Final Results

28th February 2014 Candover Investments plc Preliminary unaudited results for the year ended 31st December 2013 * NAV per share of 715p at 31st December 2013, an 18% increase compared to the prior year (31st December 2012: 608p). * Portfolio valuations up 21% over the year (160p) primarily driven by valuation improvements (154p) as well as favourable foreign currency movements (6p). * Portfolio performance continues to improve with aggregate portfolio revenues growing 3% and EBITDA 4% year on year * Increase in value at Expro International of £41 million (188p) reflects continued trading improvement, with revenues and earnings well ahead of prior year. • Successful refinancing of US private placement loan notes. Maturity extendedby over one year and adverse impact of holding high cash balances eliminated. * Net debt - increased to £47.7 million at 31st December 2013 (31st December 2012: £26.7 million). Increase reflects the impact of operating costs, financing costs and one-off cash impact of refinancing Candover's debt, including make whole. Corresponding impact on the loan-to-value ratio which rose to 25.4% (31st December 2012: 18.1%). Malcolm Fallen, Chief Executive Officer, said: "The recovery in the value of the portfolio seen over the past year isencouraging. The combination of a more active corporate environment and thesuccessful refinancing of the US private placement loan notes, including moreflexibility to repay the new notes early, offers greater potential for theCompany to start returning cash to shareholders over the next two years." Ends. For further information, please contact: Candover Investments plc Malcolm Fallen, CEO +44 20 7489 9848 Chairman's statement Our results for 2013 show an encouraging progression in NAV, with the portfoliomanaged by Arle Capital Partners ("Arle") seeing a marked rise in its value.This has resulted in an increase of 18% in our net assets during the year, withthe improvement in the performance of Expro International ("Expro") the mostsignificant contributor. At the end of 2013 we successfully refinanced our US private placement loannotes, which were due for repayment from October 2014. This was achieved byusing our excess cash balances together with proceeds from a new note issuewhich matures in December 2015. The refinancing extends the maturity of ourdebt and provides us with more flexibility in terms of future repayment of thenew notes as and when realisations occur. Significantly, it has also eliminatedthe adverse financial effect of holding large surplus cash balances at a timeof very low interest rates. The Board is not recommending a dividend payment, but the payment of dividendsin the future will be reviewed in the context of our focus on delivering aprogressive return of cash to shareholders over time as realisations areachieved by the investment manager. There have been no changes to the Board during the year. The improvement in the portfolio, when combined with a more general increase incorporate activity, is encouraging in terms of seeing progress in realising ourunderlying investments over the years ahead. Our objective remains to optimisethe long term value of our investments by returning cash to shareholders assoon as is practical. We will continue to track Arle's progress over the yearahead as it manages and realises the portfolio. Richard Stone Chairman 28th February 2014 CEO's report Our strategy is to achieve a progressive return of cash to shareholders overtime. To support the delivery of this strategy, our focus remains twofold.First, we continue to ensure that the Company remains financially stable; andsecond, we actively review and monitor the performance of Arle, our investmentmanager, as it seeks to maximise and realise the value of the portfolio. Net asset value The Company's net assets per share of 715p at 31st December 2013 represented an18% increase over the year from 31st December 2012 (608p), with the second halfperformance building on the 3% increase reported in June. The full yearincrease compares to an uplift in the FTSE All-Share Index of 20.8% over thesame period. Our operating model means that there are two clear components to NAVprogression. These are the value of the portfolio assets and any changestherein; and the costs incurred in running the business, which are principallythe fees we pay to Arle, and the interest costs associated with the US privateplacement loan notes. The impact of these costs on NAV will either be offset byincreases in the valuation of the portfolio during any financial period or willexacerbate the impact of any reductions in portfolio value. NAV growth,therefore, is solely dependent on improvements in the valuation of theportfolio managed by Arle exceeding our costs. The overall value of the portfolio, including carried interest, increased by £34.8 million (160p per share) over the year, comprising net uplifts invaluations of 154p per share and favourable foreign currency movements of 6pper share. The principal movements within the portfolio were a £41.0 millionincrease in the valuation of Expro reflecting its continuing strong tradingperformance, which was partly offset by a write down of £14.7 million on StorkBV ("Stork") due to weaker trading. During 2013, Candover's recurring administrative expenses reduced by a further7.5%, as we continued to minimise the adverse impact of costs on NAVperformance. Towards the end of the year, the Company's US private placementloan notes were refinanced as described below. The one-off impact was toincrease our finance costs in the year, thereby eroding net assets, by £4.5million. This reflected the adverse effect of the make whole obligations andrefinancing fees, offset by the write-back of the historic Fair Value hedgeadjustment. However, this erosion was offset by the uplift in the valuation ofthe portfolio, which resulted in the 18% increase in net assets per shareoutlined above. The movements are set out in Table 1 of the Financial review. Net debt Net debt during the year increased to £47.7 million at 31st December 2013 (31stDecember 2012: £26.7 million), with inflows from realisations offset by thecombination of follow-on investments and operating and financing costs,including the one-off impact of the loan note refinancing. Candover receivedtotal realisation proceeds, including carried interest, of £11.3 million fromthe sale of Qioptiq and made follow-on investments in Stork and ParquesReunidos ("Parques") totalling £5.0 million. Our loan-to-value ratio saw acorresponding increase to 25.4% at 31st December 2013 up from 18.1% at 31stDecember 2012. Additional proceeds of £1.2 million from the sale of Qioptiq,including a further carry payment, are due to be received during the first halfof 2014. Loan note refinancing On 20th December 2013, the Company announced the refinancing of its 2007 USprivate placement loan notes (the "old notes"), to lengthen the maturity of itsdebt. The old notes, which were due to mature in December 2014 and January 2015, werefully repaid using existing cash balances and the proceeds of a simultaneousissue of new notes. The new notes raised $83.9 million, with a coupon of 7.02%(the same as the dollar-denominated old notes). Their final maturity is 31stDecember 2015, although they are repayable before this date at par from theproceeds of realisations. The refinancing had two objectives: to eliminate the current inefficiency andimpact of maintaining high cash balances; and to address the risk, outlined inour Annual Report for the year ended 31st December 2012, that there could be ashortfall in Candover's ability to meet its future loan note repayments if Arlewere unable to achieve its realisation projections. The new notes contain a 40%loan-to-value covenant (consistent with the old notes), but the calculation ofthe value component of the covenant is no longer subject to concentrationlimits in respect of larger investments. This change will offer more covenantheadroom in the future. The Board, having considered the latest realisation projections provided byArle, have concluded that the Company will have access to sufficient resourcesover the next two years to meet the obligations under the terms of the new notepurchase agreement. However, as the Company does not (and cannot) control therealisation process, there remains a risk that, if insufficient realisationsare achieved by our investment manager over the next two years, new sources offinance might be required to provide additional liquidity. Follow-on investment and realisation activity During 2013, Candover invested £5.0 million alongside the Candover 2005 Fund toprovide follow-on funding for Parques and Stork. In the third quarter, one of the three remaining investments in the Candover2001 Fund was realised. Qioptiq, a world leader in the manufacture of highprecision optical components, modules and solutions for military and civilapplications, was sold to Excelitas Technologies on 30th September 2013 withthe transaction completing on 1st November 2013. Candover's initial proceeds,including carried interest, were £11.3 million (€13.6 million) with furtherproceeds of £1.2 million (€1.5 million) receivable in the first half of 2014.In addition, Candover may receive up to €1.0 million held in escrow in theevent certain criteria are met. After the end of the year DX Group, an investment made by the Candover 2005Fund, was successfully listed on AIM in London. Candover will receive proceedsof £3.4 million compared to a valuation at 31st December 2013 of £2.5 million. Outstanding commitments The Company had outstanding commitments to co-investments alongside theCandover 2005 Fund of £5.9 million at the start of the year which were reducedas a result of the follow-on investment noted above. The Company's remainingcommitment to the Candover 2005 Fund lapsed on 26th August 2013. Termination of the Candover 2001 Fund Following two extension periods to its original eight year life, the Candover2001 Fund (which had two investments remaining: Qioptiq and Innovia) terminatedon 13th June 2013. Candover and the 2001 Fund investors agreed theseinvestments would continue to be managed by Arle until they could be realisedat an appropriate price in an orderly manner. Qioptiq was disposed of duringSeptember 2013. Since the year end Innovia has been refinanced pendingconclusion of Arle's review of a number of options to realise value for Fundinvestors. Outlook The recovery in the value of the portfolio seen over the past year isencouraging. A more active corporate environment, together with the successfulrefinancing of the US private placement loan notes, including more flexibilityto repay the new notes early, offer greater potential for the Company to startreturning cash to shareholders over the next two years. We will continue tokeep a tight control on the costs of the business to minimise erosion of NAV,and Arle will continue with its stewardship of the portfolio to enhance thevalues of the portfolio companies prior to their realisation. Malcolm Fallen Chief Executive Officer 28th February 2014Financial review Net asset value per share Net asset value per share after exceptional non-recurring costs was 715p, afull year increase of 18% since 31st December 2012 (608p) and an increase of14% since 30th June 2013 (627p). See Table 1. Investments The valuation of investments, including carried interest and accrued loan noteinterest, was £191.2 million at 31st December 2013 (31st December 2012: £163.5million). Valuations increased for the year by £33.5 million before currencyeffects and after the disposal and acquisition of assets, representing anincrease of 20% on the value of these investments over their 31st December 2012value, and an increase of 17% since 30th June 2013. The overall increase of 21%in the value of the portfolio was £34.8 million, which included £1.3 million offavourable foreign currency movements. See Table 2. Net debt and loan-to-value covenant Candover's net debt increased from £26.7 million at 31st December 2012 to £47.7million at 31st December 2013. This reflects net investment inflows of £6.3million, offset by cash interest charges of £12.2 million, cash charges inrelation to the refinancing of £9.5 million, including the impact of makewhole, and operating expenses. At this level of net debt the loan-to-valueratio of the Company's net debt was 25.4% compared to 18.1% at 31st December2012. See Table 3. Following the expiry of the Candover 2005 Fund on 26th August 2013 there are nocommitments remaining. Profit before and after tax Net revenue profit before tax and exceptional non-recurring losses fromoperations for the year was £1.1 million compared to a loss of £12.6 million inthe prior year. Exceptional non-recurring loss of £0.6 million (2012: gain of £2.0 million)comprises a write-off relating to the liquidation of subsidiaries and theeffect of the unwinding of the discount applied to the property provision. Reported net revenue profit after taxation was £2.5 million compared to a lossof £13.1 million in the prior year. Table 1 £m p/share Net asset value at 31stDecember 2012 132.8 608 Gain on financial instruments and other income1 35.0 160 Recurring administrative expenses (4.9) (22) Finance costs non-recurring: refinancing (4.5) (21) Finance costs recurring (6.3) (29) Others (including tax) 3.3 15 22.6 103 Currency impact: - Unrealised investments 1.3 6 - Restatement of cash and cash equivalents (1.3) (6) - Translation of loan and fair value hedge adjustment 1.5 7balances Exceptional non-recurring losses: liquidation of (0.6) (3)subsidiaries Net asset value at 31stDecember 2013as reported 156.3 715 1Stated before favourable currency impact of £1.3 million and after including £1.5 million of income on the realisation of Qioptiq Table 2 £m Investments at 31stDecember 2012 163.5 Disposals at valuation (12.1) Additions at cost 5.0 Investments adjusted for additions and disposals 156.4 Revaluation of investments: - Valuation movements before currency impact 33.5 - Currency impact on unrealised investments 1.3 Investments at 31st December 2013 191.2 Table 3 31st December 31st December 2013 2012 £m £m Loans and borrowings 48.6 151.0 Less fair value hedge adjustment - (7.0) Deferred costs 2.1 0.4 Value of bonds 50.7 144.4 Cash (3.0) (117.7) Net debt 47.7 26.7 Manager's portfolio review ARLE CAPITAL PARTNERS LIMITED Introduction Arle is a private equity partnership with two distinct areas of focus. First,Arle is a diversified private equity asset manager, and in addition to actingas investment manager for the Candover Funds manages special purpose vehicles.Second, Arle is a mid-market energy investor in buyouts, carve-outs andplatform creations. Arle is the General Partner of the Candover 2001 Fund andManager of the Candover 2005 Fund, Candover 2008 Fund (together "the CandoverFunds") and the Preston Fund. Portfolio overview The Candover Funds portfolio performed well in 2013, with a marked improvementin the second half of the year. Collectively, the portfolio investmentsreported a 3% increase in revenues and a 4% increase in EBITDA in the 12 monthsended 31st December 2013. This was driven by strong earnings growth at Expro,Parques and Innovia. The trading performance is reflected in the 11% increasein the combined value of the Funds compared to the valuation at 31st December2012, which resulted in a 21% uplift in the Candover portfolio due to itsoverweighting in Expro. The portfolio will become increasingly concentrated on fewer assets as wecontinue to execute our realisation strategy. In 2013, we completed our fourthfull realisation with the sale of Qioptiq to Excelitas Technologies, leavingten assets remaining in the portfolio. Since the year end, DX floated on AIM ata market capitalisation of £200 million. The Candover Funds sold their fullshare allocation at listing. As at 31st December 2013, the four largestinvestments, Expro, Stork, Parques and Technogym together represented 84% ofthe portfolio. Expro International Expro, the international oilfield services company, continues to performstrongly in FY2014 with YTD earnings significantly ahead of the prior year.Expro continues to win a number of valuable new contracts with the order bookstanding at a record high at the end of December. In March, the company openeda new facility in Aberdeen creating 150 new jobs. The facility was inauguratedby Secretary of State for Business, Innovation and Skills, Vince Cable. In July, Expro issued a further tranche of $100 million 8.50% senior securednotes, repayable in 2016. The proceeds will be used to support Expro throughits next period of development. Parques Reunidos Parques, a global operator of attraction and water parks, experienced achallenging trading environment during 2013. However, whilst trading wasaffected by a significant VAT increase in Spain as well as poor weather duringthe US high season, Parques witnessed strong trading in Europe during thesummer. The renewed focus on organic growth is yielding results, with bothnumber of visitors and spend per head increasing in Europe during the summer.In addition, the group benefitted from cost saving initiatives rolled outacross the business (to offset the VAT impact), as well as from signs ofeconomic recovery in Spain and Italy. Stork BV Stork comprises two discrete and separately financed entities: Stork TechnicalServices ("STS") which provides knowledge-based managed services to energycompanies, and Fokker Technologies ("Fokker") which manufactures components andsystems for the global aerospace industry. In January 2013, independentgovernance structures and boards were put in place, thereby completing theseparation of the two businesses that began in 2012 and which is intended tolay the foundation for future exit scenarios. STS 2013 trading was disappointing due to a combination of exceptional market andoperational issues. The company is well progressed with the implementation of anumber of improvements identified as part of a strategic review of thebusiness, which it undertook earlier in the year. A new management team is nowin place, led by CEO Arnold Steenbakker, the former CEO of Fugro who has over30 years of industrial experience. In December, STS successfully amended its €110 million revolving credit facility with its banking syndicate. Fokker Trading at Fokker, the global aerospace specialist and manufacturer, was behindprior year principally due to weaker trading in the services business,partially offset by better performance by the product business. Fokkercontinued to benefit from a strong order book in 2013 and won a series ofstrategic contracts during the year. Technogym Technogym, a leading global producer of fitness and wellness equipment,celebrated its 30th anniversary in 2013. The company witnessed increasedcompetition during the year with low cost manufacturers and other competitorsbenefiting from the strength of the Euro against the US Dollar. However, theunderlying growth fundamentals for fitness and wellness remain strong, andemerging economies such as Latin America and China present significantopportunities for Technogym. The company continues to expand its presence andoperations in these regions. Innovia In early 2013, Innovia, the specialist film and polymer banknote business,successfully completed the acquisition of the 50% share in SecurencyInternational (rebranded Innovia Security), from its 50/50 joint venturepartner the Reserve Bank of Australia. Innovia's two divisions, Films andSecurity, continue to perform well. During 2013, the Films division announcedthat £20 million would be invested to increase the capacity of itspolypropylene plant at its Cumbrian headquarters, including a state of the artgas turbine. In December, the Bank of England announced that £5 and £10 noteswould be issued on polymer substrate with the transition starting in 2016 andthat it is expecting to partner with Innovia Security on this contract. Innoviawas also recognised for its staff training programme winning "2013 ApprenticeTeam of the Year" in the Brathay Apprentice Challenge, run nationally in theUK. Hilding Anders Hilding Anders, the leading manufacturer of beds and mattresses in Europe,Russia and Asia, continued to strengthen its Emerging Markets business byexpanding operations in Russia and China. In addition, the company consolidatedits position in the Swedish market with the acquisition of Carpe Diem, amanufacturer of premium bedding. Hilding Anders was refinanced in September2013, and now has a strong capital structure from which to grow across itsinternational footprint. DX Group DX Group, the leading independent logistics and parcel distribution company,completed the integration of Nightfreight during the year, launching DX Freightin August 2013. The company consolidated its service offering during the yearand sold Business Direct to ByBox. The disposal allows DX to focus more clearlyon its core B2B and B2C services. Post the year end, the company floated on AIMwith the Candover Funds selling their full share allocation. Realisations Arle continues to actively prepare each of its businesses for exit. In October,Qioptiq was sold to Excelitas Technologies for an undisclosed amount. By theyear end, the sale had generated proceeds of €109.4 million for the Candover2001 Fund (Candover's share £11.3 million including carried interest). Inaddition, in February 2014, DX floated on AIM, facilitating a full exit for theCandover 2005 Fund. The sale generated proceeds of £34 million (Candover'sshare £3.4 million). The principal realisations during 2013 are set out in Table 1. Follow-on investments During the year, Candover invested a total of £5.0 million in follow-oninvestments alongside the Candover 2005 Fund. Parques received an investment of£1.8 million to provide funding for capital growth expenditure, while £3.2million was invested in Stork. Table 1 Candover Total Type £m Proceeds €m Portfolio Qioptiq 7.2 109.4 Private equity sale Other Candover 2001 Fundcarried interest 4.1 - Crystallisation of carried interest Total realisations - 2013 11.3 109.4 Portfolio composition The portfolio is largely based in Western Europe. Whilst the UK represented 45%of the ten investments by value, the portfolio companies themselves are welldiversified in the regions in which they trade. The portfolio was exposedmostly to the energy sector (40%). Portfolio valuation review The Candover Funds reported an 11% valuation increase year-on-year reflecting asteadily improving economic backdrop, while the increase in the value ofCandover's co-investments in the portfolio of £33.2 million (152p per share)represented a 21% uplift on its value at the start of the year, after adjustingfor additions and disposals. The difference between Candover's valuation and the valuation of the Funds ismainly due to Candover holding a larger proportionate interest in Exprocompared to the Funds. Expro was written up to reflect its continued strong trading performance, andwas responsible for the majority of the portfolio's overall valuation uplift.However, the uplift was partially offset by Stork which was written down toreflect weaker trading at STS as a result of deteriorating chemicals and powermarkets in the Benelux region. Table 2 shows the valuation movement by reference to each portfolio company. Table 2 Residual cost1 Valuation Additions Valuation Valuation Valuation at Valuation at 31st and movement movement 31stDecember movement December disposals excluding attributable 2013Portfolio £m 2012 FX2 to FX2 £m pence percompany £m £m £m £m share2 Expro 92.1 31.6 - 41.7 (0.7) 72.6 188International Parques 30.0 34.8 1.8 0.1 0.7 37.4 4Reunidos Stork 42.5 46.0 3.2 (15.6) 0.9 34.5 (67) Technogym 29.2 16.0 - (0.1) 0.3 16.2 1 Innovia Films 2.7 6.6 - 2.4 0.1 9.1 11 Hilding 24.3 3.8 - 1.8 0.1 5.7 9Anders GET 1.2 3.6 - 1.5 (0.3) 4.8 5 DX Group 21.4 2.7 - (0.2) - 2.5 (1) Ono 2.2 1.7 - 0.5 - 2.2 2 Alma 15.3 - - - - - - All 260.9 146.8 5.0 32.1 1.1 185.0 152investments3 Candover 2001 0.0 8.0 (3.9) 1.5 0.0 5.6 7Fund carriedinterest Other 24.8 8.7 (8.2) (0.1) 0.2 0.6 1investments4 Total 285.7 163.5 (7.1) 33.5 1.3 191.2 160 1 Residual cost is original cost less realisations to date 2 Compared to the valuation at 31st December 2012 or acquisition date, if later 3 Excluding Candover 2001 Fund carried interest 4 Represents assets sold in 2013 and other co-investments Ten largest investments 1 Expro International Industry sector: Energy Geography: UK Date of investment: July 2008 Residual cost of investment £m: 92.1 Directors' valuation £m: 72.6 Change over prior valuation £m: 41.0 Effective equity interest (fully 4.7%diluted): % of Candover's net assets: 46.4% Basis of valuation: Multiple of earnings Dividends received £m: - Year end: March 2013 Sales: US$1,203m Earnings1: US$290m Expro is a leading oilfield service provider specialising in Well FlowManagement. The company provides services and products that measure, improve,control and process flow from high-value oil and gas wells, from explorationand appraisal through to mature field production optimisation and enhancement. Expro's vision is to be the market leader in well flow management, using theindustry's best people, to deliver the highest standards of safety, quality andpersonalised customer service. Expro's 40 years of experience and innovationempowers the company to offer tailor-made solutions for customers across theenergy sector, including multinational oil majors, as well as state-ownednational oil companies. With 5,000 employees across 50 countries, Expro offersa global service solution. The company continues to deliver a strong financial performance throughout FY2014, with YTD earnings well ahead of prior year, and budget driven by strongactivity in the subsea sector. Expro continues to secure a number of valuablenew contracts with the order book standing at a record high at the end ofDecember. In July 2013, Expro issued a further tranche of $100 million 8.50% seniorsecured notes, repayable in 2016. The proceeds will be used to support Exprothrough its next period of development. Going forward, Arle expects to see acontinuing improvement in Expro's performance as a result of growing demand forits services from the international oil & gas sector and increased capitalexpenditure on new equipment within the sector. The trading outlook for Exproremains positive and bid activity continues to be strong. The valuation has been increased by £41.0 million, an increase of 188p pershare after adverse currency movements of £0.7 million. Company website www.exprogroup.com 2 Parques Reunidos Industry sector: Services Geography: Spain Date of investment: March 2007 Residual cost of investment £m: 30.0 Directors' valuation £m: 37.4 Change over prior valuation £m: 0.8 Effective equity interest (fully 3.9%diluted): % of Candover's net assets: 23.9% Basis of valuation: Multiple of earnings Dividends received £m: - Year end: September 2013 Sales: €540m Earnings1: €167m Parques is one of the world's leading operators of attraction parks. Thecompany enjoys strong positions in all its key markets and the majority of itsparks are the leading family attractions in their respective surrounding areas.Parques operates 69 sites across 12 countries, attracting around 26 millionvisitors each year. These include theme or amusement parks, nature and animalparks, water parks, family entertainment centres and cable cars. 2013 was a transitional year for Parques. Whilst trading was negativelyinfluenced by the significant VAT increase (from 8% to 21%) in Spain and coldand wet weather on the East Coast of America during the peak summer months,trading in Europe improved during the summer months. This reflected significantprogress in driving organic growth through the successful roll-out of marketing& yield management initiatives, cost reduction, good weather during the summerin Northern Europe and signs of economic recovery in Spain and Italy. In parallel, management continues to drive through operational improvementsthroughout the park portfolio, particularly in those acquired in the past 18 to24 months. The economic outlook for 2014 appears slightly more positive than last year.The US economy should allow for continued healthy growth. Spain and Italy areshowing early, albeit fragile, signs of recovery and the economies in the restof Europe should allow for stable growth. In addition, new management contractsand selective acquisitions will provide additional earnings momentum. The investment was written up by £0.8 million (4p per share) after including afavourable foreign exchange movement of £0.7 million. Company website www.parquesreunidos.com 3 Stork Industry sector: Industrials Geography: The Netherlands Date of investment: January 2008 Residual cost of investment £m: 42.5 Directors' valuation £m: 34.5 Change over prior valuation £m: (14.7) Effective equity interest (fully 4.6%diluted): % of Candover's net assets: 22.1% Basis of valuation: Multiple of earnings Dividends received £m: - Year end: December 2011 Sales: €1,636m Earnings1: €111m Stork, the Dutch engineering conglomerate, separated its two subsidiaries,Fokker and STS, during 2012. Stork, in aggregate, was valued at £34.5 millionat the end of 2013, down 67p per share. The valuation was affected bydevelopments at STS and Fokker, and by the overall cost of debt. Stork Technical Services STS is a global provider of knowledge-based asset integrity services for theoil & gas, power and chemical sectors and employs 14,500 people across the UK &Africa, Continental Europe, the Middle East, Asia Pacific and the Americas. STSprovides innovative solutions in the areas of asset integrity, consultancy,maintenance concepts, repair, renovation, new construction, relocations andother related complex projects. 2013 trading at STS was disappointing due to a combination of operationalissues and the continuation of poor market conditions in the European chemicalsand power markets. In July 2013, Arnold Steenbakker was appointed CEO. Arnoldhas over thirty years' industrial experience having held senior managementroles at Fugro and Fluor. A strategic review of the business commenced in Julyand the management have started to roll out various new business improvementinitiatives. In December 2013, STS announced that it had amended its €110 million revolvingloan facility with its banking syndicate. The amendment will provide STS withincreased covenant headroom and give it a solid platform from which to developthe business. The strategic focus for STS over the next 12 months will be to improveoperational effectiveness through the roll-out of the improvement programmewhile continuing to increase its exposure to fast growing energy markets. Fokker Technologies Fokker is active in the civil, defence and service sectors of Aerospace spreadover 75 different aircraft types. Fokker designs and builds business units(aerostructures, wiring, landing gear) and produces over 7,000 advancedcomponents for the global aerospace industry. The company also suppliesintegrated parts availability services and MRO services to aircraft owners andoperators worldwide. R&D and production and service facilities are located inEurope as well as the Americas and Asia. Trading in 2013 was slightly behind prior year. The design and build businessestraded ahead of prior year in spite of ongoing investments in five importantnew aircraft programmes. The overall results were negatively impacted by aweaker trading of the Fokker fleet in the services business. Fokker's orderbook remains strong as customers continue to seek innovative solutions applyingadvanced technologies. In 2014, Fokker will be focusing on capitalising on the order book and growingthe aerostructures and electrical systems business units and will focus onreducing the cost base of the Fokker Services business unit. Company website www.stork.com www.storktechnicalservices.com www.fokker.com 4 Technogym Industry sector: Industrials Geography: Italy Date of investment: August 2008 Residual cost of investment £m: 29.2 Directors' valuation £m: 16.2 Change over prior valuation £m: 0.2 Effective equity interest (fully 3.2%diluted): % of Candover's net assets: 10.4% Basis of valuation: Multiple of earnings Dividends received £m: - Year end: December 2012 Sales: €412m Earnings1: €52m Technogym is a global leader in the design and manufacture of premium brandedfitness equipment and wellness solutions and enjoys strong brand recognitioninternationally. The Group serves major fitness club chains, as well asprofessional customers in the hospitality, corporate, education, medical andmilitary markets. In 2013, despite slow economic growth and currency headwinds in Europe,Technogym maintained its sales and market share. The gym equipment marketwitnessed increased competition with both low cost manufacturers and othercompetitors benefiting from the strength of the Euro versus the US Dollar.During the year Technogym continued to invest in the development of newinnovative products, and increased its market coverage by enlarging its salesnetwork. As a result, the combination of foreign exchange, competition andbusiness investment impacted performance in 2013. In 2014, Technogym will focus on growth through continued investment in salesand increased exposure to high growth emerging markets as well as improvinginternal efficiencies. The investment was written up by £0.2 million (1p per share) after includingfavourable exchange rate movements of £0.3 million. Company website www.technogym.com 5 Innovia Films Industry sector: Industrials Geography: UK Date of investment: September 2004 Residual cost of investment £m: 2.7 Directors' valuation £m: 9.1 Change over prior valuation £m: 2.5 Effective equity interest (fully 5.7%diluted): % of Candover's net assets: 5.8% Basis of valuation: Multiple of earnings Dividends received £m: - Year end: December 2012 Sales: €469m Earnings1: €54m Innovia manufactures speciality films for the tobacco, labelling and packagingindustries and is also the market leader in the manufacture of polymer banknote substrate. The business enjoys strong positions in niche markets andfocuses on higher value-added applications. Innovia traded well recently due to a strong performance by the Films division.The business continues to successfully navigate the input price volatility seenin previous years and to invest in new technology to help insulate the businessfrom future swings. The key event during the year was the acquisition of the Reserve Bank ofAustralia's 50% joint venture stake in Securency (renamed Innovia Security),which is now fully integrated into the Group. Following a public consultationin late 2013, the Bank of England announced that £5 and £10 notes would beissued on polymer substrate with the transition starting in 2016. The Bank ofEngland announced that it is expecting to partner with Innovia Security on thiscontract. The valuation has been increased by £2.5 million, an increase of 11p per shareafter favourable currency movements of £0.1 million. Company website www.innoviafilms.com 6 Hilding Anders Industry sector: Industrials Geography: Sweden Date of investment: December 2006 Residual cost of investment £m: 24.3 Directors' valuation £m: 5.7 Change over prior valuation £m: 1.9 Effective equity interest (fully 4.3%diluted): % of Candover's net assets: 3.6% Basis of valuation: Multiple of earnings Dividends received £m: - Year end: December 2012 Sales: SEK 7,410m Earnings1: SEK 1,602m Hilding Anders is Europe's largest bed and mattress manufacturer and isheadquartered in Sweden. It has leading market positions in more than 40countries in Europe and Asia, has over 25 manufacturing facilities and circa7,600 employees. Hilding Anders has an innovative and diverse portfolio ofproducts sold as private label or branded products. It has grown bothorganically and through acquisition and, in more recent years, hassignificantly reinforced its presence in emerging markets. Hilding Anders traded broadly in line with expectations in 2013, with strongperformances in Russia as well as certain regions of Europe and Asia. As planned, Anders Pettersson stepped down as Chief Executive in December 2013following the successful implementation of a new growth strategy and thecompletion of an organisational restructuring, and will become ExecutiveChairman. His replacement, Alex Myers has significant experience of working inconsumer oriented businesses such as Unilever, Orkla, and Carlsberg. Prior tojoining Hilding Anders, he was President & CEO of ArjoHuntleigh and ExecutivePresident of Extended Care at the Getinge Group. In September, Hilding Anders successfully refinanced over €800 million of itsdebt facilities, extending near-term debt maturities by three years to December2017 and reducing net debt to 4.8x via a considerable pre-payment of seniordebt facilities. As part of the refinancing process KKR Asset Managementinvested €350 million into the capital structure of the business. The new debtstructure provides Hilding Anders' with a strong financial foundation tosupport its future growth. The outlook for 2014 is similar to last year with growth expected to begenerated by the emerging markets. The investment was written up by £1.9 million (9p per share) after includingfavourable foreign exchange movements of £0.1 million. Company website www.hildinganders.com 7 GET Industry sector: Services Geography: Norway Date of investment: December 2007 Residual cost of investment £m: 1.2 Directors' valuation £m: 4.8 Change over prior valuation £m: 1.2 Effective equity interest (fully 0.5%diluted): % of Candover's net assets: 3.1% Basis of valuation: Multiple of earnings Dividends received £m: - Year end: December 2012 Sales: NOK 2,132m Earnings1: NOK 948m GET, a cable network operator, operates in Oslo and the major cities ofsouthern Norway, passing around 55% of households in Norway's metropolitanregions. It is the only cable operator within its franchise area and offers`triple play' services - TV, high speed broadband and telephony - to theresidential market. GET was sold in December 2007, with Candover and theCandover 2005 Fund reinvesting some of the exit proceeds for a small minoritystake. The valuation of Candover's reinvestment has increased by £1.2 million (5p pershare) after including adverse exchange rate movements of £0.3 million. Company website www.get.no 8 DX Group Industry sector: Services Geography: UK Date of investment: September 2006 Residual cost of investment £m: 21.4 Directors' valuation £m: 2.5 Change over prior valuation £m: (0.2) Effective equity interest (fully 4.0%diluted): % of Candover's net assets: 1.6% Basis of valuation: Multiple of earnings Dividends received £m: - Year end: June 2013 Sales: £306m Earnings1: £34m DX is the largest independent mail, courier and logistics operator in the UKand Ireland. Servicing businesses, the public sector and consumers, the companydelivers and collects more than one million letters and parcels per day,reaching 99.7% of the UK's residents. DX specialises in the delivery of time sensitive, high value and businesscritical items, and delivers passports and visas for the UK Government andforeign embassies. Key customers include the legal sector, financialinstitutions, national and local government agencies, the health andpharmaceutical sector, high street retailers and e-retailers. DX has performed in line with expectations in 2013 with revenues growing by 6%and with profits up 5% year-on-year. The strong momentum has continued into thenew financial year with a number of operational improvements also beingimplemented. The sale of Business Direct to ByBox has enabled the company tofocus more clearly on its core B2B and B2C operations. The outlook remains positive for the business with further deleveragingforecast through operating cash flow generation. Since the year end, DX floatedon AIM generating proceeds of £34 million (Candover's share £3.4 million)representing a 34% uplift on the valuation and facilitated a full exit from theinvestment for the Candover Funds. The investment has been written down by £0.2 million (1p per share). Company website www.thedx.co.uk 9 Ono Industry sector: Services Geography: Spain Date of investment: November 2005 Residual cost of investment £m: 2.2 Directors' valuation £m: 2.2 Change over prior valuation £m: 0.5 Effective equity interest (fully 0.1%diluted): % of Candover's net assets: 1.4% Basis of valuation: Multiple of earnings Dividends received £m: - Year end: December 2012 Sales: €1,573m Earnings1: €752m ONO is the leading Spanish cable operator in which Candover and the Candover2001 Fund have a small minority interest. The investment has been written up by £0.5 million (2p per share). Company website www.ono.es 10 Alma Consulting Group Industry sector: Services Geography: France Date of investment: December 2007 Residual cost of investment £m: 15.3 Directors' valuation £m: - Change over prior valuation £m: - Effective equity interest (fully 4.9%diluted): % of Candover's net assets: - Basis of valuation: Multiple of earnings Dividends received £m: - Year end: December 2012 Sales: €224m Earnings1: €58m Alma Consulting Group ("Alma") is one of the European leaders in cost reductionand optimisation, offering a wide range of consulting services. In 2013, Alma reported a fall in both revenues and EBITDA due to weak tradingarising from significant legislative changes in France which have particularlyimpacted its core Social division. The investment valuation is unchanged having been fully written down in theprior year. Company website www.almacg.com Notes: 1 Earnings figures are taken from the portfolio company's most recent auditedaccounts or financial statements filed with regulatory bodies. The figuresshown are the total earnings on ordinary activities before exceptional items,depreciation, goodwill amortisation, interest and tax for the period. Other investments The remainder of the portfolio comprises: Candover 2001 Fund carried interest Candover's share of the Candover 2001 Fund carried interest was valued at £5.6million. Update on Fund terms Following two extensions to the original eight year life of the Candover 2001Fund, the Fund terminated on 12th June 2013. Following the sale of Qioptiq, twoinvestments remain: Innovia and Ono. It has been agreed with the Company andthe 2001 Fund investors that these investments will continue to be activelymanaged by Arle until they can be realised at an optimum time and value. The follow on investment period for the Candover 2005 Fund terminated on 26thAugust 2013 following a two year extension. No further amounts can be calleddown for investment in the Fund. The ten year term of the Fund comes to an endon 26th August 2015. The investment period for the Candover 2008 Fund terminated on 12th January2010. Follow on investments can be made until 12th January 2015 with €42million available for follow on investment in Expro. Candover has no remainingcommitment in respect of the 2008 Fund. Outlook for 2014 Arle continues to work with each of our management teams to optimise theoperational and financial performance of each portfolio company and to readythe businesses for exit. As and when Arle and management consider market andtrading conditions to be favourable, we will seek to execute realisations. Arle Capital Partners Limited 28th February 2014 Ten largest investments at 31st December 2013 Movement Effective Residual from equity % of Date of cost of Directors' 31st Dec interest Candover's Basis ofInvestment investment investment valuation 2012 (fully d net assets valuation £m £m iluted) Expro Jul-08 92.1 72.6 41.0 4.7% 46.4% MultipleInternational ofOilfield services earnings Parques Reunidos Mar-07 30.0 37.4 0.8 3.9% 23.9% MultipleOperator of ofattraction parks earnings Stork Jan-08 42.5 34.5 (14.7) 4.6% 22.1% MultipleEngineering ofconglomerate earnings Technogym Aug-08 29.2 16.2 0.2 3.2% 10.4% MultiplePremium fitness ofequipment and earningswellness products Innovia Films Sep-04 2.7 9.1 2.5 5.7% 5.8% MultipleTransparent and ofcoated films and earningspolymer banknotes Hilding Anders Dec-06 24.3 5.7 1.9 4.3% 3.6% MultipleBed and mattress ofmanufacturer earnings GET Dec-07 1.2 4.8 1.2 0.5% 3.1% MultipleNorwegian cable ofnetwork operator earnings DX Group Sep-06 21.4 2.5 (0.2) 4.0% 1.6% MultipleMail services of earnings ONO Nov-05 2.2 2.2 0.5 0.1% 1.4% MultipleSpanish cable ofoperator earnings Alma Consulting Dec-07 15.3 - - 4.9% - MultipleGroup ofCost consultancy earnings Ten largest investments Analysis by value at 31st December 2013 (representing 100% of the Arle managedportfolio) By valuation method By sector 1. Multiple of earnings 100% 1. Energy & Natural Resources 40% 2. Industrials 35% 3. Services 25% By region By age 1. United Kingdom 45% 1. Greater than 5 years 100% 2. Spain 21% 3. Benelux 19% 4. Italy 9% 5. Nordic 6% Group statement of comprehensive income for the year ended 31st December 2013 Unaudited Audited Year to 31st December Year to 31st December 2013 2012 Notes Revenue Capital Total1 Revenue Capital Total1 £m £m £m £m £m £m Gains/(losses) on financialinstruments at fair valuethrough profit and loss Realised (losses)/gains - (1.6) (1.6) - 1.8 1.8 Unrealised gains/(losses) - 27.7 27.7 - (13.0) (13.0) Total - 26.1 26.1 - (11.2) (11.2) Revenue/(expense) Investment and other income 10.2 - 10.2 (5.8) - (5.8) Total 10.2 - 10.2 (5.8) - (5.8) Recurring administrative (3.7) (1.2) (4.9) (4.0) (1.3) (5.3)expenses Exceptional non-recurring 2 (0.6) - (0.6) 2.0 - 2.0costs/(gains) Profit/(loss)before finance 5.9 24.9 30.8 (7.8) (12.5) (20.3)costs and taxation Finance costs (5.4) (5.4) (10.8) (2.8) (2.8) (5.6) Exchange movements on - 1.5 1.5 - 4.6 4.6borrowings Profit/(loss)before taxation 0.5 21.0 21.5 (10.6) (10.7) (21.3) Analysed between: Profit/(loss) before (12.6) (10.7) (23.3)exceptional non-recurring 1.1 21.0 22.1(costs)/gains Exceptional non-recurring (0.6) - (0.6) 2.0 - 2.0(costs)/gains Taxation 2.0 - 2.0 (2.5) - (2.5) Profit/(loss)after taxation 2.5 21.0 23.5 (13.1) (10.7) (23.8) Other comprehensive income: Exchange differences on - - -translation of foreign - - -operations Total comprehensive income 2.5 21.0 23.5 (13.1) (10.7) (23.8) Earnings per ordinary share: Total earnings per share - (60p) (49p) (109p)basic and diluted 11p 96p 107p 1 The total column represents the Group statement of comprehensive income underIFRS i All of the gain for the year and the total comprehensive income for the yearare attributable to the owners of the Company ii The supplementary revenue and capital columns are presented for informationpurposes as recommended by the Statement of Recommended Practice issued by theAssociation of Investment Companies Group statement of changes in equity for the year ended 31st December 2013 Unaudited Called Share Other Capital Capital Revenue Total up premium reserves reserves reserves - reserve Equity share account -realised unrealised capital £m £m £m £m £m £m £m Balance at 1stJanuary 5.5 1.2 (0.1) 320.4 (182.5) (11.7) 132.82013 Net revenue after tax - - - - - 2.5 2.5 Unrealised gain on - - - - 27.7 - 27.7financial instruments Realised gain/(loss) - - - 4.3 (5.9) - (1.6)on financialinstruments Exchange movements on - - - - 1.5 - 1.5borrowing Costs net of tax - - - (6.6) - - (6.6) Profit after tax - - - (2.3) 23.3 2.5 23.5 Total comprehensive - - - (2.3) 23.3 2.5 23.5income Balance at 31st 5.5 1.2 (0.1) 318.1 (159.2) (9.2) 156.3December 2013 Audited Called Share Other Capital Capital Revenue Total up premium reserves reserves reserves - reserve Equity share account -realised unrealised capital £m £m £m £m £m £m £m Balance at 1stJanuary 5.5 1.2 (0.1) 311.6 (163.0) 1.4 156.62012 Net revenue after tax - - - - - (13.1) (13.1) Unrealised loss on - - - - (13.0) - (13.0)financial instruments Realised gain/(loss) - - - 12.9 (11.1) - 1.8on financialinstruments Exchange movements on - - - - 4.6 - 4.6borrowing Costs net of tax - - - (4.1) - - (4.1) Profit after tax - - - 8.8 (19.5) (13.1) (23.8) Total comprehensive - - - 8.8 (19.5) (13.1) (23.8)income Balance at 31st 5.5 1.2 (0.1) 320.4 (182.5) (11.7) 132.8December 2012 Group statement of financial position at 31st December 2013 Unaudited Audited 31st December 2013 31st December 2012 £m £m £m £m Non-current assets Financial investments designated atfair value through profit and loss Portfolio companies 185.2 155.1 Other financial investments 6.0 8.4 191.2 163.5 Trade and other receivables 9.0 8.5 Deferred tax asset 3.0 1.0 203.2 173.0 Current assets Trade and other receivables 1.4 0.7 Current tax asset 0.1 - Cash and cash equivalents 3.0 117.7 4.5 118.4 Current liabilities Other payables (1.2) (5.0) Provisions (1.6) (2.6) (2.8) (7.6) Net current assets 1.7 110.8 Total assets less current 204.9 283.8liabilities Non-current liabilities Loans and borrowings (48.6) (151.0) Net assets 156.3 132.8 Equity attributable to equityholders Called up share capital 5.5 5.5 Share premium account 1.2 1.2 Other reserves (0.1) (0.1) Capital reserve - realised 318.1 320.4 Capital reserve - unrealised (159.2) (182.5) Revenue reserve (9.2) (11.7) Total equity 156.3 132.8 Net asset value per share Basic 715p 608p Diluted 715p 608p Group cash flow statement for the year ended 31st December 2013 Unaudited Audited Year to 31st December Year to 31st 2013 December 2012 £m £m £m £m Cash flows from operatingactivities Cash flow from operations (4.5) 3.8 Interest paid (12.2) (10.0) Tax received - - Net cash outflow from operating (16.7) (6.2)activities Cash flows from investingactivities Purchase of financial investments (5.0) (8.3) Sale of financial investments 9.8 23.1 Net cash inflow from investing 4.8 14.8activities Cash flows from financingactivities Loan notes issue 49.2 - Loan notes repayment (150.7) (7.5) Net cash outflow from financing (101.5) (7.5)activities (Decrease)/Increase in cash and (113.4) 1.1cash equivalents Opening cash and cash equivalents 117.7 118.1 Effect of exchange rates and (1.3) (1.5)revaluation on cash and cashequivalents Closing cash and cash equivalents 3.0 117.7 Notesto the financial statements Note 1 The preliminary results for the year ended 31st December 2013 are unaudited.The financial information included in this statement does not constitute theGroup's statutory accounts within the meaning of Section 434 of the CompaniesAct 2006. Statutory accounts for the year ended 31st December 2013 will befinalised on the basis of the financial information presented by the directorsin this preliminary announcement and will be delivered to the Registrar ofCompanies in due course. The information given as comparative figures for the year ended 31st December2012 does not constitute the Company's statutory accounts for those financialperiods. Statutory accounts for the year ended 31st December 2012, prepared inaccordance with International Financial Reporting Standards as adopted by theEuropean Union, have been reported on by the Company's auditors and deliveredto the Registrar of Companies. The report of the auditors was unqualified anddid not contain a statement under Section 498 (2) or (3) of Companies Act 2006. Note 2 Exceptional non-recurring (losses)/gainsfor the Group. There were exceptional non-recurring losses for the Group in the year of £0.6million (2012: gain £2.0 million).