Candover makes cautious case for greater transparency

Candover, the UK-listed private equity investment trust, backed calls for greater disclosure as it reported increased profits and net assets in 2006. However, it believes transparency must have its limits.

Candover, a listed UK private equity investment trust, has waded into the ongoing debate about transparency within the industry, as it reported strong results for 2006.

Candover Investments, an investment trust listed on the London Stock Exchange, increased profits by 25 percent and net assets by 18 percent during the year, following a solid year for investments. This has allowed it to return £100 million (€147 million; $193 million) to shareholders and pay out a dividend of 54 pence, an 11.3 percent increase from the 2005 figure.

Candover’s report acknowledged the recent controversy about the industry. The trust said: “This year’s report has a new look, and we have deliberately tried to make it more readable and informative. It is… intended to make our business more accessible to our shareholders, the investors in our funds, and other interested parties.”

However, in an interview with the London-based Times newspaper, managing director Colin Buffin said there should be limits to the information available. He said: “I think debate is good. Whether the degree of disclosure that is being demanded in some sections of the media is appropriate remains to be seen.”

Candover was happy to disclose details on profits, reward and portfolio performance, he added: “In our accounts we list the top 20 companies [we invest in]; we show our movement in net asset value; already we’re making far greater disclosure.” But other aspects – like the extent to which Candover’s current €3.5 billion fund is invested – should remain secret, he said.

Candover’s 2006 profits before tax were £20.6 million, up from £16.5 million in 2005, while net assets reached £328.5 million or £15.03 per share. The firm said its compound growth in net assets per share was 12.1 percent over a ten year period, almost three times more than the 4.8 percent growth recorded by the FTSE All-share Index.

The trust is a cornerstone investor in the funds managed by Candover Partners, its wholly-owned subsidiary, and also co-invests on specific deals. 2006 saw £89 million put to work in this way, with co-investments in Candover’s acquisitions of Norwegian cable group Get, automotive intelligence company EurotaxGlass, mail providers DX and Secure Mail Services and bed-maker Hilding Anders.

During the year Candover also achieved two full exits: cable company Kabel Deutschland, which it sold to US firm Providence Equity Partners and PVC-maker Vestolit, which it sold for an undisclosed sum to Strategic Value Partners. There were also partial exits from Acertec, which raised £57 million by floating on AIM, and Vetco Gray, which it sold to General Electric for $1.9bn while re-investing in subsidiary Vetco Aibel. And there were three refinancings – for publishers Bureau van Dijk and Springer, and for accountancy firm Wood Mackenzie.

The group also continued its aggressive expansion in Europe, opening two new European offices – in Milan and Madrid – and appointing 13 new investment professionals, taking its total to 38.

Candover chairman Gerry Grimstone described 2007 as “a year of significant development”. He said: “Being one of the very few major quoted European pure buyout firms gives Candover particular advantages in terms of status, continuity, governance, and financial flexibility.”

Candover is currently being linked with a bid for UK fund manager Jupiter Asset Management.