ELTA.L Regulatory News (ELTA)

24 May 2005 07:01

Electra Investment Trust PLC24 May 2005 EMBARGOED UNTIL 07:00 AM, TUESDAY 24 MAY 2005 ELECTRA INVESTMENT TRUST PLC Announcement of Interim Results for six months ended 31 March 2005 • Very significant progress continued over last six months with strong net asset value growth and good share price performance • Net asset value of 1054p per share at 31 March 2005, up 15.5% since 30 September 2004 (30 September 2004: 913p per share) • Over six months to 31 March 2005 Electra's share price increased by 17.8% versus FTSE All-Share Index which increased by 8.2% • Over 10 years to 31 March 2005 Electra's share price increased by 183% versus FTSE All-Share Index which increased by 60% • Unaudited net asset value per share at 17 May 2005 of 1056p Commenting on the Interim Results, Sir Brian Williamson, Chairman, said: "The very significant progress achieved during the year ended 30 September 2004continued for the six months to 31 March 2005 resulting in strong net assetvalue growth and good share price performance. With the return of substantial amounts to shareholders over the last six yearsElectra is within reach of the commitment to deliver value made to shareholdersin March 1999. Electra's structure, together with the investment skills of Electra Partners,means that Electra is well positioned to continue making successful investmentsand delivering an attractive rate of return to investors." For further information: Sir Brian Williamson, Chairman, Electra Investment Trust PLC 020 7831 6464Hugh Mumford, Chief Executive, Electra Partners Limited 020 7831 6464Nick Miles, M: Communications 020 7153 1535 Net Asset Value Per Share 31 March 2005 30 September 2004 17 May 2005----------------------- ----------- ------------- ----------Net asset value per share 1053.92p 912.86p 1056p Increase since 30 September2004 15.45% Increase in FTSE All-ShareIndex since 8.19%30 September 2004 The unaudited net asset value per share at 17 May 2005 was calculated on thebasis of the net asset value at 31 March 2005 adjusted to reflect the purchasesand sales of investments, currency movements and mid market values on that dayin respect of listed investments and unlisted investments where these are valuedby reference to quoted prices. A copy of the Chairman's Statement, Investment Manager's Review and the InterimAnnouncement are attached. Note to Editors:Electra - Background to Recent Changes Since listing in 1976, Electra has specialised in investing in the privateequity market and, through the adoption of a flexible investment policy, hasachieved returns substantially in excess of the FTSE All-Share Index over thelast ten years. As an investment trust, Electra has a number of advantages overlimited partnership funds which invest in private equity. Between 1976 and 2005 Electra invested over £3,000 million in private equityinvestments. Inclusive of a capital injection of £32 million, Electra's assetsgrew from £58 million in 1976 to £1,145 million by 30 September 1998, thefinancial year end immediately preceding the hostile takeover bid for Electra by3i plc in 1999. This bid failed when shareholders voted in favour of a schemewhich involved the controlled realisation of the portfolio over a five yearperiod under which new investment was restricted to existing portfoliocompanies. Since the start of the realisation programme in March 1999, Electra has returned£1,113 million to shareholders leaving a gross portfolio valued at £588 millionat 31 March 2005. This compares with the stock market value of Electra of £975million immediately before the announcement of the takeover bid. Over the sixyears to 31 March 2005, £500 million has been invested in portfolio companiesand £1,800 million has been realised from the portfolio. Shareholders approved proposals in June 2001 which retained the emphasis onrealising the investment portfolio but made provision for Electra to continue asan investment vehicle. In June 2004, the Board, with input from its advisers and Electra Partners,reviewed Electra's investment strategy and concluded that, in the short term, itshould continue unchanged from the investment strategy approved by shareholdersin June 2001. Chairman's Statement The very significant progress achieved by Electra during the year ended30 September 2004 continued in the six months to 31 March 2005, with stronggrowth in net asset value and a good share price performance. It is now clearthat, with the return of substantial amounts to shareholders over the last sixyears, Electra is within reach of the commitment to deliver value made toshareholders in March 1999 when a hostile bid was made for the Company by 3iplc. In the last six months net asset value per share grew by 15.5% to 1054p and theshare price increased by 17.8% in a period when the FTSE All-Share Indexincreased by 8.2%. Taking the period from just prior to the bid, when Electra's stock market valuewas £975 million, up to 31 March 2005, over £1.1 billion has been returned toshareholders by way of tender offers or on-market buy-backs. At 31 March 2005Electra had a market capitalisation of £416 million and this aggregate increasein shareholder value of 57% compares with a decrease in the FTSE All-Share Indexof 7.7% over the six years. Realisations from the unlisted equity portfolio amounted to £82 million in thelast six months and a further £40 million has been received since 31 March. Overthe last 18 months the scale of the realisations made is such that Electra hasbeen able to not only maintain the pace of returning capital to shareholders butalso to reduce debt. This has transformed Electra's financial position andenhanced the Company's future prospects. In the last six months £34 million has been invested in new unlisted equityinvestments and details of these are set out in the Investment Manager's Review. Electra made further on-market purchases and cancelled 2.2 million shares inJanuary 2005 leaving 44.5 million shares in issue at 31 March 2005. The Boardexpects to continue making on-market buy-backs of Electra's shares in thefuture. Policy Electra's investment policy, which remains unchanged, is to invest in privateequity assets and certain other assets where added value can be achieved throughthe use of private equity techniques. These other assets include investment inreal estate and listed companies. The emphasis is on direct leveraged equityinvestments in the UK and Continental Europe. Electra also invests in privateequity funds where direct co-investment opportunities are likely to be availableor there exists some other added value potential. Electra's investments are primarily concentrated on achieving capitalappreciation. Prior to 1999 Electra paid dividends from revenue received fromits quoted portfolio and other revenue generating investments. The timing ofrevenue receipts is now more difficult to predict and the Board does not expectto be proposing dividend payments on a regular basis in future. The Boardbelieves that Electra's performance should be judged on a total return basis andthat it is more appropriate for Electra to return cash to shareholders throughbuy-backs than attempt to achieve regular dividend payments. Board of Directors Electra's Board substantially comprises the same Directors who receivedshareholder approval for the strategy originally formulated in 1999 and variedin 2001. I believe that the Directors who backed this policy should remain inplace until its completion. The major portion of the programme has now been delivered and Electra is in aposition to build up its investments in those areas where its InvestmentManager, Electra Partners, has proven expertise. For these reasons the Board has decided that it is now appropriate to considerits future composition. As a first step, we will be aiming to attract additionalDirectors. As we get closer to the completion of the realisation strategy someexisting Directors will retire from the Board. Outlook The market for realising investments continues to be favourable. The Boardbelieves that the concept of an investment trust investing in private equity isan attractive one and provides cost effective and liquid access to privateequity for both institutional and private investors. This differs from limitedpartnership funds investing in private equity, which are typically onlyavailable to larger institutions and for which there is limited liquidity.Additionally, Electra is able to take a longer term view in the acquisition anddisposal of investments, unlike limited partnership funds, which have fixedinvestment periods irrespective of the economic cycle and a realisation policydriven by the terms of the limited partnership. Over the 10 years to 31 March 2005 Electra's share price increased by 183% bycomparison with the FTSE All-Share Index which increased by 60%. Electra'sstructure, together with the investment skills of Electra Partners, means thatElectra is well positioned to continue making successful investments anddelivering an attractive rate of return to investors. Sir Brian Williamson23 May 2005 Portfolio Analysis Summary of Changes to Overall Portfolio Six months ended 31 March 2005 2004 £'000 £'000 Opening valuation 413,088 679,611Investments 33,584 22,042Realisations (82,201) (200,517)Changes in valuation 58,562 41,465Closing valuation * 423,033 542,601 * The above valuations at 31 March exclude accrued income (2005: £16,106,000;2004: £15,238,000) and investments in floating rate notes (2005: £165,026,000;2004: £164,997,000). In the six months to 31 March 2005, Electra's net asset value per shareincreased from 913p per share to 1,054p per share, an increase of 15.5%. Thisstrong performance resulted from a further substantial improvement in theinvestment portfolio which, over the six month period, recorded £59 million ofnet capital gains. Net realisations from the portfolio amounted to £49 millionbut, due to the level of capital appreciation, the overall value of theinvestment portfolio increased by £10 million to £423 million at 31 March 2005. Currency changes continued to impact the portfolio valuation reducing the valueof the portfolio by £3.9 million in the six month period. The impact of currencychanges on the net asset value was however minimal as a result of the existingstrategy of hedging non sterling assets through appropriate currency borrowings. Geographically 79% of the total portfolio is in the UK and Europe, 11% in theUSA, 8% in Asia and 2% in South America. Current Operations and Outlook The level of realisations achieved over the past 18 months of £475 million hastransformed Electra's financial position. By 31 March 2005 cash and floatingrate notes exceeded bank debt by £43 million compared with a net debt positionof £187 million at 1 October 2003. Under the current investment strategy up to one third of the proceeds ofrealisations from the portfolio existing at June 2001 can be applied in makingnew investments together with all the proceeds from investments made post June2001. With the level of realisations and the prospects of future realisations itis likely that, for the first time since 2001, funds available for investmentwill reach a material level. The recent high level of realisations has reduced the number of investments inthe existing portfolio which now consists of a relatively small number of largerinvestments which have been held for several years, together with a number ofrecent investments principally in former portfolio companies and a number ofother investments which may need to be held for the longer term in order tocreate the maximum value. With fewer investments in the portfolio opportunitiesfor realisations are correspondingly reduced although, given the currentfavourable market for selling investments and the availability of premiumprices, further realisations could take place during the balance of the currentfinancial year. New Investments In the six month period, investments totalled £34 million compared to £22million in the corresponding period of the previous year. This increase reflectsthe fact that more funds are becoming available for investment as a result ofthe high level of realisations achieved in recent periods. Investments included£24.4 million in the buy-out of Freightliner, £4.2 million for the purchase of afurther minority interest in the Energy Power Resources Group and £3.3 millionunder commitments to private equity funds. One of the advantages of an investment trust investing in private equity isthat, because of the continuing nature of the vehicle, re-investment can be madein companies which are sold from the portfolio or where there is a substantialchange in equity ownership. This is clearly advantageous when further value canbe achieved from the investment in the future. In the case of Freightliner,offers received for the company as a result of a sale process were considered tobe unsatisfactory. In order to capture further value the company was refinancedand restructured through the buy-out of a substantial minority interest. As aresult of this transaction, Electra received cash proceeds of £28.6 million andreinvested £24.4 million in the new buy-out vehicle. The process increasedElectra's equity interest in the underlying business from 28% to 40%. The investment in Energy Power Resources was made to further rationalise thegroup with a view to facilitating the sale of the business. Also during theperiod Electra made a commitment of £17 million to Sinergia, an Italian privateequity fund where it is believed there will be attractive coinvestmentopportunities. Realisations Realisations from the portfolio for the six month period amounted to £82million. In addition, the sale of Electra's interest in Energy Power Resourceshad reached the final stages at the half year end with proceeds of over £38million received in April 2005. Realisations thus continued at a substantiallevel in the period reflecting the continuing strength of the market. The largest disposal completed in the period related to Freightliner where therestructuring and recapitalisation gave rise to proceeds of £28.6 millioncompared to a book value of £21.6 million at 30 September 2004. In the case ofEnergy Power Resources, the proceeds of £38 million received shortly after thehalf year end compared to a book value at 30 September 2004 adjusted forsubsequent purchases of £15.6 million. Sale proceeds thus represented 2.4 timesbook value. This exceptional increase was due to a well executed sale processcombined with the fact that the nature of Energy Power Resources' business madethe investment difficult to value on any basis other than a conservative one. Inaddition to the proceeds received from the sale of Energy Power ResourcesElectra also received £14.4 million from the investment in Fibrothetford, one ofthe renewable energy plants in the Energy Power Resources' portfolio. Thisinvestment was acquired for £9.3 million in September 2004. Most of the proceedsof the sale of Energy Power Resources related to investments made over the lasttwo years. One other significant realisation in the period related to Amtico where thecompany redeemed the loan element of Electra's investment resulting in the earlyrepayment of £15.6 million. As a result of this transaction, almost the entireoriginal cost of the investment has now been repaid. Performance During the six month period, the investment portfolio gave rise to net capitalappreciation of £59 million, an increase of 14.2%. This strong performance wasdriven mainly by gains realised on the sale of investments. Of the total gainsof £59 million, including the gain on the sale of Energy Power Resources andGower, realised gains accounted for £41 million or almost 70% of the total netincrease. Net gains due to movement in listed prices added £7.9 million to thevalue of the portfolio of which Zensar, an Indian quoted investment, accountedfor £4.2 million. Unrealised increases in value made in the period added £25 million to theportfolio, offset by provisions totalling £15 million. The net contribution of£10 million from unrealised gains was thus relatively small and accounted foronly 17% of the overall performance. In terms of individual investments the onlysignificant increases related to Bezier (£9.2 million) and Allflex (£5.8million) both of which were made to reflect improvements in underlying earnings. Consolidated Statement of Total Return (unaudited)(incorporating the Revenue Account) --------------------- ------- ------- ------- ------- ------ ------For the six monthsended 31 March Revenue Capital 2005 Revenue Capital 2004 £'000 £'000 Total £'000 £'000 Total £'000 £'000--------------------- ------- ------- ------- ------- ------ ------ Gains on investments: Realised - 16,880 16,880 - 32,226 32,226Unrealised - 41,071 41,071 - 13,985 13,985Losses on revaluationof foreigncurrencies:Realised - (2) (2) - (49) (49)Unrealised - 4,587 4,587 - 13,788 13,788--------------------- ------- ------- ------- ------- ------ ------ - 62,536 62,536 - 59,950 59,950Income of theinvestment trust 9,378 - 9,378 12,404 - 12,404Net income ofsubsidiaryundertakings 570 - 570 - - -Priority profit sharepaid to generalpartners (4,353) - (4,353) (4,970) - (4,970)Other expenses (233) - (233) (681) - (681)--------------------- ------- ------- ------- ------- ------ ------Net Return beforeFinance Costs andTaxation 5,362 62,536 67,898 6,753 59,950 66,703Interest payable andsimilar charges (2,772) - (2,772) (2,141) - (2,141)Return on OrdinaryActivities before 2,590 62,536 65,126 4,612 59,950 64,562TaxationTaxation on OrdinaryActivities (750) - (750) - - ---------------------- ------- ------- ------- ------- ------ ------Return on OrdinaryActivities afterTaxation 1,840 62,536 64,376 4,612 59,950 64,562Exchange differencesarising onconsolidation (301) (2,266) (2,567) (715) (9,937) (10,652)--------------------- ------- ------- ------- ------- ------ ------Net Transfers toReserves for thePeriod 1,539 60,270 61,809 3,897 50,013 53,910--------------------- ------- ------- ------- ------- ------ ------Return toShareholders per 3.35p 131.18p 134.53p 5.98p 76.76p 82.74pOrdinary Share--------------------- ------- ------- ------- ------- ------ ------ The amounts dealt with in the Consolidated Statement of Total Return are allderived from continuing activities. 2005 2004 Number of Ordinary Shares in issue at 31 March 44,507,687 65,109,533 Reconciliation of Total Shareholders' Funds (unaudited)----------------------- --------------- ---------------For the six months ended 31 March 2005 2004 £'000 £'000 ----------------------- --------------- ---------------Total Return 64,376 64,562Exchange differences arising on consolidation (2,567) (10,652)Repurchase of own shares (18,896) (764)Nominal value of own shares repurchased (559) (31)----------------------- --------------- ---------------Movements in Total Shareholders' Funds 42,354 53,115Total Equity Shareholders' Funds at 1 October 426,723 495,498----------------------- --------------- ---------------Total Shareholders' Funds at 31 March 469,077 548,613----------------------- --------------- --------------- Consolidated Balance Sheet As at 31 March 2005 As at 30 Sept 2004 As at 31 March 2004 (Unaudited) (Audited) (Unaudited) £'000 £'000 £'000 £'000 £'000 £'000--------------------- ------ ------ ------ ------ ------ ------Fixed AssetsInvestments:Unlisted 401,015 391,760 522,993Floating rate notes 165,026 164,997 164,997Listed 22,018 21,328 19,608--------------------- ------ ------ ------ ------ ------ ------ 588,059 578,085 707,598--------------------- ------ ------ ------ ------ ------ ------Current AssetsDebtors 24,633 25,550 19,353Cash at bank and in 28,863 12,880 14,370hand ------ ------ ------ ------ ------ --------------------------- 53,496 38,430 33,723--------------------- ------ ------ ------ ------ ------ ------Current LiabilitiesCreditors: amountsfalling due 4,522 12,749 3,477within one year ------ ------ ------ ------ ------ ---------------------------Net Current Assets 48,974 25,681 30,246--------------------- ------ ------ ------ ------ ------ ------Total Assets lessCurrent 637,033 603,766 737,844LiabilitiesCreditors: amountsfalling due (150,447) (160,034) (165,677)after more thanone yearProvision forliabilities and (17,509) (17,009) (23,554)charges ------ ------ ------ ------ ------ ---------------------------Net Assets 469,077 426,723 548,613--------------------- ------ ------ ------ ------ ------ ------Capital andReservesCalled-up share 11,127 11,686 16,277capitalShare premium 24,147 24,147 24,147Capital redemption 32,148 31,589 26,998reserveRealised capital 529,134 567,693 624,313profitsUnrealised capital (123,298) (202,672) (137,742)lossesRevenue reserves (4,181) (5,720) (5,380)--------------------- ------ ------ ------ ------ ------ ------ 457,950 415,037 532,336--------------------- ------ ------ ------ ------ ------ ------Total EquityShareholders' 469,077 426,723 548,613Funds ------ ------ ------ ------ ------ ---------------------------Net asset value perordinary 1053.92p 912.86p 842.60pshare of 25p ------ ------ ------ ------ ------ --------------------------- Consolidated Cash Flow Statement (unaudited) ----------------------- -------- -------- -------- --------For the six months ended 31 March £'000 2005 £'000 2004 £'000 £'000 ----------------------- -------- -------- -------- --------Operating ActivitiesUK dividend income 1,339 457Unfranked investment income 7,609 27,601Interest income 501 544Other income 148 223Expenses (5,332) (6,004)----------------------- -------- -------- -------- --------Net Cash Inflow from OperatingActivities 4,265 22,821Returns on Investments and Servicingof (2,886) (2,141)FinanceInterest paid----------------------- -------- -------- -------- --------Net Cash Outflow from Returns onInvestments and Servicing of Finance (2,886) (2,141)----------------------- -------- -------- -------- --------Capital Expenditure and FinancialInvestmentPurchases of investments (158,614) (187,039)Sales of investments 205,827 190,703----------------------- -------- -------- -------- --------Net Cash Inflow from CapitalExpenditure 47,213 3,664and Financial Investment -------- -------- -------- -------------------------------Net Cash Inflow before Management ofLiquid Resources and Financing 48,592 24,344----------------------- -------- -------- -------- --------Management of Liquid Resources 17,000 (7,407) 13,617 (6,600)Financing (22,000) (26,772)Bank loans drawn (1,019) (1,365)Bank loans repaid (28,626) (795)Loans paidRepurchase of own shares----------------------- -------- -------- -------- --------Net Cash Outflow from Financing (32,607) (15,315)----------------------- -------- -------- -------- --------Increase in Cash in the Period 8,578 2,429----------------------- -------- -------- -------- -------- ----------------------- -------- -------- -------- --------For the six months ended 31 March £'000 2005 £'000 2004 £'000 £'000 ----------------------- -------- -------- -------- --------Reconciliation of Net Cash Flow toMovement in Net DebtDecrease in cash in the period 8,578 2,429Cash outflow from debt financing 5,000 13,155Cash outflow from change in liquid 7,407 6,600resources -------- -------- -------- ------------------------------- 12,407 19,755 ----------------------- -------- -------- -------- --------Change in Net Debt Resulting from Cash 20,985 22,184FlowsTranslations difference 4,585 13,725----------------------- -------- -------- -------- --------Movement in Net Debt 25,570 35,909Net debt brought forward (147,154) (187,216)----------------------- -------- -------- -------- --------Net Debt Carried Forward (121,584) (151,307)----------------------- -------- -------- -------- -------- END This information is provided by RNS The company news service from the London Stock Exchange