Candover results reveal extent of downturn

09 March 2009

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Candover Investments' final year results for 2008 reveal a sharp aggregated write-down of more than 50% in NAV following five successive years of increases. The news comes just a week after the firm announced a "strategic review" resulting in layoffs as well as the suspension of funding investments in Asia and Central and Eastern Europe. The teams in these regions are said to be seeking to raise capital independently, otherwise they are to be closed.

In a statement that reflected the severe pressures being felt by firms at the larger end of the value spectrum - and therefore the sharp end of the current downturn - the group wrote down the value of its portfolio by more than a third from £483.6m in December 2007 to £310m. The bold cuts included several write-downs against investments made in the last 12 months, something that is not required under current fair value guidelines but which the report claimed was "necessary in the current climate."

Significantly, six of the firm's 22 interests were written down to zero. Included in this group is Italian yacht manufacturer Ferretti, which was reported last week as being in the midst of a restructuring from which Candover publicly withdrew. Additionally, the investment in UK-laboratory testing services group Alcontrol, which was also reported as entering restructuring negotiations last week, was written down by close to 90%.

That is not to say that the news was all bleak on the portfolio front, with 10 of the firm's investments showing an increase in value year-on-year. However, it is important to note that all bar one of these rises was due in the main to the fact that, as Euro-denominated investments, they benefited from the strength of the currency against Sterling over the year. Furthermore, four of these investments are actually interests in two private equity funds managed by French firm Ciclad and two mezzanine funds managed by ICG.

The Rub

As a consequence of the stark figures, Candover is instigating a strategic review of all operations and has already announced several measures that will take place in the coming months.

Firstly, the firm has announced that it is no longer in a position to commit any capital to its 2008 fund, which held a first close on EUR2.8bn in August 2008 and was targeting EUR5bn. The contribution from Candover Investments was to be EUR1bn. Discussions are currently ongoing with LPs in relation to a restructuring of the fund, which may include a temporary suspension of the investment period.

Secondly, and as has been anticipated since the fund downsizing was initially announced around two weeks ago, Candover will be making a series of redundancies across the business in an effort to reduce the cost base.

Finally, there is to be no final year dividend, meaning the dividend for 2008 stands at just 22p per share (down from 60p in 2007).