H1 HitecVision Private Equity AS
first six months 2008 2 highlights HitecVision continues its growth, both in revenues, profits and assets under management. Revenues for the first six months of 2008 were NOK 88.2 million, against NOK 50.1 million for the corresponding period in 2007. Net income after tax and minority interests was NOK 40.8 million, against NOK 22.1 million for the first six months of 2007. Total commited capital in funds advised by HitecVision increased from NOK 2.3 billion to NOK 6.7 billion. A number of realisations from Fund III in the first half of the year will be recognised in the accounts in the second half, and continued high profitability is therefore expected for the rest of the year. A number of important milestones were reached during the first six months: HitecVision successfully closed its largest fund to date, HitecVision V LP. With a committed capital of USD 816 million (NOK 4.5 billion), it is one of the largest private equity funds ever raised in Norway. More than half of the capital was raised outside Norway, with 22% commited from the other Nordic countries and 30% from the rest of Europe and USA. The fund attracted a number of blue-chip international investors, and was heavily oversubscribed. HitecVision and the company s employees have each committed USD 8 million to the Fund through HVPE Capital V AS, which is held 50% by the company and 50% by the employees. In the Fund III portfolio, exit transactions totalling about one billion NOK have been closed. These include: Trade sale of Knowledge Systems Inc. Sale of 1/3 of the Fund s shares in the listed E&P company Norwegian Energy Company ASA (Noreco) Secondary sale of the Fund s investments in RigNet, Inc, Norse Cutting & Abandonment AS and SPT Group AS. HitecVision s share of the Fund s proceeds from these realisations will be booked in the second half of 2008. Fund III is now largely exited, and the only remaining investments are in listed companies: Norwegian Energy Company ASA Noreco (Oslo Stock Exchange) and ProSep, Inc. (Toronto Stock Exchange). In the Fund IV portfolio, growth and value creation activities continue. The Fund now has seven main investments - see page 5 for an overview. Major milestones in the first half of 2008 include: Creation of Subsea Technology Group AS, a specialist supplier of technology and engineering services to the growing subsea market. Creation of APPLY AS, a new major provider of electro engineering, installation and technical services. Fund V has made two investments: Spring Energy Norway AS, a recently established Oslo-based independent E&P company Hitec Products Drilling AS, a supplier of oil and gas drilling technology. (The company is not related to HitecVision.) HitecVision continued to add to both its investment and corporate services teams, with the addition of five new staff so far this year. HitecVision now employs 24 across our four offices in Stavanger, Oslo, Aberdeen and Houston. NOK 63 million was distributed to shareholders through a repurchase of 1 145 450 own shares at a share price of NOK 55. The repurchase was completed in June, following an offer to all shareholders. financial results HitecVision achieved operating revenues of NOK 88.2 million in the first half of 2008 (up 76% on the corresponding period last year) and net income after taxes and minority interest of NOK 40.8 million (up 85%). Revenues are derived as follows: Advisory fees (Fund III, IV and V): NOK 48.3 million Return on investments (Fund III): NOK 35.6 million Share of income from associated company: NOK 4.4 million No proceeds from the first six months realisations from Fund III have yet been booked in the accounts of HitecVision. 2 solidity HitecVision has a strong balance sheet with excellent liquidity and no interestbearing debt, enabling the company to meet all its investment obligations in relation to funds under management as well as to finance its further planned expansion. Due to the long term nature of fund advisory agreements, a significant part of the company s revenues are predictable for several years to come. shareholder matters A repurchase of shares was completed in June 2008, following an offer issued to all shareholders. In total 1 145 450 shares were bought back by HitecVision, at a share price of NOK 55. The shares were in turn sold on at the same price to HVPE Capital V, a company owned 50% by HitecVision and 50% by the company s employees. HitecVision s foremost asset is its human capital, and significant employee share ownership is an important factor in ensuring the long term stability of the team. As at 21st August 2008, HitecVision had 174 registered shareholders, compared to 275 one year ago. The HitecVision share is listed on the A list of the Norwegian Over The Counter (NOTC) market, organised by the Norwegian Securities Dealers Association. HitecVision publishes annual and half year reports.
fund details 3 FuND III FuND IV FuND V Key data: Key data: Key data: Final closing: 30th June 2002 Final closing: 31st May 2006 Final closing: 10th March 2008 Total committed capital: 690 MNOK Total committed capital: 300 MUSD Committed capital: 816 MUSD HitecVision committed capital: 60 MNOK HitecVision committed capital: 9.75 MUSD HitecVision Private Equity s committed capital: 16 MUSD Advisory fee: 2.5% of committed capital Advisory fee: 1.75% of committed capital Advisory fee: 1.85% of committed capital* Fund maturity: 2002 2009 Fund maturity: 2006 2016 Fund maturity: 2008 2018 *) Through HVPE Capital V AS (50% owned associated company) Fund III is nearing the end of its lifespan, as seven of the originally nine portfolio companies have been fully exited, while the two remaining holdings are in listed shares. The Fund has invested in nine portfolio companies and made a number of add-on acquisitions to these. To date the Fund has made seven full exits and two partial exits. Please refer to the back of the report for more details on the portfolio companies. Highlights in the first six months of 2008 include: Trade sale of Houston-based software company Knowledge Systems, Inc. to Halliburton, in May. The placement of 1/3 of the Fund s shares in the listed E&P company Norwegian Energy Company ASA (Noreco) in the market, at a share price of NOK 34, in June. Sale of investments in Norse Cutting & Abandonment, RigNet and SPT Group to Cubera Private Equity in a secondary transaction (agreement entered into in May, final closing held in July). Fund III s remaining portfolio consists of listed shares in Noreco and ProSep Inc. Fund IV is fully invested, i.e. it is closed for new direct investments, and the remaining capital will be used for add-on and follow-on investments in the existing portfolio companies. Per end June the fund had called in 70% of the committed capital. The Fund s originally five direct investments have during the first part of 2008 been restructured into seven direct investments. Please see the portfolio company overview for further information. During the first half of 2008 the Fund made a direct investment in STG and a follow-on investment in connection with the formation of Haaland Group. Highlights in the first six months of 2008 include: The launch of APPLY AS in February, following a restructuring of the Fund s investment in SørcoGruppen, when Maritime Systems and Teknisk Bureau merged with North Sea Innovation and Asator. With over 1000 employees, mainly in Western Norway, APPLY is a major force in its selected areas of operation. The launch of Subsea Technology Group AS (STG) in April, based on a resutructuring of the Fund s investment in Technor, during which the subsea and related businesses in Technor were turned into an independent company and acquired Ross Offshore and Ross Drilling. Fund V held its final closing in March 2008, reaching a capital base of USD 816 million. The Fund is targeting eight to ten portfolio companies, primarily in Europe and North America, with revenues between USD 50 million to 300 million. Equity investments per portfolio companies is expected to range from USD 30 million to 150 million. In addition the Fund expects to make a number of add-on investments to the portfolio companies. The Fund has made two investments during the first six months: Hitec Products Drilling AS, a fastgrowing Stavanger-based supplier of advanced oil and gas drilling technology. Spring Energy Norway, a newly established Oslo-based oil and gas company. Haaland and its subsidiary Industrigravøren were divested from the Aarbakke Group, and now form a separate development platform; Haaland Group. Due to strong growth, both Aarbakke and Haaland are investing heavily in new production facilities. The expansion project is currently being finalised at Aarbakke Group, while the new production facilities at Haaland Group are well underway. Stavanger, 21st August 2008 The Board of HitecVision Private Equity AS
Income statement 4 all figures in NOK 1 000 30.06.2008 30.06.2007 31.12.2007 Operating revenues 48 296 23 455 54 607 Investment income 39 951 26 670 107 179 Total revenues 88 247 50 126 161 785 Operating expenses 31 480 17 725 43 379 Depreciation & amortisation 706 546 1 214 Net operating income 56 061 31 855 117 193 Net financial income /(loss) 682 (186) 811 Net income before taxes 56 743 31 669 118 003 Income tax (4 726) (2 349) (3 479) Net income before minority interests 52 017 29 320 114 524 Minority interests (11 210) (7 216) (33 434) Net income after minority interests 40 807 22 104 81 091 Balance Sheet all figures in NOK 1 000 30.06.2008 30.06.2007 31.12.2007 Intangible fixed assets 3 109 3 634 3 509 Tangible fixed assets 2 117 1 808 1 988 Financial fixed assets 132 898 103 391 120 130 Receivables 8 949 2 982 8 743 Cash and bank 41 009 1 784 45 471 Total assets 188 081 113 599 179 840 Total Equity net of minority interests 161 089 66 643 120 538 Minority interests 12 019-9 923 Total Equity 173 108 66 643 130 461 Current liabilities to financial institutions - 38 497 16 798 Tax payable 4 493 2 408 3 598 Dividends payable - - 15 003 Other current liabilities 10 479 6 051 13 981 Total equity and liabilities 188 081 113 599 179 840
PORTFOLIO COMPANIES 5 FuND III current: Norwegian Energy Company AS (Noreco) Revenues for 2007: MNOK 839 Noreco is an independent oil company, founded in Stavanger in 2005. The company is building a strong pan-north sea presence organically and through acquisitions, as a base for further international expansion. Noreco was listed on the Oslo Stock Exchange in November 2007. www.noreco.com ProSep Inc Revenues for 2007: MNOK 173 ProSep, Inc. supplies process technology to the oil and gas industry from companies based in Canada, Norway, USA and Asia. The company is listed on the Toronto Stock Exchange. www.prosepinc.com exited: and offshore. MTEM was established as a spin-off from the University of Edinburgh, with financing from HitecVision and two other investors. When the technology had been commercialised, the company was sold in a trade sale to PGS ASA in June 2007. www.mtem.com Norse Cutting & Abandonment AS NCA has a leading position in several markets within subsea activities. NCA s services, based on its proprietary cutting technologies, are used in connection with subsea platform removals and modifications, and well slot recovery programs. The company s IOS Offshore subsidiary is a leading marine anchors rental business. NCA is based in Norway with a Houston based subsidiary serving the Gulf of Mexico market. The Fund s investment in NCA was sold in secondary transaction to Cubera Private Equity in 2008. www.nca-group.com Revus Energy ASA FuND IV current: Apply AS Newly established. Est. revenues for 2008: NOK 1 Bn APPLY provides Electro Engineering & Technical Services within three main areas: oil and gas, maritime and construction & building. www.apply.no Aarbakke Group AS Revenues for 2007: MNOK 766.3 Aarbakke is an independent provider of subcontracting and fabrication services to the international oil and gas industry, specializing in precision machining services. The Group consists of several companies organized in two main groups: The Aarbakke Group (machining services, primarily to subsea and downhole field applications), and the Haaland Group (sheet metal fabrication). www.aarbakke.com Technor ASA Revenues for 2007: MNOK 1,426.8* The Technor Group manufactures and distributes electronic, electromechanic and flow control products to niche markets within the oil and gas industry, including refining, petrochemical and LNG production, processing and transportation. Technor has operations in Norway, France, England, Italy and the UAE. www.technor.com Vector International AS Revenues for 2007: MEUR 101.3 Vector International is a leading provider of specialist flanges and other pipe connectors to the oil, gas and petrochemical industries. The company also maintains a large pipe and valve trading operation. Vector operates out of main offices in Norway, Belgium and Wales, with sales offices in Scotland, England, the Netherlands, Dubai, Malaysia, Australia and USA. The company s main products have strong market positions and have shown rapid growth over the last years. APL ASA APL is a world leader within loading, offloading and mooring systems for the oil and gas industry. Its solutions have been tailored for such applications as offshore terminals, FPSOs and shuttle tankers. HitecVision led the company s Management Buy-Out from Statoil in 2004. APL was listed on the Oslo Stock Exchange in March 2005, and the Fund s investment was fully realized within six months after the IPO. APL is currently part of BW Offshore. www.apl.no Knowledge Systems, Inc Knowledge Systems innovative Drillworks software, training and consulting services are used by most major and independent oil companies to avoid trouble while drilling and improve exploration and drilling success. The company is based in Houston, USA. KSI was sold in a trade sale to Halliburton in May 2008. www.knowsys.com MTEM Ltd With patented technology MTEM (Multi-Transient Electro-Magnetic) provides a complete electro-magnetic survey acquisition and processing technique for prospects both on land Revus Energy is an independent Norwegian oil company. It was established in 2002 with support from HitecVision, developed to a mid-size company, and listed on Oslo Stock Exchange in 2005. The Fund s investment was fully realised at that time. www.revus.no RigNet, Inc RigNet is a leading provider of highperformance communications networks and real-time data services for the oil and gas industry. The company operates globally with head office in Houston, USA. The Fund s investment in RigNet was sold in secondary transaction to Cubera Private Equity in 2008. www.rig.net SPT Group AS SPT provides a combination of software and consultancy services relating to multiphase flow simulation and reservoir simulation. The company operates globally with head office in Norway. The major part of the Fund s investment in SPT was sold to Altor Private Equity in 2006, while the rest was sold in secondary transaction to Cubera Private Equity in 2008. www.sptgroup.com Noble Denton Holdings Ltd Revenues for 2007: MGBP 49.3 Noble Denton is an independent, market leading consultancy firm which offers services to the global offshore, shipping and insurance industries. The Group has its head office in the UK, and additional offices in 15 different locations throughout the world. www.nobledenton.com Subsea Technology Group AS Newly established. Est. revenues for 2008: MNOK 880 STG is structured into two operational units: STG Products and STG Engineering. Combined the companies services and solutions cover the full life cycle of a field, from field evaluation and exploration drilling, through the development phase to subsea operations and inspection, maintenance and decommissioning. STG has operations in Norway, the UK and the US. www.stg-subsea.no SørcoGruppen AS Revenues for 2007: MNOK 2,082* SørcoGruppen consists of over a number of entities operating in various niches within the oil and gas industry. The major companies are Sørco, Leirvik Maritime Technology, and Nemo Engineering. www.sorco.no www.leirvikmt.no www.nemo-engineering.no www.vectorint.com FuND V current: Hitec Products Drilling AS Revenues for 2007: MNOK 289 Hitec Products Drilling (HPD) is an independent provider of advanced, customised drilling solutions and well intervention systems for the offshore oil and gas industry. HPD is headquartered in Stavanger (Norway), with subsidiaries in the Aberdeen (UK) and Houston (US). The team of 140 employees has been involved in more than 130 different rigs. Through the business segments PHD is exposed to the full life cycle of a rig. www.hitecpd.com Spring Energy Norway AS Newly established. Spring Energy Norway AS is an oil and gas company established by a group of Exploration & Production (E&P) professionals with extensive experience and an excellent track record from the Norwegian Continental Shelf (NCS). Spring Energy will participate in exploration, appraisal and development projects on the NCS, with the objective of developing a risk balanced portfolio over the next 3 to 5 years. The company is qualified as a license partner on the NCS and aims to be qualified as an operator during 2010. www.springenergy.no *) Including businesses later split out into separate holdings
HitecVision Private Equity AS Postal address: P.O. Box 8120 4068 Stavanger NORWAY Visitor address: Jåttåvågveien 7 4020 Stavanger NORWAY PHONE +47 51 20 20 20 FAX +47 51 20 20 51 contact@hitecvision.com WWW.HITECVISION.COM HitecVision sponsors the Norwegian Society for Sea Rescue Summer School for children As part of HitecVision s annual sponsor program the firm has contributed NOK 100,000 to the Norwegian Society for Sea Rescue s (NSSR) Summer School in Stavanger. The sponsorship has been used to purchase a Zodiac RIB. This is the first year in operation for the Summer School in Stavanger, giving children aged 9 to 12 years the opportunity to enjoy a week each learning seamanship and sea sense. The NSSR is a humanitarian organization established in 1891, aiming at saving lives and recovering property at sea. The fleet covers the whole Norwegian coastline from the Swedish border in the south to the Russian border in the north. stavanger - oslo - aberdeen - houston