ProSiebenSat.1 weighs on SVG

The listed private equity investor revealed its first write-down in seven years this morning. However, the group’s shares rose in early trading as investors reacted positively to the firm’s interim results statement.

SVG Capital, the London-listed asset management group that is the largest investor in Permira, has written down the net asset value of its portfolio by 12.3 percent. The firm attributed the mark-down to falling public market comparables across the portfolio, emphasising that earnings at the underlying portfolio companies were on the whole holding up well.

The sharpest decrease in value was for German television company ProSiebenSat.1 Media, which SVG wrote down by £79.8 million (€99 million; $146 million), or nearly 80 percent.

Nicholas Ferguson

The portfolio devaluation was softened by two recent, highly successful Permira exits. German telecoms company debitel and Swiss aviation servicing company Jet Aviation were sold at premia of 84 percent and 143 percent to their December 2007 valuations, respectively.

Nicholas Ferguson, chairman of SVG Capital, told PEO that the underlying portfolio companies were performing well.  “Without the effects of falling public market comparable earnings multiples, the portfolio would have shown an increase in net asset value of five percent,” he said.

The figures were contained in SVG’s interim results, released this morning.

SVG said that ProSiebenSat.1, which is currently without a chief executive officer, had encountered problems when it introduced a new advertising sales model at the beginning of 2008. Earlier this month the group announced that this year’s earnings would remain at 2007 levels.

SVG’s investment in the company was valued at £101 million in December 2007, while the latest valuation puts it at £22 million. Nevertheless, Ferguson said that around 70 percent of the company’s devaluation was due to media sector comparables.

Without the effects of falling public market comparable earnings multiples, the portfolio would have shown an increase in net asset value of five percent

Nicholas Ferguson

Other investments that were written down include Valentino Fashion Group, by £27 million to £14 million, and Principal Hayley Group, a European hotel operator, which has seen £12 million wiped off its December 2007 value of £21 million.

Galaxy Entertainment, a casino operator listed on the Hong Kong Stock exchange, saw its share price fall 31 percent in the first half of 2008. This is against a backdrop of an average devaluation of around 50 percent of gaming stocks around the world.

“The problems contained within these results were widely known about beforehand, so there are no nasty surprises for investors.Generally the businesses seem to be performing well,” said one City analyst who did not want to be named.

“The current portfolio consists of high quality businesses, most of which operate on a global scale with good growth opportunities,” said Ferguson.

The market responded to the interim results with a 2.3 percent lift in the SVG share price to 601p. Since the beginning of the year, the group’s market capitalisation has shrunk by 21 percent , an indication that investors remain cautious about the outlook for private equity stocks.

Earlier this week Candover Investments announced a largely unchanged net asset value, buoyed by favourable movements in exchange rates.