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SVG posts 23% NAV increase, returns £101m

A £143m valuation uplift for Permira-backed ProSiebenSat, Arysta Life Sciences and Hugo Boss was among the drivers behind SVG's positive half-yearly results.

SVG Capital has had a strong start to the year on the back of Permira-related exits and improving valuations, according to the latest results for the London-listed fund of funds. 

SVG’s net asset value (NAV) per share rose 23 percent to 480p, from 391p, in the six months to 30 June 2013. That compares with a rise of 16.7 percent in the total return posted by the MSCI World during the same period, according to broker Numis Securities. 

“SVG has staged a remarkable recovery since early 2009, with shareholders coming in at the 100p rights issue benefiting from a return of over 4x,” commented Numis in a broker’s note. 

Long a core investor in Permira funds, the group went through a tumultuous period in the aftermath of the financial crisis and instituted a strategic review amid concerns that rapidly deteriorating economic climate would leave the investment trust unable to honour its private equity fund commitments. SVG has since announced its intention to diversify by committing to other managers, while posting strong results on the back of strong recovery within Permira’s portfolio. SVG committed £100 million to Permira V at its first €2.2 billion close in April, as well as a another £100 million to the Fifth Cinven Fund in June. 

“The strategy that we announced in 2011 is coming into play,” commented Lynn Fordham, chief executive of SVG, during an interview with Private Equity International. “We expect to make some more commitments within the next 12 months.”

SVG's NAV increase this year has been driven by a 19.3 percent increase in the investment portfolio's value, largely linked to some of the company's largest holdings: German media group ProSiebenSat, fashion retailer Hugo Boss and agrochemical business Arysta Life Sciences together recorded an uplift of £143 million. Currency movements also helped; a 5.2 percent rise of the euro against the sterling contributed £54.8 million to portfolio returns. 

Valuations also benefited from the sale of SVG Advisers to Aberdeen Asset Management, which added 17p to NAV per share. Last February, the Scottish group acquired 50.1 percent of the unit to merge it with its existing private equity capabilities, creating a fund of funds business with around £5 billion under management.  

The period was also strong on the distribution front, with SVG returning £101 million of capital to shareholders in the first half of the year. This was largely driven by the partial realisation of broadcasting company Marazzi and full sale of Italian tile maker TDC, both exited by Permira this spring. SVG anticipates another £267 million in distributions over the next two to three years.

Deleveraging continued to take place at the portfolio level over the period. Only 5 percent of Permira’s portfolio companies’ debt was due to expire between 2015, while average net debt/EBITDA fell to 3.5x, from 7.3x at the time of acquisition.