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Candover Investments (CDI)

  Print      Mail a friend       Annual reports

Tuesday 31 August, 2010

Candover Investments

Half-yearly Report


For immediate release on 31st August 2010                                                                           
                                                                               
                           Candover Investments plc                                                       
                                                                               
          Interim results for the half year ended 30th June 2010                         
                                                                               
                                                                               


·         Net assets per share of 903p at 30th June 2010 (31st December 2009:
1038p), a 13.0% decrease. This reduction comprises a decline of 106p to reflect
falling multiples at 30th June, together with a net adverse currency impact on
investments and net debt of 29p per share.  The majority of the decline in
investment value relates to Expro, following recent volatility in the oil and
gas sector.


·         Outstanding commitments to the Candover 2005 Fund at 30th June 2010
were £72.7 million

(31st December 2009: £80.7 million), with the ratio of outstanding commitments
to net assets being 36.9%.  Since the period end, follow-on investments
totalling £33.6 million have been made, reducing the outstanding commitments to
£39.1 million based upon period end exchange rates.

 

·         Net debt reduced by 21.0% at 30th June 2010 to £58.8 million (31st
December 2009: £74.8 million), with the loan to value ratio of 25.0% being well
within the required threshold of 40.0% (31st December 2009: 26.4%)

 

·         Cash and undrawn bank facilitiesat 30th June 2010 were £200.1 million
(31st December 2009: £206.3 million), meaning outstanding commitments are 2.8
times covered.    

 

·         Ten largest investments comprised 90.4% of Candover's investment
value at 30th June 2010 with Expro individually accounting for 32.2%. 

 

Malcolm Fallen, Chief Executive Officer, said:

 

 "The first half of the year has seen further progress in Candover's
stabilisation.  We have used this period to review our options for the Company
and believe that the best way to optimise value is likely to be a move towards
implementing a plan to return cash to shareholders. The Board continues to
believe there is significant value in the underlying investments in the
portfolio. Such a plan means Candover is likely to remain as a listed
investment trust, focused on distributing value to investors over time as
portfolio realisations are achieved by Candover Partners.  The Board will
update shareholders in due course."

 

Ends.

 

*Candover means Candover Investments plc and / or one or more of its         
subsidiaries                                                                 
                                                                             
** Candover Investments means Candover Investments plc                       
                                                                             
***Candover Partners means Candover Partners Limited                         
                                                                             
                                                                             
For further information, please contact:                                     
                                                                             
                                                                             
                                                                             
Candover +44 20 7489 9848              Tulchan Communications +44 20 7353 4200         
Malcolm Fallen                         Susanna Voyle                         
Helen Walsh                            Peter Hewer                           
                                                                             
                                                                             
                                                                             
Business and financial review

 

Business review

 

Strategy and priorities

 

During the first half of this year we have continued to build upon last year's
momentum aimed at delivering greater stability for the business.  The
termination agreement reached with Candover Partners and the Limited Partners
of the Candover 2008 Fund in January of this year was a milestone in this
respect and leaves us in a solid position with regard to meeting our
outstanding commitments to ongoing funds.

 

In the first half we received an unsolicited approach from a third party to buy
the whole of the Company.  Recognising that your Board has a fiduciary duty to
consider any credible approach, we began discussions with this third party
aimed at understanding how such a potential offer might bring further financial
stability to Candover and maximise the value for shareholders.  These talks
came to an end in early July when the Board requested that the potential
offeror clarify its position.  It confirmed that it was no longer considering
making an offer.  Whilst the talks were constructive they never reached a point
where a clear proposal was forthcoming that could be considered by the Board or
shareholders.

 

We have used this first half to review our options for the Company based upon
our belief that there is significant value in the underlying investments in the
portfolio.  We consider that the best way to optimise value for shareholders is
likely to be Candover remaining as a listed investment trust, with the sole
purpose of returning cash to investors over time as portfolio realisations are
made by Candover Partners.  We are therefore reviewing the range of returns
that could be achieved, the likely timescales, and the best way of returning
capital to shareholders.

 

The interests of the Company and Candover Partners remain closely aligned, with
the principal aim being to maximise the value of the existing portfolio in the
interests of all investors.  We remain committed to supporting the team to
assist them in delivering this value.

 

Further announcements will be made to shareholders in due course.

 

Performance

 

Our results for the half year reflect the instability in the markets, both in
terms of company valuations - with the FTSE 100 on 30th June approaching its
lowest point this year - and adverse foreign exchange movements.  During the
first six months, our net assets fell by 13.0% to 903p, compared to a 7.9% fall
in the FTSE All-Share over the same period. The concentration of the portfolio
in Expro International and its resultant exposure to volatility in the oil and
gas sector, influenced by the events in the Gulf of Mexico, had a marked effect
on our first half valuations. However, since the period end, there has been a
stabilisation in the market, with all major indices improving.

 

In the preliminary statement in March, we outlined certain key metrics which we
intend to use to provide clarity of performance and to demonstrate shareholder
value:

 

Net assets per share ("NAV")

The Company's net assets per share of 903p after currency movements decreased
by 13.0% over the period to 30th June 2010 (31st December 2009: 1038p). 
Excluding Expro International, this decrease was principally caused by adverse
currency movements (54p) and the combined write down of Alma and EurotaxGlass's
to reflect lower multiples (52p). In the case of Expro International, a
downward revaluation was made to reflect volatility in the oil and gas sector
and the resultant decline in multiples of comparable quoted companies.  This
accounted for 65p of the decrease in NAV, offset by a favourable currency
impact of 25p relating to that asset.

Outstanding commitments

Outstanding commitments to the Candover 2005 Fund at 30th June 2010 were £72.7
million (31st December 2009: £80.7 million), with the ratio of outstanding
commitments to net assets being 36.9%.  Since the period end, investments
totalling £33.6 million have been made in DX Group, EurotaxGlass's, Expro
International, Hilding Anders and Technogym, reducing the outstanding
commitments to £39.1 million at period end exchange rates.

 

Net debt

As at 30th June 2010, net debt was £58.8 million (31st December 2009: £74.8
million), with the loan to value ratio of 25.0% (31st December 2009: 26.4%)
being well within the required threshold of 40.0%.   Expected proceeds from
Ontex, as announced on 14th July 2010, and the follow-on commitments noted
above, will result in a net investment outflow of £17.2 million during the
second half of the year assuming no further investments or realisations.

 

Cash and undrawn bank facilities

At 30th June 2010, cash and undrawn bank facilities were £200.1 million (31st
December 2009: £206.3 million), meaning our outstanding commitments are 2.8
times covered.    

 

Concentration of the portfolio

At 30th June 2010, the ten largest investments comprised 90.4% of Candover's
investment value, with Expro International individually accounting for 32.2%. 
Following the sale of Ontex, concentration of the portfolio will have
increased, and this trend will continue as further realisations occur.

 

Board

 

We have now transitioned to a smaller Board to reflect our status as a smaller
company, with Antony Hichens, Chris Russell and Nicholas Jones stepping down at
the AGM in May. 

 

Dividend

 

The Board continues to feel that it is not appropriate to recommence paying
dividends to shareholders at this stage. As part of the cash maximisation
strategy, we will determine the appropriate mechanisms to return capital to
shareholders, including looking at restarting dividends in due course.

 

Outlook

 

Looking ahead, the portfolio continues to demonstrate its potential for
long-term value and whilst the outlook for the macro environment remains hard
to predict, both the broader mergers and acquisitions and private equity
markets in Europe have seen a steady increase in activity which should support
our value maximisation strategy.    

 

Financial review

 

Net asset value per share

 

Net assets per share, including currency movements, reduced by 135p to 903p a
decrease of 13.0% since 31st December 2009. The decrease over the six month
period compares with a fall in the FTSE All-Share of 7.9% over the same period.

 

Two-thirds of our investments are Euro denominated and therefore the valuation
of these assets is exposed to the Euro/Sterling exchange rate.  Candover has
hedged its currency exposure in order to mitigate any adverse impact on its
loan to value covenant through the denomination of its cash, debt and swaps
rather than the potential currency impacts on net asset values.  As a result,
currency fluctuations can have a material impact on net assets.  Table 1 below
summarises the movements in net assets during the first half. The net adverse
impact of currency movements on both investments and net debt reduced reported
NAV by 29p to 903p.

 

At 30th June 2010, net assets per share, before currency movements were 932p
compared to 1038p at 31st December 2009, a reduction of 106p over the period. 
Of this, Expro International accounted for 65p, with valuation reductions on
Alma and EurotaxGlass's accounting for the balance. 



 

Table 1                                                                     
                                                                            
                                             £m      £m      p/share  p/    
                                                                      share 
                                                                            
Net asset value at 31st  December 2009 as            227.0            1038  
reported                                                                    
                                                                            
Loss on financial instruments at fair value          (13.9)           (64)  
through profit and loss before currency1                                    
                                                                            
Profit after taxation                                (6.9)            (31)  
                                                                            
Capitalised expenses (net of tax)                    (2.9)            (13)  
                                                                            
Others                                               0.5              2     
                                                                            
                                                     203.8            932   
                                                                            
Currency impact:                                                            
                                                                            
- Unrealised investments                     (13.6)          (62)           
                                                                            
- Restatement of cash and cash equivalents   (10.0)          (46)           
                                                                            
- Translation of loan and swap balances      17.2            79             
                                                                            
                                                     (6.4)            (29)  
                                                                            
Net asset value at 30th  June 2010 as                197.4            903   
reported                                                                    
                                                                            


1 Includes valuation movements as shown in Table 2, realised gains on
investments of £1.5 million, gains on reducing financial liabilities on equity
commitments of £0.9 million, but excludes decreases in accrued investment
income of £4.2 million (recognised in profit after taxation).

 

Investments

 

The valuation of investments, including accrued loan note interest, at 30th
June 2010 was £270.7 million

(31st December 2009: £319.9 million).  Table 2 below summarises the movement in
our investments over the first half.

 

Table 2                                                                     
                                                                            
                                                        £m     £m           
                                                                            
Investments at 31st  December 2009                             319.9        
                                                                            
Disposals at valuation                                         (15.1)       
                                                                            
Additions                                                      -            
                                                                            
Revaluation of investments:                                                 
                                                                            
- Valuation movements before currency                   (20.5)              
                                                                            
- Currency impact on unrealised investments             (13.6)              
                                                                            
                                                               (34.1)       
                                                                            
Investments at 30th June 2010                                  270.7        
                                                                            

 

Net debt position

 

Candover's net debt has fallen from £74.8 million as at 31st  December 2009 to
£58.8 million as at 30th June 2010, principally due to the receipt of
realisation proceeds of £17.7 million. Table 3 below analyses our net debt.

 

Table 3                                                                     
                                                                            
£ million                            30th June 2010            31st         
                                                                December    
                                                               2009         
                                                                            
Loans and borrowings                 203.6                     194.6        
                                                                            
Fair value hedge adjustment          (17.7)                    (13.3)       
                                                                            
Deferred costs                       1.2                       1.3          
                                                                            
Value of loan note                   187.1                     182.6        
                                                                            
Value of related swaps               (28.2)                    (1.5)        
                                                                            
Cash                                 (100.1)                   (106.3)      
                                                                            
Net debt                             58.8                      74.8         
                                                                            

 

The outstanding commitment to the Candover 2005 Fund fell to £72.7 million over
the period from £80.7 million at the year end, largely due to currency
movements.

 

Net revenue before tax

 

For the six month period net revenue before exceptional items and tax was a
loss of £6.2 million compared to a gain of £5.2 million in the comparable
period.  This resulted from a £9.4 million adverse variance in investment and
other income reflecting the impact of lower valuations on the level of accrued
income that is recognised.  Table 4 below analyses the makeup of net revenue.

 


 

In light of the change in our focus on realisation rather than investment, we
have reviewed and revised the allocation of expenses between revenue and
capital.  In particular, this change reflects the impact of longer hold periods
on investments before realisations which will result in a greater proportion of
the anticipated future return being received as loan stock interest, rather
than capital gains, which would therefore be recognised as revenue rather than
capital return.

 

Table 4                                                                    
                                                                           
£ million                            30th June 2010           30th June    
                                                              2009         
                                                                           
Management fees from managed funds   6.8                      9.8          
                                                                           
Costs before exceptional items and   (8.4)                    (11.1)       
taxation taken to revenue before                                           
adjustment to capitalised expenses                                         
allocation basis                                                           
                                                                           
                                     (1.6)                    (1.3)        
                                                                           
Adjustment to capitalised expenses   (1.7)                    -            
allocation basis                                                           
                                                                           
Investment and other income          (2.9)                    6.5          
                                                                           
(Loss)/profit before exceptional     (6.2)                    5.2          
items and taxation                                                         
                                                                           

 


Manager's report

 

The European buyout market continues to show renewed signs of activity, with
deal values of €25.2 billion in the first half of the year only ten per cent
lower than the value of all buyouts completed in the year to 31st December
2009.  The increase in buyout activity is encouraging in the context of exits,
and to this end Candover Partners has realised its investment in Springer
Science+Business Media and has entered into an agreement to sell Ontex.  The
Springer and Ontex transactions are two of the largest buyouts announced in
Europe in the past 12 months.

 

Investments

 

The Candover 2008 Fund's investment period was terminated in January and as a
result no new investments were made during the first six months of the year.
 However, Candover Partners continues to explore ways to enhance portfolio
company values both organically and through add-on acquisition. Since the
period end, Expro International has agreed to acquire Production Testers
International, an Asian based oilfield services company. Candover will invest £
1.5 million and the Candover 2005 and 2008 Funds will invest £25.0 million in
the transaction.

 

 In addition, since the period end Candover has invested in the following
portfolio companies:


§         £2.2 million in DX Group as part of a balance sheet restructuring;

§         £2.3 million in EurotaxGlass's as part of a restructuring;

§         £6.7 million in Hilding Anders to repay a facility put in place to
fund acquisitions; and

§         £20.9 million in Technogym to repay a debt facility put in place at
the time of the original acquisition.

 

Portfolio company                       Candover         Funds           
                                        £m               £m              
                                                                         
DX Group                                2.2              13.1            
                                                                         
EurotaxGlass's                          2.3              13.7            
                                                                         
Expro International                     1.5              25.0            
                                                                         
Hilding Anders                          6.7              40.7            
                                                                         
Technogym                               20.9             126.4           
                                                                         
Total investments - post period end     33.6             218.9           
                                                                         

 

Realisations

 

Candover and its managed funds achieved realisation proceeds totalling £52.2
million during the period. Candover's share was £17.7 million of which £16.8
million was from its managed funds.

 

In February, Candover and the 2001 Fund realised its holding in Springer
Science+Business Media. The sale generated proceeds of £16.3 million for
Candover, of which £12.6 million resulted from the crystallisation of the
carried interest.  The Candover 2001 Fund received proceeds of £32.1 million,
before payment of carried interest, which including proceeds from three earlier
refinancings, equates to an overall multiple of 1.8 times the original
investment.

 

In May, Candover Partners and the equity syndicate reached agreement with the
lenders of Gala Coral on a new capital structure, which resulted in the
mezzanine holders taking 100% of the equity. The transaction completed in June
and generated proceeds for Candover of £0.5 million including £0.2 million from
the crystallisation of the carried interest; the Candover 2001 Fund received £
2.4 million. When combined with earlier proceeds realised from the sale of an
equity stake and two refinancings, the Gala Coral investment will have achieved
an investment multiple of 0.6 times the original investment.

 

Since the period end, Candover Partners has agreed to sell its holding in
Ontex. The sale, which is expected to complete before the year end, will
generate initial estimated cash proceeds for Candover of £16.4 million,
including £4.6 million of carried interest.  A guaranteed, interest accruing
deferred payment, will result in further proceeds valued today at £7.1 million
and will be payable between completion and September 2012. The carried interest
from this deferred payment will return an additional £2.8 million. The Candover
2001 Fund will receive estimated initial proceeds of £92.0 million and a
further £55.7 million from the deferred payment, giving an investment multiple,
before carried interest, of 0.7 times the original investment.


 

Company                        Capital proceeds Exit route                  
                                                                            
                               Candover Funds                               
                               £m       £m                                  
                                                                            
Gala Coral                     0.3      2.4     Restructuring               
                                                                            
Springer Science+Business      3.7      32.1    Private equity sale         
Media                                                                       
                                                                            
Candover 2001 Fund carried     12.8     -       Crystallisation of carried  
interest                                        interest                    
                                                                            
Other                          0.9                                          
                                                                            
Total realisations to 30th     17.7     34.5                                
June 2010                                                                   
                                                                            
Ontex                          18.9     147.7   Private equity sale         
                                                                            
Candover 2001 Fund carried     7.4      -       Crystallisation of carried  
interest                                        interest                    
                                                                            
Total realisations post period 26.3     147.7                               
end                                                                         
                                                                            

 

Valuations

 

During the period under review, the portfolio has shown continued signs of
stabilisation.  Of the top ten investments, six are trading ahead at the
earnings level on a 12 month rolling basis compared to the year end position,
with the remainder trading in line with expectations.  Over the same period,
eight investee companies have reduced their net debt position, with the
portfolio weighted average net debt to EBITDA multiple of 4.3 times (December
2009: 4.8 times).  This excludes Expro International, which replaced its senior
debt with a high yield bond in December 2009 in order to ensure its financial
structure was better suited to the cyclical nature of the oil and gas sector.

 

The ten largest companies represent 90.4% of the portfolio, with the 2001 Fund
carried interest representing a further 6.7%. Within the portfolio, Expro
International accounts for 32.2% of the value, and movements in its valuation
therefore have a significant impact on the value of the portfolio and therefore
net asset value.

 

During the period, Expro International was written down by 14.6% on a constant
currency basis to reflect the volatility in the oil and gas sector and the
resultant decline in multiples of quoted comparables which have been adversely
impacted by the Macondo well incident in the Gulf of Mexico.  By way of
illustration, the Dow Jones Global Oil Equipment and Services Index (the
closest industry index) fell by 16.8% during the same period.  The oilfield
services market has continued to be challenging over the period with oil and
gas operators continuing to be impacted by the uncertainty in the global
markets. Despite this, Expro International has displayed resilient
characteristics and the lead indicators of the business are increasingly
encouraging. The business has seen a significant increase in customer inquiry
levels versus the prior year; it has recently secured over £250.0 million of
contract wins across its operations worldwide and has a global order book of
over £800.0 million. The business is geographically diversified with only
around 5.0% of revenues derived from the Gulf of Mexico area.

 

Expro International sees significant opportunity as the market recovers given
it is one of the leading providers to operators in developing complex oil
reserves with its suite of safe and value enhancing products and services. The
business is accelerating its investment in its people, technology and regional
infrastructure to capitalise on these opportunities and overcome the structural
supply challenges faced by the industry. This also includes the acquisition of
Product Testers International which will enhance its product and service
offering. The acquisition is expected to complete in September 2010. As a
result of these investments, Candover Partners believes Expro International is
well positioned to maximise the opportunities offered by the medium to
long-term fundamentals of the oil and gas sector, which continue to remain
robust.

 


Ten largest investments

Analysis by value as at 30th June 2010

By valuation method

 

1. Multiple of earnings        92%

2. Sale price                   8%

 

By region

 

1. United Kingdom              53%

2. Benelux                     24%

3. Spain                       13%

4. France                       9%

5. Switzerland                  1%

 

By sector

 

1. Energy                      36%

2. Industrials                 28%

3. Financials                  14%

4. Leisure                     13%

5. Health                       8%

6. Support services             1%

7. Media                      nil%

 

By age

 

1. <1 year                    nil%

2. 1-2 years                  nil%

3. 2-3 years                   61%

4. 3-4 years                   18%

5. 4-5 years                    7%

6. >5 years                    14%

 

 

Outlook

 

Candover Partners believes that the portfolio continues to perform well in what
remains an uncertain trading environment.  Its focus remains on maximising
value, working closely with each company and management team to ensure they are
well positioned to trade profitably, as well as build value for the future. 

 

Ten largest investments

as at 30th June 2010

 

                                                                                                
                                                                                                
                          Valuation Valuation Valuation                                         
                          at 31st   movement  movement                                          
               Residual   December  excluding attributable           Effective                  
               cost of    2009      FX        to FX                  equity                     
               investment                                  Valuation interest  % of             
               £m         £m        £m        £m           at 30th   (fully    net     Basis of 
Investment                                                 June      diluted)  assets  valuation
                                                                                                
                                                           £m                                   
                                                                                                
                                                                                                
                                                                                                
Expro          109.4      95.8      (14.2)    5.5          87.1      7.2%      44.1%   Multiple 
International                                                                          of       
                                                                                       earnings 
Oilfield                                                                                        
services                                                                                        
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
Stork          48.9       43.8      -         (4.4)        39.4      6.4%      20.0%   Multiple 
                                                                                       of       
Engineering                                                                            earnings 
conglomerate                                                                                    
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
Parques        25.7       34.7      -         (3.5)        31.2      5.6%      15.8%   Multiple 
Reunidos                                                                               of       
                                                                                       earnings 
Operator of                                                                                     
attraction                                                                                      
parks                                                                                           
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
AlmaConsulting 20.5       30.9      (4.5)     (3.1)        23.3      5.4%      11.8%   Multiple 
Group                                                                                  of       
                                                                                       earnings 
Cost reduction                                                                                  
and tax                                                                                         
recovery                                                                                        
services                                                                                        
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
Ontex          21.3       19.8      1.1       (2.0)        18.9      4.9%      9.6%    Sale     
                                                                                       price    
Hygienic                                                                                        
disposables                                                                                     
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
Qioptiq        9.6        15.8      -         (1.6)        14.2      7.2%      7.2%    Multiple 
                                                                                       of       
Optical                                                                                earnings 
engineering                                                                                     
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
Capital Safety 11.9       10.8      -         0.6          11.4      6.7%      5.8%    Multiple 
Group                                                                                  of       
                                                                                       earnings 
Fall                                                                                            
protection                                                                                      
equipment                                                                                       
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
Equity Trust   8.3        12.6      -         (1.3)        11.3      5.6%      5.7%    Multiple 
                                                                                       of       
Trust services                                                                         earnings 
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
Innovia Films  3.8        5.0       -         (0.5)        4.5       8.0%      2.3%    Multiple 
Limited                                                                                of       
Chemicals                                                                              earnings 
                                                                                                
                                                                                                
                                                                                                
                                                                                                
                                                                                                
EurotaxGlass's 17.4       11.4      (6.8)     (1.1)        3.5       8.0%      1.8%    Multiple 
                                                                                       of       
Automotive                                                                             earnings 
data                                                                                            
intelligence                                                                                    
                                                                                                
                                                                                                
                                                                                                

 


Principal risks and uncertainties

 

Details of the principal risks and uncertainties facing the Group were set out
in the risk review on pages 36 to 39 of the 2009 Report and Accounts, a copy of
which is available on our website (www.candoverinvestments.com).

 

The principal risks and uncertainties identified in the 2009 Annual Report, 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 2010.  Our views on the current market
conditions are reflected in the business 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 have been prepared in
accordance with International Accounting Standard 34 'Interim Financial
Reporting' as adopted by the EU, and that the interim management report
includes a fair review of the information required by DTR 4.2.4, DTR 4.2.7 and
DTR 4.2.8.

 

The directors of Candover Investments plc are listed on the last page of this
statement.

 

By order of the Board

 

Philip Price

Company Secretary

31st August 2010

 


Independent review report to Candover Investments plc

 

Introduction

 

We have been engaged by the Company to review the condensed consolidated set of
financial statements in the half-yearly financial report for the six months
ended 30th June 2010 which comprises the Group statement of comprehensive
income, Group statement of changes in equity, Group statement of financial
position, 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 ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information
performed by the Independent Auditor of the Entity'. 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 Disclosure and Transparency
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 2010 is not prepared, in
all material respects, in accordance with International Accounting Standard 34
as adopted by the European Union and the Disclosure and Transparency Rules of
the United Kingdom's Financial Services Authority.

 

Grant Thornton UK LLP

Registered Auditor

London

31st August 2010


Group statement of comprehensive income

for the period ended 30th June 2010

£ million                              Six months to 30th June     Six months to 30th June     Year to 31st December
                                                  2010                        2009                        2009
Unaudited
                                         Revenue  Capital    Total   Revenue Capital    Total   Revenue Capital   Total
(Loss)/gain on financial instruments
at fair value through profit and loss
Realised gains and losses                      -    (2.8)    (2.8)         -  (12.4)   (12.4)         -   (9.8)   (9.8)
Unrealised gains and losses                    -   (18.8)   (18.8)         -   (0.4)    (0.4)         -    30.5    30.5
                                               -   (21.6)   (21.6)         -  (12.8)   (12.8)         -    20.7    20.7
Revenue
Management fees from managed funds           6.8        -      6.8       9.8       -      9.8      18.6       -    18.6
Investment and other income                (2.9)        -    (2.9)       6.5       -      6.5      13.3       -    13.3
                                             3.9        -      3.9      16.3       -     16.3      31.9       -    31.9
Recurring administrative expenses          (8.7)    (1.4)   (10.1)    (10.1)   (3.6)   (13.7)    (19.7)   (5.2)  (24.9)
Exceptional non-recurring costs                -        -        -    (15.4)       -   (15.4)    (17.1)       -  (17.1)
(Loss)/Profit before finance costs and     (4.8)   (23.0)   (27.8)     (9.2)  (16.4)   (25.6)     (4.9)    15.5    10.6
taxation
Finance costs                              (1.4)    (1.5)    (2.9)     (1.0)   (4.1)    (5.1)     (1.8)   (7.1)   (8.9)
Movement in the fair value of                  -      0.3      0.3         -   (1.0)    (1.0)         -   (0.8)   (0.8)
derivatives
Exchange movements on borrowings               -      1.8      1.8         -     5.8      5.8         -     3.7     3.7
(Loss)/Profit before taxation              (6.2)   (22.4)   (28.6)    (10.2)  (15.7)   (25.9)     (6.7)    11.3     4.6
Analysed between:
(Loss)/Profit before exceptional           (6.2)   (22.4)   (28.6)       5.2  (15.7)   (10.5)      10.4    11.3    21.7
non-recurring costs
Exceptional non-recurring costs                -        -        -    (15.4)       -   (15.4)    (17.1)       -  (17.1)
Taxation                                   (0.7)        -    (0.7)     (0.8)       -    (0.8)     (2.3)       -   (2.3)
(Loss)/Profit after taxation               (6.9)   (22.4)   (29.3)    (11.0)  (15.7)   (26.7)     (9.0)    11.3     2.3
Other comprehensive income:
Exchange differences on translation of     (0.3)        -    (0.3)     (0.4)       -    (0.4)       0.4       -     0.4
foreign operations
Total comprehensive income                 (7.2)   (22.4)   (29.6)    (11.4)  (15.7)   (27.1)     (8.6)    11.3     2.7
Earnings per ordinary share:
Before exceptional non-recurring costs
Basic and diluted                          (33p)   (103p)   (136p)       18p   (72)p    (54)p       37p     52p     89p
After exceptional non-recurring costs
Basic and diluted                          (33p)   (103p)   (136p)     (52)p   (72)p   (124)p     (41p)     52p     11p
Dividends paid (£ 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.

 All of the profit for the period and the total comprehensive income for  the
period is attributable to the owners of the Company.

All items in the above Statement derive from continuing operations. No
operations were acquired or discontinued in the period.

No interim dividend is proposed.


Group statement of changes in equityfor the period ended 30th June 2010

£ million                                   Called up       Share    Other       Capital       Capital  Revenue   Total
Unaudited                                       share     premium reserves     reserve -     reserve -  reserve  equity
                                              capital     account               realised    unrealised
Balance at 1st January 2010                       5.5         1.2      0.2         359.5       (160.5)     21.1   227.0
Net revenue after tax                               -           -        -             -             -    (6.9)   (6.9)
Unrealised loss on financial instruments            -           -        -             -        (18.8)        -  (18.8)
Realised gain/(loss) on financial                   -           -        -           3.2         (6.0)        -   (2.8)
instruments
Movement in fair value of derivatives               -           -        -             -           0.3        -     0.3
Exchange movements on borrowing                     -           -        -             -           1.8        -     1.8
Costs net of tax                                    -           -        -         (2.9)             -        -   (2.9)
(Loss) after tax                                    -           -        -           0.3        (22.7)    (6.9)  (29.3)
Exchange differences on translation of
foreign operations                                  -           -    (0.3)             -             -        -   (0.3)
Total comprehensive income                          -           -    (0.3)           0.3        (22.7)    (6.9)  (29.6)
Balance at 30th June 2010                         5.5         1.2    (0.1)         359.8       (183.2)     14.2   197.4
 
Unaudited
Balance at 1st January 2009                       5.5         1.2    (0.2)         369.8       (182.1)     30.1   224.3
 
Dividends                                           -           -        -             -             -    (8.7)   (8.7)
Share based payments                                -           -      1.2             -             -        -     1.2
Transactions with equity holders                    -           -      1.2             -             -    (8.7)   (7.5)
 
Net revenue after tax                               -           -        -             -             -   (11.4)  (11.4)
Unrealised loss on financial instruments            -           -        -             -         (0.4)        -   (0.4)
Realised gain/(loss) on financial                   -           -        -          24.1        (36.5)        -  (12.4)
instruments
Movement in fair value of derivatives               -           -        -             -         (1.0)        -   (1.0)
Exchange movements on borrowing                     -           -        -             -           5.8        -     5.8
Costs net of tax                                    -           -        -         (7.7)             -        -   (7.7)
Profit/(loss) after tax                             -           -        -          16.4        (32.1)   (11.4)  (27.1)
Exchange differences on translation of              -           -    (0.4)             -             -      0.4       -
foreign operations
Total comprehensive income                          -           -    (0.4)          16.4        (32.1)   (11.0)  (27.1)
Balance at 30th June 2009                         5.5         1.2    (0.6)         386.2       (214.2)     19.1   197.2
 
Audited
Balance at 1st January 2009                       5.5         1.2    (0.2)         369.8       (182.1)     30.1   224.3
 
Net revenue after tax                               -           -        -             -             -    (9.0)   (9.0)
Unrealised loss on financial instruments            -           -        -             -          30.5        -    30.5
Realised gain/(loss) on financial
instruments                                         -           -        -           2.0        (11.8)        -   (9.8)
Movement in fair value of derivatives               -           -        -             -         (0.8)        -   (0.8)
Exchange movements on borrowing                     -           -        -             -           3.7        -     3.7
Costs net of tax                                    -           -        -        (12.3)             -        -  (12.3)
Profit/(loss) after tax                             -           -        -        (10.3)          21.6    (9.0)     2.3
Exchange differences on translation of
foreign operations                                  -           -      0.4             -             -        -     0.4
Total comprehensive income                          -           -      0.4        (10.3)          21.6    (9.0)     2.7
Balance at 31st December 2009                     5.5         1.2      0.2         359.5       (160.5)     21.1   227.0


Group statement of financial position

at 30th June 2010

£ million                                                        30th June          30th June        31st December
Unaudited                                             Notes         2010               2009               2009
Non-current assets
Property, plant and equipment                                               2.4                3.5                2.7
 
Financial investments designated at
fair value through profit and loss
Investee companies                                         4    256.3              230.9              291.6
Other financial investments                                4     14.4               25.7               28.3
                                                                          270.7              256.6              319.9
 
Trade and other receivables                                                 5.3                2.9                4.7
Deferred tax asset                                                          2.8                5.9                3.4
                                                                          281.2              268.9              330.7
 
Current assets
Trade and other receivables                                      10.1                7.7                8.2
Derivative financial instruments                                 49.3               32.9               38.4
Current tax asset                                                 0.1                  -                0.9
Cash and cash equivalents                                       100.1              151.9              106.3
                                                                          159.6              192.5              153.8
Current liabilities
Trade and other payables                                        (7.4)             (22.0)             (13.8)
Financial liability on equity commitments                      (11.3)             (27.3)             (12.2)
Derivative financial instruments                               (21.1)             (27.6)             (36.9)
Current tax liabilities                                             -              (0.2)                  -
                                                                         (39.8)             (77.1)             (62.9)
 
Net current assets                                                        119.8              115.4               90.9
Total assets less current liabilities                                     401.0              384.3              421.6
Non-current liabilities
Loans and borrowings                                                    (203.6)            (187.1)            (194.6)
Net assets                                                                197.4              197.2              227.0
 
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)              (0.6)                0.2
Capital reserve - realised                                                359.8              386.2              359.5
Capital reserve - unrealised                                            (183.2)            (214.2)            (160.5)
Revenue reserve                                                            14.2               19.1               21.1
Total equity                                                              197.4              197.2              227.0
 
Net asset value per share
Basic                                                                      903p               902p              1038p
Diluted                                                                    903p               902p              1038p
                                                                                 

Group cash flow statement

for the period ended 30th June 2010

£ million                                                   Notes   Six months to    Six months to             Year to
Unaudited                                                          30th June 2010   30th June 2009  31st December 2009
Cash flow from operating activities
Cash flow from operations                                       3          (10.2)            (3.6)              (16.1)
Interest paid                                                               (3.0)            (7.2)              (11.0)
Tax reclaimed/(paid)                                                          0.7              3.9                 3.8
Net cash from operating activities                                         (12.5)            (6.9)              (23.3)
 
Cash flows from investing activities
Purchase of property, plant and equipment                           (0.3)                -             (0.1)
Purchase of financial investments                                       -            (0.1)            (40.0)
Sale of property, plant and equipment                                   -                -               0.1
Sale of financial investments*                                       16.6             41.6              44.4
Net cash inflow from investing activities                                    16.3             41.5                 4.4
 
Cash flows from financing activities                                            -                -                   -
 
Increase/(decrease) in cash and cash equivalents                              3.8             34.6              (18.9)
Opening cash and cash equivalents                                           106.3            133.2               133.2
Effect of exchange rates and revaluation on cash
and cash equivalents                                                       (10.0)           (15.9)               (8.0)
Closing cash and cash equivalents                                           100.1            151.9               106.3
 

Whilst rolled-up loan note interest is disclosed within "Financial investments
designated at fair value through profit and loss" on the balance sheet, any
interest received or receivable is shown within the revenue column of the
"Statement of comprehensive income" and so included in cash flow from operating
activities above.


Notes to the financial statements

 

Note 1 - General information

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 2009 were approved on 24th
March 2010.  These accounts which contained an unqualified audit report under
Section 495 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 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 2009, and in accordance with IAS 34 'Interim Financial
Reporting'.  New standards adopted this period are IAS 27 Consolidated and
Separate Financial Statements (Revised) and IFRS 3 Business Combinations
(Revised).

 

Note 3 - Reconciliation of operating income to net cash flow from operating
activities

 

£ million               Six months to 30th June Six months to 30th      Year to 31st December  
                        2010                     June 2009              2009                   
                                                                                               
Total income            3.9                     16.3                    31.9                   
                                                                                               
Administrative expenses (10.1)                  (29.1)                  (42.0)                 
                                                                                               
Operating (deficit)     (6.2)                   (12.8)                  (10.1)                 
                                                                                               
Increase/(decrease) in  1.7                     6.0                     (1.9)                  
trade and other                                                                                
receivables                                                                                    
                                                                                               
(Decrease)/increase in  (6.3)                   2.8                     (4.4)                  
trade and other                                                                                
payables                                                                                       
                                                                                               
Depreciation            0.4                     0.5                     1.2                    
                                                                                               
Option cost             -                       (0.1)                   (0.8)                  
                                                                                               
(Profit)/loss on        0.2                     -                       -                      
disposal of fixed                                                                              
assets                                                                                         
                                                                                               
Net cash (outflow) from (10.2)                  (3.6)                   (16.1)                 
operating activities                                                                           
                                                                                               

 

Note 4 - Financial investments designated at fair value through profit and loss

 

£ million               Six months to 30th June Six months to 30th June Year to 31st December  
                        2010                    2009                    2009                   
                                                                                               
Opening valuation       319.9                   313.9                   313.9                  
                                                                                               
Additions at cost       -                       0.1                     40.0                   
                                                                                               
Disposals               (15.1)                  (46.8)                  (48.9)                 
                                                                                               
Valuation movements     (34.1)                  (10.6)                  14.9                   
                                                                                               
Closing valuation       270.7                   256.6                   319.9                  
                                                                                               

 

'Other financial investments' comprise the Company's valuation of its
investment as a Special Limited Partner in managed funds.

 

There was a change in accounting policy during the year ended 31st December
2009 in relation to the disclosure of the rolled-up loan note interest.  As the
value of rolled-up loan note interest recognised is based on the overall value
of the investment, the Directors feel it more appropriate to disclose rolled-up
loan note interest in the Group statement of financial position within
financial investments designated at fair value through profit and loss rather
than in trade and other receivables.

 

Note 5 - Related party transactions

The nature of the Company's interest in the Candover 1997, 2001, 2005 and 2008
Funds is disclosed in note 10 on page 64 of the 2009 Report and Accounts.

 

As at 30th June 2010, Candover's investments as a Special Limited Partner in
the Candover 2001, 2005 and 2008

 

Funds were valued at £18.0 million, £0.2 million and £0.1 million respectively
(31st December 2009 Candover 2001 Fund £27.9 million, Candover 2005 Fund £0.3
million, and Candover 2008 Fund £0.1 million).   The movement in valuation of
the Candover 2001 Fund is due mainly to realisations.

 

The Company's subsidiaries are listed in note 11 on page 67 of the 2009 Report
and Accounts, which includes a description of the nature of their business.

 

During the period the Company undertook transactions with Candover Partners
Limited which provided investment and administration services to the Company,
for which the Company was charged £2.8 million (2009: £4.6 million).

 

Note 6 - Outstanding commitments

At 30th June 2010, the Company had an outstanding commitment to fund
investments alongside the Candover 2005 Fund of £72.7 million (31st December
2009: £80.7 million). The reduction in the period was due to currency
movements.


Further information

 

Share price

 

The Company's shares are listed on the London Stock Exchange under share code
'CDI'. The share price is quoted daily in the Financial Times, The Daily
Telegraph, The Times, The Independent and the Evening Standard and is also
available on our website at www.candoverinvestments.com/ and
www.candoverinvestments.com/investor-info/price-graph.

 

ISA status

 

The Board has considered the ISA status of Candover's shares and for the time
being considers that a decision to make Candover's shares eligible for
inclusion in an ISA will impose constraints on the Company's investment
criteria that will not be in the overall interests of shareholders.

 

Website

 

For the latest information about Candover Investments plc visit our website:

 

Home page:

www.candoverinvestments.com

 

Latest plc news

www.candoverinvestments.com/media/latest-plc-news

 

Dividend History

www.candoverinvestments.com/financial-performance/dividend-history

 

Registrars

 

Enquiries concerning registered shareholdings, including changes of address,
should be referred to:

Capita Registrars

Northern House

Woodsome Park

Fenay Bridge

Huddersfield

West Yorkshire HD8 0GA

Telephone 0871 664 0300 (from UK)*

                 +44 (0) 20 8639 3399 (from Overseas)

Facsimile  +44 (0)1484 600911

Email ssd@capitaregistrars.com

 

* Calls cost 10p per minute plus network extras, lines are open 8.30 am - 5.30
pm Monday - Friday

 

Board of directors

 

G E Grimstone *†
Non-executive Chairman, Nominations Committee Chairman

 

M J Fallen
Chief Executive Officer

 

Lord Jay of Ewelme GCMG §*†
Non-executive
Senior Independent Director

 

J Oosterveld §*
Non-executive, Remuneration Committee Chairman

 

R A Stone FCA §*†
Non-executive, Audit, Risk and Valuation Committee Chairman

 

*         Member of the Remuneration Committee

§        Member of the Audit, Risk and Valuation Committee

†        Member of the Nominations committee