REG - Graphite Enterprise - Interim Management Statement <Origin Href="QuoteRef">GPE.L</Origin>
06/09/2014 02:13
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RNS Number : 3798J
Graphite Enterprise Trust PLC
11 June 2014
11 June 2014
GRAPHITE ENTERPRISE TRUST PLC
INTERIM MANAGEMENT STATEMENT
QUARTER ENDED 30 APRIL 2014
Graphite Enterprise Trust PLC ("Graphite Enterprise" or the "Company")
presents its Interim Management Statement for the quarter ended 30 April
2014.
Performance summary
In the three months to 30 April 2014 the net asset value per share rose by
1.6% from 677.2p to 688.1p. The increase over the twelve months to that date
was 8.2%.
In a quarter when little new valuation information is usually received, the
rise in the valuation of the portfolio in local currency generated a 2.1%
increase in net asset value. This was partially offset by expenses of 0.4% and
a small adverse impact from currency movements of 0.1%.
The year end dividend of 15.5p per share (see Dividend section below) has not
been reflected in the first quarter's results.
Over the three months the share price rose by 1.5% from 563.5p to 572.0p.
While this was less than the increase in the FTSE All-Share Index of 3.5%,
over the twelve months to 30 April the share price increased by 16.3% against
a rise of 6.8% in the Index.
The discount of the share price to the net asset value at 30 April was 16.9%,
which was very similar to the level of 16.8% at 31 January.
Investment portfolio
Investment performance
The underlying value of the portfolio in local currencies rose by £10.5
million in the quarter, increasing the net asset value by 2.1%. Currency
movements reduced the net asset value by £0.3 million or 0.1%.
We had received March valuations for 62% of the portfolio by the cut-off date.
As many of those managers who did report do not prepare full portfolio
revaluations at March, the great majority of the portfolio effectively remains
at its reported December valuation.
The largest gain was generated by Graphite Capital's disposal of the
investment in Education Personnel ("EP"), which was held through Graphite
Capital Partners VII ("CPVII"). The acquirer was Intermediate Capital Group
("ICG"). Although the disposal was completed after the quarter end, the April
net asset value reflects the agreed exit price. The disposal increased the net
asset value by 1.4% in the quarter.
EP was the Company's sixth largest underlying investment at 31 January. The
sale price represents a significant uplift to the previous carrying value of
the investment. Net proceeds of £14.9 million should be received in the next
few days.
Proceeds
The portfolio generated £15.9 million of cash proceeds in the three months to
30 April. None of the underlying disposal proceeds were individually
significant. As noted above, the proceeds from the sale of EP will be
received in the second quarter.
A total of seven full exits were completed in the quarter. If the EP exit is
included, the average uplift to the previous carrying value was 59% and these
exits generated an average return of 2.3 times original cost.
In addition to these realisations, we disposed of interests in three funds
receiving proceeds of £5.0 million, and bringing total proceeds from the
portfolio to £20.9 million.
Additions
A total of £23.1 million was invested in the quarter. Of this amount,
drawdowns from funds accounted for £21.3 million and secondary purchases of
interests in two funds accounted for a further £1.8 million.
A total of 15 new underlying investments were made in the three months to 30
April. The largest was Graphite Capital's acquisition of ICR, a provider of
repair and maintenance services to the energy industry. The Company's share of
this investment was £10.9 million.
Re-investment in Education Personnel
Since the quarter end the Company has invested £9.0 million alongside
Intermediate Capital Group in its acquisition of Education Personnel from
Graphite Capital Partners VII, which will therefore remain one of the
Company's ten largest underlying investments.
CPVII was raised in 2007 and, in common with most unlisted private equity
funds, has a limited life of ten years. It is currently in its seventh year
and is therefore seeking profitable disposal opportunities for its portfolio.
CPVII chose to sell its investment in EP as it is now looking to return cash
to its investors and because, at the price agreed, it had made a high return.
Graphite Enterprise has been an investor in funds managed by ICG for 25 years.
We chose to re-invest in EP alongside ICG because we believe it to be an
extremely high quality company with strong growth prospects and, unlike CPVII,
we do not have a need to return cash to investors. Graphite Enterprise is an
existing investor in ICG Europe V, the ICG fund which has invested in EP, and
we will have an indirect interest of £1.1 million through our investment in
this fund. The total investment will therefore be £10.1 million.
Further current investment opportunities
We are reviewing a number of opportunities to make co-investments and to make
secondary purchases of fund interests. If the more advanced of these
transactions were to complete, the level of new investment in the second
quarter would be significantly higher than in the first.
Cash and liquid assets
In the three months to 30 April 2014, we invested a net £2.2 million in the
portfolio. After taking account of other net outflows and currency movements,
cash and liquid assets fell by £5.1 million to £63.1 million:
Movement in liquid assets 3 months to
£m 30 April
2014
Additions (23.1)
Proceeds generated by the portfolio* 20.9
Net cash invested in the investment portfolio (2.2)
Non-investment cash flows (2.8)
Net cash outflow (5.0)
Effect of changes in foreign exchange rates (0.1)
Total movement (5.1)
Opening cash and liquid assets 68.2
Closing cash and liquid assets 63.1
*Including income
As we will be receiving proceeds of £14.9 million from the sale of EP and have
reinvested £9.0 million, the net proceeds will be £5.9 million. After taking
account of this, the payment of the £11.3 million dividend next month (see
below) and other minor movements, the pro-forma cash balance at 31 May is
£59.2 million.
Balance sheet and commitments
The summary balance sheet and commitment position as at 30 April 2014 is set
out below. The Company was 87% invested at that date.
30 April 2014 % of total assets 31 Jan 2014 % of total assets
£m £m
Total portfolio 445.7 87.5% 433.3 86.2%
Cash and liquid assets 63.1 12.4% 68.2 13.6%
Other net current assets 0.7 0.1% 1.1 0.2%
Total assets 509.5 100.0% 502.7 100.0%
Equity shareholders' funds 501.7 493.8
Undrawn bank facility 1 97.7 97.7
Total liquidity 2 160.8 165.9
Outstanding commitments 257.1 277.3
Overcommitment 3 96.3 111.4
Overcommitment as % of shareholders' funds 19.2% 22.6%
1. £50.0 million and E58.1 million translated into sterling at period end
2. Cash and liquid assets plus undrawn borrowing facilities
3. Outstanding commitments less total liquidity
Outstanding commitments fell by £20.2 million to £257.1 million in the
quarter, primarily because £21.3 million of commitments were drawn down. No
new commitments were made in the quarter but £1.5 million of commitments were
assumed with secondary fund purchases. Currency and other movements accounted
for the remainder.
As we discussed in the year end results, many of our preferred managers raised
funds last year and we made substantial commitments to them. Therefore we
expect to make a significantly lower level of primary commitments this year
than last.
Dividend
If approved by shareholders at today's Annual General Meeting, the Company
will pay a dividend of 15.5p per share on 18 June to shareholders on the
register as at the close of business on 28 May, consisting of a final dividend
of 7.5p per share and a special dividend of 8.0p per share.
The total payable by the Company will be £11.3 million and the dividend will
be accounted for in the Company's half year results.
Events since the quarter end
Other than as discussed above, the Directors are not aware of any events or
transactions which have taken place between 30 April 2014 and the date of
publication of this statement which have had a material effect on the
financial position of the company.
Not audited or reviewed
This information has not been audited or reviewed by the Company's auditors.
For further information please contact:
Tim Spence 020 7825 5358
Emma Osborne 020 7825 5357
SUPPLEMENTARY INFORMATION
The 30 largest fund investments
The 30 largest funds by value at 30 April 2014 are set out below:
Fund Outstanding commitment£ million Year of commitment Country/ Value
region £ million
1 Graphite Capital Partners VII * / ** 7.6 2007 UK 44.5
Mid-market buy-outs
2 Graphite Capital Partners VIII * 73.3 2013 UK 25.7
Mid-market buy-outs
3 Fourth Cinven Fund ** 4.1 2006 Europe 25.6
Large buy-outs
4 Euromezzanine 5 1.8 2006 France 21.6
Mezzanine loans to mid-market buy-outs
5 Thomas H Lee Parallel Fund VI 2.9 2007 USA 21.1
Large buy-outs
6 CVC European Equity Partners V ** 5.5 2008 Global 20.7
Large buy-outs
7 Doughty Hanson & Co V ** 6.3 2006 Europe 18.1
Mid-market and large buy-outs
8 Graphite Capital Partners VI ** 3.4 2003 UK 17.5
Mid-market buy-outs
9 Candover 2005 Fund ** 0.1 2005 Europe 16.7
Large buy-outs
10 TDR Capital II 0.8 2006 Europe 16.1
Mid-market and large buy-outs
11 ICG European Fund 2006 2.7 2007 Europe 15.1
Mezzanine loans to buy-outs
12 Activa Capital Fund II 0.9 2007 France 15.1
Mid-market buy-outs
13 Apax Europe VII 0.5 2007 Global 13.8
Large buy-outs
14 Deutsche Beteiligungs AG Fund V 1.3 2006 Germany 10.7
Mid-market buy-outs
15 Bowmark Capital Partners IV - 2007 UK 10.0
Mid-market buy-outs
16 Doughty Hanson & Co IV ** 0.4 2005 Europe 7.5
Mid-market and large buy-outs
17 PAI Europe V 0.4 2007 Europe 6.4
Large buy-outs
18 Charterhouse Capital Partners IX ** 2.3 2008 Europe 6.2
Large buy-outs
19 ICG Europe Fund V 3.4 2012 Europe 5.0
Mezzanine loans to buy-outs
20 Fifth Cinven Fund 11.6 2012 Europe 5.0
Large buy-outs
21 CVC European Equity Partners Tandem 0.9 2006 Global 4.9
Large buy-outs
22 Advent Central and Eastern Europe IV 1.3 2008 Europe 4.8
Mid-market buy-outs
23 BC European Capital IX 3.9 2011 Europe 4.6
Large buy-outs
24 Permira IV ** 0.3 2006 Europe 4.3
Large buy-outs
25 CVC European Equity Partners IV ** 1.4 2005 Global 4.0
Large buy-outs
26 Segulah IV 1.2 2008 Nordic 3.8
Mid-market buy-outs
27 Charterhouse Capital Partners VIII ** 1.2 2006 Europe 3.7
Large buy-outs
28 Deutsche Beteiligungs AG Fund IV 0.3 2002 Germany 3.3
Mid-market buy-outs
29 Piper Private Equity Fund IV 1.1 2006 UK 3.2
Small buy-outs
30 Charterhouse Capital Partners VII ** 0.8 2002 Europe 3.2
Large buy-outs
Total of the largest 30 fund investments 141.7 362.2
Percentage of total investment portfolio 81.3%
* Includes the associated Top Up funds
** All or part of interest acquired through a secondary fund purchase
The 30 largest underlying INVESTMENTS
The table below presents the 30 companies in which Graphite Enterprise had the
largest investments by value at 30 April 2014. These investments may be held
directly or through funds, or in some cases in both ways. The valuations are
gross and are shown as a percentage of the total investment portfolio.
Company Manager Year of investment Country Value as a % of investment portfolio
1 Micheldever
Distributor and retailer of tyres Graphite Capital 2006 UK 4.0%
2 Education Personnel *
Provider of temporary staff for the education sector Graphite Capital 2010 UK 3.7%
3 City & County Healthcare
Provider of home care Graphite Capital 2013 UK 3.2%
4 CEVA
Manufacturer and distributor of animal health products Euromezzanine 2007 France 3.2%
5 National Fostering Agency
Provider of foster care services Graphite Capital 2012 UK 2.7%
6 ICR Group
Provider of repair and maintenance services to the energy industry Graphite Capital 2014 UK 2.4%
7 Algeco Scotsman
Supplier and operator of modular buildings TDR Capital 2007 North America 2.4%
8 U-POL
Manufacturer and distributor of automotive refinish products Graphite Capital 2010 UK 1.7%
9 London Square
Developer of residential housing Graphite Capital 2010 UK 1.5%
10 Spheros
Provider of bus climate control systems Deutsche Beteiligungs 2011 Germany 1.4%
11 David Lloyd Leisure
Operator of premium health and fitness clubs TDR Capital 2013 UK 1.4%
12 TMF
Provider of management and accounting outsourcing services Doughty Hanson 2008 Netherlands 1.3%
13 Quiron
Operator of private hospitals Doughty Hanson 2012 Spain 1.2%
14 CPA Global
Provider of patent and legal services Cinven 2012 UK 1.2%
15 Acromas
Provider of financial, motoring, travel and healthcare services Charterhouse / CVC 2007 UK 1.2%
16 Parques Reunidos
Operator of attraction parks Arle 2007 Spain 1.1%
17 Spire Healthcare
Operator of hospitals Cinven 2007 UK 1.1%
18 Frontier Medical
Manufacturer of medical devices Kester Capital 2013 UK 1.0%
19 Intermediate Capital Group **
Provider of mezzanine finance ICG 1989 UK 1.0%
20 Stork
Provider of technical engineering services Arle 2008 Netherlands 1.0%
21 InnBrighton
Operator of pubs and bars Graphite Capital 2001 UK 0.9%
22 Ceridian
Provider of payment processing services Thomas H Lee Partners 2007 USA 0.9%
23 Gerflor Manufacturer of PVC flooring ICG 2011 France 0.9%
24 Eurofiber
Provider of fibre optic network Doughty Hanson 2012 Netherlands 0.8%
25 Sebia
Provider of protein testing equipment Cinven 2010 France 0.8%
26 Guardian Financial Services
Provider of insured life and pension products Cinven 2011 UK 0.8%
27 TMP Worldwide
Provider of recruitment solutions Graphite Capital 2006 UK 0.7%
28 Abertis **
Provider of private transport and communications CVC 2010 Spain 0.7%
29 Evonik Industries **
Manufacturer of specialty chemicals CVC 2008 Germany 0.7%
30 SAFE Manufacturer of industrial components Euromezzanine 2006 France 0.7%
Total of the 30 largest underlying investments 45.6%
* Sold after the period end by Graphite Capital to ICG. The Company has
re-invested alongside ICG. See "Re-investment in Education Personnel" section
for further details.
** Quoted
Portfolio analySIS
The following five tables analyse the companies in which Graphite Enterprise
had investments at 30 April 2014.
Portfolio - Investment type
% of value of underlying investments
Large buy-outs 45.7%
Mid-market buy-outs 38.5%
Mezzanine 10.0%
Small buy-outs 4.8%
Quoted 1.0%
Total 100.0%
Portfolio - Geographic distribution *
% of value of underlying investments
UK 46.8%
France 13.6%
North America 12.4%
Germany 8.4%
Benelux 5.2%
Spain 4.7%
Scandinavia 2.9%
Greece, Ireland, Italy, Portugal 2.9%
Other Europe 1.5%
Rest of world 1.6%
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 % of value of underlying investments
2014 and onwards 4.5%
2013 12.5%
2012 12.7%
2011 12.0%
2010 15.4%
2009 1.6%
2008 8.5%
2007 16.6%
2006 10.4%
2005 and before 5.8%
Total 100.0%
Portfolio - Sector analysis
% of value ofunderlying investments
Healthcare and education 19.5%
Business services 18.2%
Industrials 16.3%
Consumer goods and services 12.7%
Leisure 9.0%
Financials 8.8%
Automotive supplies 6.2%
Technology and telecommunications 3.9%
Media 3.4%
Chemicals 2.0%
Total 100.0%
Quoted equity holdings at 30 April 2014
Underlying company Ticker £m % of value of Investment portfolio
Intermediate Capital Group * ICP 4.5 1.0%
Abertis ABE 3.2 0.7%
Evonik Industries EVK 3.2 0.7%
Homag Group HG1 2.8 0.6%
Aramark Corporation ARMK 2.4 0.5%
Tumi TUMI 2.1 0.5%
Partnership PA. 1.7 0.4%
West Corporation WSTC 1.4 0.3%
Merlin MERL 1.3 0.3%
Bankrate RATE 1.1 0.3%
Hugo Boss BOSS 1.0 0.2%
The Nielsen Company NLSN 1.0 0.2%
Atos ATOS 0.9 0.2%
SouFun SFUN 0.8 0.2%
Sterling Financial Corporation STSA 0.8 0.2%
MoneyGram International MGI 0.6 0.1%
First BanCorp FBP 0.5 0.1%
Just Retirement JRG 0.3 0.1%
Freescale FSL 0.3 0.1%
ProSiebenSat.1 PSM 0.1 0.0%
Total 30.0 6.7%
* Investment held directly. All other quoted holdings are held indirectly
through third party funds and may have restrictions on their sale.
The following table analyses the closing portfolio by value.
Portfolio - Graphite and third party investments
£ million Value of third party investments Value of Graphite investments Total value
Fund investments 302.6 88.9 391.5
Direct and co-investments 35.4 18.8 54.2
Total portfolio 338.0 107.7 445.7
Graphite investments 24.2%
Third party fund investments 67.9%
Third party direct and co-investments 7.9%
Investment activity
The following two tables analyse the investment activity of Graphite
Enterprise in the three months to 30 April 2014.
Largest new underlying investments
Investment Description Country Cost£ million
ICR Provider of repair and maintenance to the energy industry UK 10.9
CeramTec Manufacturer of high performance ceramics Germany 1.2
iPrism E-wholesaler of insurance policies UK 1.1
Skillsoft Provider of 'off-the-shelf' e-learning content Ireland 0.9
Dahlback * Operator of retail bakery chain Germany 0.7
Total of 5 largest new underlying investments 14.8
* Acquired from a current fund investment of the Company and therefore also a
disposal in the period.
Largest underlying realisations
Investment Manager Realisation type Proceeds£ million
HellermanTyton Doughty Hanson Public offering 1.9
Leading Edge Graphite Capital Trade 1.6
Avio Cinven Partial 1.5
Stonegate Pub Company TDR Capital Refinancing 1.3
Quorn ICG Mezzanine repayment 1.2
Total of 5 largest underlying realisations 7.5
Commitments analysis
The following four tables analyse Graphite Enterprise's commitments at 30
April 2014.
Commitments Original commitment *£ million Outstanding commitment£ million Average drawdown percentage % of commitments
Funds in investment period 319.8 214.2 33.0% 83.3%
Funds post investment period 577.0 42.9 92.6% 16.7%
Total 896.8 257.1 71.3% 100.0%
* Original commitments are translated at 30 April 2014 exchange rates
Commitments - remaining investment period % of commitments
> 5 years 6.3%
4-5 years 28.1%
3-4 years 38.1%
2-3 years 6.3%
1-2 years 0.8%
<1 year 3.7%
Investment period complete 16.7%
Total 100.0%
Movement in commitments in the three months to 30 April 2014 £m
Opening 277.3
Drawdowns * (21.2)
New commitments arising through secondary purchases 1.5
Release of commitments through secondary disposals (1.6)
Currency (0.1)
Other 1.2
Closing 257.1
* Excludes costs incurred in respect of new investments
New commitments in the three months to 30 April 2014
Fund Strategy Geography £ million
Commitments arising from secondary purchases
TowerBrook III Upper mid-market buy-out US/Europe 1.3
Graphite Capital Partners VI Mid-market buy-out UK 0.2
Total 1.5
CURRENCY EXPOSURE
30 April2014£m 30 April2014%
Portfolio *
- sterling 216.1 48.5
- euro 145.7 32.7
- other 83.9 18.8
Total 445.7 100.0
* Currency exposure is calculated by reference to the location of the
underlying portfolio companies' headquarters.
30 April2014£m 30 April2014%
Outstanding commitments
- sterling 105.4 41.0
- euro 144.7 56.3
- other 7.0 2.7
Total 257.1 100.0
NOTES
Graphite Enterprise Trust PLC
Graphite Enterprise Trust PLC ("Graphite Enterprise" or "the Company") aims to
provide shareholders with long term capital growth through investment in
unquoted companies. To achieve this, the Company invests in private equity
funds and also directly in private companies.
The Company was listed in 1981 and has invested exclusively in private equity
and has had the same manager throughout its life.
Graphite Enterprise provides access to a diverse portfolio of buy-outs of
mature, profitable companies in established European private equity markets.
The Company invests in UK-based mid-market companies through funds managed
directly by Graphite Capital. Typically these will make up 20-25% of the
portfolio. Investments in other UK companies and in overseas markets are made
through funds managed by third parties. The Company does not invest in start
ups or early stage businesses. Direct investments in companies may be made
alongside both Graphite Capital and third party funds.
Shareholders of Graphite Enterprise gain exposure to a diverse portfolio of
buy-outs of mature, profitable companies in established European private
equity markets, with nearly 400 underlying companies. Graphite Capital
directly manages many of the largest companies in the portfolio.
Since inception, the Company has generated a return of 28 times the capital
raised.
www.graphite-enterprise.com
Graphite Capital
Graphite Capital is one of the UK's leading mid-market private equity firms
with over £1.5 billion of funds under management. It has raised and managed
funds for 33 years. The senior management team has worked together for 17
years.
Graphite Capital manages both direct investments in portfolio companies and
private equity fund investments.
Direct investments are predominantly made through limited life funds which
have a global institutional investor base. The focus of direct investments is
on UK mid-market buy-outs of companies valued at between £40 million and £200
million across a range of industry sectors.
Fund investments are made exclusively by Graphite Enterprise. Fund investments
focus mainly on European buy-out funds. The investment strategy is to back
private equity managers with strong track records operating in mature markets,
with the aim of building long term relationships.
As it has a long experience both of managing its own funds and of investing in
third party funds, Graphite Capital has a highly distinctive perspective when
assessing fund and co-investment opportunities. Graphite Enterprise benefits
from both the expertise of a dedicated fund investment team as well as the
insights of Graphite Capital's direct investment team.
www.graphitecapital.com
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