Unaudited results for the year ended January 2013
28 March 2013
GRAPHITE ENTERPRISE TRUST PLC
UNAUDITED RESULTS FOR THE
YEAR ENDED 31 JANUARY 2013
Graphite Enterprise Trust PLC ('Graphite Enterprise' or 'the Company') presents its unaudited results for the year ended 31 January 2013.
SUMMARY OF THE YEAR
Graphite Enterprise made good progress in the year to 31 January 2013. The portfolio continued to perform well in a difficult economic environment, again demonstrating the strengths of the private equity model. The Company's net asset value grew by over 10% and the share price performed exceptionally well, increasing by 36% over the year.
While private equity transaction volumes continue to be relatively subdued, we are seeing many attractive opportunities to invest in new funds and to acquire interests in existing funds. Our strong balance sheet leaves us very well placed to participate actively in the current round of new fund raisings and we expect commitments to rise significantly in the next year.
Over both the short and long term, the Company's net asset value has been one of the top performers, not only within the fund of funds sector but also within the wider listed private equity sector. The continued strong performance of the portfolio suggests that the Company is able to make progress even when underlying economies remain weak.
Mark Fane, Chairman
HIGHLIGHTS
|
+36.4% |
+10.9% |
+14.3% |
|
Share price The share price strongly outperformed the benchmark FTSE All-Share Index which rose by 12.1%
|
Net asset value per share The NAV per share has increased by more than a quarter since the end of 2007
|
Underlying value of the portfolio in local currency The portfolio grew strongly for the fourth consecutive year in weak economic conditions
|
|
£76.9m |
£100m |
+52% |
|
Realisation proceeds 20% of the opening portfolio was realised in cash
|
Bank facility After the year end the bank facility was increased by £40 million from £60 million and remains undrawn
|
Average uplift in value on realisation Profitable disposals continued to generate large uplifts in value |
FINANCIAL SUMMARY
|
|
31 Jan 2013 |
31 Jan 2012 |
Change
|
|
Net asset value per share |
631.5p |
569.4p |
+10.9% |
|
Share price |
487.0p |
357.0p |
+36.4% |
|
Dividend per share |
5.0p |
5.0p |
- |
|
FTSE All-Share Index |
3,287 |
2,933 |
+12.1% |
CHAIRMAN'S STATEMENT
SUMMARY
Graphite Enterprise continued to perform well in the year to 31 January 2013, with the net asset value per share increasing by 10.9%. Net assets have now grown for four years in succession despite the prevailing economic uncertainty. Over those four years, the net asset value per share has increased by 45%*. At 31 January, the Company had total assets of £471 million and the net asset value per share was 631.5p.
The share price rose very strongly in the year, reaching an all-time high of 490p shortly before the year end. It closed the year up 36.4% at 487p, only marginally below its peak. By comparison, the Company's benchmark, the FTSE All-Share Index, rose by 12.1%.
The increase in the share price led to a significant reduction in the discount to the net asset value, which narrowed from 37.3% to 22.9% over the twelve month period.
The Company's net asset value performance was the result of sustained growth in the portfolio, which increased in value by 14.3% in local currencies. This reflected both gains achieved on realisations and valuation increases. The latter were primarily driven by continued growth in the earnings of underlying portfolio companies.
At year end the portfolio was valued at £415 million. Just under 90% of total assets were held in the investment portfolio with the balance held in cash or cash equivalents. This level of investment was very similar to those at the last two year-ends.
Realisation proceeds** of £77 million were equivalent to 20% of the opening portfolio. As we anticipated in last year's Annual Report, this was lower than the previous year when the figure was 27%, but both years represent relatively high levels for the period since the financial crisis. Reflecting the generally lower level of activity, new investment was also lower at £54 million compared with £81 million last year.
After the year end, we secured an increase of £40 million in the bank facility to £100 million. The Company now has cash and undrawn facilities of over £150 million. This gives us significant scope both to increase commitments to new funds, which will be drawn down over time, and to acquire secondary fund investments and make co-investments, which absorb cash more quickly.
* On a total return basis which includes the effect of re-invested dividends.
** Including income from the portfolio.
ECONOMIC ENVIRONMENT
The Company's investment programme continues to be focused on the more mature private equity markets, primarily in Western Europe. The performance of these economies was weak in 2012, with concerns over the high levels of debt of some of the Eurozone countries and over the future of the euro itself depressing economic performance. As set out in the Market Review, private equity activity remained relatively subdued as a result.
Graphite Enterprise has benefited from having only limited exposure to those countries in the euro area where concerns over economic problems have been most acute, as in recent years we have chosen not to make commitments to funds focusing on these markets.
The recent strength of equity markets suggests that sentiment is changing. However, this is yet to be reflected in the underlying economic data and we continue to believe that economic growth across our key markets is likely to remain weak.
Despite these problems, the Company's performance has demonstrated that the private equity model can survive and indeed prosper in difficult times. The uncertainty which is depressing economic growth is also creating investment opportunities and we believe that private equity managers are ideally placed to identify and capitalise on these.
PERFORMANCE
Overview
The investment portfolio increased in value by 14.3% in local currencies, which compares with an increase of 12.0% the previous year. When combined with the favourable impact of the strengthening euro, this led to an increase of 16.0% in the portfolio in sterling terms. After the costs of running the Company, the cost of the bank facility and the payment of the dividend, the overall increase in net asset value per share was 10.9%.
Portfolio
Gains on the realisation of portfolio companies accounted for just over half the total valuation growth of the portfolio during the year. Although somewhat lower than last year, when a number of the largest investments were sold, it was encouraging that these realisations were achieved at well above their carrying values. The remainder of the growth came from increases in the valuations of the unrealised portfolio, driven primarily by continued earnings growth.
As the largest 30 underlying companies accounted for 43% of the portfolio at 31 January 2013, their performance will, to a large extent, determine the future performance of the Company. These investments performed well in 2012, with revenues increasing by 12% and profits by 13%*. By comparison, the aggregate revenue of the FTSE 250 fell by 4% in 2012, while the aggregate profits of those companies rose by just
2%**.
A more detailed analysis of the performance of the investment portfolio is given in the Portfolio Review.
* Excludes London Square (immature) where EBITDA is not a meaningful measure of performance.
** Source: Bloomberg. Measure of profits used is earnings before interest, tax, depreciation and amortisation.
Discount
The substantial rise in the share price in the year to January 2013, most of which occurred in the last quarter, caused the discount to narrow materially from 37.3% to 22.9%. This reflected an improvement in sentiment towards equity markets in general, but the strengthening of the listed private equity sector was particularly marked.
Over the 15 years prior to the start of the downturn, the Company's shares were typically on a discount of between 5% and 25%, while in the period since the discount has generally been between 30% and 40%. Most listed private equity companies have been on similar discounts. The Board has consistently held the view that this widening reflected adverse market sentiment and that discounts would narrow when confidence returned, as demonstrated by recent experience.
The Board continues to believe that the key to share price performance is to generate demand for the Company's shares through demonstrating consistently strong net asset value growth and through effective communication of performance and strategy. To this end, we will continue to devote significant time to our investor relations programme in 2013 and beyond.
Long term performance*
|
Years to 31 January 2013** |
3 |
5 |
10 |
|
Net asset value per share |
+38.4% |
+26.8% |
+171.5% |
|
Share price |
+64.0% |
+9.3% |
+178.2% |
|
FTSE All-Share Index |
+32.1% |
+20.4% |
+146.4% |
Over 10 years, both the net asset value and the share price have outperformed the FTSE All-Share by a significant margin. The net asset value has grown by 171.5% and the share price by 178.2%, while the Index returned 146.4% over the same period.
Over both three and five years the net asset value has outperformed the Index, while the share price has outperformed over three. In the five years since December 2007, which covers the period of the economic downturn, the rise in the share price has been limited by the widening of the discount from the very low level of 8.7% to 22.9%.
Over both the short and long term, the Company's net asset value has been one of the top performers, not only within the fund of funds sector but also within the wider listed private equity sector.
* Total return basis which includes the effect of the reinvested dividends.
** As the Company has changed its year end from December to January, these are 37, 61 and 121 month periods to 31 January 2013.
BALANCE SHEET AND COMMITMENTS
Over the last four years cash balances have fallen from £140 million to £55 million as the Company has become more fully invested. Over the same period commitments have fallen from £307 million to £127 million. We have not felt under pressure to replace amounts drawn down with new commitments, in the knowledge that our preferred managers would be raising new funds in the next 12 to 18 months.
|
Period ended |
Investment portfolio £m |
Investment portfolio % total assets |
Cash and liquid assets £m |
Cash and liquid assets % of total assets |
Commitments £m |
|
31 Dec 2008 |
192.2 |
57.9% |
139.5 |
42.1% |
307.3 |
|
31 Dec 2009 |
231.2 |
67.1% |
113.4 |
32.9% |
243.2 |
|
31 Jan 2011 |
356.6 |
89.2% |
42.9 |
10.8% |
173.7 |
|
31 Jan 2012 |
377.7 |
89.2% |
45.9 |
10.8% |
142.8 |
|
31 Jan 2013 |
415.2 |
88.1% |
56.3 |
11.9% |
126.5 |
In 2011 the Company put in place an initial bank facility of £60 million which, as noted earlier, has recently been increased to £100 million*. This facility enables the Company to make substantial long term commitments to funds without the need to retain high levels of cash to fund future drawdowns. With the facilities in place, our medium term aim is to be broadly fully invested while still ensuring that the balance sheet is managed conservatively and that we are able to take advantage of attractive investment opportunities as they arise.
To ensure that expected future proceeds from the portfolio are reinvested, we will significantly increase the level of commitments to funds. As a number of high quality funds are likely to be raised in the near future, we aim to make substantial commitments to these funds in the coming months. While acquiring secondary fund interests and making co-investments will remain important elements of our investment programme, commitments to new funds are likely to account for the majority of this programme as they have done to date.
We expect that Graphite Capital, the Manager of Graphite Enterprise, will be among those managers raising funds during the course of 2013. Both Graphite Capital's current fund and its long term track record show strong performance and the Graphite Capital-managed part of the portfolio made a substantial contribution to the net asset value growth in the year to January 2013.
The Board has therefore decided that the Company will make a significant commitment to the Manager's new fund when launched and the final amount will be decided at that time. The size of the original commitment to the last fund raised by Graphite Capital, in 2007, was £70 million and we would expect to commit at least this amount to the new fund.
* Further details of the increase in the bank facility are given in note 9 to the accounts.
REVENUE RETURN AND DIVIDEND
As we have discussed in recent reports, most of the Company's income is generated when underlying portfolio companies are sold. As realisations in the year to January 2013 were lower than in the previous year, levels of income were also lower, falling from £9.1 million to £6.1 million. Reflecting this fall, the net revenue after tax for the year was £2.3 million or 3.1p per share, as compared with £4.6 million or 6.3p per share in the prior year.
Last year the Board recommended that the dividend should be more than doubled to 5.0p per share, all of which was funded from that year's income. Although revenues were lower in the year to January 2013, the strong underlying performance of the portfolio continued and the Board has therefore decided to recommend that the dividend be maintained at 5.0p per share. This will be paid partly from the brought forward revenue reserve. After this payment, a further £9.0 million or 12.4p per share will carried forward in revenue reserves.
BOARD
Michael Cumming will retire from the Board at the end of the forthcoming Annual General Meeting. Throughout his tenure, which began in 1999, he has made a significant contribution to the Company through his incisive analysis and independence of thought. Board meetings have been enlivened by his wit and good humour. I would like to thank him sincerely on behalf of Graphite Enterprise's shareholders and my colleagues on the Board for all his hard work and to wish him the very best for the future.
Sandra Pajarola joined the Board on 27 March. At the end of 2012, Sandra retired from Partners Group, where she had worked for 13 years building its global primary investments business. Partners Group is an investment management firm listed in Switzerland with over €27 billion under management in private equity and other private assets. During her time at Partners Group, Sandra was a member of the Global Investment Committee which was responsible for commitments to more than 500 private equity funds. Sandra brings highly relevant experience of private equity investing to the Board and we are looking forward to working with her.
Two appointments have been made to the Audit Committee during the year, as it was felt to be appropriate for all the non-executive directors other than the Chairman to be members. It is intended that Sandra Pajarola will join the Audit Committee in due course.
OUTLOOK
The rise in equity markets so far in 2013 suggests that investor confidence has improved, largely it would seem, because of an absence of significant bad news rather than much good news. This confidence may yet prove to be fragile in the event of economic or political shocks. There are, nonetheless, tentative signs of improvement in the private equity market - particularly in the environment for disposals and also for raising new funds.
Fund raising by private equity managers has increased over the last 12 months, but is still low by historic levels. As a result the Company's commitments are at an unusually low level. However, investors in private equity seem more willing to back new funds now than in recent years. This positive fund raising momentum would obviously be enhanced by stronger exits from existing portfolios.
2013 looks likely to present an unprecedented range of choice for well-capitalised investors in private equity funds. Graphite Enterprise remains extremely well placed to take advantage of these market conditions, with significant net cash and the undrawn bank facility, and we expect the Company to make significant new commitments this year. We will also continue to review opportunities to acquire secondary fund interests and co-investments as these would allow us to reinvest proceeds from exits more quickly.
Our portfolio has performed well in recent years and the continued strong performance over the last twelve months suggests that it is able to make progress even when the underlying economy remains weak.
Mark Fane
March 2013
MARKET REVIEW
As Graphite Enterprise invests almost exclusively in European buy-outs, this section focuses on developments in the European market.
INVESTMENT ACTIVITY
Continuing economic uncertainty and a lack of available credit led to slightly lower activity levels in 2012. There was a 14% fall in the number of completed buy-outs, to 397. Their combined value was €61 billion, 5% lower than in the previous year.
Prices paid for new investments in 2012 were slightly above those paid the previous year, but remain slightly lower than the peak levels recorded in 2007. However, it is worth bearing in mind that the data on average entry valuations does not capture the quality of the underlying company being acquired. Taking this into account, we consider that the entry pricing remains materially below 2007 levels for companies of comparable quality. Debt levels for new buy-outs remained broadly stable but significantly below the 2007 levels.
FUNDRAISING
In contrast with the slowdown in new investments, fundraising for European buy-out funds continued to rise in 2012. Over €37 billion was raised for 38 funds, which represented more than double the €18 billion raised by 27 funds in 2011. Despite recent growth, fundraising remains significantly below the peak levels seen in 2006-2008, when fundraising averaged over €50 billion per year.
A large number of buy-out managers are planning to raise funds in the next 12-18 months as the investment periods of funds raised in the boom years are due to expire, or have expired. At the same time, for a variety of reasons, many private equity fund investors remain capital-constrained.
The combination of increased demand for capital from managers and a reduced supply from investors is making it difficult for some managers to raise capital in the current market. As an investor in funds we view a scarcity of capital as positive, as it tends to lengthen the time available for due diligence and to improve the terms for investors. Furthermore, when that capital is deployed in new underlying investments, the pricing and terms should be more attractive, reflecting the lower level of competition.
SECONDARY MARKET
The global market for secondary interests in funds remained strong in 2012 with approximately $24 billion of transactions completed, broadly unchanged from the $25 billion completed in 2011. Volumes are expected to remain high for the near future, primarily because mounting regulatory pressure on financial institutions is expected to encourage banks and insurance companies to sell private equity assets. Pricing remained strong with good funds continuing to trade at relatively low discounts to reported net asset values.
Despite discounts being relatively low, we believe that secondary fund purchases continue to offer attractive opportunities and we will continue to focus on funds with significant long-term growth potential rather than on those available on high discounts.
PORTFOLIO REVIEW
PORTFOLIO PERFORMANCE
The strong performance of recent years continued in the year to January 2013, with the underlying value of the portfolio in local currencies increasing by 14.3%. This was the fourth consecutive year of strong underlying growth in the value of the portfolio which over that period has averaged 18% per annum. After adjusting for the fall in sterling, the value of the portfolio increased by 16.0% in the year.
Gains on disposals accounted for 51% of the £54.1 million valuation increase with the remainder coming from uplifts in the valuations of unrealised investments. These were primarily driven by continued strong earnings growth.
|
|
£m |
|
Opening portfolio |
377.7 |
|
|
|
|
Additions |
54.0 |
|
Disposal proceeds |
(76.9) |
|
Net cash inflow |
(22.9) |
|
|
|
|
Gains on disposals |
27.5 |
|
Unrealised valuation gains |
26.6 |
|
Total underlying valuation gains |
54.1 |
|
Currency |
6.3 |
|
Closing portfolio |
415.2 |
INVESTMENT ACTIVITY
For the second successive year, the portfolio generated a net cash inflow. Although both realisations and new investment were lower, the net cash inflow for the year of £22.9 million was £7.4 million higher than in the previous year. In total, £76.9 million was realised and £54.0 million invested compared with £96.7 million and £81.2 million respectively in the prior year.
Realisations
The portfolio generated proceeds of £74.2 million and the balance of the cash received came from the secondary sale of an interest in a fund for £2.7 million. Realisations, excluding the secondary sale, were equivalent to approximately 20% of the opening value of the portfolio. The rate of realisation remained materially below the Company's long term average of approximately 35% but was significantly above the average of 10% experienced in the three years from 2008 to 2010.
Although proceeds were 20% lower than in the prior year, they were higher than we had anticipated at the start of the year. In last year's Annual Report we predicted that realisations would fall, primarily because a number of our largest underlying holdings had been realised in the previous twelve months. In the event, the number of full realisations fell from 18 to 14 and receipts from full realisations fell from £70.5 million to £47.1 million.
Although it is difficult to draw many conclusions from what was a relatively small number of realisations, there were signs of conditions improving slightly during the course of the year. Total proceeds in the second half were 58% higher than in the first and the number of full realisations increased from five to nine.
Overall we were encouraged both by the level of realisations achieved and by the continued high level of uplifts achieved on sale. The realisations generated an average uplift of 52% on the previous carrying value. The average multiple of original cost was also strong at 2.7.
The largest realised gain was made on Graphite Capital's sale of NES in October. NES is an international technical recruitment business which was acquired in a secondary buy-out in 2006. It was the Company's second largest underlying holding at the start of the year and was sold for a multiple of 4.7 times cost generating total proceeds of £12.4 million. This was 38% higher than the prior quarter's carrying value and 64% higher than the valuation at the start of the year.
Other notable realisations, all of which were of investments made in 2007, included:
· Data Explorers, a UK-based provider of securities lending data in which we held a direct co-investment alongside an interest through Bowmark Fund III, which generated £8.7 million of proceeds;
· Coperion, a German industrial equipment manufacturer, which was sold by Deutsche Beteiligungs ("DBAG") generating £6.1 million; and
· Norit, a supplier of purification technologies, which was sold by Doughty Hanson, generating £3.1 million.
Trade buyers continued to be active, accounting for 8 of the 14 realisations and for 58% of the total proceeds. Data Explorers, Coperion and Norit were all sold to trade buyers. The other six investments, of which NES was the most important, were sold to financial buyers.
Partial disposals generated £27.1 million of proceeds. These included the sale of DBAG's residual holding in Preh for £5.1 million and the partial sale of CVC's holding in Formula One for £2.9 million. They also included combined proceeds of £8.3 million received from the IPOs of Ziggo and Tumi and from subsequent share sales. We continue to retain an interest in both of these listed companies.
New investments
New investments in the year of £54.0 million were markedly lower than the previous year's £81.2 million. This primarily reflected the absence of any secondary fund purchases which totalled £26.8 million in the previous year. The underlying level of activity within the fund portfolio was broadly unchanged.
In contrast with the fall in new investment activity in the market, as discussed in the Market Review, drawdowns by funds were down only marginally at £48.8 million. They were, however, almost 20% lower than the £60 million forecast in last year's report. This reflected a number of extensions to investment periods which relieved some of the short-term pressure on managers to invest more mature funds.
Our fund portfolio made 38 new investments in the year, nine fewer than in the prior year. Of these 20 were primary buy-outs while 18 were secondary buy-outs from other private equity managers. Large buy-outs accounted for 19 of the total while small and mid-market buy-outs accounted for 14 and the remaining 5 were mezzanine investments.
The largest new investments included:
· CPA Global - a £5.2 million investment in Cinven's buy-out of the global market leading provider of patent renewal and intellectual property management services. This included a £2.5 million direct co-investment;
· Quirón - a £2.5 million investment in Doughty Hanson's acquisition of a Spanish hospitals operator;
· Spheros - a £2.2 million direct co-investment in DBAG's buy-out of the global market leading provider of climate systems for buses. This was added to a £2.4 million interest made through DBAG's fund at the end of the prior year; and
· Guardian Financial Services - a £1.9 million investment in Cinven's acquisition of a provider of life insurance and pension products.
Two new investments were led by Graphite Capital's direct buy-out team. These were in Explore Learning, an operator of after-school tuition centres in the UK and in Rex Restaurants, a leading London restaurant operator. The Company invested £1.7 million and £1.6 million respectively in these.
Although no secondary fund purchases were made, we reviewed a number of opportunities. Secondaries form a key part of our strategy both in generating returns and in managing the balance sheet. In the prior year, we acquired £26.8 million of secondaries as a means of re-investing a significant proportion of the high level of proceeds received. Realisations were lower in the year to 31 January and the need for secondaries was therefore commensurately lower. However, as a significant net cash inflow was received in the final quarter, we are likely to be more active in the secondary market in the coming year.
New commitments
We made four new fund commitments in the year totalling £27.3 million. Two were to managers with whom we have a longstanding relationship, DBAG and Intermediate Capital Group plc, and two were managers new to the portfolio, Advent International and Egeria.
All of these commitments are in line with our strategy of building long-term relationships with top performing managers and of subsequently partnering with them in selective co-investments and secondaries. While many investors have been rationalising manager relationships, in part due to continuing capital constraints, our strategy is to broaden the number of managers. Over the last two years we have added seven new managers to the portfolio, three of which were added in the two months since the year end. These are described below under Events since the year end. We expect to add further new relationships in the coming year.
CLOSING PORTFOLIO
At the year end, the portfolio was valued at £415.2 million and was broadly diversified with investments in 336 underlying companies across a wide range of sectors in 29 countries.
Achieving a balance between diversification and concentration remains an important element of our strategy. While the level of diversification within the portfolio reduces risk, many individual investments are still large enough to have an impact on overall performance, as demonstrated in the year by the sales of NES, Data Explorers and Coperion.
The top ten underlying companies accounted for 21% of the value of the portfolio while the top 30 accounted for 43%. The performance of these 30 investments is therefore likely to be the main driver of the future performance of the Company. As outlined in the Chairman's Statement, their performance remained strong in the year to December 2012 with revenues growing by an average of 12% and EBITDA by an average of
13%*.
The top 30 underlying companies were valued on an average multiple of 9.1 times EBITDA at January 2013. We consider this to be reasonable for the level of growth achieved and for the quality of the underlying earnings. The leverage of these companies is generally modest, with net debt averaging 3.5 times EBITDA. The gearing should enhance future equity returns without posing undue financial risk.
Graphite Capital directly manages 23% of the portfolio by value including six of the top ten and ten of the top 30 underlying investments. This gives us a high level of influence over the development of a significant part of the Company's portfolio. It also provides valuable insights which help us to make more informed strategic and short term decisions on the management of the portfolio.
At 31 January, 99% of the portfolio was valued based on December valuations. The portfolio was valued at an average of 1.4 times original cost in local currency, of which 0.5 times cost had already been realised. At these levels we believe there to be considerable potential for future growth as the portfolio matures. As around half of the portfolio is in investments made in 2007 or before, managers will be looking to realise these investments when market conditions allow.
A detailed analysis of the portfolio is included in the Supplementary Information section later in this report.
* Excludes London Square (immature) where EBITDA is not a meaningful measure of performance.
COMMITMENTS AND LIQUIDITY
At 31 January, the Company had outstanding commitments of £126.5 million and liquid assets of £55.2 million. After taking account of the undrawn bank facility which, as noted in the Chairman's Statement, has increased to £100 million since the year end, undrawn commitments are more than fully covered.
If the rate of investment were to remain constant over the outstanding investment periods of each of the funds, we estimate that approximately £35 million of current commitments would be drawn down over the next 12 months. This rate would be insufficient to keep the Company close to full investment even if we were to resume making secondary fund purchases in the coming year.
The fall in undrawn commitments over the last few years has ensured that the Company has substantial capacity to support funds raised by our preferred managers, many of whom are expected to raise new funds in the coming year.
CURRENCY
The Company's foreign exchange exposure has an impact both on total assets and on the level of outstanding commitments. At the year end 46% of total assets and 74% of outstanding commitments were denominated in foreign currencies, primarily in euros.
In the year to January 2013, foreign currency movements had a positive impact on performance, adding 1.6% to the net asset value. In the previous year the effect was a reduction in net asset value of 1.7%.
We review the Company's foreign exchange exposure regularly and to date have chosen not to hedge. We will continue to keep this under review. Further details of the exposure are set out in the Supplementary Information section.
EVENTS SINCE THE YEAR END
Since 31 January 2013, additions to the portfolio of £9.8 million have exceeded realisations of £5.4 million. We have made three new primary commitments totalling £20.6 million of which two were to new relationships with Towerbook and IK Investment Partners and the third was to an existing manager, Cinven. In March we completed a secondary purchase for £3.5 million of an interest in a fund managed by GCP Capital Partners Europe, another new relationship.
Since the year end, cash has decreased to £52.7 million while commitments have increased to £141.4 million.
PROSPECTS
The pipeline of funds being raised by high quality managers this year is exceptionally strong. We believe it is extremely important for the long term performance of the Company that we support our preferred managers by making primary commitments to their funds. As discussed in the Chairman's Statement, new commitments this year are likely to include a substantial commitment to Graphite Capital Partners VIII which we plan to launch later this year. As we also expect to make commitments to a number of third-party funds raised by both existing and new managers, it is likely that commitments will increase substantially by the year end. We believe that this is a good time in the cycle to be making commitments as the funds should be drawn down as the major European economies start to emerge from recession. As in the past, we will manage the overcommitment position prudently and will ensure that sufficient long term resources are available to fund these commitments.
As in previous years, the outlook for realisations remains somewhat uncertain. Despite the continued weakness of European economies and a shortage of bank debt, reasonably high levels of realisations have been achieved in each of the last two years. We see no reason why this should not continue in the year ahead. The recent rise in equity markets may help to stimulate activity levels but confidence remains fragile.
Our investment strategy gives us the flexibility to adapt the mix of investments, cash and commitments to changing market conditions and to deploy the Company's cash where we see the best relative value. The strength of our balance sheet leaves us well placed to capitalise on the opportunities available in the year ahead while the strength of our portfolio should continue to drive the net asset value.
Graphite Capital Management LLP
March 2013
For further information please contact:
|
Tim Spence |
020 7825 5358 |
|
Emma Osborne |
020 7825 5357 |
SUPPLEMENTARY INFORMATION
The table below summarises the 30 companies in which Graphite Enterprise had the largest investments at 31 January 2013. The valuations are gross and are shown as a percentage of the total investment portfolio.
The 30 largest underlying companies
|
|
Company |
Manager |
Year of investment |
Country |
Value as a % of investment portfolio |
|
1 |
Micheldever |
|
|
|
|
|
|
Distributor and retailer of tyres |
Graphite Capital |
2006 |
UK |
3.6% |
|
2 |
Algeco Scotsman* |
|
|
|
|
|
|
Supplier and operator of modular buildings |
TDR Capital |
2007 |
USA |
3.0% |
|
3 |
Alexander Mann Solutions |
|
|
|
|
|
|
Provider of recruitment process outsourcing |
Graphite Capital |
2007 |
UK |
2.6% |
|
4 |
Park Holidays UK |
|
|
|
|
|
|
Operator of caravan parks |
Graphite Capital |
2006 |
UK |
2.3% |
|
5 |
National Fostering Agency |
|
|
|
|
|
|
Provider of foster care services |
Graphite Capital |
2012 |
UK |
2.2% |
|
6 |
Education Personnel |
|
|
|
|
|
|
Provider of temporary staff for the education sector |
Graphite Capital |
2010 |
UK |
1.7% |
|
7 |
Stork |
|
|
|
|
|
|
Provider of technical engineering services |
Candover |
2008 |
Netherlands |
1.6% |
|
8 |
U-POL |
|
|
|
|
|
|
Manufacturer and distributor of automotive refinishing products |
Graphite Capital |
2010 |
UK |
1.6% |
|
9 |
HellermannTyton# |
|
|
|
|
|
|
Manufacturer of cable management products |
Doughty Hanson |
2006 |
UK |
1.5% |
|
10 |
Avio |
|
|
|
|
|
|
Manufacturer of aerospace engine components |
Cinven |
2007 |
Italy |
1.4% |
|
11 |
Dominion Gases |
|
|
|
|
|
|
Supplier of specialist gases to the oil and gas industries |
Graphite Capital |
2007 |
UK |
1.4% |
|
12 |
Spire Healthcare |
|
|
|
|
|
|
Operator of hospitals |
Cinven |
2007 |
UK |
1.3% |
|
13 |
CEVA |
|
|
|
|
|
|
Manufacturer and distributor of animal health products |
Euromezzanine |
2007 |
France |
1.3% |
|
14 |
Evonik Industries |
|
|
|
|
|
|
Manufacturer of specialty chemicals |
CVC |
2008 |
Germany |
1.2% |
|
15 |
London Square |
|
|
|
|
|
|
Developer of residential housing |
Graphite Capital |
2010 |
UK |
1.2% |
|
16 |
Parques Reunidos |
|
|
|
|
|
|
Operator of attraction parks |
Candover |
2007 |
Spain |
1.2% |
|
17 |
CPA Global |
|
|
|
|
|
|
Provider of patent renewal services |
Cinven |
2012 |
UK |
1.2% |
|
18 |
Willowbrook Healthcare |
|
|
|
|
|
|
Operator of care homes for the elderly |
Graphite Capital |
2008 |
UK |
1.2% |
|
19 |
Ceridian |
|
|
|
|
|
|
Provider of payment processing services |
Thomas H Lee Partners |
2007 |
USA |
1.2% |
|
20 |
Partnership |
|
|
|
|
|
|
Provider of retirement solutions |
Cinven |
2008 |
UK |
1.1% |
|
21 |
Vue Entertainment |
|
|
|
|
|
|
Operator of cinemas |
Doughty Hanson |
2010 |
UK |
1.1% |
|
22 |
Tumi# |
|
|
|
|
|
|
Manufacturer and retailer of luggage and accessories |
Doughty Hanson |
2004 |
USA |
1.0% |
|
23 |
Stonegate Pub Company |
|
|
|
|
|
|
Operator of pubs |
TDR Capital |
2010 |
UK |
0.9% |
|
24 |
Acromas |
|
|
|
|
|
|
Provider of financial, motoring, travel and healthcare services |
CVC / Charterhouse |
2007 |
UK |
0.9% |
|
25 |
Intermediate Capital Group# |
|
|
|
|
|
|
Provider of mezzanine finance |
ICG |
1989 |
UK |
0.8% |
|
26 |
Spheros |
|
|
|
|
|
|
Provider of bus climate control systems |
Deutsche Beteiligungs |
2011 |
Germany |
0.8% |
|
27 |
Sebia |
|
|
|
|
|
|
Provider of in-vitro diagnostics |
Cinven |
2010 |
France |
0.8% |
|
28 |
TMF |
|
|
|
|
|
|
Provider of management and accounting outsourcing services |
Doughty Hanson |
2008 |
Netherlands |
0.8% |
|
29 |
Ziggo# |
|
|
|
|
|
|
Operator of cable TV networks |
Cinven |
2006 |
Netherlands |
0.8% |
|
30 |
InnBrighton |
|
|
|
|
|
|
Operator of pubs |
Graphite Capital |
2001 |
UK |
0.8% |
|
|
|
|
|
|
|
|
|
Total of the 30 largest underlying investments |
|
|
42.5% |
|
* Algeco Scotsman acquired Ausco Modular, an existing TDR Capital portfolio company, in the year.
# Quoted
|
30 largest investments* - revenue growth |
|
|
|
|
|
% growth |
% by value |
|
<0% |
13.1% |
|
0-10% |
44.4% |
|
10-20% |
16.1% |
|
20-30% |
18.0% |
|
>30% |
5.4% |
|
|
|
|
30 largest investments* - EBITDA growth |
|
|
|
|
|
% growth |
% by value |
|
<0% |
16.4% |
|
0-10% |
37.0% |
|
10-20% |
13.1% |
|
20-30% |
9.7% |
|
>30% |
20.9% |
|
|
|
|
30 largest investments* - enterprise value as a multiple of EBITDA |
|
|
|
|
|
Multiple |
% by value |
|
<7.0x |
4.8% |
|
7.0-8.0x |
31.9% |
|
8.0-9.0x |
22.6% |
|
9.0-10.0x |
7.0% |
|
10.0-11.0x |
15.9% |
|
11.0-12.0x |
9.7% |
|
>12.0x |
4.9% |
|
30 largest investments* - net debt as a multiple of EBITDA |
|
|
|
|
|
Multiple |
% by value |
|
<2.0x |
26.3% |
|
2.0-3.0x |
5.7% |
|
3.0-4.0x |
28.9% |
|
4.0-5.0x |
16.2% |
|
5.0-6.0x |
10.4% |
|
6.0-7.0x |
2.9% |
|
>7.0x |
4.7% |
*Excludes London Square (immature) where revenue and EBITDA is not a meaningful measure of performance.
The 30 largest fund investments
The 30 largest funds by value at 31 January 2013 are set out below:
|
|
Fund |
Outstanding commitment £m |
Year of commitment |
Country/ |
Value |
|
1 |
Graphite Capital Partners VII*/ ** |
15.9 |
2007 |
UK |
44.7 |
|
|
Mid-market buy-outs |
||||
|
2 |
Fourth Cinven Fund** |
2.5 |
2006 |
Europe |
33.2 |
|
|
Large buy-outs |
||||
|
3 |
Graphite Capital Partners VI** |
5.1 |
2003 |
UK |
27.8 |
|
|
Mid-market buy-outs |
||||
|
4 |
ICG European Fund 2006** |
2.5 |
2007 |
Europe |
24.3 |
|
|
Mezzanine loans to buy-outs |
||||
|
5 |
Euromezzanine 5 |
1.8 |
2006 |
France |
21.0 |
|
|
Mezzanine loans to mid-market buy-outs |
||||
|
6 |
Thomas H Lee Parallel Fund VI |
4.9 |
2007 |
USA |
18.9 |
|
|
Large buy-outs |
||||
|
7 |
TDR Capital II |
1.9 |
2006 |
Europe |
17.8 |
|
|
Mid-market and large buy-outs |
||||
|
8 |
Candover 2005 Fund** |
1.1 |
2005 |
Europe |
17.4 |
|
|
Large buy-outs |
||||
|
9 |
CVC European Equity Partners V |
8.0 |
2008 |
Global |
15.3 |
|
|
Large buy-outs |
||||
|
10 |
Doughty Hanson & Co IV |
1.1 |
2005 |
Europe |
14.8 |
|
|
Mid-market and large buy-outs |
||||
|
11 |
Apax Europe VII |
0.9 |
2007 |
Global |
14.2 |
|
|
Large buy-outs |
||||
|
12 |
Activa Capital Fund II |
2.8 |
2007 |
France |
14.1 |
|
|
Mid-market buy-outs |
||||
|
13 |
Doughty Hanson & Co V |
4.5 |
2006 |
Europe |
13.8 |
|
|
Mid-market and large buy-outs |
||||
|
14 |
CVC European Equity Partners Tandem |
1.2 |
2006 |
Global |
7.4 |
|
|
Large buy-outs |
||||
|
15 |
Deutsche Beteiligungs AG Fund V |
2.1 |
2006 |
Germany |
6.7 |
|
|
Mid-market buy-outs |
||||
|
16 |
Charterhouse Capital Partners VIII** |
1.3 |
2006 |
Europe |
6.5 |
|
|
Large buy-outs |
||||
|
17 |
CVC European Equity Partners IV** |
1.5 |
2008 |
Global |
6.0 |
|
|
Large buy-outs |
||||
|
18 |
Bowmark Capital Partners IV |
4.3 |
2007 |
UK |
5.9 |
|
|
Mid-market buy-outs |
||||
|
19 |
PAI Europe V |
1.5 |
2007 |
Europe |
5.4 |
|
|
Large buy-outs |
||||
|
20 |
Advent Central and Eastern Europe IV |
2.6 |
2008 |
Europe |
5.0 |
|
|
Mid-market buy-outs |
||||
|
21 |
Charterhouse Capital Partners VII** |
1.6 |
2002 |
Europe |
3.9 |
|
|
Large buy-outs |
||||
|
22 |
Apax Europe VII Sidecar 2 |
1.0 |
2007 |
Global |
3.5 |
|
|
Large buy-outs |
||||
|
23 |
Vision Capital Partners VII |
0.8 |
2007 |
Global |
3.4 |
|
|
Secondary portfolios |
||||
|
24 |
Vision Capital Partners VI |
0.5 |
2006 |
Europe |
3.2 |
|
|
Secondary portfolios |
||||
|
25 |
Deutsche Beteiligungs AG Fund IV |
- |
2002 |
Germany |
3.1 |
|
|
Mid-market buy-outs |
||||
|
26 |
BC European Capital IX |
5.6 |
2012 |
Europe |
2.9 |
|
|
Large buy-outs |
||||
|
27 |
Piper Private Equity Fund IV |
1.2 |
2006 |
UK |
2.9 |
|
|
Small buy-outs |
||||
|
28 |
Corpfin Capital Fund II |
- |
2000 |
Spain |
2.6 |
|
|
Mid-market buy-outs |
||||
|
29 |
Bowmark Capital Partners III |
0.1 |
2004 |
UK |
2.6 |
|
|
Small buy-outs |
||||
|
30 |
Steadfast Capital Fund II** |
0.3 |
2007 |
Germany |
2.5 |
|
|
Mid-market buy-outs |
||||
|
|
|
|
|
|
|
|
|
Total of the largest 30 fund investments |
78.6 |
|
|
350.8 |
|
|
Percentage of total investment portfolio |
|
|
|
84.5% |
* Includes Graphite Capital Partners VII Top Up Fund and Top Up Fund Plus
** All or part of interest acquired through a secondary fund purchase
Portfolio analySIS
The following five tables analyse the closing portfolio by value.
Portfolio - Investment type
|
|
|
% of total portfolio |
|
Large buy-outs |
|
48.1% |
|
Small and mid-market buy-outs |
|
40.4% |
|
Mezzanine |
|
10.4% |
|
Quoted |
|
0.8% |
|
Infrastructure |
|
0.3% |
|
Total |
|
100.0% |
Portfolio - Geographic distribution*
|
|
|
% of total portfolio |
|
UK |
|
48.7% |
|
France |
|
13.2% |
|
North America |
|
11.2% |
|
Germany |
|
7.2% |
|
Benelux |
|
6.1% |
|
Spain |
|
4.4% |
|
Scandinavia |
|
2.6% |
|
Other Europe |
|
5.8% |
|
Rest of world |
|
0.8% |
|
Total |
|
100.0% |
|
|
|
|
* Location of headquarters of underlying companies in the portfolio. Does not necessarily reflect countries to which companies have economic exposure.
Portfolio - Year of investment
|
|
Multiple of cost |
Primary portfolio |
Secondary portfolio |
Total portfolio |
|
2012 onwards |
1.0x |
10.4% |
0.3% |
10.7% |
|
2011 |
1.3x |
11.3% |
0.3% |
11.6% |
|
2010 |
1.3x |
14.8% |
0.6% |
15.4% |
|
2009 |
1.9x |
1.8% |
0.2% |
2.0% |
|
2008 |
1.3x |
10.3% |
1.6% |
11.9% |
|
2007 |
1.5x |
20.6% |
3.7% |
24.3% |
|
2006 |
1.4x |
13.5% |
2.7% |
16.2% |
|
2005 |
1.0x |
1.1% |
0.3% |
1.4% |
|
2004 |
2.7x |
2.7% |
0.2% |
2.9% |
|
2003 and before |
1.5x |
3.4% |
0.2% |
3.6% |
|
Total |
1.4x |
89.9% |
10.1% |
100.0% |
Portfolio - Sector analysis
|
|
|
% of total portfolio |
|
Business services |
|
20.0% |
|
Healthcare & education |
|
14.9% |
|
Industrials |
|
14.5% |
|
Consumer goods and services |
|
12.6% |
|
Leisure |
|
11.3% |
|
Financials |
|
8.8% |
|
Automotive supplies |
|
5.6% |
|
Media |
|
4.4% |
|
Technology and telecommunications |
|
4.3% |
|
Chemicals |
|
3.6% |
|
Total |
|
100.0% |
Portfolio - Graphite and third party investments
|
31 January 2013 £ million |
|
Third party investments |
Graphite investments |
Total |
|
Fund investments |
|
294.4 |
73.4 |
367.8 |
|
Direct investments |
|
24.4 |
23.0 |
47.4 |
|
Total portfolio |
|
318.8 |
96.4 |
415.2 |
|
Graphite investments |
|
|
|
23.2% |
|
Third party fund investments |
|
|
|
70.9% |
|
Third party co-investments |
|
|
|
5.9% |
Investment activity
New investments - 10 year record
|
|
Drawdowns |
Co-investments and secondary fund purchases |
Total new investments |
|
Financial period ending |
£m |
£m |
£m |
|
31 December 2003 |
28.5 |
6.5 |
35.0 |
|
31 December 2004 |
22.8 |
6.6 |
29.4 |
|
31 December 2005 |
41.6 |
3.9 |
45.5 |
|
31 December 2006 |
74.6 |
5.7 |
80.3 |
|
31 December 2007 |
95.2 |
7.9 |
103.1 |
|
31 December 2008 |
65.8 |
12.1 |
77.9 |
|
31 December 2009 |
21.5 |
2.5 |
24.0 |
|
31 January 2011 |
65.6 |
19.2 |
84.8 |
|
31 January 2012 |
51.3 |
29.9 |
81.2 |
|
31 January 2013 |
48.8 |
5.2 |
54.0 |
Largest new underlying investments in the year
|
Investment |
Description |
Country |
£m |
|
National Fostering Agency* |
Provider of foster care services |
UK |
5.5 |
|
CPA Global |
Provider of patent renewal services |
UK |
5.2 |
|
Quirón |
Operator of hospitals |
Spain |
2.5 |
|
Spheros* |
Provider of bus climate control systems |
Germany |
2.2 |
|
Guardian Financial Services |
Provider of personal insurance |
UK |
1.9 |
|
Explore Learning |
Provider of after-school tuition |
UK |
1.7 |
|
Armatis |
Provider of call centre outsourcing |
France |
1.7 |
|
Rex Restaurants |
Operator of London restaurants |
UK |
1.6 |
|
Eurofiber |
Provider of fibre optic networks |
Netherlands |
1.4 |
|
La Maison Bleue |
Operator of child care nurseries |
France |
1.3 |
|
Total of 10 largest new investments |
|
25.0 |
|
*In addition, in the previous financial year, £3.0m was invested in National Fostering Agency through Graphite Capital Partners VII and directly and £2.1m was invested in Spheros through Deutsche Beteiligungs AG Fund V.
Realisations - 10 year record*
|
Financial period ending |
£m |
% of opening portfolio |
|
31 December 2003 |
39.4 |
23.7% |
|
31 December 2004 |
116.7 |
60.4% |
|
31 December 2005 |
93.8 |
61.9% |
|
31 December 2006 |
92.9 |
53.3% |
|
31 December 2007 |
112.4 |
54.5% |
|
31 December 2008 |
25.8 |
12.9% |
|
31 December 2009 |
14.0 |
7.3% |
|
31 January 2011 |
19.8 |
8.5% |
|
31 January 2012 |
92.9 |
26.0% |
|
31 January 2013 |
74.2 |
19.7% |
*Excluding secondary sales of fund interests.
Largest underlying realisations in the year
|
Investment |
Manager |
Buyer type |
Proceeds £m |
|
NES Group |
Graphite Capital |
Private equity |
12.4 |
|
Data Explorers |
Bowmark/Direct |
Trade |
8.7 |
|
Coperion |
Deutsche Beteiligungs |
Trade |
6.1 |
|
Preh |
Deutsche Beteiligungs/Direct |
Trade |
5.1 |
|
Ziggo* |
Cinven |
Public offering |
4.6 |
|
CPA Global |
ICG |
Private equity |
4.1 |
|
Tumi* |
Doughty Hanson |
Public offering |
3.7 |
|
Norit |
Doughty Hanson |
Trade |
3.1 |
|
Starbev |
CVC |
Trade |
2.9 |
|
Formula 1* |
CVC |
Financial |
2.9 |
|
Total of 10 largest realisations |
|
|
53.6 |
*Partial disposal
Commitments analysis
|
Commitments at 31 January 2013 |
Original commitment1 £m |
Outstanding commitment £m |
Average drawdown percentage |
% of commitments |
|
Funds in investment period |
230.3 |
93.2 |
59.5% |
73.7% |
|
Funds post investment period |
437.5 |
33.3 |
92.4% |
26.3% |
|
Total |
667.8 |
126.5 |
81.1% |
100.0% |
1 Original commitments are at 31 January 2013 exchange rates
|
Commitments at 31 January 2013 - remaining investment period |
% of commitments |
|
> 5 years |
14.7% |
|
4-5 years |
13.2% |
|
3-4 years |
10.1% |
|
2-3 years |
1.0% |
|
1-2 years |
18.9% |
|
<1 year |
15.8% |
|
Investment period complete |
26.3% |
|
Total |
100.0% |
New commitments during the year to 31 January 2013
|
Fund |
Strategy |
Geography |
£m |
|
Deutsche Beteiligungs AG Fund VI |
Mid-market buy-out |
Germany |
8.1 |
|
Egeria IV |
Mid-market buy-out |
Netherlands |
8.0 |
|
ICG Europe Fund V |
Mezzanine loans to buy-outs |
Europe |
8.0 |
|
Advent GPE VII |
Large buy-out |
Europe/USA |
3.2 |
|
Total new primary commitments |
|
|
27.3 |
UNAUDITED RESULTS
Consolidated Income Statement
|
|
Year ended 31 January 2013 |
Year ended 31 January 2012 |
|||||||
|
|
Revenue return £'000s |
Capital return £'000s |
Total £'000s |
Revenue return £'000s |
Capital return £'000s |
Total £'000s |
|||
|
Investment returns |
|
|
|
|
|
|
|||
|
Gains and losses on investments held at fair value |
5,988 |
54,555 |
60,543 |
8,365 |
28,376 |
36,741 |
|||
|
Income from cash and cash equivalents |
39 |
- |
39 |
127 |
- |
127 |
|||
|
Return from current asset investments |
74 |
- |
74 |
527 |
- |
527 |
|||
|
Other income |
4 |
(8) |
(4) |
44 |
- |
44 |
|||
|
Foreign exchange gains and losses |
- |
418 |
418 |
- |
(498) |
(498) |
|||
|
|
6,105 |
54,965 |
61,070 |
9,063 |
27,878 |
36,941 |
|||
|
|
|
|
|
|
|
|
|||
|
Expenses |
|
|
|
|
|
|
|||
|
Investment management charges |
(1,337) |
(4,010) |
(5,347) |
(1,301) |
(3,904) |
(5,205) |
|||
|
Other expenses |
(1,772) |
(1,607) |
(3,379) |
(1,510) |
(809) |
(2,319) |
|||
|
|
(3,109) |
(5,617) |
(8,726) |
(2,811) |
(4,713) |
(7,524) |
|||
|
|
|
|
|
|
|
|
|||
|
Profit before taxation |
2,996 |
49,348 |
52,344 |
6,252 |
23,165 |
29,417 |
|||
|
Taxation |
(701) |
701 |
- |
(1,633) |
1,633 |
- |
|||
|
Profit for the year |
2,295 |
50,049 |
52,344 |
4,619 |
24,798 |
29,417 |
|||
|
|
|
|
|
|
|
|
|||
|
Attributable to: |
|
|
|
|
|
|
|||
|
Equity shareholders |
2,295 |
46,597 |
48,892 |
4,619 |
22,857 |
27,476 |
|
||
|
Non-controlling interest |
- |
3,452 |
3,452 |
- |
1,941 |
1,941 |
|
||
|
Basic and diluted earnings per share |
|
|
67.1p |
|
|
37.7p |
|
||
The columns headed 'Total' represent the income statement for the relevant financial periods and the columns headed 'Revenue return' and 'Capital return' are supplementary information. There is no Other Comprehensive Income.
Consolidated Balance Sheet
|
|
|
31 January 2013 |
31 January 2012 |
||
|
|
|
£'000s |
£'000s |
£'000s |
£'000s |
|
Non-current assets Investments held at fair value - Unquoted investments |
|
411,606 |
|
374,915 |
|
|
- Quoted investments |
|
3,559 |
|
2,768 |
|
|
|
|
|
415,165 |
|
377,683 |
|
Current assets Receivables |
|
1,672 |
|
2,739 |
|
|
Current asset investments held at fair value |
|
26,398 |
|
34,946 |
|
|
Cash and cash equivalents |
|
28,778 |
|
9,218 |
|
|
|
|
56,848 |
|
46,903 |
|
|
Current liabilities Payables |
|
550 |
|
1,021 |
|
|
Net current assets |
|
|
56,298 |
|
45,882 |
|
Total assets less current liabilities |
|
|
471,463 |
|
423,565 |
|
Capital and reserves Share capital |
|
|
7,292 |
|
7,292 |
|
Capital redemption reserve |
|
|
2,112 |
|
2,112 |
|
Share premium |
|
|
12,936 |
|
12,936 |
|
Capital reserve |
|
|
425,410 |
|
378,813 |
|
Revenue reserve |
|
|
12,665 |
|
14,016 |
|
Equity attributable to equity holders |
|
|
460,415 |
|
415,169 |
|
Non-controlling interest |
|
|
11,048 |
|
8,396 |
|
Total equity |
|
|
471,463 |
|
423,565 |
|
|
|
|
|
|
|
|
Net asset value per share (basic and diluted) |
|
|
631.5p |
|
569.4p |
Consolidated Cash Flow Statement
|
|
|
Year ended 31 January 2013 £'000s |
|
Year ended 2012 £'000s |
|
Operating activities Sale of portfolio investments |
|
70,922 |
|
88,385 |
|
Purchase of portfolio investments |
|
(54,017) |
|
(81,132) |
|
Net sale/(purchase) of current asset investments held at fair value |
|
8,615 |
|
(19,170) |
|
Interest income received from portfolio investments |
|
4,670 |
|
7,650 |
|
Dividend income received from portfolio investments |
|
1,276 |
|
512 |
|
Other income received |
|
43 |
|
170 |
|
Investment management charges paid |
|
(5,407) |
|
(5,279) |
|
Taxation received/(paid) |
|
54 |
|
(55) |
|
Other expenses paid |
|
(815) |
|
(1,491) |
|
Net cash inflow/(outflow) from operating activities |
|
25,341 |
|
(10,410) |
|
Financing activities |
|
|
|
|
|
Investments by non-controlling interests |
|
432 |
|
290 |
|
Distributions to non-controlling interests |
|
(1,724) |
|
(3,976) |
|
Credit facility fee |
|
(1,260) |
|
(2,853) |
|
Equity dividends paid |
|
(3,646) |
|
(1,641) |
|
Net cash outflow from financing activities |
|
(6,198) |
|
(8,180) |
|
Net increase/(decrease) in cash and cash equivalents |
|
19,143 |
|
(18,590) |
|
Cash and cash equivalents at the beginning of year |
|
9,218 |
|
28,306 |
|
Net increase/(decrease) in cash and cash equivalents |
|
19,143 |
|
(18,590) |
|
Effect of changes in foreign exchange rates |
|
417 |
|
(498) |
|
Cash and cash equivalents at the end of the year |
|
28,778 |
|
9,218 |
Consolidated Statement of Changes in Equity
|
Group |
Share capital |
Capital redemption reserve |
Share premium |
Capital reserve |
Revenue reserve |
Total shareholder equity |
Non- controlling interest |
Total equity |
|
|
£'000
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 January 2013
|
|
|
|
|
|
|
|
|
|
Opening Balance at |
7,292 |
2,112 |
12,936 |
378,813 |
14,016 |
415,169 |
8,396 |
423,565 |
|
Profit attributable to equity shareholders |
- |
- |
- |
46,597 |
2,295 |
48,892 |
- |
48,892 |
|
Profit attributable to non-controlling interests |
- |
- |
- |
- |
- |
- |
3,452 |
3,452 |
|
Profit for the year and total comprehensive income |
- |
- |
- |
46,597 |
2,295 |
48,892 |
3,452 |
52,344 |
|
Transfer on disposal of investments |
- |
- |
- |
- |
- |
- |
- |
- |
|
Dividends paid or approved |
- |
- |
- |
- |
(3,646) |
(3,646) |
- |
(3,646) |
|
Contributions to non-controlling interest |
- |
- |
- |
- |
- |
- |
418 |
418 |
|
Distributions to non-controlling interest |
- |
- |
- |
- |
- |
- |
(1,218) |
(1,218) |
|
Closing Balance |
7,292 |
2,112 |
12,936 |
425,410 |
12,665 |
460,415 |
11,048 |
471,463 |
|
Group |
Share capital |
Capital redemption reserve |
Share premium |
Capital reserve |
Revenue reserve |
Total shareholder equity |
Non- controlling interest |
Total equity |
|
|
£'000
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 January 2012
|
|
|
|
|
|
|
|
|
|
Opening Balance at |
7,292 |
2,112 |
12,936 |
355,956 |
11,038 |
389,334 |
10,149 |
399,483 |
|
Profit attributable to equity shareholders |
- |
- |
- |
22,857 |
4,619 |
27,476 |
- |
27,476 |
|
Profit attributable to non-controlling interests |
- |
- |
- |
- |
- |
- |
1,941 |
1,941 |
|
Profit for the year and total comprehensive income |
- |
- |
- |
22,857 |
4,619 |
27,476 |
1,941 |
29,417 |
|
Transfer on disposal of investments |
- |
- |
- |
- |
- |
- |
- |
- |
|
Dividends paid or approved |
- |
- |
- |
- |
(1,641) |
(1,641) |
- |
(1,641) |
|
Contributions to non-controlling interest |
- |
- |
- |
- |
- |
- |
282 |
282 |
|
Distributions to non-controlling interest |
- |
- |
- |
- |
- |
- |
(3,976) |
(3,976) |
|
Closing Balance |
7,292 |
2,112 |
12,936 |
378,813 |
14,016 |
415,169 |
8,396 |
423,565 |
Notes to the Accounts
1 GENERAL INFORMATION
These financial statements relate to Graphite Enterprise Trust PLC ("the Company") and its subsidiaries, Graphite Enterprise Trust Limited Partnership and Graphite Enterprise Trust (2) Limited Partnership ("the Partnerships"), together the "Group". The registered address and principal place of business of the Company and the Partnerships is Berkeley Square House, Berkeley Square, London W1J 6BQ.
2 UNAUDITED RESULTS
The consolidated financial information is for the year to 31 January 2013 and does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006 and has not been audited.
Statutory accounts for the year to 31 January 2012 were approved by the Board of Directors on 2 May 2012 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statements under section 498 of the Companies Act 2006.
Statutory accounts for the year to 31 January 2013 will be delivered to the Registrar of Companies following the Company's Annual General Meeting which will be held at the Westbury Hotel, Bond Street, London, W1S 2YF at 3.30pm on 13 June 2013.
3 BASIS OF PREPARATION
The consolidated financial information for the year ended 31 January 2013 has been prepared in accordance with the Companies Act 2006 and International Financial Reporting Standards ("IFRS"). IFRS comprises standards and interpretations approved by the International Accounting Standards Board ("IASB") and the International Financial Reporting Interpretations Committee ("IFRIC") as adopted in the European Union as at 31 January 2013. These financial statements have been prepared on a going concern basis and on the historical cost basis of accounting, modified for the revaluation of certain assets.
|
4 DIVIDENDS
|
Year ended 31 January 2013 |
Year ended 31 January 2012 |
|
Group and Parent company |
£'000s |
£'000s |
|
Final paid: 5.00p (2012: 2.25p) per share |
3,646 |
1,641 |
The Board has proposed a final dividend of 5.00p per share in respect of the period ended 31 January 2013 which, if approved by shareholders, will be paid on 19 June 2013, to shareholders on the register of members at the close of business on 31 May 2013.
|
5 EARNINGS PER SHARE |
|
|
|
|||
|
Year ended 31 January 2013 |
Year ended 31 January 2012 |
|
||||
|
Revenue return per ordinary share |
3.15p |
6.33p |
|
|
||
|
Capital return per ordinary share |
63.91p |
31.35p |
|
|
||
|
Earnings per ordinary share (basic and diluted) |
67.06p |
37.68p |
|
|
||
6 INVESTMENT MANAGEMENT CHARGES
|
|
Year ended 31 January 2013 |
Year ended 31 January 2012 |
||||
|
Group and Parent Company |
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fee |
1,319 |
3,957 |
5,276 |
1,290 |
3,870 |
5,160 |
|
Irrecoverable VAT |
18 |
53 |
71 |
11 |
34 |
45 |
|
|
|
|
|
|
|
|
|
|
1,337 |
4,010 |
5,347 |
1,301 |
3,904 |
5,205 |
The allocation of the total investment management charges was unchanged in the year to 31 January 2013 with 75% of the total allocated to capital and 25% allocated to revenue.
The Company has borne a management charge of £513,000 (2012: £482,000) in respect of Graphite Capital Partners VI and £855,000 (2012: £822,000) in respect of Graphite Capital Partners VII, Graphite Capital Partners Top Up Fund and Graphite Capital Partners Top Up Fund Plus. These charges are at the same level as those paid by third party investors. The Company does not pay any additional fees to the Manager on these investments. The total investment management charges payable by the Group to the Manager (excluding VAT), including the amounts set out in the table on the previous page, were therefore £6,715,000 (2012: £6,509,000).
Graphite Capital Management LLP was a related party of Graphite Enterprise Trust PLC during the period. The amounts payable during the period are set out above. There was an accrued amount outstanding of £63,000 (excluding VAT) as at 31 January 2013 (2012: £123,000).
7 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company is an investment company as defined by section 833 of the Companies Act 2006 and conducts its affairs so as to qualify as an investment trust under the provisions of section 1158 of the Corporation Tax Act 2010 ("Section 1158"). The Group's objective is to provide shareholders with long term capital growth through investment in unquoted companies, mostly through specialist funds but also directly.
Investments in funds have anticipated lives of approximately ten years. Direct investments are made with an anticipated holding period of between three and five years. Investment agreements will, however, usually provide that any loans advanced to investee companies are for a longer period than this. The agreements will usually provide for repayments to be made by installments with provision for full repayment on sale or flotation.
Financial risk management
The Group's activities expose it to a variety of financial risks: market risk (comprising currency risk, interest rate risk and price risk), investment risk, credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The Manager has overall responsibility for managing the risks and the framework for monitoring and coordinating these risks. This is monitored by the Board. The Group's financial risk management objectives and processes used to manage these risks have not changed from the previous period and the policies are set out below:
Market risk
(i) Currency risk
The Group's investments are principally in the UK and continental Europe and are primarily denominated in sterling and in euros. There are also smaller amounts in US dollars and in other European currencies. The Group is exposed to currency risk in that movements in the value of sterling against these foreign currencies will affect the net asset value and the cash required to fund undrawn commitments. The Board regularly reviews the level of foreign currency denominated assets and outstanding commitments in the context of current market conditions and may decide to buy or sell currency or put in place currency hedging arrangements.
(ii) Interest rate risk
The fair value of the Group's investments and cash balances are not directly affected by changes in interest rates. The fair value of UK government bonds ("gilts") classified as current assets will vary with changes in interest rates but the impact of a rise in interest rates is not material to the company.
(iii) Price Risk
The risk that the value of a financial instrument will change as a result of changes to market prices is one that is fundamental to the Group's objective, which is to provide long term capital growth through investment in unquoted companies. The investment portfolio is continually monitored to ensure an appropriate balance of risk and reward in order to achieve the Group's objective. No hedging of this risk is undertaken.
The Group is exposed to the risk of change in value of its private equity investments. For all investments the market variable is deemed to be the price itself.
Credit and investment risk
(i) Investment risk
Investment risk is the risk that the financial performance of the companies in which Graphite Enterprise invests either improves or deteriorates, thereby affecting the value of that investment. Investments in unquoted companies whether indirectly or directly are by their nature subject to potential investment losses. The investment portfolio is highly diversified.
(ii) Credit risk
The Group's exposure to credit risk arises principally from its investment in gilts and its cash deposits. This risk is managed through diversification across a number of separate funds which have strong credit ratings. The Group's policy is to limit exposure to any one fund to 15% of gross assets. This is regularly monitored by the Manager as a part of its cash management process.
Cash is held on deposit principally with one UK bank and totalled £28,778,000 (2012: £9,218,000). This represents the maximum exposure to credit risk at the balance sheet date. No collateral is held by the Group in respect of these amounts. None of the Group's cash deposits were past due or impaired at 31 January 2013 (2012: nil).
Liquidity risk
The Group has significant investments in unquoted companies which are inherently illiquid. The Group also has substantial undrawn commitments to funds, the great majority of which are likely to be called over the next five years. The Group aims to manage its affairs to ensure sufficient cash, other liquid assets and undrawn borrowing facilities will be available to meet contractual commitments when they are called and also seeks to have cash generally available to meet other short term financial needs. All cash and cash equivalents are available on demand. The Group's liquidity management policy involves projecting cash flows and considering the level of liquidity necessary to meet these.
The Group has power to enter into borrowing arrangements, both short and long term. After year end, the Group agreed an additional £40 million of committed bank facilities which means the Group has access to total bank facilities of £100 million (see note 9 for further details).
As at 31 January 2013 the Group's financial liabilities amounted to £550,000 of payables (2012: £1,020,000) which were due in less than one year.
Capital risk management
The Company's capital is represented by its net assets, which are managed to achieve the Group's investment objective. The Company currently has no debt.
The Board can manage the capital structure directly since it has taken the powers, which it is seeking to renew, to issue and buy-back shares and it also determines dividend payments. The Company is subject to externally imposed capital requirements with respect to the obligation and ability to pay dividends by section 1159 Corporation Tax Act 2010 and by the Companies Act 2006, respectively.
Total equity at 31 January 2013, the composition of which is shown on the Balance Sheet was £471,463,000 (2012: £423,565,000).
8 OTHER RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation for the Group. Transactions between the Company and the Manager are disclosed in note 6.
Significant transactions between the parent company and its subsidiaries are shown below:
|
|
|
Year ended 31 January 2013 |
Year ended 31 January 2012 |
|
Subsidiary |
Nature of transaction |
£'000s |
£'000s |
|
Graphite Enterprise Trust Limited Partnership |
Decrease in loan balance |
(864) |
(1,717) |
|
|
Income allocated |
688 |
1,322 |
|
Graphite Enterprise Trust (2) Limited Partnership |
Increase in loan balance |
270 |
5,868 |
|
Income allocated |
343 |
101 |
|
|
|
Amounts owed by subsidiaries 31 January 31 January 2013 2012 |
Amounts owed to subsidiaries |
|
|
31 January 2013 |
31 January 2012 |
||
|
Subsidiary |
£'000s £'000s |
£'000s |
£'000s |
|
Graphite Enterprise Trust Limited Partnership |
3,006 3,870 |
- |
- |
|
Graphite Enterprise Trust (2) Limited Partnership |
16,691 16,421 |
- |
- |
|
|
|
|
|
|
|
|
|
|
Amounts owed by subsidiaries represents funding provided by the parent to the subsidiary partnerships to allow them to make investments. The balances will be repaid out of proceeds from their portfolios.
9 INCREASE IN BANK FACILITIES AFTER YEAR END
On 27 March 2013, the Group entered into an agreement with The Royal Bank of Scotland ("RBS") and Lloyds Bank Corporate Markets ("Lloyds") to increase its bank facilities by £40 million to £100 million. The increase has a term of four years and expires in March 2017, two years after the current £60 million facility which expires in April 2015. Like the existing facility, the increase is structured as parallel sterling and euro facilities of £20 million and €23.6 million respectively. RBS and Lloyds continue to participate equally in the facilities.
The terms of the increase are a substantial improvement on those of the original facility. The arrangement fee is 1.75% and the non-utilisation fee is 1.05% per annum. The interest margin over LIBOR/EURIBOR on drawn amounts is 3.00% subject to certain covenants.
As part of this agreement, the terms of the original £60 million facility have also been improved. The non-utilisation fee has been reduced from 2.00% to 1.90% and the interest margin over LIBOR/EURIBOR has been reduced from 3.50% to 3.00% subject to certain covenants.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that this condensed consolidated financial information has been prepared in accordance with the Disclosure and Transparency Rule 4.1.12, namely:
· the financial statements, prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and
· the Chairman's Statement, Market Review, Portfolio Review and notes to the accounts include a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
On behalf of the Board
M. Fane
March 2013
This information is provided by RNS
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