Interim Management Statement
Interim Management Statement for the three month period to 31 December 2010
14 February 2011
The information contained in this announcement is restricted and is not for release, publication or distribution directly or indirectly, in or into the United States, Canada, Japan, Australia or New Zealand. The information in these materials does not constitute an offer for securities for sale in the United States, Canada, Japan, Australia or New Zealand.
This is an Interim Management Statement issued by Electra Private Equity PLC ("Electra") in accordance with the FSA's Disclosure and Transparency Rule 4.3. This statement relates to the three month period from 1 October 2010 to 31 December 2010.
Colette Bowe, Electra's Chairman, said: "The level of investment activity in the private equity market is increasing; our Manager, Electra Partners, is able to consider a greater number of potential transactions which is likely to result in a higher rate of investment.
"During the three months to 31 December 2010 realisations totalled £68 million of which £54 million represented the sale proceeds of Rio Trens Corporation.
"Following the £100 million Convertible Bond issue in December 2010, Electra now has an investment capacity of nearly £300 million and this, together with its flexible investment strategy, means that Electra continues to be well positioned to deliver attractive returns."
1 Subordinated Convertible Bonds
On 30 November 2010 Electra announced proposals for a placing and open offer of £100 million 5% Subordinated Convertible Bonds ("Bonds"). These proposals were approved by shareholders and trading of the Bonds commenced on 29 December 2010. The Bonds were taken up in full with 94% of participants being current investors.
2 Resources and Commitments
As at 31 December 2010, Electra had available investment capacity of nearly £300 million comprising net liquid resources of £200 million together with banking facilities of £185 million and after deducting commitments to third party funds of £88 million. At that date Electra also had a quoted portfolio valued at £121 million.
3 Unaudited Net Asset Value at 31 December 2010
The calculation of the Unaudited Net Asset value per share at 31 December 2010 has been affected by the issue of the Bonds. Electra is required to prepare Accounts and report in accordance with the Companies Act 2006 and International Financial Reporting Standards (IFRS). Under IFRS, the Bond issue is treated partly as debt and partly as equity. Of the £100 million raised, £23 million of the Bonds was accounted for as an equity component with the balance accounted for as debt at 31 December 2010, and this resulted in an undiluted uplift of 65p per share (see Footnote for further detail).
As is usual for the calculation of Electra's net asset value per share for the purposes of Interim Management Statements, the investment portfolio (apart from quoted investments) has not been revalued at 31 December 2010 although it does reflect purchases and sales of investments, currency movements and bid values in respect of quoted investments at that date. The impact of these changes results in a further undiluted uplift of 13p per share. Accordingly, the undiluted net asset value at 31 December 2010 amounted to 2,128p per share.
Assuming full conversion of the Bonds at 31 December 2010 (although under the terms of the issue of the Bonds this would not have been possible before 7 February 2011 at the earliest) Electra's fully diluted net asset value per share would have amounted to 2,052p at that date (see Footnote for further detail).
|
|
31 Dec 2010 |
30 Sep 2010 |
Movement |
|
|
(p) |
(p) |
% |
|
Undiluted Net Asset Value per share |
2,128 |
2,050 |
3.8 |
|
Fully Diluted Net Asset Value per share* |
2,052 |
n/a |
- |
* Assumes the issue of a further 4.9 million ordinary shares of Electra on the basis of the conversion terms for the Bonds.
4 Composition of Portfolio
Electra's portfolio consists of investments in companies and other investment vehicles (the "investment portfolio"). The investment portfolio consists primarily of direct investments in unlisted and listed companies together with investments in funds where investments are held in limited partnerships managed by other private equity managers.
Electra will normally invest in unlisted companies but may invest in listed companies when the management team, which Electra wishes to support, operates through a listed vehicle. Listed investments may also be held where they arise from previously unlisted investments and continue to generate the returns required under Electra's investment objectives.
Investments in funds are made principally to gain exposure to geographic areas outside the UK and which, because of the relationship with the fund manager, are likely to generate co-investment opportunities for Electra.
|
|
*31 Dec 2010 |
30 Sept 2010 |
|
|
£m |
£m |
|
Direct investments |
579 |
638 |
|
Funds |
97 |
96 |
|
Cash and Liquidity Funds |
363 |
212 |
|
Gross Portfolio |
1,039 |
946 |
* Based on values at 30 September 2010, adjusted as detailed in Section 3 (Unaudited Net Asset Value) above. Excludes accrued income on the investment portfolio.
At 31 December 2010 Electra held direct investments in 59 companies with an aggregate value of £579 million and investments in 23 funds with an aggregate value of £97 million. The top 10 and 20 direct investments accounted for 62% and 85% respectively of the total direct investments.
5 Investments and Realisations
Electra invested a total of £8 million in the three months to 31 December 2010. Included in this was £5 million drawn down in commitments to third party funds. Realisations totalled £68 million for the three months to 31 December 2010 of which £54 million represented sale proceeds of Rio Trens Corporation.
6 Top 10 Direct Investments at 31 December 2010 *
|
|
Business |
Value at 30 Sept 2010 £'000 |
Net Purchases/(sales) £'000 |
Performance £'000 |
*** Value at 31 Dec 2010 £'000 |
Cost £'000 |
|
Allflex Holdings
|
Animal identification tags |
71,924 |
|
|
71,924 |
40,482 |
|
BDR Thermea |
Heating products |
62,500 |
|
|
62,500 |
55,847 |
|
London & Stamford Property** |
Property holding company |
33,561 |
|
5,346 |
38,907 |
30,195 |
|
Esure
|
Motor & home insurance |
35,376 |
|
|
35,376 |
29,733 |
|
Promontoria
|
Property holding company |
36,304 |
(1,482) |
(204) |
34,618 |
14,997 |
|
Premier Asset Management |
Investment management |
31,823 |
|
|
31,823 |
55,785 |
|
Zensar Technologies** |
Software
|
23,971 |
|
443 |
24,414 |
4,211 |
|
Lil-lets
|
Feminine hygiene products |
21,149 |
|
|
21,149 |
21,412 |
|
Nuaire
|
Ventilation systems manufacturer |
20,146 |
|
|
20,146 |
23,138 |
|
Capital Safety Group
|
Specialist safety equipment |
17,919 |
8 |
(8) |
17,919 |
17,594 |
|
|
|
354,673 |
(1,474) |
5,577 |
358,776 |
293,394 |
* Excludes liquidity funds and accrued income
** Listed
*** Valued on the basis of Section 3 (Unaudited Net Asset Value) as set out above
7 Share Price Performance
Electra's share price at 31 December 2010 was 1,673p, an increase of 22.3% over the three months while the FTSE All-Share Index increased by 6.8% over the same period. Over the year to 31 December 2010, Electra's share price increased by 39.4% while the FTSE All-Share Index increased by 10.9%.
8 Board Changes
Kate Barker joined the Board on 1 November 2010. Ms Barker was, until May 2010, a member of the Monetary Policy Committee of the Bank of England, on which she served for three terms. Geoffrey Cullinan joined the Board on 4 January 2011. Mr Cullinan brings with him a wealth of private equity experience having been a Director of Bain & Company from 1997 to 2005.
Ron Armstrong and Peter Williams, who have both been Directors of the Company since 1994, will be retiring at the forthcoming AGM.
ENDS
For further information:
For Colette Bowe/Hugh Mumford:
Nick Miles/Kate Ruck Keene, M: Communications 020 7920 2330
Monique Dumas, Investor Relations Partner, Electra Partners LLP 020 7214 4200
Footnote
Under IFRS, the Bond is a compound financial instrument that contains both a liability and an equity component. The economic effect of issuing the instrument is substantially the same as issuing both a debt instrument with an obligation to payment of interest and principal (assuming it is not converted) and an equity instrument (a written call option granting the holder the right for a specified period of time to convert it into a fixed number of ordinary shares). The proceeds from issuing convertible bonds are split on Electra's balance sheet into its constituent parts of debt and equity in accordance with the requirement of IFRS.
The fair value of debt element is calculated by using a market rate of interest for a similar borrowing that does not include an equity component or a conversion option. The equity element is calculated by deducting the fair value of debt from the fair value of the Bond. Transaction costs relating to the issue of bonds are allocated to the liability and equity components in proportion to the allocation of the fair value of the Bond.
A further requirement obliges Electra to report both undiluted and fully diluted Net Asset Value figures going forward. Therefore, for the purposes of this announcement we have assumed full conversion of the Bond on 31 December 2010 in order to show the diluted Net Asset Value.
This statement aims to give an indication of material events and transactions that have taken place during the period from 1 October 2010 to the date of publication of this statement and their impact on the financial position of Electra Private Equity PLC. These indications reflect the Board's current view. They are subject to a number of risks and uncertainties and could change. Factors which could contribute to such differences include but are not limited to, general economic and market conditions and specific factors affecting the financial prospects or performance of individual investments within Electra's portfolio.
No information contained in this announcement shall form the basis of, or be relied upon in connection with, any offer or commitment whatsoever in any jurisdiction.
This announcement is not an offer to sell or a solicitation of any offer to buy any securities of Electra Private Equity PLC (the "Company", and such securities, the "Securities") in the United States or any other jurisdiction. The Company is not registered under the U.S. Investment Company Act of 1940, as amended (the "Investment Company Act"), and holders of any Securities will not be entitled to the benefits of the Investment Company Act. The securities have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be reoffered, resold or transferred in the United States or to, or for the account or benefit of U.S. persons (as such term is defined in Regulation S under the Securities Act) unless registered under the Securities Act or an exemption from such registration is available. Copies of this announcement are not being, and should not be, distributed or sent into the United States. No public offering of Securities is being made in the United States. If for any reason in the future an offering of the Securities is made, such offering will be made by means of a prospectus that may be obtained from the Company and will contain all relevant information about the Company, its management and its financial statements.
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