Press release
For immediate release on 7th September, 2007
Candover Investments plc
Interim 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 driven
in part by a number of significant realisations from the maturing 2001 Fund
portfolio. Looking forward, however, it is unlikely that the pace of
realisations will continue in the short to medium term, as the current
volatility in the banking markets makes transactions more difficult to
accomplish. But provided we can find suitable opportunities, this could be a
good 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 9848
Peter Hewer/Susanna Voyle
Tulchan Communications
+44 207 353 4200
Chairman's statement
For the half year to 30th June, 2007
Introduction
Candover has continued to make excellent progress. Our net assets per share
increased by 23.0% over the six months to 30th June, 2007 compared with an
increase of 5.7% in the FTSE All-Share Index over the same period. This uplift
was principally due to revaluations of investee companies and gains from
companies which have either been realised or partially exited in the year to
date.
At 30th June, 2007, the unaudited net assets attributable to the ordinary
shares 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, and
1372p 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 Fund
invested £45.5 million, with deferred consideration of up to £79.5 million to
be 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. Since
the period end, a further £519.0 million has been agreed, of which Candover's
share is £78.7 million.
As reported at the year end, in January, Candover made a partial exit from
Vetco International through the sale of its subsidiary, Vetco Gray. The sale
resulted in proceeds of £14.3 million for Candover and £132.9 million for the
2001 Fund. Since the period end, the remaining subsidiary, Aibel, has been
sold, resulting in proceeds of £4.5 million for Candover and £40.9 million for
the 2001 Fund. In total, the investment has returned cash equivalent to 4.1
times the original investment.
In April, Wellstream listed on the London Stock Exchange at 320p per share. At
the listing, Wellstream repaid the loan stock representing a significant
proportion of the cost of the original investment and Candover also sold 4.3
million of its shares. The loan repayment and share sale resulted in £173.6
million being realised in cash, £17.6 million for Candover and £156.0 million
for the 2001 Fund. Candover's residual holding of 1.3 million shares is valued
at £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 a
full exit from Thule, and announced the sales of Bureau van Dijk and our stake
in Dakota, Minnesota & Eastern Railroad Corporation (DM&E). The sale of Thule
resulted in proceeds of £30.8 million for Candover and £262.9 million for the
2001 Fund (excluding short term bridging finance provided). The sale of Bureau
van Dijk, which is due to complete in October, will return approximately £16.0
million 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 Pacific
and the transaction is expected to close in the next 30 to 60 days. The total
price being paid for DM&E is US$1.48 billion payable at closing, with future
contingent payments of up to approximately US$1.0 billion if certain
performance criteria are met prior to 31st December, 2025. Candover's
investment has been written up to £27.4 million reflecting the estimated
initial net consideration. No value has been ascribed to the deferred
consideration, given the conditional nature of the proceeds. Candover's
maximum 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 was
mainly 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 disposal
proceeds or listed price. The 2001 Fund continues to do well and the value
ascribed to Candover's share of the carried interest in the 2001 Fund was
increased 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 £378.4
million was calculated having taken into account new investments, net of
realisations, of £12.7 million, and a net increase of £70.4 million in the
valuation 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 one
of the leading pan-European private equity houses. In order to diversify our
sources of funding and to maintain flexibility for the future, we have
provisionally 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 our
strategy to expand our capabilities around the deal team. Jim Graham joins the
portfolio management team from Orange, and Kit Tuke joins as a debt specialist
from Barclays Capital.
I am very sad to report that Nicolas Lethbridge, who had been on the Board of
Candover since January 2003, died on 16th August, 2007 following an accidental
fall. Because of his wisdom, experience, and good humour, Nico was a
tremendous asset to us and we will miss him very much. Our greatest sympathy
and condolences go to his family.
Prospects
The current volatility in the banking markets has reduced the availability of
bank finance for leveraged transactions, and this is likely to have an impact
on both the pricing of transactions and the level of activity in the private
equity market. The lower debt multiples will probably result in lower prices;
this could cause potential vendors, including ourselves, to delay selling
businesses in the expectation that we will see the banking market, and
therefore pricing, recover in the short to medium term.
As a result, whilst we have achieved a high number of realisations in the
first half of this year, we do not expect to see this repeated in the second
half. However, provided we can find suitable opportunities, this should be a
good period for investing if the benefits of lower pricing materialise.
We remain confident in the outlook for Candover.
G E Grimstone
Chairman
7th 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% Cost
Luxury yacht
manufacturer
Thule Sweden Dec 2004 17,276 32,497 6.7% 8.0% Sale
Proceeds
Sports utility
transportation
Gala Coral UK Mar 24,775 31,977 1.8% 7.9% Multiple
2003/Oct of
Retail gaming 2005 earnings
DX Group UK Sep 2006 28,038 28,038 9.4% 6.9% Cost
Mail services
Dakota, US Sep 1986 888 27,403 7.9% 6.8% Sale
Minnesota & proceeds
Eastern
Railroad
Corporation
Railroads
Hilding Anders Sweden Dec 2006 27,418 26,923 7.8% 6.7% Cost
Bed
manufacturer
Springer Germany Jan/Sep 573 26,096 4.0% 6.5% Multiple
Science + 2003 of
Business Media earnings
Academic
publisher
EurotaxGlass's Switzerland Jun 2006 17,397 17,026 9.1% 4.2% Multiple
of
Automotive earnings
data
intelligence
Bureau van Netherlands Nov 2004 7,788 15,972 6.3% 4.0% Sale
Dijk proceeds
Electronic
Publishing
Electronic
publishing
ALcontrol UK Dec 2004 13,202 12,867 6.8% 3.2% Multiple
Group of
earnings
Laboratory
testing
Get Norway Jan 2006 8,844 12,712 9.4% 3.1% Multiple
of
Cable TV earnings
Qioptiq UK Dec 9,739 11,954 8.6% 3.0% Multiple
2005/Oct of
Optical 2006 earnings
engineering
Capital Safety UK Jun 2007 11,504 11,287 6.9% 2.8% Cost
Group
Fall
protection
equipment
Aspen US Jun 2002 6,814 9,533 0.9% 2.4% Market
Insurance price
Holdings
Reinsurance
Wood Mackenzie UK Jul 2005 82 7,891 4.1% 2.0% Multiple
of
Energy earnings
research
Parques Spain Mar 2007 7,489 7,435 5.6% 1.8% Cost
Reunidos
Attraction
parks
Equity Trust UK May 2003 6,787 6,526 5.4% 1.6% Multiple
Holdings of
earnings
Trust services
Wellstream UK Mar 2003 15 5,622 1.4% 1.4% Market
price
Oil & gas
pipeline
Innovia Films UK Sep 2004 2,459 5,102 8.0% 1.3% Multiple
of
Speciality earnings
film
Vetco UK July 2004 0 4,450 2.5% 1.1% Sale
International proceeds
Oil & gas
services
Investments - analysis by value
Investments by valuation method
Multiple of earnings 34%
Cost 37%
Sale price 24%
Stock market price 5%
Investments by region
United Kingdom 38%
Scandinavia 21%
Italy 10%
Americas 11%
Germany 8%
Switzerland 5%
Benelux 5%
Spain 2%
Investments by sector
Industrials 38%
Support services 29%
Media 16%
Leisure 12%
Financials 5%
Investments by age
Less 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 financial
statements in the half-yearly financial report for the six months ended 30th
June, 2007 which comprises Group income statement, Statement of recognised
income and expenses, Group balance sheet, Group cash flow statement and the
related 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 guidance
contained in APB Statements of Standards for Reporting Accountants
International Standard on Review Engagements (UK and Ireland) 2410'. Our
review work has been undertaken so that we might state to the Company those
matters we 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 assume
responsibility to anyone other than the Company for our review work, for this
report, 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 are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, Interim Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of 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 to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30th June, 2007 is not prepared, in
all material respects, in accordance with International Accounting Standard 34
as adopted by the European Union and the Listing Rules of the United Kingdom's
Financial Services Authority.
Grant Thornton UK LLP
Chartered accountants
London
7th September, 2007
Note 1
The maintenance and integrity of the Candover Investments plc website is the
responsibility of the directors: the interim review does not involve
consideration of these matters and, accordingly, the company's reporting
accountants accept no responsibility for any changes that may have occurred to
the 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 statement
for 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 financial
investments and cash
equivalents at fair
value
through profit and
loss
Realised gains and - 9,520 9,520 - 7,587 7,587 - 14,249 14,249
losses
Unrealised gains and - 70,545 70,545 - 16,047 16,047 - 38,029 38,029
losses
- 80,065 80,065 - 23,634 23,634 - 52,278 52,278
Revenue
Management fees from
managed funds 18,855 - 18,855 19,547 - 19,547 39,454 - 39,454
Investment 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 - 60,461
Administrative (18,934) (5,296) (24,230) (19,533) (4,157) (23,690) (39,841) (8,315) (48,156)
expenses
Profit before
finance costs
and taxation 10,609 74,769 85,378 10,135 19,477 29,612 20,620 43,963 64,583
Interest payable and
similar 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 64,349
taxation
Taxation (3,308) 1,522 (1,786) (2,952) 1,247 (1,705) (6,231) 2,560 (3,671)
Profit attributable
to
equity shareholders 7,291 76,031 83,322 7,169 20,724 27,893 14,377 46,301 60,678
Earnings per
ordinary share
Basic 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 to
a total dividend of £4,371,000, is proposed. This dividend is not reflected in
the interim financial statement.
* The total column represents the Income Statement under IFRS.
Statement of recognised income and expenses
for the period ended 30th June, 2007
Unaudited
Six months Six months to Year to
to 30th June, 31st
30th June, December,
2007 2006 2006
£000 £000 £000
Profit attributable to equity 83,322 27,893 60,678
shareholders
Exchange differences on translation (40) (6) (11)
of foreign operations
Total recognised income and expenses 83,282 27,887 60,667
Reconciliation of movements in equity
for the period ended 30th June, 2007
Unaudited
Six months to Six months to Year to
30th June, 30th June, 31st December
2007 2006 2006
£000 £000 £000
Opening total equity 328,521 380,261 380,261
Total recognised income and 83,282 27,887 60,667
expenses
Return of cash (66) (101,313) (101,374)
Dividends (7,918) (7,002) (11,033)
Closing total equity 403,819 299,833 328,521
Group balance sheet
at 30th June, 2007
Unaudited
30th June, 2007 30th June, 2006 31st December,
2006
Notes £000 £000 £000 £000 £000 £000
Non-current assets
Property, plant and 3,311 915 1,679
equipment
Financial investments
designated at fair
value 3
through profit and loss
Investee companies 359,313 213,879 284,336
Other financial 19,051 7,005 10,927
investments
378,364 220,884 295,263
Trade and other - 4,460 1,141
receivables
Deferred tax asset 4,894 3,026 4,737
386,569 229,285 302,820
Current assets
Trade and other 33,782 15,628 29,616
receivables
Cash and cash 18,482 79,935 63,437
equivalents
52,264 95,563 93,053
Current liabilities
Trade and other (21,548) (22,917) (29,655)
payables
Loans 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 to
equity holders
Called up share capital 5,464 5,464 5,464
Share premium account 1,232 1,232 1,232
Translation reserve (59) (14) (19)
Capital redemption 499 499 499
reserve
Capital reserve - 253,731 222,672 226,894
realised
Capital reserve - 105,555 35,133 56,427
unrealised
Revenue reserve 37,397 34,847 38,024
Total equity 403,819 299,833 328,521
Net asset value per 1848p 1372p 1503p
share
Group cash flow statement
for the period ended 30thJune, 2007
Unaudited
Six months to Six months to Year to
30th June, 2007 30th June, 2006 31st December,
2006
£000 £000 £000 £000 £000 £000
Cash flow from operating
activities
Cash flow from operations (627) 9,278 12,261
Interest paid (295) (14) (293)
Tax paid (3,962) (5,967) (7,780)
Net cash from operating (4,884) 3,297 4,188
activities
Cash flows from investing
activities
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 12
equipment
Sale of financial investments 52,852 26,698 43,756
Net cash from investing (4,323) (8,759) (53,781)
activities
Cash flows from financing
activities
Equity dividends paid (7,918) (7,002) (11,008)
Return of cash (5,064) (96,234) (96,367)
Loans and borrowings (22,212) - 33,735
Decrease in cash and cash
equivalents
(44,401) (108,698) (123,233)
Opening cash and cash equivalents 63,437 189,392 189,392
Effect of exchange rates and
revaluation on cash and cash
equivalents
(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 constitute
statutory accounts as defined in Section 240 of the United Kingdom Companies
Act 1985. Comparative figures for 31st December, 2006 are taken from the full
accounts, which have been delivered to the Registrar of Companies and contain
an 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 and
loss
Six months to Six months to Year to
30th June, 30th June, 31st December
2007 2006 2006
£000 £000 £000
Opening valuation 295,263 187,875 187,875
Additions at cost 55,334 35,298 96,144
Disposals (42,606) (18,077) (28,419)
Appreciation 70,373 15,788 39,663
Closing 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.
END
CANDOVER INVESTMENTS PLC: Half-yearly Report
© 2007 PR Newswire
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