ICG Enterprise Trust (previously Graphite Enterprise Trust) has announced its interim results for the six months ended 31 July 2016. The period is the first six months under the new manager ICG Alternative Investments. The company says that the net asset value, as at 31 July 2016, is £566m million or 798p per share (31 January 2016: 731p) and represents a 10.0% NAV total return for the period. The share price also recovered to 592 pence at 31 July 2016 (31 January 2016: 545p), delivering a Total Return of 9.8% in the six months (year ended 31 January 2016: 8.2%). The company has announced an interim ordinary dividend of 10.0p per share. This is a 100% increase on the 5.0 pence per share interim dividend declared in 2015. The company says that it anticipates paying a minimum dividend of 20p per share each year.
The company says that its profit for the period of £51m, equivalent to 72p per share, was driven both by strong growth in the Portfolio (+7.4%) and favourable movements in the foreign exchange rate (+5.3%). It says that the integration of the investment team into ICG has gone smoothly and they have begun to take advantage of being part of a much larger alternative asset management business. In particular, it says that it has benefited from ICG’s broader insight into and access of private market investment opportunities to inform certain investment decisions and make new investments. Since the start of the financial year the Company has made two primary fund commitments and two secondary investments in opportunities all originated through ICG, as well as four third-party primary fund commitments.
In terms of portfolio composition, the company says that its portfolio now stands at £470m, having received realisation proceeds of £45m and invested £30m during the period. The company says that primary fund investments account for £287m (61%) and secondary and co-investments £183m (39%). Of this, ICG originated investments represent £40m (8%). In terms of geographic composition, 44% of the Portfolio is invested in the UK, 38% in continental Europe and 18% in North America.
In terms of commitments, the company says that £54m was added during the period such that undrawn commitments now stand at £297m. However, the Company holds cash of £110m and undrawn debt facilities of £102m providing total available liquidity of £212m. As such, commitments exceed total liquidity by £84m, equivalent to 15% of the period end net asset value. The company says that this level remains consistent with their ‘cautious approach’ to managing the balance sheet.
In terms of portfolio developments, the manager say that, since moving to ICG, commitments have been made to two in-house funds: ICG Strategic Secondaries Fund II (ICGSS) and ICG Asia Pacific Fund III (the latter completing since the half year end). The managers sat that they believe these funds are highly complementary to their strategy and will generate attractive returns as well as enabling the Company to access co-investments from these strategies. They say that both funds broaden the geographic scope and increase the proportion of investments on which shareholders do not pay a management fee. The managers say that they have also completed an £8.3mco-investment alongside ICGSS in a US fund restructuring transaction and a £4.1m secondary purchase of an interest in ICG Europe V, a fund in which the Company first invested in 2011, (the latter completed since the period end).
The managers say that they are benefitting greatly from ICG’s insights into private equity managers and portfolio companies in Europe, US and Asia in their investment analysis and decision-making for both funds and co-investments. They say that they have a number of investment opportunities currently under review with third-party managers who have been introduced to them through the ICG network.
The Portfolio generated Realisation Proceeds of £45.5m in the period (23 full realisations), equivalent to 11% of its opening value. The managers say that full Realisations accounted for £25.4 million of proceeds received and these continued to be completed at Uplifts to the previous holding values, averaging 21% in the period. They say that this was similar to the level achieved last year of 22%. Investments made since the financial crisis generated valuation Uplifts of 26% whereas Pre-crisis Investments realised Uplifts of 11%. The managers say that post-crisis Investments also achieved a strong multiple of original cost of 2.5 times whereas the pre-crisis investments were realised for an average return multiple of 1.0 times cost, reflecting the relative underperformance of the remaining investments from these vintages.
The largest realisation in the first half was the disposal by Deutsche Beteiligungs AG of Spheros, the manufacturer of climate systems for buses, which generated proceeds of £8.2m including from a co-investment made alongside DBAG’s fund in 2011.
In terms of portfolio valuation, the company says that the top 30 companies were valued on an average multiple of 9.7 times last twelve months EBITDA at June 2016. The manager says that, while this has increased marginally since the start of the year, they continue to believe it is reasonable for the strong growth being achieved.
In terms of outlook, the managers say that the environment for realisations continues to be positive despite volatility in markets and geopolitical concerns. They say that this reflects the high levels of equity and debt funding available to both financial and trade buyers and that they expect the portfolio to generate further realisations in the second half which should underpin growth in value given the uplifts that tend to be achieved on sale. The managers also say that, in their view, with the Portfolio continuing to demonstrate strong profit growth and valuation multiples remaining significantly below the Index, the prospects for further growth in unrealised valuations remain positive.
ICG Enterprise trust benefits from portfolio growth and sterling depreciation : ICGT