Interim Results
EMBARGOED UNTIL 07:00 AM, TUESDAY 11 JUNE 2002
ELECTRA INVESTMENT TRUST PLC
Interim Results for six months ended 31 March 2002
Highlights
* Net asset value per share increased by 6.3% to £8.81 as at 31 March 2002
(30 September 2001: £8.30 per share)
* Portfolio realisations of £62 million in the first six months - almost
double the amount achieved in the previous six months (30 September 2001: £
34 million)
* £53 million invested in new and existing investments
* Adjusted net asset value per share at 31 May 2002 of £8.73*
* The adjusted net asset value at 31 May 2002 is calculated on the basis of the
net asset value at 31 March 2002 adjusted to reflect the purchases and sales of
investments, currency movements and mid market values on that day in respect of
listed investments and unlisted investments where these are valued by reference
to quoted prices.
Sir Brian Williamson, Chairman, said:
'The Trust's performance in the first half of 2002 has been encouraging.
Despite the challenging market conditions, we are pleased to have significantly
increased portfolio realisations during the period and to report an increase in
NAV per share.
'The expertise and track record of our Manager in investing through economic
cycles, together with the underlying quality of the portfolio, means we are
well placed to benefit when market conditions improve.'
For further information:
Sir Brian Williamson, Chairman, Electra Investment Trust PLC 020 7831 6464
Hugh Mumford, Chief Executive, Electra Partners Limited
Stephen Breslin, Brunswick Group Limited 020 7404 5959
Tricia Parish, Brunswick Group Limited
Notes to Editors:
Electra - Background to Recent Changes
Since the listing of Electra in 1976, the Company has specialised in investing
in the private equity market. This arose from the belief that superior returns
could be generated from investing in private equity through the structure of an
investment trust.
Between 1976 and 2001 Electra invested over £3,000 million in private equity
investments and, inclusive of a capital injection of £32 million, Electra's
assets grew from £58 million in February 1976 to £1,145 million by 30 September
1998, the financial year end immediately preceding the hostile takeover bid for
Electra in 1999. This bid failed when shareholders voted in favour of a scheme
which involved the controlled realisation of the portfolio over a five year
period. New investment was restricted to existing portfolio companies.
Since the start of the realisation programme in March 1999, Electra has
returned £945 million to shareholders leaving a residual portfolio valued at £
773 million at 31 March 2002. This compares with the stock market value of
Electra of £975 million immediately before the announcement of the takeover
bid. Over the same period, £349 million has been invested and £1.2 billion has
been realised from the portfolio.
Shareholders approved proposals in June 2001 which retained the emphasis on
realising investments but made provision for Electra to continue as an
investment vehicle. This achieved the objective of catering for those
shareholders who wished to retain an exposure to private equity through a
shareholding in Electra.
This more flexible investment strategy provided for at least two-thirds of
future cashflow to be returned to shareholders with the balance to be invested
in private equity investments. In June 2001 the Board anticipated, subject to
market conditions, that not less than £500 million would be returned over the
next three years of which £150 million has already been returned through the
tender offer in 2001.
Dependent on maintaining appropriate levels of gearing the balance of cashflow
will be invested in follow-on investments to protect or enhance the value of
existing investments, in investment funds managed by Electra Partners and in
other private equity investment opportunities generated by Electra Partners.
In June 2001 shareholders authorised the Board to review this strategy in 2004.
CHAIRMAN'S STATEMENT
Results
At 31 March 2002 Electra's net asset value per share was £8.81 compared to £
8.30 at 30 September 2001, an increase of 6.3%. Over the same period the FTSE
All-Share Index increased by 9.3%. As previously reported, comparison of
Electra's performance with the FTSE All-Share Index continues to be less
relevant while the emphasis remains on portfolio realisation with limited new
investment. Over the six month period the UK and European investments, which
comprise 69% of the portfolio, performed satisfactorily although certain
overseas investments continued to experience more difficult conditions.
Realisations and Investments
Last year's Statement reported that the buoyant conditions which occurred over
the first two years of Electra's realisation programme were unlikely to be
continued in the short-term as prices of unlisted investments were affected by
a worsening economic environment. Nevertheless, portfolio sales of £62 million
were achieved in the six months to 31 March 2002 compared with £34 million in
the previous six months and current plans for portfolio realisations are
progressing satisfactorily.
Over the six month period, £53 million was invested in existing and new
portfolio investments compared with £16 million in the six months ended 30
September 2001. Further details of realisations and investments are included in
the Investment Manager's Review.
Dividends
The Board believes that it is inappropriate to consider dividend payments while
Electra continues to utilise bank facilities to fund returns of capital to
shareholders. No interim dividend is therefore payable in respect of the six
months ended 31 March 2002.
Overview
Since March 1999 Electra has successfully undertaken a major programme of
realising the investment portfolio and returning cash to shareholders.
Realisations over the period from 1 March 1999 to 31 March 2002 totalled £1.2
billion, some 88% of the value of Electra's portfolio at 1 March 1999. During
the same period £945 million has been returned to shareholders through three
tender offers leaving a residual portfolio valued at £773 million at 31 March
2002.
Despite these measures and a reduction of shares in issue from 173.1 million on
1 March 1999 to 65.2 million at 31 March 2002, Electra's shares still trade at
prices which are at a discount to the net asset value. Whilst the Board is
disappointed with this share price performance, it is encouraged by the
underlying value of the portfolio and the more favourable realisation
environment which is beginning to emerge.
The Future
The Manager is performing well under the revised investment strategy and there
are signs that the outlook for the majority of our portfolio companies is
improving. The Board believes that Electra's investment strategy provides a
sound basis for maximising value for shareholders and looks to the future with
confidence.
Sir Brian Williamson, Chairman 10 June 2002
Portfolio Analysis
Overall Portfolio Changes
Summary of Changes to Overall Portfolio
Six months ended 31 March 2002
Valuation Purchases Sales Net capital Valuation
appreciation
at 30 Sept 2001 £'000 £'000 at 31 March
£'000
£'000 2002
£'000
_______________________________________________________________________________________________________________
Total Portfolio 739,666 52,711 (61,713) 41,975 772,639
_______________________________________________________________________________________________________________
During the six months to 31 March 2002 Electra's investment portfolio recorded
net capital appreciation of £42 million representing an increase of 5.7% over
the value of the portfolio at 30 September 2001. Realisations of investments
generated £62 million while £53 million was invested in existing portfolio
companies and in new investments. As a result of these changes the total
portfolio increased from a valuation of £740 million at 30 September 2001 to £
773 million at 31 March 2002.
At 31 March 2002, 69% of the portfolio was invested in the UK and Continental
Europe, 21% in the USA, 7% in the Far East including India and 3% in South
America.
Outlook
The year to 30 September 2001 was a difficult year for Electra's portfolio
reflecting the turbulence in the financial markets. Over the past six months
conditions in the markets have become less volatile and the outlook for the
investment portfolio has improved. This improvement has arisen from two
factors. Firstly, the operating performance of the majority of the larger
investments has seen encouraging progress. Secondly, a number of problem
investments have been successfully restructured providing a sound basis for
further value growth.
In terms of cashflow, the relatively high level of capital calls from portfolio
companies during the period meant that the net cash generated from the
portfolio was relatively modest. Capital calls from the existing portfolio are
expected to fall in future periods.
The recent progress made by the investment portfolio together with the
potential for further added value has created a situation in which the
portfolio is well positioned for further growth. In addition, the environment
for disposing of investments has become more favourable and could lead to a
higher level of realisations provided current market conditions are maintained.
PORTFOLIO
New Investments
Under the investment policy approved by shareholders in June 2001, up to
one-third of cashflow generated from the portfolio is available for investment
in new portfolio companies and private equity funds. During the period under
review, the level of capital calls from existing portfolio companies restricted
the amount available for new investment. Total investment amounted to £53
million, of which £48 million was invested in existing portfolio companies and
£5 million was called down in respect of commitments to private equity funds.
New commitments included a £19 million participation in Electra Partners'
European Fund and a £15 million commitment to the Property Venture Capital
Fund, a property fund co-managed by Electra Partners. During the period £2.5
million was invested in respect of these commitments. The European Fund is
targeted at control positions in mid-market buy-outs in Europe while the
Property Venture Capital Fund will invest in UK property transactions with the
opportunity to add value through active management.
As a result of difficult conditions in the German banking market, Electra
provided a further £12 million to Deutsche Woolworth for working capital
purposes. This capital injection was provided through the purchase of a number
of properties previously belonging to Deutsche Woolworth on which Electra
receives rental income. A further £8 million was invested in Swifty Serve for
working capital purposes and £6 million was invested in International Garden
Products to enable bank financing to be obtained on favourable terms. In
December 2001 an additional £10 million was invested in Inchcape Shipping
Services to finance a restructuring of the operations in North America.
In May 2002, Electra provided £10 million for the purchase by Energy Power
Resources of the renewable energy interests of Kelda. Energy Power Resources is
a significant portfolio investment and this purchase will add significantly to
the future growth prospects of this investment.
Realisations
Realisations from the portfolio for the six month period amounted to £62
million. This included £28 million from the sale of unlisted securities, £22
million from the sale of listed securities and £12 million of proceeds from
private equity funds.
During the period, Electra received £15.2 million from the sale of Merlin
Communications, and £9 million from the sale of Fairbridge Estates. Both of
these investments provided good returns, and in the case of Merlin
Communications, sales proceeds represented almost four times the cost of the
investment made in 1997. Realisations from listed securities included £11.5
million from a placing of one-third of Electra's holding in Moser Baer. In the
case of Moser Baer the shares were placed at 340 Rs per share compared to an
original cost in December 1998 of 30 Rs per share.
Performance
During the period under review, the investment portfolio recorded net capital
appreciation of £42 million - an increase of 5.7% over the opening portfolio.
Taking into account the effect of the revenue account and gearing this results
in an increase in net asset value per share of 6.3% over the period. Of this
increase, £5 million arose from realised profits, £22 million from investments
valued by reference to a listed price and £15 million from unrealised
appreciation in respect of investments valued by the Directors.
The operating performance of the majority of the portfolio companies in the UK
and Continental Europe continues to make sound progress, although a number of
portfolio companies in the USA continue to be impeded by the unfavourable
banking market and credit restrictions. The performance in the period arose
mainly from the European Portfolio and from Electra's Far Eastern investments
which benefited from an improvement in the level of stock markets particularly
in India.
Largest Valuation Changes
Company £'000 Increase/
(decrease) %
Moser Baer 9,689 45.6
Leiner Health Products 7,204 52.9
Heath Lambert 7,019 31.0
Zensar Technologies 6,646 246.7
Orthofix 5,084 33.3
Allflex 4,035 12.6
Swifty Serve (9,296) (62.1)
Three of these largest valuation changes, Moser Baer, Zensar Technologies and
Orthofix, reflected an increase in the listed price which formed the basis of
their valuations. Leiner was revalued following a favourable settlement in a
law suit and Heath Lambert was revalued in the light of a strong profit
performance. On the other hand, the valuation of Swifty Serve in the US was
reduced by £9.3 million to reflect the current volatility in the company's
operating environment.
Consolidated Statement of Total Return (unaudited)
(incorporating the Revenue Account)
For the six months ended 31 March Revenue Capital 2002 Revenue Capital 2001
£'000 £'000 Total £'000 £'000 Total
£'000 £'000
_________________________________________________________________________________________________________________
Gains /(losses) on investments:
Realised - 5,041 5,041 - 15,193 15,193
Unrealised - 32,611 32,611 - (106,543) (106,543)
Losses on revaluation of foreign
currencies:
Realised - (246) (246) - (4,923) (4,923)
Unrealised - (4,767) (4,767) - (3,415) (3,415)
_________________________________________________________________________________________________________________
- 32,639 32,639 - (99,688) (99,688)
Income of the investment trust 10,096 - 10,096 7,528 - 7,528
Net (expenses)/income of subsidiary (83) - (83) 159 - 159
undertakings
Priority profit share paid to general (5,572) - (5,572) (8,000) - (8,000)
partners
Other expenses (1,238) - (1,238) (690) - (690)
Reversal of income accruals (3,844) - (3,844) - - -
_________________________________________________________________________________________________________________
Net Return before Finance Costs and
Taxation (641) 32,639 31,998 (1,003) (99,688) (100,691)
Interest payable and similar charges (3,678) - (3,678) (5,783) - (5,783)
_________________________________________________________________________________________________________________
Return on Ordinary Activities before (106,474)
(4,319) 32,639 28,320 (6,786) (99,688)
Taxation and Return to Shareholders
Exchange differences arising on 261 5,260 5,521 174 6,959 7,133
consolidation
_________________________________________________________________________________________________________________
Net Transfers (from)/to Reserves for the
Period (4,058) 37,899 33,841 (6,612) (92,729) (99,341)
_________________________________________________________________________________________________________________
Return to Shareholders per (6.62p) 50.03p 43.41p (8.42p) (123.90p) (132.32p)
Ordinary Share
_________________________________________________________________________________________________________________
The amounts dealt with in the Consolidated Statement of Total Return are all
derived from continuing activities.
2002 2001
Number of Ordinary Shares in issue at 31 March 65,231,533 80,459,959
________________________________________________________________________________________________________________
Consolidated Balance Sheet (unaudited)
As at 31 March 2002 As at 31 March 2001
£'000 £'000 £'000 £'000
_________________________________________________________________________________________________________________
Fixed Assets
Investments:
Unlisted 751,185 816,614
Listed 21,454 37,252
_________________________________________________________________________________________________________________
772,639 853,866
_________________________________________________________________________________________________________________
Current Assets
Debtors 34,275 36,823
Investments 1,768 2,856
Cash at bank and in hand 18,637 27,391
_________________________________________________________________________________________________________________
54,680 67,070
_________________________________________________________________________________________________________________
Current Liabilities
Creditors: amounts falling due within one year 8,243 26,915
_________________________________________________________________________________________________________________
Net Current Assets 46,437 40,155
_________________________________________________________________________________________________________________
Total Assets less Current Liabilities 819,076 894,021
Creditors: amounts falling due after more than
244,125 120,232
one year
_________________________________________________________________________________________________________________
Net Assets 574,951 773,789
_________________________________________________________________________________________________________________
Capital and Reserves
Called-up share capital 16,308 20,115
Share premium 24,147 24,147
Capital redemption reserve 26,967 23,160
Realised capital profits 675,649 810,673
Unrealised capital losses (162,281) (113,416)
Revenue reserves (5,839) 9,110
_________________________________________________________________________________________________________________
558,643 753,674
_________________________________________________________________________________________________________________
Total Equity Shareholders' Funds 574,951 773,789
_________________________________________________________________________________________________________________
Net asset value per ordinary share of 25p 881.40p 961.71p
_________________________________________________________________________________________________________________
Reconciliation of Total Shareholders' Funds (unaudited)
For the six months ended 31 March 2002 2001
£'000 £'000
_________________________________________________________________________________________________________________
Total Return 28,320 (106,474)
Exchange differences arising on consolidation 5,521 7,133
Repurchase of own shares - (887)
Nominal value of own shares purchased - (25)
_________________________________________________________________________________________________________________
Movements in Total Shareholders' Funds 33,841 (100,253)
Total Shareholders' Funds at 1 October 541,110 874,042
_________________________________________________________________________________________________________________
Total Shareholders' Funds at 31 March 574,951 773,789
_________________________________________________________________________________________________________________
Consolidated Cash Flow Statement (unaudited)
For the six months ended 31 March £'000 2002 £'000 2001
£'000 £'000
_________________________________________________________________________________________________________________
Operating Activities
UK dividend income 451 750
Unfranked investment income 2,590 2,844
Partnership income - 5
Interest income 152 778
Other income 146 255
Expenses (5,606) (8,912)
_________________________________________________________________________________________________________________
Net Cash Outflow from Operating Activities (2,267) (4,280)
_________________________________________________________________________________________________________________
Returns on Investments and Servicing of Finance (3,614) (9,000)
Interest paid
_________________________________________________________________________________________________________________
Net Cash Outflow from Returns on Investments and (3,614) (9,000)
Servicing Finance
_________________________________________________________________________________________________________________
Taxation Repaid - 1,871
Corporation tax
_________________________________________________________________________________________________________________
Total Taxation Repaid - 1,871
_________________________________________________________________________________________________________________
Capital Expenditure and Financial Investment
Purchases of investments (52,714) (50,846)
Sales of investments 67,553 147,814
_________________________________________________________________________________________________________________
Net Cash Inflow from Capital Expenditure and 14,839 96,968
Financial Investment
_________________________________________________________________________________________________________________
Net Cash Inflow before Management of Liquid 8,958 85,559
Resources and Financing
_________________________________________________________________________________________________________________
Management of Liquid Resources Financing 29,000 (12,326) 25,000 38,896
Bank loans drawn (29,018) (150,398)
Bank loans repaid 4,739 -
Loans received - (912)
Repurchase of own shares
_________________________________________________________________________________________________________________
Net Cash Inflow/(Outflow) from Financing 4,721 (126,310)
_________________________________________________________________________________________________________________
Increase/(Decrease) in Cash in the Period 1,353 (1,855)
_________________________________________________________________________________________________________________
Reconciliation of Net Cash Flow to Movement in
Net Debt
Increase/(Decrease) in cash in the period 1,353 (1,855)
Cash outflow from debt financing 18 125,398
Cash outflow/(inflow) from change in liquid
resources 12,326 (38,896)
_________________________________________________________________________________________________________________
12,344 86,502
_________________________________________________________________________________________________________________
Change in Net Debt Resulting from Cash Flows 13,697 84,647
Translations difference (5,012) (8,334)
_________________________________________________________________________________________________________________
Movement in Net Debt 8,685 76,313
Net debt brought forward (234,173) (169,154)
_________________________________________________________________________________________________________________
Net Debt Carried Forward (225,488) (92,841)
_________________________________________________________________________________________________________________
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