CapMan Plc Group’s (CapMan) turnover for the review period was EUR 5.4 million (EUR 14.5 million 1 Jan – 31 Mar 2000) and profit after financial items was EUR 3.4 million (EUR 13.4 million). CapMan’s Q1 result was good, even though it clearly fell short of the corresponding period in the previous year. Q1 2000 included two exceptionally profitable exits, from which CapMan earned substantial carried interest. The first quarter accounted for more than half of CapMan’s total profit in 2000. Profit after taxes and minority interests for the review period was EUR 2.3 million (EUR 9.1 million).
CapMan’s income derives from four sources: management fees received from the funds, carried interest generated by the funds, a share of affiliated company Access Capital Partners’ result and returns on other investments.
Funds managed by CapMan
Investments by the funds
CapMan manages twelve private equity funds with approximately EUR 1 160 million in total capital, of which EUR 460 million is managed through the affiliated company Access Capital Partners. Approximately 90 Finnish and international institutional investors have invested in CapMan’s funds.
Investments by CapMan funds are divided into direct investments and fund investments. Direct investments include mid-sized buy-outs, technology investments and mezzanine investments. Buy-outs and mezzanine investments are made in all industry sectors, while technology investments focus on rapidly growing Nordic software companies in the IT, telecommunications and media sectors.
Fund investments are carried out throughout Europe by Access Capital Partners, whose two funds invest in mid-sized buy-out and technology funds.
Q1 Investments and exits
CapMan’s funds made two new investments and five substantial follow-on investments during the period under review, investing EUR 23 million (EUR 83 million) in total. The new investments were in Siennax International B.V., a Dutch application service provider (ASP) and Exidio Oy, a software company specializing in money transactions and effective communications in large companies. The investment in health care group Mehiläinen Oy, announced in October 2000, was completed in part during the review period.
The most substantial follow-on investments were in IT services company AtBusiness Communications Oyj, leisure travel company Holiday Club Finland Oy, folding cartons manufacturer Å&R Carton AB, mobile technology and data security software company Intrasecure Networks Oy (Netseal) and mobile software company LPG Innovations Oy. The investments in Intrasecure Networks Oy and LPG Innovations Oy were part of an international round of financing.
CapMan’s funds made two exits during the review period; from beverage company Marli Group and Internet sports services provider MatchOn Sports Oy. Marli Group’s major owner Oy Rettig Ab and minority owners, including funds managed by CapMan, sold Marli Group to the Swedish company Vin & Sprit. The exit has an effect of approximately EUR 3.3 million on CapMan’s operating profit. As a result of the exit, Finnmezzanine Fund I was the fourth fund to begin generating carried interest. The funds managed by CapMan that had invested in Marli Group, Finnventure I, II and III, are already generating carried interest.
MatchOn Sports Oy filed for bankruptcy in March. Two CapMan funds (Finnventure Fund IV and V) had a combined investment in the company of EUR 3.36 million, which represents approximately 1.5 per cent of the capital of these funds. MatchOn Sports Oy’s bankruptcy will have no effect on CapMan Plc’s result in 2001.
Information on the funds managed by CapMan and their portfolio companies can be found by visiting CapMan’s website www.capman.fi.
A new European fund of funds for CapMan’s affiliated company
In its first closing, CapMan Plc’s affiliated company Access Capital Partners raised approximately EUR 210 million of capital for the new European fund of funds Access Capital Fund II (ACF II). The final size of the fund will be determined during this year and substantial new investments are expected. The new fund increased the amount of capital managed by Access Capital Partners to EUR 460 million and establishes Access Capital as one of the leading European funds of funds.
ACF II will invest in approximately 30 mid-sized private equity funds operating in Western Europe, half in technology funds and half in buy-out funds.
At the end of the period under review, Access Capital Fund, Access Capital’s first fund of funds with capital of EUR 250 million, had invested in 17 funds in eight European countries and in one fund in Israel.
CapMan Plc
Turnover and profit
CapMan’s turnover during the review period was EUR 5.4 million (EUR 14.5 million 1 Jan – 31 Mar 2000) of which management fees accounted for EUR 2.0 million (EUR 1.7 million) and carried interest, including imputation credit, for EUR 3.3 million (EUR 12.5 million). The share of affiliated company Access Capital Partners’ result was EUR 37,000. Profit after taxes and minority interests was EUR 2.3 million (EUR 9.1 million).
Private equity fund management companies generate carried interest from investments realized by funds when the cumulative preferential return for investors exceeds a pre-agreed level. The carried interest is typically 20 to 25 per cent of the fund’s cash flow from exits from its portfolio companies. The annual management fee is generally 1 to 2.5 per cent of the total capital of the funds.
All of the funds managed by CapMan have the aforementioned profit sharing mechanism. The number of funds generating carried interest increased to four as a result of the exit from Marli Group. These four funds manage EUR 84.1 million of capital, which is mainly invested in Finland representing approximately 12 per cent of CapMan’s total capital.
In the corresponding period of the previous year, carried interest was exceptionally high because the period included two significant exits (the listing of Satama Interactive Oyj and the sale of shares in Aldata Solution Oyj). These exits accounted for more than half of CapMan’s 2000 result. Quarterly performance in private equity fund management typically fluctuate widely and is shown in the quarterly results (Appendix 2).
CapMan’s shareholders’ equity per share was EUR 0.18 at the end of the review period. The merger of Vestcap Oyj with CapMan came into effect immediately after this. As a result of the merger, shareholders’ equity per share increased to EUR 0.62 when calculated for the new number of shares (70,072,991 shares).
Personnel
At the end of the period under review, CapMan had 43 employees (35).
Mr Orvo Siimestö, M.Sc.(Econ.), was invited to join CapMan as a Senior Advisor. He has previously served as Managing Director for Leonia Corporate Bank Plc and Executive Vice President for Leonia Bank.
Changes in Administration and Group Structure
CapMan Plc’s Board of Directors was reinforced by two new members. The Extraordinary General Meeting held on 30 January 2001 elected Mr Lauri Koivusalo, Managing Director of The LEL Employment Pension Fund and Mr Teuvo Salminen, Executive Vice President of Jaakko Pöyry Group Oyj as new members of the Board. Mr Koivusalo acts as the Chairman of the Board.
As of 14 February 2001, Mr Heikki Westerlund (34), M.Sc.(Econ.) was appointed Managing Director of CapMan Capital Management Oy, a wholly owned subsidiary of CapMan Plc. Previously Mr Westerlund acted as head of CapMan’s technology investments. The company’s former Managing Director, Mr Ari Tolppanen, will continue as CEO of the parent company CapMan Plc and Mr Westerlund will act as his deputy.
As of 14 February 2001, CapMan Capital Management Oy’s Board of Directors became an internal Board, consisting of the company’s seven Senior Partners Mr Ari Tolppanen (Chairman), Mr Peter Buch Lund, Mr Olli Liitola, Mr Tuomo Raasio, Mr Petri Saavalainen, Mr Vesa Vanha-Honko and Mr Heikki Westerlund.
CapMan Plc founded two subsidiaries in Sweden. The companies have not had business activities nor have they been consolidated into the Group balance sheet.
Decisions made by CapMan Plc’s Ordinary General Meeting
At its Ordinary General Meeting on 19 March 2001, the Board of Directors proposed that EUR 0.39 per both A and B shares be paid in dividend. The shares subscribed for in the 2000 share issue received no dividend. Total dividends amounted to EUR 15.2 million.
The Meeting decided to appoint five members to the Board of Directors. Those elected were Mr Lauri Koivusalo, Managing Director of The LEL Employment Pension Fund, Mr Teuvo Salminen, Executive Vice President of Jaakko Pöyry Group Oyj and CapMan’s Senior Partners Mr Tuomo Raasio, Mr Ari Tolppanen and Mr Vesa Vanha-Honko. Mr Lauri Koivusalo was elected Chairman of the Board and Mr Vesa Vanha-Honko was elected Deputy Chairman.
Listing of CapMan Plc
CapMan Plc’s B share has been quoted on the Main List of the Helsinki Exchanges as of 2 April 2001, after the Trade Register approved the merger of Vestcap Oyj with CapMan. The merger was approved at the General Meetings of CapMan Plc and Vestcap Oyj in December 2000.
The listing of Vestcap Oyj shares on the Pre List of the Helsinki Exchanges began on 1 November 2000 and ended on 30 March 2001. As consideration for the merger, Vestcap Oyj shareholders received CapMan B shares, representing 31.5 per cent of the total number of CapMan shares and 15.5 per cent of total voting rights. The seven Senior Partners of CapMan own 8,000,000 CapMan A shares. There are 62,072,991 CapMan B shares in total, and A shares have ten times the voting rights of B shares.
As a result of the merger, substantial investments were transferred to the ownership of CapMan. CapMan’s investments assets consist of about EUR 23.6 million in net cash and 2,931,260 Sampo plc shares (after the split).
Events after the close of Q1
The dividends paid to Sampo plc shares in April have a significant effect on CapMan’s 2001 result. The total amount of dividends paid was EUR 4.69 million, which improves profit after financial items, including imputation credit, by EUR 6.61 million.
In April 2001, CapMan Plc announced that it had acquired Danish private equity company Nordic Private Equity Group (NPE). NPE specializes in mid-sized buy-outs and manages EUR 35.4 million of capital invested in 9 companies. The acquisition is part of CapMan’s Nordic growth strategy and strengthens the company’s position as one of the leading private equity investors in the Nordic countries.
The transaction will be carried out as a share exchange and CapMan will acquire the entire share capital of the two management companies of NPE. The purchase price including both companies is 1,130,000 CapMan B shares or 1.6 per cent of the current share capital of CapMan Plc. The acquisition requires the approval of the Extraordinary General Meeting of CapMan.
On 11 May 2001, the funds managed by CapMan announced the acquisition of the entire share capital of IVO Transmission Engineering Group (IVO TE) from Fortum Group. The funds managed by CapMan own approximately 90 per cent of the company and the management owns approximately 10 per cent. The company’s name was changed to Eltel Networks Oy. It has a turnover of EUR 200 million from three business areas: design, construction and maintenance of power transmission and distribution networks, design and construction of telecommunications networks and electrification of railways. The company has about 1,500 employees in the Nordic countries, Estonia and Russia. In addition, its project management team operates in Southeast Asia among other areas.
Outlook for the present period
We believe that growth in private equity investments will continue. There will be tighter competition for good investment targets. We predict that there will be consolidations in the sector and that already established private equity teams will strengthen their positions.
CapMan’s profit after financial items is already EUR 10 million when the Q1 result as well as the dividends received from Sampo
plc shares are taken into account. However, we expect the 2001 result to fall short of the exceptional result recorded in 2000.
The Interim Report for the period 1 January – 30 June 2001 will be released on 20 August 2001.
Helsinki 15 May 2001
CAPMAN PLC
Board of Directors
The full Interim Report including tables is available to download from the enclosed link.
