20th Sep 2006 16:16
Graphite Enterprise Trust PLC20 September 2006 For immediate release GRAPHITE ENTERPRISE TRUST PLC UNAUDITED RESULTS FOR THE HALF YEAR TO 30 JUNE 2006 SUMMARY OF THE PERIOD Net assets per share +5.1% Share price +0.5% Realisations £57.5m New commitments £83.5m New investments £42.2m FINANCIAL SUMMARY Jun 2006 Dec 2005 Change Net assets per share 418.6p 398.4p +5.1% Share price 366.3p 364.3p +0.5% PERFORMANCE Years to 30 June 2006 1 3 5 10 NAV per share +16.8% +54.4% +45.1% +247.8% Share price +18.9% +64.2% +48.0% +243.9% FTSE All-Share Index +15.9% +50.5% +8.8% +59.9% Chairman's Statement Overview Graphite Enterprise made steady progress in the first half of 2006 during aperiod of volatility for quoted markets. The net asset value per share rose by5.1% to 418.6p and the share price rose by 0.5% to 366.3p. These increasescompare with a rise of 4.2% in our benchmark, the FTSE All-Share Index. At theperiod end shareholders' funds were £352.3 million. The increase in net asset value per share was mainly the result of profitabledisposals and refinancings of underlying companies in the fund portfolio, and ofco-investments alongside funds. The discount of the share price to the net asset value increased from a fiveyear low of 8.6% to 12.5% in the six months to 30 June 2006, having fallen from14.1% in the previous six months. This increase was consistent with a generalwidening of discounts in the private equity investment trust sector. Our objective is to provide shareholders with long term capital growth. In thefive years to 30 June 2006 the FTSE All-Share Index rose by 8.8%, while the netasset value per share of Graphite Enterprise rose by 45.1% and its share pricerose by 48.0%. Longer term performance has also been strong, with increases of 247.8% in thenet asset value per share and 243.9% in the share price in the ten years to 30June 2006. These movements compare with an increase of 59.9% in the FTSEAll-Share Index over the same period. Six months to 30 June 2006£m Opening Additions Disposals Gains & Closing value losses valueInvestment portfolio 174.4 42.2 (57.5) 16.3 175.4FTSE option 20.2 - - 3.8 24.0Total portfolio 194.6 42.2 (57.5) 20.1 199.4 Portfolio The portfolio generated total gains of £20.1 million during the period,representing 10.3% of its opening value. Of this amount, £16.3 million wasgenerated by the investment portfolio (9.3% of opening value) and £3.8 millionby the FTSE option (18.8% of opening value). The largest gains in the investment portfolio came from HSBC InfrastructureFund, Preh and ICG Mezzanine 2000 fund. The total value of the portfolio at 30 June 2006 was £199.4 million of which£175.4 million was in the investment portfolio and £24.0 million was in the FTSEoption. Overall, disposals exceeded additions by £15.3 million. Disposals continued ata high level in the period and additions increased substantially as drawdowns ofcommitments to funds made over the past 18 months accelerated. At 30 June 2006, 54.3% (31 December 2005: 50.1%) of the investment portfolio wasinvested in funds and 45.7% (49.9%) was held in direct investments. £m 2002 2003 2004 2005 2006 1sthalfAdditions 47.1 35.0 29.3 45.5 42.2Disposals 36.0 34.5 109.2 86.2 57.5 Disposals The investment portfolio generated total proceeds of £57.5 million (June 2005:£33.0 million) representing 33.0% of the opening value, and reflecting thecontinuing strength of the market for disposals. The largest disposal in the period was of the investment in U-POL whichgenerated proceeds of £12.7 million. The full value of this disposal wasreflected in the balance sheet at 31 December 2005. The portfolio of HSBC Infrastructure Fund was sold to a new quoted company.This generated proceeds of £6.8 million, with the remaining holding being valuedat a further £2.9 million at the period end. £5.9 million was received from the sale of the interest in Aster City which washeld through the Hicks Muse Tate & Furst Europe fund. The refinancing of Preh, a co-investment alongside the DBAG IV fund, returned£5.8 million, and the remaining holding was valued at £1.8 million at 30 June. A number of disposals by the ICG Mezzanine 2000 fund generated totaldistribution proceeds of £5.4 million. In March we disposed of our interest inLion Capital I for £7.1 million at a small premium to our cost. The fund haddrawn down £2.8 million in the period. Additions Additions to the portfolio were £42.2 million, nearly three times the level inthe first half of 2005 and almost 40% more than in the second. The two largest investments made in the period were of £8.2 million inMicheldever Tyre Services, the UK's leading independent tyre distributor, and of£7.2 million in Cinque Ports Leisure, the UK's third largest holiday home andcaravan park group. Both of these investments were made through GraphiteCapital Partners VI and alongside the fund as co-investments. Other investments included £2.3 million in Avery Healthcare and £4.8 million ina number of mezzanine debt investments Commitments£m Jun 04 Dec 04 Jun 05 Dec 05 Jun 06Total commitments 94.0 83.3 125.7 147.7 183.1 A total of £83.5 million was committed to funds in the six months to 30 June2006, compared with £50.7 million in the same period in 2005. Details of the largest new commitments are set out below: Fund Commitment £mFourth Cinven Fund 20.4Charterhouse Capital Partners VIII 13.9Euromezzanine 5 13.9TDR Capital Fund II 13.8Madison Dearborn Capital Partners V 13.0Other 8.5Total 83.5 o The Fourth Cinven Fund is a €6.5 billion fund which invests in largepan-European buy-outs. o Charterhouse Capital Partners VIII is a €4.0 billion fund which investsin medium-sized and large buy-outs throughout Europe. o Euromezzanine 5 is a €660 million fund which invests in mezzaninefinance throughout Europe but primarily in private equity transactions inFrance. o TDR Capital Fund II is a €1.75 billion fund which invests inmedium-sized and large European buy-outs. o Madison Dearborn Capital Partners V is a $6.5 billion fund investing inmedium-sized and large buy-outs, mainly in North America. Total commitments at the period end were £183.1 million, 24.0% higher than atthe beginning of the year. Balance sheet At 31 December 2005, cash and near cash balances marginally exceededcommitments. Although disposals exceeded additions in the period, high levels ofnew commitments resulted in outstanding commitments exceeding the level of cashand near cash at 30 June 2006. At 31 December 2005, the total portfolio was valued at £194.6 million,representing 56.5% of total net assets. Cash and near cash totalled £149.9million and commitments were £147.7 million, leaving £2.2 million of cashuncommitted to the portfolio. At 30 June 2006, the total portfolio was valued at £199.4 million, representing55.8% of total net assets. Cash and near cash totalled £158.2 million andcommitments were £183.1 million, resulting in commitments exceeding cash andnear cash by £24.9 million, representing 7.0% of total net assets. Fund commitments are typically drawn over a three to five year period. At thecurrent level they are expected to be funded by cash and by disposals from theexisting portfolio. We expect to increase the level of commitments further toensure that cash generated by disposals is reinvested more rapidly. The Boardregularly reviews the need for borrowing facilities to cover any potentialexcess of fund drawdowns over available cash. In October 2005, we purchased a call option over the FTSE 100 Index with a threeyear maturity. This was to address the risk of underperformance which wouldresult from holding high levels of cash if the market were to rise. The FTSE 100 Index rose by 3.8% to 5,833 in the six months to 30 June 2006 andthe value of the option rose by £3.8 million to £24.0 million. The cost of theoption was £14.0 million. Graphite Enterprise was effectively 85.4% invested as a percentage of total netassets at 30 June 2006 (31 December 2005: 87.2%), taking into account the effectof the option. We have continued to follow the policy of enhancing shareholder returns bybuying back shares when they are available in reasonable volumes at anattractive discount. A total of 720,554 shares was bought back during theperiod, at a total cost of £2.6 million. The average price paid was 358.3p, atan average discount to net asset value of 11.1%. All shares bought back havebeen cancelled. Statement of Total Return and Dividend The revenue return attributable to shareholders for the period was £2.9 millionor 3.4p per share (June 2005: £3.8 million, 4.3p). Although income frominvestments was high, it was lower than the exceptional level of the same periodin 2005. The final dividend in respect of 2005 of 4.3p per share was paid at thebeginning of June 2006. In accordance with IFRS, no provision was made for thedividend at 31 December 2005. As a result, net assets were reduced by itspayment in the current year. Outlook In July and August, a total of £12.0 million was invested. This included aco-investment of £4.3 million in Design Objectives, a designer and distributorof papercraft products, which was made through and alongside Bowmark CapitalPartners III. Disposals in July and August totalled £7.0 million. The private equity market remains active, with a reasonable balance betweenopportunities for new investments and opportunities for disposals. Theturbulence of quoted markets in May did not have a significant effect on theprivate equity market as a whole, although it has become harder to achievedisposals through flotations. We have made substantial commitments to funds over the last eighteen months andwould expect the rate of new investments to remain high over the next twelvemonths as these commitments are drawn down. John SclaterSeptember 2006 The 30 Largest Underlying Investments The table below presents the 30 companies in which Graphite Enterprise had thelargest investments by value at 30 June 2006. Values are shown as a percentageof the total investment portfolio of £175.4 million. Value as a % of Year of Country / investment Entity investment region portfolio 1 Micheldever Distributor and retailer of tyres 2006 UK 4.7% 2 Go Plant Operator of road sweeping vehicles 1995 UK 4.5% 3 Cinque Ports Owner and operator of caravan parks 2006 UK 4.1% 4 Standard Brands Supplier of household fire lighting products 2001 Europe 3.9% 5 Wagamama Chain of Japanese noodle restaurants 1996 UK 3.9% 6 Huntress Search Recruitment consultancy 2000 UK 3.1% 7 Intermediate Capital * Provider of mezzanine finance 1989 Europe 3.1% 8 Kwik-Fit Provider of automotive fast-fit services 2005 Europe 2.9% 9 OPD Group * Group of specialist recruitment agencies 1991 UK 2.8% 10 Applied Energy Manufacturer of ventilation and heating products 2001 UK 2.7% 11 Leading Edge Printer of self adhesive labels and packaging 2003 UK 2.2% 12 JT Frith Operator of discount warehouses 2004 UK 2.0% 13 Computacenter * Provider of IT equipment and services to large 1985 UK 1.9% organisations 14 Bridgewell * Provider of corporate finance and broking services 2001 UK 1.8% 15 Avery Healthcare Owner and operator of care homes for the elderly 2005 UK 1.6% Total of the 15 largest underlying investments 45.2% Value as a % of Year of Country / total investment Entity investment region portfolio 16 PIFC Pensions and employment benefits consultancy 2002 UK 1.5% 17 Segur Iberica Provider of security services and products 2004 Spain 1.4% 18 Christian Hansen Supplier of natural ingredients to the food industry 2005 Global 1.3% 19 Golden Tulip Developer and manager of hotels 2002 UK 1.2% 20 Weetabix Manufacturer of breakfast cereals 2004 Global 1.2% 21 Elis Provider of textile rental and hygiene services 2005 France 1.2% 22 Aktrion Provider of outsourced managed services to 2004 UK 1.1% manufacturers 23 TMP Recruitment communications agency 2006 UK 1.1% 24 Integrity Software Provider of software to small and medium-sized 2005 UK 1.1% companies 25 Hellermann Tyton Manufacturer of electrical and communications 2006 UK 1.1% network components 26 Perstop Manufacturer of chemical additives for the resin and 2005 Sweden 1.1% coating industries 27 Moeller Supplier of electrical components 2005 Germany 1.1% 28 Preh Manufacturer of automotive components 2003 Germany 1.0% 29 Summit Medical Manufacturer of medical devices and accessories 2001 UK 1.0% 30 Futura Operator of charter airline services 2002 Spain 1.0% Total of the 30 largest underlying investments 62.6% * Quoted The 15 Largest Fund Investments The largest fund investments by value at 30 June 2006 are set out below. Fund Outstanding Year of Country / commitment £m commitment region Value £m 1 Graphite Capital Partners VI Medium-sized buy-outs 21.9 2003 UK 24.4 2 Corpfin Capital Fund II Medium-sized buy-outs - 2000 Spain 8.3 3 PAI Europe IV Large leveraged buy-outs 12.8 2005 Europe 7.8 4 Doughty Hanson & Co IV Leveraged buy-outs of medium-sized to large 7.3 2005 Europe 7.7 companies 5 Barclays European Infrastructure Fund Infrastructure projects 4.9 2002 UK 6.4 6 ICG Mezzanine Fund 2000 Mezzanine loans to medium-sized to large 0.8 2000 Europe 5.9 buy-outs 7 Euromezzanine 4 Mezzanine loans to medium-sized buy-outs 0.4 2003 France 5.1 8 Deutsche Beteiligungs AG Fund IV Medium-sized buy-outs, primarily of 2.8 2000 Germany 4.9 manufacturers 9 Euromezzanine 5 Mezzanine loans to medium-sized buy-outs 9.1 2006 France 4.6 10 Activa Capital Fund Medium-sized buy-outs 3.4 2002 France 3.2 11 Piper Private Equity Fund III Small buy-outs of consumer businesses 0.8 2003 UK 3.0 12 HSBC Infrastructure Fund Infrastructure projects 6.1 2001 UK/Europe 2.9 13 CVC European Private Equity Partners IV Large buy-outs 7.1 2005 Europe 2.9 14 Charterhouse Capital Partners VI Medium-sized to large buy-outs 0.1 1997 UK/France 2.4 15 Candover 2005 Fund Large buy-outs 18.3 2005 Europe 2.2 Total of largest 15 fund investments 95.8 91.7 Percentage of total investment portfolio 52.3% Portfolio Analysis Sector analysis % of total investment portfolioBusiness services 19.3%Consumer goods and services 19.3%Manufacturing and engineering 12.4%Leisure 11.3%Construction and building supplies 9.2%Investment banking and finance 6.9%Advertising and recruitment 5.9%Retailing 5.1%Other 10.6%Total 100.0% Geographic distribution % of total investment portfolioUK 70.4%France 10.0%Germany 5.5%Spain 5.3%Other European 6.8%North America 2.0%Total 100.0% Investment type % of total investment portfolioMedium-sized buy-out 57.0%Large buy-out 14.6%Quoted 11.2%Mezzanine 8.9%Infrastructure 5.3%Small buy-out 3.0%Total 100.0% Year of investment % of total investment portfolio2006 18.8%2005 17.4%2004 11.7%2003 7.1%2002 8.2%2001 12.9%2000 and before 23.9%Total 100.0% Unaudited Consolidated Income Statement Half year to 30 Jun 2006 Half year to 30 Jun 2005 Year to 31 Dec 2005 Revenue Capital Total Revenue Capital Total Revenue Capital Total return return return return return return £'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000s £'000sInvestment returnsGains and losses on 4,847 20,093 24,940 6,017 33,266 39,283 14,211 69,589 83,800investments held atfair valueForeign exchange gains - (27) (27) - (372) (372) - (208) (208)and losses 4,847 20,066 24,913 6,017 32,894 38,911 14,211 69,381 83,592ExpensesInvestment management (581) (1,744) (2,325) (651) (1,944) (2,595) (1,117) (3,350) (4,467)chargesOther expenses (432) - (432) (435) - (435) (960) (288) (1,248) (1,013) (1,744) (2,757) (1,086) (1,944) (3,030) (2,077) (3,638) (5,715) Profit before tax 3,834 18,322 22,156 4,931 30,950 35,881 12,134 65,743 77,877Taxation (959) 523 (436) (1,143) 637 (506) (3,193) 1,142 (2,051)Profit for the period 2,875 18,845 21,720 3,788 31,587 35,375 8,941 66,885 75,826 Attributable to:Equity shareholders 2,875 17,497 20,372 3,788 27,854 31,642 8,941 59,894 68,835Minority interests - 1,348 1,348 - 3,733 3,733 - 6,991 6,991 Basic and diluted 24.0p 35.6p 78.8pearnings per share Dividends declared andpaid- total paid (£'000s) 3,650 3,858 7,678- per share (p) 4.3p 4.3p 8.8p The column headed 'Total' represents the income statement for the relevantperiod and the columns headed 'Revenue' and 'Capital' are supplementaryinformation. Unaudited Consolidated Balance Sheet As at 30 Jun As at 31 Dec 2006 2005 2005 £'000s £'000s £'000sNon-current assetsInvestments held at fair value - Unquoted investments 156,843 152,586 159,286 - Quoted investments 18,535 14,267 15,065 - FTSE 100 Call Option 24,060 - 20,254 199,438 166,853 194,605Current assetsCash and cash equivalents 161,613 150,199 150,871Trade and other receivables 157 618 1,404 161,770 150,817 152,275Current liabilitiesTrade and other payables 3,579 545 2,351 Net assets 357,629 317,125 344,529 Capital and reservesCalled up share capital 8,415 8,652 8,487Capital redemption reserve 989 752 917Share premium 12,936 12,936 12,936Capital reserve 318,007 276,518 303,104Revenue reserve 11,921 11,362 12,696Equity attributable to equity shareholders 352,268 310,220 338,140Minority interests 5,361 6,905 6,389 357,629 317,125 344,529 Net asset value per ordinary share (basic and diluted) 418.6p 358.5p 398.4p Unaudited Consolidated Cash Flow Statement Half year to Year to 30 Jun 31 Dec 2006 2005 2005 £'000s £'000s £'000sOperating activitiesSale of portfolio investments 57,420 32,993 86,248Purchase of portfolio investments (42,127) (15,057) (45,556)Purchase of FTSE 100 Call option - - (14,028)Income received from investments 2,957 2,934 6,634Other income 3,235 3,173 6,688Investment management charges paid (2,373) (2,029) (4,356)Other expenses (400) (873) (1,123)Taxation (91) - 312Net cash inflow from operating activities 18,621 21,141 34,819 FinancingInvestments by minority interests 66 99 205Distributions to minority interests (2,475) (1,499) (5,414)Purchase of ordinary shares (1,793) (9,126) (14,580)Equity dividends paid (3,650) (3,858) (7,678)Net cash outflow from financing activities (7,852) (14,384) (27,467) Net increase in cash and cash equivalents 10,769 6,757 7,352 Cash and cash equivalents at beginning of period 150,871 143,814 143,727Net increase in cash and cash equivalents 10,769 6,757 7,352Effect of changes in foreign exchange rates (27) (372) (208)Cash and cash equivalents at end of period 161,613 150,199 150,871 Unaudited Consolidated Statement of Changes in Equity Half year to 30 Jun Year to 31 Dec 2006 2005 2005 £'000s £'000s £'000s Total equity at the beginning of the period 344,529 296,088 296,088 Adoption of IAS 32 and IAS 39 - 83 83 344,529 296,171 296,171Profit attributable to equity shareholders 20,372 31,642 68,835Profit attributable to minority interests 1,348 3,733 6,991Total profit for the period and total recognised income and 21,720 35,375 75,826expense Dividends paid to equity shareholders (3,650) (3,858) (7,677)Purchase of ordinary shares (2,594) (9,126) (14,580)Net distribution to minority interests (2,376) (1,437) (5,211)Total equity at end the of period 357,629 317,125 344,529 Notes 1 GENERAL INFORMATION Graphite Enterprise Trust PLC (the "Company") and its subsidiary (together "Graphite Enterprise" or the "Group") are registered in England and Wales anddomiciled in England. The registered office is Berkeley Square House, BerkeleySquare, London W1J 6BQ. The Company's objective is to provide shareholders withlong term capital growth through investment in unquoted companies both directlyand through specialist funds. These consolidated interim financial statementswere approved for issue by the Board of Directors on 19 September 2006. 2 UNAUDITED INTERIM REPORT The financial information contained in this interim report does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. Thefinancial information for the half years ended 30 June 2006 and 30 June 2005 hasnot been audited. The information for the year ended 31 December 2005 has been extracted from thelatest published audited financial statements. The audited financial statementsfor the year ended 31 December 2005 have been filed with the Registrar ofCompanies. The report of the auditors on those accounts contained noqualification or statement under Section 237(2) or (3) of the Companies Act1985. 3 BASIS OF PREPARATION The financial information for the period ended 30 June 2006 has been prepared inaccordance with the Listing Rules of the Financial Services Authority (FSA) andin accordance with the accounting policies that are expected to be adopted forthe year ending 31 December 2006, which are consistent with the accountingpolicies which were set out in the 2005 consolidated financial statements. The Group has chosen not to adopt IAS 34 'Interim Financial Reporting' inpreparing its 2006 interim accounts since adoption of this standard is notmandatory until the EU Transparency Directive is implemented through the FSA'sListing Rules. 4 DIVIDENDS Half year to Year to 30 June 31 December 2006 2005 2005 £'000s £'000s £'000sDividends paid or approved in the period 3,650 3,858 7,678 5 EARNINGS PER SHARE Half year to 30 Year to June 31 December 2006 2005 2005 Revenue return per ordinary share 3.39p 4.26p 10.24pCapital return per ordinary share 20.64p 31.35p 68.60pEarnings per ordinary share (basic and diluted) 24.04p 35.61p 78.84pWeighted average number of shares 84,752,111 88,832,778 87,311,470 The earnings per share figures are based on the weighted average numbers ofshares set out above. 6 SHARE BUY BACKS Half year to 30 Year to June 31 December 2006 2005 2005 Number of shares bought back 720,554 3,200,000 4,850,000Average price per share 358.3p 283.2p 298.5pTotal cost including expenses £2,594,000 £9,126,000 £14,580,000Number of shares in issue at the end of the period 84,154,446 86,525,000 84,875,000 All shares bought back were subsequently cancelled. Copies of the Interim Report will be posted to all shareholders on or around 27September 2006 and copies may be obtained during normal business hours from theCompany's registered office thereafter. By order of the Board Graphite Capital Management LLP Secretary 20 September 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
ICG Enterprise Trust