Final Results
Electra Investment Trust PLC
19 December 2000
ELECTRA INVESTMENT TRUST PLC
Preliminary Results for Year ended 30 September 2000
* Net asset value per share up 14.1% to £10.85 as at 30 September 2000
(1999: £9.51 per share)
* £1 billion received from sale of portfolio companies and £800 million
of capital returned to shareholders since March 1999
Commenting on the results, Brian Williamson, Chairman of Electra Investment
Trust, said:
'The year to 30 September 2000 saw a continuation of Electra's strategy of
realising the investment portfolio and the return of capital to
shareholders. Net asset value increased by 14.1% over the year to £10.85 per
share. Since March 1999 £1 billion has been received from the sale of
investments which is equivalent to 75% of the £1.36 billion valuation of the
portfolio at
28 February 1999.
Given the speed of this achievement it is now appropriate for the Board to
consider in detail the most suitable options to address shareholders' wishes
for the future of Electra. I anticipate giving an update on progress by the
Annual General Meeting which is to be held on 28 February 2001.'
For further information:
Brian Williamson, Electra Investment Trust PLC 020 7831 6464
(Chairman)
Hugh Mumford, Electra Partners Limited 020 7831 6464
(Chief Executive)
Stephen Breslin, Brunswick Group Limited 020 7404 5959
Caroline Greetham, Brunswick Group Limited 020 7404 5959
30 September 30 September 30 November
2000 1999 2000
__________________________________________________________________________
Unaudited adjusted net asset
value per share £10.85 £9.51 £10.59
Increase since 30 September
1999 14.1%
Increase in FTSE All-Share
Index since 30 September 1999 7.2%
Increase in FTSE SmallCap Index
since 30 September 1999 27.5%
__________________________________________________________________________
The unaudited net asset value per share at 30 November 2000 was £10.59,
reflecting purchases and sales of investments, currency movements and
changes in value of the listed portfolio. The unlisted portfolio was not
revalued at 30 November 2000 except where securities were valued by
reference to quoted prices.
A copy of the Chairmam's Statement, Portfolio Reviews and the Preliminary
Announcement are attached.
CHAIRMAN'S STATEMENT
Review of the Year
The year to 30 September 2000 saw a continuation of Electra's strategy of
realising the investment portfolio and the return of capital to
shareholders.
In June 2000 shareholders approved proposals to return a further £250
million of capital by way of a Tender Offer and this was completed in July.
A total of 23 million shares were bought in representing 22.4% of the shares
in issue prior to the Tender Offer. This brings the cumulative return of
capital to shareholders since March 1999 to £800 million.
Results
At 30 September 2000 the net asset value per share was £10.85 compared with
£9.51 at 30 September 1999, an increase of 14.1%. Over the year to 30
September 2000 the FTSE All-Share Index increased by 7.2% and the FTSE
SmallCap Index by 27.5%. Although the performance of Electra has
historically been compared with the FTSE All-Share Index and the FTSE
SmallCap Index these benchmarks are no longer a valid comparison as the
portfolio is in the process of realisation.
The year has seen substantial realisations of investments, the proceeds of
which have been used to repay borrowings arranged to finance the Tender
Offer which was completed in 1999 and fulfil existing investment
commitments. Of the £588 million utilised for the Tender Offer completed in
April 1999, all but £30 million had been repaid by 19 May 2000 and a new £450
million facility was put in place of which £250 million was utilised
for the subsequent Tender Offer, leaving further facilities available to the
Company to make on-market share purchases.
Since the start of the realisation strategy in March 1999, £1 billion has
been received from the sale of portfolio companies. The early phase of the
realisation programme was characterised by an improved rating of smaller
listed companies and a strong demand for unlisted investments. As a result
we were able to realise a substantial part of the listed portfolio at
attractive prices and achieve full value on realisation of a significant
number of unlisted investments.
The future rate of disposal will depend on a number of factors, not least
the conditions in the banking market which will affect demand from financial
buyers who have been the main purchasers of Electra's unlisted investments
during the realisation period. The relative immaturity of a significant
proportion of the remaining unlisted investments will be important in the
timing of future realisations. In the meantime the portfolio continues to be
valued on a conservative basis.
Dividends
No dividend is proposed in respect of the year ended 30 September 2000 and,
as indicated in earlier statements, the Board considers it unlikely that
dividends will be paid in the foreseeable future.
The Board
On 12 July 2000 Michael Walton was appointed a Director of the Company. He
has extensive experience of the venture capital industry as a former
Managing Director of Gartmore Private Capital and as a Director of NatWest
Equity Partners.
Electra Partners
Electra Partners, now owned by its senior executives, has continued to
manage Electra's assets. It has had a successful year both in the management
of the portfolio and in the progress it has made in building a new client
base independent of Electra.
The Future
In my letter dated 25 May 2000 giving details of the second Tender Offer, I
stated that the Board was aware that a number of shareholders were in favour
of a continuation or rollover vehicle and that the Board would consider this
as the realisation of Electra's portfolio advanced.
Since March 1999 £1 billion has been received from the sale of investments
which is equivalent to 75% of the £1.36 billion valuation of the portfolio
at 28 February 1999. This significant progress is well ahead of our
expectations for the five year realisation programme. Given the speed of
this achievement it is now appropriate for the Board to consider in detail
the most suitable options to address shareholders' wishes for the future of
Electra. I anticipate giving an update on progress by the Annual General
Meeting which is to be held on 28 February 2001.
PORTFOLIO ANALYSIS
Summary of Changes to Overall Portfolio
Year ended 30 September 2000
Valuation Valuation
at 30 New Net capital at 30 Sept
Sept 1999 investment Sales appreciation 2000
£'000 £'000 £'000 £'000 £'000
___________________________________________________________________________
Unlisted 1,040,495 129,012 (353,009) 149,419 965,917
Listed 133,073 5,046 (129,651) 41,695 50,163
___________________________________________________________________________
Total
Portfolio 1,173,568 134,058 (482,660) 191,114 1,016,080
___________________________________________________________________________
At 30 September 2000, Electra's investment portfolio was valued at £1,016
million compared to a valuation of £1,174 million at 30 September 1999.
During the year, investment activities continued to reflect the strategy of
realising the portfolio over the five year period from 1 March 1999. Sales
from the portfolio during the year amounted to £483 million which, together
with sales in the previous seven months, increased the cumulative
realisations since 1 March 1999 to a total of £971 million. As at 30
September 2000, the listed portfolio had been reduced to a value of £50.2
million.
Net capital appreciation recorded by the portfolio during the period
amounted to £191 million, an increase over the year of 16.3%.
At the year end, 62% of the portfolio was invested in Europe, 23% in North
America, 6% in South America and 9% in Asia and India.
Outlook
During the initial 19 months of the realisation process, progress has
exceeded expectations in terms of rates of realisation and valuations
achieved. Of the total proceeds of £971 million, £723 million has arisen
from the disposal of unlisted investments and £248 million from the disposal
of listed securities.
At 30 September 2000, Electra's portfolio consisted of £189 million of
investments which were listed or listed but subject to sale restrictions and
£827 million of unlisted investments. Investments with a listing are
potentially marketable and represent relatively short term realisation
prospects. The unlisted portfolio is becoming more concentrated with the
largest 30 investments accounting for 63% of the portfolio. A number of
these investment are immature and have significant added value potential.
The desire to capture this added value will influence the timing of future
disposals with the result that the previous rate of realisation is unlikely
to be maintained. For this reason cash realisations from the unlisted
portfolio, while continuing at a satisfactory rate, are likely to be
weighted towards the latter half of the five year realisation period.
UNLISTED PORTFOLIO REVIEW
Summary
The year to 30 September 2000 proved to be a further successful period for
Electra's realisation programme. The rate of realisation from the unlisted
portfolio continued to exceed expectations and proceeds gave rise to
realised gains significantly in excess of carrying values.
As a result of investment activity in the year, there was a net
disinvestment of £224 million from the unlisted portfolio with sales of £353
million compared to purchases of £129 million.
Net capital appreciation recognised during the year amounted to £149 million
representing a percentage increase in the unlisted portfolio of 14.4% in the
period.
New Investments
In the year under review additions to unlisted investments totalled £129
million. In accordance with the current investment policy, new investments
were restricted to further investment in existing portfolio companies or to
commitments which were outstanding when the investment policy was changed.
Of the new investment, £99 million related to existing portfolio companies.
These were made primarily to finance further acquisitions and included £9.1
million in Heath Lambert, £4.8 million in Swifty Serve, £2.9 million in
International Garden Products and £2.5 million in Leiner Health Products.
Additionally £4.9 million was subscribed to a rights issue by Locus and £2.5
million was invested in Allflex to develop an e-commerce related
opportunity.
A further £30 million of investment related to existing commitments notably
£7.2 million to the Patagonian Fund in Argentina, £8.4 million to Pactual
Electra Capital Partners in Brazil and £7.3 million to Kennet Capital in the
UK.
Shortly after the year end, Electra made a significant investment of £25
million in Newmond as part of a transaction involving a merger with the Baxi
Group. The merged company will have an annual turnover of circa £750 million
and will be a significant force in the European heating market.
Realisations
Realisations from the unlisted portfolio for the year under review amounted
to £353 million. Proceeds from the sale of unlisted companies, sold either
wholly or in part, generated cash sales of £232 million. Sales through the
stock market of listed securities previously subject to dealing restrictions
realised £92 million and a further £29 million was received from the
refinancing of a number of portfolio companies.
The most significant sale related to Locus, a company based in South Korea
and quoted on the Kosdaq exchange. Approximately 33% of the holding was
realised giving rise to proceeds of £66 million. The original cost of the
entire investment in Locus made in January 1999 was £9.6 million. The
remaining holding is subject to dealing restrictions which will end in June
2001. Another significant sale related to the investment in Agricola
Holdings, a company engaged in the production of animal feed. Electra
invested £18.3 million in November 1998. As a result of the sale of this
company in June 2000, Electra received £52 million in cash and securities
which included an 8% equity holding in the new company. The refinancing of
Inchcape Shipping Services resulted in the redemption of loan stock and a
repayment to Electra of £23 million. The sale of Robert Fleming Holdings was
completed in September 2000 and resulted in cash proceeds to Electra of £30
million compared to an original cost in 1995 of £7.5 million.
Realisations from funds totalled £29 million during the year including
repayments of £12 million from Kennet Capital, which invests in high
technology companies in the IT sector. These repayments have more than
returned Electra's total investment in Kennet Capital.
Major Realisations
Direc- Direc-
tors' tors'
valuation valua-
of tion of
Coun- holding holding
try at at
of Proc- 30 Sept 30 Sept
Incor- Type of eeds 2000 Total 1999 Cost
Company pora- Security £'000 £'000 £'000 £'000 £'000
tion
____________________________________________________________________________
Locus South Equity 65,597 30,899 96,496 *35,230 *14,504
Korea
Agricola UK Equity & 52,039 - 52,039 *18,335 *18,335
Holdings loan
Robert UK Equity 29,807 - 29,807 10,362 7,470
Fleming
Holdings
HMY France Equity & 27,542 - 27,542 23,646 6,044
loan
Inchcape UK Loan 22,753 17,580 40,333 40,326 40,326
Shipping
Services
Tactica UK Equity & 14,983 - 14,983 13,300 170
loan
Vantios UK Equity & 13,014 - 13,014 12,000 2,098
loan
Aspen UK Equity & 11,329 - 11,329 11,516 3,492
loan
Euroges- France Equity & 10,376 1,000 11,376 11,041 6,178
tion loan
____________________________________________________________________________
247,44 49,479 296,919 175,756 98,617
0
* Adjusted for subsequent purchases
Performance
During the year the unlisted portfolio recorded an overall net capital
appreciation of £149 million, an increase of 14.4%.
The majority of the capital appreciation related to gains realised on
disposals. Total net realised gains amounted to £124 million of which Locus,
Agricola and Robert Fleming Holdings accounted for a significant proportion.
The valuation of the remaining portfolio benefited from the strength of the
dollar but was adversely impacted by the falling multiples used to value 'old'
economy companies. Net additions to unrealised appreciation over the
year totalled £25 million. The largest additions to unrealised appreciation
related to Moser Baer and Orthofix which were increased by £24.3 million and
£12.8 million respectively, reflecting movements in quoted prices. In
addition £9.8 million was added in respect of Guala Closures to reflect an
impending sale. The largest decrease of £14.4 million related to Zensar
Technologies and reflected a fall in the quoted price of its holding
company. Provisions included an amount of £14.1 million in respect of
Motorsport Dealers International, £13.4 million in respect of William Cook
and £12.5 million in respect of Unipart. All three companies have
encountered difficult trading conditions. Provision for diminution in the
value of investments amounted to £109 million and related to 23 portfolio
companies.
Largest Valuation Changes
Company £'000 Increase/(decrease) %
________________________________________________________________________
Locus 61,287 201.9
Agricola Holdings 33,704 184.2
Moser Baer 24,275 105.0
Robert Fleming Holdings 19,445 187.7
Orthofix International 12,807 93.2
Unipart (12,500) (62.5)
William Cook (13,400) (54.9)
Motorsport Dealers
International (14,100) (100.0)
Zensar Technologies (formerly (14,364) (59.1)
ICIL)
LISTED PORTFOLIO REVIEW
At the commencement of the year the listed portfolio was valued at £133.1
million and consisted of 52 UK smaller company stocks. In line with the
policy approved by shareholders in 1999, £129.7 million was realised from
the portfolio in the year leaving a residual holding at the year end valued
at £50.2 million. This process has supported the strategy of delivering
value to shareholders through a gradual realisation process. Despite the
high level of disposals the portfolio rose in value by £41.7 million
equating to an investment performance of 31.3%, which compared favourably to
the FTSE SmallCap Index which increased by 27.5%.
Four investments materially impacted the performance in the year. Cedar
Group, a software and service provider, was the most significant delivering
an investment uplift of £18.5 million. The company benefited substantially
from the investment technology boom of 1999 and as a result £20.8 million
was realised from this investment. Bioglan Pharma, a dermatological
pharmaceutical specialist, also performed strongly adding £6.6 million in
value. Euro Sales Finance, a factoring finance house, contributed £5.9
million. Finally Diagonal, an SAP systems consultant, added a further £4.0
million in value.
Largest Disposals
Valuation of
holding at 30 Performance Cost at
Sept 1999 during year Proceeds 30 Sept 1999
Company £'000 £'000 £'000 £'000
__________________________________________________________________________
Cedar Group * 3,159 17,637 20,796 2,358
Euro Sales Finance
* 7,533 5,881 13,414 3,176
Candover
Investments 12,438 408 12,846 377
Fibernet * 3,043 9,061 12,104 2,480
Diagonal 3,965 4,000 7,965 1,043
Kier 6,139 (446) 5,693 4,633
Wickes 5,528 99 5,627 3,437
Berisford
International 4,583 95 4,678 3,339
Wardle Storeys 3,080 995 4,075 1,551
Benchmark 4,592 (624) 3,968 4,083
__________________________________________________________________________
54,060 37,106 91,166 26,477
* Adjusted for subsequent purchases
Consolidated Statement of Total Return
(incorporating the Revenue Account)
Restated
For the year ended 30 September 2000 1999
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
___________________________________________________________________________
Gains/
(losses) on
investments:
Realised - 168,832 168,832 - 198,991 198,991
Unrealised - (2,188) (2,188) - 198,617 198,617
(Losses)/
gains on
revaluation
of foreign
currencies:
Realised - (8,414) (8,414) - 2,862 2,862
Unrealised - (1,434) (1,434) - 4,495 4,495
___________________________________________________________________________
- 156,796 156,796 - 404,965 404,965
Income of the
investment
trust
23,223 - 23,223 43,110 - 43,110
Income of
subsidiary
undertakings
4,424 - 4,424 1,443 - 1,443
Expenses:
Priority
profit share
paid to
general
partners (19,978) - (19,978) (13,082) - (13,082)
Management
fee (3,946) - (3,946) (3,350) - (3,350)
Other
expenses (6,862) - (6,862) (18,346) - (18,346)
Reversal of
income
accruals (2,803) - (2,803) (2,442) - (2,442)
___________________________________________________________________________
Net Return
before
Finance Costs
and Taxation
(5,942) 156,796 150,854 7,333 404,965 412,298
Interest
payable and
similar
charges (13,522) - (13,522) (18,078) - (18,078)
Income from
interest in
associated
undertaking - - - 4,816 - 4,816
___________________________________________________________________________
Return on
Ordinary
Activities
before
Taxation (19,464) 156,796 137,332 (5,929) 404,965 399,036
Taxation on
ordinary
activities - - - 200 - 200
___________________________________________________________________________
Return on
Ordinary
Activities
after
Taxation and
Transfers
from Reserves
for the Year (19,464) 156,796 137,332 (5,729) 404,965 399,236
Exchange
differences
arising on
consolida-
tion 714 9,099 9,813 224 171 395
___________________________________________________________________________
Net Transfers
(from)/to
Reserves for
the Year
(18,750) 165,895 147,145 (5,505) 405,136 399,631
___________________________________________________________________________
Return to
Shareholders
per Ordinary
Share (19.85p) 159.88p 140.03p (4.04)p 285.59p 281.55p
___________________________________________________________________________
The amounts dealt with in the Consolidated Statement of Total Return are all
derived from continuing activities.
Number of Ordinary Shares in issue at 30 September
2000 1999
80,559,959 103,859,120
Prior year adjustment
The results at 30 September 2000 have been prepared in accordance with UK
GAAP and the accounting policies applied to the Group's Annual Accounts for
the year ended 30 September 1999, except for the adoption of Financial
Reporting Standard No 16 - Current Taxation. The comparative figures for the
year ended 30 September 1999 have been restated accordingly. There is no
impact on the Net Assets of the Group or Transfer to Reserves for the year
although Income of the Investment Trust and Taxation on Ordinary Activities
have both been reduced by £428,000 (1999: £2,319,000).
Consolidated Balance Sheet
As at 30 Sept 2000 As at 30 Sept 1999
£'000 £'000 £'000 £'000
__________________________________________________________________________
Fixed Assets
Investments:
Associated undertaking - 9,033
Unlisted 965,917 1,040,495
Listed 50,163 133,073
__________________________________________________________________________
1,016,080 1,182,601
Current Assets
Debtors 50,601 35,969
Investments 3,293 26,567
Cash at bank and in hand 67,342 39,607
__________________________________________________________________________
121,236 102,143
__________________________________________________________________________
Current Liabilities
Creditors: amounts falling
due within one year 26,778 8,896
__________________________________________________________________________
Net Current Assets 94,458 93,247
__________________________________________________________________________
Total Assets less Current
Liabilities 1,110,538 1,275,848
Creditors: amounts falling
due after more than one
year 236,496 288,388
__________________________________________________________________________
Net Assets 874,042 987,460
__________________________________________________________________________
Capital & Reserves
Called-up share capital 20,140 25,965
Share premium 24,147 24,147
Capital redemption reserve 23,135 17,310
Realised capital profits 745,332 719,319
Unrealised capital profits 45,566 157,596
Revenue profits 15,722 43,123
__________________________________________________________________________
853,902 961,495
__________________________________________________________________________
Total Equity Shareholders'
Funds 874,042 987,460
__________________________________________________________________________
Reconciliation of Total Shareholders' Funds
Year to 30 Year to 30
Sept 2000 Sept 1999
£'000 £'000
__________________________________________________________________________
Total Return 137,332 399,236
Exchange differences arising on consolidation 9,813 395
Repurchase of own shares (254,738) (540,180)
Nominal value of own shares repurchased (5,825) (17,310)
__________________________________________________________________________
Movements in Total Equity Shareholders' Funds (113,418) (157,859)
Total Equity Shareholders' Funds at 1 October 987,460 1,145,319
__________________________________________________________________________
Total Equity Shareholders' Funds at 30 September
874,042 987,460
__________________________________________________________________________
The figures and financial information for the year ended 30 September 2000
do not constitute the statutory financial statements for that year. Those
financial statements have not yet been delivered to the Registrar, nor have
the Auditors yet reported on them. The figures and financial information for
the year ended 30 September 1999 do not constitute the statutory financial
statements for that year. Those financial statements have been delivered to
the Registrar and included the Auditors' Report which was unqualified and
did not contain a statement under either section 237(2) or section 237(3) of
the Companies Act 1985.
The Report and Accounts will be sent to shareholders in late January 2001
and will thereafter be available from the Company's registered office at 65
Kingsway, London WC2B 6QT. The Annual General Meeting will be held on
Wednesday 28 February 2001 in the Keats and Milton Meeting Rooms at the
Kingsway Hall, Great Queen Street, London WC2B 5BZ at 11am.
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