ICG Enterprise performance driven by realisations and profit growth

ICG Enterprise Trust, formerly Graphite Enterprise Trust, has announced its annual results for the year ended 31 January 2016. During the year, the trust’s NAV per share increased by 8.2% to 731p, whilst its share price fell by 1.9% reflecting a widening of the discount during the period. This compares against a 4.6% fall in the FTSE All-Share benchmark during the same. The company says that its investment portfolio performed well, rising by 11.1% in value on a local currency basis, driven by growth in profits of the underlying companies. They also say that realisations remained very high and significantly in excess of the rate of new investments with the portfolio generating £56m of net cash in the year. Reflecting this, a combination of share buy-backs and the dividends (paid and proposed) will return £17m of cash for the year to shareholders. On 1 February 2016 ICG was appointed manager, with the Graphite Capital fund investment team transferring to ICG and the Company being renamed ICG Enterprise Trust plc. The investment strategy remains the same. The board say that ICG’s appointment provides a number of major benefits to the Company including: access to a wider range of investment opportunities, access to market intelligence, incremental secondary and co-investment opportunities, access to ICG’s infrastructure expertise in areas such as treasury, investor relations and information technology and a reduction in headline fund management fees and no fees on ICG funds. In terms of portfolio activity, the company says that the rate of investment in the year at £64m remained behind the rate of realisations at £120m as the fund managers took a cautious approach to new investments in the face of reduced mid-market transaction volumes and greater competition. They say that this impacted the level of fund drawdowns and co-investment opportunities whilst the secondary market for commitments to existing funds proved to be as competitive and the manager was increasingly selective during the year. At 31 January 2016, the Company had total assets of £533m of which the portfolio represented £428m with the balance substantially held in cash. Graphite Capital managed investments represented £107m, ICG managed investments £28m and third party investments £293m. Post-2008 financial crisis investments now comprise 77% of the portfolio with the 30 largest investments accounting for half of the portfolio. The company says that the valuation of the top 30 investments at 9.4 times EBITDA is at a substantial discount to the valuation of FTSE All-Share Index. A total of 64 new underlying companies were added to the portfolio compared with 74 in the year to January 2015. The largest new investment was in PetSmart, a retailer of pet products and services in North America which was acquired by BC Partners in March. The Company invested a total of £4.7m in PetSmart both through BC European Capital IX and in a co-investment alongside the fund. The managers say that new investments in the year were acquired at broadly similar multiples of EBITDA as last year. Secondary investments showed the steepest fall in the year (a result of a more competitive pricing environment). One secondary acquisition, of an interest in BC European Capital IX, was completed for £7.1 million, which compares with the £26.6 million invested in five secondaries last year. In terms of commitments, the level of new commitments made to funds in the year was substantially up on last year at £59m whilst drawdowns of existing commitments were £46m. Outstanding commitments increased to £254m at the period end. The company says that the Those outstanding commitments are matched by total liquidity of £201m, of which £104m was in cash and £97m covered by the undrawn bank facility. Commitments therefore exceed total liquidity by £53m or 10% of the year end net asset value. The company says that this level of overcommitment is consistent with our cautious approach to managing the balance sheet. In terms of outlook, the managers say that the environment for realisations remains favourable despite the volatility in quoted equity markets and some macro uncertainties. As such, they expect the portfolio to generate further realisations this year and that this should should drive growth in value given the uplifts generally achieved on sale. ICG Enterprise performance driven by realisations and profit growth : ICGT