RNS Number:0258J
Graphite Enterprise Trust PLC
20 March 2003
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For immediate release 20 March 2003
GRAPHITE ENTERPRISE TRUST PLC
UNAUDITED PRELIMINARY STATEMENT OF RESULTS
FOR THE YEAR TO 31 DECEMBER 2002
SUMMARY
* Net assets per share fell by 7.6%
* Closing shareholders' funds were #235.4 million
* The Board has proposed a dividend of 4.3p
FINANCIAL RESULTS
2002 2001 % Change
Net assets attributable to ordinary shareholders 259.2p 280.5p -7.6%
Share price 206.5p 228.5p -9.6%
FTSE All-Share Index 1,893.73 2,523.88 -25.0%
Dividend per share 4.3p 4.3p -
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John Sclater, Chairman, made the following statement on the results:
Performance
Against a backdrop of dramatic falls in stockmarkets worldwide, in relative terms Graphite Enterprise Trust (the
"Enterprise Trust") performed well in 2002. As both the net asset value per share and the share price fell it was by
no means a good year, but the falls were far less than those suffered in the UK market generally. The FTSE All-Share
Index, the long term benchmark against which we measure the performance of the Enterprise Trust, fell by 25.0% in
2002, while the FT Small Cap Index fell by 29.4%. By comparison, the net asset value per share of the Enterprise
Trust fell by 7.6% and its share price by 9.6%. The greater fall in the share price reflected a widening of the
discount of the share price to the underlying net asset value from 18.5% at the beginning of the year to 20.3% at the
end.
The Enterprise Trust is a medium to long term investor and it is appropriate that it should be judged by its medium
and long term performance. Over the last five turbulent years in the stockmarket its net asset value per share has
risen by 27.2% and its share price by 11.0% compared with a fall of 21.5% in the FTSE All-Share Index. The net asset
value per share rose by 382.2% from 53.8p to 259.2p, while the share price rose from 44.5p to 206.5p, an increase of
364.0%. These movements compare with a rise in the FTSE All Share Index of 38.9% and a rise in the UK Retail Prices
Index of 28.2% in the ten year period.
Portfolio
The fact that the fall in the Enterprise Trust's net asset value per share was relatively small was principally
attributable to three factors. First, there were substantial disposals from the quoted portfolio in the first half of
the year before the worst of the stockmarket collapse. Secondly, the unquoted portfolio performed relatively well in
the year. Thirdly, throughout the year the Trust held significant cash or near-cash balances (referred to from this
point as "liquid holdings").
In 2001 the size of the quoted portfolio was reduced by more than half and this was repeated in 2002. Part of this
reduction was caused by a 14.2% fall in valuations. While this was disappointing it was considerably less than the
fall in the markets generally. The great majority of the reduction came from disposals. At the end of the year the
quoted portfolio had a value of #23.0 million, or 9.6% of net asset value.
By contrast with the quoted portfolio, there were relatively few disposals from the unquoted portfolio, but there
were a number of additions. The unquoted portfolio stood up reasonably well in the difficult conditions of the year,
falling in value overall by 6.6%. The fall in the investment portfolio as a whole, aggregating the results from the
quoted and the unquoted investments, was 8.4%.
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As the Enterprise Trust held an average of around 35.9% of its assets in liquid holdings during the year, it was
partly protected from the full impact of the fall in the investment portfolio. This explains the overall reduction in
the net asset value per share of 7.6% by comparison with the fall in the investment portfolio of 8.4%.
Balance Sheet
The Enterprise Trust's balance sheet has been repositioned in the last three years. There has been a reduction in
quoted investments and uncommitted liquid holdings matched by an increase in the proportion of net assets invested in
or committed to unquoted investments. At the end of 1999, 47.0% of net assets were held in the quoted portfolio by
contrast with 9.6% three years later. In the same period the Enterprise Trust's uncommitted net liquid holdings fell
from 25.3% to 7.8% of net assets while investments in and commitments to the unquoted portfolios rose from 27.7% to
82.6% of net assets. The quoted holdings and uncommitted liquid holdings were the legacy of the highly successful
period of flotations and realisations of the late 1990s. We are pleased to have made further progress in redeploying
them into the unquoted portfolios.
At the end of the year the Enterprise Trust held #73.0 million in net liquid holdings by contrast with #91.8m a year
earlier. A total of #54.4 million of this amount was committed to future investments in the unquoted portfolios.
Statement of Total Return and Dividend
The total loss for the year was #17.5 million or 19.0p per share. This represented 6.7% of opening shareholders'
funds. The capital loss was #21.6 million or 23.5p per share, offset by net revenue attributable to shareholders of
#4.1 million or 4.5p per share.
The net revenue attributable to shareholders was almost the same as in the previous year. The largest movements in
the revenue account were an increase in interest income substantially offset by a fall in dividend income. Unlike
dividend income, interest income is taxable and this accounted for a significant increase in the tax charge for the
year. Expenses fell by 9.9% from #2.0 million to #1.8 million, mostly as a result of the lower management fee payable
to Graphite Capital following the recent falls in net asset value.
For a number of years we have emphasised to shareholders that net revenues, and in consequence the annual dividend,
are likely to fall as the Enterprise Trust's assets are redeployed into unquoted investments where income is
generally lower than from liquid and quoted holdings. This remains the case, although with the net revenue unchanged
in 2002 the Board has decided to recommend an unchanged dividend of 4.3p per share. If the dividend is reduced in
future years it should be possible to smooth the decline by using the Enterprise Trust's distributable reserves which
will represent 6.3p per share after the payment of this year's dividend.
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Share Buy Backs
Since the Annual General Meeting in 2000 the Enterprise Trust has had shareholders' authority to buy back its own
shares. In 2002 we followed a policy of buying back shares when they were available in the market in reasonable
volumes and at a high discount to net assets, with the purpose of enhancing shareholder returns while maintaining
sufficient liquidity to be flexible in making new investments. We bought back a total of 2.7 million shares for a
total cost of #5.5 million and an average price of 202.7p. The average discount was 26.5%. These purchases enhanced
the net asset value per share by 1.6p in 2002. To date we have bought back no further shares in the current year.
Outlook
In the last nine months Graphite Capital has experienced a busy period for dealflow and this has been reflected in an
increased flow of new investments into the unquoted portfolio. Over the same period we have seen an increase in
demand for specialist private equity funds, particularly from fund of funds operators, together with a fall in supply
from high quality managers caused primarily by slower investment rates in difficult markets. It is likely that fewer
commitments to third party funds will be made while we judge that the market is out of balance.
Despite the higher recent rate of investment, dealflow remains unpredictable in uncertain markets. There is currently
no sign that this will change until economic prospects and the international outlook, particularly concerning Iraq,
are clearer. As ever, our aim in making new investments will be to maintain a consistently high quality, while
seeking to ensure that the Enterprise Trust has a reasonable liquidity balance over the medium term. In the meantime
we do not expect to see a strong flow of disposals. As often happens in uncertain times, the new issue market is
effectively closed to small and medium-sized companies and there are few enthusiastic trade purchasers in evidence.
We have the patience and flexibility to be in no hurry to sell investments, preferring to work on developing them
through this uncertain period with a view to disposal when confidence returns.
For further information, please contact:
Rod Richards / William Eccles Tel: 020 7825 5300
Graphite Capital
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GRAPHITE ENTERPRISE TRUST PLC
Preliminary Statement (unaudited) for the year ended 31 December 2002
CONSOLIDATED ASSETS
At 31 December
2002 2001
#'000s #'000s
Investments listed in Great Britain 21,624 49,690
Investments listed outside Great Britain 283 352
Unlisted investments at directors' valuation 144,410 123,699
Net current assets 73,012 91,773
Total assets less current liabilities 239,329 265,514
Minority interests (3,931) (3,247)
Net assets attributable to ordinary shareholders 235,398 262,267
CONSOLIDATED STATEMENT OF TOTAL RETURN (INCORPORATING THE REVENUE ACCOUNT)
For the year ended 31 December
2002 2001
Revenue Capital Total Revenue Capital Total
#'000s #'000s #'000s #'000s #'000s #'000s
Gains and losses on investments - (18,514) (18,514) - (40,624) (40,624)
Income 7,408 - 7,408 6,571 - 6,571
Investment management fee (1,096) (3,287) (4,383) (1,182) (3,546) (4,728)
Other expenses (697) 461 (236) (812) (276) (1,088)
Net return before finance costs and tax 5,615 (21,340) (15,725) 4,577 (44,446) (39,869)
Interest payable and similar charges (8) - (8) (5) - (5)
Return on ordinary activities before tax 5,607 (21,340) (15,733) 4,572 (44,446) (39,874)
Tax on ordinary activities (1,488) 1,488 - (456) 456 -
Return on ordinary activities after tax 4,119 (19,852) (15,733) 4,116 (43,990) (39,874)
Minority interests - (1,760) (1,760) - (2,553) (2,553)
Return attributable to equity shareholders 4,119 (21,612) (17,493) 4,116 (46,543) (42,427)
Dividends in respect of ordinary shares (3,904) - (3,904) (4,021) - (4,021)
(equity)
Transfer to/(from) reserves 215 (21,612) (21,397) 95 (46,543) (46,448)
Return per ordinary share 4.47p (23.46p) (18.99p) 4.38p (49.50p) (45.12p)
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2002 2001
Net cash (outflow)/inflow from operating activities (515) 318
Net cash outflow from servicing of finance (7) (5)
Net cash inflow from tax 173 -
Net cash (outflow)/inflow from investing activities (14,754) 105,892
Equity dividends paid (4,021) (4,044)
Net cash outflow from movement in liquid resources (14,490) (45,000)
Net cash outflow from financing (7,690) (3,398)
(Decrease)/increase in cash (41,304) 53,763
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The Directors propose a dividend of 4.3p (2001 - 4.3p) per share payable on 11 June 2003 to shareholders registered
on 16 May 2003.
The Annual General Meeting will be held at 3.30 p.m. on 4 June 2003 at The Richmond Room, The Washington Mayfair
Hotel, 5/7 Curzon Street, London W1. The registered office of the Company is 4th Floor, Berkeley Square House,
Berkeley Square, London W1J 6BQ.
The above financial information comprises non-statutory accounts within the meaning of Section 240 of the Companies
Act 1985. The financial information for the year ended 31 December 2001 has been extracted from published accounts
for the year ended 31 December 2001 which have been delivered to the Registrar of Companies and on which the report
of the auditors was unqualified. For the year ended 31 December 2002 copies of the audited Report and Accounts will
be posted to shareholders on or about 8 May 2003 and copies may be obtained during normal business hours from the
Company's registered office thereafter.
By order of the Board
Graphite Capital Management Limited
Secretary
20 March 2003
END
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