Candover Investments Share Discussion Threads

[asmodeus] 04/9/2015 16:37

I'm certainly holding on.

[topvest] 04/9/2015 16:28

It's getting to the stage now that EXPRO is almost no longer relevant. Downside limited. Upside more significant. I'm not going to add any more as this has not been a good investment for me, but it's certainly at least a HOLD in my view.

[skyship] 04/9/2015 15:52

PE trusts are crying out for deals. My bet is that Parques Reunidos may be the first sale......though there was talk some time ago about a possible bid for Technogym.

Who knows which will go first; but after that refinancing deal a 100p distribution should swiftly follow.

We could soon recover that gap down from 260p...

[rcturner2] 04/9/2015 15:32

Sure, I realise that, but there are loads of PE outfits out there who have cash to buy into this sort of thing, whereas CDI is supposed to be exiting.

[felix99] 04/9/2015 14:55

these are all privately held companies - you can't just flog a small stake or any stake just because its convenient for you. Unless the other shareholders want to buy you out you have to wait to flog the company to a new VC outfit who wants to take it on - or a trade buyer and then shareholders can exit or follow the money along with the new outfit.

[rcturner2] 04/9/2015 14:11

It's pointless having such a small stake in Hilding at 3M, they should get rid of that straightaway. Keep expro as at least then they are exposed to any upside if it does recover.

[skyship] 04/9/2015 08:51

DB - Many thnx for the Winterflood piece above (and below). I've edited the layout to make it more legible.
==============================================================

On 28 August Candover Investments published its interim results to 30 June. These were accompanied by a conference call hosted by the fund's Chairman, Richard Stone, and its CEO, Malcolm Fallen. John Arney of Arle Capital Partners also presented. Both the results and call are summarised below.

Results

# At 30 June the fund had net assets of £80.9m and the NAV per share was 370p. This represents a 32% decline over the period and follows a 25% fall over the preceding six months. Recurring administrative expenses in the period were £1.8m (FY14: £4.1m), while finance costs were £2.4m (FY14: £4.8m).

# The value of the portfolio declined by 24% over the period. This was driven by a £23.5m decline in constant currency terms and a further £9.3m of adverse currency movements reflecting Sterling's strength against the Euro.

# The key driver of performance was a £34.2m reduction in the value of Expro International. This was impacted by weak trading linked to the fall in the oil price and, following its refinancing, further dilution of Candover Investment's interest in the business, with the fund unable to fully follow‐on its existing investment. Having been close to an IPO in 2014, Expro is now considered to be the furthest away from being sold amongst the remaining portfolio holdings. However, while Expro's valuation was struck at 30 June and it was acknowledged that the sector has endured further difficulties since, John Arney stressed that the order book remains strong and he believes that the recently announced acquisition of Cameron by Schlumberger provides comfort over the valuation.

# There was also a £2.5m reduction in the value of Hilding Anders, which was impacted by a significant depreciation of the Rouble. However, the business is trading well and Arle are pleased with the recent appointment of a new CEO.

# More positively, the remainder of the portfolio is trading reasonably well, and excluding Expro, over the last 12 months it delivered revenue and EBITDA growth of 3% and 8%. Consequently there were increases in the constant currency valuations of Technogym (+£6.1m / +36%), Parques Reunidos (+£5.7m / +14%) and Stork Group (+£0.3m / +1%). As previously announced, Fokker Technologies is to be sold from the Stork Group, with completion anticipated in Q4'15. This is expected to result in proceeds to Candover of €9m.

# Over the six months net debt increased to £32.3m (31.4% LTV ratio) from £27.3m, reflecting operating and financing costs. As previously announced the fund's US private placement notes were refinanced after the period end with a €52m 5 year 13% PiK facility provided by 17 Capital. The new facility allows the first £21.8m (100p per share) of any realisation proceeds to be returned to shareholders, subject to an asset cover test. It was noted that the facility has no maintenance covenants or security, but guarantees minimum returns of between 1.15x and 1.4x money invested to the lender.

Portfolio

# The fund’s portfolio remains highly concentrated, comprising only five investments, with the three largest accounting for 88% of its value.

# JA noted that all of the fund's investments are being readied for sale, although the management team continue to focus on trading performance so that they are in a position to maximise value at the appropriate time.

Winterflood View:

This was another disappointing set of results for Candover Investments, and while the write‐down of Expro is not a significant surprise, its quantum is. However, while a realisation of Expro would appear to be some way off, other portfolio holdings are trading reasonably well and we would not be surprised to see one or more of these businesses being sold over the next 12 months. While the fund's new debt facility is expensive, it does provide more significant flexibility and if / when realisations occur it means that capital may potentially be returned to shareholders more quickly than might otherwise have been the case. On its current discount of 39%, we believe that Candover Investments remains an interesting special situation, albeit with a highly concentrated portfolio and with significant stock specific and execution risk.

[my retirement fund] 03/9/2015 17:02

PARQUES REUNIDOS 42M

STORK 27M

Techno Gym 22M

Expro 9M

Hilding 3M

TOTAL 103M less debt 33M = 70M

Market Cap 47M

discount around 45%

Stork and Techno may be returned in 12-18 months but not sure about the rest ?

This looks fully valued to me despite the recent sell off on those disappointing results. Im not reading into the director purchases because its still pocket change to them - especially given this fund is likely to still be paying their fat salaries several years from now imo.

[davebowler] 01/9/2015 13:24

;Winterflood

On 28 August Candover Investments published its interim results to 30 June. These were accompanied
by a conference call hosted by the fund's Chairman, Richard Stone, and its CEO, Malcolm Fallen. John
Arney of Arle Capital Partners also presented. Both the results and call are summarised below.
Results
 At 30 June the fund had net assets of £80.9m and the NAV per share was 370p. This represents a 32%
decline over the period and follows a 25% fall over the preceding six months. Recurring administrative
expenses in the period were £1.8m (FY14: £4.1m), while finance costs were £2.4m (FY14: £4.8m).
 The value of the portfolio declined by 24% over the period. This was driven by a £23.5m decline in
constant currency terms and a further £9.3m of adverse currency movements reflecting Sterling's
strength against the Euro.
 The key driver of performance was a £34.2m reduction in the value of Expro International. This was
impacted by weak trading linked to the fall in the oil price and, following its refinancing, further dilution
of Candover Investment's interest in the business, with the fund unable to fully follow‐on its existing
investment. Having been close to an IPO in 2014, Expro is now considered to be the furthest away from
being sold amongst the remaining portfolio holdings. However, while Expro's valuation was struck at 30
June and it was acknowledged that the sector has endured further difficulties since, John Arney stressed
that the order book remains strong and he believes that the recently announced acquisition of Cameron
by Schlumberger provides comfort over the valuation.
 There was also a £2.5m reduction in the value of Hilding Anders, which was impacted by a significant
depreciation of the Rouble. However, the business is trading well and Arle are pleased with the recent
appointment of a new CEO.
 More positively, the remainder of the portfolio is trading reasonably well, and excluding Expro, over
the last 12 months it delivered revenue and EBITDA growth of 3% and 8%. Consequently there were
increases in the constant currency valuations of Technogym (+£6.1m / +36%), Parques Reunidos
(+£5.7m / +14%) and Stork Group (+£0.3m / +1%). As previously announced, Fokker Technologies is to
be sold from the Stork Group, with completion anticipated in Q4'15. This is expected to result in
proceeds to Candover of €9m.
 Over the six months net debt increased to £32.3m (31.4% LTV ratio) from £27.3m, reflecting operating
and financing costs. As previously announced the fund's US private placement notes were refinanced
after the period end with a €52m 5 year 13% PiK facility provided by 17 Capital. The new facility allows
the first £21.8m (100p per share) of any realisation proceeds to be returned to shareholders, subject to
an asset cover test. It was noted that the facility has no maintenance covenants or security, but
guarantees minimum returns of between 1.15x and 1.4x money invested to the lender.
Portfolio
 The fund’s portfolio remains highly concentrated, comprising only five investments, with the three
largest accounting for 88% of its value.
 JA noted that all of the fund's investments are being readied for sale, although the management team
continue to focus on trading performance so that they are in a position to maximise value at the
appropriate time.
Winterflood View
This was another disappointing set of results for Candover Investments, and while the write‐down of
Expro is not a significant surprise, its quantum is. However, while a realisation of Expro would appear to
be some way off, other portfolio holdings are trading reasonably well and we would not be surprised to
see one or more of these businesses being sold over the next 12 months. While the fund's new debt
facility is expensive, it does provide more significant flexibility and if / when realisations occur it means
that capital may potentially be returned to shareholders more quickly than might otherwise have been
the case. On its current discount of 39%, we believe that Candover Investments remains an interesting
special situation, albeit with a highly concentrated portfolio and with significant stock specific and
execution risk.

[skyship] 31/8/2015 15:31

To my mind CDI was a bit of a slam dunk when I decided to get back in @ c270p after the c54% fall from their 590p peak.

Seems I was wrong as the asset markdown proved to be even worse than my worst fears - down from 525p to 370p! (though the recent weakness in £Sterling has recovered the position slightly to c378p)

Still, with regards to the sp, the worst may finally be behind us.

Two things to bear in mind:

# Firstly, the Outlook statement accompanying the Interims:

"After a difficult first half, we move in to the second half with a little more optimism, albeit mindful that the global economic outlook is fragile. Our financing needs are now settled and the partial realisation of Stork BV provides an initial step towards making the first return of cash to shareholders possible. The improvement in the portfolio's trading performance, other than Expro, is encouraging as our investment manager, Arle, continues to focus on positioning the portfolio companies for realisation."

# Secondly, the announcement later in the day of the purchase of 29,397 shares @ 220p by CEO Michael Fallen. This doubled his and his wife's holding to a combined 59,104 shares.

This £65,000 new investment is surely a very clear indication that the CEO for one believes the shares now offer very clear upside.

Happy to HOLD and wait for the first distribution.

[skyship] 28/8/2015 16:57

Reassuring to see Michael Fallen (CEO) buying a genuine chunk @220p...

[skyship] 28/8/2015 08:12

Depressing. But at 220p the discount is 40%; and with a cash return not far away, reckon I'll stay put.
===========================

Interim results for the half year ended 30th June 2015:

Net assets per share of 370p (31st December 2014: 545p) a 32.1% decrease over the six months to 30th June 2015.

Candover’s* investment portfolio decreased in value by £32.8 million, a decrease of 24.2% since the year end. Constant currency valuations decreased by £23.5 million and unfavourable currency movements on investments amounted to £9.3 million as a result of the strength of Sterling.

Expro’s overall valuation reduced by £34.2 million as a consequence of weak trading and, following Expro’ s refinancing, further dilution for Candover where it was unable to fully followon its existing investment. Parques and Technogym valuations benefitted from improved trading.

Net debt increased to £32.3 million at 30th June 2015 (31st December 2014: £27.3 million) reflecting operating and financing costs. Loan-to-value ratio increased to 31.4% compared to 20.1% at the year end.

US PP Notes due to mature in December 2015 were successfully refinanced after the period end, strengthening the balance sheet and potentially accelerating the timing of the initial capital return to shareholders.

Partial realisation of Stork BV announced in July 2015 expected to complete in Q4 and generate proceeds of approximately €9 million, once necessary clearances have been obtained.

Malcolm Fallen, Chief Executive Officer, said:
“The impact of the drop in the oil price on Expro’s prospects, and the need to refinance its own balance sheet, has had a material adverse impact on our portfolio valuation, offset only in part by improvement in our other investments. Since the end of the period, we have strengthened Candover’s
balance sheet and eliminated any debt maturity risk, were future portfolio disposals to be delayed.

This has also created a means to accelerate the timing of the initial capital return to shareholders.”

[skyship] 25/8/2015 09:49

Interims are this Friday - 28th...

[skyship] 24/8/2015 08:15

NAV increasing with the strength in the Euro; but looks as though someone exiting regardless - I suppose a reasonable reaction to the general Market collapse...

[hazl] 09/8/2015 20:47

Very helpful thanks, RC Turner2 and obvious I suppose when you think about it.

Skyship was it you asked about windows 10?

[rcturner2] 09/8/2015 15:19

hazl, investment trusts tend to have a discount, which is the difference between the share price and the NAV. This discount can widen significantly, particularly if the NAV is falling. You essentially get a double whammy, which is pretty much what happened here. If you buy Candover you are essentially buying stakes in 5 private companies, basically at a significant discount to the true value of the companies in question. Now whether you think that is a good idea depends on (a) the outlook for the companies in question and (b) the ability of Candover to extract the value from their holdings. We are due the next valuation sometime in August and that will give a good idea of the current position and the outlook for the trust. The last trading statement for Candover showed that for 4 of 5 businesses things are going reasonably well, with one stinker in the portfolio. Hence the discount to NAV for the stinker (expro).

[hazl] 09/8/2015 13:35

thanks skyship am evaluating further.

[skyship] 09/8/2015 12:36

Hoping for the double bottom to support a successful breach of the downtrend. First target = 310p:


free stock charts from uk.advfn.com

[skyship] 09/8/2015 11:45

Hazl - I wrote the short Intro below on the currently very quiet PE thread.

Countdown to the end-August Interims which will dictate the value here one way or another! Personally I feel that the Peter Spiller purchases have to be considered a major indicator. We all know his record; and he is not the sort of investor to be taking such a position without considerable due diligence, well beyond anything we PIs can muster.

===================================================================


One to BUY:
===========

Very interesting institutional buys over at Private Equity trust Candover Investments (CDI).

JP Morgan Securities has been declaring increases this month; then yesterday two "Holdings" RNSs from CG Asset Management. Peter Spiller is a very conservative fund manager, yet here he is increasing the Group's CDI holdings from 580k (2.7%) to 1.327m (6.1%).

He may have a steer on the upcoming EXPRO figures, an oil/gas portfolio holding accounting for c26% of the last CDI valuation; and of course the reason for the share price fall this past year since the oil price collapsed.

I added yesterday at 265p, taking me to a 5% allocation; but very tempted to increase that exposure as the share price does look way oversold at a 51.3% discount to the Dec'14 valuation of 545p; and 15% lower than a small top-up at 312p by the CEO earlier this month.

NB: To put matters into context, that 545p was already a significant markdown from the 715p NAV pertaining before the collapse in the EXPRO valuation. IMO that makes this one worthwhile to number crunch...see links below.

Finally, it should be noted that this is a trust in wind-down mode; so those asset values will be released over time.

These are the first two documents to take a look at:

May’15: 1st Qtr Trading Update:
================================


CDI Finals for the y/e Dec’14:
==============================


sp at time of Post: 266p-273p

[hazl] 09/8/2015 11:11

I am not an informed investor on Trusts and beginning to consider them.
Why has this continually dropped?
Can anybody put it into a nutshell please?
I have read some of the previous posts but people seem to be of mixed opinions as ever.
Is this a good investment and why?

[skyship] 04/8/2015 07:28

rjmahan - sorry, you've rather skewed your thinking here. Are you saying that every one of the 361 listed investment trusts should be constantly adjusting their NAV disclosure every time they trade in or out of one of their holdings?

Totally impractical and totally irrelevant.

[rcturner2] 04/8/2015 07:13

rjmahan, this is an investment trust that owns stakes in other businesses. The investment trust has £28m of debt at the last set of results. Of course the actual businesses themselves may have debt, but that is irrelevant to the NAV.

[rjmahan] 03/8/2015 22:04

I looked at this as superficially it looked attractive...

My concern is this - is the NAV a small frosting on a mountain of debt.

Ie if our £120m NAV is on top of £1bn debt then it only takes a 12% move to wipe us out - it seems unlikely but getting to the real debt figure behind our equity is hard work. The company's official debt is £28m but within each project there is a lot of debt which I dont believe is showing up on the BS...

I will keep on at this but has anyone done this work ?

If they were honest they would report total debt for each of their holdings so we could arrive at a reasoned conclusion.

I guess the fact they dont is reason to avoid in itself...

[rcturner2] 31/7/2015 09:55

iain, we will get a new NAV figure with the interim results, which are due in August. This will be the June 2015 value of the holdings minus the debt owed. There is no need to over think it, just wait for that statement.