CapMan a leading alternative asset manager in the Nordic countries and Russia

Transcription

1 CapMan a leading alternative asset manager in the Nordic countries and Russia Heikki Westerlund, CEO CapMan Plc, Senior Partner Jerome Bouix, Head of Investor Services, Senior Partner

2 Contents CapMan update Market environment Earnings model Financials Jan-Jun 2008

3 CapMan a leading alternative asset manager in the Nordic countries and Russia Specialised listed alternative asset manager Manages specialised third party private equity, venture capital and real estate funds Listed on Helsinki Stock Exchange since 2001 Market cap million incl. A shares (closing price 2.48 on 29 August 2008) Two complementary business areas Private Equity Real Estate Capital under management 3.2 billion In addition assets and mandates managed/advised by Access Capital Partners approx. 2.5 billion* One of the pioneers in the industry Established in 1989, Nordic expansion in Introduction of real estate operations in 2005 Russian expansion in 2008 Expansion to public market investments in 2008 Active owner in the portfolio companies and real estates * On 11 July 2008 CapMan signed an agreement for the transfer of CapMan s 35% stake in Access Capital Partners. 3

4 CapMan s main events in 2008 Two new investment areas Four new funds 7 new portfolio company investments 4 exits from portfolio companies 1 demerger of a portfolio company 1,025 million raised 42 new real estate investments 1 affiliated company sold CapMan Technology 2007 CapMan Hotels RE Ky CapMan Russia RUSSIA BALTIC PORK INVEST ASA CapMan Public Market Fund 39 hotel and two commercial properties Land area in Kivistö, Vantaa Announced/will be implemented in Q

5 CapMan s growth strategy 2005 Expansion to real estate investments 2008 Expansion to Russia Establishment of a fund investing in public markets Offices in Denmark, Sweden and Norway 2001 Listing in Helsinki Stock Exchange Real Estate Public Market Russia Buyout MBO Mezzanine Technology Mezzanine Technology Life Science Life Science Real Estate Buyout CapMan established in 1989 as a buyout house. Expansion to mezzanine and technology investments in Nordic growth strategy Expansion to life science investments in Utilising growth potential in alternative asset class and geographical expansion

6 Expansion to Russia CapMan acquired management companies of Norum Russia Fund III on 27 August Sellers company s senior management, DnB NOR Bank ASA and Sitra 51% of the management company s and 100% of the advisory company s share capital and voting rights to CapMan Price approx. 3.4 million - will be adjusted according to the final fund size Financed with cash and a directed share issue Right to buy the remaining shares and voting rights when the investment period of the fund ends Sellers have the right to sell the remaining shares to CapMan at any time Fundraising continues under the CapMan Russia Fund name Current fund size 88 million CapMan s commitment 13.5 million Norum has operated in the Russian private equity market since 1995 and is one of the most experienced investors in this market. CapMan Russia formed a separate investment area 6

7 CapMan Public Market fund CapMan Public Market fund established on 11 July 90 million in commitments raised by the first closing fundraising continues CapMan s commitment 15 million Fund invests in Nordic public companies Market capitalisation 100 1,000 million Utilising private equity style value creation methods in public markets Friendly co-operation with main owners and other stakeholders CapMan Public Market formed sixth investment area Included in the CapMan Private Equity business area in financial reporting The step is in line with CapMan s strategy to exploit growth opportunities within the alternative asset class No substantial impact on CapMan Plc s result for

8 The sale of Access Capital Partners shares CapMan Plc signed an agreement for the sale of its 35% stake to N+1 Group on 25 July Transaction price max 23.3 million Impact of 18.0 million on CapMan Plc s result for 2008 Buyer pays 16.5 million at closing, remaining share in 2012 A portion of the remaining price linked to Access development over the next few years Taxes payable in 2008 approx. 2.2 million CapMan will still retain return potential Possible carried interest from Access s existing funds and mandates, excl. the Access Capital Fund IV Growth Buy-out fund Expected to closing in Q after the relevant regulatory approvals are obtained Proceeds will be used to finance growth Assets under management, million 2,500 2,000 1,500 1, ,162 1,165 1,162 1, Q2/08 Private equity mandates Funds of funds 8

9 Strong growth in capital under management Capital under mgmt, M MBO Domestic partnership LISTING Nordic presence and funds /08 Buyout funds Mezzanine funds Technology funds Life Science funds Russia fund Public Market fund Real Estate funds * Capital under management refers to funds remaining investment capacity and capital already invested valued at acquisition cost. 9

10 CapMan s investment areas CapMan Private Equity 1.6 billion CapMan Real Estate 1.6 billion CapMan Buyout CapMan Technology CapMan Life Science CapMan Russia CapMan Public Market Manufacturing, retail and services Middle market equity investments million / company Both equity and mezzanine investments Expansion and later stage technology companies Equity investments 3 15 million / company Medical technology and healthcare service providers Equity investments 2 7 million / company Manufacturing and services in Russia Equity investments 5 15 million / company Nordic public companies Market capitalisation million. Equity investments million / company Commercial properties in Helsinki area, property development targets in Finland and hotel properties in Finland and Sweden Investments typically 5 50 million / real estate Latest funds CapMan Buyout VIII 440 million (2006) CapMan Mezzanine IV 240 million (2004) CapMan Technology million(2007) CapMan Life Science IV 54 million (2006) CapMan Russia 88 million (2008)* CapMan Public Market Fund 90 million (2008)* CapMan Hotels RE I 835 million (2008)* * Fund still open for new commitments. 10

11 Dedicated investment partnerships benefiting from CapMan platform CapMan Plc / Board of Directors CEO Heikki Westerlund deputy CEO Olli Liitola* Investor Services Jerome Bouix Fundraising and IR Fund Administration Performance Monitoring Communications Business Development Group Finances and Accounting, IT Kaisa Arovaara, CFO Group Finances and Accounting IT HR and Office Services Hilkka-Maija Katajisto Human Resources Office Services CapMan Buyout Tuomo Raasio (deputy Kai Jordahl) CapMan Technology Petri Niemi (deputy Lars Hagdahl) CapMan Life Science Jan Lundahl (deputy Johan Bennarsten) CapMan Real Estate* Markku Hietala (deputy Jorma Lehtonen) CapMan Russia Petri Saavalainen (Hans Christian Dall Nygård**) CapMan Public Market Jukka Ruuska *CapMan Real Estate reports to deputy CEO Olli Liitola. ** Head of CapMan Russia Investment Operations. Note: Expansion to public market investments announced on 11 July

12 CapMan s ownership 30 June % 36% 35% Employee shareholders Nominee registered and foreign shareholders Other owners Nominee registered owners at the end of 2007 included funds managed by several international investors Dunedin Enterprise Investment Trust Plc Explora Capital Management ASA Legg Mason Inc Partners Group Seventh AP Fund Royce & Associates Troy Asset Management In addition Barwon Investment Partners, C Brooke Investment Partners Ltd. and Hermes Investment Management managed CapMan shares on behalf of discretionary clients The aggregate holding of these entities was slightly above 20 per cent of the shares 12

13 All Senior Partners shareholders of CapMan Plc 30 June 2008 CapMan Partners B.V. form the second largest shareholder and the largest user of voting rights Ownership of CapMan Plc (by shares) Ownership of CapMan Plc (by voting rights) Senior Partners 28% 39% 37% 66% 6% 24% Current 14 Senior Partners CapMan Partners B.V. Other owners Current 14 Senior Partners CapMan Partners B.V. Other owners 13 13

14 Top European fund performance 30 June exits by equity funds Acquisition price indexed (date of investment = 100) The value of investments has on average increased by 3.1 times IRR 54% (gross) Average holding period 4.6 years 50 0 Value at the time of investment Realisation value* * ) Incl. dividends, interest income and sales revenue. Incl. exits made by Swedestart AB. Excl. exits made by Alliance ScanEast Fund and Nordic Private Equity Partners and from early stage growth financing companies. 14

15 Value creation in exited buyout portfolio companies 40 realised buyout investments Operational development (average CAGR) Value creation breakdown (average contribution of each value driver) 20% 18% 11% 16% 14% 33% 33% 12% 27% 10% 8% 6% 12.4% 12% p.a. p.a. 18.3% 17% p.a. p.a. 29% 4% 2% 0% Net sales EBITA Net sales increase Profitability increase Strategic position (multiple effect) Debt reduction 15 Note: Some simplifications have been made to the calculations.

16 Value creation in current buyout portfolio companies Operational development (median CAGR*) 25% Breakdown of net sales growth (indexed, aggregate for unrealised investments*) add-ons accounting for 48% of growth % % p.a % 19% p.a % Net sales EBITA 0 Net sales at entry Acquisitions Divestments Organic growth Net sales 2008E** *21 unrealised investments in CapMan Equity VII and CapMan Buyout VIII funds closed before 30 June, 2008 with average holding period 2.3 years. **2008E is CapMan estimate for full fiscal year. 16

17 Contents Capman update Market environment Earnings model Financials Jan-Jun 2008

18 Key market trends Fundraising: Demand for alternative assets continued its growth Investment activity: Nordic banks still offering financing for middle-market buyouts and real estate transactions Exit market: Nervousness of debt markets is reflected in the exit market through lower prices and longer times to exit 18

19 Nordic institutions average allocation to alternatives at international level Average allocation to alternatives at 5% Many large players just starting PE investing In the UK and US average allocation between 7% and 15% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Varma LGPI Ilmarinen State Pension Fund Tapiola group Fennia group Suomi-Yhtiöt Etera Sampo Life Veritas Alecta Skandia Liv AMF Pansion AP2 AP3 AP1 AP4 AFA Länsförsäkrings Liv AP6 Vital ASA KLP Storebrand Liv ATP PKA A/S KPF/Sampension PensionDenmark Industriens Pension Alternatives Real estate Bonds & money market Equities Source: latest company reports 19

20 but significant country variations A dozen active Finnish institutions, many since mid 1990s Largest growth potential in other Nordic countries 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2% 9% 5% 2% Denmark Finland Norway Sweden Alternatives Real estate Bonds & money market Equities Source: latest company reports Weighted sample averages 20

21 Pension funds allocations in alternative asset class growing worldwide 25% 20% +35% 3% 15% 2% 5% 10% 5% 4% 4% 5% 6% 6% 0% Target PE Real estate Hedge funds Other 21 Source: McKinsey&Co, The Rive of Universal Owners: From Best Practises to Next Practises in Institutional Investing, 2008

22 Key market trends Fundraising: Demand for alternative assets continued its growth Investment activity: Nordic banks still offering financing for middle-market buyouts and real estate transactions Exit market: Nervousness of debt markets is reflected in the exit market through lower prices and longer times to exit 22

23 The trend towards the small-cap end of the market continued over Q European buyout activity Significant increase in < 160 million deals in terms of both volume and value Improvement also in large deals five > 1.65bn deals done in March June Deal value by size range Deal number development by size range H1/ billion # H1/08 < 160m 160m bn 1.65bn+ < 160m 160m bn 1.65bn+ Source: unquote Private Equity Barometer, compiled by Incisive Media 23

24 Value of real estate transactions in the Finnish property market in H1 at year 2007 level Q2 quiet large transactions, CapMan Hotels RE and Kamppi shopping centre, explain the high value in Q Foreign buyers still active Deal value development in Finnish property market billion H1/08 preliminary 24 Domestic buyer Foreign buyer Source: KTI

25 Leverage ratios in Europe slightly decreasing European benchmark (all buyouts) Nordic banks continue to support existing clients in good deals Price of money has risen during H Annual average Net Debt / EBITDA multiples S&P benchmark all buyouts S&P benchmark buyouts < MEUR 250 Source: S&P 25

26 Strong market coverage by CapMan teams Between 2007 Q CapMan Buyout evaluated 69% of the 51 Nordic middle-market* buyout transactions CapMan Technology evaluated 68% of the 71 Nordic technology transactions raising more than M 2 CapMan Life Science evaluated 78% of the 27 Nordic medical technology and healthcare services transactions** CapMan Real Estate evaluated 60% of the 103 major Finnish real estate transactions within the funds investment focus Altogether 641 deals evaluated by CapMan s investment teams between 2007 Q *Target company net sales between M 50 M 500 and EV M 50 M 250. **Target company net sales between M 2 M 20, transactions raising more than M 1 million. Source: KTI, Mergermarket, Nordic Unquote, Venture Source, CapMan analysis 26

27 CapMan the most active investor within the Nordic middle market buyouts* Most active private equity investors between 2006 H # new investments CapMan Altor 7 Ratos 6 5 Axcel Accent Polaris EQT Herkules Industri Kapital LD Equity Litorina Kapital Nordic Capital Segulah 2 1 Triton Nine investors 32 investors *Target company net sales between M 50 M 500 and EV M 50 M 250. Source: Nordic Unquote, Mergermarket, CapMan analysis

28 Key market trends Fundraising: Demand for alternative assets continued its growth Investment activity: Nordic banks still offering financing for middle-market buyouts and real estate transactions Exit market: Nervousness of debt markets is reflected in the exit market through lower prices and longer times to exit 28

29 Exits by European PE firms decreased slightly in 2007 European benchmark Exits decreased by amount and by number Sale to other PE house more common exit method than a trade sale Divestments at cost 35 billion 30-18% Source: EVCA 29

30 Entry prices in smaller buyouts decreasing European benchmark (all buyouts) CapMan s funds have several exit processes underway Annual average EV / EBITDA multiples S&P benchmark all buyouts S&P benchmark buyouts < MEUR 250 Source: S&P 30

31 CapMan update Contents Market environment Earnings model Financials Jan-Jun 2008

32 Main components of income Management fees Based on original fund size (total commitments) or fund s remaining portfolio at cost Typically % p.a. of the capital in the funds (total commitments/ portfolio at cost) depending on whether the fund is real estate, mezzanine or equity fund Carried interest income CapMan begins to receive carried interest after the investors have regained their investment and a preferred annual return, usually 7 to 8% When a fund is in carry, CapMan s share of the fund s cash flow is typically 20 25% in the case of CapMan funds that were established before 2004, and 10 15% for newer funds Returns on direct fund investments from own balance sheet Since 2002 CapMan has been a significant investor in the funds managed by the group CapMan invests 2 10% of the total capital in CapMan s equity funds investing in portfolio companies Value development of investment objects is reflected on fair value changes on a quarterly basis Target equity fund performance above 15% net IRR to fund investors In addition: income from real estate consulting, share of associated companies result, other income 32

33 Management fees increase as a result of growth in capital under management 3,500 Capital under management, million 30 Management fees, million 3,000 3, ,500 2,120 2, ,000 1,500 1, , H1/ H1/08 Relative fee income has decreased as a result of new mezzanine and real estate funds, which have lower fee percentages Because of different fee percentages in equity, mezzanine and real estate funds the fees cannot be calculated directly from the capital under management base 33

34 Attractive earnings model: Stable income covers operating expenses M Management fees paid by funds and the income from real estate consulting covered operating expenses in the review period H1/2007 H2/2007 H1/2008 Management fees & Income from real estate consulting Operating expenses (incl. performance bonuses) 34

35 Large medium-term carried interest potential 30 June 2008 Original capital of the funds 3,842.0 million by funds carried interest stage The funds current portfolios at fair value 1,893.1 million by funds carried interest stage 6% 20% 4% 8% 19% 12% 62% 69% Funds generating carried interest Funds that are expected to start generating carried interest at the latest during 2009 Other funds not yet in carry Funds with limited carried interest potential to CapMan 35

36 Analysing short-term carried interest potential: Funds generating carried interest / old funds 30 June 2008 Current portfolio at cost: Current portfolio at fair value: million million Current portfolios Buyout FV II FV III + III G Fenno Fund Fenno/Skandia I Fenno/Skandia II FM II B FV V RE I Portfolios are presented on the following pages 36 Read more:

37 Analysing short-term carried interest: Funds generating carried interest / Finnventure V 30 June 2008 Fund size: Portfolio at cost: Portfolio at fair value: Cash flow to investors: Generated carried interest to CapMan: million 47.8 million 34.6 million million 5.3 million Carried interest of fund s cash flows: 20% CapMan s share of carried interest: 100% Buyouts (80% allocation) Technology investments (20% allocation) 37 Read more:

38 Analysing short-term carried interest: Funds generating carried interest / CapMan Real Estate I 30 June 2008 Fund size: Remaining investment capacity: Portfolio at cost: Portfolio at fair value: Cash flow to investors: Generated carried interest to CapMan: million 45.6 million* 93.4 million 95.9 million** million*** 27.4 million**** Carried interest of fund s cash flows: 40%***** CapMan s share of carried interest: 64% Kalevankatu 20, Helsinki Malminkaari 9, Helsinki Kauppakeskus Entresse, Espoo Lönnrotinkatu 20, Mastolan Helsinki keskusvarasto, Vantaa Elimäenkatu 9A and 9B, Helsinki Ludviginkatu 3 5, Helsinki Hankasuontie 3, Helsinki 38 * Taking commitments in consideration. Including gearing up to 75%, which will affect the effective carry base. ** Of the portfolio at fair value, 65.1 million is financed with debt. *** Incl. repayment of 100 million bond and interests **** Incl. minority interest. ***** After deducting outstanding senior debt. After the previous distribution of profits, new equity called in, as well as any annual preferential returns on it, must however be returned to investors before the new distribution of profits is paid.

39 Fund investments made from own balance sheet Since 2002 CapMan has been a significant investor in the funds managed by the Group. Depending on the funds demand and CapMan s own investment capacity CapMan will invest in its future funds 2 10% of the funds total commitments M 28.5 After the review period CapMan has made 13.5 million commitment in CapMan Russia fund and 15 million commitment in CapMan Public Market fund /2008 Remaining commitments targeted mainly at CapMan Technology 2007 and CapMan Buyout VIII Investments made mainly in CapMan Buyout VIII, CapMan Equity VII, CapMan Hotels RE and Access Capital Fund II 39

40 The impact of own fund investments, M The impact on the Company s result totalled -1.1 million Realised returns 0.2 million ( 0.3 million) Fair value changes -0.3 million ( 4.6 million) The changes were affected by the general market development in the first half of the year and by the funds costs. The multiples used in fair value calculations decreased as a result of the declining market valuations of portfolio companies listed peers. Funds portfolios also saw positive value adjustments for individual companies, and portfolios are overall in sound condition. The change in fair value during the comparable period was exceptionally large and broadly attributable to a value adjustment in Moventas, from which there was a partial exit during the comparison period. 40

41 Analysing impact of own investments and carried interest potential: CapMan Equity VII 30 June 2008 CAPMAN EQUITY VII A B C Sweden In total Fund size: Paid-in capital: Portfolio at cost: Portfolio at fair value: Cash flow to investors: Investment focus buyout/tech: 65% / 35% 100% / 0% 0% / 100% 65% / 35% 65% / 35% CapMan s commitment: 16.0 million Buyout investments Technology investments Exit announced Read more: 41

42 Analysing impact of own investments and carried interest potential: CapMan Buyout VIII 30 June 2008 CAPMAN BUYOUT VIII A B In total Fund size: Paid-in capital: Portfolio at cost: Portfolio at fair value: CapMan s commitment: 37.5 milion CapMan s share of carried interest: 70% 42 Investment announced Read more:

43 Contents CapMan update Market environment Earnings model Financials Jan-Jun 2008

44 Income Statement million 2004 IFRS 2005 IFRS 2006 IFRS 2007 IFRS H1/08 IFRS Turnover Management fees Carried interest Income of investments in funds Income from real estate consulting Other income Other income* Operating expenses Fair value gains Operating profit Financial income and expenses Share of associated companies result Profit before taxes Profit after taxes attributable to the parent company shareholders * Profit from the sale of 12.5% of Access Capital Partners shares in 6/2006 amounts to 0.6 million.

45 Key figures 2004 IFRS Earnings per share, 0.06 Diluted, Shareholders equity / share, Dividend / share, Dividend / result, % 2005 IFRS 2006 IFRS 2007 IFRS Dividends paid, Return on equity, % Return on investment, % Equity ratio, % Personnel (at year / review period end) H1/08 IFRS

46 Components of income and operating costs 30 June 2008, M Total effect of own investments -1.1 million Turnover 19.5 million Pre-tax profit 3.7 million Operating profit 3.7 million Management fees Carried interest Income from fund investments, realised Other income Financial income and expenses Income from real estate consulting Other operating income Fair value gains and losses of investments Operating expenses Share of associated companies result 46

47 Financial objectives Objective Status as at 30 June 2008 Growth Average capital growth of capital under management at least 15% per annum 37% growth from 31 December 2007 Profitability Capital structure Return on equity over 25% Equity fund performance above 15% net IRR to fund investors per annum Finance 50% of CapMan Plc s future fund investments with debt financing Equity ratio at least 50% Return on equity 4% Buyout 2002 net IRR 22% Real estate 2005 net IRR 32% 40% of CapMan Plc s fund investments financed with debt financing* Net gearing 44% Equity ratio 55% Dividend policy Pay-out ratio at least 50% of the net profit Dividend pay-out ratio 67% for 2007 *Debt financing as a percentage of CapMan s fund investments at fair value. 47

48 Future outlook Management fees and returns on real estate consulting cover CapMan s fixed expenses in Carried interest income in 2008 will be clearly lower than in The funds have several exit processes underway, and we expect CapMan Equity VII A, B and Sweden funds, Finnventure Fund IV fund and Finnmezzanine III A and B funds to start generating carried interest by the end of We expect our portfolio companies and real estate assets to continue to develop favourably in However the prevailing instability in financial markets may be reflected in the fair value of CapMan Plc s fund investments also in the second half of The Group s full-year result for 2008 will depend on how many new exits are made by funds already generating carried interest, on whether new funds start generating carried interest, and on how the value of investments develops in those funds in which CapMan is a substantial investor. With the sale of Access earnings per share for 2008 is estimated to be at the same level as in the previous year. 48

49 CapMan values High Ethics our heart We believe in integrity and transparency. We are a reliable partner and we respect our stakeholders. We want to be an example of high ethics. Dedication our soul We are committed to reach our objectives. We are innovative and aim to be the trendsetter for the industry. Employees are our most important resource. Active Ownership our drive We are an active industrial player with strong financial know-how. We create lasting value through growth, change and professional governance. 49

50 Mission and vision Mission Our mission is to create financial returns through active ownership. We act as a high quality service provider by investing capital in companies, properties or other targets within private equity and other alternative asset class. The lasting value of these investments is created by growth, change and professional governance. Vision Our vision is to be the preferred private equity and other alternative assets partner for investors globally and entrepreneurs locally. 50

51 Analysts following CapMan and IR schedule Analysts following CapMan Cazenove, London Christopher Brown Tel. +44 (0) Nordea Martti Larjo Tel Pohjola Bank plc Mikael Nummela Tel IR schedule 2008 Road show, London 30 October 2008 Interim Report 1 January - 30 September November 2008 Capital Markets Day 2008, Helsinki Carnegie (Tia Lehto) Tel

52 IR contacts Heikki Westerlund, CEO, Senior Partner tel Jerome Bouix, Senior Partner, Head of Investor Services tel Kaisa Arovaara, CFO tel Mari Maunula, Fundraising and IR Analyst tel