Interim Results
HG Capital Trust PLC
06 September 2006
FOR IMMEDIATE RELEASE 6 September 2006
HgCapital Trust plc
Interim Results for the six months ended 30 June 2006
HIGHLIGHTS
• Net asset value per share (NAV) has increased by 12% from 621.3p at the
31 December 2005 to 696.1p at 30 June 2006. Total return to shareholders
(NAV) increased by 13.7% in the six months to 30 June 2006 compared with
6.1% for the FTSE All-Share Index and 3.7% for the FTSE SmallCap Index.
• The Company's share price rose by 9.6% from 583.5p at 31 December 2005 to
639.5p at 30 June 2006.
• New and follow on investments amounted to £40.0 million.
• Realisations amounted to £32.0 million in cash.
• Earnings per share of 4.0p (2005: 7.6p).
• NAV was 680.1p at 31 August 2006.
Historical total return* performance
One year Three years Five years Seven years Ten years
% pa % pa % pa % pa % pa
Share price 21.3 41.3 14.1 18.1 17.5
Net asset value 24.8 28.8 13.5 14.7 14.9
FTSE All-Share Index 19.7 18.4 5.0 3.1 8.0
FTSE SmallCap Index 18.5 19.9 5.5 6.2 7.2
Based on the Company's share price at 30 June 2006 and allowing for dividends to
be reinvested, an investment of £1,000 ten years ago would now be worth £5,000.
An equivalent FTSE All-Share Index return would be worth £2,153.
*Total return assumes all dividends have been reinvested. Source: Bloomberg
The Chairman, Roger Mountford, comments:
Performance
'I am pleased to report that for the period under review the Company continued
to deliver strong NAV growth compared to the FTSE benchmarks. Net asset value
per share (NAV) increased by 12% and total return to shareholders (NAV plus
dividend) over the period was 13.7% compared with 6.1% for the FTSE All-Share
Index and 3.7% for the FTSE SmallCap Index. The Company's share price rose by
9.6% from 583.5p to 639.5p.
'Revenue return per share was 4.0p, compared with 7.6p in the same period last
year. As explained in earlier reports to shareholders, the Company's revenue
will vary from year to year in accordance with the structure of the underlying
investments.
Realisations
'A series of successful realisations that commenced in 2004 continued through
the period, with full and partial realisations yielding proceeds of £32 million.
These sales were made at prices above year end book values, contributing
further to growth in NAV. ClinPhone was successfully floated on the London
Stock Exchange; Travelsphere was sold; and the Company's remaining holding in
Raymarine plc was placed.
'Additionally, the Manager took advantage of the continuing strong market
conditions to agree the sale of investments in Castlebeck and Pharma Bio
Research (PBR). These sales were completed post period end but their valuations
as at 30 June were increased to reflect the sale proceeds achieved.
New Investments
'The Company invested a total of £37 million through three new buy-outs and a
new investment in a renewable energy project. Follow-on investments totalling
£3 million were made in six other holdings.
As announced when the Company made its first commitment to invest in renewable
energy, the Board agreed to roll over the Company's investments in this sector
into a holding within the Manager's new specialist fund. €20 million was
committed on the first closing of the fund. This will provide the Company with
a greater diversity in projects across several countries.
Prospects
'At 30 June 2006 the Company had liquid assets of £13 million, which has
increased to some £40 million following the most recent disposals; providing
adequate resources to fund further investment opportunities.
'The Managers sector teams continue to identify new opportunities for
investment. Meanwhile, most businesses in the current portfolio have been
achieving strong organic growth in sales and profits, suggesting potential for
continuing growth in NAV over the medium-term.'
Investment Manager's Review
Attribution analysis of movements in net asset value for the six months ended 30 June 2006
£'000
Opening net asset value as at 1 January 2006 156,487
Gross revenue 2,061
Expenditure (1,727)
Taxation (76)
Dividends paid (2,519)
Realised proceeds in excess of 31 December 2005 book value (excludes gross revenue) 6,786
Net unrealised appreciation of investments 18,540
Carried interest provision (4,230)
Closing net asset value as at 30 June 2006 175,322
Portfolio
The Company invests alongside other clients of HgCapital. Typically, the
Company's holding forms part of a much larger stake in predominantly buy-out
investments of between £50 million and £350 million, controlled by HgCapital.
The Investment Manager's Enterprise Value ('EV') generally refers to each
transaction in its entirety, apart from the tables which detail the Company's
participation, and where this review specifically states otherwise.
The Company's net asset value increased from £156 million to £175 million during
the period under review. This arose from unrealised movements and realised
proceeds in excess of the book value of £18.5 million and £6.8 million
respectively, following continued strong earnings growth and cash generation
within the portfolio.
The Company's investments in Castlebeck and PBR have both been sold since the
period end at a significant uplift to the December 2005 carrying value. The net
asset value at 30 June 2006 fully reflects the proceeds subsequently received
from these investments. In addition, strong profit growth from the buy-out
portfolio, in particular, Hirschmann, Blue Minerva and Clarion have contributed
to the increase in value. The Company's quoted investments have also performed
well, with Raymarine being realised during the period and a strong share price
growth in Xtx (Xyratex) as well as the flotation of ClinPhone.
Realised and unrealised movements in net asset value during the period
Realised Unrealised
Proceeds* Movements** Total
£m £m £m
Castlebeck 3.2 14.9 18.1
Xtx (Xyratex) 1.9 3.7 5.6
Hirschmann 3.2 3.2
ClinPhone 1.3 0.9 2.2
Raymarine 0.9 0.9
PBR 0.7 0.7
Hoseasons (0.5) (0.5)
Other (0.7) (0.7)
Eagle Rock (0.9) (0.9)
Match Holdings (1.5) (1.5)
W.E.T. (1.7) (1.7)
Total 7.3 18.1 25.4
* Realised proceeds in excess of 31 December 2005 book value (excludes gross
revenue (£'m)).
** Net unrealised movements of investments (£'m).
A minority of the Company's investments performed below expectations. In
particular, Match, Hoseasons and Eagle Rock continue to experience trading
difficulties and have been written down further in value.
During the period, the Company invested a total of £40 million and participated
in three new buy-out investments. These new investments were made in Visma
(Norway, £382 million EV), Paragon (UK, £322 million EV) and FTSA (Canada, £53
million EV).
On 19 June 2006, HgCapital completed the first closing of the Hg Renewable Power
Partners Fund, a limited partnership investing in renewable energy assets. The
Company became one of the Limited partners with €20 million as its commitment to
the fund at the period end.
The Company realised proceeds during the period amounting to £32 million. These
proceeds arose principally from the sale of Travelsphere, sales of quoted shares
in Raymarine, Xtx (Xyratex) and ClinPhone and the recapitalisation of both
Castlebeck and The Sanctuary Spa.
Prospects
The economic environment remains positive in our target markets of the UK,
Germany and Benelux and as a result liquidity in the Private Equity and debt
markets remains high. Competition for identifying and securing new investments
remains high with aggregate pricing in line with the FTSE All-Share Index. We
have taken advantage of these conditions with timely sales. Following new
investments and sales, the overall portfolio is relatively young, with strong
potential for earnings growth.
We will continue to secure new investments with confidence that dedicated sector
knowledge, selection disciplines and dedicated investment management resources
will enable us, not only to pick the right opportunities, but to support the
delivery of profit and value growth. Investment in our team, skills and
differentiation is on-going with eight new joiners since December, bringing our
total executive team to 27, with €2.7 billion of funds under management.
Portfolio Analysis
A diverse portfolio, invested along sector lines, with an increasing exposure to
Continental Europe.
At 30 June 2006 the Company's portfolio consisted of 44 investments, of which
the 20 principal investments represented over 90% of the portfolio valuation.
The Company offers both sector and geographic diversification in a portfolio of
fast growing small cap stocks. The top 20 investments in aggregate have
exhibited growth in both revenues and profits in excess of 20% per annum. The
portfolio's valuation increased in the first six months of the year to £163
million, benefiting from strong profit growth and positive cash flow,
particularly in the buy-out companies.
Four new investments were made during the period: three management buy-outs and
one investment in renewable energy. The management buy-outs were: the public to
private acquisition of Visma, a Norwegian software company; the acquisition of
FTSA, the world's leading crash test dummy business and the secondary purchase
of Paragon, a leading UK care home business.
Four investments were fully realised and six were partially realised, through
the sale of quoted shares, recapitalisation or trade sale. In aggregate,
capital proceeds from these realisations produced a 57% uplift over the carrying
value and a 96% uplift over cost.
Proceeds from realisations resulted in the Company ending the period with £13
million of liquid assets, which has increased to some £40 million following the
most recent disposals. These resources combined with a £25 million borrowing
facility position the Company to exploit new investment opportunities.
Asset class Geographic spread by valuation
Unquoted 84% UK 53%
Quoted 9% Germany 23%
Cash and other assets 7% North America 9%
Europe other 8%
Benelux 6%
Ireland 1%
Valuation basis Deal type by valuation
Cost 45% Buy-out 91%
Sales proceeds 17% Expansion 4%
Earnings 13% Fund 2%
Written down/off 11% Venture 2%
Quoted 10% Renewable energy 1%
Net assets 2%
Third party 2%
Sector by valuation Vintage by valuation
Technology 30% 2006 23%
Industrials 27% 2005 21%
Healthcare 26% 2004 13%
Media 7% 2003 17%
Leisure 6% 2002 18%
Fund 2% 2001 2%
Consumer 1% 2000 1%
Renewable energy 1% Pre-2000 5%
Investments
The Company invested £40 million in the six months ended 30 June 2006.
Company Sector Activity Deal Type Cost
£'000
Visma Technology Accounting and business Buy-out 13,268
software
FTSA Industrials Crash test dummies Buy-out 12,351
Paragon Healthcare Care homes Buy-out 10,799
Wind Direct Renewable Industrial site wind farms Renewable energy 710
energy
37,128
New investments
Schenck Industrials Industrial measuring and Buy-out 2,372
weighing systems
PBR Healthcare Clinical trial management Buy-out 654
Other 138
Follow-on investments 3,164
Total investment by the Company 40,292
Figures below refer to the total size of each acquisition, including debt raised
from third parties, made by HgCapital on behalf of its clients, including the
Company.
New Investments
FTSA
In March 2006, HgCapital completed the £53 million buy-out of FTSA, the global
market leader in the design and manufacture of crash test dummies for use in the
automotive and aerospace industries. It also provides associated technical
support and laboratory services, develops and supplies sophisticated software
for computer-simulated crash testing, as well as niche engineering services and
products to the medical and aerospace industries. Its sales are split evenly
between North America, Europe and the Far East.
VISMA
In May 2006, HgCapital completed the £382 million buy-out of Visma, the number
one provider of business software and related services to small and medium sized
enterprises in the Nordic region. Headquartered in Oslo with significant
revenues in Sweden, Finland and Denmark, the company provides accounting,
resource planning and payroll software, outsourced book-keeping and payroll
services, in addition to debt collection and procurement services to its
customer base of over 200,000 enterprises.
Paragon
In April 2006, HgCapital completed the £322 million buy-out of Paragon
Healthcare Group. Paragon owns and operates small community based homes for
adults with learning disabilities and associated physical disabilities, autistic
spectrum disorders, complex needs and acquired brain injury. The company
currently operates 1,600 beds in 242 services across England and Scotland.
Wind Direct
In January 2006, we completed our third renewable energy investment by securing
the exclusive rights to acquire 100MW of small UK wind farms from Wind Direct
Limited. Wind Direct places wind turbines at industrial sites in the UK,
selling power at below conventional power prices to the industrial customer
under long-term, inflation-linked power sales contracts.
Follow-on Investments
Schenck
In June 2006, Schenck completed the acquisition of Stock Equipment Company (USA)
Inc, the world market leader for bulk material handling and feeding systems for
coal-fired power plants, giving Schenck exposure to one of the key growth
industries not previously covered.
PBR
During the period, a short-term bridging loan was provided to PBR, ahead of the
sale of the business. Since the period end, PBR has been sold to PRA
International, the US listed global clinical research organisation, for a
consideration of €85 million. The deal is part cash and part quoted shares and
at 30 June, PBR has been valued based on the cash received, together with the
closing value of the quoted shares received.
Realisations
Proceeds from realisations totalling £32 million for the six months ended 30 June 2006.
Company Sector Exit route Cost Proceeds+ 2006
return+
£'000 £'000 £'000
Travelsphere Leisure Financial 3,899 7,929 4,030
Raymarine** Consumer Quoted share sale 61 4,384 4,323
Other* Liquidation 5,445 23 (5,422)
Full realisations 9,405 12,336 2,931
Xtx (Xyratex)*** Technology Quoted share sale 3,621 7,149 3,528
ClinPhone Healthcare IPO 1,079 5,623 4,544
Castlebeck Healthcare Recapitalisation 156 5,073 4,917
The Sanctuary Spa Leisure Recapitalisation 1,480 1,644 164
Other Fund Capital 49 55 6
distribution
Partial realisations 6,385 19,544 13,159
Total realisations 15,790 31,880 16,090
+ Includes gross revenue received during the period.
* Includes entities liquidated during the period which had previously been written down.
** Listed on the London Stock Exchange.
*** Traded on NASDAQ.
Full realisations
Travelsphere
Travelsphere is the UK's leading direct-sell escorted tour operator serving the
over 45 age group. In May 2006 we completed the realisation of our holding in
Travelsphere with a sale of the business to Electra Partners Europe. This
investment has returned 2.5 times the original investment cost.
Raymarine
Raymarine is one of the world's largest suppliers of marine electronic products
to the leisure boating market. In December 2004 the business was floated on the
London Stock Exchange and in January this year the remaining interest in the
business was sold. This investment has returned 4.4 times the original
investment cost.
Partial realisations
Castlebeck
Castlebeck is the UK's leading independent provider of specialist healthcare and
rehabilitation services for adults and adolescents with learning disabilities
and challenging behaviour. Over the life of our investment the business has
delivered strong earnings growth which has enabled us to complete two
recapitalisations of the business and return cash to investors. Since the
period end the business has been sold to an associate of Barchester Healthcare.
ClinPhone
In June 2006, we completed the flotation of ClinPhone on the London Stock
Exchange. ClinPhone is a leading specialist supplier of technology solutions to
the clinical trials industry. HgCapital clients have retained a 6.2% stake
which is subject to a six month lock-in period. This investment has returned
3.5 times the original cost (including the unrealised value). In line with UK
GAAP, this investment has been valued at the closing bid-market price as at 30
June 2006.
The Sanctuary Spa
The Sanctuary Spa is the UK's leading women-only day spa and beauty products
business. During the period the business has been recapitalised enabling cash
to be returned to investors.
Xtx (Xyratex)
During the period, we took the opportunity to realise 36% of HgCapital client's
holding in Xyratex, the NASDAQ quoted data storage and network technology
business. This investment has returned 2.6 times the original cost (including
the unrealised value).
Review of Principal Investments
1 Castlebeck
Sector: Healthcare Location: UK
Year of investment: 2002 www.castlebeck.com
In July 2002, HgCapital completed the £50 million buy-out of Castlebeck Group
Limited from 3i plc. We hold an 89% equity stake in the business.
Castlebeck is the UK's largest private provider of residential healthcare for
adults with learning disabilities and challenging behaviour. It operates
fourteen independent hospitals and homes based in the north-east of England and
Scotland. The company opened several new properties, including a new specialist
autism unit and adolescent homes. Following strong performance, HgCapital
recapitalised the business in both 2005 and 2006, returning £47 million in
proceeds to investors. Since the period end, the business has been sold to an
associate of Barchester Healthcare for £255 million. This returned a further
£125 million to clients, which is fully reflected in the 30 June 2006 valuation.
2 Xtx (Xyratex)
Sector: Technology Location: UK Ticker: XRTX:US
Year of investment: 2003 www.xyratex.com
In September 2003, HgCapital completed the £50 million buy-out of Xyratex for a
fully-diluted stake of 45%. Since our investment the company has been trading
ahead of plan and, in June 2004, completed an initial public offering on NASDAQ.
Xyratex is a global provider of enterprise-class data storage and subsystems and
storage process technology. Storage technology provides the means by which
businesses and personal IT data can be captured, processed, stored and retrieved
in a digital form.
During the period we took the opportunity to sell 36% of our holding in Xyratex.
3 VISMA
Sector: Technology Location: Norway
Year of investment: 2006 www.visma.com
In May 2006, HgCapital completed the £382 million buy-out of VISMA, the number
one provider of business software in the Nordic region. We hold a 57% stake in
this business.
4 FTSA
Sector: Industrials Location: Canada
Year of investment: 2006 www.ftss.com
In March 2006, HgCapital completed the £53 million buy-out of FTSA, the global
market leader in the design and manufacture of crash test dummies. We hold an
80% stake in this business.
5 Schenck
Sector: Industrials Location: Germany
Year of investment: 2005 www.schenck-mpt.de
In December 2005, HgCapital successfully completed the €205 million buy-out of
Schenck and acquired an 85% stake in the business.
Schenck is the global market leader for high-tech applications and solutions in
industrial weighing, feeding and automation. Schenck develops, manufactures,
assembles, markets and sells a full range of solutions, products, systems and
turnkey systems on the basis of reliable components, combining process-
engineering expertise and field-proven technology. Schenck has activities in
more than 40 countries and operates eleven state-of-the-art assembly facilities
globally.
6 Paragon
Sector: Healthcare Location: UK
Year of investment: 2006 www.milburycare.com
In April 2006, HgCapital completed the £322 million buy-out of Paragon
Healthcare Group. We have a 52% stake in this business.
7 Hirschmann Electronics
Sector: Industrials Location: Germany
Year of investment: 2004 www.hirschmann.de
The €115 million buy-out of Hirschmann Electronics from Rheinmetall AG was
completed in March 2004. We have an 80% equity stake in the business.
Hirschmann is a world-market-leading supplier of electronics equipment,
components and related accessories. Principal products include industrial
Ethernet and networking equipment, sophisticated car-antenna electronics,
television transmission equipment, and safety systems for mobile plant equipment
such as cranes.
8 Addison
Sector: Technology Location: Germany
Year of investment: 2005 www.addison.de
The €78 million buy-out of Addison was completed in June 2005. We have a 93%
equity stake in the business.
Addison is a leading, privately-owned German application software company that
provides business-critical solutions to two related markets - tax accountants
and SME's. It develops licenses and manager standard and sector specific
software for bookkeeping, accounts production, tax, cost accounting, payroll
administration and financial controls.
In December 2005, HgCapital make a further investment in Addison of €14 million,
to fund the acquisition of PBSG, the number three player in the German tax
accountant software market. The two businesses are in the process of being
integrated.
9 Classic Copyright t/a Boosey & Hawkes
Sector: Media Location: UK
Year of investment: 2003 www.boosey.com
The £84 million public-to-private acquisition of Boosey & Hawkes was completed
in December 2003. All instrument manufacturing operations associated with
Boosey & Hawkes were sold in February 2003 and form no part of this investment.
We have a 77% equity stake in the business.
Boosey & Hawkes is the world's leading classical music publisher with a 14%
market share. It owns, develops and exploits the largest catalogue of classical
music copyrights of works by composers such as Britten, Prokofieff,
Rachmaninoff, Ravel, Shostakovich, Strauss and Stravinsky. Revenue is derived
from royalties when the copyrights are played live or via media. The business
is now looking at opportunities to consolidate a fragmented market.
10 Blue Minerva t/a IRIS
Sector: Technology Location: UK
Year of investment: 2004 www.iris.co.uk
The £102 million buy-out of IRIS Software was completed in July 2004. We have a
60% equity stake in the business.
IRIS software is one of the largest independent business software providers to
UK accountancy practices and SMEs. In 2005, IRIS acquired Exchequer Software,
an award-winning independent software house specialising in mid-range accounting
software. IRIS won 'business of the Year' in the South East regional finals of
the National Business Awards 2005. Following strong performance in 2005,
HgCapital recapitalised Blue Minerva in December 2005, returning over £26
million to its clients.
Top 20 investment listing of the Company
Company Sector Residual Valuation Year of Portfolio Cum.
cost investment value value
£'000 £'000 % %
1. Castlebeck Group Ltd Healthcare 705 23,103 2002 14.1 14.1
2. Xtx Ltd (Xyratex)** Technology 3,374 13,210 2003 8.1 22.2
3. Visma Holdings Lux SARL# Technology 13,268 12,972 2006 7.9 30.1
4. FTSA Holdings Ltd Industrials 12,351 12,351 2006 7.6 37.7
5. Schenck MPT SA# Industrials 11,698 11,838 2005 7.2 44.9
6. Paragon Ltd Healthcare 10,799 10,799 2006 6.6 51.5
7. Hirschmann Electronics Holdings Industrials 2,669 7,349 2004 4.5 56.0
SA
8. Addison Luxembourg SA# Technology 6,499 6,678 2005 4.1 60.1
9. Classic Copyright (Holdings) Ltd Media 6,033 5,943 2003 3.6 63.7
10. Blue Minerva Ltd Technology 2,957 5,728 2004 3.5 67.2
11. Elite Holding SA# Technology 5,749 5,652 2005 3.5 70.7
12. Sporting Index Group Ltd Leisure 5,428 5,428 2005 3.3 74.0
13. Clarion Events Ltd Media 4,965 5,264 2004 3.2 77.2
14. W.E.T Holdings (Luxembourg) SA Industrials 7,590 5,099 2003 3.1 80.3
15. Hoffman M.M. SA# Industrials 4,747 4,794 2005 2.9 83.2
16. PBR Holding SA Healthcare 5,628 4,587 2002 2.8 86.0
17. The Sanctuary Spa Holdings Ltd Leisure 1,099 2,771 1995 1.7 87.7
18. Rolfe & Nolan Holdings plc Technology 238 2,034 2003 1.2 88.9
19. Doc M SARL# Healthcare 1,956 1,905 2004 1.2 90.1
20. ClinPhone plc* Healthcare 7 1,903 1996 1.2 91.3
Total 20 Investments 107,760 149,408 91.3 91.3
Other Investments (24) 39,728 13,904 8.7 100.0
Total Investments (44) 147,488 163,312 100.0 100.0
* Listed on the London Stock Exchange.
** Traded on NASDAQ.
# The difference between cost and valuation is due to foreign exchange movements.
For further information please contact:
Roger Mountford- Chairman, HgCapital Trust plc
Tel: 07799 662601
www.hgcapitaltrust.com
Ian Armitage - Partner, HgCapital
Tel: 020 7089 7979
www.hgcapital.com
Suzanne Bartch, Peter Ogden
The Maitland Consultancy
Tel: 020 7379 5151
INCOME STATEMENT
for the six months ended 30 June 2006
Revenue return £'000
Six months Six months Year
ended ended ended
30.06.06 30.06.05 31.12.05
Notes (unaudited) (unaudited) (audited)
Gains on investments and government securities - - -
Carried interest provision - - -
Income 5 2,061 2,937 4,963
Investment management fee 6 (353) (310) (587)
Other expenses 7(a) (317) (241) (498)
Net return on ordinary activities before taxation 1,391 2,386 3,878
Taxation on ordinary activities (393) (471) (913)
Transfer to reserves 998 1,915 2,965
Return per ordinary share 3.96p 7.60p 11.77p
The total column of this statement represents the Company's Income Statement.
The supplementary revenue and capital return columns are both prepared under
guidance published by the Association of Investment Trust Companies ('AITC').
All recognised gains and losses are disclosed in the revenue and capital columns
of the income statement and as a consequence no statement of total recognised
gains and losses has been presented.
All revenue and capital items in the above statement derive from continuing
operations.
INCOME STATEMENT - continued
for the six months ended 30 June 2006
Capital return £'000
Six months Six months Year
ended ended ended
30.06.06 30.06.05 31.12.05
Notes (unaudited) (unaudited) (audited)
Gains on investments and government securities 25,326 21,332 37,706
Carried interest provision (4,230) - (2,976)
Income 5 - - -
Investment management fee 6 (1,057) (931) (1,761)
Other expenses 7(a) - - -
Net return on ordinary activities before taxation 20,039 20,401 32,969
Taxation on ordinary activities 317 279 528
Transfer to reserves 20,356 20,680 33,497
Return per ordinary share 80.82p 82.11p 132.99p
The total column of this statement represents the Company's income statement.
The supplementary revenue and capital return columns are both prepared under
guidance published by the Association of Investment Trust Companies ('AITC').
All recognised gains and losses are disclosed in the revenue and capital columns
of the income statement and as a consequence no statement of total recognised
gains and losses has been presented.
All revenue and capital items in the above statement derive from continuing
operations.
INCOME STATEMENT - continued
for the six months ended 30 June 2006
Total return £'000
Six months Six months Year
ended ended ended
30.06.06 30.06.05 31.12.05
Notes (unaudited) (unaudited) (audited)
Gains on investments and government securities 25,326 21,332 37,706
Carried interest provision (4,230) - (2,976)
Income 5 2,061 2,937 4,963
Investment management fee 6 (1,410) (1,241) (2,348)
Other expenses 7(a) (317) (241) (498)
Net return on ordinary activities before taxation 21,430 22,787 36,847
Taxation on ordinary activities (76) (192) (385)
Transfer to reserves 21,354 22,595 36,462
Return per ordinary share 84.78p 89.71p 144.76p
The total column of this statement represents the Company's income statement.
The supplementary revenue and capital return columns are both prepared under
guidance published by the Association of Investment Trust Companies ('AITC').
All recognised gains and losses are disclosed in the revenue and capital columns
of the income statement and as a consequence no statement of total recognised
gains and losses has been presented.
All revenue and capital items in the above statement derive from continuing
operations.
BALANCE SHEET
as at 30 June 2006
30.06.06 30.06.05 31.12.05
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Fixed assets
Investments held at fair value
Quoted at market valuation 15,925 17,832 18,736
Unquoted at directors' valuation 147,387 97,597 109,504
163,312 115,429 128,240
Current assets
Debtors 5,185 7,058 6,609
Government securities 12,447 16,104 24,515
Cash 909 4,829 867
18,541 27,991 31,991
Creditors - amounts falling due within one year (6,531) (800) (3,744)
Net current assets 12,010 27,191 28,247
Net assets 175,322 142,620 156,487
Capital and reserves
Called up share capital 6,296 6,296 6,296
Share premium account 14,123 14,123 14,123
Capital redemption reserve 1,248 1,248 1,248
Capital reserve - realised 131,754 114,366 122,191
Capital reserve - unrealised 15,726 (59) 4,933
Revenue reserve 6,175 6,646 7,696
Total equity shareholders' funds 175,322 142,620 156,487
Net asset value per ordinary share 696.1p 566.2p 621.3p
CASH FLOW STATEMENT
for the six months to 30 June 2006
Six months Six months Year
ended ended ended
30.06.06 30.06.05 31.12.05
£'000 £'000 £'000
Note (unaudited) (unaudited) (audited)
Net cash (outflow)/inflow from operating
activities 7(b) (2,806) 655 1,542
Taxation recovered 3,046 353 352
Capital expenditure and financial investment
Purchase of fixed asset investments (40,292) (11,271) (35,376)
Proceeds from the sale of fixed asset
investments 31,013 20,640 48,831
(9,279) 9,369 13,455
Dividends paid (2,519) (2,015) (2,015)
Net cash (outflow)/inflow before management
of liquid resources (11,558) 8,362 13,334
Management of liquid resources 11,597 (4,713) (13,644)
Increase/(decrease) in cash in the period 39 3,649 (310)
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
for the six months ended 30 June 2006
Share Share Capital Capital Revenue Total
capital premium redemption reserves reserve £'000
Note £'000 account reserve £'000 £'000
£'000 £'000
At 31 December 2005 6,296 14,123 1,248 127,124 7,696 156,487
Net return from ordinary
activities* - - - 20,356 998 21,354
Dividends paid(^) 3 - - - - (2,519) (2,519)
--------- ---------- --------- ---------- --------- ----------
At 30 June 2006* 6,296 14,123 1,248 147,480 6,175 175,322
===== ======= ===== ======= ===== =======
At 31 December 2004 6,296 14,123 1,248 93,627 6,746 122,040
Net return from ordinary
activities - - - 33,497 2,965 36,462
Dividends paid# 3 - - - - (2,015) (2,015)
--------- ---------- --------- ---------- --------- ----------
At 31 December 2005 6,296 14,123 1,248 127,124 7,696 156,487
===== ======= ===== ======= ===== =======
* Unaudited.
(^) Final dividend for the year ended 31 December 2005 of 10.00p (£2,519,000) declared on 13 March 2006 and
paid on 2 May 2006.
# Final dividend for the year ended 31 December 2004 of 8.00p (£2,015,000) declared on 8 March 2005 and
paid on 29 April 2005.
NOTES TO THE INTERIM ANNOUNCEMENT
1. Principal activity
The principal activity of the Company is that of an investment company within the meaning of
section 266 of the Companies Act 1985.
2. Basis of preparation
The accounts have been prepared under the historical cost convention, modified to include the
revaluation of investments and in accordance with UK Generally Accepted Accounting Practice ('
UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment
Trust Companies' ('SORP') issued in December 2005. All of the Company's operations are of a
continuing nature. The same accounting policies used for the year ended 31 December 2005 have
been applied.
3. Dividends
It is intended that dividends will be declared and paid annually in respect of each accounting
period. A dividend of 10.00p per share, declared as a final dividend, was paid on 2 May 2006
in respect of the year ended 31 December 2005 (year ended 31 December 2004: 8.00p per share,
declared on 8 March 2005 and paid on 29 April 2005).
4. Issued share capital
There were 25,186,755 ordinary shares in issue for the six months ended 30 June 2006 and
30 June 2005; and the year ended 31 December 2005.
5. Income
Six months Six months Year
ended ended ended
30.06.06 30.06.05 31.12.05
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Income from investments
UK unquoted investment income 1,237 1,484 2,251
UK dividends from listed companies 82 814 833
Overseas dividends - 8 18
1,319 2,306 3,102
Other income
Gilt interest 719 611 1,692
Deposit interest 23 20 146
Underwriting commission - - 23
742 631 1,861
Total income 2,061 2,937 4,963
6. Investment management fee
Revenue return Capital return
Six months Six months Year Six months Six months Year
ended ended ended ended ended ended
30.06.06 30.06.05 31.12.05 30.06.06 30.06.05 31.12.05
£'000 £'000 £'000 £'000 £'000 £'000
(unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
Investment
management fee 300 264 500 900 792 1,499
Irrecoverable VAT
thereon 53 46 87 157 139 262
353 310 587 1,057 931 1,761
The investment management fee is levied quarterly in arrears. Investment management fees are charged
75% to capital and 25% to revenue.
7. Other expenses
(a) Operating expenses
Six months Six months Year
ended ended ended
30.06.06 30.06.05 31.12.05
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Custodian and administration fees 95 52 137
Other administration costs 222 189 361
317 241 498
(b) Reconciliation of net revenue return before taxation to net cash flow from operating activities
Six months Six months Year
ended ended ended
30.06.06 30.06.05 31.12.05
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Net return before finance costs and taxation 21,430 22,787 36,847
Gains on investments held at fair value (25,326) (21,332) (37,706)
Carried interest provision 1,254 - 2,976
(Increase)/decrease in accrued income (134) (599) 77
Increase/(decrease) in creditors 127 (28) (250)
Tax on investment income included within gross income (157) (173) (402)
Net cash (outflow)/inflow from operating activities (2,806) 655 1,542
8. Transaction costs
During the period the Company incurred transaction costs on the sale of quoted investments of
£13,000 (30 June 2005: £18,000 and 31 December 2005: £33,000).
9. Capital commitments
At 30 June 2006, investment purchases of £607,000 (30 June 2005: £1,653,000 and 31 December
2005: £680,000) had been authorised and contractually committed but not paid. In addition,
£13,826,000 (€20,000,000) was committed to Hg Renewable Power Partners LP.
10. Publication of non-statutory accounts
The financial information contained in this interim report does not constitute statutory
accounts as defined in section 240 of the Companies Act 1985. The financial information for
the six months ended 30 June 2006 and 2005 has not been audited.
The information for the year ended 31 December 2005 has been extracted from the latest
published audited financial statements, which have been filed with the Registrar of Companies.
The report of the independent auditor on those accounts contained no qualification or statement
under sections 237(2) or (3) of the Companies Act 1985.
11. Annual results
The Board expects to announce the results for the year ending 31 December 2006 in March 2007.
The annual report should be available by the end of March 2007, with the Annual General Meeting
being held in April 2007.
Third Floor
Minerva House
3-5 Montague Close
London SE1 9BB
6 September 2006
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