CAPMAN RECORDS AN EXCEPTIONAL 2000 RESULT
– CapMan Plc Group’s turnover amounted to EUR 32.9 million in 2000 (EUR 7.0 million in 1999)
– The Group’s profit after financial items was EUR 24.9 million (EUR 2.9 million)
– Approximately EUR 3.6 million in imputation credit related to carried interest received has not been recorded in the operating profit(EUR 0.2 million)
– Funds managed by CapMan made investments totalling EUR 144 million (EUR 80 million)
– CapMan expects a good result in 2001 and its aim is to clearly exceed the 1998 and 1999 figures. However, turnover and operating profit are not expected to reach the exceptionally high levels recorded in 2000.
Report of the Board of Directors
1 Jan – 31 Dec 2000
Turnover and profit
CapMan Plc Group’s (CapMan) turnover and profit improved significantly in 2000 compared with the previous year. CapMan’s turnover was EUR 32.9 million (EUR 7.0 million in 1999) and profit after financial items reached EUR 24.9 million (EUR 2.9 million). Increase in the carried interest contributed significantly to the growth in turnover and profit. Net profit for the fiscal year was EUR 20.1 million (EUR 2.0 million).
Of the turnover, management fees accounted for EUR 7.4 million (EUR 5.1 million) and carried interest, including imputation credit, totalled EUR 28.8 million (EUR 2.3 million). Management fees increased by 45 per cent compared with the previous year. This results mainly from the establishment of Finnventure Fund V at the end of 1999 and the establishment of Finnmezzanine Fund III in spring 2000.
The amount of carried interest during the fiscal year was exceptionally high due to three significant exits (the IPO of Satama Interactive Oyj, the sale of remaining Aldata Solution Oyj shares and the exit from Iobox Oy). Of the funds managed by CapMan, Finnventure Fund III (capital EUR 29.7 million) generated carried interest for the first time through the sale of Aldata shares and the IPO of Satama Interactive, and this raised the number of funds generating carried interest to three. The total size of these three funds is EUR 52.7 million, which corresponds to 8 per cent of the total capital of funds managed by CapMan, mainly in Finland.
Business concept
The business concept of CapMan is to act as a management company for private equity funds. CapMan’s investment activities consist of direct investments and fund investments. Direct investments are divided into buy-outs and technology investments. Investments in private equity funds are carried out in Europe through the affiliated company Access Capital Partners S.A.
CapMan raises capital from institutional investors and invests the fund capital, primarily in selected unlisted companies and European private equity and venture capital funds. CapMan takes an active role in developing its portfolio companies by participating in their decision-making and strategic leadership at the Board of Directors level. After a development phase of two to five years, portfolio companies are exited, either through stock market listings or trade sales. The aim is to achieve the highest possible return on invested capital.
Group structure
Parent company
The parent company of the Group, CapMan Plc, is responsible for establishing new funds, administrative functions and investor relations.
Subsidiaries
CapMan Capital Management Oy, a wholly owned subsidiary of CapMan Plc, is the management company for the private equity funds. Subsidiaries of CapMan Capital Management Oy are Finnmezzanine Oy (70%) and the management company of CapMan’s Eastern European fund Alliance ScanEast Fund L.P., Eastman Advisors Oy (60%). The Group also consists of Eastman Advisors’ subsidiary ScanEast Managing Partner Ltd (70%), which acts as General Partner of Alliance ScanEast Fund L.P.
Affiliated companies
Companies affiliated to CapMan Capital Management Oy are the French company Access Capital Partners S.A. (47.5%) and Access Capital Partners (Guernsey) Ltd (47.5%). These companies are the management companies of the European fund of funds, Access Capital Fund. The management owns 52.5 per cent of both companies.
Since November 2000, Baltcap Management Ltd (20%) and BIF Management Ltd (33.3%) have been affiliated companies of CapMan Plc. Baltcap Management Ltd is a private equity fund management company investing in large and medium-sized companies in Estonia, Latvia and Lithuania. BIF Management Ltd is the General Partner of Baltic Investment Fund III L.P., a fund established by Baltcap Management Ltd. The other institutional owners of Baltcap Management Ltd are the Finnish National Fund for Research and Development SITRA, AS Suprema Securities and the company’s management.
The affiliated companies had no material effect on CapMan’s profits for the year 2000.
Funds under management
CapMan Capital Management Oy is the management company of the following funds: Finnventure Fund I, Finnventure Fund II, Finnventure Fund III, Finnventure Fund III G, Finnventure Fund IV, Finnventure Fund V, Finnventure Fund V ET, Finnmezzanine Fund II A, Finnmezzanine Fund II B, Finnmezzanine Fund II C, Finnmezzanine Fund II D, Finnmezzanine Fund III A, Finnmezzanine Fund III B and Finnmezzanine Fund III C.
In spring 2000, CapMan established Finnmezzanine Fund III (III A, III B and III C), which has aggregate capital of EUR 151.8 million. The fund will make mezzanine investments in 20-30 Nordic companies.
CapMan manages the Fenno Program (in co-operation with Fenno Management Oy) and acts as the General Partner of Alta-Berkeley Nordic Partners Ky and CapMan Private Fund I.
Of CapMan’s subsidiaries, Finnmezzanine Oy manages Finnmezzanine Fund I, and EastMan Advisors Oy manages Alliance ScanEast Fund L.P.
Capital under management
At the close of the fiscal year, CapMan managed EUR 950 million of capital of which EUR 250 million through the affiliated company Access Capital Partners S.A. Approximately 90 Finnish and international investors have invested in CapMan’s funds. Information on the funds managed by CapMan can be found by visiting CapMan’s web site www.capman.fi.
Investments and exits
CapMan’s funds made 18 new investments and 6 substantial follow-on investments in existing portfolio companies in 2000, investing over EUR 144 million in total (15 new investments and 4 substantial follow-on investments totalling EUR 80 million in 1999). At year-end, CapMan had since its foundation invested EUR 345 million in total.
New investments in manufacturing and services business areas in 2000 included engineering consulting company PI Consulting Oyj, folding cartons manufacturer Å&R Carton, flooring production group Fiosan that emerged through the merger of Oy Karelia Parketti Ltd and Upofloor, accounting services group Pretax Oy, piling equipment manufacturer Junttan Oy, helicopter services company Copterline Oy and health care group Mehiläinen Oy that emerged through the merger of the hospital company Mehiläinen and Tohtoritalo 41400 Oy.
New technology investments during the fiscal year included DB2B Oy, providing Internet wholesale and portal services in the institutional kitchen sector, Foreca Oy (formerly Oy Weather Service Finland Ltd),
weather service provider, Handwise Oy, specialist in mobile Internet applications, Intrasecure Networks Oy (Netseal),software company specialising in mobile technology and information security, Quartal Oy, specialist in Internet-based financial market applications and multi-channel distribution, Republica Oy, XML technology developer, SecGo Group, information security company, Solagem, software company, Talent Code Oy eLearning provider and Utfors AB, Swedish broadband operator.
The most substantial follow-on investments in 2000 were media content and multimedia solution specialist Aktivist Networks Oy (formerly Suomen Infopiste Oy), developer of information systems solutions AtBusiness Oyj, foam plastic, mattress and blanket manufacturer Espe Oy, leisure travel company Holiday Club Finland Oy, mobile software company LPG Innovations Oy and corporate office supplies group Tamore Oy (formerly Scandinavian Corporate Suppliers Oy).
The most significant of four exits during the fiscal year were the IPO of Satama Interactive Oyj and the sale of Aldata Solutions Oyj shares in two stages, in February and August. Finnventure Fund III still holds 1,200,000 Satama Interactive shares.
In July, Alta-Berkeley Nordic Partners Ky (ABNP), a subfund to Finnventure Fund III, carried out the exit of Iobox Oy, a technology company specializing in wireless portals. Iobox Oy was acquired by the Spanish company Terra Mobile, a subsidiary of Spain’s leading telecommunications operator Telefonica. The investment was highly successful and enabled ABNP to begin generating carried interest. CapMan manages the ABNP Fund in co-operation with Alta Berkeley Associates and receives 45 per cent of the carried interest. In addition, Finnmezzanine Fund I exercised the right to exchange the debenture loan issued by Elcoteq Network Oyj into shares. The Elcoteq Network shares received in the exchange were sold in April 2000.
More information on investments by the private equity funds managed by CapMan can be found by visiting the web site www.capman.fi.
Investments by Access Capital Partners S.A.
CapMan’s affiliated company Access Capital Partners S.A. invests in European buy-out and technology funds. By the end of 2000 Access Capital Fund, established in 1999, had committed EUR 170 million in medium-sized private equity funds in Spain, the Netherlands, Ireland, the United Kingdom, Italy, France, Sweden, Germany and Israel.
In November 2000, Access announced that it would establish a new fund, Access Capital Fund II. The fund will aim to make investments primarily in medium-sized buy-out and technology funds with activities in Western Europe.
Personnel
At the end of the fiscal year CapMan had 41 employees (34). In addition, three Senior Advisors with extensive experience in company management and entrepreneurship work with CapMan Capital Management Oy as consultants. The affiliated company Access Capital Partners has 10 employees in Paris.
In August 2000, CapMan Plc announced an incentive scheme for the entire personnel (excluding the 16 existing shareholders) to motivate and reward employee commitment.
Administration
The Board of Directors of CapMan Plc comprised Mr Vesa Vanha-Honko (Chairman), Mr Peter Buch Lund, Mr Olli Liitola, Mr Tuomo Raasio, Mr Petri Saavalainen, Mr Ari Tolppanen and Mr Heikki Westerlund.
The CEO of the Company is Mr Ari Tolppanen.
SVH Pricewaterhouse Coopers Oy acts as auditor and Mr Jan Holmberg, Authorized Public Accountant as the auditor in charge.
The Board of Directors of the management company CapMan Capital Management Oy comprised Mr Lauri Koivusalo (Chairman), Mr Ralf Saxén, Mr Orvo Siimestö, Mr Kari Jokisalo, Mr Curt Lindbom and Mr Ari Tolppanen.
Merger and IPO preparations by CapMan Plc and Vestcap Oyj
On 19 April 2000, CapMan Plc (formerly CapMan Partners Oy) announced a reorganization, which will result in CapMan becoming listed on the Helsinki Stock Exchange in April 2001. In the reorganization, CapMan Plc will be merged with Vestcap Oyj, which was formed from the demerger of the former Finvest Oyj. Vestcap shares have been quoted on the Pre List of the Helsinki Exchanges as of 1 November 2000.
On 19 December 2000, the merger was approved at the shareholders’ meeting of both companies. CapMan shares can be quoted on the main list of the Helsinki Stock Exchange after the merger is registered, estimated to take place in April 2001. As a result of the reorganization, CapMan will receive EUR 6.3 million in net cash reserves and 886,253 Sampo-Leonia shares, which Vestcap Oyj received as a result of the share exchange for Mandatum Bank shares.
The number of shares offered to Vestcap’s shareholders as consideration in the merger represents 31.5 per cent of CapMan’s
shares and 15.5 per cent of CapMan’s voting rights after the merger. The payment for Vestcap shares in the merger will be in the form of CapMan B shares. The remaining 68.5 per cent of shares and 84.5 per cent of voting rights will remain with CapMan’s current shareholders.
The details of the merger have been published in the CapMan Plc and Vestcap Oyj prospectus issued on 28 November 2000.
Shares and share capital
At the close of the fiscal year, CapMan Plc’s share capital was EUR 480,000 and the total number of shares at the time of registration for the merger was 48,000,000. This consists of 8,000,000 A shares with voting rights of ten votes per share and 40,000,000 B shares with voting rights of one vote per share.
Events after the close of the fiscal year
In January 2001, the funds managed by CapMan announced that they would exit from the beverage company Marli Group. The company’s major owner Oy Rettig Ab and minority shareholders, including funds managed by CapMan, sold Marli Group to the Swedish company Vin & Sprit. The exit will have an effect on CapMan’s operating profit of approximately EUR 3 million in 2001. As a result of the exit, Finnmezzanine Fund I will generate carried interest. The funds managed by CapMan that have invested in Marli Group, Finnventure I, II and III, are already generating carried interest.
The Board of Directors of CapMan Plc was complemented by two new members. The extraordinary shareholders’ meeting, which was held on 30 January 2001, elected Mr Lauri Koivusalo, Managing Director of LEL Employment Pension Fund and Mr Teuvo Salminen, Executive Vice President of Jaakko Pöyry Group Plc as new members of the Board of Directors. Mr Koivusalo acts as Chairman of the Board of Directors.
As of 14 February 2001, Mr Heikki Westerlund, M.Sc.(Econ. & Bus. Adm.), 34, head of CapMan’s technology investments, was appointed Managing Director of CapMan Capital Management Oy, a wholly owned subsidiary of CapMan Plc. The Company’s former Managing Director, Mr Ari Tolppanen, will continue as CEO of CapMan Plc, and Mr Westerlund will act as his deputy.
Outlook for 2001
CapMan believes that growth in the private equity investment sector will continue. At the same time, there will be tougher
competition for good buy-outs and technology investments. We predict that the industry will experience consolidations, and that private equity teams already established in the market will strengthen their position.
The year 2000 was an exceptionally successful year for CapMan in terms of both turnover and profit. Three highly successful exits during the fiscal year were largely responsible for this excellent result. During
2000, Finnventure Fund III and its subfund Alta Berkeley Nordic Partners generated carried interest for the first time. As a result of the Marli Group exit, Finnmezzanine Fund I (capital EUR 31.4 million) generated carried interest for the first time. In addition, the Fenno program/Skandia (EUR 8.4 million) is approaching the cumulative preferred return where the management company will begin generating carried interest.
CapMan expects a good result in 2001 and its aim is to clearly exceed the 1998 and 1999 figures. However, turnover and operating profit are not expected to reach the exceptionally high levels recorded in 2000.
Proposal of the Board of Directors for distribution of dividend
At the end of the fiscal year, the Group’s non-restricted equity totalled EUR 21.2 million and the parent company’s EUR 20.6 million. The Board of Directors proposes to the annual shareholders’ meeting that EUR 0.39 per A and B share is to be paid in dividend, except for the shares subscribed in 2000, which will receive no dividend. Total dividends amount to EUR 15.2 million.
Helsinki, 15 February 2001
CAPMAN PLC
Board of Directors
For further information please contact:
Mr Ari Tolppanen
CEO
Tel. +358 9 6155 8307 or +358 500 407 343
DISTRIBUTION
Helsinki Stock Exchange
Key media
www.capman.fi
APPENDICES:
Group Income Statement, Balance Sheet and key figures
The full interim report including tables is available to download from the enclosed link.
