25 slides from Icg Enterprise Trust Plc Gbp's earnings presentation, Sep 26, 2014
Slide 1: Graphite Enterprise Trust PLC Half year results presentation
Graphite Enterprise Trust PLC Investing in long term growth Half year results presentation 26 September 2014
Slide 2: Half year results presentation agenda
Graphite Enterprise Half year results presentation – September 2014 1. Introduction Tim Spence Senior Partner, Finance Director 2. Performance Emma Osborne Senior Partner, Head of Fund Investment 3. Balance sheet Rod Richards Managing Partner 4. Investment activity 5. Portfolio 6. Outlook Page 1
Slide 3: Graphite Enterprise has a distinct offering in the listed private equity sector
1. Introduction Graphite Enterprise has a distinct offering in the listed private equity sector FOCUSED STRATEGY DISTINCTIVE INVESTMENT STYLE Backing high quality managers of European Focus on analysis of underlying companies buy-outs – mature, profitable companies and building long-term relationshi
Slide 4: Highlights of the six months ended July 2014
1. Introduction Highlights of the six months ended 31 July 2014 • Good underlying portfolio performance – 13% annualised • Solid NAV performance – 3%, despite adverse currency • Very strong cash realisations – £82m, 19% of opening portfolio • Strong new investment – £53m in 6 months, £30m since • Re
Slide 5: The share price outperformed the FTSE All-Share Index
2. Performance The share price outperformed the FTSE All-Share Index Jan-14 Total return Jul-14 6 months Net asset value per share 681.2p 677.2p +2.9% Share price 581.0p 563.5p +5.7% FTSE All-Share Index 3,586 3,497 +4.5% ● The share price has increased by a further 2.1% since 31 July to 593p* ─ The
Slide 6: The portfolio made steady progress, increasing by 6.5% in local currencies
2. Performance The portfolio made steady progress, increasing by 6.5% in local currencies % of opening % of opening 6 mths to Jul-14 £m portfolio NAV Underlying valuation gains 6.5 % 5.7 % 28.1 Currency (2.1)% (1.9)% (9.0) Total portfolio 4.4 % 3.8 % 19.1 Expenses and other (0.9)% (4.9) Total return
Slide 7: Realisations continued to be the main driver of performance
2. Performance Realisations continued to be the main driver of performance 6 mths to Jul-14 % of total gain £m Gains from realisations 61% 17.2 Unrealised gains 39% 10.9 Total portfolio 100% 28.1 ● Gains from realisations represent full exits ● Unrealised gains include: – the effect of partial exits
Slide 8: Graphite Enterprise outperformed the fund of funds peer group over 3 and 5 years
2. Performance Graphite Enterprise outperformed the fund of funds peer group over 3 and 5 years Years to Jul-141 1 3 5 10 Total return Graphite Enterprise NAV growth 2% 22% 79% 147% Fund of funds2 average NAV growth 7% 17% 50% 149% ● This performance is despite taking lower balance sheet risk than t
Slide 9: The share price has outperformed the FTSE All-Share by 20.3% since 31-Jul-13
2. Performance The share price has outperformed the FTSE All-Share by 20.3% since 31-Jul-13 ● The discount is currently 13.0% to the 31-Jul NAV Page 8 Note To the close on 25.09.14 (SP = 593p, FTAS = 3,544). Increases from 31 Jul 2013: SP +21.3%, Index +1.0%
Slide 10: Despite strong cash inflows, we have broadly maintained the level of investment
3. Balance sheet Despite strong cash inflows, we have broadly maintained the level of investment Pro Pro Jan-14 Jul-14 forma5 Jan-14 Jul-14 forma5 £m £m £m % % % Investments 433 402 424 86% 80% 84% Net current assets 69 102 80 14% 20% 16% Total assets less current liabilities 502 504 504 100% 100% 1
Slide 11: The rate of realisation remained very high
4. Investment activity The rate of realisation remained very high Notes 1. Excludes proceeds from secondary sales in all periods Page 10 2. Period to 25-Sep
Slide 12: Realisations continue to generate significant uplifts over prior valuations
4. Investment activity Realisations continue to generate significant uplifts over prior valuations1 Year ended Jan-12 Jan-13 Jan-14 Jul-14 Valuation uplift1 51% 49% 36% 40% Number of full realisations 18 14 33 15 Multiple of original cost 2.5x 2.7x 2.1x 1.9x ● On average, exits were of larger holdin
Slide 13: Secondaries and co-investments significantly increased the rate of new investment
4. Investment activity Secondaries and co-investments significantly increased the rate of new investment 103.1 90.6 85.7 77.8 81.2 83.3 80.3 54.0 £55.6m (67%) 45.7 24.0 Notes 1. Period to 25-Sep. £53.3m in first half, £30.0m since period end. Page 12 2. Discretionary investments consist of secondary
Slide 14: Example - Education Personnel (ICG buy-out / co-investment)
4. Investment activity Example - Education Personnel (ICG buy-out / co-investment) Background ● Leading provider of supply teachers and educational support staff in England and Wales ● Acquired by Graphite Capital Partners VII in 2010 ● Sold to management and ICG in May 2014 Investment rationale ● M
Slide 15: Case study – London Square (Graphite Capital disposal)
4. Investment activity Case study – London Square (Graphite Capital disposal) Background ● Graphite identified a market opportunity in 2009 ● Existing companies in the sector were not attractive targets ● Backed an industry-leading management team in a new venture ● Supported with £50m of equity and
Slide 16: Graphite Capital directly manages 23% of the portfolio
5. Portfolio Graphite Capital directly manages 23% of the portfolio* Graphite portfolio Third party portfolio Direct co- 23% Funds 66% (of which secondaries: 12%) invests 11% ● 46% of the portfolio is in investments over which we had full discretion: ─ Graphite portfolio 23% ─ Secondaries 12% ─ Co-i
Slide 17: The portfolio is balanced and well diversified
5. Portfolio The portfolio is balanced and well diversified ● The portfolio strikes a good balance between diversification and concentration – Exposure to 371 underlying companies – The top 30 underlying companies represent 44% of the portfolio value Note Geography denotes where a company is headqua
Slide 18: The portfolio was valued at 1.4x cost and its average maturity was 4.3 years
5. Portfolio The portfolio was valued at 1.4x cost and its average maturity was 4.3 years Jan-14 Jul-14 38% 62% Note Multiples of cost include amounts realised by current portfolio companies of 0.4 times and Page 17 reflect managers’ gross valuations. Weighted by value at 31-Jul.
Slide 19: The Top 30 companies continue to perform strongly
5. Portfolio The Top 30 companies continue to perform strongly ● Revenues and EBITDA grew by an average of 7.4% and 12.5% respectively (LTM to Jun-14) Note: Revenue growth excludes two Top 30 companies (Intermediate Capital Group and Guardian Financial Services). Page 18
Slide 20: The Top 30 were valued on average at 9.3x EBITDA
5. Portfolio The Top 30 were valued on average at 9.3x EBITDA and had 3.6x EBITDA net debt ● Compares with 9.5x EBITDA current valuation of FTSE 250 Note: Excludes two Top 30 companies (Intermediate Capital Group and Guardian Financial Services) for which EBITDA is not a relevant metric. Page 19
Slide 21: Five of the top ten holdings are managed directly by Graphite Capital
5. Portfolio Five of the top ten holdings are managed directly by Graphite Capital Company Country Manager % of portfolio * 1 Distributer and retailer of tyres UK Graphite 4.5% 2 Provider of home care services UK Graphite 3.5% 3 Provider of repair and maintenance services UK Graphite 2.7% 4 Provider
Slide 22: Outlook: The European buy-out market
6. Outlook The European buy-out market New investments ● Valuations are significantly higher than 2013, at 9-10x EBITDA vs 8-9x1 – Prices paid are as high as in 2007 – But the timing relative to the economic recovery should be more favourable ● However debt levels are only slightly higher than 2013,
Slide 23: Graphite Enterprise is well positioned to grow further
6. Outlook Graphite Enterprise is well positioned to grow further ● The environment for realisations remains favourable and managers will be seeking exits – More recent vintages are maturing and have already produced strong exits – Older vintages continue to perform ● Market for new investment is be
Slide 24: Useful information
Useful information Structure: Company registered in England and Wales Ticker: GPE.LN Investment trust tax status ISIN: GB0003292009 Registered company number: 01571089 SEDOL: 0329200 Listing: Premium London listing Website: www.graphite-enterprise.com Broker: J.P.Morgan Cazenove Angus Wilton (sales)
Slide 25: Legal notice
Legal notice What this document is for This document has been prepared by Graphite Capital Management LLP (“Graphite Capital”) as manager of Graphite Enterprise Trust PLC (“Graphite Enterprise”). The information and any views contained in this document are provided for general information only. It i