9th Mar 2007 07:00
Press release
For immediate release on Friday 9th
March 2007 Candover Investments plc
Preliminary results for the year ended 31st December, 2006
Financial highlights:
* Net assets per share increased by 17.8% over the 12 months to 31st December
2006, after adjusting for the return of cash of ‚£100 million in May 2006.
FTSE All-Share Index increased 13.2% over the same period
* Net assets per share were 1503p, compared to adjusted net assets per share
of 1276p at 31st December, 2005
* Total net assets of ‚£328.5 million compared to adjusted net assets of ‚£
278.9 million at 31st December, 2005 * Profits before tax of ‚£20.6 million (2005: ‚£16.5 million) * Total dividend per share increased by 11.3% to 54.0p (2005: 48.5p)
* Ten year compound growth in net assets per share of 12.1% per annum; FTSE
All-Share
Index growth over the same period of 4.8%
Operating highlights:
* Invested ‚£96.1 million in the year, of which ‚£89.0 million was invested
alongside the 2005 Fund in four new investments - Get, EurotaxGlass's
International, DX Services and Secure Mail Services, and Hilding Anders
* Two new investments announced since the period end - Ferretti and Parques
Reunidos
* Realisations and refinancings generated ‚£48.9 million of proceeds during
the year * Full exits were achieved from Kabel Deutschland and Vestolit. Acertec listed on AIM
* Partial exit achieved from Vetco since the year end. Vetco has now returned
3.4x the original investment * New offices opened in Milan and Madrid * 13 new investment executives appointed
Gerry Grimstone, Chairman of Candover Investments plc, commented:
"Candover enters 2007 in a strong position after a year of significant development. We have made investments in six large European businesses, we have expanded our European team which now numbers 38 people, and we have opened new offices in Milan and Madrid.
"Being one of the very few major quoted European pure buyout firms givesCandover particular advantages in terms of status, continuity, governance, andfinancial flexibility. We intend to maintain our position as one of the leadingpan-European private equity houses, and we will continue as a cornerstoneinvestor in any future funds raised by Candover. We strongly believe that thisis the best way to continue to deliver superior returns to our shareholders."
Ends.
Candover means Candover Investments plc and / or one or more of its
subsidiaries, including Candover Partners Limited as General Partner of the Candover 1997 and 2001 Funds and as Manager of the Candover 2005 Fund.
For further information, please contact:
Gerry Grimstone +44 207 489 9848
Chairman, Candover Investments plc
Colin Buffin +44 207 489 9848
Managing Director, Candover Partners
Limited Julie Foster +44 207 353 4200 Tulchan Communications Chairman's statement
Candover has continued to make excellent progress in a highly competitive market. We have further consolidated our position as one of the leading Euro- pean buyout houses.
At the conclusion of my first year as Chairman, I am pleased to report thatCandover enters 2007 in a strong position with a solid foundation for futuredevelopment. Our European network has been extended and we have significantlyincreased our skill base.This year's report has a new look, and we have deliberately tried to make itmore readable and informative. It is one of the results of a wide-rangingcommunications review that we have conducted over the past few months intendedto make our business more accessible to our shareholders, the investors in ourfunds, and other interested parties.
Our performance
Successful realisations and our desire to move towards a more efficient balancesheet allowed us to return ‚£100 million of cash to shareholders. Our year-endcash balance net of borrowings was ‚£29.7 million as against ‚£189.4 million at the end of the previous year. The more active use of our balance sheet that we have already signalled might, depending on market conditions, lead us to be geared from time to time, but we do not expect any net gearing to exceed 20% of our net assets over the investment cycle.Details of our financial performance are set out in the financial review but Iam pleased to report that our net assets per share increased by 17.8%, afteradjusting for the return of cash to shareholders, compared to a 13.2% increasein the FTSE All-Share Index over the same period. Profits before tax increasedto ‚£20.6 million compared to ‚£16.5 million last year.
We invested ‚£96.1 million in the year of which ‚£89.0 million was invested alongside the 2005 Fund in four new investments, namely the buyouts of the Norwegian cable company Get; the Swiss based automotive data intelligence group EurotaxGlass's; the UK postal service DX Services together with Secure Mail Services (SMS); and the Swedish business Hilding Anders, which manufactures beds and mattresses throughout Europe. We sold our investments in Kabel Deutschland and Vestolit, and Acertec was listed on AIM.
Realisations and refinancings generated ‚£48.9 million of proceeds during the year.
Since the year-end, we have purchased the Italian yacht manufacturer Ferretti, and we have announced the buyout of Parques Reunidos, a Spanish theme park operator. A partial exit from Vetco International has also been completed, generating a cash return of 3.4 times our original investment.
Full details of our investment and realisation activity can be found in the operational review.
Our environment
Unusually, private equity has been much in the public eye as of late and theindustry is experiencing a far greater degree of scrutiny than ever before. TheHouse of Commons Treasury Select Committee has launched an inquiry into privateequity funds. In addition, The British Venture Capital Association (BVCA) hasrecently announced a wide-ranging consultation process with a view to producinga voluntary code addressing the transparency of the industry and levels ofdisclosure. We welcome these initiatives and intend to play a full part in thedebate. Candover, because of its listed status, already makes much greaterpublic disclosure regarding its investments than most private equity firms. Wewill review this disclosure in the context of the BVCA's recommendations whenthese become available.Although market conditions have been buoyant in the private equity world, itremains a very competitive environment. As usual, therefore, it has beenimportant to maintain investment discipline. However, Candover has a long trackrecord of investing through market cycles and over the past 27 years ourreturns have been remarkably consistent.
Our people
I noted in my interim statement that Stephen Curran had retired as Chairman ofCandover, and that Doug Fairservice had stepped down from the Board. I wouldlike to repeat my thanks to them for the dedicated service that they gaveCandover over 25 and 22 years respectively. Our Board is well-resourced, but inthe period ahead, the passage of time will lead to some natural refreshing.Various specialist roles have been created in Candover Partners during 2006,and we have been fortunate in recruiting some very high quality people to carrythem out. Deal-sourcing, and ensuring that Candover-backed management teams getthe right support in the post-deal phase, have both been given an enhancedpriority. We have also strengthened our pan-European deal team: eightexecutives joined at director and investment manager level in 2006. We now have38 professionals based in our five European offices, which equates to a 50 percent increase since 2004. New offices have been opened in Milan and Madrid.
There will be more additions to the team going forward, but we feel we are now broadly at the right level to support the next phase in our development.
Dividends
The board is recommending a final dividend of 36.0p per share (32.0p in 2005),making a dividend payable for the year of 54.0p per share (48.5p in 2005), anincrease of 11.3%. We expect to maintain a progressive dividend policy but thiswill depend, of course, on the underlying revenue that is generated by ourinvestments.
Outlook
Being one of the very few major quoted European pure buyout firms givesCandover particular advantages in terms of status, continuity, governance, andfinancial flexibility. We intend to maintain our position as one of the leadingpan-European private equity houses, and we will continue as a cornerstoneinvestor in any future funds raised by Candover. We strongly believe that thisis the best way to continue to deliver superior returns to our shareholders.The performance of the Candover portfolio continues to be satisfactory, and weexpect this to allow us to maintain competitive and consistent returns for
theforeseeable future.G E GrimstoneChairman9th March, 2007Operational reviewEuropean buyouts for the full year reached ¢â€š¬170 billion, 42 per cent up on2005. The market has more than doubled in size in the past two years. Largerdeals have driven much of this growth.
During 2006 our European network generated a number of interesting opportunities. Candover participated in four new investments and one significant follow-on investment. It also made a number of smaller follow-on investments. Our total investments for the year amounted to ‚£96.1 million.
New investments
The 2005 Fund focuses on European buyouts in the ¢â€š¬500 million to ¢â€š¬1,500 millionrange. The Fund's first investment, Get (formerly known as UPC Norway) wasacquired from Liberty Global in January 2006. Candover invested ‚£16.0 millionand the 2005 Fund invested ‚£96.6 million. This triple play cable operator(broadband, television and telephony) has a loyal customer base and a dominantshare of its local market.In June, Candover invested ‚£17.4 million, alongside a commitment of ‚£105.5million from the 2005 Fund, to acquire EurotaxGlass's, a pan-European supplierof automotive intelligence.In September, Candover invested ‚£28.2 million alongside a 2005 Fund investmentof ‚£168.9 million, to secure the merged business of DX Services and SMS. Bothcompanies are long-term licence holders in the UK's liberalised postal servicesmarket. The combined business is now the UK's leading private mail company.The year ended with the purchase of Swedish bed and mattress manufacturerHilding Anders, which owns popular brand names in twelve European countries.Its management team plans to expand organically and through acquisition.Candover invested ‚£27.4 million and the 2005 Fund invested ‚£165.2 million toacquire this business.Since the year-end there have been two further transactions. Candover invested‚£32.8 million, alongside the 2005 Fund, in the luxury yacht manufacturerFerretti and committed a further ‚£18.8 million for European theme park operatorParques Reunidos. The 2005 Fund is now 45% committed.
Other investments
Candover invested an additional ‚£2.5 million in Qioptiq, alongside ‚£19.2 million provided by the 2001 Fund, to part-fund its ¢â€š¬120 million acquisition of German photonics specialist Linos.
Candover and the 2001 Fund made smaller follow-on investments of ‚£1.7 million in Equity Trust and ‚£0.5 million in ALcontrol. Candover also issued minor follow-on commitments to a French mid-market buyout fund and two mezzanine funds totalling ‚£4.4 million.
Realisations
Candover and its managed funds achieved realisation proceeds totalling ‚£289.7 million during the year; Candover's share was ‚£48.9 million.
In February, we disposed of our holding in Kabel Deutschland (KDG). Thisgenerated proceeds of ‚£3.7 million for Candover and ‚£29.1 million for the 2001Fund, bringing KDG's overall investment multiple to 3.3 times the originalinvestment. Vestolit was sold to SVP Partners in November. In addition, Acerteclisted on AIM in May, achieving a partial exit for Candover and the 1997 Fund.There were some significant refinancings during the year. Bureau van Dijkreturned a third of its original investment. The Wood Mackenzie refinancingreturned the entire original investment. Springer completed its thirdrefinancing, which led to proceeds of ‚£7.6 million for Candover and ‚£64.8million for the 2001 Fund. The academic publisher has achieved strong earningsgrowth since its acquisition in 2003; it has already returned cash equivalentto 1.6 times the original investment.Since the year end, a partial exit has been achieved from Vetco Internationalthrough the sale of its subsidiary, Vetco Gray. The sale resulted in proceedsof ‚£14.3 million for Candover and ‚£131.5 million for the 2001 Fund. Includingproceeds from previous refinancings, Vetco has returned cash equivalent to 3.4times the original investment.The 1997 Fund has one remaining investment (Acertec) while the 2001 Fund hasfully realised two out of its 16 investments and partially realised a furthersix.Outlook
With our enhanced team, we have built a strong European deal pipeline. Themarket environment remains active but the current high levels of leverage doesimpact the pricing of deals. As a result, our team will continue its successfulpolicy of selecting high quality investments and working closely with investeecompanies. This should enable us to ensure that performance is in line with
expectations.C J Buffin & M S GumiennyManaging Directors9th March, 2007
20 largest investments as at 31st December, 2006
Investment Geography Date of Cost of Directors' Effective % of Basis of Dividends Year Sales Earnings1
in- in- valuation equity Candover's valu- received end vestment vestment interest net ation (fully di assets ‚£000 luted) ‚£000 Gala Coral UK Mar 2003 24,775 31,977 1.8% 9.7% Multiple - Sept ‚£1,226.7m ‚£394.5m Retail gaming / of 06 Oct 2005 earnings DX SMS UK Sept 28,073 28,073 9.4% 8.5% Cost - See See note See note Mail services 2006 note 2 2 2 Hilding Anders Sweden Dec 2006 27,418 27,656 7.8% 8.4% Cost - See See note See note Bed note 2 2 manufacturer 2 Springer Germany Jan/Sept 573 21,383 4.0% 6.5% Multiple - Dec ¢â€š¬837.7m ¢â€š¬231.2m Science + 2003 of 05 Business Media earnings Academic publisher EurotaxGlass's SwitzerlandJun 2006 17,397 17,039 9.1% 5.2% Cost - See See note See note Automotive note 2 2 data 2 intelligence Vetco Interna UK Jul 2004 61 15,917 2.5% 4.8% Sale pro - Dec $2,491.2m $156.1m tional ceeds 05 Oil & gas and services multiple of earnings Get Norway Jan 2006 15,997 15,666 9.4% 4.8% Cost - See See note See note Cable TV note 2 2 2 Dakota, US Sept 888 15,464 8.5% 4.7% Multiple - See See note See note Minnesota 1986 of note 3 3 & Eastern earnings 3 Railroad Corporation Railroads Thule Sweden Dec 2004 15,579 15,155 6.7% 4.6% Multiple - Dec SEK SEK Sports utility of 05 3,160.1m 461.1m transportation earnings ALcontrol UK Dec 2004 12,902 12,579 6.8% 3.8% Multiple - Mar ‚£101.2m ‚£17.6m Group of 06 Holdings earnings Laboratory testing Qioptiq UK Dec 2005 9,729 10,535 9.6% 3.2% Multiple - Dec $171.5m $33.9m Optical of 05 engineering earnings Innovia Films UK Sept 9,913 10,038 8.0% 3.1% Multiple - Dec ‚£374.0m ‚£44.6m Speciality 2004 of 05 film earnings
Bureau van Netherlands Nov 2004 7,788 9,234 6.3% 2.8%
Multiple - Dec ¢â€š¬93.4m ¢â€š¬35.2m Dijk of 05 Electronic earnings Publishing Electronic publishing Aspen Insur US Jun 2002 6,814 9,177 0.9% 2.8% Market ‚£0.2m Dec $1,676.2m $487.3m ance price 05 Reinsurance Wellstream UK Mar 2003 5,496 8,459 7.5% 2.6% Multiple - Dec ‚£90.1m ‚£9.8m Oil & gas of 05 pipeline earnings
Investment Geography Date of in Cost of in Directors' Effective % of Basis of Dividends Year Sales Earnings1
vestment vestment valuation equity Candover's valuation received end interest net assets (fully di ‚£000 ‚£000 luted) Equity UK May 2003 6,673 6,418 5.4% 2.0% Multiple - Dec ¢â€š¬80.0m ¢â€š¬18.1m Trust Hold of 05 ings earnings Trust services
Ciclad 3 France Apr 2000 ‚£nil 5,609 NA 1.7%
Multiple - See See See note French of note note 4 4 buyouts earnings 4 Ontex Belgium Jan 2003 17,163 4,453 4.4% 1.4% Multiple - Dec ¢â€š¬ ¢â€š¬105.9m Hygienic of 05 924.5m disposables earnings Wood Macke UK Jul 2005 82 4,377 4.1% 1.3% Multiple - Dec ‚£49.3m ‚£14.1m nzie of 05 Energy earnings research ICG UK Jul 2000 3,682 3,738 NA 1.1% Multiple - See See See note Mezzanine of note note 4 4 Fund 2000 earnings 4 Mezzanine fund
1 Earnings figures are taken from the portfolio company's most recent audited
accounts or financial statements filed with regulatory bodies. The figures
shown are the total earnings on ordinary activities before exceptional items,
depreciation, goodwill amortisation, interest and tax for the year.
2 Audited accounts for the period since acquisition are not yet available.
3 Statutory audited accounts not prepared in accordance with local regulations.
4 Investment in a fund, sales and earnings figures not relevant.
Financial review
Net asset value
As at 31st December, 2006, the net assets attributable to the ordinary shareswere ‚£328.5 million, compared to adjusted net assets of ‚£278.9 million at 31stDecember, 2005.The movement in net assets over the period is mainly due to the return of cashof ‚£101.4 million (inclusive of costs) to shareholders, net realised gains overprior valuation of ‚£15.3 million, a net increase of ‚£39.6 million on therevaluation of investments, reflecting the maturing of our investmentsalongside the Candover 2001 Fund, plus other movements.
Net asset value per share
As at 31st December, 2006, net assets per share were 1503p compared to adjustednet assets per share of 1276p at 31st December, 2005, and 1372p at 30th June,2006. The increase in net assets over the 12 months to 31st December, 2006 of17.8% compares with an increase of 13.2% in the FTSE All-Share Index over thesame period. The increase in adjusted net assets per share over the six monthsto 31st December, 2006 was 9.5% compared to an increase in the FTSE All-ShareIndex over the same period of 8.6%.The compound growth in net assets on a five and ten year basis was 12.0% and12.1% respectively, compared to increases in the FTSE All-Share Index of 5.0%and 4.8% respectively over the same period.
Profits before tax
Profits before tax for the year were ‚£20.6 million, compared with ‚£16.5 millionfor the 12 months to 31st December, 2005. The increase in profit was mainly dueto increased income from investments alongside the Candover funds, with thegrowth in management fees having been offset by the growth in the investmentteam to enhance our investment approach and returns.
Valuation of investments
The valuation of financial investments at 31st December, 2006 was ‚£295.3million (2005: ‚£187.9 million). This valuation of ‚£295.3 million was calculatedhaving taken into account new investments, net of realisations, amounting to ‚£67.8 million, and a net increase of ‚£39.6 million in the valuation of ourinvestments.The net increase in the valuation of our investments comprised upward movementsof ‚£42.0 million and downward adjustments of ‚£2.4 million mainly due tocurrency movements. The increase in valuations reflects the maturing of theinvestments alongside the Candover 2001 Fund, which have shown growth inprofitability since acquisition, with the average age of investments alongsidethat fund now 38 months. Due to the increased value of the investments in theCandover 2001 Fund, we have made an initial recognition of the value of thecarried interest in that fund of ‚£8.5 million.
Return of cash
On 8th May, 2006 shareholders voted to return ‚£100 million, and an issue of Band C preference shares took place on 9th May, 2006. The subsequent redemptionor repurchase of these shares resulted in the return of 457p per ordinary shareto shareholders. As a result of the return of cash, Candover's net asset valueand share price were reduced proportionally.
Cash position
Cash and liquid assets, net of loans of ‚£33.7 million, totalled ‚£29.7 million(2005: ‚£189.4 million) at the year end, representing 9.0% of our net assets(2005: 49.8%). This decrease was mainly due to the return of cash toshareholders, combined with net investment outflows arising from our commitmentto the Candover 2005 Fund, offset by Candover 2001 Fund investments maturingfor realisation.
Listed shares at the year end totalled ‚£11.3 million (2005: ‚£9.4 million), representing 3.4% of our net assets (2005: 2.5%).
Following the return of cash during the year, we have significantly reduced our cash balances below historical levels, thus reducing the impact of the cash drag.
Dividends
At the half year the board increased the interim dividend by 9.1% from 16.5pper share to 18.0p per share. The board has decided to pay a final dividend of36.0p per share (32.0p per share for 2005), making a dividend payable for theyear of 54.0p per share against 48.5p for the previous year, an increase of11.3%. Payment of the dividend will be made on 25th May, 2007 to shareholderson the register at 27th April, 2007.
Group income statement
for the year ended 31st December, 2006
Unaudited Year to 31st December, Year to 31st December, 2006 2005 Revenue Capital Total* Revenue Capital Total* ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 Gains on financial investments and cash equivalents at fair value through profit and loss Realised gains and - 14,249 14,249 - 15,220 15,220losses Unrealised gains and - 38,029 38,029 - 47,810 47,810losses - 52,278 52,278 - 63,030 63,030 Revenue Management fees from 39,454 - 39,454 29,964 - 29,964managed funds Investment and other 21,007 - 21,007 14,700 - 14,700income Total revenue 60,461 - 60,461 44,664 - 44,664 Administrative ex (39,841) (8,315) (48,156) (28,029) (7,681) (35,710)penses Profit before 20,620 43,963 64,583 16,635 55,349 71,984finance costs and taxation Interest payable and (12) (222) (234) (161) - (161)similar charges Profit before 20,608 43,741 64,349 16,474 55,349 71,823taxation Taxation (6,231) 2,560 (3,671) (4,841) 2,304 (2,537) Profit attributable 14,377 46,301 60,678 11,633 57,653 69,286to equity share holders Earnings per ordinary share Basic and diluted 65.8p 211.8p 277.6p 53.2p 263.8p 317.0p
A final dividend in respect of 2006 of 36p per ordinary share, amounting to a total dividend of ‚£7,868,000 is proposed.
This dividend is not reflected in these financial statements.
\* The total column represents the income statement under IFRS.
Group statement of recognised income and expensesfor the year ended 31st December, 2006Unaudited Year to Year to 31st 31st December, December, 2006 2005 ‚£000 ‚£000 Profit attributable to equity 60,678 69,286shareholders Exchange differences on (11) (8)translation of foreign operations Total recognised income and ex- 60,667 69,278penses Group balance sheetat 31st December, 2006Unaudited 31st December, 31st December, 2006 2005 ‚£000 ‚£000 ‚£000 ‚£000 Non-current assets Property, plant and 1,679 934equipment Financial investments designated at fair value through profit and loss Investee companies 284,336 184,048 Other financial investments 10,927 3,827 295,263 187,875 Trade and other receivables 1,141 4,820 Deferred tax asset 4,737 2,289 302,820 195,918 Current assets Trade and other receivables 29,616 20,545 Cash and cash equivalents 63,437 189,392 93,053 209,937 Current liabilities Trade and other payables (29,655) (19,971) Loans and borrowings (33,735) - Current tax liabilities (3,962) (5,623) (67,352) (25,594) Net current assets 25,701 184,343 Net assets 328,521 380,261 Equity attributable to equity holders Called up share capital 5,464 5,464 Share premium account 1,232 1,451 Translation reserve (19) (8) Capital redemption reserve 499 290 Capital reserve - realised 226,894 313,214 Capital reserve - 56,427 25,170unrealised Revenue reserve 38,024 34,680 Total equity 328,521 380,261 Net asset value per share 1503p 1740p Net asset value per share 1503p 1276p(adjusted for return of cash) Group cash flow statementfor the year ended 31st December, 2006Unaudited 31st December, 31st December, 2006 2005 ‚£000 ‚£000 ‚£000 ‚£000 Cash flow from operating activities Cash flow from operations 12,261 8,165 Interest paid (293) (47) Tax paid (7,780) (8,968)Net cash from operating 4,188 (850)activities Cash flows from investing activities Purchase of property, plant (1,405) (253) and equipment Purchase of financial (96,144) (41,727) investments Sale of property, plant and 12 9 equipment Sale of financial investments 43,756 116,309 Net cash from investing (53,781) 74,338activities Cash flows from financing activities Equity dividends paid (11,008) (9,945) Return of cash (96,367) - Loans and borrowings 33,735 - Net cash from financing (73,640) (9,945)activities (Decrease)/increase in cash (123,233) 63,543and cash equivalents Opening cash and cash 189,392 124,807equivalents Effect of exchange rates and (2,722) 1,042revaluation on cash and cash equivalents Closing cash and cash 63,437 189,392equivalents
Notes to the financial statements
Note 1
During the year the Company undertook a return of cash of ‚£100 million,equivalent to 457p per ordinary share. Shareholders were entitled to receiveone B share or one C share for each ordinary share held by them on 5th May,2006. The B shares were redeemed one day after their issue and B shareholdersreceived a redemption payment of 457p plus an amount in respect of accrueddividend for each B share. A purchase offer was made for the C Shares on 10thMay, 2006 by JPMorgan Cazenove for 457p plus an amount in respect of accrueddividend for each C share. C shareholders could choose not to accept thepurchase offer in respect of some or all of the C shares which they hadreceived.10,491,231 B shares were created and redeemed. 10,271,924 C shares were createdand purchased for cancellation. The redemption of the B shares and the purchaseof the C shares resulted in a cash outflow of ‚£96.4 million. A further1,093,460 C shares with a redemption value of ‚£5.0 million were created and arestill outstanding. The total costs, inclusive of advisors' fees, were ‚£101.4million. No share consolidation was undertaken and as a result the number ofordinary shares in issue was unchanged. Net assets at 31st December 2005 havetherefore been adjusted by ‚£101.4 million for the purposes of comparison.
Note 2
Other financial investments comprise the company's valuation of its investment as a special limited partner in managed funds.
Note 3
The results in respect of the 12 months to 31st December, 2006 have been taken from the company's full accounts which have not yet been delivered to the Registrar of Companies and have not yet been reported on by the company's auditors.
Note 4
The comparative figures in respect of the 12 months to 31st December, 2005 havebeen taken from the full accounts which have been delivered to the Registrar ofCompanies and which contain an unqualified audit report.
CANDOVER INVESTMENTS PLCRelated Shares:
CDI.L