Macquarie private capital Group QUARTERLY REPORT JULY - SEPTEMBER 2006

Transcription

1 Macquarie private capital Group QUARTERLY REPORT JULY - SEPTEMBER 2006

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3 Summary Background The Macquarie Private Capital Group (MPCG or the Group) is an Australian Stock Exchange (ASX) listed private equity group that invests in a broad range of unlisted companies and assets, primarily through funds managed by specialist private equity managers. These specialist managers provide individual companies with financing for start-up, expansion and buy-outs as well as funds for development of infrastructure, property and commodity related assets. MPCG listed on 22 March 2005 and the ASX stock code is MPG. As at 30 September 2006, MPCG had a market capitalisation of approximately $87 million and Net Asset Value (NAV), after the 1.8 cents per security final distribution in respect of the year to 30 June 2006, of approximately $113 million. Of this, $95 million was invested into private equity assets and the rest, or $18 million, was primarily held in cash investments. All of the net cash in MPCG s portfolio was committed to additional investments that may be made by the specialist managers in the portfolio. In total, outstanding commitments to make additional investments through specialist private equity funds was $114 million as at 30 September MPCG s private equity investments are held through a number of structures that provide exposure to approximately 40 Australian and global private equity managers and over 300 individual underlying companies. Performance The period from 30 June 2006 to 30 September 2006 saw continued positive performance from MPCG s portfolio of private equity investments although realisations by specialist managers were relatively subdued compared to previous quarters. The most important development for MPCG in the September quarter was continued rise in the level of private equity investments in the portfolio and the commensurate reduction in cash holdings. This increased exposure to private equity investments reflects drawdowns by several funds to which MPCG has committed as well as a number of co-investment deals to which MPCG obtained an exposure 1. See further below for more details. MPCG s portfolio produced a total return of 1.0% on a pretax basis in the September quarter of 2006, to bring the total portfolio return since listing to 14.9% on a pre-tax basis. On an annualised basis this is a 9.6% pa pre-tax return. MPCG paid a 1.8 cents per security final distribution in respect of MPCG traded ex-entitlement to this distribution on 24 June 2006 and it was paid on 16 October Together with the other dividends/distributions paid by MPCG since listing on 22 March 2005 this takes the dividends/distributions from MPCG since listing to 6.6 cents per security. The increase in MPCG s NAV and the actual distributions, after approximately 18 months since listing, reflects the benefits of the seeded portfolio of assets that MPCG purchased as part of the Group s float. Usually, newly established private equity investments produce negative returns in the first few years as management fees are paid before investments are realised in the latter years of a fund. The table below provides a summary of the performance of MPCG s portfolio since the Group s listing to 30 September MPCG has obtained this exposure to co-investments through the Macquarie Wholesale Co-investment Fund (MWCIF), a fund set up to pool assets to make co-investments alongside Australian specialist private equity managers. MPCG does not pay Macquarie Investment Management Limited any additional fees to obtain its co-investment exposure through MWCIF. Performance of MPCG Portfolio and Security Listing to 30 September 2006 Period 22 March 30 Sept 2005 (1) 2006 Distributions for the Period to 30 Sept 2006 (2) Total Return Total Return Annualised MPCG NAV per Security (3) $0.978 $1.058 $ % (4) 9.6% (4) MPCG Security Price $1.000 (5) $0.810 (6) $ % (7) -8.3% (7) Premium/(Discount) of Price to NAV (8) +2.2% -23.4% (1) MPCG listing date. (2) Actual 1.6 cents per security final distribution in respect of and 5.0 cents per security dividend/distribution in respect of (3) Pre-tax. (4) Includes change in MPCG NAV plus actual dividends/distributions since listing to 30 September Pre-tax. (5) MPCG security issue price. (6) Closing price on ASX. (7) Includes change in MPCG security price plus actual dividends/distributions since listing to 30 September Pre-tax. (8) MPCG security price relative to pre-tax NAV.

4 The chart below traces MPCG s pre-tax NAV per Stapled Security including and excluding actual dividends and distributions since listing. MPCG Pre-Tax Net Assets Per Stapled Security Including and Excluding Distributions Includes dividends/distributions in respect of and $A per Stapled Security Excludes dividend/distributions in respect of and Oct-06 Sep-06 Aug-06 Jul-06 Jun-06 May-06 Apr-06 Mar-06 Feb-06 Jan-06 Dec-05 Nov-05 Oct-05 Sep-05 Aug-05 Jul-05 Jun-05 May-05 Apr-05 Mar-05 The chart highlights that the value of MPCG s investment portfolio has increased steadily since listing largely reflecting profitable investment realisations by the specialist managers used by MPCG to make its private equity investments and income from the cash raised through the Group s Initial Public Offering. MPCG Exposure to Private Equity Assets The chart to the right traces MPCG s level of private equity exposure relative to net assets over the period since listing. The very strong exit environment in 2005 was a significant drag on the level of MPCG's private equity investment in the first few quarters after the Group's listing. However, more recently a slower pace of realisations has combined with a sharp increase in the pace of drawdowns by specialist managers as well as a number of co-investments to produce a marked rise in MPCG s exposure to private equity investments. As can be seen the proportion of MPCG s funds exposed to private equity investment has increased to approximately 85% over the course of the September quarter. MPCG s Portfolio - Exposure to Private Equity From Listing to 30 September 2006 MPCG Exposure to Private Equity as % of NAV % Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Month Jun-06 MPCG's long term target exposure to private equity investments Importantly with $114 million of outstanding commitments as at end September 2006 MPCG is now well placed to have drawdowns exceed realisations by a significant margin over the next year or so. This should ensure that MPCG s exposure to private equity investments rises to the target level of between 90% and 100% of NAV. Sep-06 Dec-06 Mar-07 Jun-07 Important Information This release has been prepared by Macquarie Investment Management Ltd (MIML) (ABN AFSL ) in its capacity as manager to Macquarie Private Capital Management Limited, the responsible entity of Macquarie Private Capital Trust, Macquarie Private Capital A Limited and Macquarie Private Capital B Limited. MIML is a member of the Macquarie Group of Companies. It has been prepared without taking into account the objectives, financial situation or needs of any investor, which should be considered before investing. Investors should seek their own advice about an appropriate investment or investment strategy. It should not be relied upon as personal advice nor is it an offer of any financial product. Macquarie Investment Management Limited (MIML) is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959, and MIML s obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MIML. 4

5 Key portfolio developments MPCG s private equity portfolio continued to produce positive returns in the September quarter of 2006 with a number of realisations by specialist managers. New investments in: Riviera, a luxury motor yacht manufacturer, by Ironbridge Capital Fund 2003/4. In addition, the specialist funds in MPCG s portfolio have made a number of new investments in private companies and assets. Key portfolio developments in the September quarter included: Realisations The quarter was a relatively slow one for realisations compared with the same period in It is likely that the weakness in equity markets in the middle of 2006 adversely affected the prices that public market investors would pay for companies being exited by private equity managers. MPCG s portfolio saw one significant full realisation as Macquarie Investment Trust III sold its interest in CH4 Gas Ltd, an Australian energy company which merged with Arrow Energy during the quarter. Pacific Equity Partners II partially realised its investment in Emeco Holdings Ltd, a company providing earthmoving equipment to the quarrying and mining industries, through a listing on the ASX. Eurekster, a provider of customised Internet search engines, by Technology Venture Partners III. Paradise Foods, a Brisbane based snack foods business, by Archer Capital Fund III. Metro GlassTech, a New Zealand based manufacturer of glass and laminating products, by Catalyst Buyout Fund I. SteelForce, a Queensland/NSW-based producer and supplier of steel and pipe products, by Next Capital Fund I. Godfrey s Group, the largest retailer of vacuum cleaners in Australia, and AAS Group, a provider of asset administration services, by Pacific Equity Partners III. Emcure, an India-based pharmaceuticals distributor, by Blackstone Capital Partners V. Carlyle Riverstone Renewable Energy Infrastructure Fund I made investments in Coastal Carolina, Green Earth and Collingwood. Macquarie Technology Fund I realised its investment in Enterix, a life-sciences technology company that assists physicians and patients screen for life-threatening illnesses. Revaluations Increases Positive revaluations in the September quarter included companies in the sporting, financial services, mining, biotechnology and pharmaceuticals industries. These revaluations are justified by gains from new issues of shares on the stock exchange and positive share price movements. Charterhouse Capital Partners VIII completed investments in Elior SA, the third largest European catering company and the fourth largest in the world, and Compagnie de Fives Lille SA, an engineering consulting company based in France. Follow-on investments in: Mrs Crocket s Kitchen, a market leader in the fresh chilled prepared foods industry in Australia and Qualcare, one of the largest aged care operators in New Zealand, by Ironbridge Capital Fund 2003/4. Revaluations Decreases Negative revaluations in the portfolio included biotechnology, retailing and consumer beverages companies due to weaker share prices and operational performance during the period. Overall these made only a small impact on MPCG s portfolio. These realisations and revaluations along with the income from the cash held in the portfolio produced a 1.0% pretax return for MPCG s investments over the September quarter of Calls Typically when MPCG invests into a specialist manager s fund it is on a partly paid basis. The managers call MPCG when they find suitable investments. In the September quarter MPCG s specialist managers have called approximately $16.7 million for further investments. The most significant investments funded in the quarter included: Xelor Software, a developer of software-only solutions for enterprises deploying Internet Protocol telephony systems, and icix, an international exchange for compliance information management, by Starfish Technology Fund I and Technology Venture Partners III. Blackstone Capital Partners V made follow-on investments in V.N.U and Deutsche Telekom. Replikun, a biotechnology company that develops products to prevent and treat infectious diseases and cancer, by Bioventures Australia Fund. Avega Systems, a company enabling the technology behind wireless home entertainment systems, and Peregrine Semiconductors, a global leader of highperformance RF CMOS semiconductors, by Technology Venture Partners III. Scotts McColls, a liquids transportation specialist, by ABN Amro Capital Australia Fund II. 5

6 Distra, a supplier of transaction technology, by Jolimont Secondaries Fund I. Lifehealthcare (previously MMT Healthcare), a distributor of medical devices and equipment to the health industry, by Cresent Capital Fund II. Metro GlassTech, a New Zealand based glass merchant, manufacturer and supplyer of glass and ceramic materials, by Catalyst Buy-out Fund I. New Commitments MPCG's pace of new commitments is starting to slow after the high level of activity in the Group s first year. MPCG reached its target level of outstanding commitments. It is likely that additional new commitments will only be made by MPCG if new capacity becomes available as assets are realised by specialist mangers and return to MPCG as cash. As at 30 September 2006 the net effect on MPCG s portfolio of these changes is that exposure to private equity investments was approximately $95 million and commitments to make new investments was approximately $114 million. 6

7 Portfolio structure mpcg s Portfolio Structure - 30 September 2006 The charts below provides information on the sector breakdown of MPCG s investments and commitments as at 30 September MPCG s Portfolio Investments - Sector Exposure* 30 September 2006 Infrastructure 7.7% Distressed 8.8% Energy 1.6% Cash 17.1% Venture/Early Stage 12.% The chart below illustrates that MPCG s private equity portfolio continues to be diversified across a range of industry sectors. Industry Exposures of MPCG Private Equity Investments 30 September 2006* Consumer Staples 5.0% Health Care Equipment & Services 1.5% Information Technology 11.5% Media 2.4% Telecommunications Services 2.% Pharmaceuticals & Biotechnology 4.% Financials 5.9% Energy & Materials 6.5% Commercial Services & Supplies 2.4% Capital Goods 19.4% Buy-out 6.1% Expansion 16.4% Infrastructure 10.8% Transportation.7% Consumer Discretionary 24.% * As a percentage of Net Assets. Cash component includes cash held by managers. All of this cash has been committed to new investments as they are made by specialist managers. The chart below outlines the sector exposures of the commitments that MPCG has to fund future investments as they are made by specialist managers. MPCG s Commitments to Specialist Managers by Sector* 30 September 2006 * Excludes cash and other assets. As a proportion of total private equity investments in MPCG's portfolio as at 0 June MPCG s total foreign currency exposure, including both investments and commitments to specialist managers, was approximately 25% of Net Assets as at 30 September Approximately three-quarters of this foreign currency exposure was to $US and the remainder to Euros. Energy 11.5% Venture/Early Stage 1.1% Infrastructure 2.6% Buy-out 51.9% Expansion 16.0% Distressed 5.0% * As a percentage of total commitments outstanding. 7

8 The table below provides a snapshot of the 25 largest underlying investments in MPCG s portfolio as at 30 September The largest exposure is to Metro GlassTech, New Zealand s leading fabricator of glass and laminate products, accounting for around 4.1% of NAV. Macquarie Private Capital Group - 25 Largest Underlying Investments* Rank Investment Description % of MPCG NAV Cumulative % of MPCG NAV 1 Metro GlassTech NZ glass products fabricator and distributor 4.1% 4.1% 2 Pacific Apparel Solutions Apparel wholesaler and brand manager 3.1% 7.2% 3 Aperio Group Packaging company servicing Australia and NZ 2.9% 10.0% 4 Australian Discount Retail Australia s largest discount retailer 2.8% 12.8% 5 Super A-mart Discount furniture retailer 2.8% 15.6% 6 Peregrine Semiconductor Corporation 7 Lifehealthcare 8 Scotts McColls Specialist semiconductor producer 2.3% 17.8% Distribution and sale of medical devices and equipment to the health industry Logistics and liquid transport business servicing the mining, food and chemical industries 2.0% 19.8% 1.9% 21.7% 9 Amart All Sports Sporting goods retailer 1.8% 23.5% 10 Moraitis 11 Autoroutes Paris-Rhin- Rhone 12 Redfern Photonics Australian vertically integrated fresh produce company Europe s third largest motorway group servicing the Paris-Rhin-Rhone region Developer of photonics technology which enables high-speed optical transfer of information 1.6% 25.0% 1.5% 26.6% 1.4% 28.0% 13 Beston Caravan Parks Caravan park owner and operator 1.2% 29.2% 14 RED Paper Group 15 Choice Aggregation Services Paper products distributor (formerly Edwards Dunlop Group) 1.2% 30.4% Provider of home and investment loans 1.0% 31.4% 16 Club Hotels Australian pubs and hotels 1.0% 32.4% 17 Kailis & France Foods Frozen meals manufacturer 0.9% 33.3% 18 Wales and West Utilities UK based gas distribution network 0.9% 34.2% 19 Energy Power Resources Largest portfolio of biomass-fuelled renewable power generation assets in the UK 0.8% 35.0% 20 Brussels Airport Belgium's National Airport 0.8% 35.8% 21 Elior SA 22 Kathmandu 23 Sentinel Limited 24 Bluestone Group Contract catering to restaurants, government, healthcare, nursing facilities and schools Outdoor equipment and apparel retailer with stores across Australia and New Zealand Provider of home equity release mortgages in Australia and New Zealand Provider of financial services including low documentation and reverse mortgaes 0.7% 36.5% 0.7% 37.2% 0.7% 37.9% 0.7% 38.6% 25 South East Water Supplier of drinking water to South East England 0.7% 39.3% * As at 30 September 2006 (unaudited). Reflects look-through exposure of each specialist manager fund held by MPCG. 8

9 The table below provides detail on both the invested exposure and future commitments to the specialist managers that MPCG uses to obtain exposure to private equity investments. Macquarie Private Capital Group - Investments and Commitments by Specialist Managers and Co-investments Manager MPCG Private Equity Investments (1) MPCG Outstanding Commitments (1) MPCG PE Investments + Outstanding Commitments (1) Geographic & Sector Exposure Catalyst Investment Managers Pty Ltd 10.6% 10.0% 20.6% Australian buy-outs Quadrant Private Equity Pty Limited 6.6% 7.1% 13.7% Australian buy-outs Macquarie Investment Management (UK) Limited 5.8% 2.6% 8.3% European infrastructure Industry Ventures Management IV, LLC (US) 4.6% 5.1% 9.6% US early stage direct secondaries ABN Amro Capital Pty Limited 4.5% 3.4% 7.9% Australian expansion Archer Capital Pty Ltd 3.9% 1.8% 5.8% Australian buy-outs CFSC Wayland Advisers (US) 3.0% 0.0% 3.0% US distressed debt CHAMP Ventures Pty Ltd 2.4% 1.7% 4.0% Australian buy-outs Fulcrum Capital Management 2.2% 0.0% 2.2% Australian early stage Equity Partners Trust Management Pty Ltd 2.2% 0.5% 2.6% Australian expansion Macquarie Specialised Asset Management Limited 1.9% 0.0% 1.9% Global infrastructure Ironbridge Capital Pty Ltd 1.8% 0.5% 2.3% Australian buy-outs Starfish Ventures Pty Ltd 1.7% 3.6% 5.4% Australian early stage The Carlyle Group-Energy LLC (US) 1.6% 11.2% 12.8% US energy Start-up Australia Pty Ltd 1.6% 0.3% 1.9% Australian early stage Blackstone Capital Partners 1.3% 8.9% 10.2% Global buy-outs Oaktree Capital Management LLC (US) 1.2% 0.9% 2.1% US distressed debt MHR Fund Management LLC (US) 1.2% 1.6% 2.8% US distressed debt Carlyle Asia Partners (US) 1.1% 6.0% 7.1% Asian buy-outs Technology Venture Partners Pty Ltd 1.1% 0.4% 1.5% Australian early stage/it Foundation Management 1.1% 0.4% 1.5% Australian expansion Blackstone Distressed Debt Advisors (US) 1.0% 0.0% 1.0% US distressed debt CHAMP Pty Ltd 1.0% 0.4% 1.4% Australian buy-outs Pacific Equity Partners Pty Ltd 0.1% 0.9% 1.9% Australian buy-outs Charterhouse Capital Partners (UK) 0.9% 6.6% 7.5% European mid-market buy-outs Crescent Capital Partners Management 0.8% 0.3% 1.2% Australian expansion HgCapital (UK) 0.8% 4.1% 4.8% European mid-market buy-outs (1) As a percentage of MPCG NAV as at 30 September 2006 cont'd over 9

10 Macquarie Private Capital Group - Investments and Commitments by Specialist Managers and Co-investments (continued) MPCG Private Equity Investments (1) MPCG Outstanding Commitments (1) MPCG PE Investments + Outstanding Commitments (1) Geographic & Sector Exposure Avenue Capital Group (US) 0.8% 0.0% 0.8% US distressed debt Jolimont Venture Pty Ltd 0.8% 0.2% 1.0% Australian early stage direct secondaries TCW Group Inc (US) 0.6% 0.0% 0.6% US distressed debt GBS Ventures Ltd 0.6% 4.2% 4.8% Australian early stage/ biosciences Deutsche Asset Management (Australia) 0.4% 0.1% 0.5% Australian buy-outs Wayzata Investment Partners (US) 0.4% 0.0% 0.4% US distressed debt Next Capital Pty Limited 0.4% 1.1% 1.5% Australian expansion Aisling Capital Partners (US) 0.2% 3.0% 3.2% US early stage/biosciences Advent Management Group Ltd 0.1% 0.0% 0.1% Australian expansion Venture Capital Partners Pty Ltd 0.1% 0.0% 0.1% Australian early stage Macquarie Direct Investments Limited 0.1% 0.0% 0.1% Australian expansion Macquarie Technology Funds Management Pty Ltd Gresham Rabo Asset Management Pty Limited Proportion Invested in Specialist Managers 0.0% 0.0% 0.0% Australian early stage/it 0.0% 0.0% 0.0% Australian expansion 71.4% 86.8% 158.1% Direct Co-investments 13.1% 2.4% 15.5% Total Cash (2) 15.5% 15.5% Grand Total 100.0% 89.1% 189.1% (1) As a percentage of MPCG NAV as at 30 September 2006 (2) Includes cash held directly by MPCG and through its conduit funds but excludes cash held by specialist managers. 10

11 Contact details Registered Office Level 7 1 Martin Place Sydney NSW 2000 Australia Securities Registry Computershare Investor Services Pty Limited Level 3 60 Carrington St Sydney NSW 2000 Australia Manager Macquarie Investment Management Limited Level 7 1 Martin Place Sydney NSW 2000 Australia Robert Credaro CEO of MPCG Caroline Webb Secretary

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