ICG ENTERPRISE TRUST PLC 11 June 2014
GRAPHITE ENTERPRISE TRUST PLC
INTERIM MANAGEMENT STATEMENT
QUARTER ENDED 30 APRIL 2014
Graphite Enterprise Trust PLC ("Graphite Enterprise" or the "Company") presents its Interim Management Statement for the quarter ended 30 April 2014.
Performance summary
In the three months to 30 April 2014 the net asset value per share rose by 1.6% from 677.2p to 688.1p. The increase over the twelve months to that date was 8.2%.
In a quarter when little new valuation information is usually received, the rise in the valuation of the portfolio in local currency generated a 2.1% increase in net asset value. This was partially offset by expenses of 0.4% and a small adverse impact from currency movements of 0.1%.
The year end dividend of 15.5p per share (see Dividend section below) has not been reflected in the first quarter's results.
Over the three months the share price rose by 1.5% from 563.5p to 572.0p. While this was less than the increase in the FTSE All-Share Index of 3.5%, over the twelve months to 30 April the share price increased by 16.3% against a rise of 6.8% in the Index.
The discount of the share price to the net asset value at 30 April was 16.9%, which was very similar to the level of 16.8% at 31 January.
Investment portfolio
Investment performance
The underlying value of the portfolio in local currencies rose by £10.5 million in the quarter, increasing the net asset value by 2.1%. Currency movements reduced the net asset value by £0.3 million or 0.1%.
We had received March valuations for 62% of the portfolio by the cut-off date. As many of those managers who did report do not prepare full portfolio revaluations at March, the great majority of the portfolio effectively remains at its reported December valuation.
The largest gain was generated by Graphite Capital's disposal of the investment in Education Personnel ("EP"), which was held through Graphite Capital Partners VII ("CPVII"). The acquirer was Intermediate Capital Group ("ICG"). Although the disposal was completed after the quarter end, the April net asset value reflects the agreed exit price. The disposal increased the net asset value by 1.4% in the quarter.
EP was the Company's sixth largest underlying investment at 31 January. The sale price represents a significant uplift to the previous carrying value of the investment. Net proceeds of £14.9 million should be received in the next few days.
Proceeds
The portfolio generated £15.9 million of cash proceeds in the three months to 30 April. None of the underlying disposal proceeds were individually significant. As noted above, the proceeds from the sale of EP will be received in the second quarter.
A total of seven full exits were completed in the quarter. If the EP exit is included, the average uplift to the previous carrying value was 59% and these exits generated an average return of 2.3 times original cost.
In addition to these realisations, we disposed of interests in three funds receiving proceeds of £5.0 million, and bringing total proceeds from the portfolio to £20.9 million.
Additions
A total of £23.1 million was invested in the quarter. Of this amount, drawdowns from funds accounted for £21.3 million and secondary purchases of interests in two funds accounted for a further £1.8 million.
A total of 15 new underlying investments were made in the three months to 30 April. The largest was Graphite Capital's acquisition of ICR, a provider of repair and maintenance services to the energy industry. The Company's share of this investment was £10.9 million.
Re-investment in Education Personnel
Since the quarter end the Company has invested £9.0 million alongside Intermediate Capital Group in its acquisition of Education Personnel from Graphite Capital Partners VII, which will therefore remain one of the Company's ten largest underlying investments.
CPVII was raised in 2007 and, in common with most unlisted private equity funds, has a limited life of ten years. It is currently in its seventh year and is therefore seeking profitable disposal opportunities for its portfolio. CPVII chose to sell its investment in EP as it is now looking to return cash to its investors and because, at the price agreed, it had made a high return.
Graphite Enterprise has been an investor in funds managed by ICG for 25 years. We chose to re-invest in EP alongside ICG because we believe it to be an extremely high quality company with strong growth prospects and, unlike CPVII, we do not have a need to return cash to investors. Graphite Enterprise is an existing investor in ICG Europe V, the ICG fund which has invested in EP, and we will have an indirect interest of £1.1 million through our investment in this fund. The total investment will therefore be £10.1 million.
Further current investment opportunities
We are reviewing a number of opportunities to make co-investments and to make secondary purchases of fund interests. If the more advanced of these transactions were to complete, the level of new investment in the second quarter would be significantly higher than in the first.
Cash and liquid assets
In the three months to 30 April 2014 , we invested a net £2.2 million in the portfolio. After taking account of other net outflows and currency movements, cash and liquid assets fell by £5.1 million to £63.1 million:
Movement in liquid assets | 3 months to |
£m |
30 April |
Additions | (23.1) |
Proceeds generated by the portfolio* | 20.9 |
Net cash invested in the investment portfolio | (2.2) |
Non-investment cash flows | (2.8) |
Net cash outflow | (5.0) |
Effect of changes in foreign exchange rates | (0.1) |
Total movement | (5.1) |
Opening cash and liquid assets | 68.2 |
Closing cash and liquid assets | 63.1 |
*Including income |
As we will be receiving proceeds of £14.9 million from the sale of EP and have reinvested £9.0 million, the net proceeds will be £5.9 million. After taking account of this, the payment of the £11.3 million dividend next month (see below) and other minor movements, the pro-forma cash balance at 31 May is £59.2 million.
Balance sheet and commitments
The summary balance sheet and commitment position as at 30 April 2014 is set out below. The Company was 87% invested at that date.
30 April 2014 | % of total assets |
31 Jan 2014 | % of total assets | |
Total portfolio | 445.7 | 87.5% | 433.3 | 86.2% |
Cash and liquid assets | 63.1 | 12.4% | 68.2 | 13.6% |
Other net current assets | 0.7 | 0.1% | 1.1 | 0.2% |
Total assets | 509.5 | 100.0% | 502.7 | 100.0% |
Equity shareholders' funds | 501.7 | 493.8 | ||
Undrawn bank facility 1 | 97.7 | 97.7 | ||
Total liquidity 2 | 160.8 | 165.9 | ||
Outstanding commitments | 257.1 | 277.3 | ||
Overcommitment 3 | 96.3 | 111.4 | ||
Overcommitment as % of shareholders' funds | 19.2% | 22.6% |
1. £50.0 million and €58.1 million translated into sterling at period end
2. Cash and liquid assets plus undrawn borrowing facilities
3. Outstanding commitments less total liquidity
Outstanding commitments fell by £20.2 million to £257.1 million in the quarter, primarily because £21.3 million of commitments were drawn down. No new commitments were made in the quarter but £1.5 million of commitments were assumed with secondary fund purchases. Currency and other movements accounted for the remainder.
As we discussed in the year end results, many of our preferred managers raised funds last year and we made substantial commitments to them. Therefore we expect to make a significantly lower level of primary commitments this year than last.
Dividend
If approved by shareholders at today's Annual General Meeting, the Company will pay a dividend of 15.5p per share on 18 June to shareholders on the register as at the close of business on 28 May, consisting of a final dividend of 7.5p per share and a special dividend of 8.0p per share.
The total payable by the Company will be £11.3 million and the dividend will be accounted for in the Company's half year results.
Events since the quarter end
Other than as discussed above, the Directors are not aware of any events or transactions which have taken place between 30 April 2014 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 |
SUPPLEMENTARY INFORMATION
The 30 largest fund investments
The 30 largest funds by value at 30 April 2014 are set out below:
Fund | Outstanding commitment £ million | Year of commitment |
Country/ |
Value | |
1 | Graphite Capital Partners VII * / ** | 7.6 | 2007 | UK | 44.5 |
Mid-market buy-outs | |||||
2 | Graphite Capital Partners VIII * | 73.3 | 2013 | UK | 25.7 |
Mid-market buy-outs | |||||
3 | Fourth Cinven Fund ** | 4.1 | 2006 | Europe | 25.6 |
Large buy-outs | |||||
4 | Euromezzanine 5 | 1.8 | 2006 | France | 21.6 |
Mezzanine loans to mid-market buy-outs | |||||
5 | Thomas H Lee Parallel Fund VI | 2.9 | 2007 | USA | 21.1 |
Large buy-outs | |||||
6 | CVC European Equity Partners V ** | 5.5 | 2008 | Global | 20.7 |
Large buy-outs | |||||
7 | Doughty Hanson & Co V ** | 6.3 | 2006 | Europe | 18.1 |
Mid-market and large buy-outs | |||||
8 | Graphite Capital Partners VI ** | 3.4 | 2003 | UK | 17.5 |
Mid-market buy-outs | |||||
9 | Candover 2005 Fund ** | 0.1 | 2005 | Europe | 16.7 |
Large buy-outs | |||||
10 | TDR Capital II | 0.8 | 2006 | Europe | 16.1 |
Mid-market and large buy-outs | |||||
11 | ICG European Fund 2006 | 2.7 | 2007 | Europe | 15.1 |
Mezzanine loans to buy-outs | |||||
12 | Activa Capital Fund II | 0.9 | 2007 | France | 15.1 |
Mid-market buy-outs | |||||
13 | Apax Europe VII | 0.5 | 2007 | Global | 13.8 |
Large buy-outs | |||||
14 | Deutsche Beteiligungs AG Fund V | 1.3 | 2006 | Germany | 10.7 |
Mid-market buy-outs | |||||
15 | Bowmark Capital Partners IV | - | 2007 | UK | 10.0 |
Mid-market buy-outs | |||||
16 | Doughty Hanson & Co IV ** | 0.4 | 2005 | Europe | 7.5 |
Mid-market and large buy-outs | |||||
17 | PAI Europe V | 0.4 | 2007 | Europe | 6.4 |
Large buy-outs | |||||
18 | Charterhouse Capital Partners IX ** | 2.3 | 2008 | Europe | 6.2 |
Large buy-outs | |||||
19 | ICG Europe Fund V | 3.4 | 2012 | Europe | 5.0 |
Mezzanine loans to buy-outs | |||||
20 | Fifth Cinven Fund | 11.6 | 2012 | Europe | 5.0 |
Large buy-outs | |||||
21 | CVC European Equity Partners Tandem | 0.9 | 2006 | Global | 4.9 |
Large buy-outs | |||||
22 | Advent Central and Eastern Europe IV | 1.3 | 2008 | Europe | 4.8 |
Mid-market buy-outs | |||||
23 | BC European Capital IX | 3.9 | 2011 | Europe | 4.6 |
Large buy-outs | |||||
24 | Permira IV ** | 0.3 | 2006 | Europe | 4.3 |
Large buy-outs | |||||
25 | CVC European Equity Partners IV ** | 1.4 | 2005 | Global | 4.0 |
Large buy-outs | |||||
26 | Segulah IV | 1.2 | 2008 | Nordic | 3.8 |
Mid-market buy-outs | |||||
27 | Charterhouse Capital Partners VIII ** | 1.2 | 2006 | Europe | 3.7 |
Large buy-outs | |||||
28 | Deutsche Beteiligungs AG Fund IV | 0.3 | 2002 | Germany | 3.3 |
Mid-market buy-outs | |||||
29 | Piper Private Equity Fund IV | 1.1 | 2006 | UK | 3.2 |
Small buy-outs | |||||
30 | Charterhouse Capital Partners VII ** | 0.8 | 2002 | Europe | 3.2 |
Large buy-outs | |||||
Total of the largest 30 fund investments | 141.7 | 362.2 | |||
Percentage of total investment portfolio | 81.3% |
* Includes the associated Top Up funds
** All or part of interest acquired through a secondary fund purchase
The 30 largest underlying INVESTMENTS
The table below presents the 30 companies in which Graphite Enterprise had the largest investments by value at 30 April 2014. These investments may be held directly or through funds, or in some cases in both ways. The valuations are gross and are shown as a percentage of the total investment portfolio.
Company | Manager | Year of investment | Country | Value as a % of investment portfolio | ||
1 | Micheldever | |||||
Distributor and retailer of tyres | Graphite Capital | 2006 | UK | 4.0% | ||
2 | Education Personnel * | |||||
Provider of temporary staff for the education sector | Graphite Capital | 2010 | UK | 3.7% | ||
3 | City & County Healthcare | |||||
Provider of home care | Graphite Capital | 2013 | UK | 3.2% | ||
4 | CEVA | |||||
Manufacturer and distributor of animal health products | Euromezzanine | 2007 | France | 3.2% | ||
5 | National Fostering Agency | |||||
Provider of foster care services | Graphite Capital | 2012 | UK | 2.7% | ||
6 | ICR Group | |||||
Provider of repair and maintenance services to the energy industry | Graphite Capital | 2014 | UK | 2.4% | ||
7 | Algeco Scotsman | |||||
Supplier and operator of modular buildings | TDR Capital | 2007 | North America | 2.4% | ||
8 | U-POL | |||||
Manufacturer and distributor of automotive refinish products | Graphite Capital | 2010 | UK | 1.7% | ||
9 | London Square | |||||
Developer of residential housing | Graphite Capital | 2010 | UK | 1.5% | ||
10 | Spheros | |||||
Provider of bus climate control systems | Deutsche Beteiligungs | 2011 | Germany | 1.4% | ||
11 | David Lloyd Leisure | |||||
Operator of premium health and fitness clubs | TDR Capital | 2013 | UK | 1.4% | ||
12 | TMF | |||||
Provider of management and accounting outsourcing services | Doughty Hanson | 2008 | Netherlands | 1.3% | ||
13 | Quiron | |||||
Operator of private hospitals | Doughty Hanson | 2012 | Spain | 1.2% | ||
14 | CPA Global | |||||
Provider of patent and legal services | Cinven | 2012 | UK | 1.2% | ||
15 | Acromas | |||||
Provider of financial, motoring, travel and healthcare services | Charterhouse / CVC | 2007 | UK | 1.2% | ||
16 | Parques Reunidos | |||||
Operator of attraction parks | Arle | 2007 | Spain | 1.1% | ||
17 | Spire Healthcare | |||||
Operator of hospitals | Cinven | 2007 | UK | 1.1% | ||
18 | Frontier Medical | |||||
Manufacturer of medical devices | Kester Capital | 2013 | UK | 1.0% | ||
19 | Intermediate Capital Group ** | |||||
Provider of mezzanine finance | ICG | 1989 | UK | 1.0% | ||
20 | Stork | |||||
Provider of technical engineering services | Arle | 2008 | Netherlands | 1.0% | ||
21 | InnBrighton | |||||
Operator of pubs and bars | Graphite Capital | 2001 | UK | 0.9% | ||
22 | Ceridian | |||||
Provider of payment processing services | Thomas H Lee Partners | 2007 | USA | 0.9% | ||
23 | Gerflor Manufacturer of PVC flooring | ICG | 2011 | France | 0.9% | |
24 | Eurofiber | |||||
Provider of fibre optic network | Doughty Hanson | 2012 | Netherlands | 0.8% | ||
25 | Sebia | |||||
Provider of protein testing equipment | Cinven | 2010 | France | 0.8% | ||
26 | Guardian Financial Services | |||||
Provider of insured life and pension products | Cinven | 2011 | UK | 0.8% | ||
27 | TMP Worldwide | |||||
Provider of recruitment solutions | Graphite Capital | 2006 | UK | 0.7% | ||
28 | Abertis ** | |||||
Provider of private transport and communications | CVC | 2010 | Spain | 0.7% | ||
29 | Evonik Industries ** | |||||
Manufacturer of specialty chemicals | CVC | 2008 | Germany | 0.7% | ||
30 | SAFE Manufacturer of industrial components | Euromezzanine | 2006 | France | 0.7% | |
Total of the 30 largest underlying investments | 45.6% | |||||
* Sold after the period end by Graphite Capital to ICG. The Company has re-invested alongside ICG. See "Re-investment in Education Personnel" section for further details.
**Quoted
Portfolio analySIS
The following five tables analyse the companies in which Graphite Enterprise had investments at 30 April 2014.
Portfolio - Investment type
% of value of underlying investments | ||
Large buy-outs | 45.7% | |
Mid-market buy-outs | 38.5% | |
Mezzanine | 10.0% | |
Small buy-outs | 4.8% | |
Quoted | 1.0% | |
Total | 100.0% |
Portfolio - Geographic distribution *
% of value of underlying investments | ||
UK | 46.8% | |
France | 13.6% | |
North America | 12.4% | |
Germany | 8.4% | |
Benelux | 5.2% | |
Spain | 4.7% | |
Scandinavia | 2.9% | |
Greece, Ireland, Italy, Portugal | 2.9% | |
Other Europe | 1.5% | |
Rest of world | 1.6% | |
Total | 100.0% | |
* Location of headquarters of underlying companies in the portfolio. Does not necessarily reflect countries to which companies have economic exposure.
Portfolio - Year of investment | % of value of underlying investments | ||
2014 and onwards | 4.5% | ||
2013 | 12.5% | ||
2012 | 12.7% | ||
2011 | 12.0% | ||
2010 | 15.4% | ||
2009 | 1.6% | ||
2008 | 8.5% | ||
2007 | 16.6% | ||
2006 | 10.4% | ||
2005 and before | 5.8% | ||
Total | 100.0% |
Portfolio - Sector analysis
% of value of underlying investments | ||
Healthcare and education | 19.5% | |
Business services | 18.2% | |
Industrials | 16.3% | |
Consumer goods and services | 12.7% | |
Leisure | 9.0% | |
Financials | 8.8% | |
Automotive supplies | 6.2% | |
Technology and telecommunications | 3.9% | |
Media | 3.4% | |
Chemicals | 2.0% | |
Total | 100.0% |
Quoted equity holdings at 30 April 2014 | |||
Underlying company | Ticker | £m | % of value of Investment portfolio |
Intermediate Capital Group * | ICP | 4.5 | 1.0% |
Abertis | ABE | 3.2 | 0.7% |
Evonik Industries | EVK | 3.2 | 0.7% |
Homag Group | HG1 | 2.8 | 0.6% |
Aramark Corporation | ARMK | 2.4 | 0.5% |
Tumi | TUMI | 2.1 | 0.5% |
Partnership | PA. | 1.7 | 0.4% |
West Corporation | WSTC | 1.4 | 0.3% |
Merlin | MERL | 1.3 | 0.3% |
Bankrate | RATE | 1.1 | 0.3% |
Hugo Boss | BOSS | 1.0 | 0.2% |
The Nielsen Company | NLSN | 1.0 | 0.2% |
Atos | ATOS | 0.9 | 0.2% |
SouFun | SFUN | 0.8 | 0.2% |
Sterling Financial Corporation | STSA | 0.8 | 0.2% |
MoneyGram International | MGI | 0.6 | 0.1% |
First BanCorp | FBP | 0.5 | 0.1% |
Just Retirement | JRG | 0.3 | 0.1% |
Freescale | FSL | 0.3 | 0.1% |
ProSiebenSat.1 | PSM | 0.1 | 0.0% |
Total | 30.0 | 6.7% | |
* Investment held directly. All other quoted holdings are held indirectly through third party funds and may have restrictions on their sale.
The following table analyses the closing portfolio by value.
Portfolio - Graphite and third party investments
£ million | Value of third party investments | Value of Graphite investments | Total value | |
Fund investments | 302.6 | 88.9 | 391.5 | |
Direct and co-investments | 35.4 | 18.8 | 54.2 | |
Total portfolio | 338.0 | 107.7 | 445.7 | |
Graphite investments | 24.2% | |||
Third party fund investments | 67.9% | |||
Third party direct and co-investments | 7.9% |
Investment activity
The following two tables analyse the investment activity of Graphite Enterprise in the three months to 30 April 2014.
Largest new underlying investments
Investment | Description | Country | Cost £ million |
ICR | Provider of repair and maintenance to the energy industry | UK | 10.9 |
CeramTec | Manufacturer of high performance ceramics | Germany | 1.2 |
iPrism | E-wholesaler of insurance policies | UK | 1.1 |
Skillsoft | Provider of 'off-the-shelf' e-learning content | Ireland | 0.9 |
Dahlback * | Operator of retail bakery chain | Germany | 0.7 |
Total of 5 largest new underlying investments | 14.8 | ||
* Acquired from a current fund investment of the Company and therefore also a disposal in the period.
Largest underlying realisations
Investment | Manager | Realisation type | Proceeds £ million |
HellermanTyton | Doughty Hanson | Public offering | 1.9 |
Leading Edge | Graphite Capital | Trade | 1.6 |
Avio | Cinven | Partial | 1.5 |
Stonegate Pub Company | TDR Capital | Refinancing | 1.3 |
Quorn | ICG | Mezzanine repayment | 1.2 |
Total of 5 largest underlying realisations | 7.5 | ||
Commitments analysis
The following four tables analyse Graphite Enterprise's commitments at 30 April 2014.
Commitments | Original commitment * £ million | Outstanding commitment £ million | Average drawdown percentage | % of commitments |
Funds in investment period | 319.8 | 214.2 | 33.0% | 83.3% |
Funds post investment period | 577.0 | 42.9 | 92.6% | 16.7% |
Total | 896.8 | 257.1 | 71.3% | 100.0% |
* Original commitments are translated at 30 April 2014 exchange rates
Commitments - remaining investment period | % of commitments |
> 5 years | 6.3% |
4-5 years | 28.1% |
3-4 years | 38.1% |
2-3 years | 6.3% |
1-2 years | 0.8% |
<1 year | 3.7% |
Investment period complete | 16.7% |
Total | 100.0% |
Movement in commitments in the three months to 30 April 2014 | £m |
Opening | 277.3 |
Drawdowns * | (21.2) |
New commitments arising through secondary purchases | 1.5 |
Release of commitments through secondary disposals | (1.6) |
Currency | (0.1) |
Other | 1.2 |
Closing | 257.1 |
* Excludes costs incurred in respect of new investments
New commitments in the three months to 30 April 2014
Fund | Strategy | Geography | £ million |
Commitments arising from secondary purchases | |||
TowerBrook III | Upper mid-market buy-out | US/Europe | 1.3 |
Graphite Capital Partners VI | Mid-market buy-out | UK | 0.2 |
Total | 1.5 | ||
CURRENCY EXPOSURE
30 April 2014 £m | 30 April 2014 % | |
Portfolio * | ||
- sterling | 216.1 | 48.5 |
- euro | 145.7 | 32.7 |
- other | 83.9 | 18.8 |
Total | 445.7 | 100.0 |
* Currency exposure is calculated by reference to the location of the underlying portfolio companies' headquarters.
30 April 2014 £m | 30 April 2014 % | |
Outstanding commitments | ||
- sterling | 105.4 | 41.0 |
- euro | 144.7 | 56.3 |
- other | 7.0 | 2.7 |
Total | 257.1 | 100.0 |
NOTES
Graphite Enterprise Trust PLC
Graphite Enterprise Trust PLC ("Graphite Enterprise" or "the Company") 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 companies.
The Company was listed in 1981 and has invested exclusively in private equity and has had the same manager throughout its life.
Graphite Enterprise provides access to a diverse portfolio of buy-outs of mature, profitable companies in established European private equity markets. The Company invests in UK-based mid-market companies through funds managed directly by Graphite Capital. Typically these will make up 20-25% of the portfolio. Investments in other UK companies and in overseas markets are made through funds managed by third parties. The Company does not invest in start ups or early stage businesses. Direct investments in companies may be made alongside both Graphite Capital and third party funds.
Shareholders of Graphite Enterprise gain exposure to a diverse portfolio of buy-outs of mature, profitable companies in established European private equity markets, with nearly 400 underlying companies. Graphite Capital directly manages many of the largest companies in the portfolio.
Since inception, the Company has generated a return of 28 times the capital raised.
Graphite Capital
Graphite Capital is one of the UK's leading mid-market private equity firms with over £1.5 billion of funds under management. It has raised and managed funds for 33 years. The senior management team has worked together for 17 years.
Graphite Capital manages both direct investments in portfolio companies and private equity fund investments.
Direct investments are predominantly made through limited life funds which have a global institutional investor base. The focus of direct investments is on UK mid-market buy-outs of companies valued at between £40 million and £200 million across a range of industry sectors.
Fund investments are made exclusively by Graphite Enterprise. Fund investments focus mainly on European buy-out funds. The investment strategy is to back private equity managers with strong track records operating in mature markets, with the aim of building long term relationships.
As it has a long experience both of managing its own funds and of investing in third party funds, Graphite Capital has a highly distinctive perspective when assessing fund and co-investment opportunities. Graphite Enterprise benefits from both the expertise of a dedicated fund investment team as well as the insights of Graphite Capital's direct investment team.
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