13th Mar 2006 07:00
For release at 0700, Monday 13th March, 2006Candover Investments plc - preliminary resultsCandover*, a leading provider of equity for large European buyouts, todayannounces its preliminary results for the year ended 31st December, 2005.Financial highlights: * Total net assets increased 18.5% to ‚£380.3 million (2004: ‚£320.9 million) * Net assets per share up 18.5% to 1740p in the 12 months to 31st December, 2005 (2004: 1468p). This compares with an increase of 18.1% in the FTSE All-Share Index over the same period * Total dividend per share increased by 10.2% to 48.5p (2004: 44.0p per share) * Ten year compound growth in net assets per share of 13.8% per annum; FTSE All-Share Index growth over the same period of 4.7% per annum * Proposed return of ‚£100.0 million cash to shareholders, equivalent to 457p per ordinary share, in May 2006 Operating highlights: * Realisations and refinancings, generating proceeds of ‚£77.2 million, include the sale of Swissport, and quoted share sales of Aspen. Since the year end, Kabel Deutschland has been sold * Major refinancings of three 2001 Fund investee companies undertaken, including a partial disposal of Gala. Both Gala and Springer have now returned 1.3x the cost of the original investment (Gala prior to the Coral Eurobet funding) and Vetco has returned 1.1x its original cost * Invested ‚£14.8 million in three new investments, Wood Mackenzie, ONO and Qioptiq; and ‚£26.9 million in six follow-on investments, the most significant of which was Gala's ‚£2.2 billion acquisition of Coral Eurobet. Since the year end, ‚£16.9 million has been invested in the buyout of UPC Norway * Raised ¢â€š¬3.5 billion Candover 2005 Fund Stephen Curran, Chairman of Candover Investments plc, commented:"Candover has had another successful year. We have raised a ¢â€š¬3.5 billion Fundand have achieved a number of significant realisations and refinancings, as aconsequence of which cash at the year end amounted to ‚£189.4 million. For anumber of years, the company has held relatively high cash balances and it isfor this reason that, although mindful of the ¢â€š¬500 million commitment to the2005 Fund, the board has decided to recommend the return of ‚£100.0 million(457p per ordinary share) to shareholders."With European buyouts attaining record levels of new investment in 2005 and astrong M&A market setting the tone for the current year, I expect that our newFund, our largest raised to date, will have an ample supply of deal flow toreview. Just as the buyout market has evolved, so has Candover, and with myimminent retirement as Chairman in May, I am confident that the business iswell placed to consolidate its position as a leading European buyout house. Ileave it in the very best of hands".Ends*References in this announcement to `Candover' mean Candover Investments plcand/or, where appropriate, one or more of its subsidiaries.For further information, please contact:CandoverStephen Curran, Chairman +44 20 7489 9848Colin Buffin, Managing DirectorTulchan CommunicationsAndrew Grant +44 20 7353 4200Julie FosterCHAIRMAN'S STATEMENTThe favourable market environment has allowed us to undertake a number ofrealisations and refinancings during 2005 and since the year end, albeit atlower levels than 2004, largely because the current portfolio consists mainlyof investments less than three years old. Realisation proceeds from investeecompanies during the year amounted to ‚£77.2 million, with the disposals ofSwissport and the refinancing and partial disposal of Gala being the mostnotable. Since the year end, Candover has fully realised its investment inKabel Deutschland.In the second half of 2005, Candover committed ‚£14.8 million alongside the ‚£115.8 million invested by the 2001 Fund, in three new investments, two in alead capacity. These were an investment in Wood Mackenzie, a leading providerof research and consulting services for the energy and life sciencesindustries, to finance the company's next stage of growth; and the ¢â€š¬220.0million buyout of the High Tech Optics division of Thales, now called Qioptiq.In addition, Candover and the 2001 Fund invested ‚£27.3 million in the ¢â€š¬5.3billion acquisition of Auna by ONO, a leading Spanish cable operator. Candoveralso made a number of follow-on investments, the most significant of which wasto support Gala's acquisition of bookmaker and internet gaming operator CoralEurobet for ‚£2.2 billion. Since the year end, Candover has led the ¢â€š¬445.0million buyout of UPC Norway, a leading Norwegian cable company.RESULTS FOR 2005As at 31st December, 2005, the net assets attributable to the ordinary shareswere ‚£380.3 million compared to ‚£320.9 million at 31st December, 2004. Netassets per share were 1740p compared with 1468p at 31st December, 2004 (and1656p at 30th June, 2005). This increase in net assets per share over the 12months to 31st December, 2005 of 18.5% compares with an increase of 18.1% inthe FTSE All-Share Index over the same period. The increase in net assets pershare over the six months to 31st December, 2005 was 5.1% compared to anincrease in the FTSE All-Share Index over the same period of 11.2%.The compound growth in net assets on a five and ten year basis was 9.4% and13.8% respectively, compared to a decrease in the FTSE All-Share Index overfive years of 0.9% and an increase over ten years of 4.7%. The increase in netassets for the year of ‚£59.4 million was after taking into account net realisedgains on investments of ‚£16.0 million, a net increase of ‚£46.0 million on therevaluation of investments, and other movements.Profits before tax for the year were ‚£16.5 million compared with ‚£19.0 millionfor the 12 months to 31st December, 2004. The decrease in profits was mainlydue to a reduction in income from fixed asset investments compared to theprevious equivalent period, which contained certain non-recurring items ofincome, and an increase in administrative expenses, mainly staff costs. Thevaluation of fixed asset investments at 31st December, 2005 was ‚£187.9 million(2004: ‚£200.5 million). This valuation of ‚£187.9 million was calculated havingtaken into account realisations, net of new investments, amounting to ‚£58.6million, and a net increase of ‚£46.0 million in the revaluation of ourinvestments referred to above. The net increase in the revaluation of ourinvestments comprised upward movements of ‚£48.8 million and downwardadjustments of ‚£2.8 million.Cash and liquid assets totalled ‚£189.4 million (2004: ‚£124.8 million) at theyear end, representing 49.8% of our net assets (2004: 39.9%). Listed shares(Aspen) at the year end totalled ‚£9.4 million (2004: ‚£10.1 million),representing 2.5% of our net assets (2004: 3.1%).As noted in the interim report, from 1st January, 2005, in line with otherEuropean listed companies, Candover is required to prepare its financialstatements in accordance with International Financial Reporting Standards(IFRS). A reconciliation of the results and net assets under UK GAAP, aspreviously reported, to IFRS, is included in the notes to the financialstatements. The adoption of IFRS has resulted in only two significantadjustments to the previously reported results. These two adjustments resultfrom the requirement that the proposed dividend no longer be recorded as aliability at the balance sheet date and from the elimination of themarketability discount on quoted equities. All comparatives have been restatedaccordingly.DIVIDENDSAt the half year the board increased the interim dividend by 10.0% from 15.0pper share to 16.5p per share. The board has decided to pay a final dividend of32.0p per share (29.0p per share for 2004), making a dividend payable for theyear of 48.5p per share against 44.0p for the previous year, an increase of10.2%. Payment of the dividend will be made on 17th May, 2006 to shareholderson the register at 28th April, 2006.BOARD AND STAFFDuring the year we were joined by four new investment executives - Aldo Maccariwho joined as a director, and Tobias Hoffmann-Becking, Bill Rogers and EmmaWilkinson who joined as investment managers. Since the year end we have beenjoined by a further director, Bertrand Finet. Bertrand has over 15 years'private equity experience, gained at 3i in London and Paris and latterly CVCCapital Partners in Paris where he was managing director. He will be based inour Paris office.Over the last eighteen months we have had an active recruitment programme andthis will continue during 2006 in order to ensure we are best placed tooriginate and transact buyouts across the competitive European landscape. Theconsequence of this will be a continued increase in staff costs, as highlightedin the interim report.As reported in the interim statement, Richard Stone was appointed as anon-executive director on 10th May, 2005. Doug Fairservice will retire as adirector of the company (having previously been deputy Chairman) following theconclusion of the May annual general meeting. Doug has been with Candover for22 years and during that time has contributed immeasurably to the success ofthe Company as well as being a much liked and respected colleague. On behalf ofeveryone at Candover I would like to thank him and wish him a happy retirement.I will be stepping down as Chairman in May, but will be remaining on the boardas a non-executive director. Gerry Grimstone, currently non-executive deputyChairman and Senior Independent Director, will become non-executive Chairman.Jimmy West will be appointed Senior Independent Director.As usual, I would like to thank all the staff for their hard work during whatwas a successful year for Candover.THE CANDOVER 2005 FUNDIn May it was announced that we had commenced marketing the Candover 2005 Fundwith a target of ¢â€š¬3.0 billion. The final closing of the Fund was held inNovember with total commitments of ¢â€š¬3.5 billion. Candover committed ¢â€š¬500million to the Fund. Around 80% of total commitments to the Fund have come fromexisting investors, but we also received strong support from new investorgroups, which allowed us to raise the Fund, our ninth and largest to date, injust over six months.The investment period of the 2001 Fund was terminated following the funding ofthe Coral acquisition by Gala in October.RETURN OF CASHTaking into account Candover's historic and current cash balances, ourcommitment to the 2005 Fund, and potential investments and realisations, theboard has decided to recommend a return of cash of ‚£100.0 million, equivalentto 457p per ordinary share to shareholders. This transaction has beenstructured as a bonus issue of B shares and C shares to give shareholders achoice between receiving the cash in the form of income or capital, and, so faras possible, to give those who choose capital some choice as to when the returnis made. There will be no share consolidation and as a result, the number ofordinary shares in issue will be unchanged. The return of cash is conditionalupon, amongst other things, shareholder approval at an extraordinary generalmeeting which will be held following the annual general meeting on 8th May. Acircular detailing the terms of the return of cash will be sent to shareholdersin April.PROSPECTS2005 once again saw the value of European buyouts attaining record levels ofnew investment. Currently, the prospects look as favourable for the year aheadwith a strong M&A market and benign credit conditions providing both deal flowand exit opportunities. When I joined Candover 25 years ago, buyouts were aniche activity, but today the asset class is very much a part of mainstreambusiness. Just as the market has evolved, so has Candover, and I firmly believethat the Company is as well placed as ever to continue to be one of Europe'sleading buyout houses.OPERATIONAL REVIEWThe European buyout market enjoyed another record year during 2005, with theamounts invested rising 41.2% on the prior year to ¢â€š¬115.2 billion. This growthwas driven by a number of very large transactions and also by deals in themid-market sector, which has been on a consistent upward trend over the lastfive years.During 2005, our European network generated strong deal flow, which translatedinto a number of both new and follow-on investment opportunities. In total,Candover invested ‚£41.7 million in three new transactions and seven follow-oninvestments during the year. Of that total, ‚£38.2 million was investedalongside the 2001 Fund, which invested ‚£115.8 million in the three newtransactions and ‚£183.8 million in three sizeable follow-on investments. Sincethe year end, the 2005 Fund has made its first investment in the buyout of UPCNorway. Candover invested ‚£16.9 million in this transaction and the 2005 Fundinvested ‚£100.1 million.NEW INVESTMENTSWOOD MACKENZIEIn July, Candover invested in Wood Mackenzie, a leading provider of researchand consulting services for the energy and life sciences industries, to financethe next stage of growth. Our investment provides Wood Mackenzie with asignificant opportunity to extend its portfolio of products through organicdevelopment and strategic add-on acquisitions, as well as providing the meansto further expand its international presence. Candover invested ‚£4.4 millionand the 2001 Fund invested ‚£34.8 million.ONOIn November, Candover took a syndicate position in the ¢â€š¬5.3 billion acquisitionof Auna by ONO, a leading Spanish cable operator. The acquisition has createdthe only national cable company in Spain which serves some 60% of Spanish homesand businesses. The combined group is expected to achieve significant mergersynergies and to be well placed to benefit from the predicted growth in theSpanish market. Candover invested ‚£3.1 million and the 2001 Fund invested ‚£24.2million.QIOPTIQIn December, Candover led the ¢â€š¬220.0 million buyout of the high tech opticsdivision of Thales. The company, now known as Qioptiq, is a world leader in thedesign and manufacture of high precision optical components and modules formilitary and civil applications. Qioptiq operates in fast growing markets whichhave high barriers to entry requiring significant process know-how. Candoverinvested ‚£7.3 million and the 2001 Fund invested ‚£56.8 million.UPC NORWAYSince the year end, the Candover 2005 Fund has made its first investment viathe acquisition of UPC Norway (UPCN), a leading Norwegian cable company, fromLiberty Global. UPCN provides "triple play" services - cable television,broadband internet and telephony to 350,000 homes in Oslo and the major citiesof Southern Norway. Candover's investment will allow UPCN to finance thecompletion of the digital upgrade of its network in order to maintain itsposition as the leading triple play service provider in Norway. Candoverinvested ‚£16.9 million and the 2005 Fund invested ‚£100.1 million.OTHER INVESTMENTSSix follow-on investments totalling ‚£26.9 million were made. The mostsignificant of these was an investment of ‚£21.2 million by Candover and ‚£166.1million by the 2001 Fund to enable Gala, the bingo and casino operator, toacquire bookmaker and internet gaming operator Coral Eurobet for ‚£2.2 billion.The acquisition, which completed in October, has created Europe's pre-eminentintegrated gaming company with an enterprise value of over ‚£4.0 billion.Further investments in Equity Trust and Thule were also made by Candover andthe Candover 2001 Fund. In June, Equity Trust completed the acquisition of ABNAmro's global trust and fiduciary services business for ¢â€š¬41.0 million. Candoverinvested ‚£1.3 million and the 2001 Fund invested ‚£10.1 million. In October,Thule acquired Omnistor, a Belgian manufacturer of accessories for the motorhome and caravan market for ¢â€š¬63.0 million. Candover and the 2001 Fund invested‚£8.5 million (Candover's share ‚£0.9 million). Small follow-on commitments byCandover were also made to two French mid-market buyouts funds and a mezzaninefund.REALISATIONSNet realised gains over cost achieved by Candover and its managed fundsamounted to ‚£188.8 million - of which Candover's share was ‚£20.8 million - fromone full realisation, one partial realisation, a number of significantrefinancings and a quoted share sale.Refinancings of Gala and Vetco took place in February and March, with Galareturning approximately half of the original investment made, and Vetcoapproximately one third of the original investment. Also in March, Candover andthe 2001 Fund sold a small proportion of their shares in Aspen Insurance aspart of a secondary offering on the New York Stock Exchange. In July, Springercompleted a second refinancing, generating gains over cost of ‚£2.3 million forCandover and ‚£22.1 million for the 2001 Fund. In total, Springer has nowreturned 1.3 times the original cost of the investment. In August, Candover andthe 2001 Fund sold a minority stake in Gala to Permira. The transaction alsoincluded a further refinancing. Proceeds from this transaction resulted ingains over cost of ‚£4.0 million for Candover and ‚£35.2 million for the 2001Fund. Gala has now returned 1.3 times the cost of the original investment priorto the Coral acquisition. In October, Swissport was sold to Ferrovial for anenterprise value of CHF1.0 billion (¢â€š¬646 million), with gains over cost of ‚£11.9 million for Candover and ‚£100.6 million for the 2001 Fund, giving aninvestment multiple of 2.6 times. Finally, in December, Vetco completed itssecond refinancing of the year, taking its cash return to date to 1.1 times theoriginal investment.Since the year end, a full exit has been achieved from Kabel Deutschland (KDG)which has resulted in gains over cost of ‚£3.5 million for Candover and ‚£27.8million for the 2001 Fund. Including proceeds received from previousrefinancings, KDG has generated an investment multiple of 3.2 times theoriginal investment.OUTLOOKThe environment for European buyouts looks positive, and we believe our teamshould be well positioned to assess interesting investment opportunities overthe coming year. As always, we will maintain our proven policy of carefulselection, as well as closely monitoring the performance of our investeecompanies to ensure performance is in line with expectations.CANDOVER AT A GLANCEINVESTMENTS - ANALYSIS BY VALUENet assets per share1996 635p 1997 703p 1998 877p 1999 986p 2000 1079p 2001 1127p 2002 1040p 2003 1200p 2004 1468p 2005 1740p Pre tax profits ‚£'0001996 5,389 1997 7,270 1998 12,069 1999 10,456 2000 11,679 2001 14,408 2002 15,257 2003 17,913 2004 18,952 2005 16,474 Net dividend per share1996 15.00p 1997 20.00p 1998 25.00p 1999 27.00p 2000 29.00p 2001 32.00p 2002 36.00p 2003 40.00p 2004 44.00p 2005 48.50p Net Assets Growth Candover FTSE All-Share 1995 100 100 1996 136.9 111.7 1997 151.5 133.8 1998 189.0 148.3 1999 212.5 179.9 2000 232.5 165.5 2001 242.9 140.0 2002 224.1 105.1 2003 251.1 122.5 2004 307.2 133.7 2005 364.1 157.9 Investment by region1 United Kingdom 55% 2 Germany 12% 3 Americas 11% 4 Benelux 8% 5 Scandinavia 8% 6 France 4% 7 Spain 2% Investments by sector1 Industrials 22% 2 Support 20% services 3 Media 20% 4 Leisure 18% 5 External funds 9% 6 Financials 9% 7 Health 2% Investments by age1 Less than one year 8% 2 1-2 years 33% 3 2-3 years 37% 4 3-4 years 5% 5 4-5 years 0% 6 More than five 17% years Investments by valuation method1 Multiple of 85% earnings 2 Cost 8% 3 Stock market 5% price 4 Sale price 2% REVIEW OF THE 15 LARGEST INVESTMENTSGALA GROUP LIMITEDLocation: UKDate of investment: March 2003/October 2005Candover's investment as at 31st 2005 2004December Cost of investment ‚£24,772,000 ‚£21,728,000 Directors' valuation ‚£32,348,000 ‚£21,728,000 Effective equity interest (fully 2.0% 2.8%diluted) % of Candover's net assets 8.5% 7.0% Basis of valuation Multiple of earnings Multiple of earningsIn March 2003, Candover invested in the buyout of Gala, the leading highvolume, low stake gaming business. In October 2005, Candover backed theacquisition of Coral Eurobet, the bookmaker and internet gaming operator.Gala is the UK's third largest bookmaker with 1,267 licensed betting offices,the UK's largest bingo operator with 167 clubs and a leading operator ofcasinos with 30 outlets. Coral Eurobet's established online business, matchedwith Gala's web based products, will also make Gala a significant online gamingoperator with strong prospects for further growth.A refinancing was completed in February 2005 which returned ‚£8.3 million ofloan notes. During September 2005, a further refinancing and partial disposalreleased a further ‚£9.8 million of cost. Subsequently, in October 2005,Candover's stake of ‚£21.2 million for the follow-on investment in Coral wasfunded.Profit excluding exceptional items and before goodwill amortisation, interestand tax for the year to 24th September, 2005 was ‚£125.5 million on turnover of‚£583.5 million (2004: Profit excluding exceptional items and before goodwillamortisation, interest and tax for the year to 25th September, 2004 was ‚£115.3million on turnover of ‚£544.3 million). These numbers exclude Coral which wasacquired in October 2005.No dividends were received by Candover for the year ended 31st December, 2005(2004: ‚£nil).Sector: Leisure www.candover.com/galaSPRINGER SCIENCE + BUSINESS MEDIA S.A.Location: GermanyDate of investment: January/September 2003Candover's investment as at 31st 2005 2004December Cost of investment ¢â€š¬1,050,000 ¢â€š¬20,823,000 (‚£710,000) (‚£14,303,000) Directors' valuation ¢â€š¬27,832,000 ¢â€š¬29,317,000 (‚£19,123,000) (‚£20,737,000) Effective equity interest (fully 4.0% 4.0%diluted) % of Candover's net assets 5.0% 6.6% Basis of valuation Multiple of earnings Multiple of earnings In September 2003, Kluwer Academic Publishers (KAP) merged withBertelsmannSpringer to create Springer, the world's second largest scientific,technical and medical (STM) publisher.Candover completed the ¢â€š¬600.0 million acquisition of KAP from Wolters Kluwer inJanuary 2003. The ¢â€š¬1.1 billion buyout of BertelsmannSpringer was completed inSeptember 2003 and the two companies have subsequently been merged. Led by ahighly regarded management team, the merger has allowed Springer to play asignificant role in the ongoing consolidation of the fragmented STM publishingindustry. Springer publishes more than 1,450 journals and trade magazines andover 4,000 new book titles each year. Refinancings in August 2004 and July 2005resulted in ¢â€š¬32.7 million (‚£22.1 million) of loan stock being repaid.Profit before goodwill amortisation, interest and tax for the year to 31stDecember, 2004, the first full year of the merged entity, was ¢â€š¬125.1 million onturnover of ¢â€š¬821.0 million.No dividends were received by Candover for the year ended 31st December, 2005(2004: ‚£nil).Sector: Media www.candover.com/springerTHULE ABLocation: SwedenDate of investment: December 2004Candover's investment as at 31st 2005 2004December Cost of investment * ¢â€š¬22,635,000 ¢â€š¬21,181,000 (‚£15,579,000) (‚£14,620,000) Directors' valuation ¢â€š¬22,169,000 ¢â€š¬21,098,000 (‚£15,232,000) (‚£14,923,000) Effective equity interest (fully 6.7% 6.7%diluted) % of Candover's net assets 4.0% 4.7% Basis of valuation Multiple of earnings Cost * This investment was made in SEK and EurosCandover led the SEK4,215.0 million buyout in December 2004.Thule is a consumer goods company with a strong brand which supplies productsto the outdoor leisure markets. The company manufactures and distributes carracks and boxes, trailers, snow chains and OEM car rails. It is a global numberone in its core activity of car racks and boxes with a 40% market share. Thulealso holds either global or European market leading positions in all its otherproduct areas. In October 2005, Thule acquired leading European manufacturer ofaccessories for recreational vehicles, Omnistor Accessories NV.Profit before goodwill amortisation, interest and tax for the year to 31stDecember, 2004 was SEK353.0 million on turnover of SEK2,785.0 million.No dividends were received by Candover for the year ended 31st December, 2005(2004: ‚£nil).Sector: Industrials www.candover.com/thuleALCONTROL GROUP HOLDINGS LIMITEDLocation: UKDate of investment: December 2004Candover's investment as at 2005 200431st December Cost of investment ¢â€š¬18,585,000 ¢â€š¬18,585,000 (‚£12,844,000) (‚£12,844,000) Directors' valuation ¢â€š¬18,585,000 ¢â€š¬18,585,000 (‚£12,769,000) (‚£13,145,000) Effective equity interest 6.8% 6.8%(fully diluted) % of Candover's net assets 3.4% 4.2% Basis of valuation Multiple of earnings Cost In December 2004, Candover acquired ALcontrol, a leading European environmentaland food testing company.Headquartered in the Netherlands, ALcontrol is a laboratory-based testingbusiness which supplies services to the food and environmental markets. Itranks as number one in the UK, Benelux and Sweden, making it a leading playerin Western Europe. The group comprises 26 laboratories and operates in tencountries.Profit before goodwill amortisation, interest and tax for the period from 10thDecember, 2004 to 31st March, 2005 was ‚£2.3 million on turnover of ‚£28.5million.No dividends were received by Candover for the year ended 31st December, 2005(2004: ‚£nil).Sector: Support services www.candover.com/alcontrolVETCO INTERNATIONAL LIMITEDLocation: UKDate of investment: July 2004Candover's investment as at 2005 200431st December Cost of investment US$113,000 US$13,870,000 (‚£61,000) (‚£7,454,000) Directors' valuation US$17,391,000 US$16,824,000 (‚£10,130,000) (‚£8,840,000) Effective equity interest 2.5% 2.5%(fully diluted) % of Candover's net assets 2.7% 2.8% Basis of valuation Multiple of earnings Multiple of earningsIn July 2004, Candover acquired Vetco International which was formerly theupstream oil, gas and petrochemicals division of ABB, the Swiss-Swedishengineering group.Vetco is a major global participant in the oilfield services sector andsupplies a portfolio of hi-tech proprietary products, systems and services. Itserves major international and national oil companies as well as independentproducers throughout the world. The group manufactures drilling and productionequipment for rigs and production platforms, and designs and manages theinstallation of subsea production systems. It also undertakes modification andmaintenance work on existing offshore installations and constructs new buildfixed and floating production facilities. Vetco operates in 30 countries andhas approximately 10,000 employees, with headquarters in the UK and keyoperating centres in Houston, Aberdeen, Oslo and Singapore. To date, Vetco hasreturned US$13.7 million (‚£7.4 million) to Candover as a repayment of all ofthe original loan notes.Pro-forma profit before goodwill amortisation, non-recurring items, interestand tax for the year to 31st December, 2004 was US$77.5 million on turnover ofUS$1,858.7 million.No dividends were received by Candover for the year ended 31st December, 2005(2004: ‚£nil).Sector: Support services www.candover.com/vetcoBUREAU VAN DIJK ELECTRONIC PUBLISHING BVLocation: BelgiumDate of investment: November 2004Candover's investment as at 31st 2005 2004December Cost of investment ¢â€š¬14,586,000 ¢â€š¬14,597,000 (‚£10,231,000) (‚£10,239,000) Directors' valuation ¢â€š¬14,586,000 ¢â€š¬14,597,000 (‚£10,022,000) (‚£10,325,000) Effective equity interest (fully 6.3% 6.3%diluted) % of Candover's net assets 2.6% 3.3% Basis of valuation Multiple of earnings CostCandover led the buyout of Bureau van Dijk Electronic Publishing (BvDEP) inNovember 2004. We acquired a majority stake in the business from the existingmanagement team, who have remained as minority shareholders.BvDEP is a global publisher of specialised financial and company informationproducts via the internet and on CD/DVDs on over fifteen million companiesworldwide. Its main databases are market leaders in the niches they target andit currently sells around 40 products. The products typically include detailedfinancial accounts and data such as ownership, directors, businessdescriptions, M&A activity, news and peer performance. Proprietary softwarethat enables searching, analysis and presentation by the customer is a keyelement of the products.Pro-forma profit before goodwill amortisation, interest and tax for the year to31st December, 2004 was ¢â€š¬28.5 million on turnover of ¢â€š¬79.4 million.No dividends were received by Candover for the year ended 31st December, 2005(2004: ‚£nil).Sector: Media www.candover.com/bvdepINNOVIA FILMS LIMITEDLocation: UKDate of investment: September 2004Candover's investment as at 2005 200431st December Cost of investment ¢â€š¬14,448,000 ¢â€š¬14,448,000 (‚£9,913,000) (‚£9,913,000) Directors' valuation ¢â€š¬14,448,000 ¢â€š¬14,448,000 (‚£9,927,000) (‚£10,219,000) Effective equity interest 8.0% 8.0%(fully diluted) % of Candover's net assets 2.6% 3.3% Basis of valuation Multiple of earnings Cost Candover led the ¢â€š¬320.0 million buyout of Innovia Films in September 2004 fromUCB Group, a quoted pharmaceutical and speciality chemical company.Innovia Films is a manufacturer of specialist bi-orientated polypropylene(BOPP) and cellulose (Cello) transparent and coated films. BOPP is derived fromoil and Cello is derived from wood pulp. The business enjoys strong positionsin niche markets and focuses on higher value-added applications. The films areused primarily in the packaging sector, such as tobacco over-wrap, transparentself-adhesive bottle labels and technically advanced food packagingapplications. The films are also used as a substrate for banknotes and, via ajoint venture with the Reserve Bank of Australia, Innovia is the onlymanufacturer of film for polymer banknotes in the world.Operating profit before exceptional charges, interest, tax, depreciation andamortisation for the initial trading period from 1st October, 2004 to 31stDecember, 2004 was ¢â€š¬8.9 million on turnover of ¢â€š¬85.9 million.No dividends were received by Candover for the year ended 31st December, 2005(2004: ‚£nil).Sector: Industrials www.candover.com/innoviafilmsDAKOTA, MINNESOTA & EASTERN RAILROAD CORPORATIONLocation: USDate of investment: September 1986Candover's investment as at 31st 2005 2004December Cost of investment US$1,478,000 US$1,478,000 (‚£888,000) (‚£888,000) Directors' valuation US$16,672,000 US$nil (‚£9,711,000) (‚£nil) Effective equity interest (fully 8.5% 8.5%diluted) % of Candover's net assets 2.6% nil% Basis of valuation Multiple of earnings Multiple of earningsDakota, Minnesota & Eastern Railroad Corporation (DM&E) is a regional railroadoperating company on approximately 1,100 miles of track which began operationson 5th September, 1986. In July 2002, DM&E was joined by the Iowa, Chicago &Eastern, which took over operations of I&M Rail Link ("IMRL") and operates on afurther 1,400 miles of track.DM&E's main line runs east-west from Winona, Minnesota to Rapid City, SouthDakota and serves as the major railroad infrastructure for South Dakota andsouthern Minnesota. The IMRL operates in Illinois, Iowa, Minnesota, Missouriand Wisconsin and connects with all major railroads in Chicago, Kansas City andSt. Paul, Minnesota. A new company, Cedar American Rail Holdings, Inc. wasestablished to bridge the operations and administration of the two railroads.No dividends were received by Candover for the year ended 31st December, 2005(2004: ‚£nil).Sector: Support servicesASPEN INSURANCE HOLDINGS LIMITEDLocation: USDate of investment: June 2002Candover's investment as at 31st 2005 2004December Cost of investment ‚£6,814,000 ‚£7,830,000 Directors' valuation US$16,129,000 US$19,200,000 (‚£9,395,000) (‚£10,089,000) Effective equity interest 0.9% 1.0%(fully diluted) % of Candover's net assets 2.5% 3.1% Diluted earnings per share US$2.40 US$2.74 Basis of valuation Market price Market priceIn 2002, Candover co-led an equity syndicate which committed ‚£448.0 million tothe formation of Aspen Insurance Holdings Limited, a new Bermudian reinsurancegroup, whose UK insurance subsidiary, Aspen Insurance UK Limited, is one of thelargest reinsurance vehicles in the UK market.Aspen's key business lines comprise mainly property, casualty and specialtyinsurance and reinsurance globally and commercial property and liabilityinsurance in the UK and USA. On 4th December, 2003, Aspen successfullycompleted its listing on the New York Stock Exchange at an initial price offerof US$22.50 per share. A successful secondary offering was completed in March2005 generating capital proceeds for Candover of ‚£1.3 million.Loss before income tax for the year ended 31st December, 2005 was US$160.4million on net premiums earned of US$1,508.4 million (2004: Income beforeincome tax was US$263.2 million on net premiums earned of US$1,232.8 million).In the year ended 31st December, 2005 Candover received dividends of US$424,087or ‚£231,736 (2004: US$98,000 or ‚£51,000), and sold shares with a cost of ‚£1.0million in a secondary placing.Sector: Financials www.candover.com/aspenCICLAD 3Location: FranceDate of investment: April 2000Candover's investment as at 2005 200431st December Cost of investment ¢â€š¬2,998,000 ¢â€š¬8,306,000 (‚£1,619,000) (‚£4,854,000) Directors' valuation ¢â€š¬11,603,000 ¢â€š¬9,975,000 (‚£7,973,000) (‚£7,055,000) Effective equity interest n/a n/a(fully diluted) % of Candover's net assets 2.1% 2.3% Basis of valuation Multiple of earnings Multiple of earningsIn April 2000, Candover committed ¢â€š¬15.0 million to Ciclad 3, an investmentcompany specialising in French buyouts.A successor of Ciclad 2, Ciclad 3, with ¢â€š¬82.2 million of commitments, startedits investment period in April 2000. Ciclad 3 has invested in 27 companies,four of which have been sold, resulting in the return of cost to Candoverduring the year. 72.0% of commitments drawn down have now been returned.No dividends were received by Candover for the year ended 31st December, 2005(2004: ‚£nil).Sector: External fundsQIOPTIQLocation: UKDate of investment: December 2005Candover's investment as at 31st 2005December Cost of investment ¢â€š¬10,679,000 (‚£7,273,000) Directors' valuation ¢â€š¬10,679,000 (‚£7,338,000) Effective equity interest (fully 9.6%diluted) % of Candover's net assets 1.9% Basis of valuation CostCandover acquired the high tech optics division of Thales (Qioptiq) for ¢â€š¬220.0million in December 2005.Qioptiq is a world leader in the design and manufacture of high precisionoptical components and modules for military and civil applications. The grouphas principal operations in the UK and Singapore and various othermanufacturing or commercial activities in France, Germany, Hungary and the US.The company employs approximately 1,400 people and reported revenues of ¢â€š¬127.0million in 2004.Audited accounts for the period since acquisition are not yet available.No dividends were received by Candover for the year ended 31st December, 2005.Sector: Industrials www.candover.com/qioptiqACERTEC HOLDINGS LIMITEDLocation: UKDate of investment: June 1999Candover's investment as at 31st 2005 2004December Cost of investment ‚£7,043,000 ‚£7,043,000 Directors' valuation ‚£7,043,000 ‚£7,043,000 Effective equity interest (fully 7.9% 7.9%diluted) % of Candover's net assets 1.8% 2.3% Basis of valuation Multiple of Multiple of earnings earnings In June 1999, Candover led the ‚£135.0 million public-to-private buyout of HallEngineering (Holdings) plc, now renamed Acertec Holdings Limited.Acertec consists of four principal businesses: Carrington Wire, a leadingmanufacturer of wire in the UK; BRC Reinforcement, a leading UK supplier ofreinforcement products to the construction industry; Stadco, Acertec'sautomotive pressings business, which is one of the leading European suppliersof body-in-white pressings and assemblies to the car industry; and in the FarEast, BRC Asia, which is the market leader in the supply of prefabricated steelreinforcement systems to the Singapore housing market, and which was listed onthe Singapore Stock Exchange in July 2000.Profit before goodwill amortisation, interest and tax for the year ended 31stDecember, 2004 was ‚£14.1 million on turnover of ‚£333.4 million (2003: Profitbefore goodwill amortisation, interest and tax was ‚£5.7 million on turnover of‚£242.8 million, as restated).No dividends were received by Candover for the year ended 31st December, 2005(2004: ‚£nil).Sector: IndustrialsEQUITY TRUST HOLDINGS S.ƒ¡.r.l.Location: UKDate of investment: May 2003Candover's investment as at 31st 2005 2004December Cost of investment ¢â€š¬9,231,000 ¢â€š¬7,713,000 (‚£6,475,000) (‚£5,477,000) Directors' valuation ¢â€š¬9,231,000 ¢â€š¬7,713,000 (‚£6,343,000) (‚£5,455,000) Effective equity interest (fully 5.4% 5.2%diluted) % of Candover's net assets 1.7% 1.7% Basis of valuation Multiple of earnings Multiple of earningsIn May 2003, Candover backed the existing management team to acquire the trustand fiduciary services business of Insinger de Beaufort for ¢â€š¬197.5 million. InJune 2005, Equity Trust acquired ABN AMRO's trust business at a cost of ¢â€š¬46.6million (including restructuring costs of ¢â€š¬7.4 million).Equity Trust provides client services, primarily based around the formation andongoing administration of onshore and offshore trusts and companies. It has aninternational customer base comprising both private clients and corporateentities, providing them with solutions to business investment, wealth creationand wealth preservation issues. A follow-on investment to fund the acquisitionof ABN AMRO's trust business was completed during the year with an additionalinvestment of ‚£1.3 million.Profit before goodwill amortisation, interest and tax for the year to 31stDecember, 2004 was ¢â€š¬19.4 million on a turnover of ¢â€š¬62.6 million (2003: For theperiod 28th May to 31st December, profit before goodwill amortisation, interestand tax was ¢â€š¬8.8 million on turnover of ¢â€š¬35.9 million).No dividends were received by Candover for the year ended 31st December, 2005(2004: ‚£nil).Sector: Financials www.candover.com/equitytrustICG MEZZANINE FUND 2000Location: UKDate of investment: July 2000Candover's investment as at 2005 200431st December Cost of investment ¢â€š¬8,109,000 ¢â€š¬8,772,000 (‚£4,977,000) (‚£5,519,000) Directors' valuation ¢â€š¬7,766,000 ¢â€š¬8,772,000 (‚£5,336,000) (‚£6,204,000) Effective equity interest n/a n/a(fully diluted) % of Candover's net assets 1.4% 2.0% Basis of valuation Multiple of earnings Multiple of earningsIn July 2000, Candover committed ¢â€š¬15.0 million to the ¢â€š¬475.0 million ICGMezzanine Fund 2000. The Fund has been active in providing mezzanine financethroughout Europe. The investment period for new investments has terminated and¢â€š¬14.7 million of Candover's commitment of ¢â€š¬15 million has been drawn down.Transactions for which the ICG Mezzanine Fund 2000 provided financing includethe acquisitions of Tetley by Tata Tea, Baxi by Newmond and the buyouts ofPicard and Swissport. During the year, capital repayments were receivedresulting in a reduction in cost.No dividends were received by Candover for the year ended 31st December, 2005(2004: ‚£nil).Sector: External fundsONTEX NVLocation: BelgiumDate of investment: January 2003Candover's investment as at 31st 2005 2004December Cost of investment ¢â€š¬26,411,000 ¢â€š¬26,411,000 (‚£17,163,000) (‚£17,163,000) Directors' valuation ¢â€š¬6,610,000 ¢â€š¬6,610,000 (‚£4,542,000) (‚£4,675,000) Effective equity interest (fully 4.4% 4.4%diluted) % of Candover's net assets 1.2% 1.5% Basis of valuation Multiple of earnings Multiple of earningsCandover completed the ¢â€š¬1.0 billion buyout and delisting of Ontex, a leadingEuropean producer of own-label hygienic disposables, from the Belgian StockExchange in January 2003.Ontex is the leading European manufacturer of retailer-branded diapers andfeminine hygiene products. It also has an adult health care business, which isnumber three in Europe. Ontex supplies supermarket private label products inWestern Europe, and a combination of private label and branded products in therapidly growing markets of Eastern Europe and Turkey.In the year to 31st December, 2004 Ontex generated profit excluding exceptionalitems and before goodwill amortisation, interest and tax of ¢â€š¬54.8 million onturnover of ¢â€š¬877.4 million (2003: For the period 15th January to 31st December,Ontex generated profit excluding exceptional items and before goodwillamortisation, interest and tax of ¢â€š¬75.3 million on turnover of ¢â€š¬743.9 million).No dividends were received by Candover for the year ended 31st December, 2005(2004: ‚£nil).Sector: Health www.candover.com/ontexGROUP INCOME STATEMENTfor the year ended 31st December, 2005Unaudited Year to 31st December, Year to 31st December, 2005 2004* 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 - 15,220 15,220 - 27,420 27,420losses Unrealised gains and - 47,810 47,810 - 31,733 31,733losses - 63,030 63,030 - 59,153 59,153 Revenue Management fees from managed funds 29,964 - 29,964 24,633 - 24,633 Investment and other 14,700 - 14,700 17,162 - 17,162income Total revenue 44,664 - 44,664 41,795 - 41,795 Administrative (28,029) (7,681) (35,710) (22,832) (6,764) (29,596)expenses Profit before finance costs and taxation 16,635 55,349 71,984 18,963 52,389 71,352 Interest payable and similar charges (161) - (161) (11) - (11) Profit before 16,474 55,349 71,823 18,952 52,389 71,341taxation Taxation (4,841) 2,304 (2,537) (5,713) 2,029 (3,684) Profit attributable to equity shareholders 11,633 57,653 69,286 13,239 54,418 67,657 Earnings per ordinary share Basic and diluted 53.2p 263.8p 317.0p 60.6p 249.0p 309.6pThe total column represents the income statement under IFRS* Restated under IFRSGROUP STATEMENT OF RECOGNISED INCOME AND EXPENSESfor the year ended 31st December, 2005Unaudited Year to Year to 31st December, 31st December, 2005 2004* ‚£000 ‚£000 Profit attributable to equity 69,286 67,657shareholders Exchange differences on translation (8) -of foreign operations Total recognised income and 69,278 67,657expenses *Restated under IFRSGROUP RECONCILIATION OF MOVEMENTS IN EQUITYfor the year ended 31st December, 2005Unaudited Year to Year to 31st December, 31st December, 2005 2004* ‚£000 ‚£000 Opening total equity 320,928 262,351 Total recognised income and 69,278 67,657expenses Dividends (9,945) (9,080) Closing total equity 380,261 320,928*Restated under IFRSGROUP BALANCE SHEETfor the year ended 31st December, 2005Unaudited 31st December, 2005 31st December, 2004* ‚£000 ‚£000 ‚£000 ‚£000 Non-current assets Property, plant and 934 1,091equipment Financial investments designated at fair value through profit and loss Investee companies 184,048 159,047 Other financial investments 3,827 41,421 187,875 200,468 Associated undertaking - 1 Trade and other receivables 4,820 2,125 Deferred tax asset 2,289 - 195,918 203,685 Current assets Trade and other receivables 20,545 25,685 Cash and cash equivalents 189,392 124,807 209,937 150,492 Current liabilities Trade and other payables (19,971) (23,484) Current tax liabilities (5,623) (3,683) (25,594) (27,167) Net current assets 184,343 123,325 Non-current liabilities Deferred tax liabilities - (6,082) Net assets 380,261 320,928 Equity attributable to equity holders Called up share capital 5,464 5,464 Share premium account 1,451 1,451 Translation reserve (8) - Capital redemption reserve 290 290 Capital reserve - realised 313,214 259,433 Capital reserve - unrealised 25,170 21,298 Revenue reserve 34,680 32,992 Total equity 380,261 320,928 Net asset value per share 1740p 1468p*Restated under IFRSGROUP CASH FLOW STATEMENTfor the year ended 31st December, 2005Unaudited Year to Year to 31st December, 2005 31st December, 2004* ‚£000 ‚£000 ‚£000 ‚£000 Cash flow from operating activities Cash flow from operations 8,165 26,042 Interest paid (47) (11) Tax paid (8,968) (1,194) Net cash from operating (850) 24,837activities Cash flows from investing activities Purchase of property, plant (253) (322) and equipment Purchase of financial (41,727) (60,631) investments Sale of property, plant and 9 31 equipment Sale of financial 116,309 131,119 investments Net cash from investing 74,338 70,197activities Cash flows from financing activities Equity dividends paid (9,945) (9,080) Increase in cash and 63,543 85,954 cash equivalents Opening cash and cash 124,807 37,306equivalents Effect of exchange rates and 1,042 1,547revaluation on cash and cash equivalents Closing cash and cash 189,392 124,807equivalents *Restated under IFRSNOTES TO THE FINANCIAL STATEMENTSNote 1 Reconciliation of net assets and profit under UK GAAP to IFRSThe analysis below shows a reconciliation of net assets and profit as reportedunder UK GAAP to the revised net assets and profit under IFRS as reported inthese financial statements. In addition, there is a reconciliation of netassets under UK GAAP to IFRS at the transition date for the Group, being 1stJanuary, 2004. Year to 31st December, Note 2004 Reconciliation of profit attributable ‚£mto equity shareholders Profit after tax under UK GAAP 13.2 Capital return after tax under UK (a) 54.2GAAP Removal of discount on listed (b) 0.2financial investments Profit after tax under IFRS 67.6 1st 31st January, December, 2004 2004 Reconciliation of equity Note ‚£m ‚£m Total equity under UK GAAP 254.7 312.6 Removal of discount on listed (b) 1.8 2.0financial investments Dividend recognised under UK GAAP but (c) 5.8 6.3excluded under IFRS Total equity under IFRS 262.3 320.9(a) Where financial investments are designated as held at fair value throughprofit and loss, the profit after tax under IFRS also includes the `Capitalreturn on ordinary activities after tax' as previously reported.(b) Under IFRS, it is no longer appropriate to provide for a liquidity discounton listed financial investments where formal trading restrictions do not apply.(c) Under IFRS, dividends proposed after the period end cannot be provided forin the balance sheet as, at that date, the dividends did not represent aliability.Explanation of material adjustments to the cash flow statementIn preparing the cash flow under IFRS, cash and cash equivalents includeshort-dated fixed income securities and money market instruments of ‚£0.1million at 1st January, 2004 (31st December, 2004: ‚£111.5 million). Under UKGAAP the same had been included in the `Management of liquid resources'category. In addition, under IFRS, the impact of exchange rates on cashbalances and revaluation of cash equivalents is disclosed in the cash flowstatement.Note 2Other financial investments comprise the company's valuation of its investmentas a special limited partner in managed funds.Note 3The results in respect of the 12 months to 31st December, 2005 have been takenfrom the company's full accounts which have not yet been delivered to theRegistrar of Companies and have not yet been reported on by the company'sauditors.Note 4The comparative figures in respect of the 12 months to 31st December, 2004 (asrestated under IFRS) have been taken from the full accounts which have beendelivered to the Registrar of Companies and which contain an unqualified auditreport.ENDCANDOVER INVESTMENTS PLCRelated Shares:
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