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11 Jun 2012 14:12
11 June 2012
GRAPHITE ENTERPRISE TRUST PLC
INTERIM MANAGEMENT STATEMENT
QUARTER ENDED 30 APRIL 2012
Graphite Enterprise Trust PLC ('Graphite Enterprise' or 'the Company') presents its Interim Management Statement for the quarter ended 30 April 2012.
Unaudited net asset value
In the three months to 30 April 2012 the unaudited net asset value per share rose by 2.6% from 569.4p to 584.2p.
The increase in the underlying value of the investment portfolio, which represented 89.7% of total assets at the quarter end, generated a 4.6% increase in net asset value in the period. This was partially offset by the depreciation of the euro against sterling, which accounted for a fall of 1.2%, and by expenses and other items which reduced the net asset value by 0.8%.
These results do not include the effect of the proposed dividend of 5.0p per share (£3.6 million in total) which will be recorded in the second quarter if approved at the forthcoming Annual General Meeting.
Share price and discount
The share price rose by 14.0% to 407.0p in the quarter. This was substantially greater than the increase of 1.8% in the Company's benchmark, the FTSE All-Share Index. The share price was at a discount of 30.3% to the net asset value per share at 30 April 2012.
Since the end of April, equity markets have experienced sharp falls, due in particular to renewed concerns over the eurozone. In that period, the Company's share price has fallen by 6.9% and at 8 June 2011 was at 379.0p, a discount of 35.1% to the net asset value at 30 April. In the same period the FTSE All-Share Index has fallen by 5.4%.
In the financial year to date, the share price has therefore increased by 6.2%, compared with a 3.8% fall in the Index. This continues the trend of the previous financial year, during which the share price rose by 15.9% while the Index fell by 3.7%.
Investment portfolio
Investment performance
The portfolio has started the year well. The underlying value of the portfolio in local currencies increased by £19.2 million or by 5.1% of its opening value in the quarter. This compares with 12.0% underlying growth for the financial year to January 2012.
The euro fell in value by 1.8% against sterling, leading to a fall in the sterling value of the portfolio of 1.3%. The net portfolio valuation increase was therefore 3.8%.
Performance was driven by valuation uplifts achieved on full and partial realisations from the portfolio. These included the following:
Company | Manager | Year of investment | Size ranking at 31 Jan 2012 | Exit type |
Data Explorers | Bowmark * | 2007 | 6th | Trade sale |
Ziggo | Cinven | 2006 | 10th | IPO (partial) |
Tumi | Doughty Hanson | 2004 | 11th | IPO (partial) |
Weetabix | Lion Capital | 2004 | 19th | Trade sale (partial) |
Formula 1 | CVC | 2006 | 49th | Financial sale (partial) |
* The Company made a co-investment in Data Explorers alongside Bowmark Capital Partners III.
Some of these transactions closed after the quarter end but valuations have been updated to reflect uplifts achieved.
The average multiple of cost achieved on the full exits was 2.9x and the average uplift against the previous carrying value was 66%. We have been pleased to see that managers continue to achieve profitable disposals despite the prevailing economic uncertainty.
The investment portfolio has been valued using the latest available managers' reports. March valuations covering 69.2% of the portfolio had been received by the cut-off date of 1 June and December valuations were used for the remainder. As usual, adjustments have been made in a small number of cases to reflect post period end events.
Proceeds
Proceeds generated by the portfolio in the quarter totalled £17.3 million or 4.6% of its opening value. This represents a slowdown on the average rate for last year of 6.7% per quarter, which was enhanced by the disposal for four of the five largest investments during the year. The largest cash inflow was of £8.7 million from the disposal of the investment in Data Explorers.
Further proceeds totalling £3.0 million have been received since the quarter end, including proceeds from some of the transactions listed above.
Additions
A total of £16.0 million was invested in the quarter, substantially all of which was drawn down by funds. This was in line with our expected run-rate for drawdowns of existing commitments and was similar to the rates of investment seen in the third and fourth quarters of last year.
The largest drawdown was of £5.5 million to finance the purchase of National Fostering Agency ("NFA") by Graphite funds. This was in addition to £3.0 million already invested in NFA in January 2012.
A total of seven new underlying investments were made in the quarter in addition to NFA, none of which was individually large enough to be included in the Company's 30 largest investments.
Since the period end, co-investments in CPA Global (alongside Cinven, £2.5 million) and Spheros (alongside Deutsche Beteiligungs, £2.0 million) have been completed. After including drawdowns by funds, a total of £6.6 million has been invested in the portfolio since the end of April.
No secondary purchases of fund interests have been completed in the current financial year, although we continue to look at a number of opportunities.
Cash and liquid assets
In the three months to 30 April 2012, the portfolio was marginally cash generative. However, after taking account of other net outflows, cash and liquid asset balances fell by £0.8 million to £43.3 million:
Movement in liquid assets | 3 months to |
£m | 30 Apr 2012 |
Additions | (16.0) |
Proceeds generated by the portfolio* | 17.3 |
Net cash flow from the investment portfolio | 1.3 |
Non-investment cash flows | (2.1) |
Net cash outflow | (0.8) |
Effect of changes in foreign exchange rates | - |
Total movement | (0.8) |
Opening cash and liquid assets | 44.1 |
Closing cash and liquid assets | 43.3 |
*Including income |
Balance sheet and commitments
The summary balance sheet and commitment position as at 30 April 2012 are set out below:
30 April 2012£m | % of total assets | 31 Jan 2012£m | % of total assets | |
Total portfolio | 390.7 | 89.7% | 377.7 | 89.2% |
Cash and liquid assets | 43.3 | 9.9% | 44.1 | 10.4% |
Other net current assets | 1.8 | 0.4% | 1.8 | 0.4% |
Total assets | 435.8 | 100.0% | 423.6 | 100.0% |
Equity shareholders' funds | 426.0 | 415.2 | ||
Undrawn bank facility | 60.0 | 60.0 | ||
Total liquidity 1 | 103.3 | 104.1 | ||
Outstanding commitments | 125.5 | 142.8 | ||
Overcommitment 2 | 22.2 | 38.6 | ||
Overcommitment as % of total assets | 5.1% | 9.1% |
1. Total liquidity is cash and liquid assets plus undrawn borrowing facilities.
2. Overcommitment is outstanding commitments less total liquidity.
Outstanding commitments fell by £17.3 million to £125.5 million during the period, mainly as a result of drawdowns. No new commitments have been made in the current financial year although we are reviewing a number of opportunities and expect commitments to rise in the near term.
Recent events
The Directors are not aware of any events or transactions, other than as noted above, which have taken place between 30 April 2012 and the date of publication of this statement which have had a material effect on the financial position of the company.
Not audited or reviewed
This information has not been audited or reviewed by the Company's auditors.
For further information please contact:
Tim Spence | 020 7825 5358 |
Emma Osborne | 020 7825 5357 |
THE 30 LARGEST UNDERLYING COMPANIES
The table below summarises the 30 largest underlying companies by value in the Company's portfolio of funds and direct investments, as at 30 April 2012. The valuations are gross and are shown as a percentage of the total investment portfolio.
Entity
| Manager | Year of investment | Country | Value as % of portfolio | |
1 | Micheldever | ||||
Distributor and retailer of tyres | Graphite Capital | 2006 | UK | 3.7% | |
2 | NES Group | ||||
Provider of recruitment services | Graphite Capital | 2006 | UK | 2.2% | |
3 | National Fostering Agency | ||||
Provider of foster care services | Graphite Capital | 2012 | UK | 2.2% | |
4 | Park Holidays UK | ||||
Operator of caravan parks | Graphite Capital | 2006 | UK | 2.1% | |
5 | U-POL | ||||
Manufacturer and distributor of automotive refinishing products | Graphite Capital | 2010 | UK | 1.8% | |
6 | Tumi | ||||
Manufacturer and retailer of luggage and accessories | Doughty Hanson | 2004 | USA | 1.7% | |
7 | Ziggo + | ||||
Operator of cable TV networks | Cinven | 2006 | Netherlands | 1.6% | |
8 | Alexander Mann Solutions | ||||
Provider of recruitment process outsourcing | Graphite Capital | 2007 | UK | 1.5% | |
9 | Stork | ||||
Provider of technical engineering services | Candover | 2008 | Netherlands | 1.5% | |
10 | Parques Reunidos | ||||
Operator of attraction parks | Candover | 2007 | Spain | 1.5% | |
11 | Evonik Industries | ||||
Manufacturer of specialty chemicals | CVC | 2008 | Germany | 1.5% | |
12 | Weetabix * + | ||||
Manufacturer of breakfast cereals | Lion Capital | 2004 | UK | 1.4% | |
13 | London Square | ||||
Developer of residential housing
| Graphite Capital | 2010 | UK | 1.3% | |
14 | Hellermann Tyton | ||||
Manufacturer of cable management products | Doughty Hanson | 2006 | UK | 1.3% | |
15 | Avio | ||||
Manufacturer of aerospace engine components | Cinven | 2007 | Italy | 1.2% | |
16 | Spire Health Club | ||||
Provider of healthcare | Cinven | 2007 | UK | 1.1% | |
17 | CEVA | ||||
Manufacturer and distributor of animal health products | Euromezzanine | 2007 | France | 1.1% | |
18 | Ceridian * | ||||
Provider of payment processing services | Thomas H Lee Partners | 2007 | USA | 1.0% | |
19 | StarBev + | ||||
Manufacturer of alcoholic beverages | CVC | 2009 | Czech Republic | 1.0% | |
20 | Teaching Personnel | ||||
Provider of temporary staff for the education sector | Graphite Capital | 2010 | UK | 0.9% | |
21 | Preh * | ||||
Manufacturer automotive of control system devices | Deutsche Beteiligungs | 2003 | Germany | 0.9% | |
22 | Acromas | ||||
Provider of financial, motoring and travel services | CVC / Charterhouse | 2007 | UK | 0.9% | |
23 | Dominion Gases | ||||
Supplier of specialist gases to the oil and gas industries | Graphite Capital | 2007 | UK | 0.9% | |
24 | Coperion | ||||
Provider of mechanical engineering services | Deutsche Beteiligungs | 2007 | Germany | 0.9% | |
25 | TMF | ||||
Provider of management and accounting outsourcing services | Doughty Hanson | 2008 | Netherlands | 0.9% | |
26 | Avanza Group | ||||
Operator of buses | Doughty Hanson | 2007 | Spain | 0.8% | |
27 | Willowbrook Healthcare | ||||
Operator of care homes for the elderly
| Graphite Capital | 2008 | UK | 0.8% | |
28 | Algeco Scotsman | ||||
Supplier and operator of modular buildings | TDR Capital | 2007 | USA | 0.8% | |
29 | Vue Entertainment * | ||||
Operator of cinemas | Doughty Hanson | 2010 | UK | 0.8% | |
30 | Formula One Group + | ||||
Owner and manager of sports media rights | CVC | 2006 | UK | 0.7% | |
Total of the 30 largest underlying investments | 40.0% | ||||
* Held both through a fund and directly as a co-investment.
+ Proceeds from full or partial disposal received after the quarter end, or awaited at date of reporting.
Portfolio analyses at 30 April 2012
Portfolio - Investment type
% of total portfolio | ||
Large buy-outs | 48.0% | |
Small and mid-market buy-outs | 40.7% | |
Mezzanine | 10.3% | |
Quoted | 0.7% | |
Infrastructure | 0.3% | |
Total | 100.0% |
Portfolio - Geographic distribution *
% of total portfolio | ||
UK | 45.6% | |
France | 12.8% | |
North America | 11.1% | |
Germany | 8.7% | |
Benelux | 6.8% | |
Spain | 4.6% | |
Scandinavia | 2.8% | |
Other Europe | 6.4% | |
Rest of world | 1.2% | |
Total | 100.0% | |
NB: total continental Europe | 42.1% |
* Location of headquarters of underlying companies in the portfolio. Does not necessarily reflect countries to which companies have economic exposure.
Portfolio - Year of investment
Multiple of cost |
Primary portfolio |
Secondary portfolio |
Total portfolio | |
2012 | 1.0x | 3.7% | 0.2% | 3.9% |
2011 | 1.1x | 10.2% | 0.2% | 10.4% |
2010 | 1.1x | 14.4% | 0.6% | 15.0% |
2009 | 2.0x | 3.0% | 0.4% | 3.4% |
2008 | 1.1x | 11.2% | 1.4% | 12.6% |
2007 | 1.4x | 20.9% | 4.6% | 25.5% |
2006 | 1.3x | 14.3% | 3.1% | 17.4% |
2005 | 1.1x | 0.8% | 1.0% | 1.8% |
2004 | 2.7x | 5.4% | 0.1% | 5.5% |
2003 and before | 0.7x | 4.2% | 0.3% | 4.5% |
Total | 1.3x | 88.1% | 11.9% | 100.0% |
Portfolio - Sector analysis
% of total portfolio | ||
Business services | 19.3% | |
Consumer goods and services | 15.4% | |
Industrials | 14.9% | |
Healthcare and education | 11.2% | |
Leisure | 10.3% | |
Financials | 8.2% | |
Automotive supplies | 7.5% | |
Media | 5.3% | |
Technology and telecommunications | 4.6% | |
Basic materials | 3.3% | |
Total | 100.0% |
Movement in the portfolio
Quarter to 30 April 2012 £ million | Opening value | Additions | Disposals | Underlying gains and losses | Currency movement | Closing value |
Investment portfolio | 377.7 | 16.0 | (17.3) | 19.2 | (4.9) | 390.7 |
Portfolio - Graphite and third party investments
30 April 2012 £ million | Third party investments | Graphite investments |
Total | |
Fund investments | 281.6 | 63.2 | 344.8 | |
Direct investments | 24.0 | 21.9 | 45.9 | |
Total portfolio | 305.6 | 85.1 | 390.7 | |
Graphite investments | 21.8% | |||
Third party fund investments | 72.1% | |||
Third party co-investments | 6.1% |
Commitments analysis
Commitments at 30 April 2012 | Original commitment1 £m | Outstanding commitment £m | Average drawdown percentage |
% of commitments |
Funds in investment period | 320.1 | 98.2 | 69.3% | 78.2% |
Funds post investment period | 350.6 | 27.3 | 92.2% | 21.8% |
Total | 670.7 | 125.5 | 81.3% | 100.0% |
1 Original commitments are at 30 April 2012 exchange rates
Commitments at 30 April 2012 - remaining investment period | % of commitments |
> 5 years | 6.5% |
4-5 years | 12.0% |
3-4 years | 1.3% |
2-3 years | 16.0% |
1-2 years | 34.4% |
8.0% | |
Investment period complete | 21.8% |
Total | 100.0% |
Notes
Graphite Enterprise Trust PLC
Graphite Enterprise is a London listed investment trust, managed by Graphite Capital. It aims to provide shareholders with long term capital growth through investment in unquoted companies. To achieve this, the Company invests in private equity funds and also directly in private equity-backed companies.
Graphite Enterprise primarily invests in buy-outs of mature companies in established European private equity markets. Investments in UK-based mid-market companies are made through funds managed by Graphite Capital, which will typically represent 20-25% of the portfolio. Investments in other sectors of the UK market and in overseas markets are made through third party funds selected by Graphite Capital. Shareholders gain exposure to a diversified portfolio in which Graphite Capital directly manages many of the largest investments.
The Company has been listed on the London Stock Exchange for 31 years and has invested exclusively in private equity and been managed by Graphite Capital throughout its life. In that time, the Company has generated a return of more than 24 times the amount subscribed. The net asset value per share has outperformed the FTSE All-Share Index in 17 out of the last 20 financial years.
www.graphite-enterprise.com
Graphite Capital
Graphite Capital is one of the UK's leading mid-market private equity firms with over £1.2 billion of funds under management and a 31-year history. Graphite Capital manages both direct investments in portfolio companies and private equity fund investments. Direct investments account for more than two-thirds of funds under management while third party private equity funds and co-investments account for the remainder.
Graphite Capital's direct investments focus on buy-outs of companies valued at between £25 million and £200 million in the UK. These investments are made through limited life funds which have a global institutional investor base. The team has invested in over 100 portfolio companies since 1991 of which two thirds have been realised generating an annualised rate of return of over 35%.
Graphite Capital's fund investments and co-investments are made exclusively through Graphite Enterprise Trust PLC. The focus is on established managers with strong track records operating in mature markets, with the aim of building long term relationships. Since 1989 the team has invested in more than 60 funds and almost 30 co-investments. The net return on realised funds and co-investments is twice the amount invested.
Graphite Capital operates from a single office in London with separate teams focusing on direct and fund investments. As it has a long experience both of managing its own funds and investing in third party funds and co-investments, Graphite Capital has an unusually broad perspective when assessing new investment opportunities.
www.graphitecapital.com