7th Sep 2007 07:00
Press release
For immediate release on 7th September, 2007
Candover Investments plcInterim results for the half year ended 30th June, 2007
Financial highlights:
- Net assets per share increased by 23.0% over the six months to 30th June, 2007 and 34.7% since 30th June, 2006. FTSE All-Share Index increased 5.7% and 14.7% over the corresponding time periods
- Net assets per share were 1848p, compared to 1503p at 31st December, 2006 and 1372p at 30th June, 2006
- Interim profits before tax of ‚£10.6 million (2006: ‚£10.1 million)
- Interim dividend increased 11.1% to 20.0p (2006: 18.0p)
- Ten year compound growth in net assets per share of 13.9% per annum; FTSE All-Share Index growth over the same period of 4.5%
- Private placement of approximately ‚£150.0 million of debt provisionally agreed, to diversify sources of funding
Operating highlights:
- Three new investments made during the period; the buyouts of Ferretti and Parques Reunidos which were referred to in the preliminary announcement, and the buyout of Capital Safety Group, a global player in the fall protection market
- Two significant partial realisations during the period - Vetco Gray and Wellstream (which listed on the London Stock Exchange) - and a further four full realisations achieved or announced since the period end - DM&E, Bureau van Dijk, Aibel (the remaining Vetco subsidiary) and Thule
- Two significant refinancings - Innovia Films and Get - both of which took place in May
- In the year to date, total realisation proceeds have amounted to ‚£130.3 million
Gerry Grimstone, Chairman of Candover Investments plc, commented:
"Candover's impressive net asset increase during 2007 to date has been drivenin part by a number of significant realisations from the maturing 2001 Fundportfolio. Looking forward, however, it is unlikely that the pace ofrealisations will continue in the short to medium term, as the currentvolatility in the banking markets makes transactions more difficult toaccomplish. But provided we can find suitable opportunities, this could be agood period for investing if lower pricing benefits can be achieved."
Ends.
For further information, please contact:
Gerry Grimstone
Chairman, Candover Investments plc
+44 207 489 9848
Colin Buffin
Managing Director, Candover Partners Limited
+44 207 489 9848Peter Hewer/Susanna VoyleTulchan Communications+44 207 353 4200Chairman's statementFor the half year to 30th June, 2007
Introduction
Candover has continued to make excellent progress. Our net assets per shareincreased by 23.0% over the six months to 30th June, 2007 compared with anincrease of 5.7% in the FTSE All-Share Index over the same period. This upliftwas principally due to revaluations of investee companies and gains fromcompanies which have either been realised or partially exited in the year todate.At 30th June, 2007, the unaudited net assets attributable to the ordinaryshares were ‚£403.8 million compared to ‚£328.5 million at 31st December, 2006.Net assets per share were 1848p compared to 1503p at 31st December, 2006, and1372p at 30th June, 2006. This represents increases of 23.0% and 34.7%respectively.
Investments
In total, Candover invested ‚£55.3 million during the six months to 30th June, 2007 in three significant new investments and five follow-on financings.
In January 2007, as reported at the year end, Candover and the 2005 Fund completed the buyout of Ferretti, a luxury yacht manufacturer. Candover invested ‚£32.3 million and the 2005 Fund invested ‚£195.5 million in the transaction.
In March, Candover and the 2005 Fund completed the buyout of Parques Reunidos,a theme park operator. Candover invested ‚£7.5 million and the 2005 Fundinvested ‚£45.5 million, with deferred consideration of up to ‚£79.5 million tobe invested by Candover and the 2005 Fund in 2008-2010.
In June, Candover and the 2005 Fund completed the buyout of Capital Safety Group, a global player in the fall protection market. Candover invested ‚£11.5 million and the 2005 Fund invested ‚£68.5 million.
Since the period end, Parques Reunidos has signed an agreement to acquire Palace Entertainment Inc, the largest operator of water parks and family entertainment centres in the United States. This acquisition represents a major step in Parques Reunidos' strategy of becoming a leading player in the global leisure parks market. Candover and the 2005 Fund will invest between US$130-150 million, the final amount depending on the eventual financing structure.
Realisations
Candover and its managed funds achieved realisation proceeds totalling‚£443.8 million during the period; Candover's share was ‚£51.6 million. Sincethe period end, a further ‚£519.0 million has been agreed, of which Candover'sshare is ‚£78.7 million.As reported at the year end, in January, Candover made a partial exit fromVetco International through the sale of its subsidiary, Vetco Gray. The saleresulted in proceeds of ‚£14.3 million for Candover and ‚£132.9 million for the2001 Fund. Since the period end, the remaining subsidiary, Aibel, has beensold, resulting in proceeds of ‚£4.5 million for Candover and ‚£40.9 million forthe 2001 Fund. In total, the investment has returned cash equivalent to 4.1times the original investment.In April, Wellstream listed on the London Stock Exchange at 320p per share. Atthe listing, Wellstream repaid the loan stock representing a significantproportion of the cost of the original investment and Candover also sold 4.3million of its shares. The loan repayment and share sale resulted in ‚£173.6million being realised in cash, ‚£17.6 million for Candover and ‚£156.0 millionfor the 2001 Fund. Candover's residual holding of 1.3 million shares is valuedat ‚£5.6 million and the 2001 Fund's holding is valued at ‚£51.6 million.
Refinancings of Innovia Films and Get took place in May. Innovia Films returned almost all of the original investment, while Get returned approximately half of the original investment.
Since the period end, in addition to the sale of Aibel, we have achieved afull exit from Thule, and announced the sales of Bureau van Dijk and our stakein Dakota, Minnesota & Eastern Railroad Corporation (DM&E). The sale of Thuleresulted in proceeds of ‚£30.8 million for Candover and ‚£262.9 million for the2001 Fund (excluding short term bridging finance provided). The sale of Bureauvan Dijk, which is due to complete in October, will return approximately ‚£16.0million to Candover and ‚£136.8 million to the 2001 Fund.The sale of our interest in DM&E marks the end of a 21 year investment period;we originally invested in 1986. The company is merging with Canadian Pacificand the transaction is expected to close in the next 30 to 60 days. The totalprice being paid for DM&E is US$1.48 billion payable at closing, with futurecontingent payments of up to approximately US$1.0 billion if certainperformance criteria are met prior to 31st December, 2025. Candover'sinvestment has been written up to ‚£27.4 million reflecting the estimatedinitial net consideration. No value has been ascribed to the deferredconsideration, given the conditional nature of the proceeds. Candover'smaximum entitlement to the deferred consideration is US$80 million.
Results for the six months to 30th June, 2007
The increase in net assets of ‚£75.3 million since 31st December, 2006 wasmainly due to a net increase in the valuation of our portfolio companies, with‚£42.8 million of the uplift coming from investments either valued at disposalproceeds or listed price. The 2001 Fund continues to do well and the valueascribed to Candover's share of the carried interest in the 2001 Fund wasincreased by ‚£9.5 million (43p per share) to ‚£18.0 million.
Profits before tax for the six months under review were ‚£10.6 million, compared to ‚£10.1 million for the first half of 2006. This growth has come from increased investment and other income.
The valuation of financial investments at 30th June, 2007 was ‚£378.4 million,compared to ‚£295.3 million at 31st December, 2006. This valuation of ‚£378.4million was calculated having taken into account new investments, net ofrealisations, of ‚£12.7 million, and a net increase of ‚£70.4 million in thevaluation of investments.
Cash and liquid assets, net of loans of ‚£11.5 million, totalled ‚£7.0 million compared with ‚£29.7 million at 31st December, 2006.
Dividends
The Board has decided to increase the interim dividend by 11.1% to 20.0p per ordinary share compared to 18.0p per ordinary share last year. The dividend will be paid on 17th October, 2007 to shareholders on the register at 21st September, 2007.
Financing
We have previously made clear that we intend to maintain our position as oneof the leading pan-European private equity houses. In order to diversify oursources of funding and to maintain flexibility for the future, we haveprovisionally agreed, subject to final documentation, a debt private placement of approximately ‚£150.0 million of senior notes with maturities of seven and eight years. The financing is due to be completed in early November.
Board and staff
We have hired two experienced individuals during the half year as part of ourstrategy to expand our capabilities around the deal team. Jim Graham joins theportfolio management team from Orange, and Kit Tuke joins as a debt specialistfrom Barclays Capital.I am very sad to report that Nicolas Lethbridge, who had been on the Board ofCandover since January 2003, died on 16th August, 2007 following an accidentalfall. Because of his wisdom, experience, and good humour, Nico was atremendous asset to us and we will miss him very much. Our greatest sympathyand condolences go to his family.
Prospects
The current volatility in the banking markets has reduced the availability ofbank finance for leveraged transactions, and this is likely to have an impacton both the pricing of transactions and the level of activity in the privateequity market. The lower debt multiples will probably result in lower prices;this could cause potential vendors, including ourselves, to delay sellingbusinesses in the expectation that we will see the banking market, andtherefore pricing, recover in the short to medium term.As a result, whilst we have achieved a high number of realisations in thefirst half of this year, we do not expect to see this repeated in the secondhalf. However, provided we can find suitable opportunities, this should be agood period for investing if the benefits of lower pricing materialise.
We remain confident in the outlook for Candover.
G E GrimstoneChairman7th September, 2007
20 largest investments as at 30th June, 2007
Investment Geography Date of Cost of Directors' Effective % of
Basis of investment investment valuation equity Candover's valuation interest net assets ‚£000 ‚£000 (fully diluted)Ferretti Italy Jan 2007 32,288 33,193 5.5% 8.2% CostLuxury yachtmanufacturerThule Sweden Dec 2004 17,276 32,497 6.7% 8.0% Sale ProceedsSports utility transportationGala Coral UK Mar 24,775 31,977 1.8% 7.9% Multiple 2003/Oct ofRetail gaming 2005 earningsDX Group UK Sep 2006 28,038 28,038 9.4% 6.9% CostMail servicesDakota, US Sep 1986 888 27,403 7.9% 6.8% SaleMinnesota & proceedsEasternRailroadCorporationRailroadsHilding Anders Sweden Dec 2006 27,418 26,923 7.8% 6.7% CostBedmanufacturerSpringer Germany Jan/Sep 573 26,096 4.0% 6.5% MultipleScience + 2003 ofBusiness Media earningsAcademicpublisher
EurotaxGlass's Switzerland Jun 2006 17,397 17,026 9.1% 4.2%
Multiple ofAutomotive earningsdataintelligence
Bureau van Netherlands Nov 2004 7,788 15,972 6.3% 4.0%
SaleDijk proceedsElectronicPublishing ElectronicpublishingALcontrol UK Dec 2004 13,202 12,867 6.8% 3.2% MultipleGroup of earningsLaboratorytestingGet Norway Jan 2006 8,844 12,712 9.4% 3.1% Multiple ofCable TV earningsQioptiq UK Dec 9,739 11,954 8.6% 3.0% Multiple 2005/Oct ofOptical 2006 earningsengineeringCapital Safety UK Jun 2007 11,504 11,287 6.9% 2.8% CostGroup FallprotectionequipmentAspen US Jun 2002 6,814 9,533 0.9% 2.4% MarketInsurance priceHoldings ReinsuranceWood Mackenzie UK Jul 2005 82 7,891 4.1% 2.0% Multiple ofEnergy earningsresearchParques Spain Mar 2007 7,489 7,435 5.6% 1.8% CostReunidos AttractionparksEquity Trust UK May 2003 6,787 6,526 5.4% 1.6% MultipleHoldings of earningsTrust servicesWellstream UK Mar 2003 15 5,622 1.4% 1.4% Market priceOil & gaspipelineInnovia Films UK Sep 2004 2,459 5,102 8.0% 1.3% Multiple ofSpeciality earningsfilmVetco UK July 2004 0 4,450 2.5% 1.1% SaleInternational proceeds Oil & gasservices
Investments - analysis by value
Investments by valuation method
Multiple of earnings 34%Cost 37%Sale price 24%Stock market price 5% Investments by regionUnited Kingdom 38%Scandinavia 21%Italy 10%Americas 11%Germany 8%Switzerland 5%Benelux 5%Spain 2% Investments by sectorIndustrials 38%Support services 29%Media 16%Leisure 12%Financials 5% Investments by ageLess than 1 year 32%1 to 2 years 15%2 to 3 years 21%3 to 4 years 8%4 to 5 years 13%More than 5 years 11%
Independent review report of the auditors 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, 2007 which comprises Group income statement, Statement of recognisedincome and expenses, Group balance sheet, Group cash flow statement and therelated notes.
We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with guidancecontained in APB Statements of Standards for Reporting Accountants`International Standard on Review Engagements (UK and Ireland) 2410'. Ourreview work has been undertaken so that we might state to the Company thosematters we are required to state to them in a review report and for no otherpurpose. 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 Listing 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, 2007 is not prepared, inall material respects, in accordance with International Accounting Standard 34as adopted by the European Union and the Listing Rules of the United Kingdom'sFinancial Services Authority.Grant Thornton UK LLPChartered accountantsLondon7th September, 2007Note 1The maintenance and integrity of the Candover Investments plc website is theresponsibility of the directors: the interim review does not involveconsideration of these matters and, accordingly, the company's reportingaccountants accept no responsibility for any changes that may have occurred tothe interim report since it was initially presented on the website.
Note 2
Legislation in the United Kingdom governing the preparation and dissemination of the interim report may differ from legislation in other jurisdictions.
Group income statementfor the period ended 30th June, 2007
Unaudited
Six months to 30th June, Six months to 30th June, Year to 31st December, 2007 2006 2006 Revenue Capital Total* Revenue Capital Total* Revenue Capital Total* ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 Gains on financialinvestments and cashequivalents at fairvaluethrough profit andlossRealised gains and - 9,520 9,520 - 7,587 7,587 - 14,249 14,249lossesUnrealised gains and - 70,545 70,545 - 16,047 16,047
- 38,029 38,029losses - 80,065 80,065 - 23,634 23,634 - 52,278 52,278 RevenueManagement fees frommanaged funds 18,855 - 18,855 19,547 - 19,547 39,454 - 39,454Investment and other income 10,688 - 10,688 10,121 - 10,121 21,007 - 21,007 Total revenue 29,543 - 29,543 29,668 - 29,668 60,461 - 60,461Administrative (18,934) (5,296) (24,230) (19,533) (4,157) (23,690) (39,841) (8,315) (48,156)expenses Profit beforefinance costsand taxation 10,609 74,769 85,378 10,135 19,477 29,612 20,620 43,963 64,583Interest payable andsimilar charges (10) (260) (270) (14) - (14)
(12) (222) (234)
Profit before 10,599 74,509 85,108 10,121 19,477 29,598
20,608 43,741 64,349taxationTaxation (3,308) 1,522 (1,786) (2,952) 1,247 (1,705) (6,231) 2,560 (3,671) Profit attributabletoequity shareholders 7,291 76,031 83,322 7,169 20,724 27,893
14,377 46,301 60,678
Earnings perordinary shareBasic and diluted 33.3p 347.9p 381.2p 32.8p 94.8p 127.6p
65.8p 211.8p 277.6p
Dividends paid(‚£000) 7,918 - 7,918 7,002 - 7,002 11,008 - 11,008
An interim dividend in respect of 2007 of 20p per ordinary share, amounting toa total dividend of ‚£4,371,000, is proposed. This dividend is not reflected inthe interim financial statement.
* The total column represents the Income Statement under IFRS.
Statement of recognised income and expensesfor the period ended 30th June, 2007Unaudited Six months Six months to Year to to 30th June, 31st 30th June, December, 2007 2006 2006 ‚£000 ‚£000 ‚£000Profit attributable to equity 83,322 27,893 60,678shareholdersExchange differences on translation (40) (6)
(11)
of foreign operations Total recognised income and expenses 83,282 27,887 60,667
Reconciliation of movements in equityfor the period ended 30th June, 2007Unaudited Six months to Six months to Year to 30th June, 30th June, 31st December 2007 2006 2006 ‚£000 ‚£000 ‚£000Opening total equity 328,521 380,261 380,261Total recognised income and 83,282 27,887 60,667expensesReturn of cash (66) (101,313) (101,374)Dividends (7,918) (7,002) (11,033)Closing total equity 403,819 299,833 328,521Group balance sheetat 30th June, 2007Unaudited 30th June, 2007 30th June, 2006 31st December, 2006 Notes ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000Non-current assetsProperty, plant and 3,311 915 1,679equipmentFinancial investmentsdesignated at fairvalue 3through profit and lossInvestee companies 359,313 213,879 284,336Other financial 19,051 7,005 10,927investments 378,364 220,884 295,263Trade and other - 4,460 1,141receivablesDeferred tax asset 4,894 3,026 4,737 386,569 229,285 302,820 Current assetsTrade and other 33,782 15,628 29,616receivablesCash and cash 18,482 79,935 63,437equivalents 52,264 95,563 93,053Current liabilitiesTrade and other (21,548) (22,917) (29,655)payablesLoans and borrowings (11,523) - (33,735)Current tax liabilities (1,943) (2,098) (3,962) (35,014) (25,015) (67,352) Net current assets 17,250 70,548 25,701 Net assets 403,819 299,833 328,521 Equity attributable toequity holdersCalled up share capital 5,464 5,464 5,464Share premium account 1,232 1,232 1,232Translation reserve (59) (14) (19)Capital redemption 499 499 499reserveCapital reserve - 253,731 222,672 226,894realisedCapital reserve - 105,555 35,133 56,427unrealisedRevenue reserve 37,397 34,847 38,024 Total equity 403,819 299,833 328,521 Net asset value per 1848p 1372p 1503pshareGroup cash flow statementfor the period ended 30thJune, 2007Unaudited Six months to Six months to Year to 30th June, 2007 30th June, 2006 31st December, 2006 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000Cash flow from operatingactivitiesCash flow from operations (627) 9,278 12,261Interest paid (295) (14) (293)Tax paid (3,962) (5,967) (7,780)Net cash from operating (4,884) 3,297 4,188activities Cash flows from investingactivities
Purchase of property, plant and (1,841) (188)
(1,405)
equipment
Purchase of financial investments (55,334) (35,298) (96,144)Sale of property, plant and - 29 12equipmentSale of financial investments 52,852 26,698 43,756Net cash from investing (4,323) (8,759) (53,781)activities Cash flows from financingactivitiesEquity dividends paid (7,918) (7,002) (11,008)Return of cash (5,064) (96,234) (96,367)Loans and borrowings (22,212) - 33,735Decrease in cash and cashequivalents (44,401) (108,698) (123,233)
Opening cash and cash equivalents 63,437 189,392
189,392Effect of exchange rates andrevaluation on cash and cashequivalents (554) (759) (2,722)
Closing cash and cash equivalents 18,482 79,935
63,437
Notes to the financial statements
Note 1 - General information
The information for the year ended 31st December, 2006 does not constitutestatutory accounts as defined in Section 240 of the United Kingdom CompaniesAct 1985. Comparative figures for 31st December, 2006 are taken from the fullaccounts, which have been delivered to the Registrar of Companies and containan unqualified audit report.Note 2 - Basis of accounting
The Group financial statements are prepared under International Financial Reporting Standards (IFRS) as adopted by the European Union. This statement has been prepared using accounting policies and presentation consistent with those applied in the preparation of the accounts for the Group for the year ended 31st December, 2006, and in accordance with International Accounting Standard 34, `Interim Financial Reporting'.
Note 3 - Financial investments designated at fair value through profit andloss Six months to Six months to Year to 30th June, 30th June, 31st December 2007 2006 2006 ‚£000 ‚£000 ‚£000Opening valuation 295,263 187,875 187,875Additions at cost 55,334 35,298 96,144Disposals (42,606) (18,077) (28,419)Appreciation 70,373 15,788 39,663Closing valuation 378,364 220,884 295,263
`Other financial investments' comprise the Company's valuation of its investment as a Special Limited Partner in managed funds.
Note 4 - Return of cash
Following the return of cash in May 2006, the outstanding C shares (1,093,460) were purchased during the period.
CANDOVER INVESTMENTS PLCRelated Shares:
CDI.L