ELTA.L Regulatory News (ELTA)

8 Dec 2005 07:01

Electra Investment Trust PLC08 December 2005 EMBARGOED UNTIL 07:00 AM, 8 December 2005 ELECTRA INVESTMENT TRUST PLC Preliminary Results for Year ended 30 September 2005 • Net asset value + 31% over the year to 1,197p per share at 30 September 2005 (before reflecting proposed special dividend of 20p) (30 September 2004: 913p per share) • Share price outperformance relative to FTSE All-Share Index (Electra + 40% versus Index + 21% over year to 30 September 2005) • Unlisted equity realisation proceeds for year of £272 million (total realisation proceeds over last two years of nearly £700 million) • Special dividend of 20p per share reflecting realisation proceeds received as distributable revenue • £152 million of unlisted equity investments and commitments to invest in year • Unaudited net asset value per share at 30 November 2005 of 1,198.67p (before reflecting proposed special dividend of 20p) Commenting on the results, Sir Brian Williamson, Chairman of Electra Investment Trust, said: "Electra has again achieved a strong net asset value growth, share price performance and substantial realisations of investments. In the ten years to 30 September 2005, Electra achieved an 18% per annum compound rate of return on its investment portfolio, substantially in excess of the returns of the FTSE All-Share Index. As the existing investment policy provides increasing funds for new investment, the Board believes that Electra is well positioned to continue to create shareholder value." For further information: Sir Brian Williamson, Chairman, Electra Investment Trust PLC 020 7214 4200 Hugh Mumford, Chief Executive, Electra Partners Limited 020 7214 4200 Nick Miles, M: Communications Limited 020 7153 1535 Net Asset Value Per Share 30 September 30 September 30 November 2005 2004 2005 Net asset value per share before 1,197.22p 912.86p 1,198.67pproposed special dividend of 20p Increase since 30 September 2004 31.2% Increase since 31 March 2005 13.6% Net asset value per share after 1,177.22p 1,178.67pproposed special dividend of 20p Increase since 30 September 2004 29.0% Increase in FTSE All-Share Index 20.9%since 30 September 2004 The unaudited net asset value per share at 30 November 2005 was calculated onthe basis of the net asset value at 30 September 2005 adjusted to reflect thepurchases and sales of investments, currency movements and mid market values onthat day in respect of listed investments and unlisted investments where theseare valued by reference to quoted prices. A copy of the Chairman's Statement, Investment Manager's Review and thePreliminary Announcement 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 1999, Electra has returned£1,123 million to shareholders leaving a residual portfolio valued at £618million at 30 September 2005. This compares with the stock market value ofElectra of £975 million immediately before the announcement of the takeover bid.Over the six and a half years to 30 September 2005, £571 million has beeninvested in portfolio companies and £1,950 million has been realised from theportfolio. Shareholders approved proposals in June 2001 which retained the emphasis onrealising the investment portfolio at that date but made provision for Electrato continue as an investment vehicle. In June 2004, the Board, with input from its advisers and Electra Partners,reviewed Electra's investment strategy and concluded that it should continueunchanged from the investment strategy approved by shareholders in 2001. CHAIRMAN'S STATEMENT Year to 30 September 2005 Electra has again achieved a strong net asset value growth, share priceperformance and substantial realisations of investments. The net asset value pershare at 30 September 2005 before the proposed special dividend was 1,197p, (anet asset value of 1,177p per share and a proposed special dividend of 20p pershare). This is an increase of 31% over the year to 30 September 2005 when theFTSE All-Share Index increased by 21% and the share price increased by 40% to1,113p. Realisation proceeds from the portfolio amounted to £272 million in theyear. This is a significant achievement. Investment Activity Proceeds from realisations were, on average, 100% higher than the valuations atthe commencement of the year, in part reflecting buoyant market conditions inthe private equity market over the last year. Market conditions remain strongand this may result in further realisations from the portfolio. Over the lasttwo years proceeds from unlisted equity realisations amounted to nearly £700million, enabling debt to be effectively eliminated and substantial returns ofcapital to be made to shareholders. Of particular significance in the year ended30 September 2005 were the realisations of the investments in Energy PowerResources, Bezier and Allflex. Unlisted equity investments and commitments toinvest totalled £152 million in the year, compared with £48 million in theprevious year. Full details of the investment activity over the year areincluded in the Investment Manager's Review. Special Dividend Electra's unlisted equity investments are, for the most part, structured toachieve capital appreciation. During the last year however, part of therealisation proceeds from certain investments were received in the form ofdistributable revenue at a level which requires Electra, as an investment trust,to pay a dividend. Accordingly the Board is proposing a special dividend of 20pper share which will be paid on 10 March 2006 to shareholders on the Register ofMembers at the close of business on 10 February 2006, subject to approval byshareholders at the forthcoming Annual General Meeting. The Board does notexpect to be proposing dividend payments on a regular basis in future and thisdividend should be regarded as a special payment and not a variation in thepolicy of maximising capital appreciation. Electra's Objectives Electra has specialised in investing in the private equity market since itsshares were first publicly quoted in 1976. There is now widespread recognitionthat such investment offers exposure to a significant asset class which is wellestablished and is now a major source of funding for the acquisition anddevelopment of businesses. In order to emphasise Electra's objective ofinvesting in private equity the Directors are considering a change of theCompany's name to Electra Private Equity PLC. It will remain an investmenttrust. Electra has a number of advantages over limited partnership fundsdedicated to investment in private equity. These include giving shareholdersaccess to private equity investments on a relatively liquid basis. Additionally,Electra is able to take a longer term view of the purchase and sale ofinvestments as compared to limited partnership funds, which have fixedinvestment periods and realisation policies driven by the terms of the limitedpartnership rather than economic conditions. The investment strategy approved by shareholders in 2001 is expected to provideincreasing funds for new investment. Board of Directors In my interim statement I indicated that the Board would be considering itsfuture composition. The Nomination Committee has put in place a search forcandidates for appointment as additional Directors with a view to some of theexisting Board members retiring within a year of the completion of thisrecruitment process. At the Annual General Meeting to be held on 9 February2006, all Directors of the Company with the exception of Professor Sir GeorgeBain and Mr Michael Walton will retire and offer themselves for re-election. Performance Appraisal In my statement last year I indicated that the performance appraisal exercise ofthe Directors, Board and Committees of the Board would be reviewed externallyfor the year ended 30 September 2005. The performance appraisals were completedduring the year and have been verified by Hanson Green, who specialise in therecruitment, development and assessment of independent non-executive directors.Hanson Green have confirmed to the Board that the process was undertaken asdescribed in a thorough and objective way. More details are set out in theCorporate Governance Statement. International Financial Reporting Standards In common with all publicly quoted companies, Electra will prepare financialstatements under the International Financial Reporting Standards ("IFRS") in thenext financial year. The major impact of IFRS on Electra relates to theaccounting treatment of investments and associated entities. Over the comingmonths the Board will be considering, with Electra's advisers, the mostappropriate way of presenting Electra's future financial statements under IFRS,with an overriding objective of producing financial information which ismeaningful to shareholders. Further Authority to Buy Back Shares Under the general authority granted by shareholders, Electra made on-marketpurchases at a cost of £30 million and cancelled 3.2 million shares during theyear. The Board expects, subject to market conditions, that further returns ofcapital will be made from time to time, through on-market purchases. The Companycurrently has the ability to buy back and cancel up to a further 5.7 millionshares during the remaining term of this authority which will cease at theAnnual General Meeting to be held on 9 February 2006. The Directors will seek torenew the general authority to undertake on-market purchases of Electra's sharesat the forthcoming Annual General Meeting. Summary Electra's objectives are to provide a targeted and cost effective means ofinvestment in private equity for a wide range of investors with the aim ofdelivering a superior rate of return. In the ten years to 30 September 2005,Electra achieved an 18% per annum compound rate of return on its investmentportfolio, substantially in excess of the returns of the FTSE All-Share Index. As the existing investment policy provides increasing funds for new investment,the Board believes that Electra is well positioned to continue to createshareholder value. Sir Brian Williamson7 December 2005 Equity Portfolio Analysis Summary of Changes to Overall Equity Portfolio Year ended 30 September 2005 2004 £'000 £'000Opening Valuation 413,088 679,611Investments 82,365 48,361Realisations (250,030) (392,405)Change in valuation 107,851 77,521Closing valuation* 353,274 413,088 * The above valuations at 30 September exclude accrued income (2005:£17,593,000; 2004: £15,773,000). In the year to 30 September 2005, Electra's net asset value increased from 913pto 1,197p per share before payment of a special dividend, an increase of 31%.This compared to a 20% increase in the previous year. The performance over thetwo years has resulted primarily from a strong realisations market, which hasenabled Electra to dispose of a significant number of investments at attractiveprices. Over the last two years, Electra has realised nearly £700 million fromthe sale of investments giving rise to realised profits in excess of £190million. As a consequence of this high level of realisations, the investmentportfolio has reduced in size and the balance sheet of Electra has shown anincrease in short term liquidity. In the year under review, the investmentportfolio declined from £413 million to £353 million as a result of a netdisinvestment from the portfolio of £168 million offset by net gains of £108million. Over the year, investments increased to £82 million, together with commitmentsto invest of £70 million, by comparison with £48 million of investments andcommitments in the previous year, partially reflecting the increasedavailability of funds for investment under the current investment policy. At 30 September 2005, Electra's investment portfolio comprised directinvestments in 52 companies with a value of £300 million together withinvestments in 28 private equity funds with a value of £53 million. Of thedirect investments, those with an aggregate value of £76 million were quoted ona recognised stock exchange but subject to restrictions on sale. The ten largestinvestments accounted for 61% of the total investment portfolio. Geographically, 75% of the equity portfolio was situated in the UK and Europe,13% in the USA, 9% in Asia and 3% in South America. The total portfolio includes£265 million in floating rate notes at 30 September 2005, which were held mainlyto facilitate currency hedging and other treasury operations. Current Operations and Outlook The year has seen a further significant change in Electra's portfolio andfinancial position. The cash generated from the portfolio has been used tofinance investment of £82 million and share buybacks of £30 million, with thebalance increasing short term liquidity. At the end of the year, Electra's portfolio contained relatively few investmentsas a result of the active realisation programme and the restrictions on makinginvestments. However, with more funds for investment now becoming availableunder the existing investment policy, it is anticipated that the rate ofinvestment will increase. With the flexible approach to investment adopted byElectra, the chances of identifying good opportunities to replenish theportfolio are increased, even though the private equity market currently remainshighly competitive. As far as the existing portfolio is concerned, goodopportunities remain to add value and cash generation should continue at areasonable level if the market remains in its current buoyant condition. EQUITY PORTFOLIO REVIEW Investments In the year to 30 September 2005, investments amounted to £82 million togetherwith commitments to invest of £70 million. This compared to investments andcommitments of£48 million in the previous year. This increase in investment reflects thegradual reduction in restrictions on new investment. Under the existinginvestment strategy, one third of realisation proceeds from investments madeprior to June 2001, together with the full proceeds from investments made afterthat date, are available for new investment. The level of realisations in thepast two years, together with disposals of investments made after June 2001,have led to increasing new investment capacity and should allow significant newinvestment to be made in the current year. During the year, Electra invested £30.1 million in Allflex Holdings II, £24.4million in Freightliner Group and £5 million in Bezier II. All these investmentswere held previously by Electra, but in each case the restructuring of theinvestment included a change in shareholders and management and a new businessobjective. These transactions allowed Electra to invest on a cost effective andrelatively low risk basis. This type of investing clearly has advantages andresults from Electra's flexibility as an investment trust investing in privateequity. Amongst other transactions, Electra invested £13.7 million in a varietyof private equity funds. In addition to investments completed, Electra made a number of commitments toprivate equity funds and other private equity opportunities. £41 million wascommitted to Electra European Fund II and £17 million was committed to Sinergiacon Imprenditori, a private equity fund in Europe. It is believed that both ofthese commitments will bring with them attractive co-investment opportunities.In addition, Electra has committed £12 million to PINE, which is involved inproviding specialist financing in the nursery school sector. Realisations Realisations from the portfolio during the year amounted to £250 million. Inaddition, £22 million of interest was received on the sale of Energy PowerResources and Bezier which was recognised only on realisation. Particularlypleasing was the level of proceeds obtained for portfolio companies, reflectingnot only an effective selling process in a strong market but also good progressmade by individual investments. Overall, proceeds from realisations, includingaccrued interest, exceeded the value of the relevant investments at thebeginning of the year by more than 100%. Largest Equity Realisations Company Valuation at 30 September Proceeds from Disposal 2004 £'m £'mAllflex * 38.1 67.7Energy Power Resources ** 14.9 *** 42.8Bezier 10.7 **** 39.0Freightliner 21.6 28.6FibroThetford 9.3 14.4 94.6 192.5* Includes accrued interest of £2.4 million.** Reflects subsequent additions at cost.*** Proceeds include interest of £14.2 million.**** Proceeds include interest of £7.3 million. The most significant realisations related to the investments in Allflex, EnergyPower Resources, Bezier and Freightliner. In the case of Allflex, Electrareceived £68 million compared to a value at the beginning of the year of £38million. Such proceeds included a new investment in Allflex Holdings II, therestructured company. The proceeds from the sale of Energy Power Resourcesamounted to £43 million, including interest of £14 million not previouslyaccrued. This compared to a value at the commencement of the year, together withsubsequent additions, of £15 million and provided an excellent conclusion to aninvestment which had encountered a significant number of operating difficultiesover the holding period. Bezier, after a number of trading and other problems inearlier years, also recovered well and sale proceeds of £39 million compared tothe book value of £11 million at 30 September 2004. Other realisations included £29 million from the sale of Freightliner and £14million from the sale of FibroThetford, which had been acquired six monthspreviously for £9 million. During the year, Electra received £29 million inrespect of partnership interests in a number of private equity funds and £31million from the redemption of loans made to Amtico (£16 million) and Esporta(£15 million). Performance A strong performance by the investment portfolio resulted in net appreciationover the year of 26%. Including interest received, which had previously beenprovided against, the appreciation over the year amounted to 31%. Total netcapital gains recorded in the year reached £108 million. Of these gains, £91million was realised on the sale of investments and £15 million related to shareprice movements in respect of holdings of restricted listed securities.Unrealised increases and decreases in value in respect of unlisted investmentsheld at the year end increased the valuation of the portfolio by a net amount of£2 million. This was made up of increases in unrealised appreciation of £24million offset by provisions and valuation decreases of £22 million. The largest increase in unrealised appreciation related to Inchcape ShippingServices, where the investment was revalued upwards over the year by £12.3million, an increase of 47%. This reflected a strong operating performanceresulting in substantially improved profits. Provision and valuation reductionswere made against ten investments, the largest of which was a provision of £5.9million against Unipart pending the outcome of a restructuring of pensionliabilities and certain other matters. Largest Valuation Changes Company £'000 %Allflex 28,379 79.5Bezier * 28,312 264.6Energy Power Resources * 27,925 245.1Inchcape Shipping Services 12,345 46.8Freightliner 7,026 32.5FibroThetford 5,074 54.3Unipart (5,916) (100.0) * Includes income recognised on realisation Consolidated Statement of Total Return(incorporating the Revenue Account* ) For the year ended 30 September 2005 2004 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Gains/(losses) on investments:Realised - 90,531 90,531 - 103,102 103,102Unrealised - 6,375 6,375 - (27,134) (27,134)Gains/(losses) on revaluation of foreign currencies:Realised - (257) (257) - 30 30Unrealised - (2,215) (2,215) - 10,801 10,801 94,434 94,434 - 86,799 86,799Income of the investment trust 34,220 - 34,220 14,756 - 14,756 Income of subsidiary 17,597 - 17,597 5,588 - 5,588undertakingsExpenses:Priority profit share paid to general partners (8,964) - (8,964) (9,511) - (9,511)Other expenses (3,074) - (3,074) (2,701) - (2,701)Reversal of income (332) - (332) - - -accruals Net Return beforeFinance Costs and 39,447 94,434 133,881 8,132 86,799 94,931TaxationInterest payable andsimilar charges (5,337) - (5,337) (3,965) - (3,965) Return on OrdinaryActivities before 34,110 94,434 128,544 4,167 86,799 90,966TaxationTaxation on ordinary (5,217) (480) (5,697) - - -activities Return on OrdinaryActivities after 28,893 93,954 122,847 4,167 86,799 90,966TaxationOrdinary dividend (8,702) - (8,702) - - - Transfers to Reservesfor the Year 20,191 93,954 114,145 4,167 86,799 90,966Exchange differencesarising on consolidation 164 826 990 (610) (9,378) (9,988) Net Transfers toReserves for the Year 20,355 94,780 115,135 3,557 77,421 80,978 Return to Shareholders per Ordinary Share 45.15p 210.24p 255.39p 5.71p 124.22p 129.93p The amounts dealt with in the Consolidated Statement of Total Return are allderived from continuing activities. * The column of this statement headed "Revenue" is the Profit and Loss Accountof the Group. 2005 2004Number of Ordinary Shares in issue at 30 September 43,507,687 46,745,759 Consolidated Balance Sheet As at 30 Sept 2005 As at 30 Sept 2004 £'000 £'000 £'000 £'000Fixed AssetsInvestments:Unlisted 328,718 391,760Floating rate notes 265,026 164,997Listed 24,556 21,328 618,300 578,085Current AssetsDebtors 30,440 25,550Cash at bank and in hand 62,610 12,880 93,050 38,430 Current LiabilitiesCreditors: amounts falling due within one year 24,258 12,749 Net Current Assets 68,792 25,681 Total Assets less Current Liabilities 687,092 603,766Creditors: amounts falling due after more than one year 157,248 160,034 529,844 443,732Provision for liabilities and charges 17,663 17,009 Net Assets 512,181 426,723 Capital & ReservesCalled-up share capital 10,877 11,686Share premium 24,147 24,147Capital redemption reserve 32,398 31,589Realised capital profits 584,554 567,693Unrealised capital losses (154,430) (202,672)Revenue reserve 14,635 (5,720) 501,304 415,037 Total Equity Shareholders' Funds 512,181 426,723 Net Asset Value per Ordinary Share 1,177.22p 912.86p Ordinary Shares in issue 30 September 43,507,687 46,745,759 Reconciliation of Total Shareholders' Funds Year to 30 Year to 30 Sept 2005 Sept 2004 £'000 £'000 Total Return 122,847 90,966Ordinary dividend (8,702) -Exchange differences arising on consolidation 990 (9,988)Repurchase of own shares (28,868) (145,131)Nominal value of own shares purchased (809) (4,622) Movements in Total Equity Shareholders' Funds 85,458 (68,775)Total Equity Shareholders' Funds at 1 October 426,723 495,498 Total Equity Shareholders' Funds at 30 September 512,181 426,723 Consolidated Cash Flow Statement For the year ended 30 September 2005 2004 £'000 £'000 £'000 £'000 Operating ActivitiesUK dividend income 2,817 955Other investment income 44,792 31,405Interest income 2,066 1,402Other income 307 371Expenses (12,025) (12,566) Net Cash Inflow from Operating 37,957 21,567Activities Returns on Investments andServicing of FinanceInterest paid (5,337) (3,735) Net Cash Outflow from Returns onInvestments and Servicing of (5,337) (3,735)Finance Total Taxation - - Capital Expenditure and FinancialInvestmentPurchases of investments (307,484) (213,440)Amounts paid under incentive (2,346) (20,935)schemeSales of investments 365,797 387,741 Net Cash Inflow from CapitalExpenditure and Financial 55,967 153,366Investment Net Cash Inflow before Managementof Liquid Resources and Financing 88,587 171,198 Management of Liquid Resources (61,243) 3,400FinancingBank loans drawn 47,424 108,617Bank loans repaid (52,424) (130,362)Repurchase of own shares (38,848) (140,581)Loans advanced 5,248 (1,386) Net Cash Outflow from Financing (38,600) (163,712) (Decrease)/Increase in Cash in the (11,256) 10,886Year Reconciliation of Net Cash Flow toMovement in Net Debt(Decrease)/Increase in cash in the (11,256) 10,886yearCash outflow from debt financing 5,000 21,745Cash outflow/(inflow) from changein liquid resources 61,243 (3,400) 66,243 18,345 Change in Net Debt Resulting from 54,987 29,231Cash FlowsTranslations difference (2,471) 10,831 Movement in Net Debt 52,516 40,062Net debt brought forward (147,154) (187,216) Net Debt carried forward (94,638) (147,154) The figures and financial information for the year ended 30 September 2005 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 2004 do not constitute the statutory financial statements for thatyear. Those financial statements have been delivered to the Registrar andincluded 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 2006 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 9 February 2006 at the Barber-Surgeons' Hall, MonkwellSquare, London EC2 at 12 Noon. This information is provided by RNS The company news service from the London Stock Exchange