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Half-year Report

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RNS Number : 4327Q
Oakley Capital Investments Limited
12 September 2017
 

12 September 2017

 

Oakley Capital Investments Limited

Interim results for the six months ended 30 June 2017

 

 

CONTINUED FUND PERFORMANCE AND A HIGH LEVEL OF INVESTMENT ACTIVITY

 

Oakley Capital Investments Limited1 (AIM:OCI, the "Company"), which provides investors with access to the investment strategy pursued by the Oakley Funds2, today announces its interim results for the six months ended 30 June 2017.

 

FINANCIAL HIGHLIGHTS

 

·      NAV of £472.6 million, an 8% increase in the six months since 31 December 2016.

·      NAV per share of £2.31, flat since 31 December 2016, impacted by final treasury share sale.

·      A 2017 interim dividend of 2.25 pence per share will be paid on 26 October 2017 to shareholders on the register on 6 October.

 

PORTFOLIO HIGHLIGHTS

 

·      PERFORMANCE - the fair value of the underlying portfolio companies grew by a further 11% in the period, driven by strong sales and EBITDA growth.

·      INVESTMENTS - five investments have been completed year to date, all within the newly raised Fund III. In the period Casa/atHome, Plesk and TechInsights were acquired, leveraging Oakley's experience and success in the Digital Consumer and TMT subsectors. Two subsequent deals post period have been completed in the Education sector with the acquisition of Schülerhilfe and AMOS, a platform deal for a roll-up in the higher education sector. The investment cost at acquisition of these transactions attributable to OCI is £115.4 million.

·      REALISATIONS - Host Europe Group was realised in April 2017 at a 48% premium to its carried value, with OCI receiving proceeds of £12.0 million.

·      CO-INVESTMENT - after the period TA Associates made a significant strategic investment into Inspired, previously referred to as Educas. Fund I took the opportunity to exit its holding as it reaches the end of its life. OCI rolled it's Fund I exposure into a direct interest in Inspired and as a result of the transactions received net cash proceeds of €10.3 million. OCI's interest in Inspired, through both its co-investment and exposure to Fund II was valued at approximately €72 million in July 2017.

 

Please refer to the Company's website for the full results http://oakleycapitalinvestments.com/investor-relations/publications

 

Peter Dubens, Managing Partner, Oakley Capital Limited:

 

"2017 has continued where 2016 left off. Double digit sales and profit growth continue to drive fund performance, which grew by 11% in the period. We retain our ability to generate high quality opportunities investing €277 million in five transactions so far this year. I'm also pleased to welcome new partner Ralf Schremper to our growing senior investment team."

 

Christopher Wetherhill, Chairman, Oakley Capital Investments Limited:

 

"A strong performance from the Oakley fund portfolio companies drove an 8% increase in the company's net asset value. This growth was offset by January's dilutive treasury share sale and we have subsequently made clear our future intentions not to issue equity at a discount.

 

There has been an encouraging level of investment activity year to date at attractive prices, proving the manager's unique deal generation capabilities and reducing the impact of cash drag on OCI's future performance."

 

 

 

For further information please contact:

 

Oakley Capital Investments Limited

+44 20 7766 6900

Peter Dubens, Director

Steven Tredget, Investor Relations

 

FTI Consulting LLP

+44 20 3727 1000

Edward Bridges / Stephanie Ellis

 

Liberum Capital Limited (Nominated Adviser & Broker)

+44 20 3100 2000

Steve Pearce / Henry Freeman / Jill Li

 

 

 

1About Oakley Capital Investments Limited ("OCI")

Oakley Capital Investments Limited is a Bermudian company listed on AIM. OCI seeks to provide investors with long term capital appreciation through its investment in Oakley Capital Private Equity L.P., Oakley Capital Private Equity II, Oakley Capital Private Equity III and through co-investment opportunities.

 

2About Oakley Capital Private Equity L.P. ("Fund I"), Oakley Capital Private Equity II ("Fund II") and Oakley Capital Private Equity III ("Fund III")

Oakley Capital Private Equity L.P. and its successor funds, Oakley Capital Private Equity II and Oakley Capital Private Equity III, are unlisted mid-market private equity funds with the aim of providing investors with significant long term capital appreciation. The investment strategy of the funds is to focus on buy-out opportunities in industries with the potential for growth, consolidation and performance improvement.

 

 

 

Chairman's Statement

 

Overview

 

I am pleased to report that the six months ending 30 June 2017 has been a period of progress for the Company. The underlying portfolio companies have continued to perform strongly, with an 11% increase in fair value from 31 December 2016 on a like-for-like basis. This, however, was offset by the dilution from the treasury share sale, giving rise to an unchanged NAV per share of £2.31.

 

During the first half of 2017, Oakley Fund III completed three acquisitions with invested cost totalling €174.1 million: €104.3 million for Casa/atHome, this is after refinancing of €32.0 million: €25.2 million for Plesk: and €44.6 million for TechInsights. Post period end, two further acquisitions were completed: in July 2017, Schülerhilfe, with an invested cost of €85.9 million, and in August 2017, AMOS, with an invested cost of €16.9 million. The Oakley Fund III investments follow on from Oakley's previous success in the TMT and education sectors, as well as building on experience and expertise in online marketing-led businesses.

 

In January 2017, the Company sold 15 million treasury shares for consideration of £23.3 million. The Company subsequently cancelled the remaining 2.1 million shares still held in treasury bringing the balance of treasury shares to nil. The Board is now of the view that the Company will not in future sell stock from treasury or issue new shares at discounts to NAV.

 

In April 2017, the sale of Host Europe Group was completed, returning proceeds of €42.3 million (£36.2 million) to Oakley Fund II, representing a gross money multiple of 2.1x and gross IRR of 40%. The Company received proceeds of €14.6 million (£12.0 million) from this transaction.

 

In June 2017, the Company acquired the majority of Oakley Fund I's stake in Inspired (previously referred to as Educas), a global group of premium private schools. The Board will continue its investment in the development and expansion of the business.

 

Funding and commitments

 

Since 31 December 2016, the Company has invested a further €102.9 million (£89.9 million) in the Oakley Funds. During the period, a further €14.1 million (£12.3 million) was called by Oakley Fund I, €14.0 million (£12.3 million) was called by Oakley Fund II and €74.8 million (£65.3 million) was called by Oakley Fund III.

 

Oakley Fund I is now fully invested with just one investment in Time Out remaining. Oakley Fund II is also essentially fully invested with seven investments remaining, and Oakley Fund III is in its investment phase.

 

Performance

 

The NAV per share as at 30 June 2017 was unchanged from 31 December 2016, at £2.31.

 

Oakley Fund II's underlying portfolio has continued to perform well over the first half of the year, resulting in uplifts in fair values across a number of investments. In particular, Daisy's fair value increased due to the synergies from the integration of Alternative Networks, a UK based IT and telecoms provider, Parship Elite Group continues to see significant growth in its business and Facile's performance is strong in a buoyant market, which is reflected in the uplift in their fair values over the first half of the year.

 

Oakley Fund I realised its holding in the international schools group, Inspired, with OCI acquiring the majority of the stake in June 2017. The investment is held in the Company's accounts at a fair value of £57.0 million at period end and forms part of the Company's co-investment portfolio.

 

Three new acquisitions were made by Oakley Fund III during the period with a total invested cost for OCI of €81.8 million (£72.7 million). Detailed descriptions of these new investments are provided later in the report.

 

The Board

 

The Company held its AGM on 14 June 2017 and I am pleased to report that all ordinary resolutions put to shareholders were duly passed. A special resolution, proposed by the Company at the time of its IPO, allowed shareholders to vote on the continuation of the Company as constituted. The shareholder vote overwhelmingly supported the Company's continuation.

 

Outlook

 

The Company has performed well in this unpredictable and uncertain market, demonstrated by the performance of the underlying portfolio companies to date. The portfolio has remained resilient to the current challenging macroeconomic and geopolitical markets.

 

Looking to the second half of 2017 where macroeconomic and geopolitical uncertainty is likely to continue, I believe the Company is in a position to deliver meaningful growth to investors through its commitment to the Oakley Funds given the positivity and prospects of the underlying portfolio companies.

 

Post balance sheet events

 

Oakley Fund III completed two further acquisitions following the period end. In July 2017, it purchased the business and operations of ZGS Verwaltungs GmbH ("Schülerhilfe"), a leading provider of after school tutoring to primary and secondary school students in Germany and Austria. In August 2017, it completed the acquisition of AMOS Sport Business School, the leading sport business school in France with seven sites, six in France and one in London, as a cornerstone investment for a roll-up in the higher education space. These acquisitions fit with Oakley's model of partnering with exceptional entrepreneurs and build on Oakley's experience of investing in the education sector.

 

In July 2017, Inspired received a significant strategic growth investment from TA Associates, a leading global growth private equity firm. In order to facilitate TA Associates' entry into the capital structure, OCI and Oakley Fund II agreed to sell down part of their respective holdings.

 

In August 2017, Oakley Fund III added new subscribers, increasing its total commitments and thereby diluting the Company's current interest in Oakley Fund III from 47.0% to 42.6%.

 

 

 

Christopher Wetherhill

Chairman

11 September 2017

 

 

 

Market Overview and Outlook

 

After many years of weak global recovery, 2017 has brought signs of improvement. Trade and manufacturing output growth have picked up, helped by firmer domestic demand growth in Asia and Europe, and private sector confidence has strengthened. Policy uncertainty remains high however, trust in government has diminished and wage growth is still weak.

 

Despite this backdrop, private equity continues to make strong returns, sustaining its outperformance of other asset classes over 3, 5, 10, and 20 years. Three year returns stand at 9.8%1, topping Real Estate, Infrastructure, Hedge Funds and the MSCI World Index.

 

No surprise therefore that private equity fundraising is at its highest level since the year's pre financial crisis, with 2017 set to eclipse 2016 for private market fundraising. These inflows have led to a ten year high in the total value of private equity investments with €42.9 billion2 invested in European companies in Q2 2017. This demand has contributed to prices reaching record highs with average enterprise valuation multiple paid by a buyout firm for a European company reaching 11.6x2 EBITDA, exceeding the previous 2016 high of 10x.

 

Oakley has remained disciplined in its approach to investing. The Investment Adviser's strategy of pursuing entrepreneur led, non-competitive, proprietary deals has been advantageous to Oakley. Reliance is not on the intermediated market to source deals, rather its strong founder/manager relationships, wide network and reputation for sector expertise. Oakley continues to enjoy a strong pipeline from its relationship led sourcing model and has already made five new investments since the start of the year, at an average EV/ EBITDA entry of 10.4x in contrast to a comparable average sector multiple of 13.3x.

 

The exit environment is showing strength across all routes with private equity year to date sales up nearly 30% in value compared with H1 20163.

 

Oakley believes that the business models of its portfolio companies are generally resilient to macroeconomic trends and cyclicality. Investments are made in niches within sectors that demonstrate high growth dynamics and fragmented participation. The portfolio continues to broaden its Western European footprint with a shift from the highly intermediated UK market to a greater focus on the DACH region (German/Austrian/Swiss markets) where Oakley has a strong track record.

 

Looking to the second half of 2017 where geopolitical and economic uncertainty is likely to remain. Whilst macroeconomic factors are unpredictable, the Investment Adviser remains focussed on maximising the value of the current portfolio and continuing to deliver meaningful growth across the underlying companies, whilst identifying high quality investments to deliver attractive long term returns.

 

 

1   Source: Burgiss Q4 2016 Benchmarks

2   Source: Fitch Ratings

3   According to EY's Private Equity Capital Briefing (June 2017)

 

 

 

OCI NAV Overview

 

During the period, the NAV increased by £34.2 million to £472.6 million, an increase of 8% since 31 December 2016.

 

Movement in Net Asset Value

 


31 Dec 2016

£m

30 Jun 2017

£m

Opening Net Asset Value

at start of period

382.2

438.4

Gross revenue

11.7

4.8

Other expenditure

(4.5)

(4.1)

Net foreign currency

gains/(losses)

4.7

2.0

Realised gain on investments

8.5

6.2

Net change in unrealised appreciation/(depreciation) on investments

46.2

2.0

Treasury shares bought

(1.9)

-

Treasury shares sold

-

23.3

Dividend

(8.5)

-

Closing Net Asset Value

at end of period

438.4

472.6

Number of shares in issue

189.8

204.8

NAV per share

£2.31

£2.31

 

Net earnings were £10.9 million for the period, comprising:

·      Gross revenue of £4.8 million from interest income earned on the debt facilities provided to portfolio companies and the Funds.

·      Net other expenditure of £2.1 million, consisting of £4.1 million of expenses during the period partly offset by £2.0 million gains arising from the weakening of Sterling against the Euro.

·      Realised gains of £6.2 million and net change in unrealised gain of £2.0 million, driven predominantly by the uplift in the valuations of the underlying portfolio companies in the Oakley Funds.

 

£23.3 million was received by the Company from the sale of the treasury shares in January. The Company now holds no treasury shares and does not intend to issue equity or sell stock from treasury at a discount to NAV going forward.

 

 

 

 

OCI Investment Activity

 

The six month transactional activity for the Company's investment portfolio is summarised below:

 

Investment

31 Dec 2016

Fair value

£m

30 Jun 2017

Fair value

£m

Investment in Oakley Funds

211.3

263.3


211.3

263.3

Co-Investments



Co-Investment Fund *

-

57.0

Equity securities

43.9

42.3

Debt securities

85.8

88.8


129.6

188.1

Total Investments

340.9

451.4

 

The following pages explain movements in the underlying portfolios and their respective investments.

 

* Being OCPE Education (Feeder) L.P., a newly established limited partnership whose Limited Partners comprise of OCI and a small number of Oakley Fund I Limited Partners who rolled their Oakley Fund I interests. This entity holds the investment in Inspired.

 

 

 

Overview of OCI's underlying investments

 

Fund

Investments

Sector

Location

Year of Investment

Residual cost £m

Fair
value £m

Fund I

Time Out

Consumer

Global

2010

44.9

38.5

OCI's proportionate allocation of Fund I investments (on a look through basis)

38.5

Other assets and liabilities

(0.3)

OCI's investment in Oakley Fund I

38.3








Fund II

North Sails

Consumer

Global

2014

30.5

34.0

Fund II

Inspired

Education

Global

2014

25.3

36.1

Fund II

Facile

Consumer

Italy

2014

13.5

45.4

Fund II

Damovo

TMT

Germany

2015

3.1

7.8

Fund II

Parship Elite Group

Consumer

Germany

2015

0.0

29.9

Fund II

Daisy

Consumer

UK

2015

10.8

16.8

Fund II

Verivox

Consumer

Germany

2015

6.0

11.0

OCI's proportionate allocation of Fund II investments (on a look through basis)

180.9

Other assets and liabilities

(17.3)

OCI's investment in Oakley Fund II

163.5








Fund III

Casa/atHome

Consumer

Germany

2017

43.0

43.0

Fund III

Plesk

TMT

Switzerland

2017

10.9

9.9

Fund III

TechInsights

Business Services

Canada

2017

18.8

18.0

OCI's proportionate allocation of Fund III investments (on a look through basis)

71.0

Other assets and liabilities

(9.4)

OCI's investment in Oakley Fund III

61.6








Co-Investment

Inspired

Education

Global

2017

39.2

57.0

Co-Investment

Daisy

Consumer

UK

2015

28.2

33.5

Co-Investment

North Sails

Consumer

Global

2014

22.0

25.6

Co-Investment

Time Out

Consumer

Global

2010

47.2

42.3

Co-Investment

Fund Facilities

n/a

n/a


n/a

29.6

Total Co-Investments

188.1

Total OCI Investments

451.4

 

The OCI look-through values are calculated using the OCI attributable proportion (determined as the ratio which OCI's commitments to the respective Fund bear to total commitments to that Fund) applied to each investment's fair value as held in the relevant Oakley Fund, net of any accrued performance fees relating to that investment, and converted using the period end EUR:GBP exchange rate.

 

 

 

Outstanding Commitments of OCI

 

The period ended with liquid resources of £71.8 million supported by the capacity to obtain debt of up to a maximum amount of 25% of the Company's NAV (this would amount to £118.1 million at the period end).

 

Outstanding commitments as at 30 June 2017 were £242.5 million as shown below. Oakley anticipates the majority of these outstanding commitments to be drawn over the next 24 months, as Fund III continues to deploy capital. A total of 26% has been called to date from Fund III Limited Partners, which together with the €114.5 million borrowed under a capital call facility have been used to fund the acquisitions.

 

The table below illustrates the Company's outstanding commitments to the Oakley Funds, and their respective percentage of the June NAV. It is anticipated that outstanding commitments are likely to be partly financed by future cash flows from portfolio realisations.

 

Fund

Fund vintage

Original commitment (€m)

Outstanding at
30 Jun 2017

(€m)

Outstanding at
30 Jun 2017

(£m)

%

of NAV

Fund I

2007

188.4

2.6

2.3

0

Fund II

2013

200.0

33.0

29.0

6

Fund III

2016

325.0

240.5

211.2

45




276.1

242.5

51

Cash and cash equivalents

71.8


Net outstanding commitments unfunded by cash resources

170.7

36

Maximum allowable external debt

118.1


Net outstanding commitments unfunded by liquid resources and external debt

52.7

 

 

 

Portfolio Review: Oakley Fund I Investment Activity

 

The investment portfolio of Oakley Fund I is summarised in the table below. Oakley Fund I is denominated in Euros, and the period-end exchange rate was used, where applicable. The Company holds a 65.5% stake in Oakley Fund I.

 

OAKLEY FUND I

31 Dec 2016

Fair value

€m

30 Jun 2017

Fair value

€m

Inspired

64.3

-

Time Out

60.5

67.0

Other

0.7

0.7

Total current investments

125.5

67.6

 

Realisations during 2017:

Proceeds

Realised gain

Inspired

69.7

46.6

Total realisations

69.7

46.6

 

There was an overall decrease of €57.9 million in the fair value of Oakley Fund I's portfolio during the period. This is due to the realisation of Fund I's holding in Inspired.

 

In June 2017, with Oakley Fund I approaching the end of its life-cycle, it has taken the opportunity to exit its holding in Inspired. Oakley Fund I offered Limited Partners the option of either a cash or share distribution. OCI and a small number of other Limited Partners retained the majority of their interests in order to benefit from the next phase of growth of Inspired by purchasing Oakley Fund I's interest in OCPE Education L.P. Oakley Fund I received proceeds of €69.7 million for the sale of their stake in Inspired.

 

Time Out is a listed company and its fair value is determined by a mark-to-market valuation, based on the 30 June 2017 share price of £1.35. Time Out released its trading update for the first half of the year reporting that revenue is expected to increase year on year with Time Out Digital revenue showing strong growth. E-commerce and Time Out Markets are also performing well. During the period, Oakley Fund I injected a further €9.8 million into Time Out (Bermuda) Limited in order to repay the outstanding OCI mezzanine loan.

 

As at 30 June 2017, Oakley Fund I had called €198.8 million (£174.6 million) from the Company, including recycling of €13.0 million (£11.4 million).

 

 

 

Portfolio Review: Oakley Fund II Investment Activity

 

The investment portfolio of Oakley Fund II is summarised in the table below. Oakley Fund II is denominated in Euros, and the period-end exchange rate was used, where applicable. The Company holds a 38.1% stake in Oakley Fund II.

 

OAKLEY FUND II

31 Dec 2016

Fair value

€m

30 Jun 2017

Fair value

€m

Facile

137.0

155.3

Inspired

109.8

114.0

North Sails

101.9

102.3

Parship Elite Group

84.4

108.5

Host Europe Group

41.4

0.0

Daisy

33.9

53.0

Verivox

32.0

35.2

Damovo

18.4

26.0

Total investments

558.8

594.3

 

Realisations during 2017:

Proceeds

Realised gain

Host Europe Group

42.3

22.3

Total realisations

42.3

22.3

 

During the period, there was an overall increase of €35.5 million in the fair value of Oakley Fund II's portfolio companies. This increase is net of the realisation of Host Europe Group, which completed in April 2017, and returned proceeds of €42.3 million to Oakley Fund II, representing a gross money multiple of 2.1x and gross IRR of 40% to Oakley Fund II. OCI received proceeds of €14.6 million (£12.0 million) from this transaction.

 

The fair value uplift is primarily attributable to the strong performances from Facile and Parship Elite Group which drove the valuation uplifts at 30 June 2017. Also, Daisy's valuation now factors in the synergies being realised following the acquisition and integration of Alternative Networks, a UK based IT and telecoms provider.

 

There was further capital of €12.8 million invested by Oakley Fund II during the period; €10.3 million in North Sails to fund the development of North Sails Apparel, and €2.5 million in Inspired to facilitate the acquisition of two more schools.

 

As at 30 June 2017, Oakley Fund II had called €167.0 million (£146.7 million) from the Company, representing 83.5% of its total capital commitment.

 

 

 

Portfolio Review: Oakley Fund III Investment Activity

 

The investment portfolio of Oakley Fund III is summarised in the table below. Oakley Fund III is denominated in Euros, and the period-end exchange rate was used, where applicable. The Company held a 47.0% stake in Oakley Fund III at 30 June 2017.

 

OAKLEY FUND III

31 Dec 2016

Fair value

€m

30 Jun 2017

Fair value

€m

Casa/atHome

-

104.3

Plesk

-

24.1

TechInsights

-

43.6

Total investments

-

172.0

 

Oakley Fund III has had a very active start to 2017 with the completion of three transactions investing capital of €104.3 million in Casa/atHome, net of refinancing of €32.0 million, €25.2 million in Plesk and €44.6 million in TechInsights. These three new investments have been held at cost for the period to 30 June 2017, with only translation differences being reflected in the fair value at the period end. These investments build on Oakley's experience and success in the TMT and Digital Consumer subsectors. Oakley's investment strategy remains focused on actively seeking new investments where it can leverage its sector expertise and detailed knowledge base, building strong relationships with founders and management, and believes that it is well positioned to identify opportunities that can deliver long term capital appreciation to investors.

 

Following the period end, two further acquisitions have since been completed by Oakley Fund III. In July, Schülerhilfe was acquired with Oakley Fund III investing capital of €85.9 million, and in August, AMOS Sport Business School was acquired as the first investment in a higher education roll-up planned with our Operating Partner in Inspired, with Oakley Fund III investing capital of €16.9 million.

 

In August 2017, total commitments to Oakley Fund III increased from €691.4 million to €763.6 million. As a result, the Company's interest in Oakley Fund III has been diluted from 47.0% to 42.6%.

 

In August 2017, the acquisition cost of TechInsights was re-financed, with a net distribution paid to Limited Partners of €32.0 million. The Company received €13.6 million (£12.6 million) from this transaction. Therefore, Oakley Fund III's invested cost in TechInsights is €11.9 million, post refinancing.

 

As at 30 June 2017, Oakley Fund III had called €84.5 million (£74.2 million) from the Company, representing 26% of the Company's total capital commitment.

 

 

 

Portfolio Review: Co-Investment Activity

 

The co-investment portfolio as at 30 June 2017 is summarised in the table below:

 

Co-Investments:

31 Dec 2016

Fair value

£m

30 Jun 2017

Fair value

£m

Co-Investment Fund



OCPE Education (Feeder) LP

-

57.0

Equity Securities



Time Out

43.9

42.3

Debt Securities



Time Out

9.5

-

North Sails

22.0

25.6

Daisy

31.6

33.6

Fund Facilities

22.6

29.6

Total Investments

129.6

188.1

 

Co-Investment Fund

 

In November 2016, the interests held by both Oakley Fund I and Oakley Fund II in Inspired were restructured into a new holding entity, OCPE Education L.P. ("OCPEE LP"). At December 2016, the Company held an indirect interest in Inspired through both Oakley Fund I and Fund II's respective interest in OCPEE L.P. This entity at 30 June 2017 held a 50.49% interest in Educas LP Inc, which in turn owned 72.1% of Inspired Education Holdings Limited.

 

Inspired has grown rapidly both through acquisition and greenfield development since Oakley Fund I's first investment in July 2013. Having built up its pipeline, reputation in the market and its integration and M&A capabilities over recent years, Inspired is expected to continue its expansion in the short to medium term through further acquisitions. With Oakley Fund I well into its realisation phase it is not in a position to continue to participate in Inspired's expansion. In view of future growth prospects for Inspired, the Board offered to acquire Oakley Fund I's interest in OCPEE L.P.

 

The Company acquired 99.2% of Oakley Fund I's stake in Inspired, with the remaining 0.8% being held by a small number of Oakley Fund I Limited Partners who rolled their interests. A new vehicle was set up to hold this investment, OCPE Education (Feeder) L.P. Together with its interest through Oakley Fund II, the Company held an indirect 22.4% stake in Inspired at 30 June 2017.

 

Following the period end, Inspired received a significant strategic growth investment from TA Associates, a leading global growth private equity firm. In order to facilitate TA Associates' entry into the capital structure, OCPEE LP agreed to sell-down part of its holding in Inspired. The addition of such a high quality investor to Inspired's shareholder base, and the new investment being made by TA Associates in growth funding, should underpin Inspired's ambitious plans.

 

After dilution by TA Associates, OCPEE LP holds an indirect interest of 22.3% in Inspired. The Company received net cash proceeds of €10.3 million from the acquisition of the Oakley Fund I interest and TA Associates transaction.

 

Equity and debt securities

 

Time Out is a listed company and its fair value is determined by a mark-to-market valuation, based on the 30 June 2017 share price of £1.35. The half year trading update for Time Out is positive and has demonstrated further progress with regards to the Group's digital strategy. Revenue growth, in particular the digital and e-commerce revenue have grown 25% and 51% year on year respectively.

 

The Company provides debt facilities to certain underlying portfolio companies, and to Oakley Funds. These debt facilities are provided on an arm's length basis with competitive market interest rates. The interest income generated from these facilities exceeds the interest earned on the Company's bank deposits, allowing the Company to earn higher returns on part of its cash reserves. During the period to 30 June 2017, the Company has earned £4.5 million interest from the debt facilities provided.

 

During the period, a new debt facility of £2.3 million was provided to North Sails. This loan was used to fund the acquisition of Hall Spars, a rigging company and competitor to Southern Spars, a division of North Sails.

 

Also, during the period, the loan provided by the Company as part of the acquisition of Oakley Fund I's interest in Time Out in 2015, was repaid, providing proceeds to the Company of £9.8 million, including accrued interest.

 

The Company also provides revolving credit facilities to the Oakley Funds. Each drawing under these facilities is for no more than one year. The loans are used to fund short-term cash requirements. As at 30 June 2017, the Company had outstanding debt facilities of £29.6 million to the Oakley Funds, including accrued interest.

 

 

 

Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2017

 


Notes

Unaudited

six months

ended

30 Jun 2017

£'000

Unaudited

six months

ended

30 Jun 2016

£'000

Income




Interest income


4,544

7,144

Net realised gains/(losses) on investments at fair value through profit and loss

6

6,168

(858)

Net change in unrealised gains/(losses) on investments at fair value through profit and loss

6

1,999

17,832

Net foreign currency gains/(losses)


1,965

6,568

Other income


246

100

Total income


14,922

30,786

Expenses

9

(4,008)

(3,615)





Operating profit


10,914

27,171

Finance cost


(30)

-

Profit attributable to equity shareholders/ total comprehensive income


10,884

27,171





Earnings per share




Basic and diluted earnings per share

12

0.05

0.14

 

 

 

Consolidated Balance Sheet

for the six months ended 30 June 2017

 


Notes

Unaudited

six months

ended

30 Jun 2017

£'000

Audited

year ended

31 Dec 2016

£'000

Unaudited

six months

ended

30 Jun 2016

£'000

Assets





Non-current assets





Investments

6, 7

451,394

340,869

328,829



451,394

340,869

328,829






Current assets





Trade and other receivables


743

673

114

Cash and cash equivalents


71,767

106,509

80,941



72,510

107,182

81,055

Total assets


523,904

448,051

409,884






Liabilities





Current liabilities





Trade and other payables


51,297

9,619

2,417

Total liabilities


51,297

9,619

2,417






Net assets attributable to shareholders


472,607

438,432

407,467






Equity





Share capital

14

2,048

2,069

2,069

Share premium

14

244,533

246,245

246,245

Treasury shares

14

-

(25,024)

(25,024)

Retained earnings


226,026

215,142

184,177

Total shareholders' equity


472,607

438,432

407,467






Net asset per ordinary share





Basic and diluted net assets per share

13

£2.31

£2.31

£2.15

Ordinary shares in issue


204,804

189,804

189,804

 

 

 

Consolidated Statement of Changes in Equity

for the six months ended 30 June 2017

 


Share

capital

£'000

Share

premium

£'000

Treasury

shares

£'000

Retained

earnings

£'000

Total

shareholders'

equity

£'000

For the six months ended 30 June 2017






Balance at 1 January 2017

2,069

246,245

(25,024)

215,142

438,432

Profit for the period/ total

comprehensive income

-

-

-

10,884

10,884







Ordinary shares issued

-

-

-

-

-

Purchase of treasury shares

-

-

-

-

-

Sale of treasury shares

-

(259)

23,550

-

23,291

Cancellation of treasury shares

(21)

(1,453)

1,474

-

-

Dividends

-

-

-

-

-

Total transactions with equity shareholders

(21)

(1,712)

25,024

-

23,291

Balance at 30 June 2017

2,048

244,533

-

226,026

472,607







For the six months ended 30 June 2016






Balance at 1 January 2016

2,069

246,245

(23,170)

157,006

382,150

Profit for the period/ total

comprehensive income

-

-

-

27,171

27,171







Ordinary shares issued

-

-

-

-

-

Purchase of treasury shares

-

-

(1,854)

-

(1,854)

Sale of treasury shares

-

-

-

-

-

Dividends

-

-

-

-

-

Total transactions with equity shareholders

-

-

(1,854)

-

(1,854)

Balance at 30 June 2016

2,069

246,245

(25,024)

184,177

407,467

 

 

 

Consolidated Statement of Cash Flows

for the six months ended 30 June 2017

 


Notes

Unaudited

six months

ended

30 Jun 2017

£'000

Unaudited

six months

ended

30 Jun 2016

£'000

Cash flows from operating activities




Purchases of investments


(103,888)

(88,141)

Sales of investments


51,016

56,464

Interest income received


4,548

14,185

Expenses paid


(3,350)

(1,901)

Finance cost paid


(30)

-

Other income received


246

100

Net cash provided by/(used in) operating activities


(51,458)

(19,293)





Cash flows from financing activities




Proceeds from issue of ordinary shares

14

-

-

Proceeds from treasury shares sold

14

23,291

-

Payment for treasury shares purchased

14

-

(1,854)

Dividends paid


(8,540)

-

Net cash provided by/(used in) financing activities


14,751

(1,854)

Net increase in cash and cash equivalents


(36,707)

(21,147)

Cash and cash equivalents at beginning of the period


106,509

95,520

Effect of foreign exchange rate changes


1,965

6,568

Cash and cash equivalents at end of the period


71,767

80,941

 

 

 

Notes to the Consolidated Interim Financial Statements

for the six months ended 30 June 2017

 

 

1. Reporting entity

 

Oakley Capital Investments Limited (the "Company") is a closed-end investment company incorporated under the laws of Bermuda on 28 June 2007. The principal objective of the Company is to achieve capital appreciation through investments in a diversified portfolio of private mid-market businesses, primarily in the UK and Europe. The Company currently achieves its investment objective primarily through its investments in the following four private equity funds (the "Funds"): Oakley Capital Private Equity L.P. ("Fund I"), Oakley Capital Private Equity II-A L.P., which together with Oakley Capital Private Equity II-B L.P., Oakley Capital Private Equity II-C L.P. (collectively the "Fund II Feeder Funds") and OCPE II Master L.P. (the "Fund II Master") collectively comprise "Fund II", Oakley Capital Private Equity III-A L.P., which together with Oakley Capital Private Equity III-B L.P., Oakley Capital Private Equity III-C L.P. (collectively the "Fund III Feeder Funds") and OCPE III Master L.P. (the "Fund III Master") collectively comprise "Fund III" and OCPE Education (Feeder) L.P., which together with OCPE Education L.P. collectively comprise "OCPE Education". All constituent limited partnerships comprising the Funds are exempted limited partnerships established in Bermuda.

 

The defined term "Company" shall, where the context requires for the purposes of consolidation, include the Company's sole and wholly owned subsidiary, OCIL Financing (Bermuda) Limited ("OCI Financing").

 

The Company listed on the AIM market of the London Stock Exchange on 3 August 2007, with "OCI" as its listed ticker.

 

 

2. Basis of preparation

 

The condensed consolidated interim financial statements of the Company have been prepared on a going concern basis and under the historical cost convention, except for financial instruments at fair value through profit and loss, which are measured at fair value.

 

2.1 Basis for compliance

 

The condensed consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim financial reporting' and should be read in conjunction with the latest annual report and financial statements as at and for the year ended 31 December 2016, which were prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU. They do not include all the information required for a complete set of IFRS financial statements. However, the explanatory notes are included to explain events and transactions that are significant to an understanding of changes in the Company's financial position and performance since the last annual consolidated financial statements.

 

The condensed consolidated interim financial statements were authorised for issue on 11 September 2017 by the Company's Board of Directors.

 

2.2 Functional and presentation currency

 

The condensed consolidated interim financial statements are presented in British Pounds, which is the Company's functional currency.

 

 

3. Significant accounting policies

 

During the period ended 30 June 2017, there were no relevant standards, amendments and interpretations that became effective for the first time that have had a material impact on the Company.

 

The accounting policies used are consistent with those applied in the last annual consolidated financial statements.

 

A number of standards have been issued but are not yet effective as at period end. The most significant of these is IFRS 9 Financial Instruments. The Company is currently in the process of analysing the impact of these new standards, amendments to existing standards and annual improvements to IFRS in detail but these are not expected to have a material effect on the consolidated annual financial statements of the Company.

 

 

4. Critical accounting estimates, assumptions and judgment

 

The preparation of condensed consolidated interim financial statements requires the Board of Directors to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

In preparing the condensed consolidated interim financial statements, the significant judgments made by applying the Company's accounting policies and the key sources of estimation uncertainty were consistent with those applied to the annual consolidated financial statements as at and for the year ended 31 December 2016.

 

(a)  Fair valuation of investments

The fair values assigned to investments held at fair value through profit and loss are based upon the latest available information and do not necessarily represent amounts which might ultimately be realised. Because of the inherent uncertainty of valuation, these estimated fair values may differ significantly from the values that would have been used had a ready market for the investments existed, and those differences could be material.

 

Investments held at fair value through profit and loss are valued by the Company in accordance with IAS 39 and IFRS 13 and the IPEV valuation guidelines. Judgment is required in order to determine the appropriate valuation methodology under this standard and subsequently in determining the inputs into the valuation models used. These judgments include making assessments of the future earnings potential of portfolio companies, appropriate earnings multiples to apply, estimating future cash flows and determining appropriate discount rates.

 

(b)  Assessment as an investment entity

Entities that meet the definition of an investment entity within IFRS 10 are required to account for investments in controlled entities, as well as investments in associates and joint ventures, at fair value through profit and loss.

 

The Board of Directors has concluded that the Company meets the definition of an investment entity as its strategic objective is to invest in portfolio investments on behalf of its investors for the purpose of generating returns in the form of investment income and capital appreciation.

 

 

5. Financial risk management

 

The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest rate risk, currency risk and price risk).

 

There have been no changes to the membership of the risk committee nor to any of the Company's risk policies since 31 December 2016 and as a result the condensed consolidated interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements. The condensed consolidated interim financial statements should be read in conjunction with the Company's annual consolidated financial statements as at 31 December 2016.

 

 

6. Investments

 

Investments as at 30 June 2017:

 


31 Dec 2016

Fair value

£'000

Purchases / capital calls

£'000

Total

sales*

£'000

Realised

gains/

(losses)

£'000

Interest

and other

£'000

Change in

unrealised

gains/

(losses)

£'000

30 Jun

2017

Fair value

£'000

Oakley funds








Fund I

64,906

12,309

(17,847)

-

-

(21,121)

38,247

Fund II

144,015

12,319

(12,029)

6,168

-

13,051

163,524

Fund III

2,333

65,326

-

-

-

(6,097)

61,562

Total Oakley funds

211,254

89,954

(29,876)

6,168

-

(14,167)

263,333









Co-Investment funds







OCPE Education (Feeder) LP

-

39,222

-

-

-

17,738

56,960

Total Co-Investment funds

-

39,222

-

-

-

17,738

56,960









Total funds

211,254

129,176

(29,876)

6,168

-

3,571

320,293









Quoted equity securities








Time Out Group plc

43,854

-

-

-

-

(1,572)

42,282

Total quoted equity securities

43,854

-

-

-

-

(1,572)

42,282









Unquoted debt securities








Bellwood Holdings Ltd

-

1,878

-

-

62

-

1,940

Daisy Group Holdings Limited

17,202

-

-

-

1,254

-

18,456

Ellisfield (Bermuda) Limited

14,530

-

-

-

514

-

15,044

Fund I

12,256

3,000

(10,557)

-

438

-

5,137

Fund II

4,337

15,658

(2,332)

-

532

-

18,195

NSG Apparel BV

21,978

-

-

-

1,295

-

23,273

Oakley Capital II Limited

768

-

(769)

-

1

-

-

Oakley Capital III Limited

5,210

-

(1,001)

-

203

-

4,412

Oakley NS (Bermuda) LP

-

2,240

-

-

122

-

2,362

OCPE Education LP

-

1,426

(1,432)

-

6

-

-

TO (Bermuda) Limited

9,480

-

(9,826)

-

346

-

-

Total unquoted debt securities

85,761

24,202

(25,917)

-

4,773

-

88,819

Total investments

340,869

153,378

(55,793)

6,168

4,773

1,999

451,394

 

* Total sales includes redemptions, loan repayments and transfers

 

 

Investments as at 30 June 2016:

 


31 Dec 2015

Fair value

£'000

Purchases  /

capital calls

£'000

Total

sales*

£'000

Realised

gains/

(losses)

£'000

Interest

and other

£'000

Change in

unrealised

gains/

(losses)

£'000

30 Jun

2016

Fair value

£'000

Funds








Fund I

56,318

-

-

-

-

3,209

59,527

Fund II

102,051

-

-

-

-

23,839

125,890

Fund III

-

5,934

-

-

-

(1,429)

4,505

Total Funds

158,369

5,934

-

-

-

25,619

189,922









Quoted equity securities








Time Out Group plc

-

47,155

-

-

-

(7,074)

40,081

Total quoted equity securities

-

47,155

-

-

-

(7,074)

40,081









Unquoted equity securities








Flypay Limited

7,115

-

(6,990)

-

-

(125)

-

Time Out Group HC Limited

13,271

4,000

(15,635)

(2,165)

529

-

-

Time Out Mercado Limited

5,564

2,754

(9,530)

747

574

(109)

-

Total unquoted equity securities

25,950

6,754

(32,155)

(1,418)

1,103

(234)

-









Unquoted debt securities








Bellwood Holdings Ltd

2,805

-

(2,818)

-

13

-

-

BH(B) 55 Limited

10,948

-

(11,175)

-

227

-

-

Daisy Group Holdings Limited

14,061

-

-

-

2,036

-

16,097

Damoco Holdco Ltd

4,212

-

(4,300)

-

88

-

-

Ellisfield (Bermuda) Limited

25,711

-

-

-

864

-

26,575

Fund I

10,550

-

(504)

-

334

-

10,380

Fund II

-

3,630

-

-

70

-

3,700

NSG Apparel BV

10,066

10,000

-

-

684

-

20,750

Oakley Capital II Limited

2,895

-

(1,000)

-

61

-

1,956

Oakley Capital III Limited

-

5,500

(529)

-

76

-

5,047

Parship GmbH

-

5,172

-

-

30

-

5,202

Time Out Group BC Limited

4,032

-

(4,211)

-

179

-

-

Time Out Group HC Limited

-

2,000

(2,053)

-

53

-

-

TO (Bermuda) Limited

11,222

-

(2,652)

-

549

-

9,119

TONY MC LLC

8,395

-

(9,089)

560

613

(479)

-

Total unquoted debt securities

104,897

26,302

(38,331)

560

5,877

(479)

98,826

Total investments

289,216

86,145

(70,486)

(858)

6,980

17,832

328,829

 

* Total sales includes redemptions, loan repayments and transfers

 

 

7. Disclosure about fair value of financial instruments

 

The Company has adopted IFRS 13 in respect of disclosures about the degree of reliability of fair value measurements. These fair value measurements are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used. The Company classifies financial instruments measured at fair value in the investment portfolio according to the following hierarchy:

 

·      Level I: Quoted prices (unadjusted) in active markets for identical instruments that the   Company can access at the measurement date. Level I investments include quoted equity instruments.

·      Level II: Inputs other than quoted prices included within Level I that are observable for the instrument, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

·      Level III: Inputs that are not based on observable market data. Level III investments include private equity funds, unquoted equity and debt securities.

 

The level in the fair value hierarchy within which the fair value measurement is categorised is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the instrument. The determination of what constitutes 'observable' requires significant judgment by the Company. The Company considers observable data to be market data that are readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

 

The following table analyses the Company's investments measured at fair value as of 30 June 2017 by the level in the fair value hierarchy into which the fair value measurement is categorised:

 


Level I

£'000

Level III

£'000

Total

£'000

Funds

-

320,293

320,293

Quoted equity securities

42,282

-

42,282

Unquoted debt securities

-

88,819

88,819

Total investments measured at fair value

42,282

409,112

451,394

 

The following table analyses the Company's investments measured at fair value as of 30 June 2016 by the level in the fair value hierarchy into which the fair value measurement is categorised:

 


Level I

£'000

Level III

£'000

Total

£'000

Funds

-

189,922

189,922

Quoted equity securities

40,081

-

40,081

Unquoted debt securities

-

98,826

98,826

Total investments measured at fair value

40,081

288,748

328,829

 

Level I

Quoted equity investment values are based on quoted market prices in active markets, and are therefore classified within Level I investments. The Company does not adjust the quoted price for these investments.

 

Level II

The Company did not hold any Level II investments as of 30 June 2017 or 30 June 2016.

 

Level III

The Company has determined that Funds and unquoted debt securities fall into the category Level III. Funds and unquoted debt securities are measured in accordance with the IPEV Guidelines with reference to the most appropriate information available at the time of measurement. The condensed consolidated interim financial statements as of 30 June 2017 include Level III investments in the amount of £409,112,256; representing approximately 86.56% of equity (2016: £288,747,235; 70.86%) which includes the new fund OCPE Education, a co-investment vehicle through which the Company invests in Inspired Education Holdings Limited ("Inspired"), the holding company for the private schools business, previously referred to as Educas, which has a value of £56,959,939.

 

Funds

The Company primarily invests in portfolio companies via the Funds. The Funds are unquoted equity securities that invest in unquoted securities. The Company's investments in unquoted equity securities are recognised in the consolidated balance sheet at fair value, in accordance with IPEV Valuation Guidelines and IFRS 13 and are considered Level III investments.

 

The valuation of unquoted fund investments is generally based on the latest available net asset value ("NAV") of the fund as reported by the corresponding general partner or administrator, provided that the NAV has been appropriately determined using fair value principles in accordance with IFRS 13.

 

The NAV of a fund is calculated after determining the fair value of a fund's investment in any portfolio company. This value is generally obtained by calculating the Enterprise Value ("EV") of the portfolio company and then adding excess cash and deducting financial instruments, such as external debt, ranking ahead of the fund's highest ranking instrument in the portfolio company.

 

A common method of determining the EV is to apply a market-based multiple (e.g. an average multiple based on a selection of comparable quoted companies) to the 'maintainable' earnings or revenues of the portfolio company. This market-based approach presumes that the comparator companies are correctly valued by the market. A discount is sometimes applied to market based multiples to adjust for points of difference between the comparators and the company being valued.

 

As at 30 June 2017, the value of the Funds' investments, other assets and liabilities attributable to the Company based on its respective percentage interest in each Fund was as follows:

 


Fund I

€'000

Fund II

€'000

Fund III

€'000

OCPE

Education

€'000

Investments

44,267

226,672

80,864

65,578

Loans

(3,831)

(34,152)

(53,635)

-

Provisional profit allocation

-

(20,754)

-

-

Other net assets

3,116

14,437

42,872

(718)

Total value of the Fund attributable to the Company

43,552

186,203

70,101

64,860


£'000

£'000

£'000

£'000

Total value of the Fund attributable to the Company

38,247

163,524

61,562

56,960

 

As at 30 June 2016, the value of the Funds' investments, other assets and liabilities attributable to the Company based on its respective percentage interest in each Fund was as follows:

 


Fund I

€'000

Fund II

€'000

Fund III

€'000

OCPE

Education

€'000

Investments

73,967

191,162

-

-

Loans

(8,134)

(33,532)

-

-

Provisional profit allocation

-

(6,742)

-

-

Other net assets

5,389

(265)

5,390

-

Total value of the Fund attributable to the Company

71,222

150,623

5,390

-


£'000

£'000

£'000

£'000

Total value of the Fund attributable to the Company

59,527

125,890

4,505

-

 

 

The Company does not utilise valuation models to calculate the fair value of its Fund investments. The NAV as reported by the Funds' general partner or administrator is considered to be the key unobservable input. In addition, the Company has the following control procedures in place to evaluate whether the NAV of the underlying fund investments is calculated in a manner consistent with IFRS 13:

 

-         Thorough initial due diligence process and the Company's Risk Committee and/or the Board performing ongoing monitoring procedures, primarily discussions with Oakley Capital Limited, the Administrative Agent's investment adviser;

-         Comparison of historical realisations to last reported fair values; and

-         Review of the auditor's report of the respective Fund.

 

Unquoted equity securities

In estimating the fair value of unquoted equity securities, the Company considers the transaction price as a reasonable estimate of fair value at initial recognition. Subsequently, the Company applies the most appropriate market valuation techniques in determining fair value. Inputs considered by the Company are mainly comparable company valuation multiples.

 

Unquoted debt securities

The fair values of the Company's investments in unquoted debt securities are derived from a discounted cash flow calculation based on expected future cash flows to be received, discounted at an appropriate rate. Expected future cash flows include interest received and principal repayment at maturity.

 

Unobservable inputs for Level III investments

 

Funds

In arriving at the fair value of the unquoted fund investments, the key input used by the Company is the NAV as provided by the general partner or administrator. It is recognised by the Company that the NAV of the Funds are sensitive to movements in the fair values of the underlying portfolio companies.

 

The underlying portfolio companies owned by the Funds may include both quoted and unquoted companies. Quoted portfolio companies are valued based on market prices and no unobservable inputs are used. Unquoted portfolio companies are valued based on a market approach for which significant judgment is applied.

 

For the purposes of sensitivity analysis, the Company considers a 10% adjustment to the fair value of the unquoted portfolio companies of the Funds as reasonable. For the period ending 30 June 2017 a 10% adjustment to the fair value of the unquoted portfolio companies held by the Funds would result in a 6.9% movement in net assets attributable to shareholders (2016: 4.7%).

 

Unquoted equity securities

The Company held no unquoted equity securities as of 30 June 2017 and 30 June 2016.

 

Unquoted debt securities

In arriving at the fair value of the unquoted debt securities, the key inputs used by the Company are future cash flows expected to be received until maturity of the debt securities and the discount factor applied. The discount factor applied is considered to be an unobservable input and range between 6.5% and 15%.

 

For the purposes of sensitivity analysis, the Company considers a 1% adjustment to the discount factor applied as reasonable. For the period ending 30 June 2017 a 1% adjustment would result in a 0.3% movement in net assets attributable to shareholders (2016: 0.5%).

 

Transfers between levels

There were no transfers between the Levels during the period ended 30 June 2017.

 

The following table presents the transfers between Levels for the period ended 30 June 2016:

 



Level I

£'000

Level III

£'000

Funds


-

-

Quoted equity securities


47,155

-

Unquoted equity securities


-

(32,155)

Unquoted debt securities


-

(15,000)

Total transfers between Level I and Level III


47,155

(47,155)

 

On 14 June 2016, the Time Out unquoted debt and equity securities classified as Level III were exchanged for listed shares of Time Out Group as part of the reorganisation and Initial Public Offering of the Time Out Group. Transfers are recognised at the date of transfer.

 

Level I and Level III reconciliation

The changes in investments measured at fair value, for which the Company has used Level I and    Level III inputs to determine fair value as of 30 June 2017 and 2016, are as follows:

 

Level I Investments:

As at
30 Jun 2017

£'000

As at
30 Jun 2016

£'000

Quoted equity securities



Fair value at beginning of the period

43,854

-

Shares transferred from unquoted debt and equity securities

-

47,155

Net change in unrealised gains/(losses) on investments

(1,572)

(7,074)

Fair value of Level I investments at end of the period

42,282

40,081

 

 

Level III Investments:

Funds

£'000

Unquoted

equity

securities

£'000

Unquoted

debt

securities

£'000

Total

£'000

For the six months ended 30 June 2017





Fair value at beginning of the period

211,254

-

85,761

297,015

Purchases

129,176

-

24,202

153,378

Proceeds on disposals (including interest)

(29,876)

-

(25,917)

(55,793)

Realised gain on sale

6,168

-

-

6,168

Interest income and other fee income

-

-

4,773

4,773

Net change in unrealised gains/(losses) on investments

3,571

-

-

3,571

Fair value at end of the period

320,293

-

88,819

409,112







Funds

£'000

Unquoted

equity

securities

£'000

Unquoted

debt

securities

£'000

Total

£'000

For the six months ended 30 June 2016





Fair value at beginning of the period

158,369

25,950

104,897

289,216

Purchases

5,934

6,754

26,302

38,990

Proceeds on disposals (including interest)

-

-

(23,331)

(23,331)

Realised gain on sale

-

-

-

-

Accrued interest capitalised in debt for share conversion

-

1,103

-

1,103

Net realised loss on debt for share conversion

-

(1,418)

560

(858)

Transferred to quoted equity securities (Level I)

-

(32,155)

(15,000)

(47,155)

Interest income and other fee income

-

-

5,877

5,877

Net change in unrealised gains/(losses) on investments

25,619

(234)

(479)

24,906

Fair value at end of the period

189,922

-

98,826

288,748

 

 

Financial instruments not carried at fair value

Financial instruments, other than financial instruments at fair value through profit and loss, where carrying values are equal to fair values:

 


As at

30 Jun 2017

£'000

As at

30 Jun 2016

£'000

Cash and cash equivalents

71,767

80,941

Trade and other receivables

743

114

Trade and other payables

51,297

2,417

 

Trade and other payables includes a balance of £49,490,150 in relation to capital calls payable to Fund II and Fund III. Capital calls payable were settled by the respective due dates post 30 June 2017 (refer to Note 17).

 

 

8. Segment information

 

The Company has two reportable segments, as described below. For each of them, the Board of Directors receives detailed reports on at least a quarterly basis. The following summary describes the operations in each of the Company's reportable segments:

 

-    Fund investments: includes commitments/investments in four private equity funds.

-    Direct investments and loans: includes direct investments, loans to the Funds' portfolio companies, loans to the Funds and other loans.

 

Balance sheet and income and expense items which cannot be clearly allocated to one of the segments are shown in the column "Unallocated" in the following tables.

 

The reportable operating segments derive their revenue from investments by seeking to achieve an attractive return in relation to the risk being taken. The return consists of interest, dividends and/or unrealised and realised capital gains.

 

The financial information provided to the Board of Directors with respect to total assets and liabilities is presented in a manner consistent with the annual consolidated financial statements.  The assessment of the performance of the operating segments is based on measurements consistent with IFRS. Liabilities are not considered to be segment liabilities but rather managed at the corporate level.

 

There have been no transactions between the reportable segments during the period ended 30 June 2017 and 2016.

 

The segment information for the period ended 30 June 2017 is as follows:

 


Fund

investments

£'000

Direct

Investments

and loans

£'000

Total

operating

segments

£'000

Unallocated

£'000

Total

£'000

Net realised gains on financial assets at fair value through profit and loss

6,168

-

6,168

-

6,168

Net unrealised gains/(losses) on financial assets at fair value through profit and loss

3,571

(1,572)

1,999

-

1,999







Interest income

-

4,527

4,527

17

4,544

Net foreign currency gains/(losses)

-

-

-

1,965

1,965

Other income

-

246

246

-

246

Expenses

-

-

-

(4,008)

(4,008)

Finance cost

-

-

-

(30)

(30)







Profit/(loss) for the period

9,739

3,201

12,940

(2,056)

10,884







Total assets

320,293

131,101

451,394

72,510

523,904

Total liabilities

-

-

-

(51,297)

(51,297)

Net assets

320,293

131,101

451,394

21,213

472,607







Total assets include:






Financial assets at fair value through profit and loss

320,293

131,101

451,394

-

451,394

Cash and other

-

-

-

72,510

72,510

 

 

The segment information for the period ended 30 June 2016 is as follows:

 


Fund investments

£'000

Direct investments and loans

£'000

Total operating segments

£'000

Unallocated

£'000

Total

£'000

Net realised gains on financial assets at fair value through profit and loss

-

(858)

(858)

-

(858)

Net unrealised gains/(losses) on financial assets at fair value through profit and loss

25,619

(7,787)

17,832

-

17,832







Interest income

-

6,887

6,887

257

7,144

Net foreign currency gains/(losses)

-

-

-

6,568

6,568

Other income


93

93

7

100

Expenses

-

-

-

(3,615)

(3,615)

Finance cost

-

-

-

-

-







Profit/(loss) for the period

25,619

(1,665)

23,954

3,217

27,171







Total assets

189,922

138,907

328,829

81,055

409,884

Total liabilities

-

-

-

(2,417)

(2,417)

Net assets

189,922

138,907

328,829

78,638

407,467







Total assets include:






Financial assets at fair value through profit and loss

189,922

138,907

328,829

-

328,829

Cash and other

-

-

-

81,055

81,055

 

 

9. Expenses

 


Notes

Six months

ended

30 Jun 2017

£'000

Six months

ended

30 Jun 2016

£'000

Management fees

10

535

2,304

Operational and advisory fees

11

1,227

-

Professional fees


963

572

Performance fees

10,11

1,079

607

Other expenses


204

132



4,008

3,615

 

 

10. Management and performance fees

 

The Company had appointed Oakley Capital (Bermuda) Limited (the "Manager") to provide management services. On 31 March 2017, the management agreement was terminated.

 

Management fees for the period 1 January 2017 to 31 March 2017 totalled £535,090 (1 January 2016 to 30 June 2016: £2,304,173) and are presented in the consolidated statement of comprehensive income. There were no management fees payable to the Manager at 30 June 2017 (2016: £849,061).

 

No performance fees were paid for the period 1 January 2017 to 31 March 2017 (1 January 2016 to 30 June 2016: £606,701). There were no performance fees payable to the Manager at 30 June 2017 (2016: nil).

 

 

11. Operational, advisory and performance fees

 

Pursuant to an operational services agreement dated 1 April 2017 (the "Operational Services Agreement"), the Company appointed Oakley Capital Manager Limited (the "Administrative Agent") to provide operational assistance and services to the Board with respect to the Company's investments and its general administration.

 

Under the Operational Services Agreement, the Administrative Agent receives an operational services fee equal to 2% per annum of the net asset value of all investments, except Fund I, Fund II and Fund III, held by the Company (before deduction of any accrued performance fees). The fee is pro-rata for partial periods and payable quarterly in arrears.

 

The operational services fee for the period ending 30 June 2017 totalled £544,011 (2016: nil) and is presented in the consolidated statement of comprehensive income. The amount outstanding    as at 30 June 2017 was £544,011 (2016: nil) and is included in trade and other payables in the consolidated balance sheet.

 

Under the Operational Services Agreement, the Administrative Agent receives an advisory fee based on the successful buy-side or sell-side transactions of the Company for any equity investment. The advisory fee is 2% of the equity transaction value unless otherwise agreed between the parties.

 

Advisory fees for the period ended 30 June 2017 totalled £683,419 (2016: nil) and are presented in the consolidated statement of comprehensive income. The amount outstanding as at 30 June 2017 was £237,114 (2016: nil) and is included in trade and other payables in the consolidated balance sheet.

 

The Administrative Agent also receives a performance fee of 20% of the excess of the amount earned by the Company over and above an 8% hurdle rate in respect of the realisation or partial realisation of each co-investment. The operational services fee received and receivable by the Administrative Agent, the attributable proportion of all other expenses incurred by the Company in respect of the co-investments and the cost of the co-investment will be deducted from proceeds received in the calculation of the performance fee.

 

Performance fees for the period ended 30 June 2017 totalled £1,079,313 (2016: nil) and are presented in the consolidated statement of comprehensive income. The amount outstanding as at 30 June 2017 was £599,836 (2016: nil) and is included in trade and other payables in the consolidated balance sheet.

 

Under the Operational Services Agreement, the Administrative Agent may also recharge costs incurred, either directly or indirectly by its contracted advisors, on behalf of the Company.  For the period ending 30 June 2017, the Administrative Agent recharged such other costs to the Company totalling £218,829 (2016: nil) and is included in other expenses in Note 9.

 

The Administrative Agent has entered into an Investment Adviser Agreement with Oakley Capital Limited (the "Investment Adviser") to advise on the investment of the assets of the Company. The Investment Adviser does not receive any management or performance fees from the Company. Any fees earned by the Investment Adviser are paid by the Administrative Agent.

 

 

12. Earnings per share

 

The earnings per share calculation uses the weighted average number of shares in issue during the period.

 


Six months

ended

30 Jun 2017

Six months

ended

30 Jun 2016

Basic and diluted earnings per share

£0.05

£0.14

Profit for the period (£'000)

£10,884

£27,171

Weighted average number of shares outstanding ('000)

202,898

190,000

 

 

13. Net asset value per share

 

The net asset value per share calculation uses the number of shares in issue at the end of the period.

 


As at

30 Jun 2017

As at

30 Jun 2016

Basic and diluted net asset value per share

£2.31

£2.15

Net assets attributable to shareholders (£'000)

£472,607

£407,467

Number of shares in issue at period end ('000)

204,804

189,804

 

 

14. Share capital

 

a) Authorised and issued share capital

The authorised share capital of the Company is 280,000,000 ordinary shares at a par value of £0.01 each. Ordinary shares are listed and traded on AIM of the London Stock Exchange. Each share confers the right to one vote and shareholders have the right to receive dividends.

 

As at 30 June 2017, the Company's issued and fully paid share capital was 204,804,036 ordinary shares (2016: 189,804,036).

 


As at

30 Jun 2017

'000

As at

30 Jun 2016

'000

Ordinary shares outstanding at the beginning of the period

189,804

191,078

Ordinary shares issued and fully paid

-

-

Treasury shares purchased

-

(1,274)

Treasury shares sold

15,000

-

Ordinary shares outstanding at the end of the period

204,804

189,804

 

b) Treasury shares

During the period ended 30 June 2017, the Company sold 15,000,000 (2016: nil) ordinary shares at a share price of £1.57 per share and a total net cash consideration of £23,290,950 (2016: £nil). No treasury shares were purchased during the period (2016: 1,274,279 ordinary shares for a total cash consideration of £1,853,928). On 24 January 2017, the Company cancelled its remaining 2,108,843 treasury shares.

 

As at 30 June 2017, the Company holds no treasury shares (2016: 17,108,843). The Company adopted a policy regarding share buy backs as part of discount control management and will not in the future sell stock from treasury nor issue new shares at material discounts to NAV.

 

 

15. Commitments

 

The Company had the following capital commitments in Euros as at the period end:

 


As at

30 Jun 2017

€'000

As at

30 Jun 2016

€'000

Fund I



Total capital commitment (2017: £165,450; 2016: £157,458)

188,398

188,398

Called capital, beginning of the period

178,978

178,978

Capital calls during the period (2017: 3.6%; 2016: 0%)

6,783

-

Called capital, end of the period (2017: £163,134; 2016: £149,585)

185,761

178,978

Unfunded capital commitment (2017: £2,316; 2016: £7,873)

2,637

9,420

Aggregate recycled commitment

12,999

5,652




Fund II



Total capital commitment (2017: £175,639; 2016: £167,154)

200,000

200,000

Called capital, beginning of the period

153,000

114,000

Capital calls during the period (2017: 7%; 2016: 0%)

14,000

-

Called capital, end of the period (2017: £146,659; 2016: £95,278)

167,000

114,000

Unfunded capital commitment (2017: £28,980; 2016: £71,876)

33,000

86,000




Fund III



Total capital commitment (2017: £285,413; 2016: £208,943)

325,000

250,000

Called capital, beginning of the period

9,750

-

Capital calls during the period (2017: 23%; 2016: 3%)

74,750

7,500

Called capital, end of the period (2017: £74,207; 2016: £6,268)

84,500

7,500

Unfunded capital commitment (2017: £211,206; 2016: £202,675)

240,500

242,500




Total unfunded capital commitments (2017: £242,502; 2016: £282,424)

276,137

337,920

 

 

The Company had the following loan commitments at the period end:

 


As at

30 Jun 2017

£'000

As at

30 Jun 2016

£'000

Total revolving loan facility commitments:



Fund I

5,000

5,000

Fund II

20,000

15,000

Fund III

20,000

-

Oakley NS (Bermuda) LP

3,000

-


48,000

20,000

Total unfunded loan commitments:



Fund I

-

4,532

Fund II

2,227

11,370

Fund III

20,000

-

Oakley NS (Bermuda) LP

700

-


22,927

15,902

 

 

16. Related parties

 

Balances and transactions between the Company and its subsidiary have been eliminated on consolidation and are not disclosed in this note. Related parties as disclosed below are not part of the consolidation and for this reason are not eliminated.

 

The Manager, subsequently the Administrative Agent, and the Investment Adviser are considered related parties to the Company due to the direct and indirect control and transactions with them.

 

Management fees and performance fees paid are detailed in Notes 9 and 10. Operational fees, advisory fees and performance fees paid to the Administrative Agent are detailed in Notes 9 and 11. The agreements between the Company and these service providers are based on normal    commercial terms.

 

During the period ended 30 June 2017 the Investment Adviser recharged staff costs of £409,722 (2016: £129,002) and overheads of £2,343 (2016: £35,914) to the Company, and is included in other expenses in Note 9.

 

Fund I is considered a related party due to the investment the Company has in Fund I. During the period ended 30 June 2017, the Company acquired an interest in OCPE Education L.P. from Fund I Limited Partners and paid €23,492,217 (£20,795,311) for such additional interests in OCPE Education L.P.  As at 30 June 2017, the Company owned 99.2% of OCPE Education (Feeder) L.P. which in turn owned 38.16% of OCPE Education L.P.  As at 30 June 2017, OCPE Education L.P. held  an indirect 36.4% stake in Inspired.

 

 

17. Events after balance sheet date

 

The Board of Directors has evaluated subsequent events from the period ended 30 June 2017 to 11 September 2017, which is the date the condensed consolidated interim financial statements were approved. The following events have been identified for disclosure:

 

On 5 July 2017, the Company settled its capital calls payable to Fund II of €14,000,000 (£12,268,200) and Fund III of €42,250,000 (£37,023,675). The capital calls payable were included in Trade and other payables as at 30 June 2017. Fund II used the proceeds from the capital call to repay debt. Fund III used the proceeds from the capital call to complete its fourth acquisition, purchasing the business and operations of ZGS Verwaltungs GmbH ("Schülerhilfe"). 

 

On 1 August 2017, Fund III increased its total capital commitments from €691,400,000 to €763,550,000. The final closing of Fund III will take place by the end of September 2017. The increased commitment dilutes the Company's holding in Fund III Master from 47.0% to 42.6%.

 

On 2 August 2017, the Company received a distribution from Fund II of €8,419,200 (£7,545,287) arising from the partial realisation of Fund II's indirect interest in Inspired through its holding in OCPE (Education) Feeder L.P.

 

On 14 August 2017, the Company received a distribution from OCPE Education (Feeder) L.P. of €26,067,316 (£23,674,336) arising from the partial realisation of OCPE Education L.P. indirect interest in Inspired.

 

On 21 August 2017, the Company received a distribution from Fund II of €13,451,338 (£12,386,293) arising from the repayment of capital by Facile, and dividend proceeds from Parship Elite Group.

 

On 6 September 2017, the Company received a distribution from Fund III of €12,481,093 (£11,400.917) arising from the refinancing of capital by TechInsights.

 

On 11 September 2017, the Board of Directors declared and approved an interim dividend of 2.25 pence per ordinary share which will result in a dividend payment of £4,608,091 payable on 26 October 2017.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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