30th Aug 2011 07:00
For immediate release on 30th August 2011
Candover Investments plc Interim results for the half year ended 30th June 2011 - Net assets per share of 839p at 30th June 2011 (31st December 2010: 814p), a3.1% increase. The increase reflects an uplift in portfolio company valuationsof £13.1 million before currency movements, offset by management and financingcosts. Net assets were £183.4 million (31st December 2010: £177.9 million)
- Completion of sale of Candover Partners Limited (CPL) and the sale of a strip of portfolio investments, as part of strategy to progressively return cash to shareholders, has delivered a significant improvement in the Company's overall stability
- Net debt of £39.6 million at 30th June 2011, reduced from £91.0 million atthe year-end with the ratio of net debt to net assets falling to 21.6% (31stDecember 2010: 51.2%).
- Prepayment offer at par made to noteholders resulting in £27.2 million reduction in outstanding notes lowering ongoing financing costs
- Loan-to-value covenant improves to 18.8% from 32.6% at 31st December 2010.
- Outstanding commitments to the Candover 2005 Fund at 30th June 2011 werereduced to £12.9 million (31st December 2010: £38.9 million) due to follow oninvestments and the transfer to the strip purchaser of the remaining pro-rataco-investment commitments
Malcolm Fallen, Chief Executive Officer, said:
"The completion of the sale of CPL and the sale of the portfolio strip hasprotected and secured the position of Candover's shareholders, with theuncertainty and volatility currently being seen in global markets serving toreinforce the benefits of the disposals. Our portfolio has significant valueand we have put in place a clear strategy to deliver long-term equity valuewhich we are intent on returning to our shareholders over time as ourinvestment manager achieves realisations. "
Ends.
For further information, please contact:
Candover +44 20 7489 9848 Tulchan Communications +44 20 7353 4200Malcolm Fallen Susanna VoyleHelen Walsh Peter Hewer
Business and financial review
Overview
Our focus during the first half of the year was to complete the two disposalswhich we had identified as crucial to achieving our strategy of a progressivereturn of cash to shareholders, namely the sale of Candover Partners Limited(CPL) to Arle Capital LLP (Arle) and the sale of a strip of our investments inthe portfolio.These transactions were completed in April and have underpinned thetransformation of the Company's stability, with the uncertainty and volatilitycurrently being seen in global markets only serving to reinforce the benefitsof their successful completion. Our net debt position has been significantlyreduced, the covenant position markedly improved, and the level of outstandingliabilities to the Candover 2005 Fund has further decreased.Net assets per share have increased by 3.1% during the six months to 30th June2011, which compares with a rise in the FTSE All-Share of 1.1% over the sameperiod. The increase has been driven by valuation uplifts in some of theunderlying portfolio companies, notably Capital Safety Group, offset bycurrency movements and administration and financing costs.
Completion of the disposals
The sale of the strip and the disposal of CPL to Arle were completed on 19thApril 2011. The strip sale comprised the disposal of 29.1% of certain of ourinvestments which generated proceeds of £64.6 million. This compared to thecash proceeds of £60.0 million disclosed in the year-end accounts. As aconsequence of the exercise of rights by certain tag investors, proceedsreceived by Candover were reduced by £0.4 million, but increased by £5.0million because the strip disposal completion mechanism allowed us to sell tothe purchaser, at cost, 29.1% of any follow on investments made between 6thDecember 2010 and the date of completion.The sale of the strip has significantly improved our net debt position andloan-to-value covenant. Net debt reduced from £91.0 million at the year-end to£39.6 million as at 30th June 2011 after taking into account new follow-oninvestments made in the first half. The loan-to-value covenant was reducedfrom 32.6% to 18.8%. Additionally, our outstanding Candover 2005 Fundco-investment commitments have reduced to £12.9 million as a result of boththe follow-on investments made during the period and the transfer to the strippurchaser of the remaining pro-rata co-investment commitments.Following completion of the sale of the strip, an offer was made for voluntaryprepayment of the loan notes up to a maximum of the cash proceeds received of£64.6 million. As a result of this offer, prepayment at par of £27.2 millionwas made on 31st May 2011 which will reduce our financing costs going forward.The disposal of CPL to Arle has created a fully independent private equitymanager, with whom we have an arm's length contract for the management of ourassets. Whilst Arle will continue to be the manager of Candover's portfolioassets, the current administration services arrangement that exists betweenthe two parties, and which covers the provision of company secretarial andfinancial administration services, will be transferred to a third party duringthe second half of the year.Net asset value per share
Net assets per share increased by 3.1% from 814p to 839p over the six months to 30th June 2011. This compares with a rise in the FTSE All-Share of 1.1% over the same period.
The increase in the period was driven by the uplift in portfolio companyvaluations of £13.1 million before currency movements, being 7.4% of openingnet assets, offset by the management and financing costs of the Company.Included within the valuation uplifts in the period is an increase in thevaluation of Capital Safety Group of £9.9 million before currency movements asa result of the strong trading in the business over the period. The valuationof Candover's interest in Expro International, excluding currency movements,has reduced by £3.2 million. This arose due to the dilutive effect of ExproInternational's recent capital raising; Candover has follow-on obligationswith respect to the 2005 Fund investment in Expro International but not the2008 Fund.As previously reported, the majority of our portfolio investments aredenominated in Euros and US Dollars with our debt primarily denominated in USDollars, although hedged through swaps to Euros. Whilst currency movements canhave a material impact on net assets, the impact has been muted over the firsthalf of the year. The Board continues to monitor currency exposure and theappropriateness of the hedges currently in place on a regular basis.
Table 1 summarises the movement in net assets over the first half.
Table 1
£m £m p/share p/shareNet asset value at 31st December 2010 as reported 177.9 814Gain on financial instruments at fair 5.0 22value through profit and loss before currency1Profit after taxation 2.6 12Capitalised expenses (net of tax) (2.6)
(12)Others (0.3) (1) 4.7 21Currency impact:- Unrealised investments 3.9 18
- Restatement of cash and cash equivalents 3.1 14- Translation of loan and swap balances (6.2) (28) 0.8 4 Net asset value at 30th June 2011 as reported 183.4 839
1 Includes valuation movements as shown in Table 2 of £13.1 million but excludes increases in accrued investment income of £8.1 million (recognised in profit after taxation)
InvestmentsThe valuation of investments at 30th June 2011, including accrued loan noteinterest, was £233.9 million. Candover made follow-on investments of £21.8million in the period under our existing contractual obligations, including£5.0 million that was sold to the strip purchaser at cost, and a further £1.3million that will be sold post the period end under the terms of the stripdisposal completion mechanism.
Table 2 summarises the movement in our investments over the first half.
Table 2
£m
£m
Investments at 31st December 20101
310.0 Disposals at valuation (32.5)Additions at cost 21.8
Investments realised on sale of strip
(82.4)
Investments adjusted for transactions in period
216.9
Revaluation of investments:- Valuation movements before currency 13.1- Currency impact on unrealised investments 3.9 17.0Investments at 30th June 2011 233.91 Comprises financial investments designated at fair value through profit andloss account at 31st December 2010 of £230.0 million together with financialinvestments held for resale of £80.0 million comprising £77.4 million relatingto the strip and £2.6 million relating to ICG
An additional benefit arising from the sale of the strip has been to reduce the concentration of net assets. At 30th June the three largest investments represented 80.0% of net asset value, compared to 103.0% at the year-end.
Net debt position
Candover's net debt has fallen from £91.0 million at 31st December 2010 to£39.6 million at 30th June 2011. This reflects the receipt of the proceedsfrom the sale of the strip of £64.6 million, net investment inflows of £10.9million, offset by the settlement of exceptional costs of £10.5 million whichwere provided for at the year-end, adverse currency movements of £3.1 millionand the operating and financing costs paid over the first six months.
Table 3 analyses our net debt.
Table 3 30th June 31st December 2011 2010 £m £mLoans and borrowings 168.9 200.5Fair value hedge adjustment (15.3) (16.5)Deferred costs 0.7 1.0Value of loan notes 154.3 185.0Value of related swaps (3.1) (14.1)Cash (111.6) (79.9)Net debt 39.6 91.0
Following the sale of the strip, an offer was made for voluntary prepayment ofthe loan notes up to a maximum of the proceeds received of £64.6 million.Following the offer process a prepayment at par of £27.2 million was made on31st May 2011 leading to a reduction in the gross debt position.
The outstanding commitment to the Candover 2005 Fund fell to £12.9 million over the period from £38.9 million at the year end, due to follow-on investments and the transfer to the strip purchaser of the remaining pro-rata co-investment commitments.
Net revenue before tax
For the six month period net revenue before exceptional items and tax was a profit of £4.4 million compared to a loss of £6.8 million in the comparable period.
Including capitalised costs of £2.6 million, total administrative and financecosts in the period were £6.8 million (2010: £6.8 million), which included£2.1 million of management fees payable to Arle linked to the value ofinvestments managed and £3.2 million of financing costs.
Board
As was reported in the year-end accounts, following completion of thedisposals Gerry Grimstone stood down as Chairman and retired from the Boardand Richard Stone, a non-executive member of the Board for the last six years,was appointed as his successor. A new non-executive director, Scott Longhurst,was appointed in May and has taken over from Richard as Chair of the Audit,Risk and Valuation Committee. Scott is currently Group Finance Director ofAnglian Water Group, a former FTSE listed company which was taken private by aconsortium of private equity investors in 2006. His experience of both the PLCand private equity environments, and his background in the energy and energyservices sectors will be very relevant to Candover.
Dividend
The Board continues to believe that it is not appropriate to recommence paying dividends to shareholders at this stage, particularly in the light of the current deficit on the Company's revenue reserves. However we will be reviewing the situation in the context of our focus on delivering a progressive return of cash to shareholders over time.
Outlook
We continue to believe that there is significant unrealised value in theportfolio and we will work closely with our investment manager whoseresponsibility it is to optimise the timing and value of disposals. Whilst themedium term economic outlook remains unclear, and recessionary pressures mayslow recovery and growth, the significant active management and restructuringinitiatives that have been undertaken by the investment manager across theportfolio over the last 18 months should ensure that these companies arebetter positioned to operate successfully in an uncertain climate.When realisations are achieved by the investment manager we will consider themost efficient mechanism, consistent with our status as an Investment Trust,to return cash to shareholders and we will remain focused on ensuring theCompany's costs are minimised.
Manager's report
Arle Capital LLP
Arle is an independent private equity partnership established in April 2011 via the sale of CPL to some of its investment team. Arle is manager of the Candover 2001, 2005 and 2008 Funds in which Candover is a co-investor. The Funds have a combined portfolio of 13 investments.
Arle's focus is on continuing to explore ways to enhance the portfolio's valuethrough an active ownership strategy that encompasses both organic andacquisitive growth, ensuring that each business has strong leadership, arobust strategy and a sustainable capital structure and is therefore wellpositioned for growth. Arle intends to raise new funds in due course which itwill deploy in mid-market buyouts in the industrials, services and energysectors located in the "North Sea Rim" (the UK, Benelux, German speakingEurope and the Nordics).
Overview
In the first six months of 2011 the net asset value of investments managed byArle grew by 9.0% to €2.3bn (Plc's share: €246.5 million). The majorcontributor to the uplift was Capital Safety Group which traded stronglyduring the period. Parques Reunidos, Qioptiq and Technogym also saw positivemovements in their valuations.The period to June 30th, whilst still uncertain in outlook, represented aperiod of relative stability given the events that have unfolded in the theglobal markets since July. The European private equity market displayed arenewed level of confidence with buyouts in particular showing increases inboth volume and value: 209 transactions worth €37.9 billion completed comparedto 179 worth €21.3 billion a year earlier. Corporates with strong balancesheets, private equity houses with committed capital to invest, and improvingdebt markets were all contributory factors.Trading in the portfolio companies benefitted from these conditions withoverall revenues growing by 5.0% compared to a decline of 1.4% in the prioryear period. This was driven in particular by demand from emerging markets anda generally accommodative monetary environment supporting investment.Profitability in parts of the portfolio however continued to be impacted byrising raw material prices given the exposure to the industrials sector, butthere are now signs that commodity prices have started to soften.
Investments
During the six months to 30th June 2011, Candover invested £21.7 million (prior to the sale to the strip purchaser of its pro-rata share) in add-on investments in the following portfolio companies alongside the Candover Funds:
- £1.4 million in Capital Safety Group to fund an acquisition in Colombia to further consolidate the business's position in a high growth market;
- £0.6 million in EurotaxGlass's to finance a small acquisition in Finland with an advanced technology platform;
- £16.6 million in Parques Reunidos to refinance existing equity bridge arrangements; and
- £3.1 million in Expro International to fund growth capex requirements and prepare the business for an increase in market activity
The oilfield services market in which Expro International operates hasexperienced a challenging three years but there are now some strong indicatorsthat point to the start of an upcycle. Demand for oil saw its single largestyear-on-year increase for over 30 years in 2010 and further growth isanticipated. Spare capacity in the market is expected to shrink, leading tocontinued structural supply challenges across the industry. This is likely toresult in increased investment in exploration activities, particularly inmarginal oilfields, fuelled further by oil prices in excess of $100.00 abarrel. As a result, service provider pricing power is beginning to return inkey areas such as deep-water rigs and subsea infrastructure given the limitedsupply and lengthy time to market. Expro International is seeing signs ofincreased customer activity, particularly in the North Sea, with its own capexrequirements growing as its order book improves quarter-on-quarter. Wecontinue to believe that the company is well positioned to maximise theopportunities offered by the medium to long-term fundamentals of the sector.
The table below shows the investments made by Candover and the Funds in the six months to 30th June 2011:
Portfolio company Candover Funds £m £mCapital Safety Group 1.4 8.3EurotaxGlass's 0.6 3.6Expro International 3.1 47.3Parques Reunidos 16.6 100.7Other 0.1 -Total investments 21.8 159.9
Of this £21.8 million, £5.0 million was transferred at cost in the period tothe strip purchaser, and a further £1.3 million will be transferred post theperiod end.Realisations
The Candover Funds managed by Arle, and Candover, achieved realisation proceeds totalling £277.9 million in the six months to 30th June 2011. Candover's share was £97.3 million, with £64.6 million coming from the disposal of the strip of certain of its portfolio assets.
In January 2011, Candover and the Candover 2001 Fund realised its holding inEquity Trust which was sold to Doughty Hanson. This generated initial cashproceeds for Candover of £13.7 million, including £3.9 million of carriedinterest. An additional deferred payment of £5.3 million was paid in June. Inaddition, carried interest of £2.0 million relating to the deferred paymentwas received in July. The total proceeds received by the Candover 2001 Fundresulted in an investment multiple of 1.5x the original investment.
In March 2011, Candover received £11.0 million from the early redemption of the guaranteed, interest accruing deferred consideration relating to Ontex. This included further carried interest of £3.1 million in respect of the Candover 2001 Fund.
In addition, Candover completed the sale of its interests in the ICG 2000 and 2003 Funds generating total proceeds of £2.5 million.
The table below shows a summary of realisations in the six month period to30th June 2011:Company Capital proceeds Exit route Candover Funds £m £mStrip assets 64.6 - Partial sale of portfolio assetsEquity Trust 15.1 118.2 Private equity saleOntex 7.9 61.6 Deferred paymentCandover 2001 Fund carried interest 6.9 - Crystallisation of carried interestICG 2000 Fund 0.2 - Sale of fund interestICG 2003 Fund 2.3 - Sale of fund interestOther 0.3 0.8Total realisations to 30th June 2011 97.3 180.6Candover 2001 Fund carried interest 2.0 - Crystallisation of carried interestTotal realisations post 30th June 2011 2.0 0.0
Valuations
Over the last six months, despite the challenging trading environment across Europe and the US, nine of the top ten investments have seen an increase in revenues on a 12 month rolling basis compared to the year-end position.
The ten largest companies represent 92.3% of the portfolio, with the Candover2001 Fund carried interest representing a further 5.0%. Within the portfolio,Expro International accounts for 25.2% of the value, therefore movements inits valuation have a significant impact on the value of the portfolio and netasset value. The valuation of Candover's interest in Expro International,excluding currency movements, has reduced by £3.2 million. This arose due tothe dilutive effect of Expro International's recent $250.0 million capitalraising; Candover has follow-on obligations with respect to the Candover 2005Fund investment in Expro International but not the Candover 2008 Fund.
Capital Safety Group experienced a material increase in value following strong trading across all regions in which it operates. Earnings on a 12 month rolling basis were 21.0% ahead of the position at 30th June 2010 and 8.0% ahead of the position at December 2010. The valuation of the business has increased by £9.4 million after deducting £0. 5 million of exchange loss.
Other portfolio companies which experienced increases in valuations following strong trading momentum were Parques Reunidos, Technogym and Qioptiq.
The portfolio is largely based in Western Europe with a strong focus on the industrials sector. Whilst the UK represents 48.0% of the investments by value, the companies themselves are well diversified in the regions in which they trade. The portfolio is mostly exposed to the industrials sector via investments in Stork, Capital Safety, Qioptiq, Technogym and Hilding Anders.
The Candover Funds
During the period, Candover and the Limited Partners in the 2001 Fund agreedto extend the term of the Candover 2001 Fund by a further two years to 13thJune 2013 to allow the remaining investments to be realised at an optimum timeand value. Since the period end, Candover and the Limited Partners in theCandover 2005 Fund have agreed to extend the term of the follow-on investmentperiod of that Fund by two years to 26th August 2013 in order to ensure thatthe remaining capital in the Fund can continue to be available, if required,to support portfolio company growth. In addition, the Preston Partnership,purchaser of the strip of investments sold by Candover in April 2011, wasadmitted as a co-investor alongside Candover in the Candover 2005 and 2008Funds.
Outlook
The outlook in the second half of the year has become noticeably moreuncertain driven by the US credit rating downgrade, escalating sovereign debtproblems in the Eurozone, and weak economic data in the US and Eurozone inparticular. A combination of these factors has led to a reassessment ofeconomic growth, a significant re-rating in the equity markets and a flight tosafety. Whilst we think this backdrop will continue to cause increasedvolatility in the second half of 2011 and into 2012, we remain confident thatGDP growth will continue to be supported by an accommodative monetary policy,and that provided politicians and central banks can ensure enough liquidity inthe banking system, growth, in particular in developing markets, will supportglobal and European GDP increases. This should ensure that any slip back intorecession is avoided. This, coupled with our ongoing active management of theportfolio, should continue to create value in our businesses and allow us tolook at some selective realisations..
Ten largest investments
Analysis by value at 30th June 2011
By valuation method
1. Multiple of earnings 100.0%
By region1. United Kingdom 48.0%2. Benelux 21.0%3. Spain 19.0%4. Italy 6.0%5. France 2.0%6. Switzerland 2.0%7. Scandinavia 2.0%By sector1. Industrials 49.0%2. Energy 28.0%3. Leisure 19.0%4. Financials 2.0%5. Support services 2.0%By age1. 2-3 years 61.0%2. 3-4 years 23.0%3. 4-5 years 2.0%4. >5 years 14.0%Ten largest investmentsat 30th June 2011 Valuation at Valuation Valuation Effective Residual 31st December movement movement Valuation at equity cost of 2010 excluding FX attributable 30th June interest investment £m1 £m to FX 2011 (fully % of Basis ofInvestment £m £m £m diluted) net assets valuation Expro International 92.8 64.3 (3.2) (2.2) 58.9 4.8% 32.1% Multiple ofOilfield services earnings Stork 34.7 43.6 - 2.2 45.8 4.5% 25.0% Multiple ofEngineering earningsconglomerate Parques Reunidos 30.0 37.3 2.6 1.8 41.7 4.0% 22.7% Multiple ofOperator of earningsattraction parks Capital Safety 9.7 14.7 9.9 (0.5) 24.1 5.1% 13.1% Multiple ofGroup earningsFall protectionequipment Qioptiq 6.8 12.1 1.3 0.6 14.0 5.1% 7.6% Multiple of
Optical engineering earnings Technogym 29.2 11.4 1.1 0.5 13.0 3.2% 7.1% Multiple ofPremium fitness earningsequipment andwellness products Innovia Films 2.7 4.8 - 0.2 5.0 5.7% 2.7% Multiple ofTransparent and earningscoated films andpolymer bank notes Alma Consulting 14.9 4.5 - 0.2 4.7 3.9% 2.6% Multiple ofGroup earningsCost reduction andtax recoveryservices EurotaxGlass's 14.5 4.4 - 0.2 4.6 5.6% 2.5% Multiple ofAutomotive data earningsintelligence Hilding Anders 24.3 3.9 - 0.2 4.1 3.9% 2.2% Multiple ofBed and mattress earnings
manufacturer
1 Pro forma basis for sale of strip completion mechanism and adjusted for additions and disposals in the period
Principal risks and uncertainties
Details of the principal risks and uncertainties facing the Group were set outin the risk review on pages 38 to 41 of the 2010 Report and Accounts, a copyof which is available on our website (www.candoverinvestments.com).
The principal risks and uncertainties identified in the 2010 Annual Report, and the policies and procedures for minimising these risks and uncertainties, remain unchanged and each of them has the potential to affect the Group's results during the remainder of 2011. Our views on the current market conditions are reflected in the business and financial review and the manager's report.
Statement of directors' responsibilities
The directors of Candover Investments plc confirm that, to the best of theirknowledge, the condensed set of financial statements in this interim reporthave been prepared in accordance with International Accounting Standard 34`Interim Financial Reporting' as adopted by the EU, gives a fair view of theassets, liabilities, financial position and profit or loss of CandoverInvestments plc, or the undertakings included in the consolidation as a wholeand that the Manager's report includes a fair review of the informationrequired by DTR 4.2.7R and DTR 4.2.8R.
The directors of Candover Investments plc are listed on the page entitled Further information in this interim financial statement.
By order of the BoardPhilip PriceCompany Secretary30th August 2011
Independent review report to Candover Investments plc
Introduction
We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30thJune 2011 which comprises the Group statement of comprehensive income, Groupstatement of changes in equity, Group statement of financial position, Groupcash flow statement and the related notes. We have read the other informationcontained in the half yearly financial report and considered whether itcontains any apparent misstatements or material inconsistencies with theinformation in the condensed set of financial statements.This report is made solely to the company in accordance with guidancecontained in ISRE (UK and Ireland) 2410, 'Review of Interim FinancialInformation performed by the Independent Auditor of the Entity'. Our reviewwork has been undertaken so that we might state to the company those matterswe are required to state to them in a review report and for no other purpose.To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company, for our review work, for thisreport, or for the conclusion we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in Note 2, the annual financial statements of the Group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of financial statements included in this half-yearly financialreport has been prepared in accordance with International Accounting Standard34, 'Interim Financial Reporting,' as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview.Scope of review
We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, 'Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly,we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us tobelieve that the condensed set of financial statements in the half-yearlyfinancial report for the six months ended 30th June 2011 is not prepared, inall material respects, in accordance with International Accounting Standard 34as adopted by the European Union and the Disclosure and Transparency Rules ofthe United Kingdom's Financial Services Authority.Grant Thornton UK LLPAuditorLondon30th August 2011
Group statement of comprehensive income
for the period ended 30th June 2011
£ million Six months to 30th June 2011 Six months to 30th June 2010 Year to 31st December 2010 Unaudited Revenue Capital Total Revenue Capital Total Revenue Capital TotalGain/(loss) on financialinstrumentsat fair value through profitand lossRealised gains and losses - - - - (2.8) (2.8) - (2.7) (2.7)Unrealised gains and losses - 6.3 6.3 - (18.8) (18.8) - 2.1 2.1 - 6.3 6.3 - (21.6) (21.6) - (0.6) (0.6)RevenueInvestment and other income 8.6 - 8.6 (2.9)
- (2.9) 8.1 - 8.1Recurring administrative (2.6) (1.0) (3.6) (2.5) (1.4) (3.9) (4.5) (2.5) (7.0)expensesExceptional non-recurring - - - - - - (5.1) - (5.1)costsProfit/(Loss) before finance 6.0 5.3 11.3 (5.4) (23.0) (28.4) (1.5) (3.1) (4.6)costs and taxationFinance costs (1.6) (1.6) (3.2) (1.4) (1.5) (2.9) (3.3) (3.2) (6.5)Movement in the fair value of - (0.3) (0.3) -
0.3 0.3 - (0.8) (0.8)derivativesExchange movements on - (0.3) (0.3) - 1.8 1.8 - 0.8 0.8borrowingsProfit/(Loss) before taxation 4.4 3.1 7.5 (6.8) (22.4) (29.2) (4.8) (6.3) (11.1)Analysed between:Profit/(Loss) before 4.4 3.1 7.5 (6.8) (22.4) (29.2) 0.3 (6.3) (6.0)exceptional non-recurringcostsExceptional non-recurring - - - - - - (5.1) - (5.1)costsTaxation - - - (0.7) - (0.7) 3.4 - 3.4Profit/(Loss) after taxation 4.4 3.1 7.5 (7.5) (22.4) (29.9) (1.4) (6.3) (7.7)from continuing operations(Loss)/gain from CPL disposal (1.8) - (1.8) 0.6
- 0.6 (21.7) - (21.7)group ("discontinuedoperations")Loss relating to assets - - - - - - - (19.6) (19.6)subject to the strip disposal("discontinued operations")Profit/(Loss) after taxation 2.6 3.1 5.7 (6.9) (22.4) (29.3) (23.1) (25.9) (49.0)Other comprehensive income:Exchange differences on (0.2) - (0.2) (0.3) - (0.3) (0.1) - (0.1)translation of foreignoperationsTotal comprehensive income 2.4 3.1 5.5 (7.2) (22.4) (29.6) (23.2) (25.9) (49.1) Earnings per ordinary share:Continuing operations - basic 20p 14p 34p (34p) (102p) (136p) (7p) (29p) (36p)and dilutedDiscontinued operations - (9p) - (9p) 1p - 1p (99p) (90p) (189p)basic and dilutedTotal earnings per share - 11p 14p 26p (33p) (102p) (135p) (106p) (119p) (225p)basic and dilutedDividends paid (£ millions) - - - - - - - - -The total column represents the group statement of comprehensive income underIFRS. The supplementary revenue and capital columns are presented forinformation purposes as recommended by the Statement of Recommended Practiceissued by the Association of Investment Companies.
All of the profit for the period and the total comprehensive income for the period is attributable to the owners of the Company.
No interim dividend is proposed.
Group statement of changes in equity
for the period ended 30th June 2011
£ million Called Share Other Capital Capital Revenue TotalUnaudited up premium reserves reserve reserve - reserve equity share account - unrealised capital realisedBalance at 1st January 5.5 1.2 0.1 360.5 (187.4) (2.0) 177.92011Net revenue after tax - - - - - 2.6 2.6Unrealised gain on - - - - 6.3 - 6.3financial instrumentsRealised (loss)/gain on - - - (42.7) 42.7 - -financial instrumentsMovement in fair value - - - - (0.3) - (0.3)of derivativesExchange movements on - - - (0.3) - (0.3)borrowingCosts net of tax - - - (2.6) - - (2.6)Profit after tax - - - (45.3) 48.4 2.6 5.7Other comprehensiveincomeExchange differences on - - (0.2) - - - (0.2)translation of foreignoperationsTotal comprehensive - - (0.2) - - - (0.2)incomeBalance at 30th June 5.5 1.2 (0.1) 315.2 (139.0) 0.6 183.42011 UnauditedBalance at 1st January 5.5 1.2 0.2 359.5 (160.5) 21.1 227.02010Net revenue after tax - - - - - (6.9) (6.9)Unrealised loss on - - - - (18.8) - (18.8)financial instrumentsRealised gain/(loss) on - - - 3.2 (6.0) - (2.8)financial instrumentsMovement in fair value - - - - 0.3 - 0.3of derivativesExchange movements on - - - - 1.8 - 1.8borrowingCosts net of tax - - - (2.9) - - (2.9)Profit/(loss) after tax - - - 0.3 (22.7) (6.9) (29.3)Other comprehensiveincomeExchange differences on - - (0.3) - - - (0.3)translation of foreignoperationsTotal comprehensive - - (0.3) 0.3 (22.7) (6.9) (29.6)incomeBalance at 30th June 5.5 1.2 (0.1) 359.8 (183.2) 14.2 197.42010 AuditedBalance at 1st January 5.5 1.2 0.2 359.5 (160.5) 21.1 227.02010Net revenue after tax - - - - - (23.1) (23.1)Unrealised loss on - - - - 2.1 - 2.1financial instrumentsRealised gain/(loss) on - - - 6.7 (9.4) - (2.7)financial instrumentsMovement in fair value - - - - (0.8) - (0.8)of derivativesLoss relating to assetssubject to the stripdisposal- discontinued - - - - (19.6) - (19.6)operationsExchange movements on - - - - 0.8 - 0.8borrowingCosts net of tax - - - (5.7) - - (5.7)Profit/(loss) after tax - - - 1.0 (26.9) (23.1) (49.0)Other comprehensiveincomeExchange differences on - - (0.1) - - - (0.1)translation of foreignoperationsTotal comprehensive - - (0.1) 1.0 (26.9) (23.1) (49.1)incomeBalance at 31st 5.5 1.2 0.1 360.5 (187.4) (2.0) 177.9December 2010
Group statement of financial position
at 30th June 2011£ million 30th June 30th June 31st DecemberUnaudited Notes 2011 2010 2010Non-current assets
Property, plant and equipment - 2.4 0.1 Financial investments designated atfair value through profit and lossInvestee companies 4 221.4 256.3 212.1Other financial investments 4 12.5 14.4 17.9 233.9 270.7 230.0 Trade and other receivables 8.2 5.3 6.5Deferred tax asset 3.5 2.8 3.5 245.6 281.2 240.1 Current assetsTrade and other receivables 1.0 10.1 1.8Derivative financial instruments 38.6 49.3 44.1Current tax asset 0.1 0.1 0.1Cash and cash equivalents 111.6 100.1 78.9 151.3 159.6 124.9Financial investments held for sale
- - 80.0(`discontinued operations')Assets of CPL disposal group - - 2.3(`discontinued operations') 151.3 159.6 207.2Current liabilitiesTrade and other payables (4.6) (7.4) (15.9)Financial liability on equity commitments - (11.3) -Derivative financial instruments (35.5)
(21.1) (29.9)Provisions (4.5) - (4.5) (44.6) (39.8) (50.3)
Derivative financial instruments - - (17.4)(`discontinued operations')Liabilities of CPL disposal group
- - (1.2)(`discontinued operations') (44.6) (39.8) (68.9) Net current assets 106.7 119.8 138.3 Total assets less current liabilities 352.3 401.0 378.4 Non-current liabilitiesLoans and borrowings (168.9) (203.6) (200.5)Net assets 183.4 197.4 177.9 Equity attributable to equity holdersCalled up share capital 5.5 5.5 5.5Share premium account 1.2 1.2 1.2Other reserves (0.1) (0.1) 0.1Capital reserve - realised 315.2 359.8 360.5Capital reserve - unrealised (139.0) (183.2) (187.4)Revenue reserve 0.6 14.2 (2.0)Total equity 183.4 197.4 177.9 Net asset value per shareBasic 839p 903p 814pDiluted 839p 903p 814pGroup cash flow statement
for the period ended 30th June 2011
£ million Notes Six months to 30th Six months to Year toUnaudited June 30th June 31st December 2011 2010 2010Cash flow from operating activitiesCash flow from operations 3 (6.1) (10.2) (15.2)Interest paid (3.1) (3.0) (6.1)Tax reclaimed - 0.7 0.8
Net cash from operating activities (9.2) (12.5) (20.5) Cash flows from investing activitiesPurchase of property, plant and equipment - (0.3) (0.4)Purchase of financial investments (21.8) - (34.7)Sale of property, plant and equipment - - -Sale of financial investments* 86.8 16.6 35.5Net cash inflow from investing activities 65.0 16.3 0.4 Cash flows from financing activitiesEquity dividends paid - - -Loan notes repayment (27.2) - -Cash flows from financing activities
(27.2) - - Increase/(decrease) in cash 28.6 3.8 (20.1)and cash equivalents
Opening cash and cash equivalents
79.9 106.3 106.3Effect of exchange rates andrevaluation on cashand cash equivalents 3.1 (10.0) (6.3)
Closing cash and cash equivalents 111.6 100.1 79.9* Whilst rolled-up loan note interest is disclosed within "Financialinvestments designated at fair value through profit and loss" on the balancesheet, any interest received or receivable is shown within the revenue columnof the "Statement of comprehensive income" and so included in cash flow fromoperating activities above.
Notes to the financial statements
Note 1 - General information
This condensed consolidated half-year financial information does not comprisestatutory accounts within the meaning of Section 434 of the Companies Act2006. Statutory accounts for the year ended 31st December 2010 were approvedon 19th April 2011. These accounts which contained an unqualified audit reportunder Section 495 of the Companies Act 2006 and which did not make anystatements under Section 498 of the Companies Act 2006, have been delivered tothe Registrar of Companies in accordance with Section 441 of the Companies Act2006.
Note 2 - Basis of accounting
The Group financial statements are prepared under International FinancialReporting Standards (IFRS) as adopted by the European Union. This statementhas been prepared using accounting policies and presentation consistent withthose applied in the preparation of the accounts for the Group for the yearended 31st December 2010, and in accordance with IAS 34 `Interim FinancialReporting' (Revised). New standards adopted this period are IAS 24 'RelatedParty Disclosures' (Revised) and IFRS 7 'Financial Instruments: Disclosures'(Revised).Note 3 - Reconciliation of operating income to net cash flow from operatingactivities£ million Six months to Six months to Year to 31st 30th June 2011 30th June 2010 December 2010Total income 8.6 3.9 8.1Administrative expenses (5.5) (10.1) (27.5)Operating profit/(loss) 3.1 (6.2) (19.4)Decrease/(increase) in 3.2 1.7 (6.7)trade and otherreceivables(Decrease)/increase in (12.4) (6.3) 7.9trade and other payablesDepreciation - 0.4 0.9Exceptional depreciation - - 2.1Loss on disposal of - 0.2 -fixed assetsNet cash (outflow) from (6.1) (10.2) (15.2)operating activitiesNote 4 - Financial investments designated at fair value through profit andloss£ million Six months to Six months to Year to 31st 30th June 2011 30th June 2010 December 2010Opening valuation 310.0 319.9 319.9Disposals at valuation (32.6) (15.1) (33.1)Additions at cost 21.8 - 34.7Release of financial - (12.2)liability on equitycommitmentsInvestments realised on (82.3) - -sale of stripValuation movements 17.0 (34.1) 0.7Closing valuation 233.9 270.7 310.0
Note 5 - Loss from CPL disposal group ("discontinued operations")
The disposal of CPL to Arle, an entity formed by the executives of CPL, wascompleted on 19th April 2011. Under the terms of the sale and purchaseagreement the disposal for nominal consideration was structured by referenceto the 31st December 2010 balance sheet of CPL at which point CPL would onlyretain net assets equivalent to the minimum required level of regulatorycapital of £50,000. In addition, under the terms of the disposal, the right tothe economic interest in CPL, the discontinued business of Candover, passed toArle effective from 1st January 2011. Whilst final completion was subject to anumber of remaining conditions, notably regulatory clearances, restrictionswere agreed in the sale and purchase agreement to prevent the distribution ofdividends from CPL as well as requirements as to how CPL would be managed inthe ordinary course of business up to the point the transaction becameunconditional in all respects. The disposal completed on the terms set out inboth the circular to shareholders dated 6th December 2010 and consistent withthe presentation of the results for the year ended 31st December 2010.
In the six months ended 30th June 2011 additional costs relating to the discontinued Candover Group of £1.8 million were provided covering additional advisor costs due to the extended timeline to complete the disposals, redundancy costs and administrative costs relating to the separation of the businesses.
Exceptional costs include no increase on the onerous lease provision of £4.5 million made at 31st December 2010 following the disposal of CPL.
Note 6 - Related party transactions
The nature of the Company's interest in the Candover 1997, 2001, 2005 and 2008 Funds is disclosed in note 13 on page 73 of the 2010 Report and Accounts.
As at 30th June 2011, Candover's investments as a Special Limited Partner inthe Candover 2001, 2005 and 2008 Funds were valued at £11.9 million, £nil and£nil respectively (31st December 2010 Candover 2001 Fund £17.5 million,Candover 2005 Fund £0.2 million, and Candover 2008 Fund £nil). The movement invaluation of the Candover 2001 Fund is due mainly to realisations.During the period the Company undertook transactions with Arle (formerly CPL),the disposal of which to former executives of Candover completed on 19th April2011 such that this is no longer viewed as a related party. During the periodArle provided investment and administration services to the Company, for whichthe Company was charged £2.2 million (2010 comparative period: £2.8 million).
Note 7 - Outstanding commitments
At 30th June 2011, the Company had an outstanding commitment to fund investments alongside the Candover 2005 Fund of £12.9 million (31st December 2010: £38.9 million).
Further informationShare price
The Company's shares are listed on the London Stock Exchange under share code `CDI'. The share price is available on our website at www.candoverinvestments.com.
ISA status
The Board has considered the ISA status of Candover's shares and for the time being considers that a decision to make Candover's shares eligible for inclusion in an ISA will impose constraints on the Company's investment criteria that will not be in the overall interests of shareholders.
Website
For the latest information about Candover Investments plc, visit our website www.candoverinvestments.com
RegistrarsEnquiries concerning registered shareholdings, including changes of address,should be referred to:Capita RegistrarsThe Registry34 Beckenham RoadBeckenhamKent BR3 4TU
Telephone 0871 664 0300 (from UK)*
+44 (0) 20 8639 3399 (from Overseas)
Facsimile +44 (0)1484 600911
Email [email protected]
* Calls cost 10p per minute plus network extras, lines are open 8.30 am - 5.30 pm Monday -
Board of directorsR A Stone §*â€
Non-executive Chairman, Nominations Committee Chairman
M J Fallen
Chief Executive Officer
Lord Jay of Ewelme GCMG §*â€
Non-executive, Senior Independent Director
S R J Longhurst §*â€
Non-executive, Audit, Risk and Valuation Committee Chairman
J Oosterveld §*â€
Non-executive, Remuneration Committee Chairman
* Member of the Remuneration Committee
- Member of the Audit, Risk and Valuation Committee
†Member of the Nominations committee
XLONRelated Shares:
CDI.L