REG - Electra Priv. Equity - Preliminary Announcement for the Full Year <Origin Href="QuoteRef">ELTA.L</Origin> - Part 2

UnboundAnnouncement

09/12/2016 07:06

- Part 2: For the preceding part double click  ID:nRSI3946Ra 

buyout deals in Electra's space seen in the year 
 
Execution - making investments: 
 
Evaluation and pricing of investment opportunities; in-house and third-party due diligence; raising debt from specialist
capital markets; developing 100-day and business plans with management teams; winning deals; structuring, negotiation and
closing. 
 
· 
 
2 Buyout and Co-investment, 1 Secondary and 6 Debt investments completed in the year to 30 September 2016 
 
· 
 
Over £1 billion of new portfolio company debt raised in the year 
 
Portfolio Management - business transformation: 
 
Building exceptional management teams to drive profits growth and cash generation; working closely with the team to develop
strategy, set targets, measure and manage performance; making use of M&A to drive strategic repositioning; and dealing with
problems and opportunities. 
 
· 
 
10 portfolio company M&A transactions completed in the year to 30 September 2016 
 
· 
 
18% year-on-year profits growth in Buyouts and Co-investments portfolio* 
 
Exit - realising the investment: 
 
Identifying strategic / financial acquirers; timing the exit; creating buyer appetite and competitive tension;
supplementing M&A with refinancings. 
 
· 
 
£903 million of capital realised in the year to 30 September 2016 
 
· 
 
Including c.£260 million of cash returned from repayment of loans in the year 
 
Investment Process: pre-investment: monthly origination meetings; weekly and monthly investment team deal flow meetings;
weekly and ad hoc Investment Committee meetings to consider new investments. 
 
Investment Process: post-investment: weekly Investment Committee review of trading data; for each investment, 100-day
review, biannual valuation process and annual strategy review. 
 
Risk Management: pre- and post-investment: for new investments and the investment portfolio, the Investment Committee
identifies, evaluates, monitors and manages risks including those relating to macroeconomic conditions, portfolio
diversification, currency, liquidity and gearing, environmental, social and governance matters. 
 
* 
 
Growth in Electra's "share" of historical portfolio company earnings in respect of all investments over £5 million with the
exception of CALA Group, Retirement Bridge Group and PINE which are valued on a net assets basis. 
 
Investment Team 
 
Epiris' senior management team is one of the most experienced teams in the industry and has on average 22 years' experience
in private equity. The investment team has an average of 18 years' experience in private equity and is supported by a team
of specialists in compliance, finance, investor relations and marketing. 
 
                                                          Years' private equity experience  
 Alex Fortescue     Managing Partner                      23                                
 Bill Priestley     Chief Investment Partner              19                                
 Alex Cooper-Evans  Partner                               23                                
 Charles Elkington  Partner                               23                                
 Chris Hanna        Partner                               18                                
 Steve Ozin         Partner                               26                                
 Sarah Williams     Investment Director                   15                                
 Owen Wilson        Investment Director                   19                                
 Ian Wood           Investment Director                   15                                
 Nicola Gray        Investment Manager                    8                                 
 Arvind Tewari      Investment Manager                    7                                 
 Daniel Frazer      Investment Associate                  3                                 
 David Symondson    Chairman of the Investment Committee  33                                
 
 
For more information about Epiris please visit www.epiris.co.uk. 
 
Investment Highlights 
 
"This has been another busy and successful year during which we have been involved in M&A transactions with a combined
value of £3.2 billion. The total investment return of £751 million is the largest absolute return in Electra's history and
represents a 46% increase on the opening portfolio. 
 
"Investment performance has been driven by the success of our approach of buying attractive businesses well and then
transforming them through M&A as well as strategic and operational focus and change. Strong exits such as Elian and
Hollywood Bowl have delivered a record £903 million of realisations over the course of the year. 
 
"Clearly it has been a year of significant change and distraction at the corporate level. We are pleased to have continued
to deliver on our strategy and to drive exceptional performance for Electra." 
 
Overview 
 
On 5 December 2016 Electra Partners announced that it had changed its name to Epiris. 
 
This has been another busy and successful year of investment activity for Epiris and therefore for Electra. We have
continued to drive not only performance but also business transformation across the Buyouts and Co-Investments portfolio.
Together with a record level of realisations, this has resulted in a total investment return of £751 million, the largest
absolute return in Electra's history and representing an increase of 46% on the opening portfolio. This unprecedented level
of investment performance is the result of three principal factors. 
 
First is the continued successful implementation of our Buyouts & Co-investments strategy, which has resulted in a return
of £687 million or 48% on the opening value. At its core this strategy involves achieving value on entry by focusing on
complex situations where we can buy well. The businesses we buy have scope for transformation through add-on acquisitions
and operational improvement. M&A has been a significant source of value creation for Electra: over half of the return on
this part of the portfolio has been generated by Parkdean Resorts, Hollywood Bowl and Elian, all of which completed
transformational M&A transactions, initiated and led by the Epiris team, during the year. 
 
Second is our delivery of several strong exits during the year. Almost 40% of the return on the Buyouts & Co-investments
portfolio was either realised from transactions such as the sale of Elian, the IPO of Hollywood Bowl or the partial
realisation of Electra's investment in Allflex; or reflects transactions which completed after the year-end, namely the
sale of AXIO's Vidal and the IPO of Premier Asset Management. Overall, realisations reached £903 million, a record level
for Electra which has taken the average uplift on exit over the last five years to 58%. 
 
Finally, many of the companies in which Electra has invested derive a substantial part of their earnings from overseas
operations. The value of these earnings in Sterling has increased following the weakening of Sterling against other major
currencies since mid-June 2016. We estimate that this factor accounts for approximately £71 million, or 10%, of the total
return on the Buyouts & Co-investments portfolio. 
 
We have invested £206 million in the Core Investment Portfolio. We have deployed capital in growth assets, such as
Photobox, as well as in lower-risk, cash-yielding assets, such as Retirement Bridge Group and two CLO equity investments,
whose returns profile supports Electra's distribution policy and liquidity needs. Further new investment activity has been
curtailed by the notice of termination of our management agreement by Electra in May 2016. 
 
Performance for the Year 
 
Over the year, Electra's share price total return was 36% compared to a total return of 17% for the FTSE All-Share Index,
10% for the FTSE 250 Index and 34% for the Morningstar Private Equity Index over the same period. 
 
Electra's net asset value ("NAV") per share has grown very strongly, delivering a total return of 35% in the 12 months, to
5,149p, compared to a 28% NAV per share total return for the Morningstar Private Equity Index. 
 
The investment portfolio has continued to develop at an impressive rate, delivering a total return in the year of £751
million or 46% on the opening portfolio. Further information regarding the effect of this strong investment performance on
Electra's NAV is included in the Financial Review on pages 49 to 50. 
 
Long-Term Performance 
 
Over the last ten years, Electra's NAV per share total return has been 255%. This is more than 7x the NAV per share total
return achieved over the same period by the Morningstar Private Equity Index of 35%. 
 
Over the same period, Electra's share price total return was 237%. This corresponds favourably to the total return over the
same period of the FTSE All-Share (76%), the FTSE 250 Index (136%) and the Morningstar Private Equity Index (15%). 
 
Risk-Adjusted Returns 
 
Electra's "alpha" compared to the FTSE All-Share over the past ten years is 10%. This means that Electra's shares have
outperformed the broader UK equity market by 10% per annum on a risk-adjusted basis. In our view this reflects a number of
factors: our discipline and patience in investment decision-making; our typically using less leverage than is generally
seen in private equity transactions and, in cases such as Park Resorts or AXIO, no leverage at all; and our deliberate
construction of a portfolio designed to deliver Electra's long-term performance target. 
 
Investment Activity 
 
New investments in the year totalled £218 million. The Buyouts and Co-investments portfolio accounted for £137 million,
including new investments in Photobox Group and Retirement Bridge Group, and follow-on investments in the Davies Group. In
addition £62 million was invested in six new Debt  holdings, which included two CLO equity investments. 
 
Realisations totalled £903 million for the year, more than three times the previous year (£259 million) and a record for a
12-month period. The largest realisations were £199 million from the sale of Elian; £153 million from the IPO of Hollywood
Bowl Group; £110 million from AXIO following the sale of MIMS; £95 million from the Park Resorts Group following its merger
with Parkdean Holidays to create Parkdean Resorts; and £82 million from the sale of Electra's interest in Zensar
Technologies. 
 
Two further realisations have been announced since the year end: the partial realisation of Premier Asset Management, which
following its IPO in October returned £36 million; and the sale of Vidal from the AXIO portfolio in November, with proceeds
of £55 million. 
 
Outlook 
 
Electra's portfolio continues to perform well. The strategies we are implementing in partnership with management teams are
successfully driving growth and cash flow, and repositioning each business to make it of significant interest to strategic
buyers and financial investors alike. The portfolio's maturity means that we increasingly expect to be able to turn the
performance resulting from these strategies into cash returns. 
 
We are committed to a successful and seamless handover of responsibilities to the to-be-recruited new team at Electra
immediately following the expiry of the notice period in respect of our management agreement on 31 May 2017. We are in
discussion with Electra regarding an appropriate Transitional Services Agreement to provide any short-term support after
this time should it be required. In the meantime we will continue to manage the portfolio to optimise returns for Electra
and its shareholders. 
 
Portfolio Highlights 
 
Portfolio Breakdown: 
 
 Total investment portfolio                    £1,696 million  
 New investment                                £218 million    
 Realisations                                  £903 million    
 Portfolio investment performance in the year  46%             
 
 
£903 million 
 
Portfolio investment performance in the year 
 
46% 
 
Buyouts and Co-investments Portfolio: 
 
Electra's Buyouts and Co-investments portfolio includes direct equity investments in 16 private companies with a value of
more than £5 million; of these, three are valued on a net assets basis while the remaining thirteen have together: 
 
 LTM revenues              £2.2 billion  
 LTM EBITDA                £0.5 billion  
 EBITDA margin             22%           
 LTM EBITDA growth         14%           
 EV to EBITDA multiple     9.7x          
 Net debt to EBITDA ratio  2.5x          
 UK employees              c.19 ,100     
 
 
Net debt to EBITDA ratio 
 
2.5x 
 
UK employees 
 
c.19 
 
,100 
 
Note: 
 
LTM revenues, LTM EBITDA and UK employees are totals with no adjustment made to reflect Electra's ownership interest.
EBITDA margin reflects LTM EBITDA as a percentage of LTM revenues. LTM EBITDA growth reflects the growth in Electra's
"share" of historical portfolio company earnings. EV to EBITDA multiple and net debt to EBITDA ratio are simple averages. 
 
A Busy Year 
 
 Portfolio company        Transaction date  Type of transaction  
 AXIO Group               October 2015      Realisation          
 Zensar Technologies      October 2015      Realisation          
 PINE                     October 2015      Portfolio M&A        
 Park Resorts Group       November 2015     Portfolio M&A        
 Davies Group             November 2015     Portfolio M&A        
 Elian                    December 2015     Portfolio M&A        
 Hollywood Bowl Group     December 2015     Portfolio M&A        
 Tymon Park               December 2015     Investment           
 EP1 Secondary Portfolio  January 2016      Investment           
 Photobox Group           January 2016      Investment           
 Daler-Rowney             February 2016     Realisation          
 PINE                     March 2016        Realisation          
 Cordatus VI              March 2016        Investment           
 Sparrows                 April 2016        Investment           
 Treetops                 April 2016        Portfolio M&A        
 Retirement Bridge Group  May 2016          Investment           
 AXIO Group               June 2016         Portfolio M&A        
 Kalle                    July 2016         Realisation          
 Allflex                  July 2016         Realisation          
 Davies Group             July 2016         Portfolio M&A        
 Parkdean Resorts         August 2016       Portfolio M&A        
 Davies Group             September 2016    Portfolio M&A        
 Hollywood Bowl Group     September 2016    Realisation          
 Elian                    September 2016    Realisation          
 
 
Portfolio Overview 
 
At 30 September 2016, Electra's investment portfolio was valued at £1,696 million. The investment portfolio consists of
Buyouts and Co-investments, Secondaries, Debt investments, listed securities and funds. The top 10 and 20 investments
account for 74% and 94% respectively of the investment portfolio. 
 
Portfolio Breakdown 
 
 Investment portfolio           2016£m  2015£m  2014£m  2013£m  2012£m  
 Buyouts & Co-investments       1,461   1,418   1,052   620     600     
 Secondaries                    82      92      105     126     34      
 Debt                           51      17      7       97      80      
 Core Investment Portfolio      1,594   1,527   1,164   843     714     
 Non-core Investment Portfolio  102     103     108     125     154     
 Investment portfolio           1,696   1,630   1,272   968     868     
 
 
During the last year the classification of investments has been changed to reflect more closely the investment strategy.
Investments previously described as "Direct Unlisted" are now shown as either "Buyouts and Co-investments" or "Debt"
investments; together with "Secondaries" these form the Core Investment Portfolio, while "Funds" and "Listed" investments
have been amalgamated into a new category labelled "Non-core". This classification of investments is in line with that used
in the Half Year Report. 
 
Buyouts and Co-investments 
 
Buyouts and Co-investments form the major part of Electra's portfolio and consist of direct equity investments in 22
private companies with an aggregate value of £1,461 million. The 10 largest investments account for 84% of the Buyouts and
Co-investments portfolio at 30 September 2016. 
 
Secondaries 
 
Secondary investments consist of limited partnership interests in third-party private equity funds purchased from investors
exiting their positions prior to the end of the fund's life. As a result of their relative maturity, secondary investments
typically produce faster cash returns than Buyouts and Co-investments. At 30 September 2016, Electra held investments in
six secondary portfolios with an aggregate value of £82 million. 
 
Debt 
 
Debt investments consist of loans to UK or international borrowers acquired in either the primary or the secondary market
as either individual or portfolios of assets. The Debt portfolio comprises both performing credits, held either directly or
through a structured finance vehicle such as a collateralised loan obligation ("CLO"), where Epiris has been able to secure
attractive risk-adjusted returns and where a cash yield supports Electra's distribution policy and liquidity needs; and
stretched credits, which refers to debt in good businesses with bad balance sheets where Epiris can take a role in the
restructuring of the capital structure. At 
 
30 September 2016 
 
Electra held five Debt investments with an aggregate value of £51 million. 
 
Core Investment Portfolio 
 
The Core Investment Portfolio includes investments where Epiris has an active role in originating, evaluating, negotiating
and/or managing the investment. The core investment portfolio accounts for 94% of the investment portfolio at 30 September
2016 compared to 94% at 30 September 2015. 
 
Non-core Investment Portfolio 
 
The Non-core Investment Portfolio consists of listed and fund investments (with the exception of Hollywood Bowl Group and
Zensar Technologies, which as core investments are included within Buyouts and Co-investments above). At 30 September 2016,
Electra held five listed investments with an aggregate value of £10 million. Fund investments consist of limited
partnership interests in third party private equity funds where Electra made a primary commitment to that fund. New primary
commitments to funds are no longer part of Electra's investment strategy and no new primary commitments have been made
since 2011. At 30 September 2016, Electra held investments in 11 funds with an aggregate value of £92 million. 
 
Investment Portfolio Breakdown 
 
                                2016  2015  
 At 30 September                %     %     
 Buyouts and Co-investments     86    87    
 Secondaries                    5     6     
 Debt                           3     1     
 Non-core investment portfolio  6     6     
 
 
Investment Portfolio - Sector Breakdown 
 
                                        2016  2015  
 At 30 September                        %     %     
 Food & beverage                        0     1     
 Financial & insurance                  5     2     
 House, leisure and personal goods      11    14    
 Industrial general and transportation  10    7     
 Media                                  13    12    
 Real estate                            3     4     
 Private equity funds                   5     6     
 Secondaries                            5     6     
 Support services                       7     18    
 Technology, hardware and equipment     8     6     
 Travel and leisure                     30    24    
 Other                                  3     0     
 
 
Buyouts and Co-investments - Age Analysis 
 
                       2016  2015  
 At 30 September       %     %     
 Less than 1 year old  10    8     
 1 - 2 years           6     33    
 2 - 3 years           21    28    
 3 - 4 years           23    19    
 Over 4 years          40    12    
 
 
Buyouts and Co-investments - Valuation Basis 
 
                     2016  2015  
 At 30 September     %     %     
 Earnings basis      76    71    
 Recent transaction  15    21    
 Net assets basis    9     8     
 
 
Buyouts and Co-investments 
 
- Geographic Breakdown 
 
                     2016  2015  
 At 30 September     %     %     
 UK                  87    80    
 Continental Europe  8     9     
 USA                 4     5     
 Asia and elsewhere  1     6     
 
 
Portfolio Review 
 
Portfolio Movement 
 
Electra's investment portfolio increased from £1,630 million to £1,696 million during the twelve months to 30 September
2016. The increase of £66 million resulted from the acquisition of £218 million of new investments together with the
portfolio return of £751 million, offset by realisations of £903 million. 
 
 Year ended 30 September            2016£m  2015£m  2014£m  2013£m  2012£m  
 Opening investment portfolio       1,630   1,272   968     868     883     
 Investments                        218     188     410     337     150     
 Realisations                       (903)   (259)   (352)   (459)   (301)   
 Investment return                  751     429     246     222     136     
 Closing investment portfolio       1,696   1,630   1,272   968     868     
 Total return on opening portfolio  46%     34%     25%     26%     15%     
 
 
New Investments 
 
Total new investment for the year was £218 million compared to £188 million in the previous year. 
 
 Investment                        £m   
 Photobox Group                    89   
 Retirement Bridge Group           45   
 Other Buyouts and Co-investments  3    
 Secondaries                       7    
 Debt                              62   
 Non-core                          12   
 Total                             218  
 
 
The most significant individual new investments were in respect of Photobox Group, Retirement Bridge Group and the Debt
portfolio. 
 
Buyouts and Co-investments 
 
Photobox Group is Europe's leading digital consumer service for personalised products and gifts. Photobox's services allow
consumers to turn their digital photographs into a range of products, from traditional prints and greetings cards to
photobooks, calendars and canvases. Photobox is the market leader in Europe and is uniquely placed, due to its scale, to
capture further growth as the overall trend for personalised gifts continues. Our strategy is to accelerate growth through
improving the rate and economics of customer acquisition as well as product innovation, and to ensure that growth is
delivered effectively and efficiently. Electra invested £89 million alongside another private equity firm in the
acquisition of Photobox, which was concluded at an attractive valuation in January. 
 
In May, Electra invested £45 million alongside another private equity firm in the acquisition of Retirement Bridge Group,
an originator, consolidator and servicer of home reversion equity release plans with a portfolio of more than 3,500
properties across the UK. The investment offers an attractive risk-adjusted return benefiting from a cash yield and
downside protection from the high level of asset backing. The intention is to optimise the return from the existing
portfolio and to explore opportunities for organic and acquisition-led growth. 
 
Secondaries 
 
The EP1 Secondary Portfolio ("EP1") acquired two further secondary fund positions. In common with its previous
acquisitions, these funds were purchased at a discount to net asset value, comprise mature underlying assets and are
cash-generative. Electra supported the acquisitions with a follow-on investment of £7 million, taking its total investment
in EP1 to £93 million. Commitments outstanding to secondaries were £34 million compared to £31 million at 30 September
2015. 
 
Debt 
 
Electra has invested £32 million in the equity of two collateralised loan obligation funds ("CLOs"), namely Tymon Park and
Cordatus VI. CLO equity offers strong risk-adjusted returns from a diversified portfolio of senior debt issued by
predominantly private equity-backed issuers; much of the return is delivered as cash yield. 
 
In December, Electra provided a £10 million mezzanine loan to support the acquisition of Bowlplex by Hollywood Bowl,
formerly known as The Original Bowling Company. Later in the same month Electra invested a further £11 million to acquire
an interest in Hollywood Bowl's senior debt at a discount to par. Upon the IPO of the business in September, both of these
holdings were repaid with interest. 
 
In April, Electra invested £9 million to acquire a portion of the senior debt in Sparrows, a global provider of engineering
products and services to the energy industry. Sparrows is a market-leading business providing an essential service in
offshore oil and gas operations. Electra's investment has been concluded at an attractive valuation and benefits from a
cash yield. 
 
Non-core Investment Portfolio 
 
A further £12 million was drawn down by private equity funds in which Electra is a limited partner. Commitments outstanding
to private equity funds were £14 million compared to £21 million at 30 September 2015. 
 
New Investments and Realisations 
 
                       New investments  Realisations  
 Year to 30 September  £m               £m            
 2007                  322              303           
 2008                  114              201           
 2009                  88               33            
 2010                  183              149           
 2011                  136              137           
 2012                  150              301           
 2013                  337              459           
 2014                  410              352           
 2015                  188              259           
 2016                  218              903           
 
 
Realisations 
 
Total realisations for the year came to £903 million compared to £259 million in the previous year. 
 
 Realisations                      £m   
 Elian                             199  
 Hollywood Bowl                    153  
 AXIO                              110  
 Park Resorts Group                95   
 Zensar Technologies               82   
 Allflex                           57   
 Daler-Rowney                      33   
 Kalle                             23   
 Promontoria                       10   
 Other Buyouts and Co-investments  19   
 Secondaries                       32   
 Debt                              40   
 Non-core                          50   
 Total                             903  
 
 
The most significant realisations during the year were in respect of Elian, Hollywood Bowl, AXIO, Park Resorts Group,
Zensar Technologies, Allflex, Daler-Rowney and Kalle. 
 
Buyouts and Co-investments 
 
The largest realisation during the year was in respect of Elian. Electra received proceeds of £199 million from the £435
million sale of the company to Intertrust Group in September. Epiris led the £180 million buyout of Elian in 2014 and
worked closely with the management team to reposition the business through revenue diversification, operational excellence
and transformational M&A. This strategy was successfully implemented, including through the acquisitions of Allied Trust
and SFM in 2015. Revenues and profits increased by 40% and 60% respectively over the two years of Electra's investment,
while the value of the business more than doubled. Including income and proceeds from a previous repayment, Electra
realised a return of 2.6x original cost, an IRR of 54%. 
 
Hollywood Bowl announced a successful IPO valuing the company at £266 million in September. Epiris led the £91 million
buyout of Hollywood Bowl in 2014 and worked closely with the management team to accelerate earnings growth through
increased investment and operational focus; and to reposition the business through M&A. This strategy was successfully
implemented, with strong organic growth and the acquisition of Bowlplex in December 2015. Revenues and profits increased by
35% and 80% respectively over the two years of Electra's investment, while the value of the business almost trebled. Upon
admission, Electra received cash proceeds of £153 million giving a total return on its equity investment, including the
value of its 18% retained interest in the company, of 3.9x original cost, an IRR of 101%. 
 
In October 2015, AXIO completed the sale of its Asian healthcare business, MIMS, for $250 million. This was the third major
realisation from its portfolio following the sale of JOC Group and Breakbulk in 2014. In the same month AXIO refinanced its
aviation business, OAG. Electra received proceeds from these two transactions and from cash flow amounting to £110 million
during the year, taking total cash proceeds from its investments in AXIO (excluding proceeds subsequently received from the
sale of Vidal) to £193 million or 2.1x original cost. 
 
Electra received £95 million of loan repayments following completion of the merger of the Park Resorts Group and Parkdean
Holidays in November 2015. Total proceeds received by Electra from this investment are now £110 million or 0.8x of original
cost. 
 
The investment in Zensar Technologies was sold in October 2015 for a consideration of £82 million. Epiris supported the
company as it grew and then sought an exit once the market's valuation of the shares reflected the company's scale and
growth. Over the five years prior to exit, profits growth and rerating resulted in the value of Electra's investment more
than trebling. The investment generated a return of 19x on original cost over the 18 years of the investment, an IRR of
18%. 
 
In July, Electra announced that it had partially realised its holding in Allflex, the global leader in animal intelligence
and monitoring technologies for livestock, pets, fish and other species. Electra received total proceeds of £57 million,
equivalent to a return of 0.8x cost, from the redemption of preferred equity and from the sale of approximately 28% of its
15% equity interest. Electra originally invested in Allflex in 1998, eventually selling the business in 2013, generating a
return of 15x original cost and an IRR of 28%. Following the sale, Electra made a new equity investment for a minority
stake in the current business alongside BC Partners. The total return on the current investment now stands at 1.9x original
cost, a 24% IRR. 
 
In February 2016, Electra sold its interest in fine art materials supplier Daler-Rowney. Following a period of
underperformance in 2014, Epiris strengthened the management team and initiated a performance improvement programme. These
actions cemented the company's attractive positions in niche markets, improved its operational and financial performance,
and created good growth prospects for the years to come; as a result the business was well positioned for an exit to a
strategic buyer. Electra received proceeds of £33 million from the sale, equivalent to a return of 1.7x original cost, a
12% IRR. 
 
Electra's investment in Kalle, the global manufacturer of artificial sausage casings and sponge cloths, was realised in
April 2016, with Electra receiving cash proceeds of £23 million. Including the proceeds received from a previous
refinancing in 2013, Electra realised a return of 3.2x original cost, an IRR of 22%. 
 
In respect of Buyouts and Co-investments, over the past five years Electra has achieved an average uplift over the prior
valuation* on realisation of 58%: 
 
 Company               Uplift (%)  
 BDR Thermea           20          
 SAV Credit            229         
 CPA Global            69          
 Amtico                70          
 Capital Safety Group  76          
 Agricola              13          
 esure                 37          
 Noumena               58          
 Allflex               73          
 Lil-lets              (14)        
 UGC (Unipart)         7           
 JOC                   35          
 Breakbulk             46          
 Labco                 16          
 Nuaire                50          
 MIMS                  135         
 Daler-Rowney          170         
 Kalle                 34          
 Allflex               **49        
 Hollywood Bowl        **46        
 Elian                 66          
 Weighted average      58          
 
 
*        Except where the prior valuation at the time reflected the impending realisation, in which case the "prior, prior"
valuation has been used. 
 
**       Partial realisation, only takes into account the cash proceeds received. 
 
Other realisation proceeds from the Buyouts and Co-investments portfolio include £10 million from Promontoria, which
continues to realise its portfolio of retail properties; and £4 million from the redemption of preference shares by Premier
Asset Management. 
 
Secondaries 
 
The Secondaries portfolio produced realisations of £32 million in the year. 
 
The largest component was the EP1 Secondary Portfolio, from which Electra received distributions totalling £18 million.
This takes total distributions from the EP1 Secondary Portfolio to £87 million, or more than 0.9x cost, and the total
return on the investment to 1.6x cost. 
 
AC Infraestructuras distributed £6 million to Electra following the sale of its largest asset, Metro Ligero Oeste. This
took total proceeds since the investment was made in December 2014 to 1.2x cost and the total return to 2.1x cost. 
 
Debt 
 
In March PINE entered into a new £41 million borrowing facility which allowed the repayment of £13 million of debt held by
Electra and £7 million of capital included in the Buyouts and Co-investments portfolio. 
 
As a result of the IPO of Hollywood Bowl in September, Electra received £23 million, inclusive of interest, from the
repayment of its debt investments in the business. 
 
Non-core Investment Portfolio 
 
Electra received £35 million from private equity funds in which it held a limited partnership interest and £15 million from
the sale of listed investments. 
 
Performance 
 
During the year to 30 September 2016 Electra's investment portfolio generated a total return of £751 million, an increase
of 46% on the opening portfolio of £1,630 million. 
 
 Year ended 30 September     2016£m  2015£m  2014£m  2013£m  2012£m  
 Buyouts and Co-investments  687     397     230     172     136     
 Secondaries                 15      15      12      33      8       
 Debt                        12      2       (2)     21      3       
 Non-core                    37      15      6       (4)     (11)    
 Total return                751     429     246     222     136     
 
 
The performance arose principally from the Buyouts and Co-investments portfolio which generated a total return of £687
million, representing an increase of 48% on the opening portfolio; the Secondaries portfolio contributed £15 million to the
total return, an increase of 17%; and the Debt portfolio provided £12 million, an increase of 66%. The non-core investment
portfolio contributed £37 million, or 35% on the opening portfolio. 
 
Buyouts and Co-investments 
 
In the year to 30 September 2016 the total return of £687 million from the Buyouts and Co-investments portfolio included
£212 million of realised gains with the balance being unrealised. Unrealised appreciation included £108 million of
valuation growth resulting from: the revaluation of retained interests in investments where Electra has achieved a partial
realisation; and investments where Electra agreed a transaction that had not completed at the year-end. A further £262
million resulted from organic growth in maintainable earnings, £52 million in respect of debt reduction by portfolio
companies and £28 million as a result of changes in multiples used for valuation. The contribution of bolt-on acquisitions
made in the year to unrealised valuation growth was £25 million. 
 
Analysis of Return 
 
                     £m   %    
 Earnings growth     262  38   
 Change in net debt  52   8    
 Multiple changes    28   4    
 Bolt-ons            25   3    
 Recent transaction  108  16   
 Realised returns    212  31   
 Total return        687  100  
 
 
In determining the Fair Value of each of investment at the reporting date, Epiris applies an appropriate and reasonable
multiple to the maintainable earnings, or in the case of property companies to the net assets, of individual investee
companies in order to derive their enterprise value. 
 
Typically Epiris derives the multiple using a market approach which references observable market inputs, generally the
market valuations of quoted comparable companies and the price at which unquoted comparable companies have changed
ownership. Differences between these comparable companies and the investee company being valued are reflected by adjusting
the multiple, generally by applying a discount, for points of difference such as relative size, growth, profitability or
return on capital. 
 
The unrealised gain from multiple changes of £28 million in the year under review may be disaggregated into a reduction of
£123 million from changes in the market valuations of quoted comparable companies and an increase of £151 million from
changes in adjustments for points of difference. The latter, which is tested using a tool known as "calibration" which is
explained in more detail in the Principles of Valuation of Investments on page 79, generally reflects progress in
implementing Epiris' strategy to improve performance and reposition investee companies. The largest individual movement was
in respect of Parkdean Resorts, which at 30 September 2015 was valued on the basis of the merger which completed in
November 2015; this investment contributed a reduction of £53 million from changes in the market valuations of quoted
comparable companies and an increase of £95 million from changes in adjustments for points of difference. 
 
In respect of maintainable earnings, Epiris usually uses reported earnings for the most recent twelve-month period,
adjusted if necessary to represent a reasonable estimate of maintainable earnings. Such adjustments might include
exceptional or non-recurring items, the impact of discontinued activities and acquisitions, or forecast material changes in
earnings. 
 
The unrealised gain from earnings growth of £262 million in the year under review may be disaggregated into an increase of
£207 million from growth in reported earnings for the most recent twelve-month period, and an increase of £55 million from
changes in adjustments to reflect maintainable earnings. This latter includes £42 million in relation to adjustments to
reflect the increased value of portfolio companies' earnings derived from overseas operations as a result of the weakening
of Sterling against other major currencies since mid-June; and £13 million relating to other adjustments to maintainable
earnings. The largest individual movement was in respect of Parkdean Resorts, which contributed an increase of £112 million
from earnings growth. At 30 September 2015 this investment was valued using the valuation agreed for the mergers of
Electra's holiday park assets with Parkdean Holidays to form Parkdean Resorts; this transaction was announced in August
2015 and completed in November 2015. A portion of this £112 million could therefore be considered to result from earnings
growth achieved between the date upon which the merger valuation was agreed and 30 September 2015. 
 
Approximately a further £29 million of unrealised gain results from the effect of the weakening of Sterling against other
major currencies since mid-June on the valuation of investments denominated in currencies other than Sterling. 
 
The most significant realised returns were generated by Elian, Hollywood Bowl and Allflex, as discussed above. The largest
unrealised increases in valuation arose in respect of Parkdean Resorts, AXIO, Audiotonix and Innovia. 
 
The merger of the Park Resorts Group with Parkdean Holidays to create Parkdean Resorts completed in November 2015. Electra
initially invested in Park Resorts in 2012, buying the company's senior debt before taking an equity position in a
refinancing led by Epiris in 2013. This refinancing allowed Epiris to implement its strategy to improve performance and
consolidate the sector, which increased group EBITDA from £32 million in 2012 to £68 million in 2015. The merger combined
two complementary portfolios of holiday parks to create a nationwide operator with 2015 EBITDA of over £100 million.
Earnings have grown further from this level during 2016 as a result of strong financial performance coupled with the
successful execution of the merger integration plan. This has resulted in a £188 million increase in the valuation of
Electra's investment during the year. The total return on the investment now stands at 3.7x original cost. 
 
The investment in AXIO has continued to benefit from Epiris' strategy to reposition each component business with strategic
clarity, operational improvement, growth investment and M&A. In October 2016, AXIO agreed to sell its European healthcare
information business, Vidal, to M3, Inc., subject to certain conditions. Following completion of this sale in November
2016, AXIO has returned to Electra 2.7x original cost in cash. Amongst the three remaining businesses, performance in OAG
and RISI continues to be strong while, in June 2016, TechInsights acquired Chipworks to create the market leader in
advanced technology intelligence and patent advisory services. In aggregate, these three businesses have more than trebled
earnings since the investment was made. The valuation of Electra's investment increased by £130 million during the year as
a result of the agreement to sell Vidal, earnings growth, an increase in the valuation multiple and cash flow. The total
return on the investment, which was made in 2013, now stands at 4.6x original cost. 
 
Audiotonix's financial performance remains strong. The continued investment in research and development has resulted in
successful new product launches along with a growing pipeline of future products. The company sells to over 90 countries
and over 50% of its revenues are in US Dollars.  The recent devaluation of Sterling has benefited Audiotonix's earnings,
which are reported in Sterling. The valuation of Electra's investment has increased by £50 million as a result of earnings
growth and cash flow. The total return on the investment now stands at 3.3x original cash cost. 
 
Innovia's earnings have increased substantially over the past year. Product mix, production of substrate for £5 and £10
notes and operational improvements have contributed to earnings growth. In April 2016 Innovia sold its cellophane
manufacturing business to Futamura Chemicals Co., Ltd., allowing it to focus on its core product areas of polymer banknote
substrate, where it is the global market leader, and BOPP films, where it is building on its "double bubble" technology to
develop products for its core and new markets. The valuation of Electra's investment has increased by £50 million during
the year as a result of earnings growth and an increase in the valuation multiple. The total return on the investment now
stands at 2.5x original cost. 
 
The largest valuation decreases were in respect of Hotter Shoes and TGI Fridays. 
 
The valuation of Electra's investment in Hotter has reduced to £31 million, or 0.4x original cost. The investment in Hotter
was written down significantly at 31 March 2016 as a result of earnings declines and a consequent reduction in the
valuation multiple in the first half of the year. Following this underperformance, a new management team has been recruited
and is implementing an operational improvement plan with a focus on cost reductions and cash and stock management. Earnings
have stabilised and Epiris and the management team are focusing on delivering the improvement plan over the short term. 
 
TGI Fridays' earnings are performing in line with the investment case, reflecting a successful store opening programme
offset by some weakness in like-for-like performance as a result of UK casual dining market conditions. The valuation of
Electra's investment in TGI Fridays reduced by £23 million to 0.9x original cost as a result of a decline in comparable
company multiples. 
 
The table below shows the valuation changes in respect of Electra's Buyouts and Co-investments portfolio. 
 
                           Change in valuation  Return on opening position  
 Company                   £m                   %                           
 Parkdean Resorts          188                  65                          
 AXIO Group                130                  65                          
 Hollywood Bowl            94                   92                          
 Elian                     79                   66                          
 Allflex Corporation       53                   73                          
 Innovia Group             50                   169                         
 Audiotonix                50                   55                          
 Treetops Nurseries        22                   81                          
 Daler-Rowney              21                   168                         
 Davies Group              19                   82                          
 Premier Asset Management  17                   53                          
 Photobox Group            15                   n/a                         
 Kalle                     9                    66                          
 PINE                      5                    12                          
 Retirement Bridge Group   3                    n/a                         
 Promontoria               1                    8                           
 Sentinel                  1                    n/a                         
 CALA Group                (3)                  (7)                         
 Knight Square             (9)                  (25)                        
 TGI Fridays               (23)                 (20)                        
 Hotter Shoes              (30)                 (50)                        
 Other                     (5)                  n/a                         
 
 
Buyouts and Co-investments - Valuation Multiples 
 
The distribution of Electra's Buyouts and Co-investments portfolio by EV:EBITDA ratio at 30 September 2016 is shown below. 
 
The simple average ratio was 9.7x compared to 8.4x at 30 September 2015. 
 
 Multiple band  Number of investments  Portfolio value  Portfolio value  
                in associated band     £m               %                
 <7x            2                      115              9                
 7-8x           2                      111              8                
 8-9x           1                      141              11               
 9-10x          4                      238              18               
 >10x           4                      715              54               
                13                     1,320            100              
 
 
Note: 
 
All investments over £5 million with the exception of CALA Group, Retirement Bridge Group and PINE which are valued on a
net assets basis. 
 
More than 85% of the increase in the simple average was due to those investments where Electra has either achieved a
partial exit during the year or sold some or all of its investment following the year end; such investments have been
valued at the valuation of the transaction in question. 
 
Buyouts and Co-investments - Profit Growth 
 
The distribution of Electra's Buyouts and Co-investments portfolio by EBITDA growth in the last year compared to the
previous year is shown below. 
 
Aggregate portfolio company EBITDA attributable to Electra's interest increased by 14%, of which approximately one
percentage point was due to bolt-on acquisitions, compared to 12%, of which approximately 2% was due to bolt-on
acquisitions, at 30 September 2015. This analysis calculates portfolio company EBITDA attributable to Electra's interest by
multiplying Electra's investment valuation as a proportion of the total equity valuation at 30 September 2016 by EBITDA for
the most recent twelve-month period and for the preceding twelve-month period in respect of each portfolio company. Thus it
is a measure of the growth in Electra's "share" of historical portfolio company earnings. 
 
Buyouts and Co-investments - EBITDA Growth Rates 
 
 Band    Number of investments  Portfolio value  Portfolio value  
         in associated band     £m               %                
 <0%     2                      56               4                
 0-10%   2                      159              12               
 10-20%  3                      587              45               
 >20%    6                      518              39               
         13                     1,320            100              
 
 
Note: 
 
All investments over £5 million with the exception of CALA Group, Retirement Bridge Group and PINE which are valued on a
net assets basis. 
 
The increase in the rate of growth of Electra's "share" of earnings is due to increased underlying earnings growth across
the portfolio, offset by a reduction in the weighting of higher-growth companies, for example because of a partial
realisation. 
 
Buyouts and Co-investments - Debt/EBITDA ratio 
 
The distribution of Electra's Buyouts and Co-investments portfolio by net debt to EBITDA ratio at 30 September 2016 is
shown below. 
 
The simple average ratio was 2.5x compared to 2.7x at 30 September 2015. 
 
 Multiple band  Number of investments  Portfolio value  Portfolio value  
                in associated band     £m               %                
 <0x            2                      266              20               
 0-1x           1                      44               3                
 1-2x           2                      184              14               
 2-3x           3                      105              8                
 3-4x           2                      170              13               
 4-5x           2                      482              37               
 >5x            1                      69               5                
                13                     1,320            100              
 
 
Note: 
 
All investments over £5 million with the exception of CALA Group, Retirement Bridge Group,and PINE which are valued on a
net assets basis. 
 
The decrease in the simple average is due to changes to the portfolio's composition as a result of investment activity. 
 
Alex Fortescue 
 
Managing Partner 
 
Epiris Managers LLP 
 
8 December 2016 
 
Market Review 
 
"The private equity market in the year to 30 September 2016 has continued to see a limited supply of investment
opportunities helping prices remain at a high level." 
 
Market Deal Volumes 
 
Deal volumes in the year to 30 September 2016 were significantly below the levels seen in previous years, even with a
return to more normal levels in the fourth quarter. 
 
Quarterly UK deal volumes for the year ended 30 September (£75 million to £300 million) 
 
 Year  Q1  Q2  Q3  Q4  Total  
 2007  15  16  22  18  71     
 2008  17  10  15  4   46     
 2009  0   1   3   3   7      
 2010  3   8   4   9   24     
 2011  2   5   5   6   18     
 2012  6   3   8   6   23     
 2013  5   9   13  7   34     
 2014  11  7   9   9   36     
 2015  8   9   6   2   25     
 2016  3   2   2   7   14     
 
 
Source: MergerMarket (completed deals where EV is provided) 
 
Market Deal Pricing 
 
Deal pricing has remained relatively strong, fuelled by a scarcity of assets and a plentiful supply of acquisition debt.
Although the average entry multiple for UK buyouts valued at over £10 million fell slightly from 11.4x in the year to
September 2015 to 10.8x EBITDA this year, it remains above the five and ten-year average, both of which stand at 10.4x
(source: CMBOR). 
 
Investment Activity 
 
A number of factors, relating both to private equity in particular and to financial markets more broadly, have increased
asset prices as well as liquidity in the M&A and credit markets. At the same time, Electra's portfolio of assets has
matured as our investment strategy has successfully created a portfolio of growth businesses which are of increasing
interest to strategic and financial buyers alike. 
 
We have capitalised on this to deliver a record level of realisations during the year, £903 million in total. The Buyouts
and Co-investments portfolio alone has generated realisations of £781 million and the weighted average exit multiple in
this part of the portfolio was 13.4x EBITDA. This includes three exits to strategic buyers and one in an IPO. 
 
Bill Priestley 
 
Chief Investment Partner 
 
Epiris Managers LLP 
 
8 December 2016 
 
New Investment and Realisations 
 
Photobox Group 
 
Date of initial investment: January 2016 
 
Type of deal: Buyout 
 
Equity ownership: 37% 
 
Original cost: £89 million 
 
Amount realised: £2 million 
 
Valuation: £102 million 
 
Valuation: Based on multiple of earnings 
 
Multiple of cost: 1.2x 
 
IRR: 27% 
 
Location: Europe 
 
Website: www.group.photobox.com 
 
Management: Jody Ford, CEO; Douglas McCallum, Chairman 
 
In January 2016, Electra invested £89 million in the acquisition of Photobox alongside Exponent Private Equity. The balance
of the financing of the transaction was provided from bank facilities arranged by both firms. 
 
Photobox is Europe's leading digital consumer service for personalised products and gifts. It enables millions of customers
to share memories by turning their digital photographs into a range of personalised products and gifts, from traditional
prints and greetings cards to photobooks, calendars and canvases, using the group's websites, installed software and mobile
applications. Products are manufactured at one of the group's five production facilities and sold across Europe through the
PhotoBox, Moonpig, Sticky9, Hofmann and posterXXL brands. 
 
Photobox is the European market leader and due to its scale is well placed to capture further market growth, which is
expected to continue as a result of the growth in digital photography as well as an increased propensity to purchase
personalised products. Our strategy is to accelerate growth through improving the rate and economics of customer
acquisition as well as through product innovation, and to ensure that growth is delivered effectively and efficiently. 
 
Performance in the financial year to April 2016 was ahead of the Epiris investment case and the start to the current
financial year has been similarly positive. Jody Ford, formerly at eBay, joined the company as CEO in July 2016 as part of
the planned management succession. 
 
Retirement Bridge Group 
 
Date of initial investment: May 2016 
 
Type of deal: Co-investment 
 
Equity ownership: 50% 
 
Original cost: £45 million 
 
Amount realised: £1 million 
 
Valuation: £47 million 
 
Valuation: Based on net assets 
 
Multiple of cost: 1.1x 
 
IRR: 16% 
 
Location: UK 
 
Website: n/a 
 
Management: Paul Barber, CEO; Steve Groves, Chairman 
 
In May 2016, working alongside Patron Capital, Electra invested £45 million in the acquisition of Retirement Bridge Group,
formerly known as Grainger Retirement Solutions. 
 
Retirement Bridge is a consolidator and servicer of home reversion equity release plans with a portfolio of more than 3,500
properties across the UK. The investment offers an attractive risk-adjusted return benefiting from a cash yield and
downside protection from the high level of asset backing. 
 
The intention is to optimise the return from the existing portfolio and to explore opportunities for organic and
acquisition-led growth. 
 
Since acquisition the company has been successfully separated from its former parent and the management team has been
complemented through the appointment of Steve Groves, formerly CEO of Partnership Group plc, as Chairman. Performance since
acquisition has been in line with expectations and the management team is focused on both growth and operational
improvement initiatives. 
 
Realisations 
 
Daler-Rowney 
 
Date of initial investment: March 2011 
 
Date of realisation: February 2016 
 
Type of deal: Buyout 
 
Original cost: £20 million 
 
Proceeds: £33 million 
 
Multiple of cost: 1.7x 
 
IRR: 12% 
 
Location: International 
 
Website: www.daler-rowney.co.uk 
 
Management: Patrick Giraud, CEO 
 
In 2011 Electra made a £17 million equity investment in support of the buyout of Daler-Rowney from private shareholders.
Electra invested a further £3 million in 2014 in order to provide additional liquidity. 
 
Headquartered in Bracknell, Berkshire, Daler-Rowney is one of the largest suppliers of fine art materials in the world. The
company has a long history of product innovation (its history dates to 1783) and its comprehensive product range includes
artists' paints, brushes, papers and canvases which meet the needs of artists of all kinds, from beginners to
professionals. The company manufactures its products in the UK and the Dominican Republic and sells in more than ninety
countries worldwide. 
 
The investment strategy was to continue organic growth, with investment in product development and in sales and marketing,
and to grow through acquisition. In 2013 the company acquired the business of Dr. Fr. Schoenfeld GmbH & Co, a leading
manufacturer of fine arts colours under the Lukas and Nerchau brands, thus becoming the market leader in German-speaking
Europe. 
 
Following a period of underperformance in 2014, Epiris strengthened the management team and initiated a performance
improvement programme. These actions cemented the company's attractive positions in niche markets, improved its operational
and financial performance, and created good growth prospects for the years to come; as a result the business was well
positioned for an exit to a strategic buyer. Electra received proceeds of £33 million from the sale, representing an uplift
of 168% on the valuation at 30 September 2015 and equivalent to a return of 1.7x original cost, a 12% IRR. 
 
Kalle 
 
Date of initial investment: February 2010 
 
Date of realisation: April 2016 
 
Type of deal: Co-investment 
 
Original cost: £9 million 
 
Proceeds: £29 million 
 
Multiple of cost: 3.2x 
 
IRR: 22% 
 
Location: Germany 
 
Website: www.kalle.de 
 
Management: Dr Carsten Heldmann, CEO; Peter Fearn, non-executive Chairman 
 
In 2010 Electra made a E10 million (£9 million) equity investment in the E216 million acquisition of Kalle. In 2013 a
refinancing of the business returned E7 million (£6 million) to Electra. 
 
Headquartered in Wiesbaden, Germany, and operating from fifteen production facilities across nine countries, Kalle is a
market leader in the production of artificial casings for sausages, with strong positions in the viscose, textile and
plastic product segments. 
 
Kalle has a portfolio of high-quality products and a pipeline of new innovations. It operates in defensive markets which
benefit from robust demand in developed markets, and growing demand in emerging economies, for low-cost protein sources.
Further growth opportunities exist by virtue of increasing penetration of artificial casings. 
 
In July 2016 Kalle was sold to a financial buyer with Electra receiving proceeds of £23 million. Together with proceeds


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