ELTA.L Regulatory News (ELTA)

5 Dec 2006 07:02

Electra Private Equity PLC05 December 2006 TUESDAY 5 December 2006 ELECTRA PRIVATE EQUITY PLC Preliminary Results for Year ended 30 September 2006 • Continued growth in net asset value - up 29% over the year to 1,545p per share at 30 September 2006 - Unaudited net asset value per share at 30 November 2006 of 1,551p • Share price outperformance relative to FTSE All-Share Index - Electra rose by 23.2% versus an Index increase of 11.1% over the year • Busy year of investment activity - £257 million realised and £131 million invested plus outstanding commitments to invest of £133 million at 30 September 2006 • Special dividend of 17p per share reflecting high level of distributable revenue • New investment strategy to return to full investment of capital resources in private equity approved in October 2006. Commenting on the Results, Sir Brian Williamson, Chairman, said: "The year has been one of great achievement for Electra with excellent results, the completion of a major business review and shareholders' approval for a strategy which returns Electra to full investment of its capital resources in private equity." For further information: Sir Brian Williamson, Chairman, Electra Private Equity PLC 020 7306 3883 Hugh Mumford, Managing Partner, Electra Partners LLP 020 7214 4200 Nick Miles, M: Communications Limited 020 7153 1535 Net Asset Value Per Share 30 September 30 September 30 November 2006 2005 2006Net asset value per share 1,545p *1,197p 1,551p Increase since 30 September 2005 29.0% Increase in FTSE All-Share Index 11.1%since 30 September 2005 * As restated for IFRS as explained in the Basis of Accounting The unaudited net asset value per share at 30 November 2006 was calculated onthe basis of the net asset value at 30 September 2006 adjusted to reflect thepurchases and sales of investments, currency movements and market values on thatday in respect of listed investments and unlisted investments where these arevalued by reference to quoted prices. A copy of the Chairman's Statement, Manager's Review and the PreliminaryAnnouncement are attached. The figures and financial information for the year ended 30 September 2006 donot constitute the statutory financial statements for that year. Those financialstatements have not yet been delivered to the Registrar, nor have the Auditorsyet reported on them. The figures and financial information for the year ended30 September 2005 which have been restated under IFRS do not constitute thestatutory financial statements for that year. The financial statements inrespect of the year ended 30 September 2005 have been delivered to the Registrarand included the Auditors' Report which was unqualified and did not contain astatement under either section 237(2) or section 237(3) of the Companies Act1985. The Report and Accounts will be sent to shareholders in January 2007 and willthereafter be available from the Company's registered office at PaternosterHouse, 65 St Paul's Churchyard, London EC4M 8AB. The Annual General Meeting willbe held on Thursday 8 February 2007 at the Barber-Surgeons' Hall, MonkwellSquare, London EC2 at 12 Noon. CHAIRMAN'S STATEMENT Overview of Year Electra has once again had a successful year with strong net asset value growth,share price performance and a busy period of investment activity. Towards theend of the financial year the Board undertook a review of Electra's market, itsinvestment management and its investment strategy. Subsequently, shareholdersapproved the Board's proposals to adopt a new investment strategy wherebyElectra returned to full investment of its capital resources in private equity,complemented by ongoing share buybacks and the active management of its capitalposition. Results The net asset value per share increased over the year by 29% from 1,197p pershare to 1,545p per share. Inclusive of the special dividend of 20p per sharepaid in March 2006, Electra achieved a total return to shareholders of 31% forthe year to 30 September 2006. Over the same period the FTSE All-Share Indexincreased by 11.1% and Electra's share price rose by 23.2%. Investment Activity Realisations continued at a significant level with aggregate proceeds of £257million over the year. £131 million was invested and there were outstandingcommitments to invest in new portfolio investments and private equity funds of£133 million at 30 September 2006. New portfolio investments during the yearincluded SAV Credit, Bizspace and Vent-Axia. In addition, Electra invested inthe secondary buy-out of Amtico following the successful sale of its originalholding and in the refinancing and restructuring of Capital Safety Group I. Fulldetails of the investment activity are included in the Manager's Report. Update of Investment Strategy and Terms of Appointment of Electra Partners Since the change of investment strategy in April 1999, Electra has createdsignificant value for shareholders. In the period from 1 April 1999 to 30September 2006, Electra sold investments realising a total of £2.2 billion, madefurther investments of £0.7 billion and returned a total of £1.2 billion in cashto shareholders through tender offers and on-market share buybacks. Over thesame period, Electra's cash position moved from borrowings of £600 million to anet liquid assets position of £238 million. During this period Electra's netasset value increased by 96.5%, which compares with a rise in the FTSE All-ShareIndex of 2.4% over the same period. In order to build on this strong track record of value creation, the Boardundertook a review of Electra's market, its Investment Manager and itsinvestment strategy. Following this review, the Board considered that Electrahad strong potential to continue to create significant value for shareholders.In order to best achieve this the Board proposed that shareholders approve a newinvestment strategy, whereby Electra returns to full investment of its capitalresources in private equity, complemented by ongoing share buybacks and theactive management of its capital position. The Board also proposed that Electra Partners LLP, a new limited liabilitypartnership formed by the existing senior management team, be appointed asElectra's Manager. Contractual and compensation arrangements were negotiatedwith Electra Partners to reflect the new long term investment strategy forElectra and to ensure that arrangements were in line with current marketpractice. The Board was assisted in this process by Lazard and MM&K (anindependent firm of strategic remuneration consultants) and approval was givenby shareholders to these proposals at the Extraordinary General Meeting held on12 October 2006. Electra's Objectives Following approval of these proposals Electra will target a rate of return onequity of between 10% and 15% per annum over the long-term. Electra will aim toachieve this target rate of return by: • exploiting a track record of successful private equity investment; • utilising Electra's inherent competitive advantages as an investor; • exploiting the proven skills of Electra Partners' senior management team withits strong record of dealflow generation and long-term presence in the privateequity market; • investing in a number of value creating transactions with a balanced riskprofile across a broad range of investment sectors through a variety offinancial instruments; • effecting ongoing on-market share buybacks to generate shareholder value; • actively managing its capital position and gearing in light of prevailingmarket conditions. Further Authority to Buy Back Shares During the year ended 30 September 2006 Electra made on-market purchases at acost of £64.3 million and cancelled 4.78 million shares. Authority was given at the Extraordinary General Meeting to buy back and cancel up to a further 5.8 million shares (representing 14.99% of the shares in issue). This authority will cease at the Annual General Meeting which has been convened for 8 February 2007. Directors will seek to renew this general authority at the forthcoming Annual General Meeting. Special Dividend In the year ended 30 September 2006, Electra again received distributablerevenue at a level which requires it as an investment trust to pay a dividend.Accordingly the Board is proposing a special dividend of 17p per share whichwill be paid on 9 March 2007 to shareholders on the Register of Members at theclose of business on 9 February 2007 subject to approval by shareholders at theforthcoming Annual General Meeting. This is the second year in which a dividendhas been proposed for this reason. However, this is not a variation in thepolicy of maximising capital growth and the Board would not expect dividendpayments to continue on a regular basis once a substantial proportion ofElectra's capital resources are once again invested in private equitytransactions. Board of Directors With the review of the investment strategy and management arrangementscompleted, it is now appropriate to refresh the membership of the Board. Iindicated in my interim statement that this process was in hand and, since then,the Nomination Committee has interviewed a number of candidates. The Board hopesto make an announcement on Board composition in the near future. All current Directors with the exception of Professor Sir George Bain willretire and offer themselves for re-election at the forthcoming Annual GeneralMeeting. Financial Statements Electra's financial statements for the year ended 30 September 2006 have beenprepared for the first time under the International Financial ReportingStandards ("IFRS"). The major impact of IFRS for Electra in this year related tothe accounting treatment of the special dividend which was paid in March 2006and to the format of the financial statements. Private Equity Investment Trusts ("PEIT") Private equity is an increasingly attractive and dynamic asset class. In itsrecent discussion paper, the Financial Services Authority acknowledges that manyinvestors have difficulty in accessing private equity, although one of the waysto do so is through PEITs. Electra is a substantial PEIT which offers thisopportunity. Outlook The year has been one of great achievement for Electra with excellent results,the completion of a major business review and shareholders' approval for astrategy which returns Electra to full investment of its capital resources inprivate equity. The Board believes that Electra Partners, with its strong track record andinvestment capability, has the best team to maximise returns on the existingportfolio and to implement the new strategy. Electra, with its differentiated investment approach, has a good market positionand provides shareholders with simple and liquid access to private equity. Sir Brian Williamson Investment Portfolio Analysis Excluding Investments in Floating Rate Notes Summary of Changes to Investment Portfolio Year ended 30 September 2006 2005 2004 £'000 £'000 £'000Opening valuation 353,274 413,088 679,611Investments 130,669 82,365 48,361Realisations (257,084) (250,030) (392,405)Net capital increase 153,300 107,851 77,521Closing valuation* 380,159 353,274 413,088 * The valuations at 30 September exclude accrued income (2006: £5,874,000; 2005:£17,024,000; 2004: £15,773,000). In the year to 30 September 2006, Electra's net asset value increased from1,197p to 1,545p per share, an increase of 29%. This compares to an increase of31% and 20% in the previous two years. Over the last three years the net assetvalue per share has risen by 103%. The performance continues to be driven by buoyant market conditions forrealisations, which have enabled Electra to successfully realise investments forcash proceeds exceeding £900 million in the three year period, generating profits of over £300 million. Partly as a result of the exceptional level ofcash receipts in the past three years, Electra has become increasingly liquidand at 30 September 2006 held net liquid assets primarily in the form offloating rate notes of £238 million. The total portfolio at 30 September 2006thus comprised £380 million of investments, excluding accrued income, and £238million of net liquid assets. The restrictions on new investments which havebeen in force since 2001 have also contributed to the position of relativelyhigh liquidity. Over the year, investments were completed to a value of £131 million, comparedto £82 million in the previous year. At 30 September 2006 there were outstandingcommitments to invest of £133 million. Realisations from the portfolio amounted to £257 million, generating proceedsequivalent to 73% of the opening value of the portfolio. On average,realisations were achieved at prices which exceeded book value by 95%. For the first time in seven years, the total value of the investment portfolioincreased as a result of new investment and value increases exceedingrealisations. At 30 September 2006, the portfolio comprised direct investmentsin 55 companies with a value of £313 million together with investments in 34private equity funds with a value of £67 million. Of the direct investments,those with an aggregate value of £63 million were quoted on a recognised stockexchange but subject to restrictions on sale. Geographically, 78% of theportfolio was situated in the UK and Europe, 13% in the USA, 7% in Asia and 2%in South America. Current Operations and Outlook The year has seen significant changes in the composition of Electra's portfolio.Although the level of investment continues to increase, cash generated fromrealisations gave rise to an increase of £53 million in short term liquidityafter funding investment of £131 million and returns to shareholders of £73million in the form of a special dividend and on-market share buybacks. With the removal of restrictions on new investment, it is anticipated that therate of investment will increase further in contrast to the level ofrealisations, which will fall as a result of the change in age profile of theportfolio. This will lead to a reversal in Electra's current liquid position asthe investment portfolio increases. Electra is currently receiving attractive investment opportunities despiteconditions in the private equity market which remain very competitive.Furthermore, the ability to adopt a flexible approach enables Electra tomaximise the benefits from these investment opportunities. Electra is thereforein a good position to add new investments with potential to a portfolio which isalready well positioned for further growth. Investment Portfolio Review Investments Electra invested £131 million in the year and at 30 September 2006 hadoutstanding commitments to invest of £133 million. Investments and commitmentstaken together represented a marked step up in investment activity and comparedto investments and commitments of £82 million and £70 million made in theprevious year. Since 2001 Electra's investment strategy has restricted the fundsavailable for investment. Such restrictions have gradually decreased as thepre-2001 portfolio has been realised, with the result that the investment ratehas increased in each of the last three years. Following approval at theExtraordinary General Meeting held on 12 October 2006, all restrictions on newinvestment have been removed. The investments made by Electra in the year of £131 million were made up of £104million in direct investments and £27 million in private equity funds. Directinvestments included £18 million in the refinancing of Capital Safety Group IIand £23 million in the secondary buyout of Amtico. While these investments hadpreviously been held by Electra, the refinancing and restructuring providedexcellent opportunities to reinvest in a cost effective manner while continuingto benefit from the growth of these companies. Other direct investments included £16 million in the buyout of Vent-Axia, the UKmarket leader in the manufacture of residential and commercial ventilation fans,£15 million in SAV Credit, to finance the expansion of this company in thesub-prime credit market, and £13.7 million in Bizspace, which provides low cost,flexible workspace occupied on short term licences. Of the £27 million invested in private equity funds, £12.6 million was investedin the Electra European Fund II (now Cognetas Fund II) with the balance beinginvested primarily in three other funds. Electra's investment policy includestaking strategic positions in funds where the relationship is likely to giverise to significant co-investment and co-underwriting opportunities. Totalundrawn commitments to funds at 30 September 2006 amounted to £95 million. Realisations Realisations from the portfolio during the year amounted to £257 million. Thesubstantial level of realisations reflected the strength of the private equitymarket which continued throughout the year. Prices achieved on realisation wereabove expectations and, in overall terms, proceeds from realisations exceededthe book value at the beginning of the year by 95%. Largest RealisationsCompany Valuation at 30 September Proceeds from Disposal* 2005 £'m £'mInchcape Shipping *38.9 102.0ServicesCapital Safety Group I **55.6 ***59.0Amtico 17.3 36.8Tensar - ****17.0 111.8 214.8 * Includes accrued interest of £0.2 million ** Includes accrued interest of £15.0 million *** Proceeds include interest of £15.5 million **** Proceeds include interest of £2.9 million The most significant realisation related to the investment in Inchcape ShippingServices, which was sold in January 2006 providing net proceeds to Electra of£102 million, 162% higher than the carrying value at 30 September 2005 whichdemonstrates the value that can be achieved in the current marketplace in a wellcontrolled and competitive auction. The proceeds of £102 million compare to abook value of the investment at 30 September 2005 of £38.7 million. The originalcost of the investment in 1999 was £17 million and the subsequent furtherinvestment of £10 million was repaid by Inchcape Shipping Services prior to thefinal sale. The refinancing and restructuring of Capital Safety Group I resultedin proceeds to Electra of £59 million, which included interest payments of £15.5million, accounted for through the revenue account. As well as the proceeds,Electra acquired a significant stake in the restructured company. In August,Electra sold its investment in Amtico to another financial investor resulting inproceeds to Electra of £36.8 million. The rate of return to Electra over theeleven years in which the investment was held was just over 14% per annum andthe proceeds, together with previous loan repayments, provided a multiple of 3.5times the original investment. The other significant sale was that of Tensar,where total proceeds amounted to £17 million. This investment had previouslybeen provided against in full, in view of the company's potential exposure to alegal action. Performance The investment portfolio performed very strongly in the year to 30 September2006, driven principally by the high level of realised gains. Over the year,changes in value to the portfolio gave rise to a net capital increase of £153million, a percentage appreciation of 43.4%. Of these gains,£124 million represented realised profits on the sale of investments and afurther £10 million resulted from share price movements of restricted listedsecurities held at the end of the financial year. The remaining £19 millionrepresented the net increase in unrealised appreciation in respect of unlistedinvestments held at the end of the year. Total increases in unrealisedappreciation amounted to £25 million offset by valuation decreases of £6million. A significant portion of the realised gains was accounted for by the sale ofInchcape Shipping Services and Amtico, which provided gains of £63 million and£20 million respectively. Largest Valuation Changes Company £'m %Inchcape Shipping Services 63.1 162Amtico 19.5 113Tensar * 17.0 -Dinamia 6.3 58Capital Safety Group II 5.8 31Hemingway 5.3 118 * Includes income recognised on realisation Increases in unrealised appreciation were made in respect of ten investments,the largest relating to Electra's investments in Capital Safety Group II,Greenpark and Baxi. Increases of £5.8 million in Capital Safety Group II and£4.3 million in Baxi were made to reflect strong operating performance. Theincrease in value of Greenpark, a company engaged in the production ofelectricity from coal mine methane, reversed a provision previously made againstthe cost of the investment. Valuation reductions were made in the case of fourinvestments for a total of £6 million of which £4.9 million related to PrizeFoods which was fully provided against after a disappointing tradingperformance. Consolidated Income Statement For the year ended 30 2006 *RestatedSeptember 2005 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Net gains on investments 33,484 143,579 177,063 49,443 96,906 146,349Profits on revaluation of - 6,122 6,122 - (2,472) (2,472)foreign currencies 33,484 149,701 183,185 49,443 94,434 143,877Other income 2,437 - 2,437 2,374 - 2,374Priority profit share paid to (10,681) - (10,681) (8,964) - (8,964)general partnersOther expenses (3,539) (645) (4,184) (2,603) 512 (2,091)Net Profit before FinanceCosts and Taxation 21,701 149,056 170,757 40,250 135,196 4,946Finance costs (8,799) - (8,799) (6,140) - (6,140)Profit on Ordinary Activitiesbefore 12,902 149,056 161,958 34,110 94,946 129,056 TaxationTaxation Expenses (4,286) (7,208) (11,494) (5,217) (480) (5,697)Profit after Taxation 8,616 141,848 150,464 28,893 94,466 123,359Attributable to Equity 8,616 141,848 150,464 28,893 94,466 123,359Shareholders Basic and Diluted Earnings per Ordinary Share 20.58p 338.80p 359.38p 64.09p 209.54p 273.63p The Total column of this statement represents the Group's Income Statementprepared in accordance with IFRS and the Companies Act. The supplementaryRevenue and Capital columns are both prepared under guidance published by theAssociation of Investment Companies. The amounts dealt with in the Consolidated Income Statement are all derived fromcontinuing activities. 2006 2005 Number of Ordinary Shares in issue at 30 September 38,722,687 43,507,687 * As restated for the adoption of IFRS, as explained within the Basis ofAccounting. +----------------------------+--------+-------+--------+-------+-------+-------+|Dividends Paid | | | 2006| | | 2005|| | | | | | | ||Total paid (£'000) | | | 8,592| | | -|| | | | 20p| | | -||Per share | | | | | | |+----------------------------+--------+-------+--------+-------+-------+-------+ Consolidated Statement of Changes in Equity For the year ended 30 September 2006 2005 £'000 £'000Total equity at 1 October * 520,883 426,723Adoption of IAS 39 ** 1,239 -Profit after Taxation 150,464 123,359Special dividend *** (8,592) -Exchange differences arising on (1,445) 478consolidationRepurchase of own shares (64,257) (29,677)Total Equity Shareholders' Funds at 30 598,292 520,883September * As restated for the adoption of IFRS, explained within the Basis ofAccounting. ** Opening balance at 1 October 2005 has been restated for IAS 39 such thatlisted investments have been valued at bid rather than mid price andmarketability discounts have not been applied. *** Special dividend paid of 20p per share after share buy-back of 550,000ordinary shares on 6 February 2006. Consolidated Balance Sheet * Restated As at 30 Sept 2006 As at 30 Sept 2005 £'000 £'000 £'000 £'000Non-Current AssetsInvestments held at fair value:Unlisted and listed 386,033 370,298Floating rate notes 394,201 265,595 780,234 635,893Current AssetsTrade and other receivables 1,481 12,847Cash and cash equivalents 9,875 62,610 11,356 75,457Current LiabilitiesTrade and other payables 15,591 15,556Net Current (Liabilities)/Assets (4,235) 59,901Total Assets less Current Liabilities 775,999 695,794Bank loans 165,823 157,248 610,176 538,546Provision for liabilities and charges 11,884 17,663Net Assets 598,292 520,883Capital and ReservesCalled-up share capital 9,681 10,877Share premium 24,147 24,147Capital redemption reserve 33,594 32,398Translation reserve (453) 478Realised capital profits 645,107 584,240Unrealised capital losses (136,980) (154,430)Revenue reserves 23,196 23,173 588,611 510,006Total Equity Shareholders' Funds 598,292 520,883Net asset value per ordinary share 1,545.07p 1,197.22p * As restated for the adoption of IFRS, as explained within the Basis ofAccounting. Consolidated Cash Flow Statement * RestatedFor the year ended 30 September 2006 2005 £'000 £'000 £'000 £'000 Operating ActivitiesPurchases of investments (457,865) (307,484)Amounts paid under incentive (13,691) (2,346)schemesSales of investments 460,114 365,797Dividend received 14,560 2,817Other investment income received 28,323 44,792Interest received 2,139 2,066Other received 297 307Expenses paid (13,407) (11,222)Taxation paid (7,380) -Net Cash Inflow from Operating 13,090 94,727Activities Financing Activities Bank loans drawn 71,680 47,424 Bank loans repaid (56,680) (52,424) Repurchase of own shares (64,257) (38,848) Loans received - 5,248 Finance costs (7,451) (5,337) Other finance costs (222) (803) Dividend paid (8,592) - Net Cash Outflow from Financing (65,522) (44,740)Activities Changes in cash and cash (52,432) 49,987equivalentsCash and cash equivalents at 1 62,610 12,880OctoberTranslation difference (303) (257)Cash and cash equivalents at 30 9,875 62,610September * As restated for the adoption of IFRS, as explained within the Basis ofAccounting. Basis of Accounting The Accounts have been prepared in accordance with the accounting policies setout in Electra's Interim Report for the six months ended 31 March 2006 which wasposted to shareholders in June 2006 and which is available on the Company'swebsite (www.electraequity.com). Electra has applied these policies for thefirst time in the Accounts for the year ended 30 September 2006 in accordancewith the International Financial Reporting Standards, as adopted by the EuropeanUnion ("IFRS"), and in accordance with those parts of the Companies Act 1985applicable to companies reporting under IFRS. The Accounts have been preparedunder the historical cost basis of accounting, modified to include therevaluation of certain assets. Change of Accounting Policy Prior to the adoption of IFRS the Accounts of the Group had been prepared inaccordance with United Kingdom accounting standards (UK GAAP). UK GAAP differsin certain respects from IFRS and certain accounting and valuation methods havebeen amended when preparing these Accounts, to comply with IFRS. The comparativefigures in respect of 2005 have been restated to reflect these amendments. TheUK GAAP accounting policies in respect of financial instruments as applied at 30September 2005 have continued to be used for the comparative financialinformation, as permitted under IFRS 1. A reconciliation and description of theeffect of the transition from UK GAAP to IFRS on the Group reported financialposition, financial performance and cash flows is set out below. Year to 30 September 2005 £'000 Transfer to Reserves for the period under UK GAAP 115,135 Transfer to Translation Reserve* (478) Special dividend ** 8,702 Profit After Taxation Under IFRS 123,359 30 September 2005 1 October 2004 £'000 £'000Total equity shareholders' funds under UK 512,181 426,723GAAPSpecial dividend ** 8,702 -Total equity shareholders' funds under 520,883 426,723IFRS Year to 30 September 2005 £'000Change in cash under UK GAAP (11,256)Short term deposits *** 61,243Change in cash and cash equivalents under IFRS 49,987 * Foreign currency differences arising on retranslation of assets andliabilities of foreign operations are recognised directly in the TranslationReserve under IFRS. ** Under IFRS dividends declared after the Balance Sheet date are not recognisedas a liability at the Balance Sheet date. *** For the purposes of the Cash Flow Statement, short term deposits areclassified as cash equivalents under IAS 7, whilst they were included as liquidresources under UK GAAP. IFRS has not significantly changed any of the cashflows of the Group. ----- E N D ----- This information is provided by RNS The company news service from the London Stock Exchange