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

ICG Enterprise TrustAnnouncement

16/07/2015 10:35

RNS Number : 9249P
Graphite Enterprise Trust PLC
11 June 2015
11 June 2015
GRAPHITE ENTERPRISE TRUST PLC
INTERIM MANAGEMENT STATEMENT
QUARTER ENDED 30 APRIL 2015
Graphite Enterprise Trust PLC ("Graphite Enterprise" or "the Company") presents its Interim Management Statement for the quarter ended 30 April 2015. 
Performance summary1
In the three months to 30 April, the net asset value per share increased by 0.4% to 697.9p and the share price by 0.5% to 578.0p. Over the same period, the FTSE All-Share Index rose by 5.1%. 
In a quarter when little new valuation information is usually received, the rise in the valuation of the portfolio in local currencies generated a 2.3% increase in the net asset value. This was partially offset by the impact of adverse currency movements which reduced the NAV by 1.5% and by other costs which reduced it by a further 0.4%. 
Over the five years to 30 April, the NAV and share price have both outperformed the Index, rising by 57.3% and 92.1% respectively, while the Index has increased by 53.8%.
At the quarter end, the discount of the share price to the net asset value was 17.2%, which was almost unchanged from the level of 17.3% at 31 January.
1. All performance figures are on a total return basis, including the effect of re-invested dividends.
Investment portfolio 
Investment performance
In the quarter to April, the value of the portfolio in local currencies increased by 11.9million or by 2.8%. Graphite Capital's sale of National Fostering Agency generated the largest gain, accounting for a 0.6% increase in value of the portfolio. As few of the managers of our fund portfolio revalue their investments at March, the great majority of the portfolio effectively remains at its reported December valuation. 
The Company was 84% invested at the start of the year with the result that the 2.8% increase in the portfolio generated a 2.3% increase in the net asset value. As noted above, the adverse effect of currency movements and costs reduced the NAV by a total of 1.9%. The share buy-backs completed in the period had a small positive impact, bringing the net increase to 0.4%. 
Proceeds
The portfolio generated 28.8 million of cash proceeds in the three months to 30 April. Nine full realisations were completed in the quarter at an average uplift to the manager's previous carrying value of 33% and at an average total return of 1.9 times original cost. 
The sale of National Fostering Agency has been the most significant disposal achieved this year. It generated 2.2 million of proceeds in the quarter and a further 9.7 million in early May. Including these further proceeds, the total of 38.5 million received represents 8.9% of the opening portfolio which is broadly in line with the rate of realisations seen last year.
Additions
A total of 18.4 million was invested in the quarter. 10.4 million or 57% of this was in two discretionary investments, both with the same manager. In February, we acquired a further position in BCPartners IX in the secondary market for 7.2million and in the same month we made a 3.2 million co-investment alongside that fund in PetSmart, the leading retailer of pet products and services in North America.
Almost all of the balance was drawn down by funds. The total of 8.0 million was lower than the rate of drawdown experienced last year. This was primarily because Graphite Capital Partners VIII did not make any drawdowns in the period. 
A total of ten new underlying investments were made in the quarter, the largest of which was PetSmart where the total invested (including the amount through the fund) was 4.7million. 
Cash 
The portfolio generated a net 4.3 million* of cash in the three months to 30 April. After taking account of other net outflows, cash fell by 1.4million to 88.7 million. 
Movement in liquid assets
3 months to
m
30 April 2015
Additions* 
(24.5)
Proceeds generated by the portfolio**
28.8
Net cash generated by the investment portfolio
4.3
Non-investment cash flows
(4.5)
Share buy-backs
(0.9)
Net cash outflow
(1.1)
Effect of changes in foreign exchange rates
(0.3)
Total movement
(1.4)
Opening cash and liquid assets
90.1
Closing cash and liquid assets
88.7
*Including 6.1m of deferred consideration paid, which was accrued at the year end
**Including income

At 10 June the cash balance had increased by 7.2 million to 95.9million. The 9.7 million of further proceeds received from National Fostering Agency and other net cash inflows of 0.1 million were partially offset by share buy-backs of 2.6million (see below). On a pro forma basis, cash falls to 84.7 million if the dividend of 11.2million to be paid in June (see below) is deducted.
Balance sheet and commitments
The Chairman's Statement in the recent annual report advised shareholders that "We may use share buy-backs as a means of reducing the cash balance." The portfolio has continued to generate net cash in the first four months of the financial year and markets for new investments have remained challenging. As a result the cash balance has remained high. The Company has therefore started to buy back its shares. The first purchases were made at the end of April with 150,000 shares being acquired by the quarter end for consideration of 0.9 million. A further 450,000 shares have been bought back since then for 2.6 million. The average price paid to date has been 572.6p and the average discount to the estimated daily NAV per share was more than 15%.
The summary balance sheet and commitment position at 30 April 2015 is set out below. The Company was 83% invested at that date.

30 April 2015
m 
% of total assets
31 Jan 2015
m
% of total assets
Total portfolio
426.3
82.5%
431.9
83.6%
Cash and liquid assets
88.7
17.2%
90.1
17.4%
Other net current assets/(liabilities)
1.6
0.3%
(5.4)
(1.0)%
Total assets
516.6
100.0%
516.6
100.0%
Equity shareholders' funds
507.8

506.9

Undrawn bank facility 1
95.0

96.4

Total liquidity 2
183.7

186.5

Outstanding commitments
227.8

234.0

Overcommitment 3
44.1

47.5

Overcommitment as % of shareholders' funds
8.7%

9.4%

1. 50.0 million and 61.7 million translated into sterling at period end
2. Cash and liquid assets plus undrawn borrowing facilities
3. Outstanding commitments less total liquidity
No new primary commitments were made in the period, although a commitment of 4.9million was acquired with the secondary purchase of the interest in BC Partners IX discussed above and there were other increases of 1.5 million. As 8.0 million of commitments were drawn down and currency movements reduced commitments by 4.6million, the level of outstanding commitments fell by 6.2 million to 227.8 million in the quarter. We expect to complete a number of new fund commitments in the coming months. 
Dividend
If approved by shareholders at the forthcoming AGM, the Company will pay a final dividend of 10.0p per share and a special dividend of 5.5p per share on 18 June. The total distributed to shareholders will be 11.2million.
The shares have been trading without rights to the dividends since 28 May. In isolation this reduced the net asset value per share by 15.5p. 
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 2015 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 table below summarises the 30 largest funds by value at 30 April 2015.

Fund
Outstanding commitment
m
Year of commitment
Country/
region
Value
m
1
Graphite Capital Partners VIII *




Mid-market buy-outs
61.2
2013
UK
36.0
2
Graphite Capital Partners VI **




Mid-market buy-outs
5.4
2003
UK
26.1
3
Graphite Capital Partners VII * / **




Mid-market buy-outs
7.6
2007
UK
22.6
4
CVC European Equity Partners V **




Large buy-outs
2.1
2008
Europe/USA
22.0
5
Candover 2005 Fund **




Large buy-outs
0.1
2005
Europe
14.5
6
Thomas H Lee Parallel Fund VI




Large buy-outs
1.7
2007
USA
14.5
7
TDR Capital II




Mid-market and large buy-outs
0.7
2006
Europe
13.0
8
BC European Capital IX **




Large buy-outs
6.4
2011
Europe
12.6
9
Fourth Cinven Fund **




Large buy-outs
3.5
2006
Europe
12.1
10
Doughty Hanson & Co V **




Mid-market and large buy-outs
5.6
2006
Europe
11.9
11
Activa Capital Fund II




Mid-market buy-outs
0.7
2007
France
11.5
12
Bowmark Capital Partners IV




Mid-market buy-outs
-
2007
UK
11.2
13
PAI Europe V **




Mid-market and large buy-outs
1.1
2007
Europe
10.7
14
Deutsche Beteiligungs AG Fund V




Mid-market buy-outs
1.0
2006
Germany
9.6
15
Fifth Cinven Fund




Large buy-outs
7.6
2012
Europe
7.3
16
Landmark Acquisition Fund VIII **




Mezzanine
10.5
2014
Europe
6.7
17
ICG Europe V




Mezzanine
0.5
2012
Europe
6.7
18
Doughty Hanson & Co IV




Mid-market and large buy-outs
0.3
2005
Europe
5.6
19
Advent Central and Eastern Europe IV




Mid-market buy-outs
1.2
2008
Eastern Europe
4.7
20
Charterhouse Capital Partners IX **




Large buy-outs
1.1
2008
Europe
4.4
21
Deutsche Beteiligungs AG Fund VI




Mid-market buy-outs
3.1
2012
Germany
4.3
22
Euromezzanine 5




Mezzanine
1.6
2006
France
3.8
23
GCP Capital Partners Europe II **




Small buy-outs
1.1
2013
UK
3.5
24
TowerBrook III **




Mid-market and large buy-outs
1.3
2007
USA/Europe
3.5
25
Segulah IV




Mid-market buy-outs
1.3
2008
Nordic
3.4
26
Trident Private Equity III




Small buy-outs
-
2009
UK
3.3
27
IK VII




Mid-market buy-outs
3.9
2013
Europe
3.3
28
CVC European Equity Partners IV **




Large buy-outs
1.3
2005
Europe
3.1
29
Hollyport Secondary Opportunities IV




Secondaries
1.2
2013
Global
3.0
30
Charterhouse Capital Partners VIII **




Large buy-outs
0.3
2006
Europe
2.9





Total of 30 largest underlying funds 
133.4


297.8
Percentage of total investment portfolio



69.9%
* Includes the associated Top Up Fund(s)
** All or part of interest acquired through a secondary market 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 2015. 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
5.4%
2
City & County Healthcare Group





Provider of home care services
Graphite Capital
2013
UK
3.2%
3
ICR Group 





Provider of repair and maintenance services to the energy industry
Graphite Capital
2014
UK
3.1%
4
Education Personnel +





Provider of temporary staff for the education sector 
ICG 
2014
UK
2.4%
5
Human Capital Investment Group 





Provider of recruitment services
Graphite Capital
2014
UK
2.0%
6
Skillsoft +





Provider of off the shelf e-learning content
Charterhouse
2014
Ireland
2.0%
7
Algeco Scotsman





Supplier and operator of modular buildings 
TDR Capital 
2007
USA 
1.9%
8
U-POL





Manufacturer and distributor of automotive refinish products
Graphite Capital
2010
UK
1.5%
9
David Lloyd Leisure + 





Operator of premium health and fitness clubs
TDR Capital
2013
UK
1.5%
10
Standard Brands +





Manufacturer of fire lighting products
Graphite Capital
2001
UK
1.4%
11
Spheros +





Provider of bus climate control systems
Deutsche Beteiligungs 
2011
Germany
1.4%
12
CPA Global +





Provider of patent and legal services
Cinven
2012
UK
1.3%
13
TMF





Provider of management and accounting outsourcing services
Doughty Hanson
2008
Netherlands
1.3%
14
Intermediate Capital Group +/ *





Provider of mezzanine finance
ICG
1989
UK
1.2%
15
Parques Reunidos 





Operator of attraction parks 
Arle 
2007
Spain 
1.2%
16
The Laine Pub Company +





Operator of pubs and bars
Graphite Capital
2014
UK
1.2%
17
Frontier Medical +





Manufacturer of medical devices
Kester Capital
2013
UK
1.2%
18
PetSmart +





Retailer of pet products and services
BC Partners
2015
USA
1.1%
19
Co-investment +/ **





Provider of business services
Large buy-out manager
2014
Europe
1.1%
20
Eurofiber





Provider of fibre optic network
Doughty Hanson
2012
Netherlands
1.0%
21
SAFE





Manufacturer of industrial components
Euromezzanine
2006
France
1.0%
22
TMP





Provider of recruitment services
Graphite Capital
2006
UK
1.0%
23
R&R Ice Cream +





Manufacturer and distributor of ice cream products
PAI Partners
2013
UK
1.0%
24
Stork 





Provider of technical engineering services
Arle
2008
Netherlands
1.0%
25
Guardian Financial Services 





Provider of insured life and pension products
Cinven
2011
UK
1.0%
26
Cognito +





Supplier of communications equipment, software and services
Graphite Capital
2002
UK
0.9%
27
VWR International +/ *





Distributor of laboratory supplies
Madison Dearborn
2007
USA
0.8%
28
Comdata +/ *





Provider of fleet payment cards to trucking industry
Thomas H Lee Partners
2007
USA
0.8%
29
Gerflor





Manufacturer of PVC flooring
ICG
2011
France
0.7%
30
Groucho Club





Operator of members' club
Graphite Capital
2006
UK
0.7%

Total of the 30 largest underlying investments


45.3%
+ All or part of this investment is held directly as a co-investment or other direct investment.
* 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 30 April 2015.
Portfolio - Investment type


% of value of underlying companies
Large buy-outs

47.3%
Mid-market buy-outs

37.9%
Mezzanine

8.3%
Small buy-outs

4.5%
Quoted

2.0%
Total

100.0%
Portfolio - Geographic distribution*


% of value of underlying companies
UK

47.8%
North America

14.6%
Germany

9.7%
France

9.2%
Benelux

5.9%
Scandinavia

4.7%
Spain

2.9%
Other Europe

2.5%
Italy

2.3%
Rest of world

0.4%
Total

100.0%
NB: Total Continental Europe

37.2%
* Location of headquarters of underlying companies in the portfolio. Does not necessarily reflect countries to which companies have economic exposure.
Portfolio - Year of investment 
Calendar year

Valuation as multiple of cost
% of value of underlying companies
2015

1.0x
2.6%
2014

1.1x
20.5%
2013

1.3x
15.2%
2012

1.5x
10.0%
2011

1.6x
9.8%
2010

1.5x
7.1%
2009

2.7x
2.3%
2008

1.1x
7.4%
2007

1.7x
9.1%
2006

1.6x
11.6%
2005 and before

1.7x
4.4%
Total

1.4x
100.0%
Portfolio - Sector analysis


% of value of
underlying 
companies
Business services

21.5%
Industrials

17.9%
Healthcare and education

14.8%
Consumer goods and services

12.7%
Leisure

8.7%
Automotive supplies

8.1%
Financials

8.0%
Technology and telecommunications

4.2%
Media

2.4%
Chemicals

1.7%
Total

100.0%
Quoted equity holdings at 30 April 2015
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
5.3
1.2%
VWR International
VWR
3.5
0.8%
FleetCor
FLT
3.3
0.8%
Saga
SAGA
3.0
0.7%
Elior
ELIOR
2.8
0.7%
Spire
SPI
2.5
0.6%
Party City
PRTY
2.5
0.6%
Evonik
EVK
2.1
0.5%
Avolon Aerospace
AVOL
1.8
0.4%
Abertis
ABE
1.7
0.4%
Partnership
PA
1.7
0.4%
Sunrise Communications
SRCG
1.7
0.4%
ComHem
COMH
1.5
0.4%
West Corporation
WSTC
1.4
0.3%
Tumi
TUMI
1.3
0.3%
Aramark Corporation
ARMK
1.0
0.2%
Cerved
CERV
1.0
0.2%
Others

3.1
0.7%
Total

 41.2
9.6%
The following table analyses the closing portfolio by value.
Graphite and third party investments at 30 April 2015
Portfolio
Third party
m
Graphite Capital
m
Total
m
% of investment portfolio
Primary investments in funds
191.0
71.0
262.0
61.4%
Secondary investments in funds
61.4
14.0
75.4
17.7%
Direct and co-investments
64.5
24.4
88.9
20.9%
Total portfolio
316.9
109.4
426.3
100.0%
Third party fund investments - primary
44.8%


Discretionary investments - Graphite investments
25.7%
- Third party fund investments - secondary
14.4%
- Third party co-investments
15.1%
- Total discretionary investments
55.2%
Investment activity
The following two tables analyse the investment activity of Graphite Enterprise in the three months to 30 April 2015.
Largest new underlying investments
Investment
Description
Country
Cost
 million
PetSmart
Retailer of pet products and services
USA
4.7
Cleanpart
Provider of services to semi-conductor industries
Germany
0.7
Loparex
Manufacturer of silicon release liners 
Netherlands
0.7
Hurtigruten
Operator of passenger shipping
Norway
0.7
Mirion
Manufacturer of radiation detection products
USA
0.6
Total of 5 largest new underlying investments

7.4 
Largest underlying realisations 
Investment
Manager
Realisation type
Proceeds
 million
National Fostering Agency*
Graphite Capital
Secondary
2.2
Atos
PAI
Public share sale
1.6
Gondola Group
Cinven
Secondary
 1.3 
Weetabix
Lion Capital
Trade
 1.3 
Sunrise Communications
CVC
IPO in year
 1.2 
Total of 5 largest underlying realisations

7.6
* Proceeds from disposal of co-investment only. A further 9.7m of proceeds from Graphite Capital Partners VII was received in May 2015.
Commitments analysis
The following four tables analyse Graphite Enterprise's commitments at 30 April 2015.
Commitments 
Original commitment1
 million
Outstanding commitment
 million
Average drawdown percentage
% of commitments
Funds in investment period
278.8
175.2
37.2%
76.9%
Funds post investment period
519.5
52.6
89.9%
23.1%
Total
798.3
227.8
71.5%
100.0%
1 Original commitments are translated at 30 April 2015 exchange rates
Commitments - remaining investment period
% of commitments
4-5 years
13.3%
3-4 years
22.1%
2-3 years
8.4%
1-2 years
32.6%
<1 year
0.5%
Investment period complete
23.1%
Total
100.0%
Movement in commitments in the three months to 30 April 2015
 million
Opening
234.0
Drawdowns
(8.0)
New commitment through secondary purchase of BC European Capital IX
4.9
Currency
(4.6)
Other
1.5
Closing
227.8
CURRENCY EXPOSURE

30 April
2015
 million
30 April
2015
%
Portfolio*


- sterling
225.9
53.0
- euro
111.4
26.1
- other
89.0
20.9
Total
426.3
100.0
* Currency exposure is calculated by reference to the location of the underlying portfolio companies' headquarters.

30 April
2015
 million
30 April
2015
%
Outstanding commitments


- sterling
90.6
39.8
- euro
130.0
57.0
- other
7.2
3.2
Total
227.8
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 over 350 underlying companies. Graphite Capital directly manages many of the largest companies in the portfolio.
Since inception, the Company has generated a return of over 28 times the amount subscribed. 
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 34 years. The senior management team has worked together for 18 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

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