ELTA.L Regulatory News (ELTA)

Electra Private Equity PLCPreliminary Announcement for the Full Year ended 30 September 2018

This Preliminary Announcement for the Full Year ended 30 September 2018 has been extracted from the audited Annual Report and Financial Statements.

Highlights

· NAV at 30 September 2018 of £342m (892.4 pence per share)

· Pro forma NAV of £202m (527.4 pence per share) following the £140m initial Special Dividend of FY19 being paid on 14 December 2018

· Fully controlled assets (TGI, Hotter and SPC) have combined LTM maintainable EBITDA of £33.3m with Net Debt of £29m - including cash held centrally (post dividend)

· Investment Policy and Objective changed at shareholder meeting in October 2018 with over 99% support

· Strategy to conduct a managed wind-down of the portfolio over a period of time, allowing optimisation of returns, the return of cash to shareholders, and ultimately the winding-up of the Company

· Operating costs and Board composition being reduced to reflect the reduced scale and activities of the Company

· Further dividend announcements will follow in the first quarter of 2019

Portfolio

· Concentration of portfolio leads to volatility as difficult conditions in UK retail and casual dining impacted TGI Fridays (£124.6m) and Hotter Shoes (£6.8m). Both impacted by exceptional weather conditions in 2018 as well as underlying markets. Recovery plans for both businesses are in place intended to increase resilience and value prior to exits in an acceptable timeframe

· Special Product Company (£7.3m) performing strongly in US cable and telecom infrastructure market whilst Sentinel (£4.1m) is experiencing a challenging end to a strong year as customers supply chains adjust to end user demand in UK building products sector

· Tail assets continue to provide expected value realisations

· Photobox sold post year end and Knight Square disposal expected to complete later this month

Composition of NAV

Commenting, Neil Johnson, Chairman of Electra Private Equity, said:

"From a market capitalisation of £1.2bn at the start of October 2015 we have now made and announced distributions to shareholders of over £2.0bn with remaining net assets of £0.2bn after announced distributions. The direction is now clear, and we will seek to optimise value in the remaining portfolio over an acceptable timeframe whilst managing our cost base accordingly."

For further information: Gavin Manson, Chief Financial Officer, Electra Private Equity PLC 020 3874 8300Gill Ackers, Brunswick Group 020 7404 5959

The audited Annual Report and Financial Statements for the Year ended 30 September 2018 have not yet been delivered to the Registrar of Companies but are expected to be published in January 2019. The Financial Statements for the year to 30 September 2018 are audited. The financial information set out below does not constitute the Company's statutory accounts for the years to 30 September 2018 or 2017 but is derived from those accounts. The auditors have reported on those accounts; their reports (i) were unqualified, (ii) included a reference to matters to which the auditors drew attention by way of emphasis in relation to the basis of preparation other than going concern, without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for the year to 30 September 2018 or 30 September 2017. Statutory accounts for the year to 30 September 2017 were approved by the Board of Directors on 6 December 2017, published on 31 January 2018 and delivered to the Registrar of

Companies.

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, New Zealand or South Africa. References in this announcement to Electra Private Equity PLC and its subsidiaries have been abbreviated to 'Electra' or the 'Company' or the 'Group'. References to Epiris Managers LLP (formerly Electra Partners LLP) have been abbreviated to 'Epiris'.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

Chairman's Statement

"From a market capitalisation of £1.2bn at the start of October 2015 we have now made and announced distributions to shareholders of over £2.0bn with remaining net assets of £0.2bn after announced distributions. The direction is now clear, and we will seek to optimise value in the remaining portfolio over an acceptable timeframe whilst managing our cost base accordingly."

The past year has been one focused on setting the strategic direction of the Company and of its portfolio of investments, as well as of continued corporate simplification and tidying up the past.

Having concluded in the second phase of our strategic review in October 2017 that a listed closed ended fund structure is not optimal for private equity investment, and having had significant interest in our portfolio assets, in May 2018 we commenced the third and final stage of our strategic review. This considered all options for the future.

The review concluded that it would be optimal to accept offers received for our larger non-controlled assets and thereafter consult with shareholders over the future. The Board considered that having now paid and announced distributions to shareholders of over £2.0bn since 2016, and given the size of the remaining portfolio, it is unsustainable to continue in our current form, and on 30th October 2018, recommended a managed wind-down of the portfolio to shareholders.

In making this recommendation, the Board had concluded that, given the well documented challenges in both the UK retail and casual dining sectors, it was not appropriate to sell the two remaining larger assets TGI Fridays and Hotter Shoes at this time. These assets represent nearly 90% of the remaining portfolio, after disposals already announced, and are fully controlled. Despite the impact of short-term trading conditions on current valuation, the Board is confident that both assets offer good opportunity for growth and can provide strong exits in an acceptable timeframe. This concentration of value in two assets, both with exposure to UK consumer and retail markets, introduces a concentration of risk and possible volatility that would have been inappropriate in the context of the previous Investment Objective and Policy.

With over 99% of shareholders who voted at the October 2018 General Meeting accepting the Board's recommendation, the direction is now clear. The Board is now focused on managing the recovery and strategic development of TGI Fridays and Hotter Shoes, and the continued growth of our smaller controlled investment, Special Product Company, towards acceptable exits balancing value and timing, and will continue to seek optimised exits from the remaining non-core portfolio and remaining non-controlled investment, Sentinel Performance Solutions.

Over the past year, we have continued to make excellent progress in simplifying our complex corporate structure and in tidying up issues from the past. This progress, combined with the reduced portfolio size, now allows us to further reduce our cost base. From early 2019, our recurring cost base will be reduced by 50% to approximately £3m p.a. and from the AGM we will take further steps in reducing the size of our Board to reflect the reduced size and complexity of the Company.

An inevitable consequence of our strategy and of managing our cost base accordingly is that a number of colleagues who have contributed significantly to the successful generation of shareholder value over the past three years will be leaving us. I would like to thank them for their contributions and wish them well.

Through focus on optimising the performance and value of our remaining investments and in managing our cost base, the Board is confident that the Company can deliver good value to shareholders over an acceptable timeframe.

Neil Johnson

Chairman

10th December 2018

Strategic Report

The Strategic Report provides a review of the Company's business, the operating performance during the year to 30th September 2018, and its strategy going forward. It also considers the principal risks and uncertainties facing the Company. References to other sections of this Annual Report and Financial Statements are provided where appropriate.

Strategy in the year to 30th September 2018 and Strategic Review

Throughout the year under review, the Company continued to operate as an approved investment trust, following its investment strategy and policy, holding a portfolio of private equity assets which was intended to achieve a rate of return on equity of between 10% and 15% per year over the long term.

During the year, the Board and the internal executive team undertook all strategic and administrative activities, working closely with G10 Capital Limited ('G10'), the Company's Alternative Investment Fund Manager ("AIFM"), to fulfil all relevant regulated activities.

Towards the end of the year, the Company undertook the third and final stage of its strategic review, covering all options for the future direction of the Company including testing market appetite for a sale of the Company or for all of the Company's assets.

On 24th August 2018, the Board announced that it had received interest in acquiring each of the portfolio assets (individually and in groups). However, no firm interest had been received in acquiring the Company. Discussions were to continue with a number of parties over the possibility of acquiring portfolio assets individually and in groups.

This resulted in the announcement on 4th October 2018 that:

· An agreement had been reached for the sale of the larger non-controlled assets, Photobox and Knight Square at 103% of adjusted 31st March 2018 carrying value (adjusted carrying values take into account a follow-on investment of £4m in Photobox and the repayment of £13m of loan notes by Knight Square, following the sale of non-core assets)

At the same time, the outcome of the third phase of the strategic review was announced which was that:

· The Board considered that each of the remaining corporate investments represents an opportunity for value creation within an acceptable timeframe. However, the concentration of the portfolio and the structural inefficiency in reinvesting in a listed private equity vehicle with a significant market discount to NAV make it inappropriate to seek to do this within the existing investment objective and policy of the Company

· The Board concluded, and recommended, that it is in the best interests of shareholders to conduct a managed wind-down of the portfolio over a period of time, allowing optimisation of returns, the return of cash to shareholders, and ultimately the winding-up of the Company (the 'Recommendation'). The Board intends that until it is finally wound up, the Company will continue to be listed on the London Stock Exchange in its existing listing category and will pay annual dividends funded by cash generated from the portfolio

· The Board will further reduce the operating cost base of the company (including a reduction in the number of Board members) in recognition of the reduced scale of the portfolio and the change to the investment objective and policy

The sale of the investment in Photobox completed in October 2018. Regulatory approval for sale of the interests in Knight Square has been obtained, and the sale is expected to complete in December 2018.

Implementation of the Recommendation following the third phase of the strategic review required shareholder approval of a new Investment Objective and Policy. This was voted on and passed with overwhelming support at a General Meeting of the Company on 30th October 2018.

The Board has declared a first Special Dividend of FY19 of £140m (365p per share) payable on 14th December 2018 and intends to pay further dividends following all material disposals and annual dividends of £10m funded from cashflows from portfolio companies.

Principal Risks and Risk Management

The Board consider that the risks detailed below are the principal risks currently facing the Company, along with the risks detailed in Note 18 of the Notes to the Financial Statements ("the Notes"). These are the risks that could affect the ability of the Company to deliver its recently announced strategy.

The Board can confirm that the principal risks of the Company, including those which would threaten its future performance, solvency or liquidity, have been robustly assessed throughout the year ended 30th September 2018, and that processes are in place to continue this assessment.

Portfolio Diversification Risk

The Company is subject to the risk that its portfolio may not be diversified by being heavily concentrated in any one sector or industry, particularly in relation to the UK economy where the majority of its investments are located.

At the General Meeting on 30th October 2018, shareholders voted in favour of the new investment objective and investment policy. With the switch towards a strategy of realisation without new investments, the Company is increasingly exposed to the performance, favourable or unfavourable, of the remaining individual investments which may lead to greater volatility in fair value. As such, the risk is considered higher than at the prior year end.

Strategy Implementation Risk

The Company is subject to the risk that implementation of its strategy and its level of performance fail to meet the expectations of its shareholders. The Board has undertaken a thorough review of the Company's investment strategy and policy and its structure, with the objective of maximising shareholder value.

Given the reduced size of the portfolio, the distributions made to shareholders over the past two years and recent announcements regarding strategy, investment policy and distributions, this risk is lower than at the end of the prior year.

Investment Risk

The performance of the Company's portfolio is influenced by a number of factors. These include, but are not limited to: (i) the quality of the initial investment decision; (ii) reliance on co-investment parties; (iii) the quality of the management team of each underlying portfolio company and the ability of that team to implement its business strategy successfully; (iv) the success of the executive team in building an effective working relationship with each team in order to agree and implement value-creation strategies; (v) changes in the market or competitive environment in which each portfolio company operates; and (vi) the macroeconomic risks described below. Any one of these factors could have an impact on the valuation of an investment and on the Company's ability to realise the investment in a profitable and timely manner.

The Company has a rigorous process which ensures disciplined review of investments and portfolio management. This includes detailed due diligence, regular portfolio reviews and in most cases an active engagement with portfolio companies, by way of Board representation. This level of risk is considered broadly similar year on year.

Solvency and Liquidity Risk

Private equity investments are relatively illiquid and generally more difficult to realise than listed equities or bonds. Accordingly, it is difficult to provide any certainty on the timeframe for realisation of the Company's investments.

Costs, cash and reserves forecasts are reviewed by the Board to ensure sufficient funds are available for running costs of the Company and to support the portfolio as required. The strategy of conducting a managed wind-down and the higher concentration of assets result in this risk being higher than at the prior year end.

Macroeconomic Risk

The performance of the Company's investment portfolio is materially influenced by economic conditions. These may affect demand for products or services supplied by investee companies, foreign exchange rates, the price of commodities or other input costs, interest rates, debt and equity capital markets and the number of active trade and financial buyers. All of these factors could be influenced by the outcomes of the Brexit negotiations and all have an impact on the Company's ability to realise a return from its investment portfolio and cannot be directly controlled by the Company. The Board does not consider the level of these risks to be significantly higher or lower than at the same time last year.

Valuation Risk

The valuation of investments in accordance with IFRS 13 and International Private Equity and Venture Capital Valuation (IPEV) guidelines requires considerable judgement and is explained in the Notes. This risk has not materially changed in impact from the prior year.

Operational Risk

The Company is exposed to a range of operational risks including those relating to human resources, legal and regulatory matters, financial reporting, information technology systems, business disruption and shortcomings in internal controls. The Company's investment management, control systems and many administrative systems are managed by the executive team or outsourced partners and overseen by the Board. Reviews of the controls are carried out by independent parties. These risks are considered lower than for the prior financial year.

Gearing Risk

Gearing is used across the Company's investment portfolio. One of the principal risks of gearing is that it can cause both gains and losses in the asset value of portfolio investments to be magnified. Another significant risk associated with gearing is the potentially severe impact on portfolio investments of any breaches of their banking covenants. Secondary risks relate to whether the cost of gearing is too high and whether the contracted terms of the gearing, including those relating to the terms of borrowings is appropriate.

Gearing is actively monitored across the investment portfolio, including working closely with management teams to ensure that the terms of any borrowing facilities are being forecast, and through maintaining relationships with the lenders who make facilities available. Given the levels of cash held and the lack of borrowing at the Company level, this risk is considered to be in line with prior years.

Foreign Currency Risk

Foreign exchange exposures also exist across the Company's investment portfolio as a result of the denomination of revenues, costs, assets and liabilities in different currencies. The executive directors work with the Company's investment portfolio to make use of natural, financing and derivative hedges to mitigate these exposures.

Cash Drag Risk

Returns to the Company through holding cash deposits are currently low. Due to the Board's recommendation of a managed wind-down of the portfolio, the revised investment policy and the distribution policy, all announced in October 2018, this risk is considered lower than at the prior year end.

Viability Statement

The Directors have carefully assessed the Company's current position and prospects as well as the Principal Risks stated above and have formed a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next three financial years, irrespective of the timing of portfolio wind-down events. Should appropriate conditions exist the Directors may recommend the winding-up of the Company sooner.

The particular factors the Directors have considered in assessing the prospects of the Company and in selecting a suitable period in making this assessment are as follows:

· The Company is presently invested primarily in long-term illiquid investments which are not publicly traded. The Company will not make any new investments although it has committed to support its existing portfolio to the extent required to optimise returns

· The Board considers that each of the remaining corporate investments represents an opportunity for value creation within a medium-term timeframe

· The Board reviews the liquidity of the Company and regularly considers any commitments it has, cash flow projections and the use of gearing

· The Valuations Committee oversees the valuation process. Typically, the medium-term prospects of each portfolio company form an important part of the valuation process

· A thorough review of the Company's investment objective and policy has recently been undertaken with the objective of optimising returns and distributing cash to shareholders

Taking account of the above factors, the term periods of gearing facilities of the portfolio companies, the liquidity of the Company and the valuations and medium-term prospects of its portfolio companies, the Directors have formed a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next three financial years.

In making this assessment, the Directors have assumed that the threats to the Company's solvency and liquidity incorporated in the Principal Risks will be managed or mitigated as outlined there.

Community, Social, Employee, Human Rights, Environmental Issues, Anti-bribery and Anti-corruption

The Company is committed to carrying out business in an honest and fair manner with a zero-tolerance approach to bribery and corruption. As such, policies and procedures are in place to prevent bribery and corruption. In carrying out its activities and in its relationships with the community, the Company aims to conduct itself responsibly, ethically and fairly, including in relation to social and human rights issues.

As an investment trust, with limited internal resource, the Company has little impact on the environment. However, the Company believes that high standards of corporate social responsibility ("CSR") make good business sense and have the potential to protect and enhance investment returns. Consequently, the Group's investment process ensures that social, environmental and ethical issues are taken into account and best practice is encouraged.

Diversity

There are currently seven male Directors and one female Director on the Board. The Company aims to have a balance of relevant skills, experience and background amongst the Directors on the Board and believes that all Board appointments should be made on merit and with due regard to the benefits of diversity, including gender.

Not including Directors, the Company employs ten people, five women and five men. The senior management team comprises one woman and two men, excluding Directors.

Performance and Prospects

Performance

The summary of performance of results can be seen on the Consolidated Income Statement.

A number of Key Performance Indicators ("KPIs") are considered by the Board in assessing the Company's success in achieving its objectives. These KPIs are:

· Return on Equity (ROE) over the long term

ROE is calculated as the total return divided by opening shareholder funds. Electra's ROE has been calculated by taking the annualised percentage change in diluted NAV per share after adding back dividends paid per share.

During the year the Company's objective was to achieve a return on equity of between 10% and 15% per year over the long term. Over the 10 years to 30th September 2018 the Company's annualised ROE was 12% (2017: 11%).

· The Net Asset Value (NAV) per ordinary share total return

This is the aggregate of income and capital profits of the investment portfolio for the period less all costs. It is expressed as a percentage of the opening NAV. Electra compares its NAV per ordinary share total return over twelve months, three years and ten years to the Morningstar Private Equity Index.

The Company's Net Asset Value per share total return was negative 8% (2017: positive 9%) over the twelve months, 43% (2017: 76%) over the three years and 213% (2017: 190%) over the ten years to 30th September 2018. These compared with 9%, 91% and 89% respectively by the Morningstar Private Equity index.

· The Total Shareholder Return (TSR)

This is expressed as a percentage and is calculated by dividing the sum of the closing share price and adjusted for dividends paid in the period by the opening share price. Electra compares its total shareholder return with the FTSE 250 Index over twelve months and ten years.

The Company's share price total return was 6% (2017: 21%) over the twelve months, 75% (2017: 106%) over the three years and 369% (2017: 230%) over the ten years to 30th September 2018. These compared with 5% (2017: 14%), 32% (2017: 26%) and 239% (2017: 139%) respectively by the FTSE 250 Index.

Prospects

The Company's prospects are described in the Chairman's Statement.

This report was approved by the Board of Directors and signed on its behalf by:

Neil Johnson

Chairman

10th December 2018

CFO Review

"In the year under review, the valuation of our remaining portfolio has been significantly impacted by adverse trading conditions affecting TGI Fridays and Hotter Shoes. We remain confident that, with changes to make these businesses more resilient and with focused management, the performance of both will recover and provide strong targeted exits within an acceptable timeframe. This, combined with the progress made with our other assets, in simplifying our corporate structure and in tidying up issues from the past, leaves us well positioned to deliver further shareholder value through the execution of the strategy adopted by our shareholders in October."

Portfolio

In the year to 30th September 2018, the performance and valuation of both TGI Fridays and Hotter Shoes have been impacted by trading conditions affecting the wider UK consumer, retail and casual dining sectors. This was compounded by extreme weather that impacted TGI over the specific periods involved and had a more profound effect on Hotter in disrupting the launch of the spring/summer season with a resultant impact on the promotional calendar of Hotter and its competitors, leading to lower margin sales throughout the summer. We are working with their management to increase the resilience of both businesses and to achieve profitable growth. A key aim has been to move to full control of both businesses in order to allow focused implementation of their strategies without the constraint imposed by high gearing. In the case of TGI, we had reduced gearing in 2017 in anticipation of challenging trading conditions to come and completed the buyout of a minority shareholder for £6m in early 2018. In the case of Hotter, in 2018 we went ahead with the investment necessary for the achievement of medium-term optimisation despite shorter term pressures that would impact short-term valuation. This investment comprised the buy-out of a significant minority shareholder (£19m) in early 2018 that was necessary to facilitate implementation of our strategy for the business and a reduction in gearing (£14m) to allow focus on value creation. The short-term valuation of both businesses has been impacted by trading and the valuations of comparator companies. However, we remain confident in the opportunity for medium term value creation in each. 

Whilst it was not appropriate to agree to sell TGI or Hotter given the conditions affecting their markets in 2018, the valuations of Photobox and Knight Square have increased in value to reflect the successful sales agreed post year end (together an uplift of £15m).

Investment realisations in the year include disposals of the non-core assets (funds and secondaries totalling £41m) and the repayment of Knight Square loan notes following the sale of non-core assets. In addition to this, the Company has received interest income, dividends and other distributions totalling £15m.

Going Concern and Viability

As described in the Strategic Report, the Board has concluded that it is in the best interests of shareholders to conduct a managed wind-down of the portfolio over a period of time, the return of cash to shareholders, and ultimately the winding-up of the Company. IAS 1 therefore prescribes that technically the Company is no longer considered to be a going concern. It is important to note that this has no impact on the reported results for the year (for reasons described in Note 25) and that as set out in the Strategic Report the Directors have assessed, and continue to have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next three financial years. If the Directors recommend the winding-up of the Company any sooner, the Company will be able to continue in operation and meet its liabilities as they fall due over this shortened period.

Total Shareholder Return and Analysis of Movement in Net Asset Value per share

Total Shareholder Return (TSR) for the year was 6%, representing a performance ahead of the FTSE 250 TSR of 5%. The Consolidated Income Statement shows the total return for the year and, together with dividends of 939p per ordinary share paid during the year, explains the movement in NAV per share for the year to 30th September 2018.

The investments returned a negative 192p per share during the year or negative 8% of the opening NAV per share. The reversal of incentive provisions in respect of the former manager, as a result of legal advice referred to at the Half Year, has resulted in a 60p per share contribution, and deducted from this were exceptional costs relating to the change in strategy and the Group structure simplification of 8p per share, and operating costs and tax, which together totalled 10p per share. Dividends of 939p per share were paid in the year. This resulted in a net decrease in net assets of 1,089p per share.

As announced in October 2018, our strategy is now to conduct a managed wind-down of the portfolio over a period of time, allowing optimisation of returns, the return of cash to shareholders, and ultimately the winding-up of the Company.

Distributions

In addition to the distributions in the year of 939p per share, a further distribution of 365p per share will be made in December 2018 to shareholders on the register on 16th November 2018.

Operating Costs

There has been a significant reduction in operating costs in the year, being the first full year with the internal executive team in place. Costs this year are £6.6m (down from £29m including Priority Profit Share of £23m, in 2017). With the continued efforts to simplify the corporate structure, dispose of non-core assets from the portfolio and the focus on standard, streamlined processes, costs have reduced over the year. Were the existing structure to continue we estimate that annual ongoing costs have reached a level of £5.5m. As a result of the final stage of the strategic review the cost base will be reduced further in 2019.

Net Liquid Resources

The Consolidated Cash Flow Statement analyses the movement in the Group's cash for the year. Cash on the Balance Sheet has decreased by £51m to £3m, reflecting our strategy for surplus cash. Where we have no near-term requirement for funds, our variable capital model sees us returning cash to shareholders (£359m in dividends). Cash balances held are invested in money market funds to mitigate the cash drag effect.

Cash inflows mainly related to sales of investments and investment income, which yielded approximately £437m in cash, of which £374m related to redemption of money market funds. After distributions, the next largest constituent of the cash outflow related to cash paid for investments of £110m, of which £65m was investing in money market funds. In addition, £6m was paid in incentive scheme payments to the former manager, and operating expenses, exceptional costs (Note 4) and tax of approximately £11m were paid in the year.

Gearing

At 30th September 2018, Electra was ungeared at the Group level. Certain of the portfolio companies are funded in part by third party debt. In line with our strategy, where we see an opportunity to optimise returns by reducing third party debt and we have the capital, we will invest further in debt instruments in the portfolio companies. Should it be appropriate to utilise gearing at a Company level in order to optimise the balance between timing of returning cash to shareholders and maximisation of value, the Company will maintain gearing below 40% of its total assets.

Foreign exchange 

At 30th September 2018, the estimated foreign currency exposure in the balance sheet was €5m and $9m based on the currency of underlying securities in the investment portfolio. The Euro has strengthened against Sterling by 1.0% while the US Dollar has strengthened by 2.7% during the year, resulting in a small gain in respect of the investment portfolio.

Also included in the Consolidated Income Statement is a £8m credit representing the reclassification of foreign exchange gains previously recognised in the translation reserve. This item has been moved to the Consolidated Income Statement as a result of the liquidation of two of the partnerships in the period and has no impact on NAV.

Gavin Manson

Chief Financial Officer

10th December 2018

Consolidated Income Statement

The "Total" columns of this statement represent the Group's Consolidated 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. This is further explained in the Basis of Accounting and Significant Accounting Policies in Note 25.

All activities represent continuing operations. The accompanying notes are an integral part of these financial statements.

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

The accompanying notes are an integral part of these financial statements.

Company Statement of Changes in Equity

The accompanying notes are an integral part of these financial statements.

Consolidated Balance Sheet

The accompanying notes are an integral part of these financial statements.

These financial statements were approved by the Board of Directors and signed on their behalf by:

Neil Johnson Gavin Manson

Executive Chairman Chief Financial Officer

10th December 2018 10th December 2018

Electra Private Equity PLC

Company Number: 00303062

Company Balance Sheet

The Company loss for the year was £57m in 2018 (2017 profit: £173m).

The accompanying notes are an integral part of these financial statements.

These financial statements were approved by the Board of Directors and signed on their behalf by:

Neil Johnson Gavin Manson

Executive Chairman Chief Financial Officer

10th December 2018 10th December 2018

Electra Private Equity PLC

Company Number: 00303062

Consolidated Cash Flow Statement

The accompanying notes are an integral part of these financial statements.

Notes to the Financial Statements

1 Segmental Analysis

The Group operates a single business segment for reporting purposes and is managed as a single investment company, with multiple investment categories including Buyouts and Co-investments, Secondaries and Funds. Reporting is provided to the Board of Directors on an aggregated basis. These investments are located across multiple geographic regions and investment gains and losses are allocated as follows:

Geographic information

2 Investment Income - Revenue

3 Income Reversal

Accrued income is recognised when the value of investment is greater than the value of any loan note associated with the investment. Income reversal is the reversal of accrued income recognised in previous periods arising from changes in valuation of certain investments. The £26m income reversal presented in the Consolidated Income Statement for the year ended 30th September 2018 relates to accrued income reversed on the Company's loan investment in TGI Fridays, while the £6m income reversal for the year ended 30th September 2017 related to accrued income reversed on the Company's loan investment in Photobox.

4 Other Expenses

Exceptional expenses for 2018 relate to costs incurred on strategic review, simplification of group structure, and one-off transaction services, while the 2017 amount included expenses incurred on completing the handover of the investment portfolio and operational responsibilities from the former external manager and building a robust and sustainable corporate governance structure, establishing a new office and implementing an ERP system appropriate for reporting.

For the purpose of tax computation, £1m (2017: £2m) of the total exceptional expenses are treated as disallowable. £3m (2017: £6m) of the total exceptional expenses have been settled in cash during the year.

Auditor's Remuneration - Deloitte LLP

* The other assurance services in 2018 include £48,000 related to services associated with the strategic review and £36,000 related to the half year review (2017: £90,000 related to services associated with the strategic review and £36,000 related to the half year review).

Non-audit services

It is the Group's practice to employ Deloitte LLP on assignments additional to their statutory audit duties only when their expertise and experience with the Group are important or where they have been awarded assignments on a competitive basis. Details of the Group's process for safeguarding and supporting the independence and objectivity of the external auditor are given in the Audit and Risk Committee report.

5 Directors' Remuneration

Other benefits include Directors' expenses and the cost of the long-term incentive schemes, while other benefits for 2017 also included the bonus of the Executive Director.

During the year one Director (2017: one) waived his remuneration.

The Board of Directors are considered to be the Key Management Personnel.

6 Employees Costs

The average number of employees, excluding Directors, for the Group and Company during the year was 10 (2017: 7). All employees are within the Head Office function.

Wages and salaries shown above include salaries, benefits, social security costs of £0.3m (2017: £0.1m) as well as pension contributions of £0.1m (2017: £0.1m) in the year for the Group and Company. These costs are included in the other expenses in the Consolidated Income Statement.

7 Operating Leases

The Company, on behalf of the Group, entered into an operating lease agreement for its Head Office property. Operating lease expenses are included in other expenses in the Consolidated Income Statement.

The future minimum lease payments payable under operating leases are as follows:

8 Taxation Expenses

The difference between the income tax expense shown above and the amount calculated by applying the effective rate of UK corporation tax, currently 19% (2017: 19.5% pro-rata) to the (loss)/profit before tax is as follows:

8 Taxation Expenses (continued)

The Finance Act 2016 included legislation to reduce the standard rate of UK corporation tax to 19% from 1st April 2017 and to 17% from 1st April 2020.

9 Dividends

A first Special Dividend of FY19 of £140m (365p per share), payable on 14th December 2018, was declared on 30th October 2018.

Distributable reserves

The Company had distributable reserves of £220m (2017: £609m), being the sum of the Realised Capital Reserve and the Revenue Reserve as disclosed in the Company balance sheet, or £80m after allowing for the first Special Dividend of FY19 payable on 14th December 2018. The Board does not consider the Unrealised Capital Reserve to be distributable.

10 Earnings per share

The weighted average number of undiluted and diluted ordinary shares in issue during the year was 38,282,763 (2017: 38,740,222). Net revenue loss was £24,149,200 (2017: profit of £7,281,438) and net capital loss was £26,007,000 (2017: profit of £165,432,114).

11 Net Asset Value per Ordinary Share

The basic Net Asset Value ("NAV") per share is calculated by dividing the NAV of £341,633,062 (2017: £758,366,568) by the number of ordinary shares in issue at the year end amounting to 38,282,763 (2017: 38,282,763).

There were no dilutive potential shares in 2017 or 2018.

12 Investments Held at Fair Value

Non-current Investments Held at Fair Value

Current Investments Held at Fair Value

12 Investments Held at Fair Value (continued)

Reconciliation of movements on investments held at fair value are as follows:

* This includes purchases and disposals of liquidity funds that were made during the year in line with cash requirements and surplus funds.

13 Assets Held for Sale

In October 2018, the Group entered into an agreement to dispose of two of the non-controlled assets in its portfolio. The sale of Photobox was completed in October 2018 and the sale of Knight Square is expected to complete in December 2018. Fair values of the investments at 30th September 2018 were based on sale prices less associated costs.

The 2017 balances related to the disposal of a portfolio of secondary and fund investments, into which an agreement had been entered at 30th September 2017. The sale of these investments was subsequently fully completed during the year ended 30th September 2018.

14 Trade and Other Receivables

15 Trade and Other Payables

Other payables include accrued expenses, including bonuses.

16 Provision for Liabilities and Charges

During 2018, all remaining incentive provisions of £23m have been released (Note 23). The amount as at 30th September 2018 includes the portion of Directors' bonuses deferred into shares over a period of three years, and other liabilities such as rental incentives received upfront which are recognised as deferred income and National Insurance Contributions provided on the incentive schemes operated by the Company. Details of the Directors' bonuses are shown in the Directors' Remuneration Report. The actual timing and costs of future cash flows are dependent on future events and therefore uncertain.

17 Deferred Tax Liability

The following are the deferred tax liabilities recognised by the Group and Company and movements thereon during the current and prior periods.

18 Financial Instruments

(i) Management of Risk

During the year as an investment trust, the Group's investment objective was to seek capital growth from a portfolio of securities drawn from markets both within the UK and worldwide. The holding of these financial instruments to meet this objective results in certain risks.

The Group's financial instruments comprise securities in unlisted companies, partnership interests, trade receivables, trade payables, money market funds and cash.

The main risks arising from the Group's and Company's financial instruments are fluctuations in market price, interest rate, credit, liquidity, capital and foreign currency exchange rate. The policies for managing each of these risks are summarised below. These policies have remained constant throughout the year under review and the preceding year. The financial risks of the Company are aligned to the Group's financial risks.

Market Price Risk

Market price risk arises mainly from uncertainty about future prices of financial instruments used in the Group's operations. It represents the potential loss the Group might suffer through holding market positions in the face of price movements, mitigated by stock selection.

The Group is exposed to the risk of the change in value of its fund investments, unlisted equity, non-equity shares, fixed and floating rate securities. For unlisted equity and non-equity shares the market risk is deemed to be the price/earnings ratio or other appropriate valuation methodology as set out in the accounting policy. The impact on profit or loss after tax and on shareholders' equity, in absolute and percentage terms of those figures, due to movements in these variables, is set out in part (vi) of this note.

Foreign Currency Risk

The Group's total return and net assets are affected by foreign exchange translation movements as a proportion of the investments held are denominated in or impacted by currencies other than sterling. The foreign investments held are principally held in the USA and Continental Europe. The Board monitors the Group's exposure to foreign currencies on a regular basis and assesses the risks by considering the effect of currency movements on the Group's net asset value and income.

The impact on profit after tax and on shareholders' equity due to increases and decreases in the value of the US Dollar and Euro, in absolute terms and as a percentage of those figures, are analysed in part (iii) of this note.

Interest Rate Risk

The Group finances its operations through retained profits including realised capital profits. These profits are held as cash balances to the extent they have not been distributed. The Company had no gearing at 30th September 2018.

Interest rate risk profiles for financial assets and liabilities and the impact of the profit or loss after tax and on shareholders' equity due to increases or decreases in interest rates, in absolute terms and as a percentage of those figures, are shown in part (iv) of this note. These profiles exclude short-term receivables and payables.

Liquidity Risk

The Group's assets comprise unlisted equity and non-equity shares, fixed income securities, liquidity funds and secondaries. Whilst unlisted equity is illiquid, short-term flexibility is achieved through cash which is available on demand and liquidity funds which are available within twenty-four hours. The Group's financial liabilities are expected to be settled within the next twelve-month period.

Credit Risk

The Group's exposure to credit risk principally arises from its cash deposits. Only major banks (with market capitalisation above £20bn) are used when making cash deposits and the level of cash is reviewed on a regular basis. Cash was principally held with two UK banks (see table below) and totalled £3m (2017: £54m).

18 Financial Instruments (continued)

Capital Risk Management

The Group's capital comprised:

The Group's objective in the management of capital risk is to safeguard its liquidity in order to provide returns for shareholders and to maintain an optimal capital structure. In doing so the Group may adjust the amount of dividends paid to shareholders (whilst remaining within the restrictions imposed by its investment trust status) or issue new shares or debt. During the year the Group paid dividends totalling £359m (2017: £1,394m).

The Group manages the levels of cash deposits held whilst maintaining sufficient liquidity for investments. The Group has an existing authority to implement an on-market share buy-back programme to generate shareholder value. During 2017, £94m, including transaction fees, were utilised to repurchase shares for cancellation. There were no share repurchases during 2018. 

There are no externally imposed requirements on the Company's capital.

 (ii) Market Price Exposure

The table below shows the Group's exposure to market price changes on its listed investments. In determining a reasonable possible price movement, the Group observed historical price changes on a bi-annual frequency over the preceding ten-year period. As at 30th September 2018, no listed financial assets held by the Group or Company are subject to this risk.

 (iii) Foreign Currency Exposures

The table below shows the Group's exposure to foreign currency risks. In determining reasonably possible currency movements, the Group analysed observable market rates for Euro and US Dollar for the preceding ten-year period. The 10% movement is determined using the historic average of absolute changes. 

Currency

18 Financial Instruments (continued)

(iii) Foreign Currency Exposures (continued)

(iv) Interest Rate Risk Exposures

The financial instruments held by the Group include equity and non-equity shares as well as floating interest securities. The financial instruments shown below are separated into the type of income they generated as at 30th September 2018. Base interest rate in the UK has less than 1% for a number of years and for the purpose of sensitivity analysis, the Group analysed a 1% rate change scenario, which is considered to be a reasonable movement in light of the recent rise in the base interest rate.

Interest on floating rate financial assets is at prevailing market rates.