The directors present their report together with the audited financial statements for the year ended 31st December, 2007.
Principal activities
Candover Investments plc is an investment company within the meaning of
Section 833 of the Companies Act 2006 as well as an investment trust under
section 842 of the Income and Corporation Taxes Act 1988, the tax
status of which is shown in this section.
Candover is engaged principally in the identification, implementation and monitoring of large buyouts and buyins. Candover Investments plc makes investments either under a co-investment agreement alongside third party managed funds or on its own account. The third party managed funds, established with commitments from a wide range of international institutional investors, are managed by Candover Partners Limited, which is regulated by the Financial Services Authority and is wholly-owned by Candover Investments plc.
Candover participates in the profit made in certain of these funds subject to an overall minimum return having first been generated for investors in the funds. Candover Investments plc will be entitled to between 2% and 5% of any profit made by the Candover 2005 Fund. The exact percentage received by Candover Investments plc will be determined by a ratchet based on the investment multiple achieved by the Fund.
These funds and their investment activities are set out in the funds and investments section.
As referred to in the Chairman’s statement, the Candover 2005 Fund is now 72% committed and Candover Partners Limited have therefore commenced marketing the Candover 2008 Fund. The target for this new Fund is €5.0 billion. The objectives, scope and principal terms of this new Fund are expected to be essentially the same as those of the Candover 2005 Fund.
Investment policy
Candover Investments plc’s principal investment focus is investing alongside
funds managed by Candover Partners Limited, its wholly-owned subsidiary.
These funds focus on mid-to-large European buyouts with an enterprise
value typically in excess of €500 million, although investments may
also be made in larger or smaller businesses, both inside and outside
Europe. Typically, the Company invests €25 million to €100 million
in these buyouts.
The funds managed by Candover Partners Limited have a strategy to invest in a wide range of industries and countries, mainly in Europe, to ensure there is diversity in the portfolio. As a result, at any given time, Candover Investments plc’s portfolio will contain a risk profile that is balanced both by geography and investment sector.
Additionally, the Company makes direct investments, and makes commitments to other funds, inside and outside Europe.
Candover Investments plc will not invest, on acquisition, more than 15% by value of its investments in a single business or company or more than 15% of its total assets in any other listed closed-ended investment funds.
Candover Investments plc actively manages its balance sheet and levels of gearing in light of prevailing economic conditions. Net gearing is not expected to exceed 20% of net assets over the investment cycle and at no time will it be greater than 40% of net assets, at the time any gearing is taken out.
Application of investment policy
The summary
information, the Chairman’s
statement, the operational
and financial
reviews, the descriptions of new
investments and of the 20
largest investments explain and demonstrate how Candover has invested
its assets with a view to spreading investment risk in accordance with
its investment policy.
Results and review of business
The Group profit for the financial year after taxation was £14,119,000
(2006: £14,377,000). Revenue was £59,288,000 (2006: £60,461,000). Administrative
expenses charged to revenue were £37,920,000 (2006: £39,841,000). The
changes in fixed asset investments are described, together with a review
of the Group’s activities, in the Chairman’s
statement, operational
review and financial
review.
The key performance indicators (KPIs) used to measure the progress and performance of the Company are as follows:
Details of the financial KPIs are shown in the financial review.
Return of cash
In May 2006 a resolution was passed at the Annual General Meeting authorising
the return of £100 million in cash to shareholders. Most of this sum was
paid to shareholders in May 2006, and the remaining £5 million was paid
in May 2007 through the purchase of 1,093,460 C preference shares at 457.0p
per share. Further details are contained in note
27 to the accounts.
Dividend and proposed transfer to reserves
The directors recommend the payment of a final dividend of £8,743,000,
equal to 40.0p per ordinary share (2006: £7,868,000, equal to 36.0p per
share) giving a total dividend for the year of £13,115,000, equal to 60.0p
per ordinary share (2006: £11,874,000, equal to 54.0p per share). Payment
of the dividend will be made on 22nd May, 2008 to shareholders on the
register at the close of business on 25th April, 2008. The dividend details
are shown in note
7.
In accordance with IFRS, proposed dividends are provided for in the period in which they are formally declared and approved. As a result, the final dividend for 2007 will be recognised in 2008.
Directors
Except where otherwise indicated the directors listed below served on
the Board throughout the year and were in office at the end of the year.
All directors are non-executive.
Mr Gerry Grimstone – Chairman
Mr Stephen Curran (resigned 6th December, 2007)
Mr Antony Hichens
Lord Jay (appointed 1st January, 2008)
Mr Nico Lethbridge (died 16th August, 2007)
Mr Chris Russell
Mr Richard Stone
Mr Jimmy West
As announced on 7th March, 2008 Nicholas Jones will join the Board on 14th April, 2008. Nicholas Jones, who is 61, is Vice Chairman of Lazard in London. He was previously a director of J. Henry Schroder Wagg & Co. Ltd and, prior to that, a chartered accountant with Peat, Marwick, Mitchell & Co. He is a non-executive director of Ladbrokes plc and Newbury Racecourse plc.
In accordance with the Company’s Articles of Association and in compliance with the Combined Code Lord Jay and Nicholas Jones will seek election at the forthcoming Annual General Meeting and Antony Hichens and Chris Russell will retire and, being eligible, will offer themselves for re-election at the AGM. Jimmy West will retire at the AGM and will not seek re-election.
The biographical details of the serving directors and those seeking election or re-election appear in this section and, in the case of Nicholas Jones, in the board of directors section. Each of those seeking election or re-election has (or in the case of Nicholas Jones, whose appointment takes effect on 14th April, 2008 will have) a letter of appointment, the terms of which are described in the directors’ remuneration report.
Share capital structure
Note
18 to the accounts sets out details of the Company’s capital structure.
There are no shares in issue other than ordinary shares.
Notifiable interests in the Company’s shares
The names of those persons who, insofar as the Company is aware, are interested
directly or indirectly in 3% or more of the issued share capital of the
Company as at 17th March, 2008 are shown in note
18 to the accounts.
Directors’ interests
The statements in respect of directors’ interests in the share capital
of the Company are contained in note
18 to the accounts. Other matters requiring disclosure by the directors
are contained in the directors’
remuneration report.
Political and charitable donations
During the year the Company made donations of £21,000 to various charities
(2006: £5,800). In addition, Candover Partners Limited committed £125,000
to the Private Equity Foundation, as referred to in the corporate
responsibility section. There were no political donations made during
the year (2006: £nil).
Share buyback
Although authority to buy back the Company’s ordinary shares was granted
to the directors at the AGM in 2006 and 2007, there were no buybacks of
ordinary shares during the year. The authority granted in 2007 is limited
to 3,276,306 ordinary shares and will last until the AGM in 2008 or until
16th August, 2008, if earlier. The minimum price that the Company may
pay is 25.0p per share and the maximum price (excluding expenses) is 5%
over the average mid-market price of the ordinary shares of the Company
based on the London Stock Exchange Daily Official List for the five business
days immediately before the day on which the Company buys the ordinary
shares. Resolution 10 set out in the Notice of Meeting will be proposed
as a special resolution to renew this authority. The purchase of C preference
shares in May 2007 is described under ‘Return of cash’
in this section.
Annual General Meeting
The Annual General Meeting of the Company will be held on Wednesday 14th
May, 2008 at 12 noon at Founders’ Hall, 1 Cloth Fair, London EC1A 7HT.
Resolutions 4-7 concern the election or re-election of certain directors. Biographical details for those directors are given in the board of directors section. Each of the directors standing for re-election, namely Antony Hichens and Chris Russell, has demonstrated a strong commitment to Candover and the ability to bring a wide ranging and valuable set of skills, knowledge and experience to the Company and each such director has been the subject of an annual appraisal.
In addition to the ordinary business of the Annual General Meeting, the following special business will be put to shareholders:
Resolution 10, if passed, authorises the Company to purchase up to 3,276,306 of its ordinary shares. This authority will expire at the next Annual General Meeting of the Company, or on 14th August, 2009 if the next Annual General Meeting has not been held by then. This resolution also sets out the highest and lowest price at which the shares can be bought.
In the event that ordinary shares are purchased, they would either be cancelled (and the number of shares in issue reduced accordingly) or, subject to the Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 (S.I. 2003/1116) (the ‘Regulations’), be retained as treasury shares. The Regulations permit companies to hold shares repurchased as treasury shares with a view to possible re-sale at a future date rather than having to cancel them.
The Company would consider holding any of its own ordinary shares repurchased pursuant to the proposed resolution in treasury rather than cancelling them, subject to a maximum of 10% of the issued share capital immediately prior to such purchase. By holding its shares in treasury, the Company is afforded the ability to reissue treasury shares quickly and cost effectively, and gains additional flexibility in the management of its capital base. It should be noted that no dividends would be paid on shares while held in treasury, no voting rights would attach to them and the shares would be treated as if cancelled. The resolution follows the rules set down by the Companies Act 1985 and the UK Listing Authority.
The directors are committed to managing the Company’s capital efficiently and will keep under review the possibility of buying back the Company’s shares. However, they will only do this if they believe that it is in shareholders’ best interests.
There were 211,140 options outstanding at 17th March, 2008 to subscribe for ordinary shares, as set out in note 2 to the accounts. Those represent 0.97% of the issued share capital of the Company as at 17th March, 2008 and would represent 1.14% of such issued share capital if the full authority to buy back shares pursuant to resolution 10 was used.
Resolution 11 seeks shareholder approval to the change of the Company’s name from Candover Investments public limited company to Candover Investments plc. Shareholdings will be unaffected by this name change. Where ordinary shares are held in certificated form, existing share certificates will remain valid and new certificates will not be sent to existing shareholders.
Resolution 12 seeks shareholder approval to the adoption of new Articles of Association (the ‘New Articles’) in place of the Company’s current Articles of Association (the ‘Current Articles’). The New Articles will take account of changes in English company law and practice since the adoption of the Current Articles and in particular those changes brought about by the Companies Act 2006. The Company is also proposing further changes, effective on 1st October, 2008, concerning directors’ interests and conflicts.
The principal changes are summarised in the Appendix to the Notice of Annual General Meeting. Other changes, which are of a minor, technical or clarifying nature and also some more changes which merely reflect changes made automatically by the Companies Act 2006 have not been noted in the Appendix. The New Articles showing all the changes to the Current Articles are available for inspection, as noted in note 12 to the Notice of Annual General Meeting.
The directors consider the passing of the above resolutions to be in the best interests of the Company and its shareholders as a whole.
Supplier payment policy
The Company negotiates payment terms with its suppliers on an individual
basis, with the normal arrangements being within 14 to 30 days from receipt
of invoice. Trade creditor days of the Company for the year ended 31st
December, 2007 were 21 days based on the ratio of Company trade creditors
at the end of the year to the amounts invoiced during the year by trade
creditors.
ISA status
The Board has considered the ISA status of Candover’s shares and for the
time being considers that a decision to make Candover’s shares eligible
for inclusion in an ISA will impose constraints on the Company’s investment
criteria that will not be in the overall interests of shareholders.
Auditors
Grant Thornton UK LLP offer themselves for reappointment as auditors in
accordance with section 385 of the Companies Act 1985 and an appropriate
resolution will be put to the shareholders at the Annual General Meeting.
Tax status
The board of Her Majesty’s Revenue and Customs has approved the Company’s
status as an investment trust, under section 842 of the Income and Corporation
Taxes Act 1988, for the year ended 31st December, 2006. In the opinion
of the directors, the Company’s affairs since that date have been conducted
so as to enable it to continue to be treated as an investment trust.
Financial risk factors
The Group’s investment activities expose it to a variety of financial
risks: market risk (including currency risk, price risk and interest rate
risk), credit risk and liquidity risk. The Group’s overall risk management
programme focuses on the unpredictability of financial markets and seeks
to minimise potential adverse effects on the Group’s financial performance.
Further information on financial risk management is contained in note
24.
Rights attaching to shares
The rights attaching to the Company’s shares are set out in the Company’s
Articles of Association.
Subject to any restrictions referred to in the next section, members may attend any general meeting of the Company. Voting rights attaching to the ordinary shares are described in the next section.
Members can declare final dividends by passing an ordinary resolution but the amount of the dividends cannot exceed the amount recommended by the Board. The Board can pay interim dividends provided the distributable profits of the Company justify such payment. The Board may, if authorised by an ordinary resolution of the members, offer any member the right to elect to receive new shares, which will be credited as fully paid, instead of their cash dividend. Any dividend which has not been claimed for 12 years after it became due for payment will be forfeited and will then revert to the Company.
If the Company is wound up the liquidator can, with the sanction of the members, divide among the members all or any part of the assets of the Company and can value any assets and determine how the divisions shall be carried out as between the members or different classes of members. The liquidator can also transfer the whole or any part of the assets to trustees upon any trusts for the benefit of the members. No members can be compelled to accept any asset which would give them any liability.
There are no special control rights in relation to the Company’s shares.
Voting at general meetings
Subject to any restrictions below, on a show of hands every member who
is present at a general meeting has one vote on each resolution and, on
a poll, every member who is present has one vote on each resolution for
every share of which he is the registered member.
A resolution put to the vote of a general meeting is decided on a show of hands unless before or on the declaration of the result of the show of hands, a poll is demanded by the chairman of the meeting, or by at least two members present in person and having the right to vote, or by any members present in person having at least one tenth of the total voting rights of all members, or by any members present in person holding shares on which an aggregate sum has been paid up of at least one-tenth of the total sum paid up on all shares.
A member may vote personally or by proxy at a general meeting. Any form of proxy sent by the Company to members in relation to any general meeting must be delivered to the Company not less than 48 hours before the time appointed for holding the meeting or adjourned meeting at which the person named in the appointment proposes to vote. No instrument of proxy shall be valid after the expiration of 12 months from the date of its execution except at an adjourned meeting originally held within such 12 month period. A corporation which is a member of the Company may authorise such person as it thinks fit to act as its representative at any general meeting of the Company.
In the case of joint holders, the vote of the senior who tenders the vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders. For this purpose seniority shall be determined by the order in which the names stand in the register of members. No member shall be entitled to attend or vote either personally or by proxy at a general meeting in respect of any share if any call or other sum presently payable by him to the Company in respect of such share remains unpaid.
The Board may direct that a member shall not be entitled to attend or vote either personally or by proxy at a general meeting in respect of some or all of the shares held by him (the ‘Default Shares’) if he or any person with an interest in shares has been sent a notice under section 793 of the Companies Act 2006 (which confers upon public companies the power to require information with respect to interests in their voting shares) and he or any interested person fails to supply the Company with the information requested within 14 days after delivery of that notice. These restrictions end seven days after receipt by the Company of all the information required by the relevant section 793 notice.
Restrictions on the transfer of shares
The Board may refuse to register a transfer of a share which is not fully
paid. The Board may decline to recognise any instrument of transfer unless
(i) it is lodged, duly stamped (if stampable), at the registered office
of the Company or any other place decided by the Board, accompanied by
the certificate for the share to which it relates and such other evidence
as the Board may reasonably require to show the right of the transferor
to make the transfer (and if the instrument of transfer is executed by
some other person on behalf of the transferor, the authority of that person
to do so); and (ii) it is in respect of only one class of shares. The
Board may also refuse to register any transfer of a share in favour of
more than four transferees.
Transfers of uncertificated shares must be carried out using CREST and the Board can refuse to register a transfer of an uncertificated share in accordance with the regulations governing the operation of CREST.
The Board may decide to suspend the registration of transfers, for up to 30 days a year, by closing the register of members. The Board cannot suspend the registration of transfers of any uncertificated shares without gaining consent from CREST. The Board may direct that, subject to certain exceptions set out in the Articles of Association (a ‘Permitted Transfer’), no transfers of Default Shares (as defined in the section entitled ‘Voting at general meetings’ above) shall be permitted if the Default Shares represent at least 0.25% (in nominal value) of the issued shares of the relevant class (the ‘Transfer Restrictions’). The Transfer Restrictions end seven days after receipt by the Company of all information required by the relevant section 793 notice or, in the case of a Permitted Transfer, upon receipt by the Company of notice of such a transfer.
There are no other restrictions on the transfer of ordinary shares in the Company other than restrictions imposed from time to time by laws and regulations (e.g. insider trading laws) or pursuant to the Listing Rules of the Financial Services Authority (whereby certain employees of the Company require the approval of the Company to deal in ordinary shares).
Employee share schemes
Shares in the Company may be held, from time to time, by the trustee of
the Candover Investments SMP Trust (the ‘SMP Trust’) established in connection
with the share matching plan referred to in the directors’
remuneration report, which is an employees’ share scheme. The
trustee of the SMP Trust may not vote shares that are held in the trust.
As at 31st December, 2007 no shares were held by the trustee of the SMP
Trust.
Additional information
No agreements between the holders of securities are known to the Company
which may result in restrictions on the transfer of securities or on voting
rights.
There are no significant agreements to which the Company is a party that take effect, alter or terminate upon a change of control of the Company following a takeover bid, other than (i) certain financing agreements, under which borrowings may become prepayable and (ii) in relation to the employee share schemes referred to in the directors’ remuneration report. Awards and options under those schemes will vest or become exercisable upon or shortly after a change of control, although the number of shares comprised within those awards or options may be reduced.
There are no agreements between the Company and its directors or employees providing for compensation for loss of office or employment that occurs because of a takeover bid.
The Company’s Articles of Association provide that each director will seek re-election at the Annual General Meeting at least every three years. Additionally, new directors may be appointed by the Board but are subject to election by members at the first opportunity after their appointment. The Articles of Association limit the number of directors to not less than two and not more than 12 save where members decide otherwise. Members may remove any director (subject to the giving of special notice) and, if desired, replace such removed director by ordinary resolution.
The Articles of Association of the Company may be amended by special resolution. Resolution 12 set out in the Notice of Annual General Meeting will be proposed as a special resolution seeking shareholder approval to the adoption of new Articles of Association. There are no conditions contained in the memorandum in relation to the alteration of the Articles of Association of the Company.
By order of the Board
Andrew Moberly
Company Secretary
20 Old Bailey
London EC4M 7LN
31st March, 2008