12th Sep 2005 06:00
The information contained herein is not for publication or distribution topersons in the United States of America. Any securities referred to herein havenot been and will not be registered under the U.S. Securities Act of 1933, asamended (the "Securities Act"), and may not be offered or sold withoutregistration thereunder or pursuant to an available exemption therefrom. Anyoffering of securities to be made in the United States would have to be made bymeans of an offering document that would be obtainable from the issuer or itsagents and would contain detailed information about the issuer of thesecurities and its management, as well as financial information. Neither thisdocument nor the information contained herein constitutes an offer to sell orthe solicitation of an offer to buy any securities. These materials do notconstitute an offer of securities for sale in the United States; the securitiesmay not be offered or sold in the United States absent registration or anexemption from registration. No money, securities or other consideration isbeing solicited, and, if sent in response to the information contained herein,will not be accepted.For release at 0700, Monday 12th September, 2005CANDOVER INVESTMENTS PLCINTERIM RESULTS FOR THE HALF YEAR ENDED 30TH JUNE, 2005FINANCIAL HIGHLIGHTS * Total net assets of ‚£362.0 million or 1656p per share, an increase of 12.8% over the six months to 30th June, 2005 (31st December, 2004: 1468p per share). FTSE All-Share Index increased 6.2% over the same period. * Net assets per share increased 31.1% on the prior year (30th June, 2004: 1263p per share). FTSE All-Share Index increased 14.9% over the same period. * Net revenue return before tax of ‚£9.4 million (2004: ‚£12.3 million). * Interim dividend increased 10.0% to 16.5p (2004: 15.0p). * Ten year compound growth in net assets per share of 14.4% per annum. FTSE All-Share growth over the same period of 4.7%. OPERATING HIGHLIGHTS * Successful refinancing of Gala and Vetco. Further refinancing of Springer after period end. * Sale of minority stake in Gala and exchange of contracts for sale of Swissport announced post period end. * No major investments during first half of 2005. In July, Candover invested in Wood Mackenzie, a leading provider of research and consulting services for the energy and life sciences industries. * First close of the Candover 2005 Fund at ¢â€š¬2.3 billion in August. Stephen Curran, Chairman of Candover Investments plc, commented:"Candover continues to show good net asset growth which is a reflection of theunderlying quality of our investee company portfolio. The European buyoutmarket is on target for another landmark year and we are pursuing a variety ofnew investment opportunities across our target markets. I am confident that ourtrack record and network of contacts will continue to deliver high quality dealflow over the months ahead. The Candover 2005 Fund has had a first close at 75%of its target, with a final close anticipated by the year end."*References in this announcement to `Candover' mean Candover Investments plcand/or, where appropriate, one or more of its subsidiaries.For further information, please contact:Stephen Curran, Chairman, Candover Investments plc +44 207 489 9848Julie Foster, Tulchan Communications +44 207 353 4200CHAIRMAN'S STATEMENTfor the half year ended 30th June, 2005INTRODUCTIONCandover's net assets per share increased by 12.8% over the six months to 30thJune, 2005. This uplift was principally due to revaluations of investeecompanies that have either been realised or partially realised since the periodend.At 30th June, 2005 the unaudited net assets attributable to the ordinary shareswere ‚£362.0 million compared to ‚£320.9 million at 31st December, 2004. Netassets per share were 1656p compared to 1468p at 31st December, 2004, and 1263pat 30th June, 2004, increases of 12.8% and 31.1% respectively.The 12.8% increase in net assets per share over the six months to 30th June,2005 compares with an increase of 6.2% in the FTSE All-Share Index over thesame period, and the increase of 31.1% over the year to 30th June, 2005compares with an increase of 14.9% in the FTSE All-Share Index over the fullyear.From 1st January, 2005, in line with other European listed companies, Candoveris required to prepare its financial statements in accordance withInternational Financial Reporting Standards (`IFRS'). A reconciliation of theresults and net assets under UK GAAP, as previously reported, to IFRS isincluded in the notes to the financial statements. The adoption of IFRS hasresulted in only two significant adjustments to the previously reportedresults. These two adjustments result from the requirement that the proposeddividend no longer be recorded as a liability at the balance sheet date andfrom the elimination of the marketability discount on quoted equities. Allcomparatives have been restated accordingly.INVESTMENTSNo new major investments were made during the first half of the year. In July,Candover invested in Wood Mackenzie, a leading provider of research andconsulting services for the energy and life sciences industries, to finance thecompany's next stage of growth. Our investment provides Wood Mackenzie with asignificant opportunity to extend its portfolio of products through organicinvestment and strategic add-on acquisitions, as well as providing the means tofurther develop its international presence. Candover invested ‚£4.4 million andthe 2001 Fund invested ‚£34.8 million.Also, in June, Equity Trust, a 2001 Fund portfolio company, completed theacquisition of ABN AMRO's global trust and fiduciary services business for ¢â€š¬41.0 million. Candover and the 2001 Fund invested a total of ‚£11.4 million(Candover's share ‚£1.3 million).REALISATIONSRefinancings of Gala and Vetco took place in February and March, with Galareturning approximately half of the original investment made, and Vetco,approximately one third of the original investment. Also in March, Candover andthe 2001 Fund sold a small proportion of their shares in Aspen Insurance aspart of a secondary offering on the New York Stock Exchange.Since the period end, Springer has successfully completed a second refinancing,generating gains over cost of ‚£2.4 million for Candover and ‚£22.0 million forthe 2001 Fund. In total, Springer has now returned 1.3 times the original costof the investment.In August, Candover and the 2001 Fund sold a minority stake in Gala to Permira.The transaction also included a refinancing of the company's debt. Proceedsfrom this transaction resulted in gains over cost of ‚£4.0 million for Candoverand ‚£35.6 million for the 2001 Fund. Gala has now returned 1.3 times the costof the original investment. Also in August, contracts were exchanged for thesale of Swissport to Ferrovial of Spain, with gains over cost of approximately‚£11.9 million for Candover and ‚£109.1 million for the 2001 Fund.The partial realisation and refinancing of Gala, and the impending sale ofSwissport accounted in aggregate for a 77p increase in net assets per share.RESULTS FOR THE SIX MONTHS TO 30TH JUNE, 2005The increase in net assets of ‚£41.1 million since 31st December, 2004, wasmainly due to a net increase in valuations of portfolio companies. The valueascribed to Candover's share of the carried interest in the 1997 Fund wasincreased by ‚£0.9 million (4p per share) to ‚£42.3 million.Profits before tax for the six months under review were ‚£9.4 million comparedwith ‚£12.3 million in the first half of 2004. This decline is mainly due to areduction in income from fixed asset investments compared to the previousequivalent period, which contained certain non-recurring items of income, andan increase in administrative expenses.The valuation of fixed asset investments at 30th June, 2005 was ‚£233.8 million(31st December, 2004: ‚£200.5 million). This valuation was calculated aftertaking into account realisations net of additions of ‚£10.3 million, and a netincrease of ‚£43.6 million in the valuation of investments. Valuationadjustments include downward adjustments of ‚£3.4 million and ‚£47.0 million ofupward movements.Cash and liquid assets totalled ‚£123.0 million compared with ‚£124.8 million at31st December, 2004.DIVIDENDSThe Board has decided to raise the interim dividend by 10.0% to 16.5p per sharecompared to 15.0p per share last year and, absent unforeseen circumstances,expects to be able to continue its progressive dividend policy in future. Thedividend will be paid on 18th October, 2005 to shareholders on the register at23rd September, 2005.BOARD AND STAFFAt the AGM in May, it was announced that we would be appointing Richard Stone(62) as a non-executive director with immediate effect. Richard retired fromthe global board of PricewaterhouseCoopers at the end of 2000. Prior to themerger with Price Waterhouse in 1998, he was Deputy Chairman of Coopers &Lybrand and chairman of the firm's European corporate finance activities. He isChairman of Drambuie Limited, and a non-executive director of Halma plc, TRProperty Investment plc and Gartmore Global Trust.Since the period end we have been joined by four new investment executives.Aldo Maccari joins Candover as a director, and will be focussing on the Italianmarket. He was latterly at BNP Paribas in Milan where he was a managingdirector and deputy head of corporate finance. In addition to Aldo, we havebeen joined by three investment managers, Bill Rogers, Emma Wilkinson andTobias Hoffmann-Becking. Bill joins us from McKinsey & Company, Emma fromMorgan Stanley via Harvard and Tobias from Bain Capital.Overall, we have recruited seven investment executives during the last 18months and this recruitment programme is planned to continue. The market forexperienced investment professionals in our industry remains competitive andthis, combined with our ongoing recruitment programme, means that a substantialincrease in staff costs is to be expected.THE CANDOVER 2005 FUNDIn May, it was announced that we had commenced marketing the Candover 2005 Fundwith a target of ¢â€š¬3.0 billion and, in August, the Fund had its first close at ¢â€š¬2.3 billion. Under the terms of a coinvestment agreement, Candover has so farcommitted ¢â€š¬400 million to the Fund and, dependent on the overall performance ofthe Fund, will be entitled to between 2% and 5% of any profit made by thatFund, subject to an overall minimum return having first been generated forinvestors. The exact percentage received by Candover will be determined by aratchet based on the investment multiple achieved by the Fund. A final close isanticipated by the year-end. No management fees are payable on the 2005 Fundcommitments until the investment period for the 2001 Fund has been terminated.Therefore the fees associated with the 2005 Fund will have limited, if any,impact on this year's results, and in subsequent years are expected to belargely absorbed by the increased staff costs referred to above.PROSPECTSThe European buyout market has enjoyed a buoyant first six months, with recordvalues of transactions completing. M&A markets generally are predicting anequally busy second half, so it would seem that 2005 could be another recordyear for European buyouts.We continue to pursue a variety of new investment opportunities across ourtarget markets and are confident that our track record and network of contactswill continue to deliver high quality deal flow over the months ahead. Themajority of our investee companies are performing in line with expectations andwe monitor their progress carefully.S W Curran Chairman12th September, 2005For the latest information visit www.candover.comOVERVIEW OF THE 15 LARGEST INVESTMENTSThe overview and review of investments at 30th June, 2005 show the 15 largestinvestments by value. The top 15 investments represent 96% of Candover'sportfolio and are thus a fair representation of the overall portfolio (31stDecember, 2004: 99%).INVESTMENTS BY VALUATION METHOD1 Multiple of earnings 58%2 Cost 25%3 Sale price 11%4 Stock market price 6%INVESTMENTS BY REGION1 United Kingdom 43%2 Germany 17%3 Switzerland 11%4 Americas 8%5 Benelux 8%6 Scandinavia 8%7 France 5%INVESTMENTS BY SECTOR1 Support services 29%2 Media 22%3 Industrials 17%4 Leisure 13%5 Financials 9%6 External funds 8%7 Health 2%INVESTMENTS BY AGE1 5 years 11%REVIEW OF THE 15 LARGEST INVESTMENTSSPRINGER SCIENCE + BUSINESS MEDIA S.A. (Germany, media)Date of investment: January/September 2003Springer is the world's second largest scientific, technical and medicalpublisher. Since the period end, the company has been refinanced, realisingcapital proceeds of ‚£15.7 million for Candover.Candover's 30th June, 2005 31st December, 2004investment as at Cost of investment ¢â€š¬20,823,000 (‚£ ¢â€š¬20,823,000 (‚£ 14,303,000) 14,303,000) Directors' valuation ¢â€š¬46,161,000 (‚£ ¢â€š¬29,317,000 (‚£ 31,177,000) 20,737,000) Effective equity 4.0% 4.0%interest (fully diluted) % of Candover's net 8.6% 6.5%assets Basis of valuation Multiple of earnings Multiple of earningsGALA GROUP LIMITED (UK, leisure)Date of investment: March 2003Gala is the UK's leading high volume, low stake gambling operation. It is thenumber one bingo operator and the number three casino operator. In February2005, the company was successfully refinanced generating capital proceeds of ‚£8.3 million. Subsequent to the period end, a further refinancing and partialdisposal has occurred, realising a further ‚£13.6 million of capital proceeds.Candover's investment as at 30th June, 2005 31st December, 2004 Cost of investment ‚£13,386,000 ‚£21,728,000 Directors' valuation ‚£23,987,000 ‚£21,728,000 Effective equity interest (fully 2.8% 2.8%diluted) % of Candover's net assets 6.6% 6.8% Basis of valuation Multiple of earnings Multiple of earningsSWISSPORT (SWT (LUX) S.A.) (Switzerland, support services)Date of investment: February 2002Swissport is the largest airport ground handling agent in the world andoperates in 41 countries at 180 airports, servicing over 600 airlinesworldwide. In April 2004, Swissport acquired Groundstar, the UK ground handler.Since the period end, contracts have been exchanged for the sale of Swissport,the price of which has been used as the basis of valuation.Candover's investment as at 30th June, 2005 31st December, 2004 Cost of investment* ¢â€š¬13,202,000 (‚£ ¢â€š¬14,481,000 (‚£ 8,891,000) 8,891,000) Directors' valuation ¢â€š¬30,909,000 (‚£ ¢â€š¬20,449,000 (‚£ 20,876,000) 14,464,000) Effective equity interest (fully 5.5% 5.5%diluted) % of Candover's net assets 5.8% 4.5% Basis of valuation Sale price Multiple of earnings* This investment was made in CHF and Euros.VETCO INTERNATIONAL LIMITED (UK, support services)Date of investment: July 2004Vetco International is a major global participant in the oilfield servicessector and supplies a portfolio of hi-tech proprietary products and services.It routinely serves the major national and international oil companies as wellas independent producers throughout the world. In March 2005, the company wassuccessfully refinanced generating capital proceeds of ‚£2.5 million.Candover's investment as at 30th June, 2005 31st December, 2004 Cost of investment US$9,137,000 (‚£ US$13,870,000 (‚£ 4,910,000) 7,454,000) Directors' valuation US$26,415,000 (‚£ US$16,824,000 (‚£ 14,736,000) 8,840,000) Effective equity interest (fully 2.5% 2.5%diluted) % of Candover's net assets 4.1% 2.8% Basis of valuation Multiple of earnings Multiple of earningsTHULE AB (Sweden, industrials)Date of investment: December 2004Thule is a consumer goods company with a strong brand which supplies productsto the outdoor leisure markets. It is the global number one in its coreactivity of car racks and boxes and also holds either global or European marketleading positions in all its other product areas.Candover's investment as at 30th June, 2005 31st December, 2004 Cost of investment* ¢â€š¬21,366,000 (‚£ ¢â€š¬21,181,000 (‚£ 14,620,000) 14,620,000) Directors' valuation ¢â€š¬20,698,000 (‚£ ¢â€š¬21,098,000 (‚£ 13,979,000) 14,923,000) Effective equity interest (fully 6.7% 6.7%diluted) % of Candover's net assets 3.9% 4.6% Basis of valuation Cost Cost\* This investment was made in SEK and Euros.ALCONTROL GROUP HOLDINGS LIMITED (UK, support services)Date of investment: December 2004ALcontrol is a laboratory-based testing business which supplies services to thefood and environmental markets. It ranks as number one in the UK, Benelux andSweden, making it a leading player in Western Europe. The group comprises 26laboratories and operates in ten countries.Candover's investment as at 30th June, 2005 31st December, 2004 Cost of investment ¢â€š¬18,585,000 (‚£ ¢â€š¬18,585,000 (‚£ 12,844,000) 12,844,000) Directors' valuation ¢â€š¬18,585,000 (‚£ ¢â€š¬18,585,000 (‚£ 12,552,000) 13,145,000) Effective equity interest (fully 6.8% 6.8%diluted) % of Candover's net assets 3.5% 4.1% Basis of valuation Cost CostASPEN INSURANCE HOLDINGS LIMITED (US, financials)Date of investment: June 2002Aspen Insurance, one of the largest independent reinsurance vehicles in the UKmarket, listed on the New York Stock Exchange in December 2003. A successfulsecondary offering was completed in March 2005 generating capital proceeds of ‚£1.3 million.Candover's investment as at 30th June, 2005 31st December, 2004 Cost of investment ‚£6,814,000 ‚£7,830,000 Directors' valuation US$18,779,000 (‚£ US$19,200,000 (‚£ 10,473,000) 10,089,000) Effective equity interest (fully 0.9% 1.0%diluted) % of Candover's net assets 2.9% 3.1% Basis of valuation Market price Market priceBUREAU VAN DIJK ELECTRONIC PUBLISHING BV (Belgium, media)Date of investment: November 2004Bureau van Dijk is a global publisher of specialised financial and companyinformation products via the internet and on CD/DVDs on over ten millioncompanies worldwide, with a strong emphasis on private companies. Its maindatabases are market leaders in the niches they target.Candover's investment as at 30th June, 2005 31st December, 2004 Cost of investment ¢â€š¬14,597,000 (‚£ ¢â€š¬14,597,000 (‚£ 10,239,000) 10,239,000) Directors' valuation ¢â€š¬14,597,000 (‚£ ¢â€š¬14,597,000 (‚£ 9,859,000) 10,325,000) Effective equity interest (fully 6.3% 6.3%diluted) % of Candover's net assets 2.7% 3.2% Basis of valuation Cost CostINNOVIA FILMS LIMITED (UK, industrials)Date of investment: September 2004Innovia Films is a manufacturer of specialist bi-orientated polypropylene andcellulose transparent and coated films. The business enjoys strong positions inniche markets and focuses on higher value-added applications.Candover's investment as at 30th June, 2005 31st December, 2004 Cost of investment ¢â€š¬14,448,000 (‚£ ¢â€š¬14,448,000 (‚£ 9,913,000) 9,913,000) Directors' valuation ¢â€š¬14,448,000 (‚£ ¢â€š¬14,448,000 (‚£ 9,758,000) 10,219,000) Effective equity interest (fully 8.0% 8.0%diluted) % of Candover's net assets 2.7% 3.2% Basis of valuation Cost CostCICLAD 3 (France, external funds)Date of investment: April 2000Ciclad is an investment company specialising in French buyouts. The companycalled down ‚£1.4 million during the half year.Candover's investment as at 30th June, 2005 31st December, 2004 Cost of investment ¢â€š¬9,848,000 (‚£ ¢â€š¬8,306,000 (‚£ 6,298,000) 4,854,000) Directors' valuation ¢â€š¬14,366,000 (‚£ ¢â€š¬9,975,000 (‚£ 9,703,000) 7,055,000) Effective equity interest (fully n/a n/adiluted) % of Candover's net assets 2.7% 2.2% Basis of valuation Multiple of earnings Multiple of earningsACERTEC HOLDINGS LIMITED (UK, industrials)Date of investment: June 1999Acertec consists of four principal businesses: Carrington Wire, a leadingmanufacturer of wire in the UK; BRC Reinforcement, a leading UK supplier ofreinforcement products to the construction industry; Stadco, Acertec'sautomotive pressings business, which is one of the leading European suppliersof body-in-white pressings and assemblies to the car industry; and in the FarEast, BRC Asia, which is the market leader in the supply of prefabricated steelreinforcement systems to the Singapore housing market, and which was listed onthe Singapore Stock Exchange in July 2000.Candover's investment as at 30th June, 2005 31st December, 2004 Cost of investment ‚£7,043,000 ‚£7,043,000 Directors' valuation ‚£7,043,000 ‚£7,043,000 Effective equity interest (fully 7.9% 7.9%diluted) % of Candover's net assets 1.9% 2.2% Basis of valuation Multiple of earnings Multiple of earningsEQUITY TRUST HOLDINS S.A.R.L (UK, financials)Date of investment: May 2003Equity Trust's principal business is the formation and administration ofoffshore trusts and companies. A follow-on investment was completed during theperiod with an additional investment of ‚£1.3 million.Candover's investment as at 30th June, 2005 31st December, 2004 Cost of investment ¢â€š¬9,647,000 (‚£ ¢â€š¬7,713,000 (‚£ 6,766,000) 5,477,000) Directors' valuation ¢â€š¬9,647,000 (‚£ ¢â€š¬7,713,000 (‚£ 6,516,000) 5,455,000) Effective equity interest (fully 5.5% 5.2%diluted) % of Candover's net assets 1.8% 1.7% Basis of valuation Multiple of earnings Multiple of earningsICG MEZZANINE FUND 2000 (UK, external funds)Date of investment: July 2000The Fund has been active in providing mezzanine finance throughout Europe.Capital repayments have been made during the period resulting in a reduction incost of ‚£0.6 million.Candover's investment as at 30th June, 2005 31st December, 2004 Cost of investment ¢â€š¬7,864,000 (‚£ ¢â€š¬8,772,000 (‚£ 4,887,000) 5,519,000) Directors' valuation ¢â€š¬7,864,000 (‚£ ¢â€š¬8,772,000 (‚£ 5,311,000) 6,204,000) Effective equity interest (fully n/a n/adiluted) % of Candover's net assets 1.5% 1.9% Basis of valuation Multiple of earnings Multiple of earningsONTEX NV (Belgium, health)Date of investment: January 2003Ontex is the leading European manufacturer of retailer branded diapers andfeminine hygiene products. It also has an adult healthcare business, which isnumber three in Europe.Candover's investment as at 30th June, 2005 31st December, 2004 Cost of investment ¢â€š¬26,411,000 (‚£ ¢â€š¬26,411,000 (‚£ 17,163,000) 17,163,000) Directors' valuation ¢â€š¬6,610,000 (‚£ ¢â€š¬6,610,000 (‚£ 4,464,000) 4,675,000) Effective equity interest (fully 4.4% 4.4%diluted) % of Candover's net assets 1.2% 1.5% Basis of valuation Multiple of earnings Multiple of earningsDAKOTA, MINNESOTA AND EASTERN RAILROAD CORPORATION (US, support services)Date of investment: September 1986Dakota, Minnesota & Eastern Railroad Corporation (`DM&E') is a regionalrailroad operating company on 1,103 miles of track. DM&E also owns Iowa,Chicago & Eastern Railroad Corporation, a contiguous railroad, which acquiredthe assets of I&M Rail Link in July 2002.Candover's investment as at 30th June, 2005 31st December, 2004 Cost of investment US$1,478,000 (‚£ US$1,478,000 (‚£ 888,000) 888,000) Directors' valuation US$7,505,000 (‚£ US$nil (‚£nil) 4,187,000) Effective equity interest (fully 8.2% 8.2%diluted) % of Candover's net assets 1.2% n/a Basis of valuation Multiple of earnings Multiple of earningsINDEPENDENT REVIEW REPORTTO THE MEMBERS OF CANDOVER INVESTMENTS PLCINTRODUCTIONWe have been instructed by the Company to review the financial information forthe six months ended 30th June, 2005 which comprises the Group incomestatement, Group statement of changes in equity, Group balance sheet, Groupcash flow statement, accounting policies, and the related notes. We have readthe other information contained in the interim report which comprises only theChairman's statement, Overview and Review of the 15 largest investments andValuation policy and considered whether it contains any apparent misstatementsor material inconsistencies with the financial information.This report is made solely to the Company's members, as a body, in accordancewith guidance contained in APB Bulletin 1999/4 `Review of Interim FinancialInformation'. Our review work has been undertaken so that we might state to theCompany's members those matters we are required to state to them in a reviewreport and for no other purpose. To the fullest extent permitted by law, we donot accept or assume responsibility to anyone other than the Company and theCompany's members as a body, for our review work, for this report, or for theconclusion we have formed.DIRECTORS' RESPONSIBILITIESThe interim report including the financial information contained therein is theresponsibility of, and has been approved by, the directors. The directors areresponsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority.As disclosed in the accounting policies, the next annual financial statementsof the Group will be prepared in accordance with those International FinancialReporting Standards adopted for use by the European Union. This interim reporthas been prepared in accordance with the accounting policies set out herein.The accounting policies are consistent with those that the directors intend touse in the next annual financial statements. There is, however, a possibilitythat the directors may determine that some changes to these policies arenecessary when preparing the full annual financial statements for the firsttime in accordance with those IFRSs adopted for use by the European Union. Thisis because, as disclosed in the accounting policies, the directors haveanticipated that the amendments to IAS 39, Financial Instruments: Recognitionand Measurement (The Fair Value Option), which has yet to be formally adoptedfor use in the European Union, will be so adopted in time to be applicable tothe next annual financial statements.REVIEW WORK PERFORMEDWe conducted our review in accordance with guidance contained in Bulletin 1999/4 `Review of Interim Financial Information' issued by the Auditing PracticesBoard for use in the United Kingdom. A review consists principally of makingenquiries of management and applying analytical procedures to the financialinformation and underlying financial data and, based thereon, assessing whetherthe accounting policies and presentation have been consistently applied unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance with UnitedKingdom auditing standards and therefore provides a lower level of assurancethan an audit. Accordingly, we do not express an audit opinion on the financialinformation.REVIEW CONCLUSIONOn the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30th June, 2005.Grant Thornton UK LLPChartered AccountantsLondon12th September, 2005GROUP INCOME STATEMENTFOR THE PERIOD ENDED 30TH JUNE, 2005UNAUDITED Six months to 30th June, Six months to 30th June, Year to 31st December, 2005 2004* 2004* Revenue Capital Total Revenue Capital Total Revenue Capital Total ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 Gains on financial investments and cash equivalents at fair value through profit and loss Realised gains - 757 757 - 7,702 7,702 - 27,420 27,420and losses Unrealised gains - 42,528 42,528 - 5,056 5,056 - 31,733 31,733and losses - 43,285 43,285 - 12,758 12,758 - 59,153 59,153 Revenue Management fees from managed funds 12,265 - 12,265 12,687 - 12,687 24,633 - 24,633 Investment and 7,645 - 7,645 9,509 - 9,509 17,162 - 17,162other income Total revenue 19,910 - 19,910 22,196 - 22,196 41,795 - 41,795 Administrative (10,507) (3,381) (13,888) (9,864) (2,856) (12,720) (22,832) (6,764) (29,596)expenses Profit before finance costs and taxation 9,403 39,904 49,307 12,332 9,902 22,234 18,963 52,389 71,352 Interest payable and similar charges (8) - (8) (6) - (6) (11) - (11) Profit before 9,395 39,904 49,299 12,326 9,902 22,228 18,952 52,389 71,341taxation Taxation (2,912) 1,014 (1,898) (3,484) 857 (2,627) (5,713) 2,029 (3,684) Profit attributable to equity 6,483 40,918 47,401 8,842 10,759 19,601 13,239 54,418 67,657shareholders Earnings per ordinary share Basic and 29.7p 187.2p 216.9p 40.5p 49.3p 89.7p 60.6p 249.0p 309.6pdiluted *Restated under IFRSGROUP STATEMENT OF CHANGES IN EQUITYFOR THE PERIOD ENDED 30TH JUNE, 2005UNAUDITED Six Six Year to months to months to 30th 30th 31st June, June, December, 2005 2004* 2004* Notes ‚£000 ‚£000 ‚£000 Profit attributable 47,401 19,601 67,657to equity shareholders Dividends 1 (6,338) (5,802) (9,080) Net addition to 41,063 13,799 58,577total equity Opening total 320,928 262,351 262,351equity Closing total 361,991 276,150 320,928equity *Restated under IFRSGROUP BALANCE SHEETAT 30TH JUNE, 2005UNAUDITED 30th June, 2005 30th June, 2004* 31st December, 2004* Notes ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 Non-current assets Property, plant 950 1,265 1,091and equipment Financial investments designated at fair value through profit and loss Investee 191,486 109,119 159,047 companies Other financial 2 42,321 64,120 41,421 investments 233,807 173,239 200,468 Associated - 1 1undertakings Trade and other 925 3,325 2,125receivables 235,682 177,830 203,685 Current assets Trade and other 20,178 13,853 25,685 receivables Cash and cash 123,031 101,449 124,807 equivalents 143,209 115,302 150,492 Current liabilities Trade and other (8,954) (6,253) (23,484) payables Current tax (2,887) (2,472) (3,683) liabilities (11,841) (8,725) (27,167) Net current 131,368 106,577 123,325assets Non-current liabilities Deferred tax (5,059) (8,257) (6,082)liabilities Net assets 361,991 276,150 320,928 Equity attributable to equity holders Called up share 5,464 5,464 5,464capital Share premium 1,451 1,451 1,451account Capital 290 290 290redemption reserve Capital reserve 257,525 203,255 259,433- realised Capital reserve 64,124 33,817 21,298- unrealised Revenue reserve 33,137 31,873 32,992 Total equity 361,991 276,150 320,928 Net asset value 1656p 1263p 1468pper share *Restated under IFRSGROUP CASH FLOW STATEMENTFOR THE PERIOD ENDED 30TH JUNE, 2005UNAUDITED Six months to Six months to Year to 30th June, 2005 30th June, 2004 31st December, * 2004* ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 Cash flow from operating activities Cash flow from operations (1,595) 16,569 26,042 Interest paid (8) (6) (11) Tax paid (3,717) 904 (1,194) Net cash from operating (5,320) 17,467 24,837activities Cash flows from investing activities Purchase of property, (65) (60) (322) (65)plant and equipment Purchase of financial (3,503) (4,048) (60,631) (3,503)investments Sale of property, plant - 8 31 -and equipment Sale of financial 14,431 57,133 131,119 14,431investments Net cash from investing 10,863 53,033 70,197activities Cash flows from financing activities Equity dividends paid (6,338) (5,792) (9,080) Effect of exchange rates and revaluation on cash and cash (981) (565) 1,547equivalents Increase/(decrease) in cash and cash equivalents (1,776) 64,143 87,501*Restated under IFRSACCOUNTING POLICIESThe principal accounting policies adopted in the preparation of these financialstatements are set out below. These policies have been consistently applied toall the periods presented, unless otherwise stated.BASIS OF PREPARATIONThese financial statements have been prepared on the basis of the recognitionand measurement requirements of International Financial Reporting Standards(`IFRS') in issue that either are endorsed by the European Union (`EU') andeffective (or available for early adoption), or are expected to be endorsed andeffective (or available for early adoption) at 31st December, 2005, the Group'sfirst annual reporting date at which it is required to use adopted IFRS. Basedon these adopted and unadopted IFRS, the directors have made assumptions aboutthe accounting policies expected to be applied when the first annual IFRSfinancial statements are prepared for the year ending 31st December, 2005. TheGroup has adopted the Fair Value Option amendments to IAS 39 with effect from1st January, 2005, ahead of the effective date, on the assumption that it willbe endorsed by the EU. The disclosures required by IFRS1 `First time adoptionof International Financial Reporting Standards', concerning the transition fromUK GAAP to IFRS are given in note 1.A summary of the more important Group accounting policies is set out below.INVESTMENT TRUST SORPWhere presentational guidance set out in the Statement of Recommended Practice(`SORP') for investment trusts, issued by the Association of Investment Trustsin January 2003, is consistent with the requirements of IFRS, the directorshave sought to prepare the financial statements on a basis compliant with theSORP.Management expensesManagement expenses have been allocated 80 per cent to capital and 20 per centto revenue.BASIS OF CONSOLIDATIONThe consolidated financial statements incorporate the financial statements ofthe Company and entities controlled by the Company (its subsidiaries) made upto the balance sheet date. Control is achieved where the Company has the powerto govern the financial and operating policies of an investee entity so as toobtain benefits from its activities.INCOMEIncome arises from investment management, fees relating to advisory work oninvestment transactions and interest income. Investment management fees arerecognised under the accruals basis, other fees are recognised in full once acontractual obligation is created for the third party.Interest income is recognised in the income statement using the effectiveinterest rate applicable. A provision will be made against this income wherethere is uncertainty as to its future recoverability. The requirement orotherwise for a provision is considered in conjunction with the valuation ofthe related financial investment, the approach to which is stated below.PLACEMENT FEESPrepaid placement fees incurred in the establishment of managed funds arecarried as current assets recoverable from future management fees receivableand are written off over the anticipated duration of the managed fund.PROPERTY, PLANT AND EQUIPMENTAll property, plant and equipment is stated at historical cost lessdepreciation.Depreciation is calculated to write down the cost less residual value of allproperty, plant and equipment by equal annual instalments over their expecteduseful lives. The periods generally applicable are: plant and equipment 2-5years and motor vehicles 3 years. Leasehold improvements are depreciated overthe duration of the lease.FINANCIAL INVESTMENTSThe directors consider that a substantial measure of the performance of theGroup is assessed through the capital gains and losses arising from theinvestment activity of the Group. Consequently, for measurement purposes,financial investments, including equity, loan and similar instruments, aredesignated at fair value through profit and loss, and are valued in compliancewith the International Private Equity and Venture Capital Valuation Guidelinesas recommended by the British Venture Capital Association, the principles ofwhich are set out on page 20.Gains and losses on the realisation of financial investments are dealt withthrough the income statement, and taken to realised capital reserve. Financialinvestments are not held for immediate resale and any gains on realisations arenot available for distribution as a dividend. The difference between the marketvalue of financial investments and cost to the Group is shown as an unrealisedgain or loss in the income statement, and taken to the unrealised capitalreserve.CASH AND CASH EQUIVALENTSCash and cash equivalents include cash in hand, deposits held at call withbanks, other short-dated listed fixed income securities and money marketinstruments. Such assets are held-for-trading, with capital gains, losses andfair value movements accounted for in the income statement, and taken tocapital reserves due to the fact that such balances are held for futureinvestment in financial investments.DEFERRED TAXDeferred tax is recognised in full, using the liability method, on alltemporary differences arising between the tax bases of assets and liabilitiesand their carrying amounts in the financial statements. Deferred tax ismeasured using rates of tax that have been enacted or substantively enacted bythe balance sheet date.Deferred tax assets are recognised to the extent that it is probable thatfuture taxable profits will be available against which the temporarydifferences can be utilised.Due to the Company's status as an investment trust, and the intention tocontinue meeting the conditions required to obtain approval in the foreseeablefuture, the Company has not provided for deferred tax on any capital gains andlosses arising on the revaluation or disposal of investments.FOREGN CURRENCIESForeign currency transactions are translated into the functional currency usingthe exchange rates prevailing at the dates of the transactions. Foreignexchange gains and losses resulting from the settlement of such transactionsand from the translation at period-end exchange rates of monetary assets andliabilities denominated in foreign currencies are recognised in the incomestatement. Where exchange differences result from the translation into sterlingof foreign currency resources that are held for future financial investments,the gain or loss is accounted for in the income statement, and taken to capitalreserves.The results and financial position of all the Group entities that have afunctional currency different from the presentation currency are translatedinto the presentation currency as follows:(i) assets and liabilities for each balance sheet presented are translated atthe closing rate at the date of that balance sheet;(ii) income and expenses for each income statement are translated at averageexchange rates;(iii) all resulting exchange differences are recognised as a separate componentof equity.PENSION COSTSThe Group contributes towards a number of funded defined contribution pensionand funded unapproved retirement benefit schemes designed to provide retirementbenefits for its directors and employees. The assets of the schemes are heldseparately from the Group in independently administered funds. The pension costcharge represents contributions payable by the Group to the schemes in respectof the accounting period.LEASESLeases in which a significant portion of the risks and rewards of ownership areretained by the lessor are classified as operating leases. Payments made underoperating leases (net of any incentives received from the lessor) are chargedto the income statement on a straight-line basis over the period of the lease.DIVIDENDS PAYABLEFinal dividends are accounted for when they are ratified at the Annual GeneralMeeting. Interim dividends are recognised when approved by the Board.CRITICAL ACCOUNTING AND JUDGEMENTSThe preparation of financial statements requires the use of estimates andassumptions that affect the reported amounts of assets and liabilities at thedate of the financial statements and the reported amounts of revenues andexpenses during the reported period. Although these estimates are based onmanagement's best knowledge of the amount, event or actions, actual resultsultimately may differ from those estimates.The estimates and assumptions that have a significant risk of causing amaterial adjustment to the carrying amounts of assets and liabilities relate tothe valuation of unlisted financial investments held at fair value throughprofit and loss, which are valued on the basis noted above and the recognitionor otherwise of accrued income on loan notes and similar instruments granted toinvestee companies.VALUATION POLICYInvestments have been valued by the directors in compliance with the principlesof the International Private Equity and Venture Capital Valuation Guidelines asrecommended by the British Venture Capital Association.Principles of valuation of unlisted investmentsInvestments are stated at amounts considered by the directors to be areasonable assessment of their fair value, subject to the requirement to applya degree of caution in making the necessary estimates. Fair value is the amountat which an asset could be exchanged between knowledgeable, willing parties inan arm's length transaction.All investments are valued according to one of the following bases:¢â‚¬¢ cost (less any provision required);¢â‚¬¢ earnings multiple;¢â‚¬¢ net assets;¢â‚¬¢ price of recent investment; or¢â‚¬¢ sale price.Investments are only valued at cost for a limited period after the date ofacquisition, otherwise investments are valued on one of the other basesdescribed above, and generally the earnings multiple basis of valuation will beused unless this is inappropriate, as in the case of certain asset-basedbusinesses.When valuing on an earnings multiple basis, profits before interest and tax ofthe current year will normally be used, depending on whether or not more thansix months of the accounting period remain and the predictability of futureprofits. Such profits will be adjusted to a maintainable basis, taxed at thefull corporation tax rate and multiplied by an appropriate and reasonable price/earnings multiple. This is normally related to comparable quoted companies orrecent transactions, with adjustments made for points of difference between thecomparator and the company being valued, in particular for risks, earningsgrowth prospects and surplus assets or excess liabilities.Where a company is loss-making, or the value is derived mainly from theunderlying value of its assets rather than its earnings, the valuation may becalculated with regard to the underlying net asset. Where there has been asubsequent recent investment by a third party in a new financing round that isdeemed to be at arm's length this may be used as the basis of valuation. Incases where an exit is actively being sought, then any offers from potentialpurchasers would be relevant in assessing the valuation of an investment andare taken into account in arriving at the valuation.Where appropriate, a marketability discount, in the range of 10% to 30% may beapplied to the investment valuation, based on the likely timing of an exit, theinfluence over that exit, the risk of achieving conditions precedent to thatexit and general market conditions.When investments have obtained an exit (either by listing or trade sale) afterthe valuation date but before finalisation of Candover's relevant accounts(interim or final), the valuation is based on the exit valuation.In arriving at the value of an investment, the percentage ownership iscalculated after taking into account any dilution through outstanding warrants,options and performance related mechanisms.PRINCIPLES OF VALUATION OF LISTED INVESTMENTSInvestments are valued at bid price or the conventions of the market on whichthey are quoted subject, if appropriate, to marketability discounts whereformal restrictions on trading exist.VALUATION REVIEW PROCEDURESValuations are initially prepared by the relevant investment executive. Thesevaluations are then subject to review by senior management and externalauditors, prior to approval by the directors.NOTES TO THE FINANCIAL STATEMENTSNOTE 1 RECONCILIATION OF NET ASSETS AND PROFIT UNDER UK GAAP TO IFRSThe analysis below shows a reconciliation of net assets and profit as reportedunder UK GAAP to the revised net assets and profit under IFRS as reported inthese financial statements. In addition, there is a reconciliation of netassets under UK GAAP to IFRS at the transition date for the Group, being 1stJanuary, 2004. Six Year to months to 30th 31st June, December, 2004 2004 Reconciliation of profit attributable Note ‚£m ‚£mto equity shareholders Profit after tax under UK GAAP 8.8 13.2 Capital return after tax under UK GAAP (a) 10.6 54.2 Removal of discount on listed financial (b) 0.2 0.2investments Profit after tax under IFRS 19.6 67.6 1st 30th 31st January, June, December, 2004 2004 2004 Reconciliation of equity Note ‚£m ‚£m ‚£m Total equity under UK GAAP 254.7 270.9 312.6 Removal of discount on listed financial (b) 1.8 2.0 2.0investments Dividend recognised under UK GAAP but (c) 5.8 3.2 6.3excluded under IFRS Total equity under IFRS 262.3 276.1 320.9(a) Where financial investments are designated as held at fair value throughprofit and loss, the profit after tax under IFRS also includes the `Capitalreturn on ordinary activities after tax' as previously reported.(b) Under IFRS it is no longer appropriate to provide for a liquidity discounton listed financial investments where formal trading restrictions do not apply.(c) Under IFRS, dividends proposed after the period end cannot be provided forin the balance sheet as, at that date, the dividends did not represent aliability.EXPLANATION OF MATERIAL ADJUSTMENTS TO THE CASH FLOW STATEMENTIn preparing the cash flow under IFRS, cash and cash equivalents includeshort-dated fixed income securities and money market instruments of ‚£0.1million at 1st January, 2004 (30th June, 2004: ‚£9.9 million; 31st December,2004: ‚£111.5 million). Under UK GAAP the same had been included in the`Management of liquid resources' category. In addition, under IFRS, the impactof exchange rates on cash balances and revaluation of cash equivalents isdisclosed in the cash flow statement.NOTE 2`Other financial investments' comprise the Company's valuation of itsinvestment as a Special Limited Partner in managed funds.NOTE 3The maintenance and integrity of the Company's website is the responsibility ofthe directors: the interim review does not involve consideration of thesematters and, accordingly, the Company's reporting accountants accept noresponsibility for any changes that may have occurred to the interim reportsince it was initially presented on the website.NOTE 4Legislation in the United Kingdom governing the preparation and disseminationof the interim report may differ from legislation in other jurisdictions.Candover Investments plcRegistered in Englandand Wales No. 1512178Registered office20 Old BaileyLondonEC4M 7LNTel: +44 (0)20 7489 9848Fax: +44 (0)20 7248 [email protected] INVESTMENTS PLCRelated Shares:
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