REG - Graphite Enterprise - Interim Management Statement <Origin Href="QuoteRef">GPE.L</Origin>

ICG Enterprise TrustAnnouncement

03/12/2014 07:10

RNS Number : 6717Y
Graphite Enterprise Trust PLC
03 December 2014
3 December 2014
GRAPHITE ENTERPRISE TRUST PLC
INTERIM MANAGEMENT STATEMENT
QUARTER ENDED 31 OCTOBER 2014
Graphite Enterprise Trust PLC ("Graphite Enterprise" or "the Company") presents its Interim Management Statement for the quarter ended 31 October 2014. 
Performance summary1
The net asset value at 31 October was 679.4p, which represented a marginal decrease of 0.3% in the quarter, bringing the net rise in the year to date to 2.6%. Over the three months, the share price increased by 4.2% and the FTSE All-Share Index rose by 3.1%.
As few of the managers of our fund portfolio revalue their investments at September, the great majority of the portfolio effectively remains at its reported June valuation. The valuation of the portfolio rose in local currencies in the three months to October, however this was offset by adverse currency movements and expenses.
In the nine months to October, the value of the portfolio in local currencies increased by 7.3%. As the Company was 86% invested at the start of the year, this generated a 6.4% increase in the net asset value. The impact of currency movements on euro-denominated investments reduced the NAV by 2.3%, and expenses and other items reduced it by a further 1.5%, bringing the net increase to 2.6%. 
Over the five years to 31 October, the NAV increased by 74.8% and the share price by 84.6%, while the Index increased by 58.1%.
At 31 October the discount of the share price to the net asset value was 15.7%. This was slightly wider than the 14.7% at 31 July and slightly narrower than the 16.8% at 31 January.
1. All performance figures are on a total return basis, including the effect of re-invested dividends.
Investment portfolio 
Investment performance
The underlying value of the portfolio in local currencies rose by 2.8 million in the quarter, increasing the portfolio by 0.7% and the net asset value by 0.6%. This was partially offset by adverse currency movements which reduced the net asset value by 1.5 million or 0.3%. 
Proceeds
The portfolio generated 20.5 million of cash proceeds in the three months to 31 October. Eight full realisations were completed in the quarter and these accounted for 51.2% of the proceeds received. 
The amounts received in the quarter brought total proceeds received from the portfolio in the year to date to 102.9 million, or 23.7% of the opening portfolio. The full realisations brought the number completed in the year to 24 and these accounted for 65.9 million or 64% of the total proceeds received. The average uplift to the previous carrying value was 39% and the average return over the life of the investments was 1.9times original cost. The remaining 37.0 million or 36% of total proceeds was generated by a combination of refinancings, IPOs, sell-downs of listed holdings by third party managers and other partial realisations.
In addition to these realisations, interests in three funds were sold in the secondary market in the first half of the year. The amounts received of 21.1million bring total proceeds from the portfolio for the nine months to 124.0 million.
Additions
A total of 41.8 million was invested in the quarter. This was unusually high as a number of the investments completed had been initiated earlier in the year.
Secondary interests in two funds, PAI Europe V and Graphite Capital PartnersVI, were acquired in the period. These accounted for 18.8million or 45% of the amount invested. Co-investments totalling 11.1 million were made in two companies, the largest of which was in Skillsoft, a provider of e-learning content, alongside Charterhouse Capital Partners. The remaining amount invested was accounted for by 7.6million of drawdowns by funds and 4.3million of direct investment in three companies managed by Graphite Capital.
A total of 13 new underlying investments were made in the quarter, the largest of which were the two co-investments. This brought the total for the year to date to 53. 
The 41.8 million invested in the quarter brings the total invested in the first nine months to 95.1 million. This already exceeds the total of 90.6 million invested in the previous full financial year. 
Investments in secondaries, co-investments and Graphite Capital buy-outs totalled 64.9million in the nine months. More than two thirds of new investment was therefore in assets over which Graphite Capital as Manager had full discretion.
Since the quarter end, 8.7 million has been invested in Human Capital Investment Group ("HCIG"), a provider of recruitment services, through Graphite Capital Partners VIII. HCIG is now the Company's 5th largest underlying investment.
New commitments
The Company made two new commitments to buy-out funds in the quarter. The first was of 8 million to Bain Capital Europe IV and the second was of 15 million to Silverfleet Capital Partners II. Both of these are new manager relationships for Graphite Enterprise.
Cash and liquid assets
A net 21.3 million was invested in the portfolio in the three months to 31 October. Including other net outflows and of currency movements, cash and liquid assets fell by 23.3million to 77.8 million. This was 9.6 million higher than at the start of the financial year.
Movement in liquid assets
3 months to
9 months to
m
31 October 2014
31 October 2014
Additions 
(41.8)
(95.1)
Proceeds generated by the portfolio*
20.5
123.6
Net cash invested in the investment portfolio
(21.3)
28.5
Non-investment cash flows
(1.9)
(18.5)
Net cash outflow
(23.2)
10.0
Effect of changes in foreign exchange rates
(0.1)
(0.4)
Total movement
(23.3)
9.6
Opening cash and liquid assets
101.1
68.2
Closing cash and liquid assets
77.8
77.8
*Including income


After taking account of the 8.7 million investment in HCIG and other net cash inflows of 3.0 million, the cash balance at 28 November was 72.1 million.
Balance sheet and commitments
The summary balance sheet and commitment position at 31 October 2014 is set out below. The Company was 84% invested at that date.

31 October 2014
m
% of total assets
31 Jan 2014
m
% of total assets
Total portfolio
425.2
84.4%
433.3
88.8%
Cash and liquid assets
77.8
15.4%
68.2
10.9%
Other net current assets
1.1
0.2%
1.2
0.3%
Total assets
504.1
100.0%
502.7
100.0%
Equity shareholders' funds
495.4

493.8

Undrawn bank facility 1
95.5

97.7

Total liquidity 2
173.3

165.9

Outstanding commitments
247.7

277.3

Overcommitment 3
74.4

111.4

Overcommitment as % of shareholders' funds
15.0%

22.6%

1. 50.0 million and 58.1 million translated into sterling at period end
2. Cash and liquid assets plus undrawn borrowing facilities
3. Outstanding commitments less total liquidity
Outstanding commitments increased by 7.0 million to 247.7 million in the quarter, primarily due to new primary commitments of 18.1 million (23.0 million) which were partially offset by drawdowns.
Events since the quarter end
Other than as discussed above, the Directors are not aware of any events or transactions which have taken place between 31 October 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 31 October 2014 are set out below:

Fund
Outstanding commitment
 million
Year of commitment
Country/
region
Value
 million
1
Graphite Capital Partners VIII * 
70.1
2013
UK
27.9

Mid-market buy-outs
2
Graphite Capital Partners VI ** 
5.4
2003
UK
27.0

Mid-market buy-outs
3
CVC European Equity Partners V **
3.1
2008
Global
21.0

Large buy-outs
4
Graphite Capital Partners VII * / **
7.6
2007
UK
19.3

Mid-market buy-outs 
5
Fourth Cinven Fund **
3.8
2006
Europe
19.3

Large buy-outs
6
Doughty Hanson & Co V **
6.0
2006
Europe
18.6

Mid-market and large buy-outs 
7
Candover 2005 Fund **
0.1
2005
Europe
16.9

Large buy-outs
8
Thomas H Lee Parallel Fund VI
1.8
2007
USA
16.0

Large buy-outs
9
ICG European Fund 2006
-
2007
Europe
13.7

Mezzanine loans to buy-outs
10
TDR Capital II
0.8
2006
Europe
13.7

Mid-market and large buy-outs
11
Activa Capital Fund II
1.0
2007
France
12.8

Mid-market buy-outs
12
PAI Europe V **
1.2
2007
Europe
12.7

Large buy-outs
13
Deutsche Beteiligungs AG Fund V 
1.7
2006
Germany
10.8

Mid-market buy-outs
14
Bowmark Capital Partners IV
-
2007
UK
10.7

Mid-market buy-outs
15
Fifth Cinven Fund
9.5
2012
Europe
6.4

Large buy-outs
16
Euromezzanine 5
1.7
2006
France
6.2

Mezzanine loans to mid-market buy-outs
17
Doughty Hanson & Co IV
0.3
2005
Europe
 5.9

Mid-market and large buy-outs
18
ICG Europe V
2.0
2012
Europe
5.7

Mezzanine loans to buy-outs
19
Charterhouse Capital Partners IX **
1.9
2008
Europe
5.2

Large buy-outs
20
Advent Central and Eastern Europe IV 
1.3
2008
Europe
4.5

Mid-market buy-outs
21
BC European Capital IX
3.7
2011
Europe
4.2

Large buy-outs
22
Segulah IV
1.1
2008
Nordic
4.0

Mid-market buy-outs
23
TowerBrook III **
1.3
2007
Europe/ USA
3.9

Mid-market and large buy-outs
24
Permira IV **
0.3
2006
Europe
3.6

Large buy-outs
25
CVC European Equity Partners Tandem
0.9
2006
Global
3.6

Large buy-outs
26
Deutsche Beteiligungs AG Fund IV
0.3
2002
Germany
3.5

Mid-market buy-outs
27
Piper Private Equity Fund IV
1.1
2006
UK
3.4

Small buy-outs
28
CVC European Equity Partners IV **
1.4
2005
Global
3.0

Large buy-outs
29
Trident Private Equity III
-
2009
UK
3.0

Small buy-outs
30
GCP Capital Partners Europe II **
1.6
2013
UK
2.9

Small buy-outs







Total of the largest 30 fund investments
131.0


309.4

Percentage of total investment portfolio



72.8%
* Includes the associated Top Up fund(s)
** 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 31 October 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
5.5%
2
ICR Group 





Provider of repair and maintenance services to the energy industry
Graphite Capital
2014
UK
3.6%
3
City & County Healthcare Group





Provider of home care
Graphite Capital
2013
UK
3.3%
4
Education Personnel





Provider of temporary staff for the education sector 
ICG 
2014
UK
2.3%
5
Human Capital Investment Group +





Provider of recruitment services
Graphite Capital
2014
UK
2.1%
6
Algeco Scotsman





Supplier and operator of modular buildings 
TDR Capital 
2007
USA 
2.0%
7
National Fostering Agency 





Provider of foster care services 
Graphite Capital
2012
UK
2.0%
8
Skillsoft





Provider of 'off the shelf' e-learning content
Charterhouse
2014
Ireland
1.9%
9
U-POL





Manufacturer and distributor of automotive refinish products
Graphite Capital
2010
UK
1.6%
10
Quiron #





Operator of private hospitals
Doughty Hanson
2012
Spain
1.5%
11
David Lloyd Leisure 





Operator of premium health and fitness clubs
TDR Capital
2013
UK
1.5%
12
TMF





Provider of management and accounting outsourcing services
Doughty Hanson
2008
Netherlands
1.4%
13
CPA Global





Provider of patent and legal services
Cinven
2012
UK
1.3%
14
Parques Reunidos 





Operator of attraction parks 
Arle 
2007
Spain 
1.3%
15
Spheros





Provider of bus climate control systems
Deutsche Beteiligungs 
2011
Germany
1.3%
16
The Laine Pub Company





Operator of pubs and bars
Graphite Capital
2014
UK
1.3%
17
Standard Brands





Manufacturer of fire lighting products
Graphite Capital
2001
UK
1.2%
18
Frontier Medical





Manufacturer of medical devices
Kester Capital
2013
UK
1.1%
19
Stork 





Provider of technical engineering services
Arle
2008
Netherlands
1.1%
20
R&R Ice Cream 





Manufacturer and distributor of ice cream products
PAI Partners
2013
UK
1.0%
21
TMP





Provider of recruitment services
Graphite Capital
2006
UK
1.0%
22
Intermediate Capital Group *





Provider of mezzanine finance
ICG
1989
UK
1.0%
23
Sebia





Provider of protein testing equipment
Cinven
2010
France
1.0%
24
Spire Healthcare *





Operator of hospitals 
Cinven
2007
UK
0.9%
25
Co-investment **





Provider of business services
Large buy-out manager
2014
Europe
0.9%
26
Eurofiber





Provider of fibre optic networks
Doughty Hanson
2012
Netherlands
0.9%
27
SAFE





Manufacturer of industrial components
Euromezzanine
2006
France
0.9%
28
Guardian Financial Services 





Provider of insured life and pension products
Cinven
2011
UK
0.9%
29
Cognito





Supplier of communications equipment, software and services
Graphite Capital
2002
UK
0.9%
30
Gerflor





Manufacturer of PVC flooring
ICG
2011
France
0.9%

Total of the 30 largest underlying investments


47.6%
+ Interest in Human Capital Investment Group ("HCIG") was acquired on 26 November. Top 30 companies presented on a pro forma basis, as if HCIG had been acquired at 31 October.
# Sale was announced in July but is not expected to complete until the end of the year.
* Quoted
** We are not permitted to disclose the details of this co-investment under the terms of a confidentiality agreement.
Portfolio analySIS
The following five tables analyse the companies in which Graphite Enterprise had investments at 31 October 2014.
Portfolio - Investment type


% of value of underlying investments
Large buy-outs

47.8%
Mid-market buy-outs

37.3%
Mezzanine

9.3%
Small buy-outs

4.7%
Quoted

0.9%
Total

100.0%
Portfolio - Geographic distribution*


% of value of underlying investments
UK

47.9%
North America

11.9%
France

11.3%
Germany

8.9%
Benelux

5.5%
Spain

5.1%
Scandinavia

4.1%
Other Europe

4.8%
Rest of world

0.5%
Total

100.0%
NB: Total Continental Europe

39.7%
* Location of headquarters of underlying companies in the portfolio. Does not necessarily reflect countries to which companies have economic exposure.
Portfolio - Year of investment 

Valuation as multiple of cost
% of value of underlying investments
2014 and onwards 

1.0x
16.6%
2013

1.1x
13.9%
2012

1.5x
12.8%
2011

1.5x
10.3%
2010

1.5x
9.1%
2009

2.0x
1.5%
2008

1.1x
8.2%
2007

1.6x
10.5%
2006

1.5x
12.3%
2005 and before

1.6x
4.8%
Total

1.4x
100.0%
Portfolio - Sector analysis


% of value of
underlying 
investments
Healthcare and education

19.2%
Industrials

18.3%
Business services

18.0%
Consumer goods and services

11.8%
Leisure

9.2%
Automotive supplies

8.0%
Financials

7.5%
Technology and telecommunications

4.1%
Media

2.0%
Chemicals

1.9%
Total

100.0%
Quoted equity holdings at 31 October 2014
All quoted holdings, other than Intermediate Capital Group, are held indirectly through third party funds and may have restrictions on their sale. The timing of any disposal of these interests is determined by the managers of those funds.
Company
Ticker
m
% of value of 
Investment portfolio
Intermediate Capital Group 
ICP
 4.1 
1.0%
Spire Healthcare
SPI
 4.0 
0.9%
Abertis
ABE
 3.3 
0.8%
VWR International
VWR
3.0
0.7%
Acromas 
SAGA
 2.9 
0.7%
Elior
ELIOR
 2.2 
0.5%
Evonik Industries
EVK
 2.1 
0.5%
West Corporation
WSTC
 1.9 
0.5%
Aramark Corporation
ARMK
 1.8 
0.4%
Atos
ATO
 1.6 
0.4%
Partnership
PA
 1.3 
0.3%
Cerved
CERV
 1.1 
0.3%
Tumi
TUMI
 1.0 
0.2%
Merlin
MERL
 0.9 
0.2%
Card Factory
CARD
 0.8 
0.2%
Hugo Boss
BOSS
 0.8 
0.2%
ComHem
COMH
 0.7 
0.2%
The Nielsen company
NLSN
 0.7 
0.2%
Others

3.2
0.7%
Total

 37.4
8.9%
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

266.8
75.4
342.2
Direct and co-investments

57.3
25.7
83.0
Total portfolio

324.1
101.1
425.2
Graphite investments



23.8%
Third party fund investments - primary



50.0%
Third party fund investments - secondary



12.7%
Third party co-investments



13.5%
Investment activity
The following two tables analyse the investment activity of Graphite Enterprise in the three months to 31 October 2014.
Largest new underlying investments
Investment
Description
Country
Cost
 million
Co-investment*
Provider of business services
Europe
4.0
Lindorff
Provider of debt purchase and outsourced debt collection services
Norway
0.8 
GHD
Provider of homecare services
Germany
 0.6 
Domus
Operator of retirement homes
France
 0.5 
Vedici
Operator of private hospitals
France
 0.4 
Total of 5 largest new underlying investments

6.3 
*We are not permitted to disclose the details of this co-investment under a confidentiality agreement.
Largest underlying realisations 
Investment
Manager
Realisation type
Proceeds
 million
Acosta
TH Lee
Secondary
2.7
Gondola Group
Cinven
Secondary
2.3
Nuance
PAI
Trade
 2.3 
Ergalis
Activa
Trade
 1.7 
JAC Group
Bowmark
Secondary
 1.6 
Total of 5 largest underlying realisations

10.6
Commitments analysis
The following four tables analyse Graphite Enterprise's commitments at 31 October 2014.
Commitments 
Original commitment1
 million
Outstanding commitment
 million
Average drawdown percentage
% of commitments
Funds not yet in investment period
18.0
18.0
-
7.3%
Funds in investment period
263.8
183.8
30.3%
74.2%
Funds post investment period
597.8
45.9
92.3%
18.5%
Total
879.6
247.7
71.8%
100.0%
1 Original commitments are translated at 31 October 2014 exchange rates
Commitments - remaining investment period
% of commitments
Investment period not commenced
7.3%
4-5 years
26.8%
3-4 years
8.6%
2-3 years
33.7%
1-2 years
3.7%
<1 year
1.4%
Investment period complete
18.5%
Total
100.0%
Movement in commitments in the three months to 31 October 2014
million
Opening
240.7
Drawdowns*
(11.6)
New commitments arising through primary purchases
18.1
New commitments arising through secondary purchases
2.4
Currency
(1.2)
Other
(0.7)
Closing
247.7
*Excludes legal fees in respect of new investments
New commitments in the three months to 31 October 2014
Fund
Strategy
Geography
 million
New primary commitments


Silverfleet Capital Partners II
Mid-market buy-outs
Europe
11.8
Bain Capital Europe IV
Upper mid-market buy-outs
Europe
6.3



Commitments arising from secondary purchases


Graphite Capital Partners VI
Mid-market buy-outs
UK
2.0
PAI Europe V
Large buy-outs
Europe
0.4
Total


20.5
CURRENCY EXPOSURE

31 October
2014
 million
31 October
2014
%
Portfolio*


- sterling
213.0
50.1
- euro
134.6
31.7
- other
77.6
18.2
Total
425.2
100.0
*Currency exposure is calculated by reference to the location of the underlying portfolio companies' headquarters.

31 October
2014
 million
31 October
2014
%
Outstanding commitments


- sterling
101.4
41.0
- euro
139.3
56.2
- other
7.0
2.8
Total
247.7
100.0
NOTES
Graphite Enterprise Trust PLC
Graphite Enterprise Trust PLC ("Graphite Enterprise" or "the Company") aims to provide shareholders with long term capital growth through investment in unquoted companies. To achieve this, the Company invests in private equity funds and also directly in private companies.
The Company has been listed on the London Stock Exchange since 1981 and has invested exclusively in private equity and has had the same manager throughout its life.
Graphite Enterprise provides access to a diverse portfolio of buy-outs of mature, profitable companies in established 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 increased the amount of capital raised 28 times. 
www.graphite-enterprise.com
Graphite Capital
Graphite Capital is one of the UK's leading mid-market private equity firms with over 1.4billion 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 institutional funds with a global investor base. The focus of direct investments is on UK mid-market buy-outs of companies valued at between 25 million and 200 million across a range of industry sectors.
Fund investments are made exclusively by Graphite Enterprise. Fund investments focus principally on European buy-out funds. The investment strategy is to back private equity managers with strong track records operating in mature markets, with the aim of building long term relationships.
As Graphite Capital has a long experience both of managing its own funds and of investing in third party funds, it has an unusually broad perspective when assessing fund and co-investment opportunities. Graphite Enterprise benefits from both the expertise of a dedicated fund investment team as well as the insights of Graphite Capital's direct investment team.
www.graphitecapital.com

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