CapMan Plc Group’s (CapMan) turnover for the first half of 2001 was EUR 7.7 million (EUR 17.4 million 1 Jan – 30 Jun 2000). Profit after financial items was EUR 28.5 million (EUR 14.4 million), which includes capital gain of EUR 18 million from the sale of Sampo plc shares. The Group’s profit after taxes and minority interests was about EUR 20 million (EUR 9.6 million). Earnings per share on 30 June 2001 was EUR 0.34 (EUR 0.20).
CapMan’s core business is private equity fund management and the company’s income derives from four sources: management fees received from the funds, carried interest, a share of affiliated company Access Capital Partners’ result and returns on other financial assets.
The interim report is divided into two sections: the funds managed by CapMan and CapMan’s business and profit for the review period.
Funds managed by CapMan
CapMan manages twelve private equity funds with capital totalling EUR 1,160 million, of which the affiliated company Access Capital Partners manages EUR 460 million. About 90 Finnish and international institutional investors have invested in the funds.
Investments by CapMan funds are divided into investments in portfolio companies and fund investments. Investments in portfolio companies include mid-sized buy-outs, technology investments and mezzanine investments (mezzanine financing). Buy-outs and mezzanine investments are made in manufacturing, service and retail industries while technology investments focus on Nordic software companies undergoing strong growth 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.
Investments by CapMan funds during the review period
The funds managed by CapMan made four new investments and six substantial follow-on investments in the first half of 2001, investing EUR 60.2 million (EUR 107 million) in total.
There were two new investments in the second quarter: Eltel Networks Oy and SMEF Group A/S. The entire share capital of Eltel Networks Oy (formerly IVO Transmission Engineering Oy), a specialist in the design and construction of power transmission and telecommunications networks, was sold by Fortum Group to the funds managed by CapMan and the operative management. The Office of Fair Trading approved the acquisition on 29 June 2001. In May, the funds managed by CapMan invested in the Danish SMEF Group A/S, which is a distributor of machinery, fittings and services to the Nordic woodworking industry. The investment was CapMan’s first in Denmark and made in cooperation with Danish private equity investor Nordic Private Equity Group. In April 2001 CapMan decided to acquire the whole share capital of NPE.
New investments made during the first quarter were in Siennax International B.V., a Dutch application service provider (ASP) and Exidio Oy, a software company specializing in web-based treasury solutions for large corporations.
The most substantial follow-on investments during the first half of 2001 were in CRM-software company AtBusiness Communications Oyj, leisure travel company Holiday Club Finland Oy, wireless technology and data security software company Intrasecure Networks Oy (Netseal), wireless software company LPG Innovations Oy and folding cartons manufacturer Å&R Carton AB. The follow-on investments in Intrasecure Networks Oy and LPG Innovations Oy were part of an international round of financing. The investment in health care group Mehiläinen Oy was carried out in part during the review period.
Exits by the funds
The funds managed by CapMan made no significant exits during the second quarter. Finnventure Fund II’s share of Hope Smoke Oy was sold to the other owners in June. The sale had no effect on CapMan’s result.
There were two exits in the first quarter: Marli Group and MatchOn Sports Oy. The Marli Group exit has an effect of about EUR 3.3 million on CapMan’s operating profit for 2001. As a result of the exit, Finnmezzanine Fund I began generating carried interest. Sports media service provider MatchOn Sports Oy filed for bankruptcy in March. The bankruptcy has no effect on CapMan’s 2001 result.
Information on the funds managed by CapMan and their portfolio companies can be found by visiting CapMan’s website www.capman.fi
Growth in European fund investments
In spring 2001, CapMan Plc’s affiliated company Access Capital Partners had the first closing of its new European fund of funds Access Capital Fund II (ACF II) at the level of approximately EUR 210 million. The final closing will be held later this year.
The new fund increased the amount of capital managed by Access Capital Partners to EUR 460 million and thus ranks Access Capital among the leading private equity fund of funds managers in Europe. ACF II will invest in about 30 mid-sized private equity funds, approximately half focusing on technology funds and half in buy-out funds in Western Europe.
CapMan Plc has decided to invest EUR 10 million in ACF II. The contribution of Access Capital Partners to CapMan’s result is insignificant at this stage.
Further information about Access Capital Partners and its fund investments can be found at Access Capital’s website
www.access-capital-partners.com.
CapMan Plc
Turnover and profit
CapMan’s turnover during the first half of 2001 was EUR 7.7 million (EUR 17.4 million 1 Jan – 30 Jun 2000). Of the turnover, management fees accounted for EUR 4.1 million (EUR 3.6 million) and carried interest for EUR 3.4 million (EUR 13.3 million). The share from affiliated companies for January-June was EUR 126,000 (EUR 250,000), mainly from the shareholding in Access Capital Partners. CapMan’s profit after taxes and minority interests was EUR 20 million (EUR 9.6 million).
Quarterly results (turnover and profit after financial items) are presented in appendix 2.
CapMan received 2,931,260 Sampo plc shares as a result of the merger of CapMan Plc and Vestcap Oyj. Approximately EUR 4.7 million was paid in dividends for the Sampo shares in April, which increased profit after financial items for the review period, including imputation credit, by EUR 6.6 million. CapMan Plc sold its Sampo plc shares in May. The market value of the shares was approximately EUR 30 million, and the effect on the interim result after financial items was about EUR 18 million.
Shareholders’ equity per share was EUR 0.88, compared to EUR 0.18 on 31 March 2001. This significant increase is due to the good result as well as the merger of Vestcap Oyj into CapMan, which took place immediately after the close of the first quarter. At the end of the review period CapMan’s cash assets were approximately EUR 56 million. The company has no interest-bearing debt.
Four funds generating carried interest
Private equity fund management companies will start receiving carried interest when the return of a fund for investors has exceeded a required cumulative return target. Carried interest is typically 20 to 25 per cent of the fund’s cash flow through 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 agreement. The number of funds generating carried interest rose to four as a result of the Marli exit. These four funds have capital of EUR 84.1 million, which represents about 12 per cent of the total capital in CapMan’s funds that invest mainly in Finland.
In the first half of 2000, carried interest was exceptionally high because the period included two significant exits. Wide fluctuations in quarterly performance are typical of private equity fund management.
Personnel
At the end of the period under review, CapMan had 45 (37) employees.
Changes in Group structure
In April 2001, CapMan Plc announced that it had decided to acquire the Danish private equity investor Nordic Private Equity Group (NPE). The company specialises in mid-sized buy-outs and manages two equity funds with approximately EUR 35.4 million in capital. The funds have invested in nine companies in total.
The acquisition is part of CapMan’s Nordic growth strategy and strengthens the company’s position as one of the leading Nordic private equity investors. In the transaction CapMan acquires the entire share capital of NPE and the sale is carried out as a share exchange, totalling 1,130,000 CapMan B shares or 1.6 per cent of CapMan Plc’s current share capital.
Listing of CapMan Plc
CapMan Plc’s B share has been quoted on the Main List of the Helsinki Stock Exchange as of 2 April 2001, after the Trade Register approved the merger of Vestcap Oyj and CapMan. The listing of Vestcap Oyj shares on the Pre List of the Helsinki Stock Exchange ended on 30 March 2001.
As consideration for the merger, Vestcap Oyj shareholders received CapMan Plc B shares that entitle to full dividend in 2001. At the shareholder meeting on 8 June 2001, Vestcap Oyj shareholders adopted the final account and the settlement of shares issued as consideration in the merger between CapMan Plc and Vestcap Oyj.
Shares and share capital
CapMan Plc’s B share is quoted on the Main List of the Helsinki Stock Exchange. The closing price on the first trading day 2 April 2001 was EUR 2.20 and on the last trading day of the review period it was EUR 2.30. The share’s lowest trading price for April-June was EUR 1.64 and the highest was EUR 2.55. The average price of trades was EUR 2.12. At the end of June, the market value of the B shares was about EUR 143 million and the company’s total market capitalization was about EUR 162 million. There are 62,064,630 CapMan Plc B shares and 8,000,000 CapMan A shares in total. The company’s registered share capital is EUR 700,646.30.
Decisions by the CapMan Plc Extraordinary General Meeting
The Extraordinary General Meeting of CapMan Plc held on 31 May 2001 authorised the Board of Directors to have a right to increase the company’s share capital in one or more instalments, and to decide on obtaining a convertible loan agreement, or issuing options, regardless of the subscription privilege of former shareholders. According to this authorisation the share capital of the company may be increased by a maximum of EUR 70,000.00 by issuing a maximum of 7,000,000 new company B-shares at a nominal value of EUR 0.01 in one lot or in instalments, based on a share issue, convertible loan or option rights. The share issue can, according to the Board’s decision, be made against consideration in kind or by setting off a receivable. The authorisation is valid for one year from the resolution.
The EGM authorised the Board to resolve upon purchasing the maximum amount of 3,503,649 of the company’s own B-shares at a nominal value of EUR 0.01 by using the distributable equity of the company. The total nominal value of the B-shares belonging to the company and affiliated companies, or the number of votes they equal to may not exceed 5 per cent of the share capital of the company or the total number of votes. The purchase of the shares limits the distributable equity of the company. The authorisation is valid for one year from the resolution.
Events after the review period
Funds managed by CapMan
After the review period, the funds have made follow-on investments in Finndomo Oy, Modultek Oy and Aktivist Networks Oy. No new investments or exits have been made.
CapMan Plc
There were no significant events after the close of the review period.
Outlook for 2001
Funds managed by CapMan
Interesting opportunities exist for private equity investors in the prevailing market conditions. Indeed, investment opportunities have improved as the price level of unlisted companies has also fallen. Particularly in the technology sector, raising of capital via listing on the stock exchange has virtually ceased and more and more companies are turning to private equity investors for financing.
Listing a portfolio company on a stock exchange is just one exit alternative, so profitable exits are not dependent on stock market conditions. A viable alternative to public listing is a trade sale to a strategic industrial buyer. A good example of this is the sale of Marli shares to Swedish Vin & Sprit in spring.
CapMan Plc
CapMan Plc will record a good result in 2001. In the first half, profit before taxes was EUR 28.5 million and profit after taxes was EUR 20.0 million. As management fees paid by the funds normally cover CapMan’s expenses, the final 2001 result will depend on any significant exits from portfolio companies owned by
7 (13)
funds already generating carried interest. Exit possibilities are currently looked into in certain portfolio companies.
CapMan’s 2001 result will be at least EUR 20.0 million. According to the published dividend policy, CapMan’s objective is to distribute at least 50 per cent of the net profit in dividends. In 2001, the dividend will be at least EUR 0.14 per share. The final dividend will be decided by the Annual General Meeting held in spring 2002.
The establishment of new funds will advance during the second half of 2001. The final size of the fund of funds Access Capital Fund II, which had capital of EUR 210 million after the first closing, will be determined by the end of the year. Fundraising for CapMan’s seventh private equity fund CapMan Equity VII will start during autumn.
The interim report for the period 1 January – 30 September 2001 will be released on 15 November 2001.
Helsinki 20 August 2001
CAPMAN PLC
Board of Directors
The complete interim report including tables can be downloaded from the enclosed link.
