders shortly. Outlook Electra continues to perform well and has had an excellent six months. The Board believes that Electra, with its organisation and position in the marketplace, will be able to continue to deliver an attractive return to shareholders. Sir Brian Williamson 7 June 2006 Investment Manager's Review Investment Portfolio Analysis Summary of Changes to Investment Portfolio Six months ended 31 March 2006 2005 £'000 £'000 ------------------ ------------------ ------------------ Opening Valuation 353,274 413,088 Investments 59,871 33,584 Realisations (176,297) (82,201) Change in valuation 106,847 58,562 Closing valuation* *343,695 423,033 ------------------ ------------------ ------------------ * The above investment portfolio at 31 March excludes accrued income (2006: £2,723,000; 2005: £16,106,000) and investments in floating rate notes (2006: £390,086,000, 2005: £165,026,000). In the six months to 31 March 2006, Electra's net asset value per share increased from 1197p per share to 1417p per share, an increase of 18.4%. This exceptional performance resulted primarily from the high level of realisations during the six month period giving rise to substantial realised gains in excess of opening fair value. Realisations from the portfolio amounted to £176 million in the period and £60 million was invested in new investments and portfolio companies. Net realisations from the portfolio thus amounted to £116 million although the reduction of the overall portfolio was largely offset by capital appreciation of £107 million. The value of the portfolio at 31 March 2006 was thus only £9 million less than at the start of the period. Geographically 73% of the investment portfolio is in the UK and Europe, 14% in USA, 11% in Asia and 2% in South America. Current Operations and Outlook With the strong level of realisations achieved in the past eighteen months Electra now has substantial funds available for new investment and further funding into portfolio companies. Current dealflow has been encouraging although the market remains very competitive and the search for good value is challenging. However, with its flexible investment policy, Electra is able to focus on those sectors where competition is less pronounced. Investment Portfolio Review New Investments In the six month period, investments totalled £60 million compared to £34 million in the corresponding period of the previous year. The increase in investment rate has resulted from the high level of realisations achieved in recent periods which has led to a greater level of funds being available for investment. New portfolio investments included SAV Credit (£15 million) and Bizspace Unit Trust ('BUT') (£5.8 million), a further investment of £18 million in the refinancing and restructuring of Capital Safety and £17.9 million drawn down under commitments to private equity funds. SAV Credit was a company set up in 2001 to serve the sub-prime or non-standard credit card market through the 'aqua' card. The company has grown rapidly and Electra's investment was made to fund further growth. Electra's investment may increase by a further £10 million to a total of £25 million under certain circumstances. BUT is a joint venture set up as a provider to small and medium sized businesses of offices, light industrial space and storage on lettings of three to twelve months. Electra committed £15 million to this joint venture, of which £5.8 million has been drawn. During the period Electra reinvested £18 million in the restructuring of Capital Safety Group as this represented an excellent investment opportunity. The marketplace for new investment remains fully priced and competitive. However, Electra, with its flexible mandate remains well placed to identify attractive investment opportunities. Realisations Investment proceeds from the portfolio for the six month period amounted to £176 million, more than double the level achieved in the corresponding period of the previous year. This very high level of realisation reflected a marketplace which continued to be favourable for the sale of portfolio companies. By far the most significant realisation was that of Inchcape Shipping Services. This investment was originally purchased in 1999 for £17 million but required further financing of £10.4 million in 2001 to restructure the group. Since the restructuring, operating profits have grown substantially which enabled Electra to successfully dispose of Inchcape Shipping Services in January 2006. Net proceeds to Electra amounted to £102 million, 163% higher than the carrying value at 30 September 2005 which demonstrates the value that can be achieved in the current marketplace in a well controlled and competitive auction. Over the holding period of seven years, Electra achieved an IRR of 25% on this investment. The refinancing and restructuring of Capital Safety Group resulted in proceeds to Electra of £57 million. As mentioned previously, Electra acquired a significant stake in the successor company. Other realisations included £5.4 million from the redemption of loan notes by Esporta and £13.8 million from limited partner interests in private equity funds. Of the proceeds from private equity funds, £9.4 million came from funds based in South America. Performance During the six month period, the investment portfolio achieved net capital appreciation of £107 million, a 30.2% increase. This very substantial increase resulted primarily from gains achieved on the realisation of investments which amounted to £67 million thus accounting for 63% of the total increase. Investments with a listed price also performed well and added £21 million to the value of the portfolio, accounting for a further 20% of the portfolio increase. The most significant performer amongst companies with a listing was of Dinamia which specialises in private equity investment in Spain. The value of Electra's investment in Dinamia rose by 87% during the six month period. Unrealised increases in value recognised in the period added £27 million of value to the portfolio offset by £8 million of provisions. Net unrealised appreciation thus accounted for only 17% of the overall net capital appreciation. These increases arose primarily from the reinstatement of a valuation on investments which had previously been written off. Consolidated Income Statement (unaudited) -------------------- ------- ------- ------- ------- ------- ------- For the six months ended 31 March Revenue Capital 2006 Revenue Capital *Restated £'000 £'000 Total £'000 £'000 2005 £'000 Total £'000 -------------------- ------- ------- ------- ------- ------- ------- Gains on investments: Realised - 67,479 67,479 - 16,880 16,880 Unrealised - 33,099 33,099 - 41,071 41,071 (Losses)/Profits on revaluation of foreign currencies: Realised - (58) (58) - (2) (2) Unrealised - (3,063) (3,063) - 4,587 4,587 -------------------- ------- ------- ------- ------- ------- ------- - 97,457 97,457 - 62,536 62,536 Total Income + 13,417 - 13,417 9,948 - 9,948 Priority profit share paid to general (5,310) - (5,310) (4,353) - (4,353) Partners Other expenses (768) - (768) (233) - (233) -------------------- ------- ------- ------- ------- ------- ------- Net Profit before Finance Costs and Taxation 7,339 97,457 104,796 5,362 62,536 67,898 Finance costs (3,611) - (3,611) (2,772) - (2,772) Profit on Ordinary Activities before Taxation 3,728 97,457 101,185 2,590 62,536 65,126 Taxation Expenses (2,449) - (2,449) (750) - (750) -------------------- ------- ------- ------- ------- ------- ------- Profit after Taxation 1,279 97,457 98,736 1,840 62,536 64,376 -------------------- ------- ------- ------- ------- ------- ------- Basic and Diluted Earnings per Ordinary Share 2.96p 225.92 228.88 4.00p 136.11p 140.11p -------------------- ------- ------- ------- ------- ------- ------- Dividends Paid Total paid (£000) 8,592 - Per share 20p - -------------------- ------- ------- ------- ------- ------- ------- The Total column of this statement represents the Group's Income Statement prepared in accordance with IFRS and Companies Act. The supplementary Revenue and Capital columns are both prepared under guidance published by the Association of Investment Trust Companies. The amounts dealt with in the Consolidated Income Statement are all derived from continuing activities. 2006 2005 Number of Ordinary Shares in issue at 31 March 40,722,687 44,507,687 ---------------------------- ---------------- ----------- * As restated for the adoption of IFRS, as explained within the Basis of Accounting. + Total Income includes Income of the Investment Trust of £12,910,000 (2005: £9,378,000) and Net Income of Subsidiary Undertakings of £507,000 (2005: £570,000). Consolidated Statement of Changes in Equity (unaudited) ----------------------- --------------- --------------- For the six months ended 31 March 2006 2005 £'000 £'000 ----------------------- --------------- --------------- Total equity at 1 October * 520,883 426,723 Adoption of IAS 39 ** 1,239 - Profit after Taxation 98,736 64,376 Exchange differences arising on consolidation 1,026 (2,567) Ordinary dividend + (8,592) - Repurchase of own shares (36,080) (19,455) ----------------------- --------------- --------------- Total Equity at 31 March 577,212 469,077 ----------------------- --------------- --------------- * As restated for the adoption of IFRS, explained within the Basis of Accounting. ** Opening balance at 1 October 2005 has been restated for IAS 39 such that listed investments have been valued at bid rather than mid price and marketability discounts have not been applied. + Ordinary dividend paid of 20p per share after share buy-back of 550,000 ordinary shares on 6 February 2006. Consolidated Balance Sheet (unaudited) *Restated *Restated As at 31 March As at 30 Sept As at 31 March 2006 2005 2005 £'000 £'000 £'000 £'000 £'000 £'000 ------------------ ------- ------- ------- ------- ------- ------- Fixed Assets Investments held at fair value: Unlisted and liste 343,695 353,274 423,033 Floating rate notes 390,086 265,026 165,026 ------------------ ------- ------- ------- ------- ------- ------- 733,781 618,300 588,059 ------------------ ------- ------- ------- ------- ------- ------- Current Assets Debtors 8,344 30,440 24,633 Cash at bank and in hand 19,735 62,610 28,863 ------------------ ------- ------- ------- ------- ------- ------- 28,079 93,050 53,496 ------------------ ------- ------- ------- ------- ------- ------- Current Liabilities Creditors: amounts falling due within one year 10,795 15,556 4,522 ------------------ ------- ------- ------- ------- ------- ------- Net Current Assets 17,284 77,494 48,974 Total Assets less Current Liabilities 751,065 695,794 637,033 ------------------ ------- ------- ------- ------- ------- ------- Creditors: amounts falling due after more than one year 160,311 157,248 150,447 ---------------- ------- ------- ------- ------- ------- ------- 590,754 538,546 486,586 Provision for liabilities and charges 13,542 17,663 17,509 ------------------ ------- ------- ------- ------- ------- ------- Net Assets 577,212 520,883 469,077 ------------------ ------- ------- ------- ------- ------- ------- Capital and Reserves Called-up share capital 10,181 10,877 11,127 Share premium 24,147 24,147 24,147 Capital redemption reserve 33,094 32,398 32,148 Translation reserve 2,016 990 (2,567) Realised capital profits 623,742 583,728 531,400 Unrealised capital losses (131,828) (154,430) (123,298) Revenue reserves 15,860 23,173 (3,880) ------------------ ------- ------- ------- ------- ------- ------- 567,031 510,006 457,950 ------------------ ------- ------- ------- ------- ------- ------- Total Equity Shareholders' Funds 577,212 520,883 469,077 ------------------ ------- ------- ------- ------- ------- ------- Net asset value per ordinary share of 25p 1417.42p 1197.22p 1053.92p ------------------ ------- ------- ------- ------- ------- ------- * As restated for the adoption of IFRS, as explained within the Basis of Accounting. Consolidated Cash Flow Statement (unaudited) ----------------------- -------- -------- -------- -------- For the six months ended 31 March £'000 2006 £'000 *Restated £'000 2005 £'000 ----------------------- -------- -------- -------- -------- Operating Activities Purchases of investments (216,100) (158,614) Sales of investments 206,400 205,827 Dividend income 8,110 1,339 Other investment income 12,832 7,609 Interest income 1,428 501 Other income 882 148 Expenses (6,093) (5,332) ----------------------- -------- -------- -------- -------- Net Cash Inflow from Operating Activities 7,459 51,478 ----------------------- -------- -------- -------- -------- Financing Activities Bank loans drawn 56,680 17,000 Bank loans repaid (56,680) (22,000) Repurchase of own shares (36,080) (28,626) Loans (advanced)/received (1,993) 1,019 Interest paid (3,611) (2,886) Dividend paid (8,592) - ----------------------- -------- -------- -------- -------- Net Cash Outflow from Financing Activities (50,276) (35,493) ----------------------- -------- -------- -------- -------- Changes in cash and cash equivalents (42,817) 15,985 Cash and cash equivalents at 1 October 62,610 12,880 Translation difference (58) (2) ----------------------- -------- -------- -------- -------- Cash and cash equivalents at 31 March 19,735 28,863 ----------------------- -------- -------- -------- -------- * As restated for the adoption of IFRS, as explained within the Basis of Accounting. Basis of Accounting The Accounts for the six months ended 31 March 2006 have been prepared using the accounting policies expected to be used in the Group's annual Accounts to 30 September 2006. These accounting policies will be based on International Financial Reporting Standards ('IFRS') issued by the International Accounting Standards Board ('IASB') that will be applicable and adopted for use in the European Union for the Group's year ending 30 September 2006, except as noted below. The Directors have followed the guidance contained in the UK Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' 2003, revised in 2005 ('the SORP'), to the extent that it is not inconsistent with the requirements of IFRS. The Accounts have been prepared on the historical cost basis of accounting, modified to include the revaluation of certain assets. First Time Adoption of International Financial Reporting Standards ('IFRS 1') The date of transition to IFRS for the Group is 1 October 2004. The IFRS accounting policies detailed herein have been applied retrospectively to the opening balance sheet as at 1 October 2004 and all subsequent periods, except as described below. As permitted by IFRS 1, the UK GAAP accounting policies in respect of financial instruments as applied at 30 September 2005 have continued to be used for the comparative financial information presented in this report. The effect of adopting IAS 32 Financial Instruments: disclosure and presentation, and IAS 39 Financial Instruments: recognition and measurement, for the comparative periods would not have been significant. Under IFRS 1 cumulative translation differences on the consolidation of subsidiaries are being accumulated from the date of transition to IFRS and disclosed in a separate Translation Reserve and not from the original acquisition date. Basis of Consolidation The consolidated Accounts include in full the Company and its subsidiary undertakings. Where subsidiaries are acquired or sold during the year their results are included in the consolidated accounts from the date of acquisition and up to the date of disposal respectively. A subsidiary is an entity where the Company has the power to govern the financial and operating policies so as to obtain benefit from its activities. The structures through which Electra's investments are made mean that for the purposes of consolidation, Electra is deemed not to have significant influence over the operating and financial decisions of the investee companies. Consequently, limited partnerships and any significant investment holdings are not consolidated. Control in all cases vests with parties outside the Electra Group. Investments Purchases and sales of listed investments and floating rate notes are recognised on the trade date where a contract exists whose terms require delivery within a timeframe determined by the relevant market. Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional. Investments are designated at fair value through profit and loss and are subsequently measured at reporting dates at fair value. Changes in the fair value of investments are recognised in the income statement through the capital column. Limited Partnership Funds Significant investments made by the Company in limited partnership funds managed by Electra Partners, are accounted for as listed or unlisted investments, dependent on the underlying nature of the investments held within the limited partnership funds. Investments in other limited partnership funds are treated as unlisted investments and disclosed separately. Listed Investments The listed investment portfolio is held within a limited partnership fund managed by Electra Partners. Listed investments are stated at the last traded bid price on the balance sheet date without discount. Investments in overseas companies listed both abroad and on The London Stock Exchange are classified as investments listed overseas. Unlisted Investments Unlisted investments are held at fair value as fixed asset investments. The fair value is calculated in accordance with International Private Equity and Venture Capital Valuation Guidelines issued in March 2005 following the methodology outlined in the Principles of Valuations of Unlisted Equity Investments. Floating Rate Notes Floating rate notes are held at fair value which equates to the issue price. Cash and cash equivalents Cash comprises cash at bank and short term deposits with an original maturity of less then three months. Dividends Dividend distributions to shareholders are recognised as a liability in the period in which they are paid or approved. Foreign currencies The Group's presentational currency is pounds sterling ('sterling'). Transactions in currencies other than sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date assets and liabilities of foreign operations are translated into sterling at the rates prevailing on the balance sheet date. Foreign exchange differences arising on retranslation of the equity and reserves of subsidiaries with functional currencies other than sterling are recognised directly in the Translation Reserve in equity. Foreign exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the income statement for the period. Income Dividends receivable from equity shares are brought into account on the ex-dividend date or, where no ex-dividend date is quoted, are brought into account when the Company's right to receive payment is established. Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis so as to reflect the effective yield on the shares and debt securities. Deep discounts on debt securities are recognised on an effective yield basis. Where there is a reasonable doubt that a return, which falls within the accounting period, will actually be received by the Company, the recognition of the return is deferred until the reasonable doubt has been removed. Where income accruals previously recognised, but not received, are no longer considered to be reasonably expected to be received, either through investee company restructuring or doubt over receipt, then these amounts are reversed through expenses. Expenses All expenses are accounted for on an accruals basis. Expenses are charged through the revenue account except for expenses in connection with the disposal of fixed asset investments, which are deducted from the disposal proceeds of the investment. Priority Profit Share The majority of the investments are made by the Company in limited partnership funds managed by Electra Partners. Under the terms of the limited partnership agreements the general partner is entitled to appropriate, as a first charge on the net income or net capital gains of the limited partnership funds an amount equivalent to its priority profit share. In periods in which the limited partnership funds have not yet earned sufficient net income or net capital gain to satisfy this priority profit share the entitlement is carried forward to the following period. In all instances the cash amount paid to the general partner in each period is equivalent to the priority profit share. In order to reflect the substance of these transactions, revenue and/or capital is included in the Group and Company Accounts to reflect the type of return appropriated by the general partners in satisfaction of their priority profit shares, and expenses or interest free loans are included to reflect the proportion of the Company's net income and/or net capital gain in the limited partnership funds that has been paid to the general partners by way of priority profit shares. The priority profit share is charged wholly to the revenue account. Taxation The tax effect of different items of income/gain and expense/loss is allocated between capital and revenue on the same basis as the particular item to which it relates, using the Company's effective rate of tax for the accounting period. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Revenue and Capital Reserves The Capital Profit component of Total Income is taken to the Non-distributable Realised Capital Profit Reserve within the Consolidated Statement of Changes in Equity. The Revenue Profit component of Total Income is taken to the Revenue Reserve from which dividend distributions are made. Change of Accounting Policy The impact of the movement from UK GAAP to IFRS to the Profit After Taxation, Total Equity Shareholders' Funds and the change in cash and cash equivalents as per the Cash Flow Statement is detailed below. As explained in the Basis of Accounting, the UK GAAP accounting policies in respect of financial instruments as applied at 30 September 2005 have continued to be used for the comparative financial information, as permitted under IFRS 1. Year to Six months to 30 September 2005 31 March 2005 unaudited unaudited £'000 £'000 ------------------- ------------- ------------- ------------ Transfer to Reserves for the period under UK GAAP 114,145 64,376 Ordinary dividends * 8,702 - ------------------- ------------- ------------- ------------ Profit After Taxation Under IFRS ** 122,847 64,376 ------------------- ------------- ------------- ------------ 30 September 2005 31 March 2005 1 October 2004 unaudited unaudited unaudited £'000 £'000 £'000 ------------------- ------------- ------------- ------------ Total equity shareholders' funds under UK GAAP 512,181 469,077 426,723 Ordinary dividends * 8,702 - - ------------------- ------------- ------------- ------------ Total equity shareholders' funds under IFRS 520,883 469,077 426,723 ------------------- ------------- ------------- ------------ Six months to 31 March 2005 unaudited £'000 ------------------- ------------- ------------- ------------ Change in cash under UK GAAP 8,578 Short term deposits *** 7,407 ------------------- ------------- ------------- ------------ Change in cash and cash equivalents under IFRS 15,985 ------------------------------ ------------- ------------ * Under IFRS dividends declared after the balance sheet date are not recognised as a liability at the Balance Sheet date. ** There is no change in Profit After Taxation in the 31 March comparative period under IFRS from UK GAAP. The exchange difference arising on consolidation, which was previously included in the Consolidated Statement of Total Return, is not detailed in the Income Statement under IFRS but is included in the Translation Reserve on the Balance Sheet. Under IFRS 1 the Translation Reserve has been accumulated from the date of transition to IFRS and not from the original acquisition date. *** For the purposes of the Cash Flow Statement, short term deposits are classified as cash equivalents under IFRS, whilst they were included as liquid resources under UK GAAP. IFRS has not significantly changed any of the cash flows of the Group. END This information is provided by RNS The company news service from the London Stock Exchange

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