SVG spanks benchmark, but profits tumble

Private equity investor SVG Capital boasted of strong returns in uncertain markets in the first half of 2012, as it comfortably outpaced gains on its benchmark index.

The group saw a 12.3% increase in net assets per share to 378.5p (excluding SVG Advisers and SVG Investment Managers), showing a clean pair of heels to the FTSE All-Share Total Return index, which rose 3.35 over the same period.

The investment portfolio saw a total return of 9.8% over the six month period, with the stakes in fashion firm Hugo Boss and casino operator Galaxy Entertainment the top performers.

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"The majority of companies in the portfolio continue to demonstrate resilient earnings growth. We remain mindful of the uncertainty in the macroeconomic environment and the impact this may have on our portfolio companies. However, we feel positive that our exposure to an underlying portfolio of high quality assets and the progress we are making on our strategy will continue to deliver value for our shareholders over the shorter and longer term," said Lynn Fordham, Chief Executive Officer of SVG Capital.

Gains on investments (at fair value) in the first half of 2012 totalled £114.2m, versus gains of £270.1m in the first half of 2011.

Distributions in the first half were described as "muted" by Fordham at £38.6m. The company paid out £22.2m in cash calls in the period, giving a net cash inflow from the investment portfolio of £16.4m.

The most notable call was for £19.5m to the Permira IV fund, largely to pay for a follow-on investment into Arysta LifeScience, whilst distributions included £10.9m from a partial realisation of the investment in TDC and £5.4m from the Japan Fund IV.

Profit before tax more than halved to £104.6m from £246.7m the year before. Diluted earnings per share tumbled to 35.8p from 78.3p the year before.

At 30th June 2012, funds under management or advice stood at €3.7bn, in-line with December 2011.

Uncertainty in the wider economic environment had made it harder for private equity investors to cash in on their investments, admitted Chairman Nicholas Ferguson, who will be stepping down from the role once a successor has been found.

As a result of share repurchases, the group's cash position fell from £121.0m at the end of 2011 to £33.1m at June 30th, 2012. Other cash outflows in the period include £13.4m of finance costs and £7.4m of Senior Note buy-backs.

"We anticipate conditions to remain challenging while uncertainty prevails, yet feel confident we have exposure to an underlying portfolio of quality businesses with global reach, which continue to grow resiliently," Ferguson said.

JH