Source - RNS
RNS Number : 0113L
ICG Enterprise Trust PLC
28 September 2016
 

28 September 2016

ICG ENTERPRISE TRUST PLC

UNAUDITED RESULTS FOR THE

SIX MONTHS ENDED 31 JULY 2016

 

ICG Enterprise Trust plc ("ICG Enterprise" or "the Company") presents its unaudited results for the six months ended 31 July 2016.

 

Chairman's Statement

 

Interim review

 

"The portfolio continues to generate strong growth over the short, medium and long term."

 

On behalf of the Company, I am able to report a successful set of results for the first six months under the management of ICG1. The net asset value as at 31 July 2016 is £566 million or 798 pence per share (31 January 2016: 731p), a 10.0% Total Return2 for the period. The share price also recovered to 592 pence at 31 July 2016 (31 January 2016: 545p), delivering a Total Return of 9.8% in the six months (year ended 31 January 2016: 8.2%).

 

We are pleased to announce an interim ordinary dividend of 10.0 pence per share, a 100% increase on the 5.0 pence per share interim dividend declared in 2015. This will be paid on 21 October 20163.

 

Performance in years to 31 July 2016

1

3

5

10*

Net asset value per share Total Return

15.6%

24.1%

48.3%

115.6%

Share price Total Return

2.3%

29.9%

65.9%

89.3%

FTSE All-Share Index Total Return

3.8%

15.5%

44.1%

75.6%

 

 

 

 

 

*As the Company changed its year end in 2010, the ten year figures are for the 121 month period to 31 July 2016.

 

Profit for the period was £51 million, equivalent to 72 pence per share, driven both by strong growth in the Portfolio2,4 (+7.4%) and favourable movements in the foreign exchange rate (+5.3%). The integration of the investment team into ICG has gone smoothly and they have begun to take advantage of being part of a much larger alternative asset management business. In particular the Company has benefited from ICG's broader insight into and access of private market investment opportunities to inform certain investment decisions and make new investments. Since the start of the financial year the Company has made two primary fund commitments and two secondary investments in opportunities all originated through ICG, as well as four third-party primary fund commitments.

Portfolio

The Portfolio now stands at £470 million with the Company having received Realisation Proceeds2 of £45 million and invested £30 million in the period. Primary fund investments account for £287 million (61%) and secondary and co-investments £183 million (39%). ICG originated investments represent £40 million (8%). 44% of the Portfolio is invested in the UK, 38% in continental Europe and 18% in North America.

Post-crisis Investments2 now comprise 80% of the Portfolio with the 30 largest investments accounting for 48% of the Portfolio. The valuation of the top 30 investments at 9.7 times EBITDA2 is at a substantial discount to the valuation of FTSE All-Share Index at 14.0 times EBITDA.

Balance sheet

Commitments of £54 million were added in the period such that Undrawn Commitments2 now stand at £297 million. The Company holds cash of £110 million and undrawn debt facilities of £102 million providing total available liquidity of £212 million. Commitments therefore exceed total liquidity by £84 million or 15% of the period end net asset value; a level that remains consistent with our cautious approach to managing the balance sheet.

Distributions

In the period the Company paid a final dividend of £4.3 million for the year to 31 January 2016, equivalent to 6.0 pence per share. In order to provide shareholders with greater clarity of the income they can expect from the Company, the Board anticipates paying a minimum dividend each year of 20.0 pence per share. We intend to maintain the practice of paying an interim dividend and we are pleased to declare an interim ordinary dividend of 10.0 pence per share to be paid on 21 October 20163.

We repurchased 458,426 shares at an average price of 574p for total consideration of £2.6 million. This improved the net asset value per share by 0.2%. So long as the shares are valued at a significant discount to the net asset value the Board believes that the shares offer good value and will continue to repurchase shares on an opportunistic basis.

 

Outlook

We are encouraged to see the Portfolio maintaining its positive growth momentum of the last 7 years, delivering double digit EBITDA growth in the last 12 months and yet it is still valued at a material discount to the FTSE All Share Index. Our focus on partnering with only the most experienced managers, with strong track records of investing and managing companies through economic cycles provides us with reassurance that the Portfolio is well positioned to adapt to changing market conditions. Whilst the stock market's response to the recent Brexit decision has been positive, we acknowledge that the negotiations with the EU may present some medium term uncertainty for the UK. We remain confident that the risk profile of the underlying investments is low, the diversity of investments is high and the liquidity position of the balance sheet is strong. In fact, the Company is well positioned to take advantage of future investment opportunities that invariably arise at times of market instability.  Finally, the change of Manager to ICG is already delivering material benefits to shareholders which should only increase in both the short and long term.

 

 

Mark Fane

27 September

 

 

1.   ICG Alternative Investment Limited, a regulated subsidiary of Intermediate Capital Group plc, acts as the Manager of the Company.

 

2.   Constitutes an Alternative Performance Measure ("APM"). APMs are used throughout this report if considered by the Board and the Manager to be the most relevant basis for shareholders in assessing the overall performance of the Company, and for comparing the performance of the Company to its peers and its previously reported results. The Glossary, which is located after the notes to the financial statements, includes further details of APMs and reconciliations to IFRS measures, where appropriate.

 

3.   Shares will trade without rights to the interim dividend from 6 October 2016 ("ex-dividend date"). The last date for registering transfers to receive the dividend is 7 October 2016 ("record date").

 

4.   In the Chairman's Statement, Manager's Review and Supplementary Information, reference is made to the "Portfolio". This is an APM (see footnote 2). The Portfolio is defined as the aggregate of the investment portfolios of the Company and of its subsidiary limited partnerships. The rationale for this APM is discussed in detail in the Manager's Review. The Glossary, which is located after the notes to the financial statements, includes a reconciliation of the Portfolio to the most relevant IFRS measure.

 

 

Manager's Review

Change of Manager

This is our first half year report since the appointment of ICG as Manager of the Company and the transfer of the investment team from Graphite Capital Management LLP ("Graphite Capital"). At the time of the appointment, a number of potential benefits to investors were identified, including: 

·      Access to a wider range of investment opportunities through ICG's global office network and local private equity manager relationships;

·      Insights and market intelligence from ICG's direct investment teams;

·      Support from ICG's infrastructure and expertise in areas such as treasury, investor relations and information technology; and

·      Lower costs through a reduction in the headline management fee and no fees on ICG funds (in addition to no fees on Graphite Capital funds).

In the relatively short time since moving to ICG we are encouraged by the progress we have made towards realising all of these benefits. Most notably, commitments have been made to two in-house funds: ICG Strategic Secondaries Fund II ("ICGSS") and ICG Asia Pacific Fund III (the latter completing since the half year end). We believe these funds are highly complementary to our strategy and will generate attractive returns as well as enabling the Company to access co-investments from these strategies. Both funds broaden the geographic scope and increase the proportion of investments on which shareholders do not pay a management fee. Further details of these funds are given in the Supplementary Information section.

We have also completed an £8.3 million co-investment alongside ICGSS in a US fund restructuring transaction and a £4.1 million secondary purchase of an interest in ICG Europe V, a fund in which the Company first invested in 2011, (the latter completed since the period end).

In addition to completing these in-house investment opportunities, we are benefitting greatly from ICG's insights into private equity managers and portfolio companies in Europe, US and Asia in our investment analysis and decision-making for both funds and co-investments. We have a number of investment opportunities currently under review with third-party managers who have been introduced to us through the ICG network. 

Finally, we are working with a range of specialist functions within ICG to provide support and enhance the management of the Company.

These benefits are being achieved while maintaining the strong historical relationship with Graphite Capital, which, at almost a quarter of the Portfolio, continues to be the Company's most significant underlying manager.

Strategy

Our strategy is fundamentally unchanged since the move to ICG, continuing our focus on buyouts led by established managers in developed private equity markets. We believe this segment of the market offers investors the best balance of risk and reward. 

Our approach to sourcing investments is also unchanged. We continue to access private equity backed companies by developing relationships with our selected managers through commitments to their new funds ("primary fund commitments") and sourcing follow-on investments through both acquiring existing funds in the secondary market ("secondary fund purchases" or "secondaries") and investing directly in companies alongside our funds ("co-investments"). This approach gives us greater discretion over the investments as well as more flexibility to adapt the mix of investments to changing market conditions and Portfolio developments.

While the strategy is essentially the same, the emphasis is evolving in order to maximise the benefits of the change of Manager from a UK focused buyout house to an alternative investment firm with global reach. We are broadening the geographic scope of the Portfolio by increasing our focus on US managers with the benefit of insights and relationships from ICG's US investment teams. We are also starting to consider developed Asian markets through ICG's Asia Pacific mezzanine team. These developments are likely to have a gradual impact on the Portfolio rather than a radical shift from the 18% in US and less than 1% in Asia at 31 July 2016.

Interim results

In this Interim Report, references to the "Portfolio" include the investment portfolios of both the Company and its subsidiary partnerships. In the financial statements, in accordance with IFRS 10 'Consolidated Financial Statements', "Investments at fair value" are stated net of balances receivable from subsidiary partnerships and the accrual for the co-investment incentive scheme. Both the Manager and the Board consider that the Portfolio as presented below is the most relevant basis for shareholders in assessing the overall performance of the Company as it is consistent with industry practice and therefore enables comparison with peers as well as with the Company's previously reported results. A reconciliation of the Portfolio to the financial statements is set out in the Glossary.

Comparatives, unless otherwise stated, represent the equivalent figures for the full year to 31 January 2016. This is considered more meaningful to shareholders than the comparables for the half year to 31 July 2015.

Portfolio performance overview

£ million

 

 

Six months

ended

31 July 2016

Year ended

31 January

2016

Movement in the Portfolio

 

 

 

 

Opening Portfolio

 

 

428.2

431.9

Additions

 

 

30.3

64.3

Realisation Proceeds1

 

 

(45.5)

(120.3)

Net cash inflow

 

 

(15.2)

(56.0)

Underlying Valuation Movement*,1

 

 

31.8

48.0

% underlying Portfolio growth

 

 

+7.4%

+11.1%

Currency movement

 

 

24.9

4.3

% currency movement

 

 

+5.8%

+1.0%

Closing Portfolio

 

 

469.7

428.2

 

 

 

+13.2%

+12.1%

Other Key Portfolio Metrics

 

 

 

 

Proceeds as % of opening Portfolio

 

 

11%

28%

Number of Full Realisations

 

 

23

41

Uplift on exit1

 

 

21%

22%

New primary fund commitments

 

 

51.2

58.6

Outstanding commitments

 

 

296.8

253.8

* In this interim report 99.7% of the Portfolio is valued using 30 June 2016 or 31 July valuations.

In the first half of the year the Portfolio made strong progress, rising in value by 13.2%. After adjusting for the impact of foreign currency movements on the value of our overseas investments, the Portfolio generated a valuation gain of 7.4% in local currencies.

At 31 July 2016 the Portfolio was valued at £469.7 million. This was £41.5 million higher than at the start of the period as valuation and currency gains more than offset net realisations.

Realisations

The Portfolio generated Realisation Proceeds of £45.5 million in the period, equivalent to 11% of its opening value. This implies a slight fall in realisations relative to last year when the cash conversion rate was 28% for the full year. However, the total of 23 Full Realisations was slightly higher than last year's rate. The lower level of proceeds therefore reflects a smaller average size of disposals rather than a general slowdown in realisation activity.

Full Realisations accounted for £25.4 million of proceeds received and these continued to be completed at Uplifts to the previous holding values, averaging 21% in the period. This was similar to the level achieved last year of 22%.

Investments made since the financial crisis generated valuation Uplifts of 26% whereas Pre-crisis Investments1 realised Uplifts of 11%, continuing the divergence we have noted over the last few years. Post-crisis Investments1 also achieved a strong multiple of original cost of 2.5 times whereas the pre-crisis investments were realised for an average return multiple of 1.0 times cost, reflecting the relative underperformance of the remaining investments from these vintages.

The largest realisation in the first half was the disposal by Deutsche Beteiligungs AG ("DBAG") of Spheros, the manufacturer of climate systems for buses, which generated proceeds of £8.2 million including from a co-investment made alongside DBAG's fund in 2011. Further details of the ten largest underlying realisations are set out in the Supplementary Information section.

New investments

New investment of £30.3 million in the period was slightly lower than the rate of investment last year as market conditions continued to be challenging.

Drawdowns1 of fund commitments of £21.6 million were below expectations. This was mainly because our largest fund commitment, Graphite Capital Partners VIII, made no drawdowns in the period, although this fund has completed two new investments since the period end. Across the fund portfolio generally, drawdowns were also relatively slow.

Secondary investment of £8.3 million reflects the co-investment alongside ICGSS noted above as no fund secondaries were completed in the period. Volumes in the market for secondary fund interests were down by between 17% and 23%, depending on the data source2, and pricing remained relatively high. We therefore chose to remain highly selective despite reviewing a wide range of opportunities.  However, we continue to focus on the secondary market and believe that our approach to sourcing opportunities, primarily in funds either that we are already invested in or where we have an informational edge through our manager relationships, will secure attractive investments going forward.

A total of 26 new buyouts were completed in the period compared with 64 in the year to January 2016. These were acquired at a weighted average of slightly less than nine times EBITDA1 which is marginally lower than the prices paid last year. Therefore, while the level of new investment was lower than expected, it is reassuring that our managers appear to be maintaining pricing discipline.

 

New fund commitments

Primary commitments of £51.2 million to five funds in the first half were relatively high for a six month period as many of our preferred managers have raised, or are raising, funds this year. Our pipeline therefore remains strong for the second half.

All five funds completed were raised by managers the Company has been investing with for many years. Established firms are the focus of our investment strategy as we believe they tend to be lower risk than firms with newer, less experienced, teams.

Further details of new fund commitments are set out in the Supplementary Information section.

Closing Portfolio

At 31 July 2016, the Portfolio was valued at £469.7 million with investments in more than 400 underlying companies managed by 34 private equity firms through 64 funds and 26 co-investments.  Investments are well diversified across a wide range of sectors, geographies and vintages. 

Co-investments and secondaries accounted for 38.9% of the Portfolio at the period end. This proportion has increased from approximately 18% immediately prior to the financial crisis as our strategy has evolved to give us greater discretion over investments into the Portfolio than is the case for a typical fund investor. Graphite Capital and ICG manage 23.8% and 8.5% of the Portfolio respectively including co-investments and secondaries. Third-party primary funds represent 45.9% of the Portfolio.

Whilst this well-diversified Portfolio reduces risk, we aim to strike a balance between diversification and concentration such that many underlying companies are large enough to have a meaningful impact on overall performance. The top 30 underlying companies accounted for 48% of the Portfolio at the period end therefore the performance of these investments is likely to be a key driver of future growth. In the year to June 2016 the revenues and EBITDA of these companies increased by an average of 7% and 10% respectively (in underlying currencies). By contrast, the FTSE All-Share Index reported revenue growth of 2% and a fall in EBITDA of 14% over the same period.

The top 30 companies were valued on an average multiple of 9.7 times last twelve months EBITDA at June 2016. While this has increased marginally since the start of the year we continue to believe it is reasonable for the strong growth being achieved. By comparison, the FTSE All-Share Index is currently valued at 14 times June 2016 EBITDA despite the lack of profit growth noted above. It is interesting to note that over the last 5 years, the EBITDA valuation multiple of the Company's top 30 companies has been relatively stable (although its constituents have changed almost entirely over that period) while the EBITDA multiple of the FTSE All-Share Index has increased from less than 7 in 2011 to its current level of 14.

The Net Debt1 of the top 30 companies averaged 3.8 times EBITDA which has increased slightly relative to the top 30 at the start of the year. At this level the gearing should enhance future equity returns without involving undue financial risk, particularly given the relatively flexible terms on which many of the companies have been able to borrow over the last few years.

The share of the Portfolio represented by post-crisis investments has continued to increase and at 31 July 2016 represented 80.2% of underlying investments. We expect these to continue to generate the most significant future value growth and it is therefore encouraging that the Portfolio is now heavily concentrated in these vintages.

Commitments and liquidity

At 31 July 2016, the Company had outstanding commitments of £296.8 million and total liquidity of £212.5 million, of which £110.4 million was in cash3 (31 January 2016: £103.8 million) and £102.1 million of undrawn bank facilities (31 January 2016: £97.1 million). Commitments therefore exceeded available liquidity by £84.3 million or 14.9% of the net asset value. This continues to represent a conservative level of Overcommitment1 despite a modest increase from the 10.1% at the start of the year.

Funds in Investment Period1 represented £221.0 million of the undrawn commitments. These are typically drawn down over a period of four to five years from the start of a fund with 10-20% of commitments usually retained at the end of the investment period to fund follow-on investments and expenses and for contingencies. If outstanding commitments to each of the funds were to be drawn down at a constant rate over their remaining investment periods, approximately £70-75 million of commitments would be drawn down over the next 12 months. 

The Company therefore has adequate resources in cash and undrawn facilities to fund drawdowns for more than two years even if no realisations were to be achieved. As we expect the Portfolio to continue to generate cash over this period, the current liquidity gives us the ability to take advantage of a range of potential investment opportunities.

Outlook

The environment for realisations continues to be positive despite volatility in markets and geopolitical concerns. This reflects the high levels of equity and debt funding available to both financial and trade buyers. We therefore expect the Portfolio to generate further realisations in the second half which should underpin growth in value given the uplifts that tend to be achieved on sale. Also, with the Portfolio continuing to demonstrate strong profit growth and valuation multiples remaining significantly below the Index, the prospects for further growth in unrealised valuations remain positive.

At times when markets are favourable for exits, it can be more challenging to invest at reasonable valuations. We believe this dynamic is reflected in the relatively low level of new investment in the first half but we are reassured that our managers are continuing to exercise price discipline. 

Our investment strategy, which is fundamentally unchanged following the move to ICG, gives us the flexibility to adapt the mix of primary funds, secondaries and co-investments to changing market conditions and to deploy cash where we see the best relative value. The Company has the benefit of a strong balance sheet and it is encouraging that in the short space of time since joining ICG we are seeing dealflow, both in-house and alongside our third-party managers, which should enable us to deploy the Company's cash balances in attractive investments.

 

ICG Private Equity Fund Investment Team

September 2016

1.   See Glossary for definitions. The Glossary is located after the notes to the financial statements.

2.   Includes reports from Greenhill Cogent, Evercore, Setter Capital and NYPPX

3.   This compares with cash shown on the balance sheet of £110.3m. The difference of £0.1m represents cash held by the Company's subsidiary limited partnerships.

 

SUPPLEMENTARY INFORMATION

 

This section presents supplementary information regarding the Portfolio (see Manager's Review and the Glossary for further details and definitions).

 

The 30 largest underlying INVESTMENTS

The table below presents the 30 companies in which ICG Enterprise had the largest investments by value at 31 July 2016. These investments may be held directly or through funds, or in some cases in both ways. The valuations are shown as a percentage of the Portfolio.

 

 

Company

Manager

Year of investment

Country

Value as % of Portfolio

1

Micheldever +

 

 

 

 

 

Distributor and retailer of tyres

Graphite Capital

2006

UK

5.7%

2

City & County Healthcare Group

 

 

 

 

 

Provider of home care services

Graphite Capital

2013

UK

3.4%

3

nGAGE

 

 

 

 

 

Provider of recruitment services

Graphite Capital

2014

UK

2.6%

4

Education Personnel +

 

 

 

 

 

Provider of temporary staff for the education sector

ICG

2014

UK

2.5%

5

R&R Ice Cream +

 

 

 

 

 

Manufacturer and distributor of ice cream products

PAI Partners

2013

UK

 2.3%

6

Standard Brands +

 

 

 

 

 

Manufacturer of fire lighting products

Graphite Capital

2001

UK

2.1%

7

Skillsoft +

 

 

 

 

 

Provider of off-the-shelf e-learning content

Charterhouse

2014

USA

2.1%

8

PetSmart +

 

 

 

 

 

Retailer of pet products and services

BC Partners

2015

USA

1.8%

9

David Lloyd Leisure +

 

 

 

 

 

Operator of premium health and fitness clubs

TDR Capital

2013

UK

1.8%

10

Frontier Medical +

 

 

 

 

 

Manufacturer of medical devices

Kester Capital

2013

UK

1.7%

11

U-POL

 

 

 

 

 

Manufacturer and distributor of automotive refinishing products

Graphite Capital

2010

UK

1.7%

12

TMF

 

 

 

 

 

Provider of management and accounting outsourcing services

Doughty Hanson

2008

 Netherlands

1.7%

13

Co-investment +/ *

 

 

 

 

 

Provider of business services

Large buy-out manager

2014

Europe

1.6%

14

The Laine Pub Company +

 

 

 

 

 

Operator of pubs and bars

Graphite Capital

2014

UK

1.5%

15

Algeco Scotsman

 

 

 

 

 

Supplier and operator of modular buildings

TDR Capital

2007

USA

1.5%

16

CPA Global +

 

 

 

 

 

Provider of patent and legal services

Cinven

2012

UK

1.4%

17

NWTC

 

 

 

 

 

Operator of distinctive pub restaurants

Graphite Capital

2016

UK

1.4%

18

Formel D

 

 

 

 

 

Provider of out-sourced services to the automotive industry

Deutsche Beteiligungs

2013

Germany

1.1%

19

Cognito +

 

 

 

 

 

Supplier of communications equipment, software and services

Graphite Capital

2002

UK

1.0%

20

Swiss Education+

 

 

 

 

 

Provider of hospitality training

Invision Capital

2015

Switzerland

0.9%

21

Ceridian+

 

 

 

 

 

Provider of payment processing services

Thomas H. Lee Partners

2007

USA

0.9%

22

Quironsalud

 

 

 

 

 

Provider of private healthcare services

CVC

2011

Spain

0.9%

23

Parques Reunidos**

 

 

 

 

 

Operator of attraction parks

Arle Capital

2007

Spain

0.9%

24

Cambium

 

 

 

 

 

Provider of educational solutions and services

ICG

2016

USA

0.9%

25

Aero Technics Group

 

 

 

 

 

Provider of civil aircraft maintenance

Graphite Capital

2015

UK

0.9%

26

ICR Group

 

 

 

 

 

Provider of repair and maintenance services to the energy industry

Graphite Capital

2014

UK

0.8%

27

InVentiv Health

 

 

 

 

 

Provider of commercial solutions for healthcare companies

Thomas H Lee Partners

2010

USA

0.8%

28

Gerflor

 

 

 

 

 

Manufacturer of vinyl flooring

ICG

2011

France

0.8%

29

Property Services Holdings

 

 

 

 

 

Provider of residential property sales and letting services

Bowmark

2010

UK

0.8%

30

TMP

 

 

 

 

 

Provider of recruitment services

Graphite Capital

2006

UK

0.8%

 

Total of the 30 largest underlying investments

 

 

48.3%

+ All or part of this investment is held directly as a co-investment or other direct investment.

* We are not permitted to disclose the details of this co-investment under the terms of a confidentiality agreement

** Quoted investment.

 

 

 

The 30 largest fund investments

The 30 largest funds by value at 31 July 2016 are set out below:

 

Fund

Outstanding commitment

£ million

Year of commitment

Country/
region

Value
£ million

1

Graphite Capital Partners VIII *

 

 

 

 

 

Mid-market buy-outs

56.0

2013

UK

35.6

2

Graphite Capital Partners VI **

 

 

 

 

 

Mid-market buy-outs

2.1

2003

UK

24.6

3

CVC European Equity Partners V **

 

 

 

 

 

Large buy-outs

1.2

2008

Europe/USA

20.3

4

BC European Capital IX **

 

 

 

 

 

Large buy-outs

4.0

2011

Europe

17.2

5

Thomas H. Lee Parallel Fund VI

 

 

 

 

 

Large buy-outs

1.0

2007

USA

16.7

6

Graphite Capital Partners VII */**

 

 

 

 

 

Mid-market buy-outs

7.6

2007

UK

14.5

7

Deutsche Beteiligungs Fund V

 

 

 

 

 

Mid-market buy-outs

0.3

2006

Germany

14.2

8

Activa Capital Fund II

 

 

 

 

 

Mid-market buy-outs

0.7

2007

France

13.0

9

TDR Capital II

 

 

 

 

 

Mid-market and large buy-outs

0.8

2006

Europe

12.6

10

Fifth Cinven Fund

 

 

 

 

 

Large buy-outs

3.4

2012

Europe

12.3

11

Bowmark Capital Partners IV

 

 

 

 

 

Mid-market buy-outs

-

2007

UK

11.1

12

ICG Velocity Partners Co-Investor**

 

 

 

 

 

VSS IV fund restructuring

2.4

2016

USA

10.5

13

PAI Europe V **

 

 

 

 

 

Mid-market and large buy-outs

1.0

2007

Europe

10.2

14

Doughty Hanson & Co V **

 

 

 

 

 

Mid-market and large buy-outs

6.4

2006

Europe

9.6

15

ICG European Fund 2006 B **

 

 

 

 

 

Mezzanine

2.0

2014

Europe

8.5

16

IK VII

 

 

 

 

 

Mid-market buy-outs

0.5

2013

Europe

8.4

17

ICG Europe V

 

 

 

 

 

Mezzanine

0.8

2012

Europe

7.5

18

Permira V

 

 

 

 

 

Large buy-outs

2.1

2013

Europe

6.9

19

CVC Capital Partners VI

 

 

 

 

 

Large buy-outs

10.1

2013

Global

6.3

20

Candover 2005 Fund **

 

 

 

 

 

Large buy-outs

0.1

2005

Europe

5.7

21

Piper Private Equity Fund V

 

 

 

 

 

Small buy-outs

0.9

2010

UK

5.4

22

Deutsche Beteiligungs Fund VI

 

 

 

 

 

Mid-market buy-outs

3.1

2012

Germany

5.4

23

PAI Europe VI

 

 

 

 

 

Mid-market and large buy-outs

11.8

2013

Europe

5.0

24

Nordic Capital Partners VIII

 

 

 

 

 

Mid-market and large buy-outs

4.0

2013

Nordic

4.7

25

TDR Capital III

 

 

 

 

 

Mid-market and large buy-outs

4.6

2013

Europe

4.6

26

Activa Capital Fund III

 

 

 

 

 

Mid-market buy-outs

7.5

2013

France

4.5

27

Egeria Private Equity Fund IV

 

 

 

 

 

Mid-market buy-outs

4.3

2012

Europe

4.3

28

Hollyport Secondary Opportunities V

 

 

 

 

 

Tail-end secondary portfolios

4.9

2015

Global

4.1

29

Hollyport Secondary Opportunities IV

 

 

 

 

 

Tail-end secondary portfolios

0.8

2013

UK

4.0

30

Steadfast Capital III

 

 

 

 

 

Mid-market buy-outs

0.9

2011

Europe

3.8

 

Total of the largest 30 fund investments

145.3

 

 

311.5

 

Percentage of Portfolio

 

 

 

66.3%

* Includes the associated Top Up funds.

** All or part of interest acquired through a secondary fund purchase.

 

 

ANALYSIS OF THE 30 LARGEST UNDERLYING INVESTMENTS

 

The tables below analyse the 30 companies in which ICG Enterprise had the largest investments by value at 31 July 2016. These investments may be held directly or through funds or, in some cases, in both ways.

 

 

 

30 largest investments* - revenue growth

% growth

% by number

<0%

20.0%

0-10%

46.7%

10-20%

10.0%

20-30%

16.7%

 

 

30 largest investments** - EBITDA growth

% growth

% by number

<0%

26.7%

0-10%

20.0%

10-20%

23.3%

20-30%

6.7%

>30%

13.3%

 

30 largest investments*** - enterprise value as a multiple of EBITDA

Multiple

% by number

<7.0x

10.0%

7.0-8.0x

13.3%

8.0-9.0x

23.3%

9.0-10.0x

13.3%

10.0-11.0x

10.0%

11.0-12.0x

10.0%

>12.0x

16.7%

 

30 largest investments - net debt as a multiple of EBITDA

Multiple

% by number

<2.0x

26.6%

2.0-3.0x

16.7%

3.0-4.0x

13.3%

4.0-5.0x

16.7%

5.0-6.0x

6.7%

6.0-7.0x

10.0%

>7.0x

10.0%

 

* Excludes NWTC and Aero Technics where this metric is not meaningful

** Excludes NWTC, Aero Technics and Cognito where this metric is not meaningful

*** Excludes Cognito where this metric is not meaningful

 

 

Portfolio analySIS

The following six tables analyse the Portfolio by value at 31 July 2016.

 

 

Portfolio - Investment type

 

% of value of underlying investments

Large buy-outs

 

44.6%

Mid-market buy-outs

 

43.9%

Mezzanine

 

7.8%

Small buy-outs

 

3.7%

Total

 

100.0%

 

 

Portfolio - Geographic distribution*

 

% of value of underlying investments

UK

 

43.9%

North America

 

17.9%

Germany

 

10.6%

France

 

10.4%

Scandinavia

 

5.7%

Benelux

 

4.7%

Spain

 

2.3%

Italy

 

2.3%

Other Europe

 

2.0%

Rest of world

 

0.2%

Total

 

100.0%

NB: Total Continental Europe

 

38.0%

* Location of headquarters of underlying companies in the Portfolio. Does not necessarily reflect countries to which companies have economic exposure.

 

 

Portfolio - Year of investment

 

Valuation as multiple of cost

% of value of   underlying investments

2016

 

1.1x

8.7%

2015

 

1.3x

12.2%

2014

 

1.2x

21.2%

2013

 

1.8x

17.2%

2012

 

1.7x

7.4%

2011

 

1.4x

5.6%

2010

 

1.7x

6.4%

2009

 

2.8x

1.5%

2008

 

0.9x

4.4%

2007

 

1.5x

5.1%

2006 and prior

 

1.3x

10.3%

Total

 

1.4x

100.0%

 

 

 

Portfolio - Sector analysis

 

% of value of

underlying

investments

Business services

 

20.6%

Healthcare and education

 

17.4%

Consumer goods and services

 

16.2%

Industrials

 

13.3%

Leisure

 

11.1%

Automotive supplies

 

8.3%

Financials

 

5.2%

Technology and telecommunications

 

3.7%

Media

 

2.8%

Chemicals

 

1.4%

Total

 

100.0%

 

 

Quoted equity holdings at 31 July 2016

 

All quoted holdings are held indirectly through third party funds and may have restrictions on their sale.  The timing of any disposal of these interests is determined by the managers of those funds.

 

 

Underlying investment

Ticker

£ million

% of Portfolio

Parques Reunidos

PQR

4.2

0.9%

VWR International

VWR

2.6

0.6%

Party City

PRTY

2.2

0.5%

Black Knight

BKFS

2.1

0.4%

ComHem

COMH

1.7

0.4%

Tumi

TUMI

1.6

0.3%

JRP

JRP

1.4

0.3%

Technogym

TGYM

1.0

0.2%

Fogo de Chao

FOGO

0.8

0.2%

West Corporation

WSTC

0.8

0.2%

Univar N.V

UNVR

0.7

0.1%

FleetCor

FLT

0.5

0.1%

First BanCorp

FBP

0.5

0.1%

Lululemon Athletica

LULU

0.5

0.1%

Others (less than £0.5 million)

 

1.1

0.1%

Total

 

21.7

4.5%

 

 

 

Third party, Graphite Capital and ICG investments at 31 July 2016

 

Portfolio

 

 

 

Third party

£ million

 

 

Graphite Capital

£ million

 

 

 

ICG

£ million

 

 

 

Total

£ million

 

 

 

 

% of Portfolio

Primary investments in funds

215.8

62.0

9.1

286.9

61.1%

Secondary investments in funds

40.8

12.7

19.0

72.5

15.4%

Direct and co-investments

61.4

37.3

11.6

110.3

23.5%

Total Portfolio

318.0

112.0

39.7

469.7

100.0%

% of Portfolio

67.7%

23.8%

8.5%

100.0%

 

 

 

Investment activity

 

Largest new underlying investments in the six months ended 31 July 2016

Investment

Description

 

Manager

Country

Cost

£ million

Atlas for Men

Retailer of outdoor clothing

Activa

France

1.3

LOOK Cycle

Manufacturer of bicycle equipment

Activa

France

1.1

Factory-CRO

Provider of contract research organisation to medical industry

Kester Capital

Netherlands

1.0

Cablevision

Operator of cable TV

BC Partners

USA

0.9

TEG

Provider of recruitment and payroll services

Netherlands

0.7

The Masai Clothing Company

Wholesaler and retailer of women's clothing

Silverfleet

Denmark

0.7

Jessen

Manufacturer of high precision electrical sheet

Steadfast

Germany

0.7

Guntermann & Drunck

Provider of digital and analogue computer signal management

Steadfast

Germany

0.7

NeTel Group

Provider of physical telecom, broadband and electrical networks

IK Investment Partners

Sweden

0.6

Kurt Geiger

Retailer of footwear

Cinven

UK

0.5

Total of 10 largest new underlying investments

 

 

8.2

 

 

Largest underlying realisations in the six months ended 31 July 2016

Investment

Manager

 

Year of investment

 

Realisation type

Proceeds

£ million

Spheros

Deutsche Beteiligungs

2011

Trade

8.2

David Lloyd Leisure

TDR Capital

2013

Recapitalisation

3.7

Swissport

PAI Partners

2011

Trade

3.4

Stork

Arle Capital

2008

Trade

2.0

PetSmart

BC Partners

2015

Return of capital

2.0

Technogym

Arle Capital

2008

IPO

1.9

Frontier Medical

Kester Capital

2013

Recapitalisation

1.8

Hunkemoller

PAI Partners

2011

Secondary

1.6

Education Personnel

ICG

2014

Recapitalisation

1.4

Elior

Charterhouse

2006

Public sell down post IPO

1.4

Total of 10 largest underlying realisations

 

 

27.4

           

 

 

Commitments analysis

 

The following four tables analyse ICG Enterprise's commitments at 31 July 2016.

 

 

Commitments at 31 July 2016

Original commitment*

£ million

Outstanding commitment £ million

Average drawdown percentage

 

% of commitments

Investment period not commenced

34.5

34.5

n/a

11.6%

Funds in investment period

374.6

221.0

41.0%

74.5%

Funds post investment period

542.4

41.3

92.4%

13.9%

Total

951.5

296.8

68.8%

100.0%

* Original commitments are translated at 31 July 2016 exchange rates.

 

Commitments - remaining investment period, at 31 July 2016

% of commitments

Investment period not commenced

11.6%

4-5 years

11.9%

3-4 years

25.0%

2-3 years

29.1%

1-2 years

4.4%

<1 year

4.1%

Investment period complete

13.9%

Total

100.0%

 

 

Movement in outstanding commitments in six months ended 31 July 2016

 

£ million

Opening

253.8

New primary commitments

51.2

New commitments arising through secondary purchase of fund interests

2.3

Drawdowns

(21.7)

Currency and other movements

11.2

Closing

296.8

 

 

New commitments during the six months to 31 July 2016

 

Fund

Strategy

Geography

£ million

Primary commitments

 

 

 

Sixth Cinven Fund

Large buy-outs

Europe

15.5

Advent Global Private Equity VIII

Large buy-outs

Europe/USA

11.7

ICG Strategic Secondaries Fund II

GP led fund restructurings

USA/Europe

10.6

IK VIII

Mid-market buyouts

Europe

8.4

Piper Private Equity Fund VI

Small buy-outs

UK

5.0

Total primary commitments

 

 

51.2

 

 

 

 

Commitments arising from secondary purchases

 

 

 

 

ICG Velocity Partners Co-Investor

 

VSS IV fund restructuring

 

 

USA

 

2.3

Total new commitments

 

 

53.5

 

 

CURRENCY EXPOSURE

 

31 July

2016

£ million

31 July

2016

%

31 January

2016

£ million

31 January

2016

%

Portfolio*

 

 

 

 

 - Sterling

225.4

48.0%

209.1

48.8%

 - Euro

121.2

25.8%

122.8

28.7%

 - US dollar

84.7

18.1%

60.9

14.2%

 - Other European

36.2

7.7%

33.5

7.8%

 - Other

2.2

0.4%

1.9

0.5%

Total

469.7

100.0%

428.2

100.0%

* Currency exposure is calculated by reference to the location of the underlying portfolio companies' headquarters.

 

 

31 July

2016

£ million

31 July

2016

%

31 January

2016

£ million

31 January

2016

%

Outstanding commitments

 

 

 

 

 - Sterling

104.2

35.1%

102.3

40.3%

 - Euro

158.2

53.3%

131.2

51.7%

 - US dollar

32.4

10.9%

18.4

7.2%

 - Other European

2.0

0.7%

1.9

0.8%

Total

296.8

100.0%

253.8

100.0%

 

 

 

Dividend HISTORY and Shareholder Analysis

 

Dividend History

 

 

 

 

 

 

Period ended

Revenue
return
per share

p

Ordinary dividend
per share
p

Special dividend
per share
p

Total
dividend
per share

p

Net asset value
per share

p

Closing
mid-market
share price

p

31 July 2016*

4.0

10.0

-

10.0

798.0

592.0

31 January 2016

11.1

11.0

-

11.0

730.9

545.0

31 January 2015

13.0

10.0

5.5

15.5

695.2

575.0

31 January 2014

19.0

 7.5

8.0

15.5

677.2

563.5

31 January 2013

3.2

5.0

-

5.0

631.5

487.0

31 January 2012

6.3

5.0

-

5.0

569.4

357.0

31 January 2011

1.5

2.25

-

2.25

534.0

308.0

31 December 2009

-0.1

2.25

-

2.25

464.1

305.0

31 December 2008

5.1

4.5

-

4.5

449.0

187.0

31 December 2007

8.9

8.0

-

8.0

519.4

474.0

31 December 2006

7.4

6.5

-

6.5

454.6

386.0

 

* As discussed in the Chairman's Statement, an interim dividend of 10.0p per share will be paid on 21 October.

 

Shareholder Analysis

 

 

 

 

31 July 2016

 

31 January 2016

 

 

Number of

shares held** ('000)

 

Percentage

of total

 

Number of

shares held+
('000)

 

Percentage

of total

Individuals

 

40,362

 

57.0%

 

 40,443

 

56.7%

Investment funds

 

18,298

 

25.8%

 

 19,402

 

27.2%

Private client wealth managers

 

5,262

 

7.4%

 

 5,246

 

7.4%

Pensions and endowments

 

3,441

 

4.9%

 

 3,535

 

5.0%

Specialist private equity investors

 

1,579

 

2.2%

 

 1,125

 

1.6%

Banks

 

1,290

 

1.8%

 

 807

 

1.1%

Insurance companies

 

268

 

0.4%

 

 268

 

0.4%

Other

 

368

 

0.5%

 

 501

 

0.7%

Total

 

70,868

 

100%

 

 71,327

 

100.0%

** Excludes 2,044,589 shares held in treasury.

+ Excludes 1,586,613 shares held in treasury.

 

 

 

 

 

UNAUDITED RESULTS FOR THE SIX MONTHS TO 31 JULY 2016

Income Statement (unaudited)

 

 

 

Half

year to 31 July 2016

 

 

Half year to 31 July 2015

 

 

 

Year ended 31 January 2016

 

 

Revenue

Capital

Total

Revenue

Capital

Total

Revenue

Capital

Total

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Investment returns

 

 

 

 

 

 

 

 

 

Income, gains and losses on investments

4,560

48,436

52,996

7,720

11,118

18,838

12,100

33,761

45,861

Deposit interest

163

-

163

145

-

145

309

-

309

Other income

-

-

-

-

-

-

115

-

115

Foreign exchange gains and losses

-

1,924

1,924

-

(572)

(572)

-

747

747

 

4,723

50,360

55,083

7,865

10,546

18,411

12,524

34,508

47,032

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

Investment management charges

(736)

(2,061)

(2,797)

(751)

(2,251)

(3,002)

(1,509)

(4,260)

(5,769)

Other expenses

(588)

(567)

(1,155)

(754)

(571)

(1,325)

(1,722)

(1,123)

(2,845)

 

(1,324)

(2,628)

(3,952)

(1,505)

(2,822)

(4,327)

(3,231)

(5,383)

(8,614)

 

 

 

 

 

 

 

 

 

 

Profit before taxation

3,399

47,732

51,131

6,360

7,724

14,084

9,293

29,125

38,418

Taxation

(526)

526

-

(562)

562

-

(1,292)

1,292

-

Profit for the period

2,873

48,258

51,131

5,798

8,286

14,084

8,001

30,417

38,418

 

Attributable to:

Equity shareholders

2,873

 

48,258

 

51,131

 

5,798

 

8,286

 

14,084

 

8,001

 

30,417

 

38,418

 

 

Basic and diluted earnings per share

 

 

71.7p

 

 

19.4p

 

 

53.1p

 

The columns headed 'Total' represent the income statement for the relevant financial periods and the columns headed 'Revenue' and 'Capital' are supplementary information, in line with the Statement of Recommended Practice for investment trusts issued by the Association of Investment Companies in November 2014.  There is no Other Comprehensive Income.

 

 

 

Balance Sheet (unaudited)

 

 

31 July 2016

31 July 2015

31 January 2016

 

£'000

£'000

£'000

Non-current assets

 

 

 

Investments held at fair value

 

 

 

- Unquoted investments

392,496

341,296

356,939

- Quoted investments

-

2,517

-

- Subsidiary investments

60,823

56,937

57,168

 

453,319

400,750

414,107

Current assets

 

 

 

Cash and cash equivalents

110,314

100,994

103,831

Receivables

2,763

4,511

4,038

 

113,077

105,505

107,869

Current liabilities

 

 

 

Payables

851

586

634

Net current assets

112,226

104,919

107,235

Total assets less current liabilities

565,545

505,669

521,342

 

 

 

 

Capital and reserves

 

 

 

Share capital

7,292

7,292

7,292

Capital redemption reserve

2,112

2,112

2,112

Share premium

12,936

12,936

12,936

Capital reserve

530,392

467,705

484,782

Revenue reserve

12,813

15,624

14,220

Total equity

565,545

505,669

521,342

 

 

 

 

Net asset value per share (basic and diluted)

798.0p

700.3p

730.9p

 

Cash Flow Statement (unaudited)

 

Half year to

Half year to

Year to

 

31 July

31 July

31 January

 

2016

2015

2016

 

£'000

£'000

£'000

 

 

 

 

Operating activities

 

 

 

Sale of portfolio investments

37,518

51,554

89,941

Purchase of portfolio investments

(26,192)

(28,261)

(56,213)

Interest income received from portfolio investments

3,134

5,630

8,951

Dividend income received from portfolio investments

513

2,635

2,882

Other income received

163

156

384

Investment management charges paid

(2,726)

(2,975)

(5,840)

Other expenses paid

(622)

(571)

(1,269)

Net cash inflow from operating activities

11,788

28,168

38,836

 

 

 

 

Financing activities

 

 

 

Bank facility fee

(518)

(1,431)

(1,963)

Purchase of shares into treasury

(2,412)

(4,070)

(9,110)

Equity dividends paid

(4,280)

(11,209)

(14,816)

Net cash outflow from financing activities

(7,210)

(16,710)

(25,889)

 

 

 

 

Net increase in cash and cash equivalents

4,578

11,458

12,947

 

 

 

 

Cash and cash equivalents at beginning of period

103,831

90,137

90,137

Net increase in cash and cash equivalents

4,578

11,458

12,947

Effect of changes in foreign exchange rates

1,905

(601)

747

Cash and cash equivalents at end of period

110,314

100,994

103,831

 

 

 

Statement of Changes in Equity (unaudited)

 

 

Share
capital

Capital redemption reserve

Share
premium

Capital reserve

Revenue reserve

Total shareholders' equity

 

 £'000

£'000

£'000

£'000

£'000

£'000

Six months to

31 July 2016

 

 

 

 

 

 

Opening balance at
1 February 2016

7,292

2,112

12,936

484,782

14,220

521,342

Profit for the period and total comprehensive income

-

 

-

-

48,258

2,873

51,131

Dividends paid or approved

-

-

-

-

(4,280)

(4,280)

Purchase of shares into treasury*

-

-

-

(2,648)

-

(2,648)

Closing balance

at 31 July 2016

 

 

7,292

 

2,112

 

12,936

 

530,392

 

12,813

 

565,545

* 458,426 10p ordinary shares with an aggregate nominal value of £45,843 were purchased during the period and are held in treasury.  Distributable reserves have been reduced by £2.6 million, being the consideration paid for these shares.

 

 

 

Share
capital

Capital redemption reserve

Share
premium

Capital reserve

Revenue reserve

Total shareholders' equity

 

 £'000

£'000

£'000

£'000

£'000

£'000

Six months to

31 July 2015

 

 

 

 

 

 

Opening

balance at

1 February 2015

7,292

2,112

12,936

463,489

21,035

506,864

Profit for the period and total comprehensive income

-

 

-

-

8,286

5,798

14,084

Dividends paid or approved

-

-

-

-

(11,209)

(11,209)

Purchase of shares into treasury*

-

-

-

(4,070)

-

(4,070)

Closing balance

at 31 July 2015

 

 

7,292

 

2,112

 

12,936

 

467,705

 

15,624

 

505,669

 

* 705,833 10p ordinary shares with an aggregate nominal value of £70,583 were purchased during the period and are held in treasury.  Distributable reserves have been reduced by £4.1 million, being the consideration paid for these shares.

 

 

 

 

 

Share
capital

Capital redemption reserve

Share
premium

Capital reserve

Revenue reserve

Total shareholders' equity

 

 £'000

£'000

£'000

£'000

£'000

£'000

Year to

31 January 2016

 

 

 

 

 

 

Opening balance at
1 February 2015

7,292

2,112

12,936

463,489

21,035

506,864

Profit for the year and total comprehensive income

-

 

-

-

30,417

8,001

38,418

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

* 1,586,163 10p ordinary shares with an aggregate nominal value of £158,616 were purchased during the period and are held in treasury.  Distributable reserves have been reduced by £9.1 million, being the consideration paid for these shares.

 

 

 

Notes to the interim report (unaudited)

 

 

1   GENERAL INFORMATION

 

ICG 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. This report was approved for issue by the Board of Directors on 27 September 2016.

 

 

2   UNAUDITED INTERIM REPORT

 

This 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 2016 were approved by the Board of Directors on 26 April 2016 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.

 

This financial report has not been audited.

 

 

3   BASIS OF PREPARATION

 

The financial report for the six months ended 31 July 2016, comprising the interim financial statements, has been prepared in accordance with the Disclosure Rules and Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. This financial report should be read in conjunction with the annual financial statements for the year to 31 January 2016, which have been prepared in accordance with IFRSs as adopted by the European Union.

 

The accounting policies applied are consistent with those of the annual financial statements for the year to 31 January 2016, as described in those annual financial statements. Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

 

In order to reflect the activities of an investment trust company, supplementary information which analyses the income statement between items of a revenue and capital nature has been presented alongside the income statement. In analysing total income between capital and revenue returns, the directors have followed the guidance contained in the Statement of Recommended Practice for investment trusts issued by the Association of Investment Companies in November 2014.

 

INVESTMENTS

 

All investments are designated upon initial recognition as held at fair value through profit or loss (described in these financial statements 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 INVESTMENTS

 

Fair 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 2015 International Private Equity and Venture Capital Valuation Guidelines. The primary valuation methodology used is an earnings multiple methodology, with other methodologies used where they are more appropriate.

 

QUOTED INVESTMENTS

 

Quoted 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.

 

SUBSIDIARY INVESTMENTS

 

Subsidiary investments represents the fair value of the Company's interests in its limited partnership subsidiaries: ICG Enterprise Trust Limited Partnership, ICG Enterprise Trust (2) Limited Partnership and ICG Enterprise Trust Co-investment LP.

 

CURRENT ASSET INVESTMENTS HELD AT FAIR VALUE

 

Current 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.

 

ASSOCIATES

 

Investments 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.

 

 

4  RECEIVABLES

 

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 July 2016, £668,900 of bank facility costs are included within receivables. Of this, £368,364 is expected to be amortised in less than one year.

 

 

5  DIVIDENDS

 

Half year to

31 July 2016

£'000

Half year to

31 July 2015

£'000

Year to

31 January 2016

£'000

Final in respect of the year ended 31 January 2014: 7.5p per share

-

5,468

-

Special in respect of the year ended 31 January 2014: 8.0p per share

-

5,834

-

Final in respect of the year ended 31 January 2015: 10.0p per share

-

-

7,232

Special in respect of the year ended 31 January 2015: 5.5p per share

-

-

3,977

Final in respect of the year ended 31 January 2016:  6.0p per share

4,280

-

-

 

 

 

 

 

4,280

11,302

11,209

 

An interim dividend for the year ended 31 January 2017 of 10.0p per share will be paid on 21 October 2016.

 

 

6  CALLED UP SHARE CAPTIAL

 

At 31 July 2016, 72,913,000 shares had been allocated, called up and fully paid.  Of this total, the Company held 2,044,589 shares in treasury (31 July 2015: 705,833 and 31 January 2016: 1,586,163) leaving 70,868,411 outstanding, all of which have equal voting rights.

 

           

7  EARNINGS PER SHARE

 

Half year to

31 July 2016

Half year to

31 July 2015

Year to

31 January 2016

Revenue return per ordinary share

4.0p

8.0p

11.1p

Capital return per ordinary share

67.7p

11.4p

42.1p

Earnings per ordinary share (basic and diluted)

71.7p

19.4p

 53.1p

Weighted average number of shares

71,290,770

               72,602,027

               72,310,909

 

The earnings per share figures are based on the weighted average numbers of shares set out above.

 

 

8  FAIR VALUES ESTIMATION

 

IFRS 13 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 are all classified as Level 3 investments.

 

Fair value for unquoted investments is established by using various valuation techniques.  Funds ("indirect 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 issued in 2015. The primary valuation methodology used is an earnings multiple methodology, with other methodologies used where they are more appropriate.

 

The fair value of the Company's unquoted 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 six months to 31 July 2016.

 

 

 

 

 

 

 

 

Unquoted investments

(indirect) at fair value through

profit or loss

Unquoted investments

(direct) at fair value through profit or loss

 

 

 

 

Subsidiary investments

Total

 

 

 

 

£'000

£'000

£'000

£'000

Opening balance

272,495

84,444

57,168

414,107

Additions

25,899

293

-

26,192

Disposals

(22,976)

(9,983)

(2,457)

(35,416)

Gains and losses recognised in profit or loss

28,770

13,554

 

6,112

48,436

Closing balance

304,188

88,308

60,823

453,319

Total gains for the period included in income statement for assets held at the end of the reporting period

18,278

6,291

 

 

6,112

30,681

 

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.  There were no level 1 or level 2 instruments at 31 July 2016 (31 January 2016: none)

 

 

9 INVESTMENT MANAGEMENT CHARGES

 

The investment management charges for the periods ended 31 July 2015 and 31 January 2016 set out in the table below were payable to the Former Manager, Graphite Capital Management LLP. The Former Manager was a related party in those periods. The investment management charges for the half year to 31 July 2016 were payable to the Manager, ICG Alternative Investment Limited. The Manager was a related party in that period.

 

 

 

 

 

 

 

 

 

Half year to

31 July 2016

 

Half year to

31 July 2015

 

Year to

31 January 2016

 

 

 

 

 

 

£'000

 

£'000

 

£'000

Investment management fee

 

 

2,797

 

2,976

 

5,659

Irrecoverable VAT

 

 

-

 

26

 

110

 

 

 

 

 

 

2,797

 

3,002

 

5,769

 

The management fee charged by the Manager is 1.4% of the value of invested assets and 0.5% of outstanding commitments to funds in their investment period, in both cases excluding funds managed by Graphite Capital and funds managed by ICG. No fee is charged on cash or liquid asset balances.

 

In the periods ended 31 July 2015 and 31 January 2016, the Former Manager charged a management fee of 1.5% of the value of invested assets and 0.50% of outstanding commitments to funds in their investment period, in both cases excluding funds managed by Graphite Capital.  No fee was charged on cash and liquid asset balances.

 

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.

 

At 31 July 2016 management fees of £70,847 were accrued (31 July 2015: £97,000).

 

The table below sets out the management charges that the Company has borne in respect of its investments in funds managed by the Former Manager in periods when the Former Manager was a related party, and those borne in respect of its investments in funds managed by the Manager in periods when the Manager was a related party.

 

 

 

 

 

 

 

Half year to 31 July 2016

 

Half year to 31 July 2015

 

Year to

31 January 2016

 

 

 

 

£'000

 

£'000

 

£'000

ICG Europe Fund V

40

 

*

 

*

ICG Europe Fund VI

37

 

*

 

*

ICG Europe Fund 2006B

-

 

*

 

*

ICG Strategic Secondaries II

51

 

*

 

*

ICG Velocity Partners Co-Investor

-

 

*

 

*

Graphite Capital Partners VI

*

 

(99)

 

(120)

Graphite Capital Partners VII

*

 

1

 

86

Graphite Capital Partners VIII

 

 

 

*

 

812

 

1,561

 

 

 

 

128

 

714

 

1,527

 

  *not applicable as the manager of this fund was not a related party in the period

 

 

10 RELATED PARTY TRANSACTIONS

 

Significant transactions between the Company and its subsidiaries are shown below:

 

 

Subsidiary

Nature of transaction

Half year to

31 July 2016

Year to

31 January 2016

ICG Enterprise Trust Limited Partnership

(Decrease)/Increase in loan to Company

(11)

3,549

 

Income allocated

175

875

 

 

 

 

ICG Enterprise Trust (2) Limited Partnership

Decrease/(increase) in loan from Company

2,445

(2,325)

 

Income allocated

738

1,284

 

 

 

 

ICG Enterprise Trust Co-investment LP

Increase in loan from Company

(1)

-

 

Income allocated

-

-

 

 

 

 

Amounts owed by subsidiaries

Amounts owed to subsidiaries

Subsidiary

31 July       2016

31 January 2016

31 July       2016

31 January 2016

ICG Enterprise Trust Limited Partnership

-

-

25,360

25,371

 

 

 

 

 

ICG Enterprise Trust (2) Limited Partnership

33,233

35,678

-

-

 

 

 

 

 

ICG Enterprise Trust Co-investment LP

1

-

-

-

 

 

 

 

 

 

Amounts owed by subsidiaries represent funding provided by the Company to its subsidiaries to allow them to make investments.  The balances will be repaid out of proceeds from their portfolios.

The value of subsidiary investments is shown net of an accrual for the interests of the Co-investors in the co-investment incentive scheme. As at 31 July 2016, £15,579,000 (31 January 2016: £11,939,000) was accrued in respect of these interests. During the six months to 31 July 2016, the Co-investors invested £63,000 and received payments of £882,000.

 

 

 

INTERIM MANAGEMENT REPORT AND STATEMENT OF THE DIRECTORS' RESPONSIBILITIES

 

Principal Risks and Uncertainties

 

The principal risks and uncertainties facing the Company for the second half of the financial year are substantially the same as those disclosed in the Report and Accounts for the year ended 31 January 2016. 

 

Going Concern

 

The factors likely to affect the Company's ability to continue as a going concern were set out in the Report and Accounts for the year ended 31 January 2016.  As at 31 July 2016, there have been no significant changes to these factors.  Having reviewed the Company's forecasts and other relevant evidence, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.  Accordingly, they continue to adopt the going concern basis in preparing the half-yearly financial statements.

 

Statement of Directors' Responsibilities

 

The directors confirm that the interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union and that the business review includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

 

-       an indication of important events that have occurred during the first six months of the financial year and their impact on the interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
 

-       material related-party transactions in the first six months of the financial year and any material changes in the related-party transactions described in the last annual report.

 

On behalf of the Board

 

Mark Fane, Chairman

 

27 September 2016

 

 

Glossary


Alternative Performance Measure ("APM")
APMs are a term defined by the European Securities and Markets Authority as "financial measures of historical or future performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework".

APMs are used in this report if considered by the Board and the Manager to be the most relevant basis for shareholders in assessing the overall performance of the Company and for comparing the performance of the Company to its peers, taking into account industry practice. Definitions and reconciliations to IFRS measures are provided in the main body of the report or in this Glossary, where appropriate.

Co-investment incentive scheme accrual
The co-investment incentive scheme accrual represents the estimated value of interests in the co-investment incentive scheme operated by the Company. At both 31 July 2016 and 31 January 2016, the accrual was estimated as the theoretical value of the interests if the Portfolio had been sold at its carrying value at those dates. The annual report for the year ended 31 January 2016 includes further details regarding the operation of the co-investment incentive scheme.

Drawdowns
Amounts invested by the Company into funds when called by underlying managers in respect of an existing commitment.

EBITDA
EBITDA stands for earnings before interest, tax, depreciation and amortisation, which is a widely used valuation measure in the private equity industry.

Enterprise value
The aggregate value of a company's entire issued share capital and net debt.

Full realisations
Exit events (e.g. trade sale, sale by public offering, or sale to a financial buyer) following which the residual exposure to an underlying company is zero or immaterial.

Funds in investment period
Funds in investment period are those funds which are able to make new investments under the terms of their fund agreements, usually up to five years after the initial commitment.

Net debt

Net debt is calculated as the total short term and long term debt in a business, less cash and cash equivalents.

 

Overcommitment
In order to achieve full or near full investment, it is usual for fund-of-funds to make commitments exceeding the amount of cash immediately available for investment. This is described as "overcommitment". When determining the appropriate level of overcommitment, careful consideration needs to be given to the rate at which commitments might be drawn down, and the rate at which realisations will generate cash from the existing portfolio to fund new investment.

 

Portfolio
Throughout the Chairman's Statement, Manager's Review and Supplementary Information, reference is made to the "Portfolio", which represents the aggregate of the investment portfolios of the Company and of its subsidiary limited partnerships. This is consistent with the commentary in previous annual and interim reports. The Board and the Manager consider that this is the most relevant basis for shareholders in assessing the overall performance of the Company and for comparison with its peers.

The closest equivalent amount reported on the balance sheet is "investments at fair value". A reconciliation of these two measures at 31 July 2016 and at 31 January 2016 is presented below.

£000

Investments at fair value as per balance sheet

Cash held by subsidiary limited partnerships

Balances receivable from            subsidiary limited partnerships

Co-investment incentive scheme accrual

Portfolio

31 July 2016

453,319

-86

+907

+15,579

469,720

31 January 2016

414,107

-

+2,127

+11,939

428,173

 

Post-crisis investments

Post-crisis investments are defined as those completed in 2009 or later.

 

Pre-crisis investments

Pre-crisis investments are defined as those completed in 2008 or before, based on the date the original deal was completed, which may differ from when the Company invested if acquired through a secondary.

Realisation proceeds
Amounts received by the Company in respect of the Portfolio, which may be in the form of capital proceeds or income such as interest or dividends.

Total return
Total Return is a performance measure that assumes the notional re-investment of dividends. This is a measure commonly used by the listed private equity sector and listed companies in general. In this report:
 

-       net asset value per share Total Return is calculated as the change in the Company's net asset value per share, assuming that dividends are re-invested at the end of the quarter in which the dividend was paid;

-       share price Total Return is calculated as the change in the Company's share price, assuming that dividends are re-invested on the day that they are paid; and

-       FTSE All-Share Index Total return is calculated as the change in the level of the Index, assuming that dividends are re-invested on the day that they are paid.

 

The tables below set out the share price and the net asset value per share growth figures for periods of 1, 3, 5 and 10 years to the balance sheet date, on both an unadjusted basis (i.e. without dividends re-invested) and on a Total Return basis.

 

Unadjusted performance in years to 31 July 2016

1

3

5

10*

Net asset value per share

14.0%

17.0%

37.6

90.6%

Share price

0.3%

21.1%

51.0%

61.6%

FTSE All-Share Index

0.0%

4.1%

20.7%

23.1%

Total Return performance in years to 31 July 2016

1

3

5

10*

Net asset value per share

15.6%

24.1%

48.3%

115.6%

Share price

2.3%

29.9%

65.9%

89.3%

FTSE All-Share Index

3.8%

15.5%

44.1%

75.6%

 

*As the Company changed its year end in 2010, the ten year figures are for the 121 month period to 31 July 2016.

 

 

Underlying valuation movement

The change in the valuation of the Company's Portfolio, before the effect of currency movements.

 

Undrawn commitments

Undrawn commitments are commitments that have not yet been drawn down (see definition of drawdowns).

 

Uplift on exit

Uplift on exit represents the increase in gross value relative to the underlying manager's most recent valuation prior to the announcement of the disposal. Excludes a small number of investments that were public throughout the life of the investment. May differ from uplift in the reporting period in certain instances.

 

 

 

Copies of the Interim Report will be available on the Company's website (www.icg-enterprise.co.uk) in October and posted to shareholders who have elected to receive a paper copy. Copies may be obtained during normal business hours from the Company's registered office thereafter.

For further information please contact:

Emma Osborne

Head of Private Equity Fund Investments

020 3201 1302

Mark Crowther

Investor Relations

020 3201 7842

Michael Pote

Finance

020 3201 1307

 

 

END

 


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