TIDMCDI
24th August 2016
Candover Investments plc
Interim results for the half year ended 30th June 2016
* Net assets per share of 148p (31st December 2015: 243p) a 39.1% decrease
over the six months to 30th June 2016.
* Realisations completed in the period included the realisation of the
balance of Stork BV announced in December 2015 together with the partial
realisation of Parques and Technogym following their IPOs. Proceeds in the
period totalled GBP30.1 million.
* Candover's* retained investment portfolio decreased in value by GBP9.7
million, a decrease of 19.8% since the year end.Constant currency
valuations decreased by GBP15.4 million offset by favourable currency
movements on investments of GBP5.7 million as a result of the weakness of
Sterling relative to the Euro.
* The decrease in the retained portfolio valuation reflected the impact of
the reduced IPO valuations of Parques and Technogym. This was compounded by
the post IPO share price weakness of Parques offset by recovery in the
performance of Technogym's share price.
* Net debt decreased to GBP10.2 million at 30th June 2016 (31st December 2015:
GBP33.2 million) reflecting the benefit of realisation proceeds offset by
operating and accrued financing costs together with adverse foreign
currency effects.
Malcolm Fallen, Chief Executive Officer, said:
"Our balance sheet is much improved following the first half realisations
leaving the business better placed to weather any uncertainty over the
foreseeable future. Until we can establish a route to secure liquidity from the
shares held in Parques and Technogym, our NAV will be driven by the performance
of both these businesses and their respective share price performance."
Ends.
* Candover means Candover Investments plc and/or one or more of its
subsidiaries
For further information, please contact:
Candover Investments plc
Malcolm Fallen, CEO +44 20 7489 9848
Business and financial review
Overview
Net assets per share decreased by 39.1% or 95p per share during the six months
to 30th June 2016 to 148p (31st December 2015: 243p). NAV growth is dependent
upon the valuation of the portfolio managed by Arle Capital Partners Limited
("Arle") increasing, thereby offsetting the costs of running the business.
In late April, Candover announced the partial realisation by Arle of its
investments in Parques Reunidos ("Parques") and Technogym S.p.A ("Technogym"),
following the initial public offering ("IPO") of Parques in Spain and Technogym
in Italy. In the IPO of Parques, Candover sold 7.7% of its interest in Parques
for net cash proceeds of EUR3.5 million with the remaining interest in Parques
valued at EUR42.1 million at the IPO price. Dealings in the shares of Parques
commenced on 29th April 2016, following which the share price declined by 15.8%
up to 30th June. The retained interest in Parques represents approximately 3.3%
of its share capital.
In the IPO of Technogym, Candover sold 71.9% of its interest in Technogym for
net cash proceeds of EUR17.3 million, after the exercise of the greenshoe
option. Candover's remaining interest in Technogym was valued at EUR7.3 million
at the IPO price. Dealings in the shares of Technogym commenced on 3rd May
2016, following which the share price increased by 21.7% up to 30th June. The
retained interest in Technogym represents approximately 0.89% of its share
capital.
Following the respective IPOs, both shareholdings are subject to lock ups of
180 days from the date that shares commenced trading.
The retained portfolio's aggregate value decreased by GBP15.4 million, on a
constant currency basis, which reflects a write down in the value of Parques of
GBP16.5 million offset by a GBP1.1 million increase in the valuation of Technogym.
The impact of foreign currency movements increased the valuation of the
portfolio by GBP5.7 million, reflecting the weakness of Sterling relative to the
Euro.
Candover's net debt decreased to GBP10.2 million during the first six months,
compared to GBP33.2 million at the year end. This comprised gross cash balances
of GBP20.6 million and gross debt of GBP30.8 million. The decrease in net debt
reflected the receipt of aggregate realisation proceeds of GBP30.1 million from
the Parques and Technogym IPOs together with proceeds from completion of the
sale of the balance of Stork BV. This was offset by accrued interest charges,
operating expenses and adverse foreign currency movements totalling GBP7.1
million.
In May 2016, the Company announced that the Board had concluded that, given
both the length of the lock up period and the structure of Candover's debt
arrangements, the best use of cash balances was to make an initial repayment of
debt rather than make a distribution to shareholders as permitted by the debt
facility. This decision reflected the fact that under the terms of the debt
facility a prepayment of up to EUR19.4 million is allowed, subject to the lender
receiving a minimum return of 1.15x on the principal repaid. If this payment
had been delayed until after 12th August 2016, the minimum return would have
increased to 1.4x principal, diluting net assets by GBP3.85 million. The
repayment was completed in late June.
Net asset value per share
Net assets per share decreased by 39.1% from 243p to 148p over the six months
to 30th June 2016. The decrease of 95p per share was split between losses on
financial instruments in the portfolio investments (86p), overall favourable
currency movements (16p), and the impact of on-going business costs (25p). In
the first half, these costs comprised accrued financing costs, the investment
manager's fee and general administration costs.
Table 1
GBPm p/share
Net asset value at 31st December 2015 as reported 53.2 243
Loss on financial instruments and other income1 (18.9) (86)
Recurring administrative expenses (1.2) (5)
Finance costs (4.4) (20)
Currency impact:
- Unrealised investments 5.7 26
- Retranslation of cash and cash equivalents 2.6 12
- Translation of loan (4.7) (22)
Net asset value at 30th June 2016 as reported 32.3 148
1 Stated before favourable currency impact of GBP5.7 million
Investments
The valuation of investments at 30th June 2016, including accrued loan note
interest, was GBP39.3 million. Valuations of the retained portfolio decreased for
the period by GBP15.4 million, before currency effects, representing a decrease
of 31.4% in the value of these investments over their 31st December 2015 value.
The overall decrease in the valuation of the portfolio in the period was GBP9.7
million representing a decrease of 19.8% which included GBP5.7 million of
favourable foreign currency movements.
Table 2
GBPm
Investments at 31st December 2015 82.6
Disposals at valuation (33.6)
Investments adjusted for additions and disposals 49.0
Revaluation of investments:
- Valuation movements before currency impact (15.4)
- Currency impact on unrealised investments 5.7
Investments at 30th June 2016 39.3
Net debt position
Candover's net debt decreased from GBP33.2 million as at 31st December 2015 to GBP
10.2 million as at 30th June 2016. This reflects the cash inflow from
realisations offset by the impact of interest accrued on borrowings, operating
expenses and adverse foreign currency movements in the period.
Table 3
30th June 31st December
2016 2015
GBPm GBPm
Loans and borrowings 30.4 39.4
Deferred costs 0.4 0.3
Value of loan 30.8 39.7
Cash (20.6) (6.5)
Net debt 10.2 33.2
Profit before and after tax
Net revenue loss before tax and exceptional non-recurring costs for the period
was GBP3.0 million compared to a profit of GBP2.3 million in the comparable period.
Including capital costs of GBP2.5 million (2015: GBP1.8 million), total
administrative and finance costs in the period were GBP5.6 million (2015: GBP4.2
million). This included GBP0.6 million (2015: GBP1.1 million) of management fees
payable to Arle, linked to the value of investments managed, and GBP4.4 million
of financing costs (2015: GBP2.4 million) which increased following the
refinancing completed in August 2015.
There was no exceptional non-recurring gain in the period (2015: gain GBP0.3
million).
Board
There were no changes to the Board during the period.
Dividend
The Board is not recommending a dividend payment, but the payments of dividends
in the future will be reviewed in the context of our focus on delivering a
progressive return of cash to shareholders over time.
Outlook
Our balance sheet is much improved following the first half realisations
leaving the business better placed to weather any uncertainty over the
foreseeable future. Until we can establish a route to secure liquidity from the
shares held in Parques and Technogym, our NAV will be driven by the performance
of both these businesses and their respective share price performance.
The Board believes that it is prudent to await the expiry of the lock up
periods for Parques and Technogym before making any future decisions on
returning value to shareholders.
Manager's report
Arle Capital Partners Limited
Introduction
Arle is the private equity asset manager of the Candover 2005 Fund and Candover
2008 Fund (together 'the Candover Funds' or 'Funds'), as well as special
purpose vehicles.
Portfolio Overview
The Candover Funds' portfolio has continued to make steady progress in
optimising the operational and financial performance of its residual portfolio
companies in readiness for exit. During the first six months of the year, Arle
announced two partial realisations with the successful flotations of Parques
Reunidos ("Parques") in Spain and Technogym in Italy. This leaves two
companies in the portfolio yet to be realised: Expro International ("Expro")
and Hilding Anders.
As a result of the pricing of the two partial exits during the period and the
subsequent movement in their listed share price, the overall valuation of the
Candover Funds' unrealised portfolio contracted by 20.7%. Individual company
valuations for Expro and Hilding Anders remained constant from December 2015.
Parques Reunidos
Parques is a leading global operator of regional leisure parks and one of the
three truly global leisure park operators. It operates a well-diversified
portfolio of 57 different attraction parks, animal parks, water parks, family
entertainment centres and other attractions which attract approximately 20
million visitors each year.
On 29th April 2016, Arle announced a partial exit of the investment, with the
IPO of Parques on the Madrid, Barcelona, Bilbao and Valencia stock exchanges
and on the Automated Quotation System or Mercado Continuo of the Spanish Stock
Exchanges at EUR15.50, a discount of 23% to 31st December 2015 valuation.
Net proceeds from the IPO of EUR35.0 million were raised through a sale of 7.7%
of the Candover Fund's investment. On listing, an interest of 33.9% of the
ordinary share capital was retained and is subject to a lock-up period of 180
days. On 30th June 2016, the Candover Fund's residual stake in the listed
shares, which is held via an intermediate holding company, was valued at EUR356.0
million.
Parques published Q3 results on 29th July 2016 and reported a 0.2% rise in
aggregate revenue to June to EUR248.1 million compared to the same period in the
previous year. It generated an aggregate EBITDA of EUR10.0 million which was a
fall of EUR3.5 million compared to the same period in the prior year. The
aggregate results to June correspond with the low season of the business and
most of the revenue is generated during the fourth quarter due to the holiday
period.
The company achieved solid results during the first and second quarters of the
year growing revenue on a like-for-like basis by 3.8% and 17.0% respectively,
which were offset by a decrease in revenue of 7.7% experienced during the third
quarter of the year, which was affected by adverse weather conditions.
In July, the Group announced the agreement of a 10 year management contract
with Sun Group to manage a theme park and a water park located in Halong Bay,
Vietnam. In addition, throughout the year, a number of agreements were reached
to develop five new leisure spaces within shopping centres: two in Madrid, one
in London, one in Lisbon and one in Murcia. With these agreements Parques is
now present in 14 countries, including the 2 new markets of Vietnam and
Portugal.
The valuation was written down by GBP16.5 million from 31 December 2015 to
reflect the listed share price of EUR13.05 at 30th June 2016, before positive
currency movements of GBP4.8 million (total: -54p per share).
Technogym
Technogym is a world leading supplier of technology and design-driven products
and services in the Wellness and Fitness industry. Founded in 1983, Technogym
provides a complete range of cardio, strength and functional equipment
alongside a cloud-based digital platform enabling consumers to connect with
their personal wellness experience anywhere, both on Technogym equipment and
via mobile apps on any device. Technogym targets 4 specific market segments:
Fitness Clubs; Hospitality & Residential; Health, Corporate & Public (HCP); and
Consumer.
At the end of April 2016, Arle announced the IPO of Technogym on the Mercato
Telematico Azionario (MTA), organised and managed by the Borsa Italiana S.p.A.
Demand for the IPO was four times oversubscribed and the final share price
settled at EUR3.25 per share, a discount of 19% to 31st December 2015 valuation,
resulting in a market capitalisation of EUR650 million. At 30th June 2016, the
share price was EUR3.95 with the stock trading well above the listing price.
Gross proceeds of EUR186.9 million were raised by Arle by listing 25% of
Technogym's share capital and a further 3.75% from the greenshoe option.
A 15% stake was retained by Arle but this reduced to 11.25% after the greenshoe
option was fully utilised. Arle entered a lock-up period of 180 days from the
start date of trading on 3rd May 2016.
Technogym issued maiden results for the six months to 30th June 2016 on 4th
August, reporting double digit revenue growth of 10.5% to EUR250 million compared
to the same period in 2015. Excluding the foreign exchange impact, revenue
growth was 12.4%. EBITDA growth was also strong with a 22.9% improvement to EUR
35.2 million in the first half of 2016. At constant exchange rates, this was a
30.1% rise.
Technogym has also been the official and exclusive supplier of fitness
equipment to the Rio 2016 Olympic Games. This was the sixth Olympic games as
official supplier of equipment and gyms for the competing athletes.
The valuation was marked GBP2.9 million lower than at 31st December 2015, before
positive foreign currency movements of GBP0.6 million (total: -10p per share).
Hilding Anders
Hilding Anders, the leading European manufacturer of beds and mattresses,
showed a good trading performance in Europe and Asia while Russia's performance
was below plan driven by more difficult market conditions. As planned, in Q2
2016 the business successfully exercised a call option to increase its stake in
the Russian subsidiary.
Hilding Anders also successfully extended the maturities of its debt facilities
by 2.5 years in an Amend & Extend process, providing the business with
flexibility and time to execute on the European cost initiative programme, and
to capitalise on the Asian and Russian growth.
The valuation was written down by GBP0.1 million against 31st December 2015
before positive foreign exchange movements of GBP0.2 million (total: nil p per
share).
Expro International
Expro, the international oilfield services company, reported annual results to
31st March 2016 with headline revenue of $909.1 million, down 30%, and adjusted
operating profit of $223.5 million, down 32% compared to the fiscal year ending
31st March 2015.
These results reflected a challenging energy market, led by reduced commodity
prices, which have seen lower activity levels across the business. To minimise
the impact, Expro has proactively managed its cost base, reducing operating
expenses to deliver stable adjusted EBITDA margins (compared to the previous
fiscal year).
Through its long-term relationships with customers, Expro announced a number of
key contract wins during the financial year, with Statoil, Tullow and, more
recently, Apache.
Despite the industry downturn, Expro outperformed most of its peers in terms of
EBITDA margin, and revenue and margin decline rates. Management continues to
work hard to adjust the business in line with market conditions, while
maintaining the highest levels of safety and service quality and including a
strong focus on efficiency.
Expro's Middle East and North Africa region revenue is up compared to the prior
fiscal year, and activity in the Gulf of Mexico has been remarkably resilient
alongside strong results from its market-leading subsea completion business.
Emerging technology product lines, including Meters and Wireless Well
Solutions, have also performed well.
While the past year has undoubtedly been challenging for the industry, Expro
continues to work closely with its customers, leaving the business well
positioned for the cycle upside.
The valuation was held flat against 31st December 2015, benefiting from
positive foreign currency movement of GBP0.1 million (total: nil p per share).
Realisations
There were two partial realisations during the period with the flotations of
Parques and Technogym. Proceeds were received in the period following
completion of the disposal of Stork which was agreed in December 2015.
Valuations
The investments are largely based in Western Europe and operate in the
services, industrial and energy sectors. The co-investments managed by Arle on
behalf of Candover are shown below.
Portfolio valuations
Residual Valuation Additions Valuation Valuation Valuation Valuation
cost1 at 31st and movement movement at 30th movement
December disposals excluding attributable June 2016 pence per
Portfolio 2015 FX2 to FX2 GBPm share2
company GBPm GBPm GBPm GBPm GBPm
Parques 30.6 43.4 (2.6) (16.5) 4.8 29.1 (54)
Reunidos
Technogym3 10.3 22.5 (13.1) (2.9) 0.6 7.1 (10)
Hilding 24.3 1.5 - (0.1) 0.2 1.6 -
Anders
Expro 94.4 0.5 - - 0.1 0.6 -
International
Stork Group 5.0 14.1 (13.7) (0.1) - 0.3 -
Alma 15.3 - - - - - -
All 179.9 82.0 (29.4) (19.6) 5.7 38.7 (64)
investments
Other 67.6 0.6 - - - 0.6 -
investments4
Total 247.5 82.6 (29.4) (19.6) 5.7 39.3 (64)
1 Residual cost is original cost less realisations to date
2 Compared to the valuation at 31st December 2015 or acquisition date, if
later
3 During the period a partial realisation of Technogym generated proceeds of
GBP13.1 million. Taking into account the discount to the year-end valuation on
IPO and subsequent upward movement in the value of the investment retained, the
overall value of the investment in Technogym decreased by GBP2.9 million in the
period (excluding FX). From an accounting perspective this movement was
treated as a realised loss on IPO of the investment of GBP4.0 million with a
subsequent uplift in the investment retained from the date of the IPO to 30th
June 2016 of GBP1.1m
4 Represents other co-investments
Outlook
During the remainder of 2016, Arle will continue to focus on optimising
performance across the portfolio, ensuring that the remaining investments in
the Funds can be realised at the appropriate time.
Arle Capital Partners Limited
23rd August 2016
Candover portfolio at 30th June 2016
Analysis by value
By valuation method By sector
1. Function of listed share price 1. Services 75.2%
93.5%
2. Multiple of earnings 5.7% 2. Industrial 23.2%
3. Disposal proceeds 0.8% 3. Energy 1.6%
By region By age
1. Spain 75.2% 1. Greater than 5 years 100%
2. Italy 18.3%
3. Nordic 4.1%
4. United Kingdom 1.6%
5. Benelux 0.8%
Portfolio investments
Movement Effective
Residual from equity % of
Date of cost of Directors' 31st Dec interest Candover's Basis of
Investment investment investment valuation 20151 (fully net assets valuation
GBPm GBPm GBPm diluted)
Function
Parques Reunidos Mar-07 30.6 29.1 (11.7) 3.3 90.1 of listed
Operator of share
attraction parks price
Function
Technogym Aug-08 10.3 7.1 (2.3) 0.9 22.0 of listed
Premium fitness share
equipment and price
wellness products
Hilding Anders Dec-06 24.3 1.6 0.1 4.3 5.0 Multiple
Bed and mattress of
manufacturer earnings
Expro International Jul-08 94.4 0.6 0.1 4.7 1.9 Multiple
Oilfield services of
earnings
Stork Group Jan-08 5.0 0.3 (0.1) N/A 0.9 Proceeds
Engineering
conglomerate
Alma Consulting Dec-07 15.3 - - 4.9 - Multiple
Group of
Cost consultancy earnings
1 Adjusted for additions and disposals in the period
Principal risks and uncertainties
Details of the principal risks and uncertainties facing the Group were set out
in the Risk review on pages 6 to 8 of the 2015 Report and Accounts, a copy of
which is available on our website (www.candoverinvestments.com).
The principal risks and uncertainties identified in the 2015 Report and
Accounts, and the policies and procedures for minimising these risks and
uncertainties, remain unchanged and each of them has the potential to affect
the Group's results during the remainder of 2016. Our views on the current
market conditions are reflected in the Business and financial review and the
Manager's report.
Statement of Directors' responsibilities
The Directors of Candover Investments plc confirm that, to the best of their
knowledge, the condensed set of financial statements in this interim report
have been prepared in accordance with International Accounting Standard 34
'Interim Financial Reporting' as adopted by the EU, and give a fair view of the
assets, liabilities, financial position and profit or loss of Candover
Investments plc, and the undertakings included in the consolidation as a whole,
and that the Manager's report includes a fair review of the information
required by DTR 4.2.7R and DTR 4.2.8R.
By order of the Board
Ipes (UK) Limited
Company Secretary
23rd August 2016
Independent review report to the members of
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 of Candover Investments plc for
the six months ended 30th June 2016 which comprises the Group statement of
comprehensive income, the Group statement of changes in equity, the Group
statement of financial position, the Group statement of cash flows and the
related explanatory notes. We have read the other information contained in the
half-yearly financial report which comprises only the Business and financial
review, the Manager's report, the Candover portfolio, the Principal risks and
uncertainties and the Statement of directors' responsibilities 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's members, 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. Our review work has been
undertaken so that we might state to the Company's members those matters we are
required to state to it in an independent 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 and the Company's members as a
body 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 Disclosure and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the Group are
prepared in accordance with International Financial Reporting Standards 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 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 2016 is not prepared, in
all material respects, in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and the
Disclosure and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
23rd August 2016
Group statement of comprehensive income
for the period ended 30th June 2016
GBP million Six months to 30th Six months to 30th Year to 31st December
June 2016 June 2015 2015
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Unaudited unaudited audited
(Loss)/gain on financial
instruments
at fair value through profit
and loss
Realised (losses)/gains - (3.4) (3.4) - 0.2 0.2 - 0.6 0.6
Unrealised (losses)/gains - (7.3) (7.3) - (38.4) (38.4) - (54.4) (54.4)
- (10.7) (10.7) - (38.2) (38.2) - (53.8) (53.8)
Revenue
Investment and other income 0.1 - 0.1 4.7 - 4.7 6.4 - 6.4
Recurring administrative (0.9) (0.3) (1.2) (1.2) (0.6) (1.8) (2.6) (0.9) (3.5)
expenses
Exceptional non-recurring - - - 0.3 - 0.3 (5.1) - (5.1)
gains/(losses)
(Loss)/profit before finance (0.8) (11.0) (11.8) 3.8 (38.8) (35.0) (1.3) (54.7) (56.0)
costs and taxation
Finance costs (2.2) (2.2) (4.4) (1.2) (1.2) (2.4) (3.2) (3.2) (6.4)
Exchange movements on - (4.7) (4.7) - 0.7 0.7 - (1.5) (1.5)
borrowings
(Loss)/profit before (3.0) (17.9) (20.9) 2.6 (39.3) (36.7) (4.5) (59.4) (63.9)
taxation
Analysed between:
(Loss)/profit before (3.0) (17.9) (20.9) 2.3 (39.3) (37.0) 0.6 (59.4) (58.8)
exceptional non-recurring
costs
Exceptional non-recurring - - - 0.3 - 0.3 (5.1) - (5.1)
gains/(losses)
Taxation - - - (1.6) - (1.6) (2.1) - (2.1)
(Loss)/profit after taxation (3.0) (17.9) (20.9) 1.0 (39.3) (38.3) (6.6) (59.4) (66.0)
Total comprehensive income (3.0) (17.9) (20.9) 1.0 (39.3) (38.3) (6.6) (59.4) (66.0)
Earnings per ordinary share:
Total earnings per share (13p) (82p) (95p) 5p (180p) (175p) (30p) (272p) (302p)
- basic and diluted
Dividends paid (GBP millions) - - - - - - - - -
The total column represents the Group statement of comprehensive income under
IFRS. The supplementary revenue and capital columns are presented for
information purposes as recommended by the Statement of Recommended Practice
issued by the Association of Investment Companies and updated in November 2014
All of the loss for the period and the total comprehensive income for the
period are attributable to the owners of the Company
No interim dividend is proposed
Group statement of changes in equity
for the period ended 30th June 2016
Unaudited Called Share Other Capital Capital Revenue Total
up premium reserves reserves reserves - reserve equity
share account - unrealised
capital GBPm GBPm realised GBPm GBPm GBPm
GBPm GBPm
Balance at 1st January 2016 5.5 1.2 (0.1) 309.9 (252.4) (10.9) 53.2
Net revenue after tax - - - - - (3.0) (3.0)
Unrealised loss on financial - - - - (7.3) - (7.3)
instruments
Realised (loss)/gain on - - - (27.9) 24.5 - (3.4)
financial instruments
Exchange movements on - - - - (4.7) - (4.7)
borrowing
Costs net of tax - - - (2.5) - - (2.5)
Profit/(loss) after tax - - - (30.4) 12.5 (3.0) (20.9)
Total comprehensive income - - - (30.4) 12.5 (3.0) (20.9)
Balance at 30th June 2016 5.5 1.2 (0.1) 279.5 (239.9) (13.9) 32.3
Unaudited
Balance at 1st January 2015 5.5 1.2 (0.1) 310.4 (193.5) (4.3) 119.2
Net revenue after tax - - - - - 1.0 1.0
Unrealised loss on financial - - - - (38.4) - (38.4)
instruments
Realised gain/(loss) on - - - 0.2 - - 0.2
financial instruments
Exchange movements on - - - - 0.7 - 0.7
borrowing
Costs net of tax - - - (1.8) - - (1.8)
Profit/(loss) after tax - - - (1.6) (37.7) 1.0 (38.3)
Total comprehensive income - - - (1.6) (37.7) 1.0 (38.3)
Balance at 30th June 2015 5.5 1.2 (0.1) 308.8 (231.2) (3.3) 80.9
Audited
Balance at 1st January 2015 5.5 1.2 (0.1) 310.4 (193.5) (4.3) 119.2
Net revenue after tax - - - - - (6.6) (6.6)
Unrealised loss on financial - - - - (54.4) - (54.4)
instruments
Realised gain/loss on - - - 3.6 (3.0) - 0.6
financial instruments
Exchange movements on - - - - (1.5) - (1.5)
borrowing
Costs net of tax - - - (4.1) - - (4.1)
Loss after tax - - - (0.5) (58.9) (6.6) (66.0)
Total comprehensive loss - - - (0.5) (58.9) (6.6) (66.0)
Balance at 31st December 2015 5.5 1.2 (0.1) 309.9 (252.4) (10.9) 53.2
Group statement of financial position
at 30th June 2016
GBP million Notes 30th June 2016 30th June 2015 31st December
unaudited unaudited 2015
audited
Non-current assets
Financial investments designated at
fair value through profit and loss
Investee companies 5 38.7 102.4 82.0
Other financial investments 5 0.6 0.6 0.6
39.3 103.0 82.6
Trade and other receivables 3.2 9.3 3.5
Deferred tax asset - 0.5 -
3.2 112.8 86.1
Current assets
Trade and other receivables 0.1 0.1 -
Current tax asset 0.1 0.1 0.2
Cash and cash equivalents 20.6 20.8 6.5
20.8 21.0 6.7
Current liabilities
Trade and other payables (0.6) (0.2) (0.2)
Provisions - (0.1) -
Loans and borrowings - (52.6) -
(0.6) (52.9) (0.2)
Net current assets/(liabilities) 20.2 (31.9) 6.5
Total assets less current 62.7 80.9 92.6
liabilities
Non-current liabilities
Loans and borrowings (30.4) - (39.4)
Net assets 32.3 80.9 53.2
Equity attributable to equity
holders
Called up share capital 5.5 5.5 5.5
Share premium account 1.2 1.2 1.2
Other reserves (0.1) (0.1) (0.1)
Capital reserve - realised 279.5 308.8 309.9
Capital reserve - unrealised (239.9) (231.2) (252.4)
Revenue reserve (13.9) (3.3) (10.9)
Total equity 32.3 80.9 53.2
Net asset value per share
Basic 148p 370p 243p
Diluted 148p 370p 243p
Group cash flow statement
for the period ended 30th June 2016
GBP million Notes Six months to Six months to Year to
30th June 2016 30th June 2015 31st December
unaudited unaudited 2015
audited
Cash flows from operating activities
Cash flow from operations 4 (0.4) (3.0) (4.1)
Interest paid (2.4) (1.9) (2.3)
Net cash outflow from operating (2.8) (4.9) (6.4)
activities
Cash flows from investing activities
Purchase of financial investments - (1.9) (2.3)
Sale of financial investments 30.1 1.7 8.2
Net cash inflow/(outflow) from 30.1 (0.2) 5.9
investing activities
Cash flows from financing activities
Loan notes issued - - (54.0)
Loan facility utilised - - 35.0
Loan facility repaid (15.8) - -
Net cash outflow from financing (15.8) - (19.0)
activities
Increase/(decrease) in cash and cash 11.5 (5.1) (19.5)
equivalents
Opening cash and cash equivalents 6.5 26.6 26.6
Effect of exchange rates and 2.6 (0.7) (0.6)
revaluation on cash and cash
equivalents
Closing cash and cash equivalents 20.6 20.8
6.5
Notes to the financial statements
for the period ended 30th June 2016
Note 1 General information
Candover Investments plc is a private equity investment trust listed on the
London Stock Exchange, registered and incorporated in England and Wales. The
consolidated financial statements, which are made up to the Statement of
financial position date, incorporate the Financial statements of Candover
Investments plc and Candover Services Limited, its wholly owned subsidiary.
This condensed consolidated half-year financial information does not comprise
statutory accounts within the meaning of Section 434 of the Companies Act 2006.
Statutory accounts for the year ended 31st December 2015 were approved on 23rd
March 2016. Those accounts, which contained an unqualified audit report under
Section 498 of the Companies Act 2006 and which did not make any statements
under Section 498 of the Companies Act 2006, have been delivered to the
Registrar of Companies in accordance with Section 441 of the Companies Act
2006.
Note 2 Basis of preparation
The condensed interim consolidated financial statements ("the interim financial
statements") incorporate the Financial statements for the six months ended 30th
June 2016 and are presented in sterling which is the functional currency of the
parent company. The accounting policies and presentation used in the
preparation of this report are consistent with the consolidated financial
statements for the year ended 31st December 2015. They have been prepared in
accordance with IAS 34 'Interim Financial Reporting' (IAS 34). They do not
include all of the information required in annual financial statements in
accordance with International Financial Reporting Standards ("IFRS"), and
should be read in conjunction with the consolidated financial statements for
the year ended 31st December 2015.
Under the UK Corporate Governance Code dated September 2014 and applicable
regulations and guidance, including the FRC's 'Going Concern and Liquidity
Risk: Guidance for Directors of UK Companies 2009', the Directors are required
to satisfy themselves that it is reasonable to presume that the Company is a
going concern. Candover's business activities, together with the factors likely
to affect its future development, performance and position, are set out in the
Business and financial review and the Manager's report on pages 2 to 8. The
financial position of Candover, its cash flows, liquidity position and
borrowing facilities are described in the Financial review on pages 2 to 4. The
Directors have a reasonable expectation that Candover and the Group have
adequate resources to continue as a going concern for the foreseeable future.
For these reasons, they continue to adopt the going concern basis in preparing
the interim financial statements as at 30th June 2016.
Note 3 Estimates
When preparing the interim financial statements, management undertakes a number
of judgements, estimates and assumptions about recognition and measurement of
assets, liabilities, income and expenses. The actual results may differ from
the judgements, estimates and assumptions made by management, and will seldom
equal the estimated results. The judgements, estimates and assumptions applied
in the interim financial statements, including the key sources of estimation
uncertainty, were consistent with those applied in the Group's last annual
financial statements for the year ended 31st December 2015.
Note 4 Reconciliation of operating income to net cash flow from operating
activities
GBP million Six months to Six months to Year to
30th June 2016 30th June 2015 31st December
unaudited unaudited 2015
audited
Total income 0.1 4.7 6.4
Administrative expenses (1.2) (1.8) (3.5)
Operating profit (1.1) 2.9 2.9
Decrease/(Increase) in 0.3 (5.6) 6.7
trade and other
receivables1
Increase/(decrease) in 0.4 (0.3) (0.3)
trade and other payables
Net cash outflow from (0.4) (3.0) (4.1)
operating activities
1 Includes accrued portfolio income recognised within Financial investments
shown under Non-current assets on the Group statement of financial position.
Note 5 Financial investments designated at fair value through profit and loss
GBP million Six months to Six months to Year to
30th June 2016 30th June 2015 31st December
unaudited unaudited 2015
audited
Opening valuation 82.6 135.6 135.6
Disposals at valuation (33.6) (1.7) (8.2)
Additions at cost - 1.9 2.3
Valuation movements (9.7) (32.8) (47.1)
Closing valuation 39.3 103.0 82.6
Note 6 Fair value hierarchy measurements and disclosures
IFRS 13 requires a company to classify fair value measurements using a fair
value hierarchy that reflects the significance of the inputs used in making the
measurements. The fair value hierarchy has the following levels:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2 - Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices including interest rates, yield
curves, volatilities, prepayment speeds, credit risks and default rates) or
other marker corroborated inputs.
Level 3 - Inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs).
The table below sets out fair value hierarchy under the IFRS 7 fair value
disclosures and IFRS 13 fair value measurement:
Six months to 30th June 2016
unaudited
Group Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm
Continuing equity investments - - 39.3 39.3
Cash equivalents1 20.6 - - 20.6
Total 20.6 - 39.3 59.9
Six months to 30th June 2015
unaudited
Group Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm
Continuing equity investments - - 103.0 103.0
Cash equivalents1 20.8 - - 20.8
Total 20.8 - 103.0 123.8
Year to 31st December 2015
audited
Group Level 1 Level 2 Level 3 Total
GBPm GBPm GBPm GBPm
Continuing equity investments - - 82.6 82.6
Cash equivalents1 6.5 - - 6.5
Total 6.5 - 82.6 89.1
1These are short-dated listed fixed income securities and money market
instruments which meet the definition of cash and cash equivalents
There have been no transfers between levels since the year end 31st December
2015 despite the IPO of Technogym and Parques. Whilst Candover's interests in
both entities are driven by their respective share prices, they are held via an
unquoted intermediate company, with lock-up arrangements in force for their
retained interests.
Valuations prepared by the investment manager are initially prepared by its
finance department using comparable multiples sourced from an independent third
party and financial results provided by the portfolio companies. The valuations
for Technogym and Parques are now based on a function of the share price of the
individual investments due to the nature of the investment held. These are then
passed to the relevant investment executive for review and comment, in
particular with respect to the sustainability of earnings and level of
underlying debt; the comparables; and any adjustments to be made thereto for
points of difference. Any changes to earnings basis or comparables used in a
valuation, compared to the prior valuation, must be approved by the senior
management of the investment manager. These valuations are then subject to
review, challenge and approval by the senior management of the investment
manager, who at the same time will discuss the underlying trading and outlook,
both internal and external, of the portfolio company. The valuations are
included in the financial statements of both Candover and the Candover Funds,
which are audited by separate independent auditors.
Valuations are based on earning multiples as derived from comparable listed
companies. Level 3
investments are sensitive to assumptions made when ascertaining fair value as
described in the valuation policy above. Using an alternative assumption could
have a significant impact on the fair value of Level 3 investments. A
reasonable assumption could be to value the portfolio companies using the
average market multiple of comparable listed companies, rather than the
specific approach adopted. This would result in an unadjusted valuation of GBP
41.9 million which is 9% higher than the current valuation. The multiples of
the comparable basket of companies range from 9.2x to 9.9x with adjustments
made to reflect the relative size and trading diversity between portfolio
companies and listed comparable companies of +0% to -25% (June 2015: +39% to
-37%, December 2015: +1% to -41%). These adjustments have an aggregate negative
impact of GBP3.2 million giving a valuation of GBP38.7 million of portfolio
companies as at 30th June 2016.
Note 7 Related party transactions
The nature of the Company's interest in the Candover 2005 and 2008 Funds is
disclosed in note 9 on page 64 of the 2015 Report and Accounts.
As at 30th June 2016, Candover's investments as a Special Limited Partner in
the Candover 2005 Fund were valued at GBP0.4 million (31st December 2015: GBP0.4
million).
Note 8 Outstanding commitments
At 30th June 2016, the Company had no outstanding co-investment commitments.
Note 9 Operating segments
Candover's operating segments are being reported based on the financial
information provided to the Chief Executive Officer of Candover. Co-investment
activity is presented on the Group statement of comprehensive income in
accordance with the Statement of Recommended Practice. Income arising from
co-investment is reported under 'revenue', and capital gains and losses within
'capital'. The Group's material non-current assets are the portfolio companies
of the co-investment segment. These are assessed geographically in the
Manager's portfolio review on page 9. There have been no changes from prior
periods in measurement methods used to determine operating segments during the
six month period to 30th June 2016.
END
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