15th Nov 2011 07:00
For immediate release on 15 November 2011
Candover Investments plc - Interim Management Statement
Candover Investments plc ("Candover" or the "Company") today issues its Interim Management Statement in accordance with FSA Disclosure and Transparency Rule 4.3. This statement which, as usual, is unaudited, relates to the period from 1 July 2011 to the date of this announcement.
Unwinding of hedging structure
At the end of September, Candover unwound the hedging arrangements put in place in 2007 when the US private placement notes (the "Notes"), repayable in late 2014, were issued. The hedges involved both a series of cross currency swaps and an interest rate swap from fixed to floating rates. The currency swaps were originally structured to match the currency of the Company's commitment to the Candover funds with the currency of its debt.
In light of the change in the Company's investment policy, together with the repayment of part of the Notes earlier this year, the Board considered that this structure was no longer required. Additionally, the Board considered that it would be timely to unwind these arrangements in order to take advantage of the increase in the value of the swaps since 30 June 2011 due to the weakening of the Euro versus the US Dollar.
The unwind of the hedges:
* has generated a cash inflow of £12.8 million, an uplift of £9.7 million from the 30 June 2011 value of the swaps; * will result in an increase in the annual cost of financing of 3% to 4% due to the removal of the fixed/floating rate swap benefit currently received; and * will result in the amortisation of the £14.9 million fair value hedge accounting provision in Candover's balance sheet over the period up to the repayment of the Notes in 2014, offsetting the impact of the increase in the cost of financing.
Following the unwind of the hedging structure, around two thirds of net assets are Euro denominated and one third Sterling denominated.
Portfolio valuation and performance
Candover's investment portfolio was last valued as of 30 June 2011, resulting in a net asset value per share of 839p. Since that date, there have been no follow-on commitments to investments held by the Company. Realisation proceeds of £2.0 million were received by way of a further carried interest payment in respect of the Candover 2001 Fund that related to the sale of Equity Trust in the first half of the year.
The next valuation of the Company's assets will be conducted as of 31 December 2011. Consistent with its valuation policy the Company will continue to apply earnings based valuations to portfolio businesses and will appropriately value the carried interest of the Company in the Candover funds.
Sales growth remains ahead of the prior year in the majority of the top ten investments. However the volatile nature of the global economy during the third quarter of the year has created a challenging environment for the portfolio, with earnings in a number of the businesses coming under pressure.
The continuing market uncertainty may slow the pace of realisations achievable by the investment manager in the near term, but we continue to believe that there is considerable value in the portfolio which will be delivered when market conditions are more favourable.
Our belief remains that the best way to optimise the long term value for shareholders is for Candover to focus on a progressive return of cash over time.
Outstanding commitments
As at 30 June 2011, the Company had outstanding commitments of £12.9 million.
Change of company secretarial and financial administration service provider
The Company indicated in its interim statement on 30 August that its administration services arrangement with Arle Capital Partners Limited ("Arle") would be transferred to a third party during the second half of the year. At the end of October, Ipes (UK) Limited was appointed to provide both administration services and to act as Company Secretary. Arle remains as Candover's investment manager.
Ends
For further information, please contact:
Candover Investments plc
Malcolm Fallen, CEO +44 207 489 9848
Helen Walsh, Communications +44 7747 868347
XLONRelated Shares:
CDI.L