TIDMICP
RNS Number : 7012L
Intermediate Capital Group PLC
23 April 2018
ICG Enterprise Trust
Unaudited Preliminary Results
For the 12 months ended 31 January 2018
CONTINUED STRONG PERFORMANCE AND EXCELLENT PROGRESS
AGAINST STRATEGIC GOALS
-- NAV per share of 959p - total return of 12.5%(1) in the year
-- Growth driven by strong operating performance and realisation uplifts
-- High quality Portfolio(1) and record period for realisations
-- 16.4% constant currency return on the investment Portfolio; 15.3% return in sterling
-- 12% average LTM earnings growth from Largest 30 Companies; 47% of the Portfolio
-- GBP227m of realisations; cash proceeds 37% of the opening Portfolio value
-- Realisations at 40% uplift to carrying value; 2.7x multiple to cost
-- Selective investment into compelling opportunities
-- GBP142m of new capital deployed; 42% into high conviction investments
-- Flexibility to adapt investment mix according to where the
investment team see the best relative value
-- GBP110m committed to nine primary funds; four new relationships
-- Strategic benefits of move to ICG continue to add significant value
-- GBP30m of co-investment alongside ICG; ICG managed
investments now represents 18% of the Portfolio
-- Focus on defensive growth companies and structural downside protection
-- Continued geographic diversification; US now represents 22% of the Portfolio
-- Move to progressive annual dividend policy - dividend of 21p
-- 5% increase on previous year and 2.6% yield on year end share price
-- Move to quarterly dividend payments
-- Continued short, medium and long-term outperformance of public markets
Performance to 31 January 2018 1 year 3 year 5 year 10* year
-------------------------------------------------------------- ------------ ----------- ----------- ---------
Net asset value per share (total return) 12.5% 48.0% 67.8% 113.0%
Share price (total return) 20.1% 55.1% 89.7% 107.3%
FTSE All-Share Index (total return) 11.3% 27.4% 50.3% 80.9%
All performance figures are stated on a total return basis (i.e. including the effect of re-invested
dividends)
*As the Company changed its year end in 2010, the ten-year figures are for the 121-month period
to 31 January 2018.
(1) Alternative Performance Measure
Jeremy Tigue, Chairman, commented:
"This has been another very successful year with continued
strong performance and excellent progress against strategic
goals.
"The current market dynamics play to the core strengths of our
strategy and the team's expertise; a patient and highly selective
approach and the ability to be flexible and ensure downside risks
are limited. These strengths and our high-quality portfolio should
serve us well, and I am confident the Company will continue to
deliver long term growth ahead of public markets."
Emma Osborne, ICG, commented:
"I am pleased that the portfolio has continued to perform well,
with strong underlying profit growth and a record period for
realisations translating into another year of double digit
growth.
"Our flexible mandate has meant that we have been able to adapt
the mix of new investments for the current market environment,
benefitting from proprietary deal flow from ICG and our strong
third-party manager relationships.
"We have a strong pipeline of new opportunities and believe the
portfolio is well positioned to continue to generate significant
shareholder value."
Enquiries
Analyst / Investor enquiries:
+44 (0) 20
Emma Osborne, Portfolio Manager, ICG 3201 7700
Nikki Edgar, Finance and Investor +44 (0) 20
Relations, ICG 3201 7700
Media
Helen Gustard, Head of Corporate Communications, +44 (0) 20 3201
ICG 7917
Vikki Kosmalska, Associate Partner, +44 (0) 20 7379
Maitland 5151
Comparison to prior year
31 Jan 2018 31 Jan 2017
NAV 959p 871p
Realisations in the 12 months GBP227m GBP86m
Cash proceeds as a % of opening portfolio value 37% 20%
Realisations - uplift to carrying value 40% 24%
Realisations - multiple to cost 2.7x 1.9x
Capital deployed GBP142m GBP128m
% of Capital deployed into high conviction investments 42% 39%
New primary fund commitments GBP110m GBP118m
Notes
Included in this document are Alternative Performance Measures
("APMs"). APMs have been used 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 includes further details of APMs and
reconciliations to IFRS measures, where appropriate. The rationale
for the APMs is discussed in detail in the Manager's Review.
In the Chairman's Statement, Manager's Review and Supplementary
Information, reference is made to the "Portfolio". This is an APM.
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 includes a reconciliation of the
Portfolio to the most relevant IFRS measure.
In the Chairman's Statement, Manager's Review and Supplementary
Information, all performance figures are stated on a total return
basis (i.e. including the effect of re-invested dividends).
ICG Alternative Investment Limited, a regulated subsidiary of
Intermediate Capital Group plc, acts as the Manager of the
Company.
Disclaimer
This report may contain forward looking statements. These
statements have been made by the Directors in good faith based on
the information available to them up to the time of their approval
of this report and should be treated with caution due to the
inherent uncertainties, including both economic and business risk
factors, underlying such forward looking information.
These written materials are not an offer of securities for sale
in the United States. Securities may not be offered or sold in the
United States absent registration under the US Securities Act of
1933, as amended, or an exemption therefrom. The issuer has not and
does not intend to register any securities under the US Securities
Act of 1933, as amended, and does not intend to offer any
securities to the public in the United States. No money, securities
or other consideration from any person inside the United States is
being solicited and, if sent in response to the information
contained in these written materials, will not be accepted. This
report contains information which, prior to this announcement, was
inside information.
Chairman's Statement
Another year of excellent progress and strong returns
I am very pleased to report another year of excellent progress
and strong returns, further extending the Company's track record of
consistently strong growth over multiple cycles.
Highly selective and balanced approach continuing to drive
significant shareholder value
A record period of realisations at significant uplifts to
carrying value and continued strong portfolio company operating
performance have again driven returns that have outperformed the
wider market, with NAV per share increasing from 871p to 959p, a
12.5%(1) total return in the year.
These results and the underlying progress of our Portfolio(2)
are driven by the highly selective and balanced approach taken by
our investment team. With a focus on consistent and strong returns,
the team has, over many years, delivered significant growth, while
limiting downside risk. In an environment where volatility is
rising and pricing for new investments is high, our flexible
mandate allows us to strike the right balance between risk and
reward; adjusting the mix of investments to where the team sees the
best relative value and increasing exposure to companies that the
team believes will outperform, through the cycle.
This approach and our flexible mandate is unique among listed
private equity funds and we believe will continue to drive better
returns than public markets.
Leveraging the strengths of ICG's global platform
ICG is a leading alternative asset manager, a specialist
investor in private credit, debt and equity with EUR27bn of assets
under management and a strong track record spanning 29 years.
The strategic benefits of our move to ICG two years ago are
gaining momentum. Not only do insights on the marketplace and
private equity managers help inform investment decisions, but we
are also seeing significant tangible benefits of the move, in
particular, an increase in proprietary deal flow of highly
attractive investments. We have become more diversified
geographically, with the US now representing 22% of the Portfolio.
At the same time there has been more capital deployed into the high
conviction portfolio (co-investments, ICG managed funds and
secondary fund investments), which we expect to produce the best
returns. We have set more precise targets for how and where the
Portfolio is invested and over the next five years expect exposure
to the US to represent 30% -- 40% of the Portfolio and the
weighting to high conviction investments to increase to 50% --
60%.
I am delighted with the significant progress we have made in a
short period of time and believe that the strategic benefits of the
move to ICG will only increase over time.
Move to progressive annual dividend policy and quarterly
payments
Towards the end of the year, we announced our intention to grow
the annual dividend progressively and move to quarterly dividend
payments (subject to sufficient distributable reserves). In line
with this, the Directors are proposing a final dividend of 6p,
which, together with the interim dividends of 10p and 5p, will take
total dividends for the year to 21p. This is a 5% increase on the
prior year dividend of 20p and a 2.6% yield on the year end share
price. Subject to shareholder approval at the AGM, the final
dividend of 6p will be paid on 13 July 2018 to shareholders on the
register on 22 June 2018. Further information on the timing of
dividend payments can be found in the Annual Report.
Strong balance sheet and accretive share buybacks
The Company had net assets of GBP664m at the year end (31
January 2017: GBP613m).
The strong exit environment of the last few years has continued
into 2018, a dynamic reflected in our Portfolio with GBP227m of
realisations in the 12 months (31 January 2017: GBP86m). Against
this, GBP142m of capital has been deployed (31 January 2017:
GBP128m), and we ended the year with cash balances of GBP78m (31
January 2017: GBP39m), or 12% of net assets.
Nine primary commitments were made during the 12 months and
uncalled commitments stood at GBP321m at the year end (31 January
2017: GBP300m). While the Company has an undrawn GBP104m working
capital borrowing line in place (31 January 2017: GBP103m), we
anticipate that these uncalled commitments will be met from cash
resources and proceeds from future realisations.
During the year, the Company bought back GBP8m of shares at a
17% discount to our January 2018 net asset value per share. We have
a high quality Portfolio with strong growth prospects and will
continue to purchase shares on an opportunistic basis.
Continued evolution of the board
The Board is evolving. I succeeded Mark Fane as Chairman after
the AGM in June 2017, and Peter Dicks will be retiring at this
year's AGM. Peter has been on the board for 20 years and was
chairman of the Audit Committee and Senior Independent Director for
many years. He has made a significant contribution to the success
of the Company and I would like to thank him for his wise counsel
and support.
We have appointed a new non-executive director, Alastair Bruce,
with effect from 1 May 2018. Alastair was formerly the Managing
Partner of Pantheon Ventures and brings extensive financial and
private equity experience to the Board and I welcome him.
Annual general meeting
The Annual General Meeting will be held at The Wren Suite, The
Crypt, St Paul's Cathedral, St Paul's Churchyard, London, EC4M 8AD
on 18 June 2018 at 3.00pm. There will be a presentation by the
Company's investment team and an opportunity for shareholders to
meet the investment team and the Board. I encourage you to
attend.
Current market environment plays to the strengths of our
balanced approach and flexible mandate
This has been another very successful year with the returns
driven by the continued strong portfolio company operating
performance and realisations at significant uplifts to carrying
value.
While private equity managers continue to take advantage of the
supportive conditions to sell companies, competition for good
quality assets and an abundance of capital available to invest
means that pricing for new investments remains high. These market
dynamics play to the core strengths of our strategy and the team's
expertise; a patient and highly selective approach and the ability
to be flexible and ensure downside risks are limited. These
strengths and our high quality Portfolio should serve us well, and
I am confident the Company will continue to deliver long-term
growth ahead of public markets.
Jeremy Tigue
Chairman
23 April 2018
Footnotes
(1) Including reinvested dividends. Please refer to the Glossary
for definition of Total Return.
(2) In the Chairman's Statement, Manager's Review and
Supplementary Information, reference is made to the "Portfolio".
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 glossary.
Manager's Review
We believe our strategy leads to a portfolio which strikes the
right balance between concentration and diversification. While
diversification at both the manager and company level reduces risk,
concentration in our high conviction portfolio ensures that
individual winners can make a difference to performance.
Performance overview
Excellent performance across the Portfolio
The Portfolio has continued to build on its strong performance,
generating a gain of 16.4% in constant currencies, or 15.3% in
sterling (31 January 2017: 28.9%), and ending the year valued at
GBP601m (31 January 2017: GBP594m). These returns have been driven
by both strong operating performance and realisation activity and
further extend the average 15.0% p.a. constant currency growth that
the Portfolio has generated over the last five years.
Performance in the year was driven primarily by strong earnings
growth, which combined with a modest increase in valuation
multiples, has translated into valuation write-ups across the
Portfolio. In particular, our largest 30 underlying companies,
which represent 47% of the Portfolio, continue to perform well,
with aggregate LTM earnings growth of 12% and revenue growth of
11%. As we look at the entire Portfolio, the growth and valuation
trends are similar, reflecting the high quality of the Portfolio
overall. Almost a third of the underlying Portfolio gains came from
companies which were realised during the year.
Year-ended Year-ended
Movement in the portfolio 31 January 31 January
GBPm 2018 2017
------------------------------------------------------------------------- --------------------- --------------------
Opening Portfolio** 594.4 428.2
Third-party funds portfolio drawdowns 82.3 80.0
High conviction investments - ICG funds, secondary investments and
co-investments 59.6 47.9
--------------------- --------------------
Total new investment 141.9 127.8
Realisation Proceeds (226.6) (85.5)
--------------------- --------------------
Net cash (inflow)/outflow (84.7) 42.4
Underlying Valuation Movement* 97.7 93.5
% underlying Portfolio growth 16.4% 21.8%
Currency movement (6.7) 30.3
% currency movement (1.1%) 7.1%
--------------------- --------------------
Closing Portfolio** 600.7 594.4
* 94% of the Portfolio is valued using 31 December 2017 (or later) valuations.
** Refer to the Glossary for reconciliation to the portfolio balance presented in the unaudited
results.
Portfolio overview
Our Portfolio combines investments managed by ICG with those
managed by third-parties, in each case both through funds and
directly. This approach enables us to enhance returns by
proactively increasing exposure to companies that we have a high
conviction will outperform through the cycle. The common theme in
our high conviction portfolio is that ICG has made the decision to
invest in the underlying company, unlike in a conventional
fund-of-funds model where the third-party managers make all of the
underlying investment decisions.
We believe that our strategy strikes the right balance between
concentration and diversification and combines the best elements of
both the direct and fund-of-funds models which are prevalent in the
listed private equity sector, differentiating us from our
peers.
Investment category % of portfolio
------------------------------------- --- ---------------
High conviction portfolio
ICG managed investments 18.3
Third party co-investments 17.1
Third party secondary investments 6.6
Total High Conviction investments 42.0
Third party funds' portfolio
Graphite Capital primary funds 15.1
Third party primary funds 42.9
Total diversified fund investments 58.0
------------------------------------- --- ---------------
Total 100.0%
------------------------------------------ ---------------
Portfolio of leading private equity funds provides a base of
strong diversified returns
Our third-party funds portfolio accounted for 58% of value at
the year end and comprised 72 funds, managed by 37 leading private
managers with a bias to mid-market and large-cap European and US
private equity managers. This part of the Portfolio underpins our
strategy providing a base of strong diversified returns and deal
flow for the third-party direct co-investments and secondary
investments in our high conviction portfolio, which are almost
invariably sourced from managers with whom we have a primary fund
investment relationship.
Over the last five years, the third-party funds portfolio has
generated a constant currency return of 13.1% p.a. and is well
positioned to continue to deliver strong diversified returns and
ongoing deal flow for our high conviction portfolio.
High conviction portfolio of actively sourced investments
enhance returns
The high conviction portfolio of ICG investments, third-party
direct co-investments and third-party secondary fund investments,
represents 42% of value.
The exposure to ICG managed investments increased to 18% from
10% at the start of the year, with much of this increase driven by
co-investment activity. Within this weighting, we are invested in
three of ICG's 16 strategies with a focus on funds that have a bias
to equity returns, targeting gross annualised returns of at least
15% - 20% p.a. We expect our exposure to ICG investments to
increase to between 20% - 30% of the Portfolio over the next three
to five years as we continue to selectively co-invest, uncalled
commitments are drawn, and further funds added.
Almost a quarter of the Portfolio is weighted towards
third-party direct co-investments and secondary fund investments.
These investments enhance returns through selectively investing in
attractive companies on an opportunistic basis.
Over the last five years, our high conviction portfolio has been
a significant driver of performance, generating constant currency
returns of 18.6% p.a. and we believe the high conviction portfolio
is well positioned to continue to deliver significant shareholder
value.
Realisation activity
Record year for realisations at significant uplifts to carrying
value and cost
Our underlying managers took advantage of the continued
favourable exit environment to sell 59 of our underlying portfolio
companies compared with 40 in the prior year. This includes seven
of our top 30 companies which helped drive proceeds to a record
high of GBP217m or 2.5 times the amount generated in the previous
year. At 37% of the opening portfolio this cash conversion rate is
the highest for over a decade.
Realisations generated an average uplift of 40% to the previous
carrying value and an average multiple of 2.7x original cost. These
significant uplifts build on the Portfolio's strong track record.
Over the last five years, realisations have generated average
uplifts of 33% and a multiple of 2.2x cost.
In addition to the realisations by our underlying managers, we
also executed the sale of one of the third-party funds in the
secondary market, reflecting our active approach to managing the
Portfolio and bringing total proceeds in the year to GBP227m (31
January 2017: GBP86m).
Largest underlying realisations in the year to 31 January 2018
-----------------------------------------------------------------------------------------------
Investment Manager Year of investment Realisation type Proceeds GBPm
---------------- ---------------------- ------------------- ----------------- -------------
Micheldever Graphite Capital 2006 Trade 36.0
Standard Brands Graphite Capital 2001 & 2014 Trade 16.1
CPA Global Cinven 2012 Financial buyer 11.2
Formel D Deutsche Beteiligungs 2013 Financial buyer 7.1
ProXES Deutsche Beteiligungs 2013 Financial buyer 6.4
AVS Group Steadfast Capital 2013 Financial buyer 6.2
Quironsalud CVC 2011 Trade 5.9
Visma Cinven 2014 Financial buyer 5.5
ista CVC 2013 Financial buyer 5.4
Froneri PAI Partners 2013 Recapitalisation 4.9
---------------- ---------------------- ------------------- ----------------- -------------
Total of 10 largest underlying realisations 104.7
Total realisations 226.6
New investment activity
Increased investment rate into high conviction assets
In the current market environment, a patient and selective
investment approach is key, and our focus has mainly been on the
highest quality defensive businesses.
High conviction investments accounted for 42% of the GBP142m of
capital deployed in the year, up from 39% last year reflecting our
medium-term strategic objective of increasing high conviction
investments to 50% - 60% of the Portfolio. The increase in high
conviction investments was primarily driven by an increase in ICG
investments which accounted for 35% of new investment in the year.
This increased from 25% in the previous year, highlighting the
continuing strategic benefits of the move to ICG.
Alongside ICG Europe we invested GBP18m in DomusVi (a leading
European nursing home operator) and added GBP10m to our 2014
investment in Visma (a market leading provider of software for
small and medium-sized businesses in Northern Europe). We also
participated in a secondary fund recapitalisation which increased
our exposure to Gerflor (a global market leading flooring
manufacturer) to GBP13m. Alongside ICG Asia Pacific we invested
GBP8m in Yudo (a leading global manufacturer of mission-critical
components for the injection moulding industry). All of these
investments have a bias towards structural downside protection, by
typically investing in a blend of subordinated debt and equity.
This helps to limit downside risk while remaining within our target
return range. We believe this approach is particularly attractive
at this point in the cycle.
Elsewhere in our high conviction portfolio, we completed a GBP5m
secondary investment in two funds managed by Oak Hill Capital
Partners, a US mid-market manager and signed a GBP7m co-investment
alongside Leeds Equity Partners, another US mid-market manager,
although this investment did not close until shortly after the year
end.
While high quality defensive growth remains our overarching
investment philosophy, our flexible strategy allows us also to be
opportunistic, and during the year, we were able to find a number
of relative value situations facilitated by the transaction
dynamics, such as fund recapitalisations and late primary
investments (as described below).
Largest underlying new investments in the year to 31 January 2018
----------------------------------------------------------------------------------------------------------------------
Investment Description Manager Country Cost GBPm
DomusVi* Operator of retirement homes ICG France 17.6
Provider of accounting software and accounting
Visma* outsourcing services ICG Norway 9.9
Yudo Manufacturer of components for injection moulding ICG South Korea 8.2
Manufacturer of vinyl flooring for professional,
Gerflor** sports and residential applications ICG France 6.9
Provider of leadership consulting and management
YSC assessment services Graphite Capital UK 6.6
Provider of fostering services and children's
Compass Community residential care Graphite Capital UK 5.4
Provider of medical animation and digital media
services to the healthcare and pharmaceutical
Random42 industry Graphite Capital UK 5.2
Operator of an online marketplace and price
Allegro comparison website Cinven/Permira Poland 2.2
PSB Academy Provider of private tertiary education ICG Singapore 2.1
Park Holidays Operator of caravan parks ICG UK 1.9
--------------------- --------------------------------------------------- ----------------- ------------ ---------
Total of 10 largest underlying new investments 66.0
-------------------------------------------------------------------------- ------------------------------ ---------
Total new investment 141.9
* Represents additional investment via co-invest alongside and fund holding in ICG Europe
Fund VI; both investments were already in the portfolio at 31 January 2017.
** Represents a secondary position via ICG Recovery Fund 2008B; Gerflor was already in the
portfolio at 31 January 2017.
Selective new commitments to both existing and new manager
relationships
We completed eight new third-party fund commitments and
increased the commitment to ICG Strategic Secondaries Fund II
resulting in a total of GBP110m of primary fund commitments in the
year (31 January 2017: GBP118m). Four of the new third-party funds
were raised by managers we have backed successfully for many years
(CVC, PAI, TH Lee and Hollyport), while four are new to the
Portfolio (New Mountain, Oak Hill, Leeds and HgCapital). Three of
the new manager relationships (New Mountain, Oak Hill, and Leeds)
are focused on the US mid to upper mid-market reflecting our
strategic objective to increase exposure to this important
market.
All new commitments are to established managers with successful
track records of investing and adding value through cycles and with
a bias towards high quality, defensive businesses. We believe that
focusing on the most established managers in developed markets
reduces risk and leads to more consistent and less volatile
returns.
Both the Oak Hill IV and Leeds VI funds had already invested in
several portfolio companies giving us good visibility into the
underlying portfolios and opportunities for immediate cash
deployment as well as early valuation gains. In the case of Oak
Hill IV, the fund recently announced the sale of a portfolio
company for a multiple of 3x cost, returning 43% of capital
deployed to that fund to date. Situations such as this, known as
"late primary" investments, suit our style of investing by applying
our bottom-up, underlying company focused due diligence style and
help us to deploy capital more efficiently. In the last two years,
we have completed 18 new fund commitments of which six were late
primary investments.
The GBP8m increase in commitment to the ICG Strategic
Secondaries Fund II is a further example of a late primary
investment, with the demonstrable progress of the existing
portfolio making the fund a compelling opportunity. To date, the
fund has completed six transactions at highly attractive valuations
of 6x to 7x EBITDA. The total commitment to this fund is now $35m,
with a further $15m co-invested alongside the fund in one of its
transactions.
Portfolio analysis
A modest increase in valuation multiples
Within the largest 30 companies, the valuation multiple has
increased to 10.6x, up from 9.7x at the start of the year. This
increase has been driven by a combination of a change in the mix
and overall weightings of the largest underlying companies and a
modest increase in aggregate multiples overall. Looking across the
wider portfolio, the aggregate valuation multiples are in-line with
our largest 30 companies.
The net debt/EBITDA ratio of the largest 30 companies increased
to 4.2x from 3.6x, a result of the change of mix and weightings of
the underlying companies.
Focus on mid-market companies
Our strategy is focused exclusively on the buyout segment of the
private equity market, in which target companies are almost
invariably established, profitable and cash generative. The
Portfolio is biased towards the mid-market (48%) and large deals
(43%), which we view as more defensive, benefiting from experienced
management teams and often leading market positions. In contrast,
we view small companies as tending to be more vulnerable to
economic cycles and we believe our focus on mid-market and larger
deals offers the best balance of risk and reward.
Exposure to US increasing
The Portfolio is focused on developed private equity markets:
primarily continental Europe (40%), the UK and the US, with almost
no emerging markets exposure. In line with one of our strategic
objectives, our weighting to the US increased to 22% from 14% at
the time of the move to ICG two years ago while the UK bias has
reduced to 35% from 45% over the same period.
We expect both of these trends to gather pace as the benefits of
being part of ICG's global alternative asset manager platform are
further realised. We have a three to five year target to increase
the US focus to 30% - 40% of the Portfolio. The US is the largest
and most developed private equity market in the world, and we
believe will provide the Portfolio with attractive returns and
further geographic diversification.
Sector bias towards growth sectors
The Portfolio is weighted towards sectors that primarily have
non-cyclical drivers, such as demographics, with 22% of the
Portfolio invested in healthcare and education and 16% in business
services. The remainder of the portfolio is broadly spread across
the industrial (17%), consumer goods and services (15%), leisure
(12%) and TMT (10%) sectors.
Attractive and well-balanced vintage year exposure
The Portfolio has an attractive maturity profile which balances
near-term realisation prospects with a strong pipeline of medium to
longer-term growth.
Investments completed in 2014 or earlier, which are more likely
to generate gains from realisations in the shorter-term, represent
45% of the Portfolio. Against this, 55% of value is in investments
made between 2015 and 2017, providing the Portfolio with medium to
longer term growth as value created within these businesses
translates into gains. Within the more mature holdings, relatively
little value remains in companies acquired before 2008, with this
category falling from 13% to 3% in the year.
Balance sheet and financing
Strong balance sheet and positive financing outlook
The exceptionally high level of proceeds of GBP227m far
outweighed capital deployed of GBP142m, and after allowing for
dividends, buybacks and expenses resulted in an increase in cash
balances to GBP78m from GBP39m a year earlier.
Undrawn commitments of GBP321m provide the Company with a robust
medium-term investment pipeline. With total liquidity of GBP182m,
including the undrawn bank facility, commitments therefore exceeded
liquidity by 21% of net asset value. This remains within the
Company's historical conservative parameters.
31 Jan 2018 31 Jan 2017
------------------------------------------------ ------------ ------------
Portfolio GBP601m GBP594m
Cash GBP78m GBP39m
Net liabilities (GBP15m) (GBP20m)
------------------------------------------------ ------------ ------------
Net assets GBP664m GBP613m
------------------------------------------------ ------------ ------------
Outstanding commitments GBP321m GBP300m
Total available liquidity (including facility) GBP182m GBP142m
Overcommitment (including facility) GBP139m GBP159m
Overcommitment % 21% 26%
Commitments are typically drawn down over a period of four to
five years with approximately 10% - 15% retained at the end of the
investment period to fund follow-on investments and expenses. If
outstanding commitments were to follow a linear investment pace to
the end of their respective remaining investment periods, we
estimate that approximately GBP80m would be called over the next 12
months. This leaves significant available capital for high
conviction investments over and above those that will be made by
our underlying funds.
In managing the Company's balance sheet our objective is to be
broadly fully invested through the cycle while ensuring that we
have sufficient liquidity to be able to take advantage of
attractive investment opportunities as they arise. We do not intend
to be geared other than, potentially, for short-term working
capital purposes.
Outlook
Continued investment activity and a strong pipeline of new
opportunities
Since the year end, the Portfolio has continued to benefit from
the favourable exit environment, with GBP18m of proceeds received
in the two months to 31 March 2018. Against this, we have paid
GBP17m of calls and have recently committed GBP30m to Graphite
Capital IX and EUR40m to ICG Europe VII, ICG's latest European
mezzanine and equity fund.
Portfolio well positioned to generate significant shareholder
value
We have a high quality Portfolio with strong underlying profit
growth and realisation activity continuing to drive performance
across the Portfolio.
Against the current backdrop of a favourable exit environment,
continuing geopolitical uncertainties and increasing volatility, we
remain cautious in deploying the high levels of cash generated by
the Portfolio. Our flexible mandate allows us to be patient and
selective, adapting the Portfolio mix to market conditions and
where we see the best relative value in our high conviction
portfolio. We remain focused on investing in the highest quality
defensive businesses and situations where we have clear visibility
on performance drivers.
We have a strong pipeline of new opportunities and believe the
Portfolio is well positioned to continue to generate significant
shareholder value.
Private Equity Funds Investment Team
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 companies
The table below presents the 30 companies in which ICG
Enterprise had the largest investments by value at 31 January 2018.
These investments may be held directly or through funds, or in some
cases in both ways. The valuations are gross and are shown as a
percentage of the total investment Portfolio.
Company Manager Year of investment Country Value
as a % of portfolio
--------------------------------------------- ---------------- ------------------ ----------- --------------------
City & County Healthcare Group
1 Provider of home care services Graphite Capital 2013 UK 3.5%
DomusVi (1 / 2)
2 Operator of retirement homes ICG 2017 France 2.9%
Visma (1)
Provider of accounting software and
3 accounting outsourcing services ICG & Cinven 2014 & 2017 Europe 2.5%
Gerflor (2)
4 Manufacturer of vinyl flooring ICG 2011 France 2.2%
5 Education Personnel (1 / 2) ICG 2014 UK 2.2%
Provider of temporary staff for the
education sector
David Lloyd Leisure (1)
6 Operator of premium health clubs TDR Capital 2013 UK 2.1%
Roompot (1)
7 Operator and developer of holiday parks PAI Partners 2016 Netherlands 2.1%
nGAGE
8 Provider of recruitment services Graphite Capital 2014 UK 2.0%
PetSmart (1)
9 Retailer of pet products and services BC Partners 2015 USA 1.9%
10 ICR Group Graphite Capital 2014 UK 1.7%
Provider of repair and maintenance
services to the energy industry
11 Froneri (1 / 2) PAI Partners 2013 UK 1.7%
Manufacturer and distributor of ice cream
products
12 System One (1) TH Lee 2016 USA 1.6%
Provider of specialty workforce solutions
13 Beck & Pollitzer Graphite Capital 2016 UK 1.6%
Provider of industrial machinery
installation and relocation
The Laine Pub Company (1)
14 Operator of pubs and bars Graphite Capital 2014 UK 1.6%
15 Skillsoft (1) Charterhouse 2014 USA 1.5%
Provider of off the shelf e-learning
content
Frontier Medical (1)
16 Manufacturer of medical devices Kester Capital 2013 UK 1.5%
17 TMF (2) Doughty Hanson 2008 Netherlands 1.5%
Provider of management and accounting
outsourcing services
18 Yudo (1) ICG 2018 South Korea 1.4%
Manufacturer of components for injection
moulding
19 Cambium (2) ICG 2016 USA 1.3%
Provider of educational solutions and
services
Swiss Education (1)
20 Provider of hospitality training Invision Capital 2015 Switzerland 1.2%
21 YSC Graphite Capital 2017 UK 1.1%
Provider of leadership consulting and
management assessment services
New World Trading Company
22 Operator of distinctive pub restaurants Graphite Capital 2016 UK 1.1%
23 U-POL (2) Graphite Capital 2010 UK 1.0%
Manufacturer and distributor of
automotive refinishing products
24 Cognito (1) Graphite Capital 2002 UK 1.0%
Supplier of communications equipment,
software & services
25 Compass Community Graphite Capital 2017 UK 0.9%
Provider of fostering services and
children's residential care
26 Random42 Graphite Capital 2017 UK 0.9%
Provider of medical animation and digital
media services
Ceridian (1)
27 Provider of payment processing services TH Lee 2007 USA 0.8%
Odgers (1)
28 Provider of recruitment services Graphite Capital 2009 UK 0.6%
29 Minimax (2) ICG 2014 Germany 0.6%
Supplier of fire protection systems and
services
30 CeramTec Cinven 2013 Germany 0.6%
Manufacturer of high performance ceramics
----------------------------------------- ---------------- ------------------ ----------- --------------------
Total of the 30 largest underlying investments 46.6%
----------------------------------------------------------------------------------- ----------- --------------------
(1) All or part of this investment is held directly as a co-investment or other direct investment.
(2) All or part of this investment was acquired as part of a secondary purchase.
The 30 largest fund investments
The table below presents the 30 largest funds by value at 31
January 2018. The valuations are net of any carried interest
provision.
Fund Year of Country/ Value Outstanding
Commitment Region GBPm Commitment
GBPm
----------------------------------------------- ----------- ------------ ----- -----------
Graphite Capital Partners VIII (1)
1 Mid-market buyouts 2013 UK 74.8 26.6
ICG Europe VI (2)
2 Mezzanine and equity in mid-market buyouts 2015 Europe 21.6 4.6
BC European Capital IX (2)
3 Large buyouts 2011 Europe/USA 20.5 0.8
Fifth Cinven Fund
4 Large buyouts 2012 Europe 16.0 1.6
CVC European Equity Partners VI
5 Large buyouts 2013 Europe/USA 15.8 2.2
CVC European Equity Partners V (2)
6 Large buyouts 2008 Europe/USA 12.8 0.4
Graphite Capital Partners VII (1 / 2)
7 Mid-market buyouts 2007 UK 12.6 4.7
ICG Strategic Secondaries Fund II
8 Secondary fund recapitalisations 2016 Europe/USA 12.0 16.2
Permira V
9 Large buyouts 2013 Europe/USA 10.9 0.6
Thomas H Lee Equity Fund VII
10 Mid-market and large buyouts 2015 USA 10.8 6.1
11 ICG Velocity Partners Co-Investor (2) 2016 USA 10.7 2.0
Mid-market buyout fund recapitalisations
Thomas H Lee Parallel Fund VI
12 Mid-market and large buyouts 2007 USA 10.0 1.0
One Equity Partners VI
13 Mid-market buyouts 2016 Europe/USA 9.4 2.1
PAI Europe VI
14 Mid-market and large buyouts 2013 Europe 9.4 6.7
TDR Capital III
15 Mid-market and large buyouts 2013 Europe 8.8 3.1
Egeria Private Equity Fund IV
16 Mid-market buyouts 2012 Netherlands 8.7 2.0
Doughty Hanson & Co V (2)
17 Mid-market and large buyouts 2006 Europe 8.6 6.7
Hollyport Secondary Opportunities V
18 Tail-end secondary portfolios 2015 Global 8.5 2.3
19 ICG Europe V (2) 2012 Europe 8.4 0.9
Mezzanine and equity in mid-market buyouts
Activa Capital Fund III
20 Mid-market buyouts 2013 France 8.0 5.9
IK VII
21 Mid-market buyouts 2013 Europe 7.9 0.4
22 ICG European Fund 2006 B(2) 2014 Europe 7.5 2.1
Mezzanine and equity in mid-market buyouts
Graphite Capital Partners VI (2)
23 Mid-market buyouts 2003 UK 7.5 2.1
Bowmark Capital Partners IV
24 Mid-market buyouts 2007 UK 7.5 -
Deutsche Beteiligungs Fund VI
25 Mid-market buyouts 2012 Germany 7.4 1.2
Nordic Capital Partners VIII
26 Mid-market and large buyouts 2013 Europe 7.4 1.9
27 ICG Asia Pacific Fund III 2016 Asia Pacific 5.9 5.4
Mezzanine and equity in mid-market buyouts
Advent Global Private Equity VIII
28 Large buyouts 2016 Europe/USA 5.8 7.2
Activa Capital Fund II
29 Mid-market buyouts 2007 France 5.6 1.9
Gridiron Capital Fund III
30 Mid-market buyouts 2016 USA 5.6 5.4
------------------------------------------- ----------- ------------ ----- -----------
Total of the largest 30 fund investments 366.4 124.1
-------------------------------------------------------------------------- ----- -----------
Percentage of total investment Portfolio 61.0%
(1) Includes the associated Top Up funds.
(2) All or part of an interest acquired through a secondary fund purchase.
Portfolio analysis
Closing Portfolio by value at 31 January 2018
% of value of
underlying
Portfolio by investment type investments
------------------------------ --------------
Mid-market buyouts 48.1%
Large buyouts 42.4%
Small buyouts 8.2%
Other 1.3%
------------------------------- --------------
Total 100.0%
------------------------------- --------------
Portfolio by calendar year of investment % of value of underlying investments
------------------------------------------- -------------------------------------
2018 2.1%
2017 19.3%
2016 20.9%
2015 12.9%
2014 17.8%
2013 12.4%
2012 3.3%
2011 2.4%
2010 2.2%
2009 1.2%
2008 2.1%
2007 1.3%
2006 and before 2.1%
-------------------------------------------- -------------------------------------
Total 100.0%
-------------------------------------------- -------------------------------------
% of value
of underlying
Portfolio by sector investments
----------------------------- ---------------
Healthcare and education 22.4%
Industrials 17.4%
Business services 15.6%
Consumer goods and services 14.7%
Leisure 12.1%
TMT 10.2%
Financials 4.9%
Other 2.7%
Total 100.0%
------------------------------ ---------------
Portfolio by geographic % of value of
distribution based on underlying
location of company headquarters investments
Europe 40.0%
UK 35.2%
North America 21.8%
Rest of world 3.0%
------------------------------------ --------------
Total 100.0%
------------------------------------ --------------
Commitments analysis
The following tables analyse commitments at 31 January 2018.
Original commitments are translated at 31 January 2018 exchange
rates.
Total undrawn commitments
Original Outstanding Average
commitment commitment drawdown % of
GBP'000 GBP'000 percentage commitments
-------------------------------- ----------- ----------- ----------- ------------
Investment period not commenced 35,962 35,962 0.0% 11.2%
Funds in investment period 483,217 231,466 52.1% 72.1%
Funds post investment period 678,006 53,738 92.1% 16.7%
-------------------------------- ----------- ----------- ----------- ------------
Total 1,197,185 321,166 73.2% 100.0%
-------------------------------- ----------- ----------- ----------- ------------
Movement in outstanding commitments in year ended 31 January 2018 GBPm
------------------------------------------------------------------- ------
As at 1 February 2017 300.3
New primary commitments 109.9
New commitments relating to co-investments and secondary purchases 9.5
Drawdowns (99.3)
Currency and other movements 0.8
------------------------------------------------------------------- ------
As at 31 January 2018 321.2
------------------------------------------------------------------- ------
New commitments during the year to 31 January 2018
Fund Strategy Geography GBPm
----------------------------- --------------------------------- ----------- -----
Primary commitments
PAI VII Mid-market and large buyouts Europe 22.0
CVC VII Large buyouts Europe/USA 20.9
THLee VIII Mid-market and large buyouts USA 14.9
Oak Hill IV Mid-market buyouts USA 12.0
New Mountain V Mid and large market buyouts USA 11.5
ICG Strategic Secondaries II Secondary fund recapitalisations Europe/USA 8.0
Hollyport VI Tail-end secondary portfolios Global 7.6
Leeds VI Mid-market buy-outs USA 7.5
Hg Capital 8 Mid-market buy-outs Europe 5.5
Total primary commitments 109.9
Commitments relating to co-investments and secondary investments 9.5
----------------------------------------------------------------------------- -----
Total new commitments 119.4
----------------------------------------------------------------------------- -----
Currency exposure
31 January 31 January 31 January 31 January
2018 2018 2017 2017
Portfolio(1) GBPm % GBPm %
------------------------- ----------------- ----------------- ----------------- -----------------
Sterling 235.8 39.3 269.1 45.3
Euro 174.3 29.0 156.5 26.3
US Dollar 119.6 19.9 115.4 19.4
Other European 49.8 8.3 41.5 7.0
Other 21.2 3.5 11.8 2.0
------------------------- ----------------- ----------------- ----------------- -----------------
Total 600.7 100.0 594.3 100.0
------------------------- ----------------- ----------------- ----------------- -----------------
(1) Currency exposure is calculated by reference to the location of the underlying Portfolio
companies' headquarters.
31 January 31 January 31 January 31 January
2018 2018 2017 2017
Outstanding commitments GBPm % GBPm %
------------------------ ---------- ---------- ---------- ----------
- Sterling 63.2 19.7 77.5 25.8
- Euro 170.0 52.9 166.2 55.4
- US Dollar 86.1 26.8 54.5 18.1
- Other European 1.9 0.6 2.1 0.7
------------------------ ---------- ---------- ---------- ----------
Total 321.2 100.0 300.3 100.0
------------------------ ---------- ---------- ---------- ----------
Principal Risks and uncertainties
Risk management
The Board is responsible for risk management and determining the
overall risk appetite. The Audit Committee assesses and monitors
the risk management framework and specifically reviews the controls
and assurance programmes in place.
The Board accepts a level of investment risk to achieve its
targeted returns. There is a very low tolerance for financing risk
with the aim to ensure that even under the most severe stress
scenario, the Company is likely to meet its funding requirements
and financial obligations. Similarly, there is a very low risk
tolerance with respect to legal, taxation and regulatory risk.
Principal risks and uncertainties
The execution of the Company's investment strategy is subject to
risk and uncertainty and the Board and Manager have identified a
number of principal risks to the Company's business. A
comprehensive risk assessment process is undertaken regularly to
re-evaluate the impact and probability of each risk materialising
and the nancial or strategic impact of the risk. Where the residual
risk is determined to be outside of appetite, appropriate action is
taken. Further information on risk factors are set out on pages 35
to 39 of the Financial Statements.
Risk Mitigation
----------------------------- ----------------------------------------
Investment
-----------------------------------------------------------------------
Investment performance The Manager has a highly selective
The Manager selects investment approach and disciplined
the fund investments process. Further, the Company's
and direct co-investments Portfolio is diversified reducing
for the Company's the likelihood of a single
Portfolio. The underlying investment decision impacting
managers of those portfolio performance. ICG
funds in turn select Enterprise's investment committee
individual investee within the Manager comprises
companies. The origination, a balance of skills and perspectives.
investment selection
and management capabilities
of both the Manager
and the third-party
managers are therefore
key to the performance
of the Company.
----------------------------- ----------------------------------------
Valuation The Manager carries out a formal
By valuing its investments valuation process involving
in private equity a quarterly review of third-party
funds and unquoted valuations, verification of
companies and publishing the latest audited reports,
its NAV, the Company as well as a review of any
relies to a significant potential adjustments that
extent on the accuracy are required to ensure the
of financial and other valuation of the underlying
information provided investments are in accordance
by these funds and with the fair market value
companies to the Manager. principles required under International
There is the potential Financial Reporting Standards
for inconsistency ("IFRS").
in the valuation methods
adopted by the managers
of these funds and
companies.
----------------------------- ----------------------------------------
Political and macroeconomic The Manager actively monitors
uncertainty these developments, with the
Political and macroeconomic support of a dedicated in-house
uncertainty, including economist and professional
impacts from the EU advisers where appropriate,
referendum or similar to ensure it is prepared for
scenarios, could impact any potential impacts.
the environment in
which the Company,
and its investment
portfolio companies,
operate.
----------------------------- ----------------------------------------
Private equity sector Private equity has outperformed
The private equity public markets over the long
sector could fall term and it has proved to be
out of favour with an attractive asset class through
investors leading various cycles.
to a reduction in The Manager is active in marketing
demand for the Company's the Company's shares to a wide
shares and a widening variety of investors to ensure
of the Company's discount. the market is informed about
This has the potential the Company's performance and
to damage the Company's investment proposition.
reputation and cause The Board monitors the discount
shareholder dissatisfaction. to NAV and considers appropriate
solutions to address any ongoing
or substantial discount to
NAV, including share buybacks.
----------------------------- ----------------------------------------
Operational
-----------------------------------------------------------------------
Regulatory, legislative The Board is responsible for
and taxation compliance ensuring the Company's compliance
Failure by the Manager with all applicable regulations.
to comply with relevant Monitoring of this compliance,
regulation and legislation and regular reporting to the
could have an adverse Board thereon, has been delegated
impact on the Company. to the Manager. The Manager's
This includes the in-house legal counsel provides
Corporation Tax Act regular updates to the Board
2010, the Companies covering relevant changes to
Act, the Alternative legislation and regulation.
Investment Fund Managers
Directive, accounting
standards, investment
trust regulations
and the Listing Rules
and Disclosure Guidance
and Transparency Rules.
----------------------------- ----------------------------------------
People The Manager regularly updates
Loss of a key investment the Board on team developments.
professional at the The Manager's compensation
Manager could impair policy is designed to minimise
the Company's ability turnover of key people and
to deliver its investment historically turnover has been
strategy if replacements low. In addition, the senior
are not found in a investment professionals are
timely manner. required to co-invest alongside
the Company for which they
are entitled to a share of
investment profits if performance
hurdles are met.
----------------------------- ----------------------------------------
The Manager and other The Audit Committee formally
third party advisers assesses the internal controls
The Company is dependent of the Manager, the Administrator
on third parties for and Depositary on an annual
the provision of all basis. The assessment in respect
systems and services of the current year is discussed
(in particular, those in the Report of the Audit
of the Manager, the Committee.
Administrator and The Management Agreement is
the Depository) and subject to a notice period
any control failures that is designed to provide
and gaps in these the Board with adequate time
systems and services to put in place alternative
could result in a arrangements.
loss or damage to
the Company.
----------------------------- ----------------------------------------
Information security Application of the Manager's
The Company is dependent and Administrator's information
on effective information security policies is supported
technology systems by a governance structure and
at both the Manager a risk framework that allows
and Administrator. for the identification, control
These systems support and mitigation of technology
key business functions risks. The adequacy of the
and are an important systems and controls the Manager
means of safeguarding and the Administrator has in
sensitive information. place to mitigate the technology
Any significant disruption risks is continuously monitored
to these IT systems, and subject to regular testing.
including breaches The effectiveness of the framework
of data confidentiality is periodically assessed.
or cybersecurity,
could result in, among
other things, financial
losses, in inability
to perform business
critical functions,
regulatory censure,
legal liability and
reputational damage.
----------------------------- ----------------------------------------
Financial (Credit and liquidity)
-----------------------------------------------------------------------
Foreign exchange The Board regularly reviews
Foreign exchange The the Company's exposure to currency
Company makes investments risk and reconsiders possible
in US dollars, Euros hedging strategies on an annual
and other currencies basis. Furthermore, the Company's
as well as Sterling. multi-currency bank facility
Accordingly, the movement permits the borrowings to be
in exchange rates drawn in Euro's if required.
between these currencies At present the Company does
may have a material not hedge its currency exposures.
effect on the performance
of the Company.
----------------------------- ----------------------------------------
Financing The Manager monitors the Company's
The Company has outstanding liquidity on a frequent basis
commitments in excess and provides regular updates
of total liquidity to the Board. If necessary
to private equity the Company can reduce the
funds that may be level of co-investments and
drawn down at any secondary investments, which
time. The ability are discretionary, to preserve
to fund this difference liquidity for funding its commitments.
is dependent on receiving The Company could also dispose
cash proceeds from of assets.
investments (the timing The total available liquidity
of which are unpredictable) as at 31 January 2018 stood
and the availability at GBP182m, comprising GBP78m
of financing facilities. in cash balances and GBP104m
There is a risk the in undrawn bank facilities.
Company will encounter As a result, the available
difficulties in meeting financing along with the private
its outstanding commitments. equity portfolio exceeded the
outstanding commitments by
a factor of 2.4 times.
----------------------------- ----------------------------------------
Statement of directors' responsibilities
The directors are responsible for preparing the Annual Report,
the Directors' Remuneration Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have prepared the financial statements in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union. Under company law the directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the directors are required
to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgements and accounting estimates that are reasonable
and prudent;
-- state whether applicable IFRS as adopted by the European
Union have been followed, subject to any material departures
disclosed and explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the
financial position of the company and the group and enable them to
ensure that the financial statements and the Directors'
Remuneration Report comply with the Companies Act 2006 and, as
regards the group financial statements, Article 4 of the IAS
Regulation. They are also responsible for safeguarding the assets
of the company and the group and hence for taking reasonable steps
for the prevention and detection of fraud and other
irregularities.
The directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Having taken advice from the Audit Committee, the directors
consider that the Annual Report, taken as a whole, is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the Company's position and performance,
business model and strategy.
Each of the directors, confirm that, to the best of their
knowledge:
-- the financial statements, which have been prepared in
accordance with IFRS as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit of
the Company; and
-- the Strategic Report includes a fair review of the
development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties that it faces.
On behalf of the Board
Jeremy Tigue
Chairman
23 April 2018
Income statement (unaudited)
Year to 31 January 2018 Year to 31 January 2017
Revenue Capital Revenue Capital
return return Total return return Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ----- -------- -------- -------- -------- -------- --------
Investment returns
Income, gains and losses on investments 8 22,257 60,124 82,381 9,892 105,194 115,086
Deposit interest 59 - 59 242 - 242
Other income 70 - 70 17 - 17
Foreign exchange gains and losses - 826 826 - 2,993 2,993
-------- -------- -------- -------- -------- --------
22,386 60,950 83,336 10,151 108,187 118,338
-------- -------- -------- -------- -------- --------
Expenses
Investment management charges 4 (1,791) (5,374) (7,165) (1,552) (4,657) (6,209)
Other expenses (1,659) (1,075) (2,734) (1,638) (1,145) (2,783)
-------- -------- -------- -------- -------- --------
(3,450) (6,449) (9,899) (3,190) (5,802) (8,992)
-------- -------- -------- -------- -------- --------
Profit before tax 18,936 54,501 73,437 6,961 102,385 109,346
-------- -------- -------- -------- -------- --------
Taxation 5 (2,435) 2,294 (141) (1,184) 787 (397)
-------- -------- -------- -------- -------- --------
Profit for the year 16,501 56,795 73,296 5,777 103,172 108,949
-------- -------- -------- -------- -------- --------
Attributable to:
-------- -------- -------- -------- -------- --------
Equity shareholders 16,501 56,795 73,296 5,777 103,172 108,949
-------- -------- -------- -------- -------- --------
Basic and diluted earnings per share 6 105.56p 153.43p
The columns headed 'Total' represent the income statement for
the relevant financial years and the columns headed 'Revenue
return' and 'Capital return' are supplementary information, in line
with the Statement of Recommended Practice for Financial Statements
of Investment Trust Companies and Venture Capital Trusts issued by
the Association of Investment Companies. There is no Other
Comprehensive Income.
Balance sheet (unaudited)
31 January 31 January
2018 2017
Notes GBP'000 GBP'000
---------------------------------------------- ----- ---------- ----------
Non-current assets
Investments held at fair value
Unquoted investments 8 478,362 491,099
Quoted investments 8 1,733 364
Subsidiary investments 8 96,392 80,718
---------- ----------
576,487 572,181
---------- ----------
Current assets
Cash and cash equivalents 78,389 38,522
Receivables 9 10,410 2,384
---------- ----------
88,799 40,906
---------- ----------
Current liabilities
Payables 10 963 354
---------- ----------
Net current assets 87,836 40,552
---------- ----------
Total assets less current liabilities 664,323 612,733
---------- ----------
Capital and reserves
Share capital 11 7,292 7,292
Capital redemption reserve 2,112 2,112
Share premium 12,936 12,936
Capital reserve 630,738 581,753
Revenue reserve 11,245 8,640
---------- ----------
Total equity 664,323 612,733
---------- ----------
Net asset value per share (basic and diluted) 12 959.1p 871.0p
Cash flow statement (unaudited)
Year to Year to
31 January 31 January
2018 2017
Notes GBP'000 GBP'000
----------------------------------------------------- ----- ----------- -----------
Operating activities
Sale of portfolio investments 147,888 50,338
Purchase of portfolio investments (99,601) (102,621)
Interest income received from portfolio investments 15,967 7,263
Dividend income received from portfolio investments 6,230 2,629
Other income received 129 259
Investment management charges paid (7,090) (6,143)
Other expenses paid (1,456) (1,380)
----------- -----------
Net cash inflow/(outflow) from operating activities 62,067 (49,655)
----------- -----------
Financing activities
Bank facility fee (1,320) (1,089)
Purchase of shares into treasury (7,810) (6,201)
Equity dividends paid 7 (13,896) (11,357)
----------- -----------
Net cash outflow from financing activities (23,026) (18,647)
----------- -----------
Net increase/(decrease) in cash and cash equivalents 39,041 (68,302)
----------- -----------
Cash and cash equivalents at beginning of year 38,522 103,831
Net increase/(decrease) in cash and cash equivalents 39,041 (68,302)
Effect of changes in foreign exchange rates 826 2,993
----------- -----------
Cash and cash equivalents at end of year 78,389 38,522
----------- -----------
Statement of changes in equity (unaudited)
Capital Realised Total
redemption capital Unrealised Revenue shareholders'
Share capital reserve Share premium reserve capital reserve reserve equity
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------------- --------------- ------------- -------- ---------------- --------- --------------
Year to 31
January 2018
Opening balance
at 1 February
2017 7,292 2,112 12,936 355,946 225,807 8,640 612,733
Profit for the
year and total
comprehensive
income - - - (34,586) 91,381 16,501 73,296
Dividends paid
or approved - - - - - (13,896) (13,896)
Purchase of
shares into
treasury - - - (7,810) - - (7,810)
------------- --------------- ------------- -------- ---------------- --------- --------------
Closing balance
at 31 January
2018 7,292 2,112 12,936 313,550 317,188 11,245 664,323
------------- --------------- ------------- -------- ---------------- --------- --------------
Capital Realised Total
redemption capital Unrealised Revenue shareholders'
Share capital reserve Share premium reserve capital reserve reserve equity
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------------- --------------- ------------- -------- ---------------- --------- --------------
Year to 31
January 2017
Opening balance
at 1 February
2016 7,292 2,112 12,936 363,325 121,457 14,220 521,342
Profit for the
year and total
comprehensive
income - - - (1,178) 104,350 5,777 108,949
Dividends paid
or approved - - - - - (11,357) (11,357)
Purchase of
shares into
treasury - - - (6,201) - - (6,201)
------------- --------------- ------------- -------- ---------------- --------- --------------
Closing balance
at 31 January
2017 7,292 2,112 12,936 355,946 225,807 8,640 612,733
------------- --------------- ------------- -------- ---------------- --------- --------------
Notes to the financial statements (unaudited)
1) General information
These financial statements relate to ICG Enterprise Trust plc
("the Company"). ICG Enterprise Trust plc 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.
2) Unaudited financial 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 2017 were approved by
the Board of Directors on 4 May 2017 and delivered to the Registrar
of Companies. The report of the auditors on those accounts was
unqualified, did not contain an emphasis of matter paragraph and
did not contain any statements under section 498(2) or (3) of the
Companies Act 2006.
Statutory accounts for the year to 31 January 2018 will be
delivered to the Registrar of Companies following the Company's
Annual General Meeting which will be held at The Wren Suite, St
Paul's Cathedral at 3.00pm on 18 June 2018.
3) Basis of preparation
The financial information for the year ended 31 January 2018 has
been prepared in accordance with the Companies Act 2006 as
applicable to companies using International Financial Reporting
Standards ("IFRS") and the Statement of Recommended Practice
("SORP") as amended in November 2014 and updated in January 2017
with consequential amendments issued by the Association of
Investment Companies.
IFRS comprises standards and interpretations approved by the
International Accounting Standards Board ("IASB") and the IFRS
Interpretations Committee as adopted in the European Union as at 31
January 2018.
These financial statements have been prepared on a going concern
basis and on the historical cost basis of accounting, modified for
the revaluation between items of 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 certain assets
at fair value.
The principal accounting policies adopted are set out below.
These policies have been applied consistently throughout the
current and prior year. In order to reflect the activities of an
investment trust company, supplementary information which analyses
the income statement Recommended Practice for investment trusts
issued by the Association of Investment Companies in November 2014.
The following requirements of the SORP have been followed:
-- The income statement shows a revenue column and a capital
column prepared in accordance with the guidance per the SORP.
-- Capital gains and losses on investments sold and on
investments held arising on the revaluation or disposal of
investments classified as held at fair value through profit or loss
should be shown in the capital column of the income statement.
-- Returns on any share or debt security for a fixed amount
(whether in respect of dividends, interest or otherwise) should be
shown in the revenue column of the income statement.
-- The Board should determine whether the indirect costs of
generating capital gains should also be shown in the capital column
of the income statement. If the Board decides that this should be
so, the management fee should be allocated between revenue and
capital in accordance with the Board's expected long term split of
returns, and other expenses should be charged to capital only to
the extent that a clear connection with the maintenance or
enhancement of the value of investments can be demonstrated.
The accounting policy regarding the allocation of expenses is
set out in note 1(i).
In accordance with IFRS 10 (amended), the Company is deemed to
be an investment entity on the basis that:
(a) it obtains funds from one or more investors for the purpose
of providing investors with investment management services;
(b) it commits to its investors that its business purpose is to
invest funds for both returns from capital appreciation and,
investment income; and
(c) it measures and evaluates the performance of substantially
all of its investments on a fair value basis.
As a result, the Company's subsidiaries are included in unquoted
investments at fair value as the subsidiaries are also deemed to be
investment entities.
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 SORP (see note 1(a)). More
detail on certain categories of investment is set out below. Given
that the subsidiaries and associates are held at fair value and are
exposed to materially similar risks as the Company, we do not
expect the risks to materially differ from those disclosed in note
13.
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 undertakings
The investments in the subsidiaries are recognised at fair value
through profit and loss.
The valuation of the subsidiaries takes into account an accrual
for the estimated value of interests in the co-investment incentive
scheme. Under these arrangements, ICG and certain of its executives
and, in respect of certain historic investments, the executives and
connected parties of Graphite Capital Management LLP (the "Former
Manager") (together "the Co-investors"), are required to co-invest
alongside the Company, for which they are entitled to a share of
investment profits if certain performance hurdles are met. These
arrangements are discussed further in the Report of the Directors.
At 31 January 2018, the accrual was estimated as the theoretical
value of the interests if the portfolio had been sold at the
carrying value at that date.
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.
The Company holds an interest (including indirectly through its
subsidiaries) of more than 20% in a small number of investments
that may normally be classified as subsidiaries or associates.
These investments are not considered subsidiaries or associates as
the Company does not exert control or significant influence over
the activities of these companies/partnerships as they are managed
by other third parties.
4) Investment Management charges
Management fees amounted to 1.12% (2017:1.10%) of the average
net assets in the period. The management fee charged for managing
the Company remains at 1.4% (2017: 1.4%) of the fair value of
invested assets and 0.5% (2017: 0.5%) of outstanding commitments,
in both cases excluding funds managed by Graphite Capital
Management LLP and ICG. No fee is charged on cash or liquid asset
balances. The allocation of the total investment management charge
was unchanged in 2018 with 75% of the total allocated to capital
and 25% allocated to revenue.
The amounts charged during the year are set out below.
Year ended 31 January 2018 Year ended 31 January 2017
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- --------- -------- --------- --------- --------
Investment management charge 1,791 5,374 7,165 1,552 4,657 6,209
The table below sets out the management charges that the Company
has borne in respect of its investments in funds managed by members
of the ICG Group on an arms length basis.
Year ended Year ended
31 January 31 January
2018 2017
GBP'000 GBP'000
---------------------------------- ----------- -----------
ICG Europe Fund VI 234 299
ICG Europe Fund V 100 320
ICG Europe Fund 2006B 54 94
ICG Recovery Fund 2008B 59 -
ICG Strategic Secondaries Fund II 469 185
ICG Velocity Partners Co-investor 143 115
ICG Asia Pacific III 272 124
----------- -----------
1,331 1,137
----------- -----------
5) Taxation
In both the current and prior years the tax charge was lower
than the standard rate of corporation tax, principally due to the
Company's status as an investment trust, which means that capital
gains are not subject to corporation tax. The standard rate of
corporation tax in the UK changed from 20% to 19% with effect from
1 April 2017. Accordingly the Company's profits for the year ended
31 January 2018 are taxed at an effective rate of 19.16%. The
effect of this and other items affecting the tax charge is shown in
note 5(b) below.
Year ended Year ended
31 January 31 January
2018 2017
GBP'000 GBP'000
a) Analysis of charge in the year
Tax charge on items allocated to revenue 2,435 787
Tax charge on items relating to prior years - 397
Total tax charge allocated to revenue 2,435 1,184
Tax credit on items allocated to capital (2,294) (787)
----------- -----------
Corporation tax 141 397
----------- -----------
b) Factors affecting tax charge for the year
Profit on ordinary activities before tax 73,437 109,346
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of
19.16% (2017: 20%) 14,072 21,869
Effect of:
- net investment returns not subject to corporation tax (11,679) (21,637)
- dividends not subject to corporation tax (1,194) (526)
- current year management expenses (utilised)/not utilised (1,058) 294
- overseas tax suffered - 397
----------- -----------
Total tax charge 141 397
----------- -----------
The Company has no carried forward excess management expenses
(2017: GBP5.5m). There are no carried forward deferred tax assets
or liabilities (2017: nil). Due to the Company's status as an
investment trust, and the intention to continue meeting the
conditions required to obtain approval in the foreseeable future,
the Company has not provided deferred tax on any capital gains and
losses arising on the revaluation or disposal of investments. For
all investments the tax base is equal to the carrying amount.
The total tax charge in the prior year relates to the write off
of irrecoverable Italian withholding tax previously recognised on
the balance sheet.
6) Earnings per share
Year ended Year ended
31 January 31 January
2018 2017
------------------------------------------------ ----------- ------------
Revenue return per ordinary share 23.76p 8.13p
Capital return per ordinary share 81.80p 145.30p
Earnings per ordinary share (basic and diluted) 105.56p 153.43p
Revenue return per ordinary share is calculated by dividing the
revenue return attributable to equity shareholders of GBP16.5m
(2017: GBP5.8m) by the weighted average number of ordinary shares
outstanding during the year.
Capital return per ordinary share is calculated by dividing the
capital return attributable to equity shareholders of GBP56.8m
(2017: GBP103.2m) by the weighted average number of ordinary shares
outstanding during the year.
Basic and diluted earnings per ordinary share are calculated by
dividing the earnings attributable to equity shareholders GBP73.3m
(2017: GBP108.9m) by the weighted average number of ordinary shares
outstanding during the year.
The weighted average number of ordinary shares outstanding
(excluding those held in treasury) during the year was 69,435,737
(2017: 71,010,218). There were no potentially dilutive shares, such
as options or warrants, in either year.
7) Dividends
Year ended Year ended
31 January 31 January
2018 2017
GBP'000 GBP'000
--------------------------------------------------------------------------- ----------- -----------
Interim in respect of year ended 31 January 2017: 10.0p per share - 7,077
Final in respect of year ended 31 January 2017: 10.0p (PY: 6.0p) per share 6,960 4,280
Interim in respect of year ended 31 January 2018: 10.0p per share 6,936 -
----------- -----------
Total 13,896 11,357
----------- -----------
The Company paid an interim dividend of 5.0p per share in March
2018. The Board has proposed a final dividend of 6.0p per share
(totalling GBP4,155,723) in respect of the year ended 31 January
2018 which, if approved by shareholders, will be paid on 13 July
2018, to shareholders on the register of members at the close of
business on 22 June 2018.
8) Investments
The tables below analyse the movement in the carrying value of
the investment portfolio in the year. In accordance with accounting
standards, this note has been prepared on a fund-level basis rather
than an underlying investment basis.
A fund is considered to generate realised gains if it is more
than 85% drawn and has returned at least the amount invested by the
Company. All gains and losses arising from the underlying
investments of such funds are presented as realised. All gains and
losses in respect of other funds are presented as unrealised.
Direct investments are considered realised when they are
sold.
Investments are held by both the Company and through the
underlying subsidiary Partnerships. The subsidiary Partnerships
hold investments which are eligible for the co-investment incentive
scheme. An analysis of gains and losses on a looking-through legal
structure on an underlying investment basis is presented in the
Supplementary Information.
Subsidiary
Quoted Unquoted Undertakings Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------------------------- -------- --------- ------------- ---------
Cost at 1 February 2017 432 333,579 40,281 374,292
Unrealised appreciation at 1 February 2017 (68) 157,520 40,437 197,889
Valuation at 1 February 2017 364 491,099 80,718 572,181
Movements in the year:
Purchases at cost 1,983 97,976 11,029 110,988
Transfer of instrument to level 1 469 (469) - -
Sales
- capital proceeds (932) (165,874) - (166,806)
- realised gains and losses based on carrying value at previous balance
sheet date (69) (31,188) - (31,257)
Movement in unrealised appreciation (82) 86,818 4,645 91,381
----------------------------------------------------------------------- -------- --------- ------------- ---------
Valuation at 31 January 2018 1,733 478,362 96,392 576,487
----------------------------------------------------------------------- -------- --------- ------------- ---------
Cost at 31 January 2018 1,552 338,539 51,310 391,401
Unrealised appreciation at 31 January 2018 181 139,823 45,082 185,086
----------------------------------------------------------------------- -------- --------- ------------- ---------
Valuation at 31 January 2018 1,733 478,362 96,392 576,487
----------------------------------------------------------------------- -------- --------- ------------- ---------
Cost at 1 February 2016 - 264,466 28,184 292,650
Unrealised appreciation at 1 February 2016 - 92,473 28,984 121,457
Valuation at 1 February 2016 - 356,939 57,168 414,107
Movements in the year:
Purchases at cost 460 102,161 12,097 114,718
Sales
- capital proceeds (29) (61,809) - (61,838)
- realised gains and losses based on carrying value at previous balance
sheet date - 844 - 844
Movement in unrealised appreciation (67) 92,964 11,453 104,350
----------------------------------------------------------------------- -------- --------- ------------- ---------
Valuation at 31 January 2017 364 491,099 80,718 572,181
----------------------------------------------------------------------- -------- --------- ------------- ---------
Cost at 31 January 2017 432 333,579 40,281 374,292
Unrealised appreciation at 31 January 2017 (68) 157,520 40,437 197,889
----------------------------------------------------------------------- -------- --------- ------------- ---------
Valuation at 31 January 2017 364 491,099 80,718 572,181
----------------------------------------------------------------------- -------- --------- ------------- ---------
31 January 31 January
2018 2017
GBP'000 GBP'000
----------------------------------------------------------------------- ---------- ----------
Realised gains based on cost 72,927 28,762
Amounts recognised as unrealised in previous years (104,184) (27,918)
Realised gains based on carrying values at previous balance sheet date (31,257) 844
Increase in unrealised appreciation 91,381 104,350
Gains on investments 60,124 105,194
Related undertakings
At 31 January 2018, the Company held interests in three limited
partnership subsidiaries, ICG Enterprise Trust Limited Partnership,
ICG Enterprise Trust (2) Limited Partnership, and ICG Enterprise
Trust Co-investment Limited Partnership. The value of these
interests represented 94%, 70%, and 69% (2017: 89%, 70% and 100%)
respectively of the net assets of each partnership at the balance
sheet date. The registered address and principal place of business
of the partnerships is Juxon House, 100 St Paul's Churchyard,
London EC4M 8BU.
In addition the Company held an interest (including indirectly
through its subsidiaries) of more than 20% in the following
entities:
As at 31 January 2018
Investment Instrument % interest*
-------------------------------------------- ------------------------------ -----------
Cognito IQ Limited^ Preference shares 44.0%
Cognito IQ Limited^ Ordinary shares 36.1%
CSP Secondary Opportunities II Unit Trust** Limited partnership interests 59.7%
Graphite Capital Partners VI+ Limited partnership interests 20.8%
Graphite Capital Partners VII Top Up Plus+ Limited partnership interests 20.0%
Graphite Capital Partners VIII Top Up+ Limited partnership interests 41.1%
The Groucho Club Limited*** Ordinary shares 21.6%
The Laine Pub Company Limited**** Preference shares 42.6%
The Laine Pub Company Limited**** Ordinary shares 32.4%
As at 31 January 2017
Investment Instrument % interest*
-------------------------------------------- ------------------------------ -----------
Cognito IQ Limited^ Preference shares 43.7%
Cognito IQ Limited^ Ordinary shares 34.1%
CSP Secondary Opportunities II Unit Trust** Limited partnership interests 59.7%
Graphite Capital Partners VI+ Limited partnership interests 20.8%
Graphite Capital Partners VII Top Up Plus+ Limited partnership interests 20.0%
Graphite Capital Partners VIII Top Up+ Limited partnership interests 41.1%
Standard Brands (UK) Limited# Ordinary shares 65.8%
The Groucho Club Limited*** Ordinary shares 21.6%
The Laine Pub Company Limited**** Preference shares 42.6%
The Laine Pub Company Limited**** Ordinary shares 32.4%
* The percentage shown for limited partnership interests
represents the proportion of total commitments to the relevant
fund. The percentage shown for shares represents the proportion of
total shares in issue.
^ Address of principal place of business is Rivergate House,
Newbury Business Park, London Road, Newbury, United Kingdom, RG14
2PZ.
** Address of principal place of business is No 1 Seaton Place,
St Helier, Jersey JE4 8YJ.
+ Address of principal place of business is Berkeley Square
House, Berkeley Square, London, United Kingdom W1J 6BQ.
# Address of principal place of business is Cleeve Court, Cleeve Rd, Leatherhead KT22 7SD.
*** Address of principal place of business is 45 Dean Street,
London, England, W1D 4QB.
**** Address of principal place of business is Park House
Crawley Business Quarter, Manor Royal, Crawley, West Sussex, United
Kingdom, RH10 9AD.
These investments are not considered subsidiaries or associates
as the Company does not exert control or significant influence over
the activities of these companies/partnerships.
9) Receivables - current
31 January 31 January
2018 2017
GBP'000 GBP'000
------------------------------- ---------- ----------
Fund distribution receivable 6,095 -
Prepayments and accrued income 992 939
Subsidiary undertakings 3,323 1,445
---------- ----------
10,410 2,384
---------- ----------
As at 31 January 2018, prepayments and accrued income included
GBP0.5m (2017: GBP0.5m) of unamortised costs in relation to the
bank facility. Of this amount GBP0.3m (2017: GBP0.3m) is expected
to be amortised within 12 months from the Balance Sheet date.
10) Payables - current
31 January 31 January
2018 2017
GBP'000 GBP'000
--------------------------- ---------- ----------
Accruals 464 354
Corporation tax payable 141 -
Fund capital call payables 358 -
---------- ----------
963 354
---------- ----------
11) Share capital
Issued and
fully paid
Authorised Nominal Nominal
Equity share capital Number GBP'000 Number GBP'000
----------------------------------------------- ----------- ------------------ ---------- -----------
Balance at 31 January 2017 and 31 January 2018 120,000,000 12,000 72,913,000 7,292
All ordinary shares have a nominal value of 10.0p. At 31 January
2018, 72,913,000 shares had been allocated, called up and fully
paid. Of this total, the Company held 3,650,945 shares in treasury
(2017: 2,568,508) leaving 69,262,055 (2017: 70,344,492) shares
outstanding, all of which have equal voting rights. The market
value of the Company's ordinary shares at 31 March 1982 was
16p.
12) Net asset value per share
The net asset value per share is calculated on equity
attributable to equity holders of GBP664.3m (2017: GBP612.7m) and
on 69,262,055 (2017: 70,344,492) ordinary shares in issue at the
year end. There were no potentially dilutive ordinary shares, such
as options or warrants, at either year end. Calculated on both the
basic and diluted basis the net asset value per share was 959.1p
(2017: 871.0p).
13) Financial instruments and risk management
The Company is an investment company as defined by section 833
of the Companies Act 2006 and conducts its affairs so as to qualify
as an investment trust under the provisions of section 1158 of the
Corporation Tax Act 2010 ("Section 1158"). The Company's objective
is to provide shareholders with long term capital growth through
investment in unquoted companies, mostly through specialist funds
but also directly.
Investments in funds have anticipated lives of approximately ten
years. Direct investments are made with an anticipated holding
period of between three and five years. Investment agreements will,
however, usually provide that any loans advanced to investee
companies are for a longer period than this. The agreements will
usually provide for repayments to be made by instalments with
provision for full repayment on sale or flotation.
Financial risk management
The Company's activities expose it to a variety of financial
risks: market risk (comprising currency risk, interest rate risk
and price risk), investment risk, credit risk and liquidity risk.
The Company's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise
potential adverse effects on the Company's financial performance.
The Manager has overall responsibility for managing the risks and
the framework for monitoring and coordinating these risks. This is
monitored by the Board. The Company's financial risk management
objectives and processes used to manage these risks have not
changed from the previous period and the policies are set out
below:
Market risk
(i) Currency risk
The Company's investments are principally in the UK and
continental Europe and are primarily denominated in sterling and in
euros. There are also smaller amounts in US dollars and in other
European currencies. The Company is exposed to currency risk in
that movements in the value of sterling against these foreign
currencies will affect the net asset value and the cash required to
fund undrawn commitments. The Board regularly reviews the level of
foreign currency denominated assets and outstanding commitments in
the context of current market conditions and may decide to buy or
sell currency or put in place currency hedging arrangements.
The composition of the net assets of the Company by currency at
the year end is set out below:
Sterling Euro USD Other Total
31 January 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- -------- -------- -------- --------
Investments 266,602 219,281 83,700 6,904 576,487
Cash and cash equivalents and other net current assets 40,090 44,526 2,168 1,052 87,836
-------- -------- -------- -------- --------
306,692 263,807 85,868 7,956 664,323
------------------------------------------------------- -------- -------- -------- -------- --------
Sterling Euro USD Other Total
31 January 2017 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------- -------- -------- -------- -------- --------
Investments 274,454 223,854 66,694 7,179 572,181
Cash and cash equivalents and other net current assets 33,447 2,611 4,338 156 40,552
-------- -------- -------- -------- --------
307,901 226,465 71,032 7,335 612,733
-------- -------- -------- -------- --------
These figures are based on the currency of the location of the
underlying portfolio companies' headquarters.
The effect of a 25% increase or decrease in the sterling value
of the euro would be a fall and a rise of GBP51.0m and GBP51.3m in
the value of shareholders' equity at 31 January 2018 respectively
(2017: GBP36.5m and GBP36.3m based on 25% increase or decrease).
The effect of a 25% increase or decrease in the sterling value of
the euro on profit after tax would be a fall and a rise of GBP32.6m
and GBP77.6m (2017: fall and rise of GBP18.9m and GBP60.6m based on
25% movement).
The effect of a 25% increase or decrease in the sterling value
of the USD would be a fall and a rise of GBP27.8m and GBP29.3m in
the value of shareholders' equity at 31 January 2018 respectively
(2017: fall and a rise of GBP30.6m and GBP31.8m based on 25%
movement). The effect of a 25% increase or decrease in the sterling
value of the USD on profit after tax would be a fall and a rise of
GBP7.9m and GBP53m (2017: fall and a rise of GBP12.5m and GBP54.2m
based on 25% movement).
The percentages applied are based on market volatility in
exchange rates over recent periods.
(ii) Interest rate risk
The fair value of the Company's investments and cash balances
are not directly affected by changes in interest rates.
(iii) Price risk
The risk that the value of a financial instrument will change as
a result of changes to market prices is one that is fundamental to
the Company's objective, which is to provide long term capital
growth through investment in unquoted companies. The investment
portfolio is continually monitored to ensure an appropriate balance
of risk and reward in order to achieve the Company's objective. No
hedging of this risk is undertaken.
The Company is exposed to the risk of change in value of its
private equity investments. For all investments the market variable
is deemed to be the price itself. The table below shows the impact
of a 30% increase or decrease in the valuation of the investment
portfolio. The percentages applied are reasonable based on the
managers' expectation of potential changes in portfolio valuation
in light of volatility in the market.
31 January 2018 31 January 2017
Increase Decrease Increase Decrease
in variable in variable in variable in variable
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------- ------------ ------------ ------------ ------------
30% (2017: 30%) movement in the price of investments
Impact on profit after tax 202,759 (157,662) 199,156 (157,465)
Impact as a percentage of profit after tax 276.6% (215.1%) 182.8% (144.5%)
Impact on shareholders' equity 167,507 (169,018) 165,350 (168,413)
Impact as a percentage of shareholders' equity 25.2% (25.4%) 27.0% (27.5%)
Investment and credit risk
(i) Investment risk
Investment risk is the risk that the financial performance of
the companies in which ICG Enterprise invests either improves or
deteriorates, thereby affecting the value of that investment.
Investments in unquoted companies whether indirectly or directly
are by their nature subject to potential investment losses. The
investment portfolio is highly diversified.
(ii) Credit risk
The Company's exposure to credit risk arises principally from
its investment in cash deposits. The Company aims to invest the
majority of its liquid portfolio in assets which have low credit
risk. The Company's policy is to limit exposure to any one
investment to 15% of gross assets. This is regularly monitored by
the Manager as a part of its cash management process.
Cash is held on deposit with three UK banks and totalled
GBP78.4m (2017: GBP38.5m). Of this amount GBP47.8m was deposited at
Royal Bank of Scotland ("RBS"), which currently has a credit rating
of BAA3 from Moody's, and this represents the maximum exposure to
credit risk at the balance sheet date. No collateral is held by the
Company in respect of these amounts. None of the Company's cash
deposits were past due or impaired at 31 January 2018 (2017:
nil).
Liquidity risk
The Company has significant investments in unquoted companies
which are inherently illiquid. The Company also has substantial
undrawn commitments to funds, the great majority of which are
likely to be called over the next five years. The Company aims to
manage its affairs to ensure sufficient cash, other liquid assets
and undrawn borrowing facilities will be available to meet
contractual commitments when they are called and also seek to have
cash generally available to meet other short term financial needs.
All cash and cash equivalents are available on demand. The
Company's liquidity management policy involves projecting cash
flows and considering the level of liquidity necessary to meet
these.
The Company has access to committed bank facilities of a
headline GBP104m, which are structured as parallel sterling and
euro facilities of GBP50m and EUR61.7m (GBP54.0m). The facilities
are provided jointly by Lloyds and The Royal Bank of Scotland
("RBS"). Of the total facilities, the balance of GBP20m and
EUR23.6m will expire in March 2020 after being renewed in March
2017 on the following basis:
-- Upfront Cost: 90bps
-- Non-utilisation fees: 90bps
-- Margin: 300bps
The remaining balance of GBP30m and EUR38.1m will expire in
April 2019.
As at 31 January 2018 the Company's financial liabilities
amounted to GBP1.0m of payables (2017: GBP0.3m) which were due in
less than one year.
Capital risk management
The Company's capital is represented by its net assets, which
are managed to achieve the Company's investment objective. The
Company currently has no debt.
The Board can manage the capital structure directly since it has
taken the powers, which it is seeking to renew, to issue and
buy-back shares and it also determines dividend payments. The
Company is subject to externally imposed capital requirements with
respect to the obligation and ability to pay dividends by section
1159 Corporation Tax Act 2010 and by the Companies Act 2006,
respectively.
Total equity at 31 January 2018, the composition of which is
shown on the balance sheet was GBP664.3m (2017: GBP612.7m).
Fair values estimation
IFRS 7 requires disclosure of fair value measurements of
financial instruments categorised according to the following fair
value measurement hierarchy:
-- Quoted prices (unadjusted) in active markets for identical
assets or liabilities (level 1).
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
The valuation techniques applied to level 1 and level 3 assets
are described in note 3.
The sensitivity of the Company's investments to a change in
value is discussed on page 36.
The following table presents the assets that are measured at
fair value at 31 January 2018. The Company had no financial
liabilities measured at fair value at that date.
Level 1 Level 2 Level 3
GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- --------
Investments held at fair value
Unquoted investments - indirect - - 379,921
Unquoted investments - direct - - 98,441
Quoted investments - direct 1,733 - -
Subsidiary undertakings - - 96,392
------------------------------------- -------- -------- --------
Total investments held at fair value 1,733 - 574,754
------------------------------------- -------- -------- --------
The following table presents the assets that are measured at
fair value at 31 January 2017. The Company had no financial
liabilities measured at fair value at that date.
Level 1 Level 2 Level 3
GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- --------
Investments held at fair value
Unquoted investments - indirect - - 383,068
Unquoted investments - direct - - 108,031
Quoted investments - direct 364 - -
Subsidiary undertakings - - 80,718
------------------------------------- -------- -------- --------
Total investments held at fair value 364 - 571,817
------------------------------------- -------- -------- --------
All unquoted and quoted investments are valued at fair value in
accordance with IFRS 13.
The following tables present the changes in level 3 instruments
for the year to 31 January 2018.
Unquoted investments Unquoted investments
(indirect) at fair value (direct) at fair value
through profit or loss through profit or loss Subsidiary undertakings Total
31 January 2018 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------------------------- ------------------------- ------------------------- ---------
Opening balances 383,068 108,031 80,718 571,817
Additions 81,122 16,853 11,029 109,004
Disposals (128,941) (36,933) - (165,874)
Transfer of instrument to
level 1 - (469) - (469)
------------------------- ------------------------- ------------------------- ---------
Gains and losses
recognised in profit or
loss 44,672 10,959 4,645 60,276
------------------------- ------------------------- ------------------------- ---------
Closing balance 379,921 98,441 96,392 574,754
------------------------- ------------------------- ------------------------- ---------
Total (losses)/gains for
the year included in
income statement for
assets held at the end
of the reporting period (53,072) (7,277) 4,645 (55,704)
------------------------- ------------------------- ------------------------- ---------
The following tables present the changes in level 3 instruments
for the year to 31 January 2017.
Unquoted investments Unquoted investments
(indirect) at fair value (direct) at fair value
through profit or loss through profit or loss Subsidiary undertakings Total
31 January 2017 GBP'000 GBP'000 GBP'000 GBP'000
Opening balances 272,495 84,444 57,168 414,107
Additions 94,116 8,365 12,097 114,578
Disposals (49,920) (11,889) - (61,809)
Gains and losses
recognised in profit or
loss 66,377 27,111 11,453 104,941
------------------------- ------------------------- ------------------------- ---------
Closing balance 383,068 108,031 80,718 571,817
------------------------- ------------------------- ------------------------- ---------
Total gains for the year
included in income
statement for assets held
at the end of the
reporting
period 45,734 19,838 11,453 77,025
------------------------- ------------------------- ------------------------- ---------
14) Related Party Transactions
Significant transactions between the Company and its
subsidiaries are shown below:
Year ended Year ended
31 January 31 January
2018 2017
Subsidiary Nature of transaction GBP'000 GBP'000
------------------------------------------------- ----------------------------------------- ----------- -----------
ICG Enterprise Trust Limited Partnership Increase in amounts owed to subsidiaries 7,623 3,338
Income allocated 1,205 248
ICG Enterprise Trust (2) Limited Partnership Increase in amounts owed to subsidiaries 11,192 1,683
Income allocated 1,719 1,080
ICG Enterprise Trust Co - Investment Limited
Partnership Increase in amounts owed by subsidiaries 30,441 14,991
Income allocated 426 204
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.
Amounts owed by subsidiaries Amounts owed to subsidiaries
31 January 2017
Subsidiary 31 January 2018 GBP'000 31 January 2017 GBP'000 31 January 2018 GBP'000 GBP'000
-------------------------- ----------------------- ----------------------- ----------------------- ---------------
ICG Enterprise Trust
Limited Partnership - - 36,332 28,709
ICG Enterprise Trust (2)
Limited Partnership 36,939 36,939 14,136 2,944
ICG Enterprise Trust Co -
Investment Limited
Partnership 45,432 14,991 - -
A full list of related undertakings is presented in note 8.
Funds managed by the Company's Manager:
Year ended 31 January 2018 Year ended 31 January 2017
Remaining Fair Original Remaining Fair
Original commitment value commitment commitment value
Fund commitment GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------------------- ----------- -------- ----------- ----------- --------
ICG Europe Fund VI* 21,868 4,561 21,601 21,457 12,101 9,683
ICG Europe Fund V* 13,451 892 8,392 13,198 1,191 10,828
ICG Europe Fund 2006B* 9,204 2,104 7,531 19,312 2,065 7,163
ICG Recovery Fund 2008B* 10,497 8,135 2,821 - - -
ICG Strategic Secondaries Fund II** 24,664 16,176 12,032 19,879 14,005 6,873
ICG Velocity Partners Co-Investor** 10,570 2,012 10,703 11,927 2,270 10,994
ICG Asia Pacific III** 10,570 5,383 5,923 11,927 9,510 3,119
------------------------------------ ------------------- ----------- -------- ----------- ----------- --------
Total 100,824 39,263 69,003 97,700 41,142 48,660
------------------------------------ ------------------- ----------- -------- ----------- ----------- --------
* Euro denominated positions translated to sterling at spot rate
on 31 January 2017 and 31 January 2018.
** US dollar denominated positions translated to sterling at
spot rate on 31 January 2017 and 31 January 2018.
At the balance sheet date the Company has fully funded its share
of all commitments due to ICG managed funds in which it is
invested.
Glossary
Alternative Performance Measures ("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.
Buyout funds are funds that acquire controlling interests in
companies with a view towards later selling those companies or
taking them public.
CAGR or Compound Annual Growth Rate represents the annual growth
rate of an investment over a specified period of time longer than
one year.
Carried interest is equivalent to a performance fee, this
represents a share of the profits that will accrue to the
underlying private equity managers, after achievement of an agreed
preferred return.
Co-investment is a direct investment in a company alongside a
private equity fund.
Co-investment incentive scheme accrual represents the estimated
value of interests in the co-investment incentive scheme operated
by the Company. At both 31 January 2018 and 31 January 2017, the
accrual was estimated as the theoretical value of the interests if
the Portfolio had been sold at its carrying value at those
dates.
Commitment represents the amount of capital that each limited
partner agrees to contribute to the fund which can be drawn at the
discretion of the general partner.
Discount arises when the Investment trust shares trade at a
discount to NAV. In this circumstance, the price that an investor
pays or receives for a share would be less than the value
attributable to it by reference to the underlying assets. The
discount is the difference between the share price and the NAV,
expressed as a percentage of the NAV. For example, if the NAV was
100p and the share price was 90p, the discount would be 10%.
Drawdowns are amounts invested by the Company into funds when
called by underlying managers in respect of an existing
commitment.
EBITDA stands for earnings before interest, tax, depreciation
and amortisation, which is a widely used performance measure in the
private equity industry.
Enterprise value is the aggregate value of a company's entire
issued share capital and net debt.
FTSE All-Share Index Total return is the change in the level of
the FTSE All-Share Index, assuming that dividends are re-invested
on the day that they are paid.
Full realisations are 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 are those funds which are able to
make new platform investments under the terms of their fund
agreements, usually up to five years after the initial
commitment.
General partner ("GP") is the entity managing a private equity
fund that has been established as a limited partnership. This is
commonly referred to as the Manager.
Hedging is an investment technique designed to offset a
potential loss on one investment by purchasing a second investment
that is expected to perform in the opposite way.
High conviction comprises co-investments, ICG managed funds and
secondary fund investments.
Initial Public Offering ("IPO") is an offering by a company of
its share capital to the public with a view to seeking an admission
of its shares to a recognised stock exchange.
Internal Rate of Return ("IRR") is the annualised rate of return
received by an investor in a fund. It is calculated from cash drawn
from and returned to the investor together with the residual value
of the investment.
Last Twelve Months ("LTM") refers to the time frame of the
immediately preceding 12 months in reference to a financial metric
used to evaluate the company's performance.
Limited partner ("LP") is an institution or individual who
commits capital to a private equity fund established as a limited
partnership. These funds are generally protected from legal actions
and any losses beyond the original investment.
Limited Partnership includes one or more general partners, who
have responsibility for managing the business of the partnership
and have unlimited liability, and one or more limited partners, who
do not participate in the operation of the partnership and whose
liability is ordinarily capped at their capital and loan
contribution to the partnership. In typical fund structures, the
general partner receives a priority profit share ahead of
distributions to limited partners.
Management Buyin ("MBI") is a change of ownership, where an
incoming management team raises financial backing, normally a mix
of equity and debt, to acquire a business.
Management Buyout ("MBO") is a change of ownership, where the
incumbent management team raises financial backing, normally a mix
of equity and debt, to acquire a business it manages.
Net asset value per share ("NAV") is the value of the Company's
assets attributable to one Ordinary share. It is calculated by
dividing 'shareholders' funds' by the total number of Ordinary
shares in issue. Shareholders' funds are calculated by deducting
current and long-term liabilities, and any provision for
liabilities and charges, from the Company's total assets.
Net asset value per share Total Return is 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.
Net debt is calculated as the total short term and long-term
debt in a business, less cash and cash equivalents.
Overcommitment refers to where private equity fund investors
make commitments exceeding the amount of cash immediately available
for investment. 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 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 to assess the overall performance
of the Company and comparison with its peers.
The closest equivalent amount reported on the balance sheet is
"investments at fair value". A reconciliation of these two measures
is presented below.
Balances receivable
Cash held by from
Investments subsidiary subsidiary Co-investment
at fair value limited limited incentive scheme
GBPm as per balance sheet partnerships partnerships accrual Portfolio
---------------- --------------------- ---------------------- ------------------- --------------------- ---------
31 January 2018 576.5 - 1.7 22.5 600.7
31 January 2017 572.2 - 1.4 20.7 594.3
Post-crisis investments are defined as those completed in 2009
or later.
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.
Preferred return is the preferential rate of return on an
individual investment or a portfolio of investments, which is
typically 8% per annum.
Premium occurs when the share price is higher than the NAV and
investors would therefore be paying more than the value
attributable to the shares by reference to the underlying
assets.
Public to private ("P2P") The purchase of all of a listed
company's shares using a special-purpose vehicle funded with a
mixture of debt and unquoted equity.
Quoted company is any company whose shares are listed or traded
on a recognised stock exchange.
Realisation proceeds are 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.
Secondary investments occur when a Company purchases existing
private equity fund interests and commitments from an investor
seeking liquidity.
Share price Total Return is the change in the Company's share
price, assuming that dividends are re-invested on the day that they
are paid.
Total Ongoing Charges is explained in the Director's Report.
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.
Underlying valuation movement is the change in the valuation of
the Company's Portfolio, before the effect of currency
movements.
Undrawn commitments are commitments that have not yet been drawn
down (see definition of drawdowns).
Unquoted company is any company whose shares are not listed or
traded on a recognised stock exchange.
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 valuation gains in the reporting period in certain
instances due to timing differences.
Valuation multiples are earnings or revenue multiples applied in
valuing a business enterprise
The tables below set out the share price and the net asset value
per share growth figures for periods of one, three, five and ten
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 January 2018 1 year 3 year 5 year 10 year*
--------------------------------------------------- ------ ------ ------ --------
Net asset value per share 10.1% 38.0% 51.9% 84.7%
Share price 17.1% 42.3% 68.0% 72.6%
FTSE All-Share Index 7.2% 14.2% 25.9% 25.9%
Total Return performance in years to 31 January 2018 1 year 3 year 5 year 10 year*
----------------------------------------------------- ------ ------ ------ --------
Net asset value per share 12.5% 48.0% 67.8% 113.0%
Share price 20.1% 55.1% 89.7% 107.3%
FTSE All-Share Index 11.3% 27.4% 50.3% 80.9%
* As the Company changed its year end in 2010, the ten year
figures are for the 121 month period to 31 January 2018.
Venture capital refers to investing in companies at a point in
that company's life cycle that is either at the concept, start-up
or early stage of development.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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