Interim Management Statement

RNS Number : 2782I
Graphite Enterprise Trust PLC
08 December 2015
 



8 December 2015

GRAPHITE ENTERPRISE TRUST PLC

 

INTERIM MANAGEMENT STATEMENT

PERIOD ENDED 31 OCTOBER 2015

 

Graphite Enterprise Trust PLC ("Graphite Enterprise" or "the Company") presents its Interim Management Statement for the period ended 31 October 2015.

 

Performance overview1

 

In the nine months to 31 October, the net asset value per share increased by 2.9% to 694.9p. In the same period the FTSE All-Share Index fell by 0.9%.

 

The share price performed strongly in the nine months, increasing by 10.5%. An interim dividend of 5.0p per share was paid to shareholders on 20 October.

 

In the nine months, the value of the portfolio in local currencies increased by 7.6%. As the Company was 84% invested at the start of the year, this generated a 6.5% increase in the net asset value. The impact of currency movements on euro-denominated investments and cash balances reduced the net asset value by 2.3%, with expenses and other items reducing it by a further 1.3%. Overall, the net asset value increased by 2.9%.

 

The long term performance of the Company remains strong, with both the net asset value and the share price comfortably outperforming the Index over five and ten years.

 

In the most recent quarter, the three months to 31 October, the net asset value decreased slightly by 0.1%. As few of the managers of our fund portfolio revalue their investments at September, the great majority of the portfolio effectively remains at its reported June valuation. Further details about performance and activity in the quarter are presented below.

 

1. All performance figures are on a total return basis, including the effect of re-invested dividends.

 

Performance and activity in the quarter

 

Net asset value

A small decrease in the underlying valuation of the portfolio was more than offset by positive currency movements, with the result that the total valuation of the portfolio increased the net asset value by 0.3%. The impact of expenses and other items reduced the net asset value by 0.4%. Overall, the net asset value decreased slightly by 0.1%.

 

Proceeds

The portfolio generated £14.7 million of cash proceeds in the three months to 31 October. Eight full realisations were completed and these accounted for 68% of the proceeds received.

 

The amounts received in the quarter brought total proceeds received from the portfolio in the year to date to £88.2 million, or 20% of the opening portfolio.  The full realisations brought the number completed in the year to 27 and these accounted for £55.6 million or 63% of the total proceeds received. The average uplift to the previous carrying value was 24% and the average return over the life of the investments was 1.8 times original cost. The remaining £32.6 million or 37% of total proceeds was generated by a combination of refinancings, IPOs, sell-downs of listed holdings by third party managers and other partial realisations.

 

Additions and new commitments

The slowdown in new investment activity, which we highlighted in the interim report, has continued, with £4.6 million invested in the quarter. This brings the total invested in the nine months to £37.5 million.

 

A total of 10 new underlying investments were made in the quarter. This brought the total for the year to date to 40.

 

In addition to the cash invested, we committed £3.9 million to a co-investment in Swiss Education Group, a provider of hospitality training in Switzerland, alongside Invision Private Equity, which completed shortly after the period end.

 

The Company made two new commitments to buy-out funds in the quarter. Both are existing manager relationships for Graphite Enterprise. The first was of €15 million to Charterhouse Capital Partners X and the second was of $20 million to TH Lee Equity Fund VII. The latter was our first commitment to a US focused buy-out manager since 2007.

 

Cash and liquid assets

 

The portfolio generated a net £10.1 million of cash in the three months to 31 October. Non-investment cash flows and adverse currency movements reduced cash by £2.8 million. The interim dividend of 5.0p per share returned £3.6 million to shareholders, and the Company bought back £0.4 million of shares. Overall, cash and liquid assets increased by £3.3 million to £104.4 million.

 

Movement in liquid assets

3 months to

9 months to

£m

31 October 2015

31 October 2015

Additions

(4.6)

(43.6)

Proceeds generated by the portfolio*

14.7

88.0

Net cash generated by the investment portfolio

10.1

44.4

Non-investment cash flows

(2.7)

(10.3)

Effect of changes in foreign exchange rates

(0.1)

(0.6)

Cash inflow before shareholder distributions

7.3

33.5

Dividends

(3.6)

(14.8)

Share buy-backs

(0.4)

(4.4)

Net cash movement

3.3

14.3

Opening cash and liquid assets

101.1

90.1

Closing cash and liquid assets

104.4

104.4

*Including income



 

Since the quarter end the cash balance has decreased to £95.8 million at 7 December, mainly due to net investment into the portfolio of £6.7 million and share buy-backs of £1.9 million.

 

Balance sheet and commitments

 

The summary balance sheet and commitment position at 31 October 2015 is set out below. The Company was 79% invested at that date.

 


31 October 2015
£m

% of total assets

31 January 2015
£m

% of total assets

Total portfolio

402.9

78.9%

431.9

83.6%

Cash and liquid assets

104.4

20.4%

90.1

17.4%

Other net current assets

3.6

0.7%

(5.4)

(1.0%)

Total assets

510.9

100.0%

516.6

100.0%

Equity shareholders' funds

501.3


506.9


Undrawn bank facility 1

94.1


96.4


Total liquidity 2

198.5


186.5


Outstanding commitments

272.8


234.0


Overcommitment 3

74.3


47.5


Overcommitment as % of shareholders' funds

14.8%


9.4%


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 increased by £24.1 million to £272.8 million in the quarter, primarily due to new primary commitments of £24.0 million (as discussed above).

 

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 31 October 2015 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 underlying INVESTMENTS

The table below presents the 30 companies in which Graphite Enterprise had the largest investments by value at 31 October 2015. 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

5.8%

2

City & County Healthcare Group






Provider of home care services

Graphite Capital

2013

UK

3.6%

3

ICR Group






Provider of repair and maintenance services to the energy industry

Graphite Capital

2014

UK

3.2%

4

Education Personnel +






Provider of temporary staff for the education sector

ICG

2014

UK

2.8%

5

Spheros +






Provider of bus climate control systems

Deutsche Beteiligungs

2011

Germany

2.2%

6

nGAGE (previously Human Capital Investment Group)






Provider of recruitment services

Graphite Capital

2014

UK

2.2%

7

Skillsoft +






Provider of off-the-shelf e-learning content

Charterhouse

2014

USA

2.1%

8

Standard Brands +






Manufacturer of fire lighting products

Graphite Capital

2001

UK

1.8%

9

David Lloyd Leisure +






Operator of premium health and fitness clubs

TDR Capital

2013

UK

1.7%

10

U-POL






Manufacturer and distributor of automotive refinishing products

Graphite Capital

2010

UK

1.6%

11

R&R Ice Cream +






Manufacturer and distributor of ice cream products

PAI Partners

2013

UK

1.6%

12

CPA Global +






Provider of patent and legal services

Cinven

2012

UK

1.5%

13

TMF






Provider of management and accounting outsourcing services

Doughty Hanson

2008

 Netherlands

1.5%

14

Frontier Medical +






Manufacturer of medical devices

Kester Capital

2013

UK

1.5%

15

Parques Reunidos






Operator of attraction parks

Arle Capital

2007

Spain

1.5%

16

Algeco Scotsman






Supplier and operator of modular buildings

TDR Capital

2007

USA

1.5%

17

Guardian Financial Services






Provider of insured life and pension products

Cinven

2011

 UK

1.4%

18

The Laine Pub Company +






Operator of pubs and bars

Graphite Capital

2014

UK

1.3%

19

TMP






Provider of recruitment services

Graphite Capital

2006

UK

1.2%

20

PetSmart +






Retailer of pet products and services

BC Partners

2015

USA

1.2%

21

Co-investment +/ **






Provider of business services

Large buy-out manager

2014

Europe

1.2%

22

Stork






Provider of technical engineering services

Arle Capital

2008

Netherlands

0.9%

23

Cognito +






Supplier of communications equipment, software and services

Graphite Capital

2002

UK

0.9%

24

Odgers +






Provider of recruitment services

Graphite Capital

2009

UK

0.9%

25

Suddenlink






Operator of cable networks

BC Partners

2012

USA

0.8%

26

Swissport






Provider of airport ground and cargo handling services

PAI Partners

2011

Switzerland

0.8%

27

VWR International +/ *






Distributor of laboratory supplies

Madison Dearborn

2007

USA

0.8%

28

Technogym






Manufacturer of premium fitness equipment and wellness products

Arle Capital

2006

Italy

0.8%

29

Gerflor






Manufacturer of vinyl flooring

ICG

2011

France

0.8%

30

Ceridian +






Provider of payment processing services

Thomas H Lee Partners

2007

USA

0.7%


Total of the 30 largest underlying investments



49.8%

+ All or part of this investment is held directly as a co-investment or other direct investment.

* Quoted investment.

** We are not permitted to disclose the details of this co-investment under the terms of a confidentiality agreement.

 

 

The 30 largest fund investments

The 30 largest funds by value at 31 October 2015 are set out below:

Fund

Outstanding commitment

£ million

Year of commitment

Country/
region

Value
£ million

1

Graphite Capital Partners VIII *






Mid-market buy-outs

61.2

2013

UK

35.0

2

Graphite Capital Partners VI **






Mid-market buy-outs

5.4

2003

UK

23.9

3

CVC European Equity Partners V **






Large buy-outs

1.3

2008

Europe/ USA

18.6

4

Candover 2005 Fund **






Large buy-outs

0.1

2005

Europe

14.7

5

BC European Capital IX **






Large buy-outs

5.1

2011

Europe

13.8

6

Thomas H Lee Parallel Fund VI






Large buy-outs

1.7

2007

USA

13.1

7

Graphite Capital Partners VII */**






Mid-market buy-outs

7.6

2007

UK

13.0

8

PAI Europe V **






Mid-market and large buy-outs

1.1

2007

Europe

12.1

9

Deutsche Beteiligungs Fund V






Mid-market buy-outs

0.3

2006

Germany

11.4

10

Fourth Cinven Fund **






Large buy-outs

3.5

2006

Europe

10.9

11

TDR Capital II






Mid-market and large buy-outs

0.7

2006

Europe

10.4

12

Fifth Cinven Fund






Large buy-outs

5.7

2012

Europe

10.3

13

Bowmark Capital Partners IV






Mid-market buy-outs

0.5

2007

UK

10.3

14

Activa Capital Fund II






Mid-market buy-outs

0.8

2007

France

10.0

15

Doughty Hanson & Co V **






Mid-market and large buy-outs

5.4

2006

Europe

8.0

16

Landmark Acquisition Fund VIII **






Mezzanine

10.3

2014

Europe

7.3

17

ICG Europe V






Mezzanine

0.5

2012

Europe

7.1

18

Permira V






Large buy-outs

2.7

2013

Europe

4.6

19

Deutsche Beteiligungs Fund VI






Mid-market buy-outs

2.8

2012

Germany

4.2

20

IK VII






Mid-market buy-outs

2.8

2013

Europe

4.1

21

Charterhouse Capital Partners IX **






Large buy-outs

0.8

2008

Europe

4.0

22

Piper Private Equity Fund V






Small buy-outs

2.0

2010

UK

3.7

23

Hollyport Secondary Opportunities IV






Tail-end secondary portfolios

0.8

2013

Global

3.7

24

Segulah IV






Mid-market buy-outs

1.2

2008

Nordic

3.6

25

Nordic Capital Partners VIII






Mid-market and large buy-outs

3.7

2013

Nordic

3.6

26

TowerBrook III **






Mid-market and large buy-outs

1.3

2007

Europe/ USA

3.2

27

Doughty Hanson & Co IV






Mid-market and large buy-outs

0.3

2005

Europe

3.0

28

TDR Capital III






Mid-market and large buy-outs

4.5

2013

Europe

2.9

29

Piper Private Equity Fund IV






Small buy-outs

1.1

2006

UK

2.7

30

Permira IV **






Large buy-outs

0.2

2006

Europe

2.6


Total of the largest 30 fund investments

135.4



275.8


Percentage of total investment portfolio




68.9%

* Includes the associated Top Up fund(s)

** All or part of interest acquired through a secondary fund purchase

 

 

Portfolio analySIS

The following five tables analyse the companies in which Graphite Enterprise had investments at 31 October 2015.

 

Portfolio - Investment type



% of value of underlying investments

Large buy-outs


46.6%

Mid-market buy-outs


39.5%

Mezzanine


8.3%

Small buy-outs


4.3%

Quoted


1.3%

Total


100.0%

 

 

Portfolio - Geographic distribution*



% of value of underlying investments

UK


47.8%

North America


13.9%

Germany


10.6%

France


9.3%

Scandinavia


5.0%

Benelux


4.5%

Spain


3.3%

Italy


2.4%

Other Europe


2.9%

Rest of world


0.3%

Total


100.0%

NB: Total Continental Europe


38.0%

* Location of headquarters of underlying companies in the portfolio. Does not necessarily reflect countries to which companies have economic exposure.

 

 

Portfolio - Year of investment


 

Valuation as multiple of cost

 

% of value of   underlying investments

2015


1.0x

6.9%

2014


1.2x

22.0%

2013


1.4x

16.7%

2012


1.6x

9.3%

2011


1.6x

9.5%

2010


1.6x

7.7%

2009


2.7x

1.8%

2008


1.1x

7.0%

2007


1.7x

6.8%

2006


1.6x

9.5%

2005 and before


1.8x

2.8%

Total


1.4x

100.0%

 

 

Portfolio - Sector analysis



% of value of

underlying

investments

Business services


20.3%

Industrials


19.2%

Healthcare and education


15.0%

Consumer goods and services


13.1%

Leisure


9.5%

Automotive supplies


8.0%

Financials


7.9%

Technology and telecommunications


3.7%

Media


2.1%

Chemicals


1.2%

Total


100.0%

 

 

Quoted equity holdings at 31 October 2015

 

All quoted holdings, other than Intermediate Capital Group, are held indirectly through third party funds and may have restrictions on their sale.  The timing of any disposal of these interests is determined by the managers of those funds.

 

Underlying investment

Ticker

£ million

% of investment portfolio

VWR International

VWR

3.2

0.8%

Avolon Aerospace

AVOL

2.8

0.7%

Intermediate Capital

ICP

2.4

0.6%

Saga

SAGA

2.4

0.6%

Party City

PRTY

1.9

0.5%

Partnership

PA

1.7

0.4%

Black Knight

BKFS

1.7

0.4%

Abertis

ABE

1.6

0.4%

ComHem

COMH

1.6

0.4%

Elior

ELIOR

1.5

0.4%

Tumi

TUMI

0.8

0.2%

Evonik

EVK

0.8

0.2%

Fogo do Chao

FOGO

0.8

0.2%

West Corporation

WSTC

0.8

0.2%

FleetCor (Comdata)

FLT

0.7

0.2%

Univar N.V

UNVR

0.7

0.2%

Others


4.0

1.0%

Total


29.4

7.4%

 

 

The following table analyses the closing portfolio by value.

 

Graphite and third party investments at 31 October 2015

 

Portfolio

Third party

£ million

Graphite Capital

£ million

Total

£ million

% of investment portfolio

Primary investments in funds

180.4

59.6

240.0

59.6%

Secondary investments in funds

57.3

12.3

69.6

17.3%

Direct and co-investments

67.8

25.5

93.3

23.1%

Total portfolio

305.5

97.4

402.9

100.0%

Discretionary investments*

125.1

97.4

222.5

55.2%

*Includes Graphite Capital funds, all secondary fund interests and all direct investments

 

 

Investment activity

The following two tables analyse the investment activity of Graphite Enterprise in the three months to 31 October 2015.

 

Largest new underlying investments

Investment

Description

Country

Cost

£ million

Pharmathen

Manufacturer of pharmaceutical products

Greece

0.7

PKP Energetyka

Provider of electricity and maintenance to the rail sector

Poland

0.5

Imtech T&I

Provider of electronic systems for traffic and infrastructure

Netherlands

0.5

Tractel

Provider of working-at-height equipment

France

0.4

Linxens

Designer and manufacturer of smart card connectors

France

0.3

Total of 5 largest new underlying investments


2.4

 

 

Largest underlying realisations

Investment

Manager

Realisation type

Proceeds

£ million

Lowell Group

TDR Capital

Secondary

2.7

Balta

Doughty Hanson

Secondary

1.6

Skrill

CVC Partners

Trade

1.3

Briefing Media

Kester Capital

Secondary

1.2

Formel D

Deutsche Beteiligungs

Refinancing

1.2

Total of 5 largest underlying realisations


8.0

 

 

Commitments analysis

The following four tables analyse Graphite Enterprise's commitments at 31 October 2015.

 

Commitments

 

 

Original commitment1

£ million

 

 

Outstanding commitment

£ million

 

 

Average drawdown percentage

 

 

 

% of commitments

Funds not yet in investment period

18.2

18.1

0.4%

6.7%

Funds in investment period

310.0

204.5

34.0%

74.9%

Funds post investment period

522.2

50.2

90.4%

18.4%

Total

850.4

272.8

67.9%

100.0%

 

1 Original commitments are translated at 31 October 2015 exchange rates

 

 

Commitments - remaining investment period

 

% of commitments

Investment period not commenced

6.7%

4-5 years

25.5%

3-4 years

11.2%

2-3 years

30.8%

1-2 years

5.0%

<1 year

2.4%

Investment period complete

18.4%

Total

100.0%

 

 

Movement in outstanding commitments in the three months to 31 October 2015

£ million

Opening

248.6

Drawdowns

(4.7)

New primary commitments

24.0

New commitments relating to co-investments*

3.9

Currency

1.1

Other

(0.1)

Closing

272.8

*This commitment was in respect of the co-investment in Swiss Education Group, which completed in November.

 

 

New commitments in the three months to 31 October 2015

 

Fund

Strategy

Geography

£ million

Primary commitments



Charterhouse Capital Partners X

Large buy-outs

Europe

11.0

Thomas H. Lee Equity Fund VII

Large buy-outs

USA

13.0

Total primary commitments


24.0




Commitments relating to co-investments



Swiss Education Group

Provider of hospitality training

Europe

3.9





Total new commitments



27.9

 

 

CURRENCY EXPOSURE

 


31 October

2015

£ million

31 October

2015

%

Portfolio*



 - Sterling

210.5

52.3

 - Euro

105.3

26.1

 - US dollar

56.7

14.1

 - Other European

28.7

7.1

 - Other

1.7

0.4

Total

402.9

100.0

 

*Currency exposure is calculated by reference to the location of the underlying portfolio companies' headquarters.

 


31 October

2015

£ million

31 October

2015

%

Outstanding commitments



 - Sterling

112.3

41.2

 - Euro

136.8

50.1

 - US dollar

18.6

6.8

 - Other European

5.1

1.9

Total

272.8

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 has been listed on the London Stock Exchange since 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 private equity markets, principally in Europe. 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 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 over 29 times the amount subscribed.

 

www.graphite-enterprise.com 

 

The Manager - Graphite Capital

Graphite Capital is one of the UK's leading mid-market private equity firms with over £1.3 billion of funds under management. It has raised and managed funds for 34 years. The senior management team has worked together for 18 years.

 

Graphite Capital manages both direct investments in portfolio companies and private equity fund investments.

 

Direct investments are predominantly made through institutional funds with a global investor base. The focus of direct investments is on UK mid-market buy-outs of companies valued at between £25 million and £200 million across a range of industry sectors.

 

Fund investments are made exclusively by Graphite Enterprise. Fund investments focus principally 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 Graphite Capital has a long experience both of managing its own funds and of investing in third party funds, it has an unusually broad 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.

 

www.graphitecapital.com 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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