REG - ICG Enterprise Trust - Unaudited results for year ended 31 January 2016 <Origin Href="QuoteRef">ICGT.L</Origin> - Part 2
15/04/2016 07:05
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Trade 2.6
Suddenlink BC Partners 2012 Trade 2.4
Total of 10 largest underlying realisations 46.4
* Sold by Graphite Capital in the year. The Company re-invested alongside
Alcuin Capital.
Commitments analysis
The following four tables analyse ICG Enterprise's commitments at 31 January
2016.
Commitments Original commitment* £ million Outstanding commitment £ million Average drawdown percentage % of commitments
Funds in investment period 336.9 206.9 38.6% 81.5%
Funds post investment period 503.4 46.9 90.7% 18.5%
Total 840.3 253.8 69.8% 100.0%
* Original commitments are translated at 31 January 2016 exchange rates.
Commitments - remaining investment period % of commitments
4-5 years 20.1%
3-4 years 21.8%
2-3 years 32.9%
1-2 years 2.6%
<1 year 4.1%
Investment period complete 18.5%
Total 100.0%
Movement in outstanding commitments in the year to £ million
31 January 2016
Opening 234.0
Drawdowns (46.3)
New primary commitments 58.6
New commitments arising through secondary purchase of fund interests 4.9
New commitments relating to co-investments* 0.6
Currency 2.7
Other (0.7)
Closing 253.8
*This represents a follow-on commitment in Swiss Education Group.
New commitments in the year to 31 January 2016
Fund Strategy Geography £ million
Primary commitments
Thomas H. Lee Equity Fund VII Large buy-outs USA 13.0
Charterhouse Capital Partners X Large buy-outs Europe 11.0
ICG Europe Fund VI Mezzanine Europe 10.6
The Fourth Alcuin Fund Small buy-outs UK 9.0
Harwood Private Equity IV Small buy-outs UK 7.5
Hollyport Secondary Opportunities V Tail-end secondary portfolios Global 7.5
Total primary commitments 58.6
Commitments arising from secondary purchases of fund interests
BC European Capital IX Large buy-outs Europe 4.9
Commitments relating to co-investments
Swiss Education Group Provider of hospitality training Europe 0.6
Total new commitments 64.1
CURRENCY EXPOSURE
31 January2016£ million 31 January2016% 31 January2015£ million 31 January2015%
Portfolio*
- Sterling 209.1 48.8% 230.1 53.3%
- Euro 122.8 28.7% 119.7 27.7%
- US dollar 60.9 14.2% 54.9 12.7%
- Other European 33.5 7.8% 25.1 5.8%
- Other 1.9 0.5% 2.1 0.5%
Total 428.2 100.0% 431.9 100.0%
*Currency exposure is calculated by reference to the location of the
underlying portfolio companies' headquarters.
31 January2016£ million 31 January2016% 31 January2015£ million 31 January2015%
Outstanding commitments
- Sterling 102.3 40.3% 91.8 39.2%
- Euro 131.2 51.7% 135.0 57.7%
- US dollar 18.4 7.2% 6.1 2.6%
- Other European 1.9 0.8% 1.1 0.5%
Total 253.8 100.0% 234.0 100.0%
UNAUDITED RESULTS
Income Statement (unaudited)
Year to 31 January 2016(unaudited) Year to 31 January 2015(unaudited)
Revenue return Capital return Total Revenue return Capital return Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment returns
Income, gains and losses on investments 12,100 33,761 45,861 13,896 19,854 33,750
Deposit interest 309 - 309 228 - 228
Other income 115 - 115 417 - 417
Foreign exchange gains and losses - 747 747 - (754) (754)
12,524 34,508 47,032 14,541 19,100 33,641
Expenses
Investment management charges (1,509) (4,260) (5,769) (1,452) (4,357) (5,809)
Other expenses (1,722) (1,123) (2,845) (1,593) (1,835) (3,428)
(3,231) (5,383) (8,614) (3,045) (6,192) (9,237)
Profit before tax 9,293 29,125 38,418 11,496 12,908 24,404
Taxation (1,292) 1,292 - (2,044) 2,044 -
Profit for the year 8,001 30,417 38,418 9,452 14,952 24,404
Attributable to:Equity shareholders 8,001 30,417 38,418 9,452 14,952 24,404
Basic and diluted earnings per share 53.1p 33.5p
The columns headed 'Total' represent the income statement for the relevant
financial years and the columns headed 'Revenue return' and 'Capital return'
are supplementary information. There is no Other Comprehensive Income.
Balance Sheet (unaudited)
31 January2016 31 January2015
£'000 £'000
Non-current assets
Investments held at fair value
- Unquoted investments 356,939 357,830
- Quoted investments - 4,962
- Subsidiary investments 57,168 56,217
414,107 419,009
Current assets
Cash and cash equivalents 103,831 90,137
Receivables 4,038 4,177
107,869 94,314
Current liabilities
Payables 634 6,459
Net current assets 107,235 87,855
Total assets less current liabilities 521,342 506,864
Capital and reserves
Share capital 7,292 7,292
Capital redemption reserve 2,112 2,112
Share premium 12,936 12,936
Capital reserve 484,782 463,489
Revenue reserve 14,220 21,035
Total equity 521,342 506,864
Net asset value per share (basic and diluted) 730.9p 695.2p
Cash Flow Statement (unaudited)
Year to Year to
31 January 31 January
2016 2015
£'000 £'000
Operating activities
Sale of portfolio investments 91,167 132,953
Purchase of portfolio investments (57,439) (102,185)
Interest income received from portfolio investments 8,951 8,382
Dividend income received from portfolio investments 2,882 5,458
Other income received 384 644
Investment management charges paid (5,840) (5,815)
Other expenses paid (1,259) (983)
Net cash inflow from operating activities 38,846 38,454
Financing activities
Bank facility fee (1,963) (1,651)
Purchase of shares into treasury (9,110) -
Equity dividends paid (14,816) (11,302)
Net cash outflow from financing activities (25,889) (12,953)
Net increase in cash and cash equivalents 12,957 25,501
Cash and cash equivalents at beginning of year 90,137 65,390
Net increase in cash and cash equivalents 12,957 25,501
Effect of changes in foreign exchange rates 737 (754)
Cash and cash equivalents at end of year 103,831 90,137
Statement of Changes in Equity (unaudited)
Share Capital redemption reserve Share Capitalreserve Revenue reserve Total shareholders' equity
capital premium
£'000 £'000 £'000 £'000 £'000 £'000
Year to 31 January 2016
Opening balance at 7,292 2,112 12,936 463,489 21,035 506,864
1 February 2015
Profit for the year and total comprehensive income - - - 30,417 8,001 38,418
Transfer on disposal of investments - - - - - -
Dividends paid or approved - - - - (14,816) (14,816)
Purchase of shares into treasury - - - (9,124) - (9,124)
Closing balance at 31 January 2016 7,292 2,112 12,936 484,782 14,220 521,342
Share Capital redemption reserve Share Capitalreserve Revenue reserve Total shareholders' equity
capital premium
£'000 £'000 £'000 £'000 £'000 £'000
Year to 31 January 2015
Opening balance at 7,292 2,112 12,936 448,537 22,885 493,762
1 February 2014
Profit for the year and total comprehensive income - - - 14,952 9,452 24,404
Transfer on disposal of investments - - - - - -
Dividends paid or approved - - - - (11,302) (11,302)
Purchase of shares into treasury - - - - - -
Closing balance at 31 January 2015 7,292 2,112 12,936 463,489 21,035 506,864
NOTES TO THE FINANCIAL REPORT (unaudited)
1 GENERAL INFORMATIONICG Enterprise Trust plc (formerly Graphite Enterprise Trust PLC, "the Company") is registered in England and Wales and domiciled in England. The registered office is Juxon House, 100 St Paul's Churchyard, London EC4M 8BU. The Company's objective is to provide shareholders with long term capital growth through investment in unquoted companies, mostly through private equity funds but also directly. During the year ended 31 January 2016, Graphite Capital Management LLP ("Graphite
Capital" or "the Former Manager") served as manager of the Company. On 1 February 2016, the Board appointed ICG Alternative Investment Limited ("ICG" or "the Manager") as the new manager of the Company. At the same time, the name of the Company was changed from Graphite Enterprise Trust PLC to ICG Enterprise Trust plc, and the names of its subsidiaries Graphite Enterprise Trust Limited Partnership and Graphite Enterprise Trust (2) Limited Partnership were changed to ICG Enterprise Trust Limited Partnership
and ICG Enterprise Trust (2) Limited Partnership (together "the Partnerships"). The Company's objective remains unchanged following the appointment of ICG. Further details regarding the change of manager are provided in the Chairman's Statement. This report was approved for issue by the Board of Directors on 14 April 2016. 2 UNAUDITED FINANCIAL REPORTThis financial report does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year to
31 January 2015 were approved by the Board of Directors on 24 April 2015 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(2) or (3) of the Companies Act 2006.Statutory accounts for the year to 31 January 2016 will be delivered to the Registrar of Companies following the Company's Annual General Meeting which will be held at the Stationers' Hall, Ave
Maria Lane, London EC4M 7DD at 1.00pm on 14 June 2016. 3 BASIS OF PREPARATIONThe financial information for the year ended 31 January 2016 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 2016. The
financial information has been prepared on a going concern basis and on the historical cost basis of accounting, modified for the revaluation of certain assets.At previous balance sheet dates the Partnerships were consolidated into the accounts as subsidiaries of ICG Enterprise Trust plc. In accordance with IFRS 10, the Company has elected to treat the Partnerships as "investment entities".As a result, the Company no longer prepares consolidated accounts. The Partnerships' cash balances (which were
previously included in cash and cash equivalents) together with the amounts previously presented as non-controlling interests are included in unquoted investments. This is purely a presentational change and there has been no impact on the net asset value of the Company. INVESTMENTSAll investments are designated upon initial recognition as held at fair value through profit or loss (described in this financial report as investments held at fair value) and are measured at subsequent reporting dates at fair
value. Changes in the value of all investments held at fair value, which include returns on those investments such as dividends and interest, are recognised in the income statement and are allocated to the revenue column or the capital column in accordance with the Statement of Recommended Practice for investment trusts issued by the Association of Investment Companies in November 2014.UNQUOTED INVESTMENTSFair value for unquoted investments is established by using various valuation techniques.Funds and co
-investments are valued at the underlying investment manager's valuation where this is consistent with the requirement to use fair value. Where this is not the case adjustments are made or alternative methods are used as appropriate. The most common reason for adjustments is to take account of events occurring after the date of the manager's valuation, such as realisations.The fair value of direct unquoted investments is calculated in accordance with the International Private Equity and Venture Capital
Valuation ("IPEV") Guidelines. The primary valuation methodology used is an earnings multiple methodology, with other methodologies used where they are more appropriate.QUOTED INVESTMENTSQuoted investments are held at the last traded bid price on the balance sheet date. When a purchase or sale is made under contract, the terms of which require delivery within the timeframe of the relevant market, the contract is reflected on the trade date.CURRENT ASSET INVESTMENTS HELD AT FAIR VALUECurrent asset
investments may include investments in fixed income funds or instruments. These are valued based on the redemption price as at the balance sheet date, which is based on the value of the underlying investments.ASSOCIATESInvestments which fall within the definition of an associate under IAS 28 (Investments in associates) are accounted for as investments held at fair value through profit or loss, as permitted by that standard.IAS 28 requires certain disclosures to be made about associates, including summary
historical financial information, even where these associates have been accounted for in accordance with IAS 39 and held at fair value. ICG Enterprise has a small number of investments which fall within the definition of an associate, all of which are held at fair value.The disclosures required by IAS 28 have not been made. It is considered that, in the context of the investment portfolio, such information would not be useful to users of the accounts. Information is considered useful if it helps users
assess the net asset value of the Company or the future growth therein. Many factors are taken into account in determining the fair value of individual investments, of which historical financial information is only one. Taken alone, this information would not be useful in making such an assessment and would be misleading in some instances. 4 INVESTMENT MANAGEMENT CHARGESThe investment management charges set out in the table below were payable to the Former Manager, Graphite Capital Management LLP, in the
year. The Former Manager is a related party. Year to 31 January 2016 Year to 31 January 2015 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Investment management charge 1,415 4,244 5,659 1,439 4,317 5,756 Irrecoverable VAT 94 16 110 13 40 53 1,509 4,260 5,769 1,452 4,357 5,809 The allocation of the total investment management charges was unchanged in 2016 with 75% of the total allocated to capital and 25% allocated to income.The management fee charged by the Former
Manager was 1.5% of the value of invested assets and 0.5% of outstanding commitments, in both cases excluding funds managed by Graphite Capital. No fee is charged on cash or liquid asset balances. The amounts payable during the year are set out above.Following the appointment of ICG as Manager on 1 February 2016 (see note 1), the management fee charged has been reduced to 1.4% (from 1.5%) of the value of invested assets and 0.5% of outstanding commitments, in both cases excluding funds managed by Graphite
Capital and also funds managed by ICG.At 31 January 2016 management fees of £1,312 (excluding VAT) were prepaid (31 January 2015: accrual of £70,000).The Company has borne management charges in respect of its investments in funds managed by Graphite Capital as set out below: Year to 31 January 2016 Year to31 January 2015 £'000 £'000 Graphite Capital Partners VI* (120) 150 Graphite Capital Partners VII 86 392 Graphite Capital Partners VIII 1,561 1,376 1,527 1,918 * In the year to 31 January 2016, Graphite
Capital Partners VI credited the Company with £120,000 of management charges5 TAXATIONIn both the current and prior years the tax charge was lower than the standard rate of corporation tax, principally due to the Company's status as an investment trust, which means that capital gains are not subject to corporation tax. The standard rate of corporation tax in the UK changed from 21% to 20% with effect from 1 April 2015. Accordingly the Company's profits for the year ended 31 January 2016 are taxed at an
effective rate of 20.17%. The effect of this and other items affecting the tax charge is shown in note 5 (b) below. Year to 31 January 2016 Year to31 January 2015 £'000 £'000 a) Analysis of charge in the year Tax charge on items allocated to revenue 1,292 2,044 Tax credit on items allocated to capital (1,292) (2,044) UK corporation tax at 20.17% (2015: 21.33%) - - b) Factors affecting tax charge for the year Profit on ordinary activities before tax 38,418 24,404 Profit on ordinary activities multiplied
by standard rate of corporation tax in the UK of 20.17% (2015: 21.33%) 7,749 5,205 Effect of: - net investment returns not subject to corporation tax (6,960) (4,074) - UK dividends not subject to corporation tax (133) (260) - expenses not deductible for tax purposes 20 20 - excess management expenses utilised in the year (206) (724) - other deductions (470) (167) Total tax charge - - The Company has no carried forward excess management expenses (2015: nil). There are no carried forward deferred tax assets
or liabilities (2015: nil). Due to the Company's status as an investment trust, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. For all investments the tax base is equal to the carrying amount. 6 EARNINGS PER SHARE Year to31 January 2016 Year to31 January 2015 Revenue return per ordinary share 11.1p 13.0p Capital
return per ordinary share 42.0p 20.5p Earnings per ordinary share (basic and diluted) 53.1p 33.5p Weighted average number of shares 72,310,909 72,913,000 The earnings per share figures are based on the weighted average numbers of shares set out above. 7 DIVIDENDS Year to31 January 2016£'000 Year to31 January 2015£'000 14/15 final paid: 10.0p (PY: 7.5p) per share 7,232 5,468 14/15 special paid: 5.5p (PY: 8.0p) per share 3,977 5,834 15/16 interim paid: 5.0p (PY: nil) per
share 3,607 - 14,816 11,302 8 RECEIVABLES - CURRENT Year to31 January 2016£'000 Year to31 January 2015£'000 Prepayments and accrued income 1,912 2,246 Subsidiary undertakings 2,126 1,931 4,038 4,177 The Company has access to committed bank facilities, which are undrawn. The set up costs in relation to these were capitalised and are recognised over the lives of the facilities on a straight line basis. At 31 January 2016, £989,561 of bank facility costs are included within receivables. Of this, £467,867 is
expected to be amortised in less than one year. 9 PAYABLES - CURRENT Year to31 January 2016£'000 Year to31 January 2015£'000 Accruals 537 6,459 Other payables 97 - 634 6,459 10 SHARE CAPITALAt 31 January 2016, 72,913,000 shares had been allocated, called up and fully paid. Of this total, the Company held 1,586,163 shares in treasury (31 January 2015: nil) leaving 71,326,837 in issue. 11 FINANCIAL INSTRUMENTS AND RISK MANAGEMENTThe 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. The Company'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 instalments with provision for full repayment on sale or flotation.Financial risk managementThe Company'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 Company's overall risk management
programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company'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 Company'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 riskThe
Company's investments are principally in the UK and continental Europe and are primarily denominated in sterlingand in euros. There are also smaller amounts in US dollars and in other European currencies. The Company is exposedto 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 riskThe fair value of the Company's investments and cash balances are not directly affected by changes in interest rates.(iii) Price riskThe 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 Company'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 Company's objective. No hedging of this risk is undertaken.The Company 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.Investment and credit risk(i) Investment riskInvestment risk is the risk that the financial performance of the companies in which ICG 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 riskThe Company's exposure to credit risk arises principally from its investment in cash deposits. The Company aims to invest the majority of its liquid portfolio in assets which have low credit risk. The Company's policy is to limit
exposure to any one investment 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 with three UK banks and totalled £103,831,000 (2015: £90,137,000). Of this amount £35,731,000 was deposited at Lloyds Bank ("Lloyds") and this represents the maximum exposure to credit risk at the balance sheet date. No collateral is held by the Company in respect of these amounts. None of the Company's cash deposits were past due or impaired at
31 January 2016 (2015: nil).Liquidity riskThe Company has significant investments in unquoted companies which are inherently illiquid. The Company also has substantial undrawn commitments to funds, the great majority of which are likely to be called over the next five years. The Company 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 Company's liquidity management policy involves projecting cash flows and considering the level of liquidity necessary to meet these.The Company has access to committed bank facilities of a headline £97 million, which are structured as parallel sterling and euro facilities of £50 million and E61.7 million. The facilities are provided jointly by Lloyds and The Royal Bank of Scotland ("RBS"). Of the
total facilities, balances of £20 million and E23.6 million will expire in March 2017. The remaining balances of £30 million and E38.1million will expire in April 2019. As at 31 January 2016 the Company's financial liabilities amounted to £634,000 of payables (2015: £6,459,000) which were due in less than one year.Capital risk managementThe Company's capital is represented by its net assets, which are managed to achieve the Company'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 2016, the composition of which is shown on the balance sheet was £521,342,000 (2015: £506,864,000). 12
FAIR VALUES ESTIMATIONIFRS 7 requires disclosure of fair value measurements of financial instruments categorised according to the following fair value measurement hierarchy:• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).• Inputs for the asset or liability that are not
based on observable market data (that is, unobservable inputs) (level 3).All private equity and quoted investments are valued at fair value in accordance with IFRS 13. The Company's unquoted investments and subsidiary undertakings are all classified as Level 3 investments. Fair value for unquoted investments is established by using various valuation techniques. Funds are valued at the underlying investment manager's valuation where this is consistent with the requirement to use fair value. Where this is
not the case adjustments are made or alternative methods are used as appropriate. The most common reason for adjustments is to take account of events occurring after the date of the manager's valuation, such as realisations. The fair value of direct unquoted investments is calculated in accordance with the International Private Equity and Venture Capital Valuation ("IPEV") Guidelines issued in December 2015. The primary valuation methodology used is an earnings multiple methodology, with other methodologies
used where they are more appropriate. The Company makes unquoted investments through its subsidiary undertakings, as well as directly. The fair value of these unquoted investments is calculated in the same way as the direct unquoted investments discussed above. The fair value of the subsidiary undertakings also takes into account the value of interests in the co-investment incentive scheme. At 31 January 2016, this was estimated as the theoretical value of the interests if the portfolio had been sold at the
carrying value at the balance sheet date.The fair value of the Company's unlisted investments is sensitive to changes in the assumed earnings multiples. An increase in the earnings multiple would lead to an increase in the fair value of the investment portfolio and a decrease in the earnings multiple would lead to a decrease in the fair value.The realised and unrealised gains and losses have been recognised in Income, gains and losses on investments in the Income Statement.The following table presents the
changes in level 3 instruments for the year to 31 January 2016. Unquoted investments (indirect) at fair value through profit or loss Unquoted investments(direct) at fair value through profit or loss Subsidiary undertakings Total £'000 £'000 £'000 £'000 Opening balance 289,491 68,339 56,217 414,047 Additions 43,857 8,643 (1,226) 51,274 Disposals (77,790) (6,860) - (84,650) Gains and losses recognised in profit or loss 16,937 14,322 2,177 33,436 Closing balance 272,495 84,444 57,168 414,107 Total gains
for the period included in income statement for assets held at the end of the reporting period 16,937 14,322 2,177 33,436 The following tables present the assets that are measured at fair value. The Company did not have any financial liabilities measured at fair value at these dates. 31 January 2016 Level 1 Level 2 Level 3 £'000 £'000 £'000 Investments held at fair value Unquoted investments - indirect - - 272,495 Unquoted investments - direct - - 84,444 Quoted investments - direct - - - Subsidiary
undertakings - - 57,168 Total investments held at fair value - - 414,107 31 January 2015 Level 1 Level 2 Level 3 £'000 £'000 £'000 Investments held at fair value Unquoted investments - indirect - - 289,491 Unquoted investments - direct - - 68,339 Quoted investments - direct 4,962 - - Subsidiary undertakings - - 56,217 Total investments held at fair value 4,962 - 414,047
Year to 31 January 2016 Year to 31 January 2015
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management charge 1,415 4,244 5,659 1,439 4,317 5,756
Irrecoverable VAT 94 16 110 13 40 53
1,509 4,260 5,769 1,452 4,357 5,809
The allocation of the total investment management charges was unchanged in
2016 with 75% of the total allocated to capital and 25% allocated to
income.The management fee charged by the Former Manager was 1.5% of the value
of invested assets and 0.5% of outstanding commitments, in both cases
excluding funds managed by Graphite Capital. No fee is charged on cash or
liquid asset balances. The amounts payable during the year are set out
above.Following the appointment of ICG as Manager on 1 February 2016 (see note
1), the management fee charged has been reduced to 1.4% (from 1.5%) of the
value of invested assets and 0.5% of outstanding commitments, in both cases
excluding funds managed by Graphite Capital and also funds managed by ICG.At
31 January 2016 management fees of £1,312 (excluding VAT) were prepaid (31
January 2015: accrual of £70,000).The Company has borne management charges in
respect of its investments in funds managed by Graphite Capital as set out
below:
Year to 31 January 2016 Year to31 January 2015
£'000 £'000
Graphite Capital Partners VI* (120) 150
Graphite Capital Partners VII 86 392
Graphite Capital Partners VIII 1,561 1,376
1,527 1,918
* In the year to 31 January 2016, Graphite Capital Partners VI credited the
Company with £120,000 of management charges5 TAXATIONIn both the current and
prior years the tax charge was lower than the standard rate of corporation
tax, principally due to the Company's status as an investment trust, which
means that capital gains are not subject to corporation tax. The standard rate
of corporation tax in the UK changed from 21% to 20% with effect from 1 April
2015. Accordingly the Company's profits for the year ended 31 January 2016 are
taxed at an effective rate of 20.17%. The effect of this and other items
affecting the tax charge is shown in note 5 (b) below.
Year to 31 January 2016 Year to31 January 2015
£'000 £'000
a) Analysis of charge in the year
Tax charge on items allocated to revenue 1,292 2,044
Tax credit on items allocated to capital (1,292) (2,044)
UK corporation tax at 20.17% (2015: 21.33%) - -
b) Factors affecting tax charge for the year
Profit on ordinary activities before tax 38,418 24,404
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 20.17% (2015: 21.33%) 7,749 5,205
Effect of:
- net investment returns not subject to corporation tax (6,960) (4,074)
- UK dividends not subject to corporation tax (133) (260)
- expenses not deductible for tax purposes 20 20
- excess management expenses utilised in the year (206) (724)
- other deductions (470) (167)
Total tax charge - -
The Company has no carried forward excess management expenses (2015: nil).
There are no carried forward deferred tax assets or liabilities (2015: nil).
Due to the Company's status as an investment trust, and the intention to
continue meeting the conditions required to obtain approval in the foreseeable
future, the Company has not provided deferred tax on any capital gains and
losses arising on the revaluation or disposal of investments. For all
investments the tax base is equal to the carrying amount. 6 EARNINGS PER
SHARE
Year to31 January 2016 Year to31 January 2015
Revenue return per ordinary share 11.1p 13.0p
Capital return per ordinary share 42.0p 20.5p
Earnings per ordinary share (basic and diluted) 53.1p 33.5p
Weighted average number of shares 72,310,909 72,913,000
The earnings per share figures are based on the weighted average numbers of
shares set out above. 7 DIVIDENDS
Year to31 January 2016£'000 Year to31 January 2015£'000
14/15 final paid: 10.0p (PY: 7.5p) per share 7,232 5,468
14/15 special paid: 5.5p (PY: 8.0p) per share 3,977 5,834
15/16 interim paid: 5.0p (PY: nil) per share 3,607 -
14,816 11,302
8 RECEIVABLES - CURRENT
Year to31 January 2016£'000 Year to31 January 2015£'000
Prepayments and accrued income 1,912 2,246
Subsidiary undertakings 2,126 1,931
4,038 4,177
The Company has access to committed bank facilities, which are undrawn. The
set up costs in relation to these were capitalised and are recognised over the
lives of the facilities on a straight line basis. At 31 January 2016, £989,561
of bank facility costs are included within receivables. Of this, £467,867 is
expected to be amortised in less than one year. 9 PAYABLES - CURRENT
Year to31 January 2016£'000 Year to31 January 2015£'000
Accruals 537 6,459
Other payables 97 -
634 6,459
10 SHARE CAPITALAt 31 January 2016, 72,913,000 shares had been allocated,
called up and fully paid. Of this total, the Company held 1,586,163 shares in
treasury (31 January 2015: nil) leaving 71,326,837 in issue. 11 FINANCIAL
INSTRUMENTS AND RISK MANAGEMENTThe 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. The Company'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 instalments with provision for full
repayment on sale or flotation.Financial risk managementThe Company'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 Company's overall risk management programme
focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the Company'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
Company'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 riskThe Company's investments are
principally in the UK and continental Europe and are primarily denominated in
sterlingand in euros. There are also smaller amounts in US dollars and in
other European currencies. The Company is exposedto 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 riskThe fair value of the Company's
investments and cash balances are not directly affected by changes in interest
rates.(iii) Price riskThe 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 Company'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 Company's objective. No hedging of this risk is undertaken.The
Company 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.Investment and credit risk(i) Investment riskInvestment risk is the
risk that the financial performance of the companies in which ICG 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 riskThe Company's exposure to
credit risk arises principally from its investment in cash deposits. The
Company aims to invest the majority of its liquid portfolio in assets which
have low credit risk. The Company's policy is to limit exposure to any one
investment 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 with three
UK banks and totalled £103,831,000 (2015: £90,137,000). Of this amount
£35,731,000 was deposited at Lloyds Bank ("Lloyds") and this represents the
maximum exposure to credit risk at the balance sheet date. No collateral is
held by the Company in respect of these amounts. None of the Company's cash
deposits were past due or impaired at 31 January 2016 (2015: nil).Liquidity
riskThe Company has significant investments in unquoted companies which are
inherently illiquid. The Company also has substantial undrawn commitments to
funds, the great majority of which are likely to be called over the next five
years. The Company 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 Company's liquidity management
policy involves projecting cash flows and considering the level of liquidity
necessary to meet these.The Company has access to committed bank facilities of
a headline £97 million, which are structured as parallel sterling and euro
facilities of £50 million and E61.7 million. The facilities are provided
jointly by Lloyds and The Royal Bank of Scotland ("RBS"). Of the total
facilities, balances of £20 million and E23.6 million will expire in March
2017. The remaining balances of £30 million and E38.1million will expire in
April 2019. As at 31 January 2016 the Company's financial liabilities amounted
to £634,000 of payables (2015: £6,459,000) which were due in less than one
year.Capital risk managementThe Company's capital is represented by its net
assets, which are managed to achieve the Company'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
2016, the composition of which is shown on the balance sheet was £521,342,000
(2015: £506,864,000). 12 FAIR VALUES ESTIMATIONIFRS 7 requires disclosure of
fair value measurements of financial instruments categorised according to the
following fair value measurement hierarchy:• Quoted prices (unadjusted) in
active markets for identical assets or liabilities (level 1).• Inputs other
than quoted prices included within level 1 that are observable for the asset
or liability, either directly (that is, as prices) or indirectly (that is,
derived from prices) (level 2).• Inputs for the asset or liability that are
not based on observable market data (that is, unobservable inputs) (level
3).All private equity and quoted investments are valued at fair value in
accordance with IFRS 13. The Company's unquoted investments and subsidiary
undertakings are all classified as Level 3 investments. Fair value for
unquoted investments is established by using various valuation techniques.
Funds are valued at the underlying investment manager's valuation where this
is consistent with the requirement to use fair value. Where this is not the
case adjustments are made or alternative methods are used as appropriate. The
most common reason for adjustments is to take account of events occurring
after the date of the manager's valuation, such as realisations. The fair
value of direct unquoted investments is calculated in accordance with the
International Private Equity and Venture Capital Valuation ("IPEV") Guidelines
issued in December 2015. The primary valuation methodology used is an earnings
multiple methodology, with other methodologies used where they are more
appropriate. The Company makes unquoted investments through its subsidiary
undertakings, as well as directly. The fair value of these unquoted
investments is calculated in the same way as the direct unquoted investments
discussed above. The fair value of the subsidiary undertakings also takes into
account the value of interests in the co-investment incentive scheme. At 31
January 2016, this was estimated as the theoretical value of the interests if
the portfolio had been sold at the carrying value at the balance sheet
date.The fair value of the Company's unlisted investments is sensitive to
changes in the assumed earnings multiples. An increase in the earnings
multiple would lead to an increase in the fair value of the investment
portfolio and a decrease in the earnings multiple would lead to a decrease in
the fair value.The realised and unrealised gains and losses have been
recognised in Income, gains and losses on investments in the Income
Statement.The following table presents the changes in level 3 instruments for
the year to 31 January 2016.
Unquoted investments (indirect) at fair value through profit or loss Unquoted investments(direct) at fair value through profit or loss Subsidiary undertakings Total
£'000 £'000 £'000 £'000
Opening balance 289,491 68,339 56,217 414,047
Additions 43,857 8,643
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