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RNS

Half-year Report

Released 07:00 06-Sep-2018

RNS Number : 9198Z
Oakley Capital Investments Limited
06 September 2018
 

06 September 2018

 

Oakley Capital Investments Limited

 

Interim Results for the Six Months Ended 30 June 2018

 

Oakley Capital Investments Limited (AIM:OCI, the "Company"), which provides investors with access to the investment strategy pursued by the Oakley Funds, today announces its interim results for the six months ended 30 June 2018.

FINANCIAL HIGHLIGHTS

·     NAV per share of £2.59 at 30 June 2018, up 6% since 31 December 2017

·     Half year NAV of £529.7 million representing a 17% CAGR over five years

·     A 2018 interim dividend of 2.25 pence per share will be paid on 25 October 2018 to shareholders on the register on 28 September 2018

·     Total shareholder return of 14% in the period

·     In total, £55.7 million of capital was deployed and £126.5 million cash was returned to the Company in the half year

PORTFOLIO HIGHLIGHTS

PERFORMANCE 

·     The fair value of the Oakley Funds grew by 19% in the period. These positive revaluations were across Oakley's three core sectors: Consumer, TMT and Education. Uplifts have been driven by the portfolio companies' continued ability to exhibit strong performance and growth in profitability

·     Average portfolio company year on year EBITDA growth was 29%

·     The uplift in NAV was offset by 12 pence due to a fall in the share price of Time Out Group Plc during the period. Time Out continues to make progress and its Board remains confident of meeting its strategic and financial goals

INVESTMENTS - two Fund III investments were completed in the period:

·     Career Partner Group - a leading provider of private higher education and personnel development in Germany. Oakley Capital Fund III acquired a 67% stake in the business. OCI's contribution to the investment is £30.5 million

·     Facile.it - a leading online price comparison company in Italy. Following Oakley Capital Fund II's sale of Facile.it, Oakley Fund III invested alongside new owners, EQT, to participate in the next phase of the company's growth. OCI's contribution is £28.9 million

One deal has been signed post the period end:

·     cPanel - a leading internet infrastructure software business. Oakley Capital Fund III has signed an agreement to invest in cPanel. A continuation of Oakley's strategy to acquire leading internet infrastructure software businesses. The investment cost to OCI will be approximately £16.0 million

REALISATIONS

·     During the period OCI has benefitted from the disposals of Parship Elite, Verivox and Facile.it, which generated a combined gross money multiple of 3.9x and returned £102.4 million to OCI

·     These exits reflect Oakley's continued success in the consumer space as well as its ability to create value and identify long term attractive assets. The realisations were at a combined 39% premium to the OCI's year-end look through value and increased the Company's NAV by 14 pence

·     The sale of unified communication company, Damovo, was completed post the period end and returned proceeds of £12.6 million to OCI

 

Christopher Wetherhill, Chairman, Oakley Capital Investments Limited

"OCI has delivered a strong start to the year, driven by three successful exits that contributed to a 19% increase in the Oakley Funds. This in turn has resulted in the company's NAV growing by 6% and a total shareholder return in the period of 14%. Oakley Capital has taken advantage of a strong pricing environment while continuing to demonstrate its ability to identify attractive investments at compelling valuations, through its unique network."

Peter Dubens, Managing Partner, Oakley Capital Limited

"The talented management teams we partner with continue to surpass our expectations. There is no better demonstration of this than the 3.9x money multiple achieved following the disposals in the past six months. The remaining portfolio companies continue to perform well and their ranks have been strengthened further by the addition of Career Partner Group, which makes education our largest sector by funds invested. Fund III will be almost 70% invested post cPanel, as our connected, creative and collaborative approach to investment continues to produce industry-leading results."

This announcement contains inside information.

Please refer to the Company's website for the Half Year Report and Accounts http://oakleycapitalinvestments.com/investor-relations/publications

- ends -

 

For further information please contact:

Oakley Capital Investments Limited

+44 20 7766 6900

Steven Tredget, Investor Relations

 

Greenbrook Communications Ltd

+44 20 7952 2000

Alex Jones / Matthew Goodman / Gina Bell

 

Liberum Capital Limited (Nominated Adviser & Broker)

+44 20 3100 2000

Gillian Martin / Owen Matthews

 

Notes:

About Oakley Capital Investments ("OCI")

OCI is an AIM listed investment vehicle, which provides access to the Oakley funds. It is a liquid vehicle that provides capital growth and dividends to investors.

The Oakley Funds

Oakley Capital Private Equity L.P. and its successor funds, Oakley Capital Private Equity II and Oakley Capital Private Equity III, are unlisted focused 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

The Investment Adviser

Founded in 2002 Oakley Capital has demonstrated the repeated ability to acquire attractive growth assets at attractive prices. To do this they rely on their sector and regional expertise, their ability to tackle transaction complexity and their deal generating entrepreneur network.

 

Chairman's Statement

 

Overview 

Over the six months ending 30 June 2018, the Company ("OCI") delivered a strong performance, driven by three successful exits and a 19% rise in the fair value of the underlying portfolio, delivering a 6% uplift in NAV.

Share-price growth over the period of 13% and a dividend of 2.25 pence per share represent a 14% increase in total shareholder return. The share price discount to NAV closed from 33% to 29% following a programme of enhanced corporate governance and investor communication.

OCI continues to benefit from the Investment Adviser's ("Oakley") expertise and network that identifies attractive opportunities and unlocks value to create stronger, more valuable businesses. Over the period, OCI benefitted from £59.4m of investment in two businesses and the sale of three businesses, which saw OCI receive proceeds of £102.4m.

Successful sale of strong businesses

The April sale of Oakley Fund II's remaining interest in Parship Elite Group, the leading DACH online dating site, marks the end of a prosperous relationship that began when Oakley partnered with the management in 2015. Strong organic growth combined with the acquisition of a leading competitor saw EBITDA increase threefold. OCI proceeds from the sale amount to €40.8m (£35.6m), representing a gross money multiple of 4.7x and an IRR of 118%.

In a separate transaction, Oakley Fund II sold its remaining 9.9% stake in Verivox, bringing to an end another successful long-term partnership that began in 2009. OCI received €17.4m (£15.2m) from the sale of the remaining stake in a transaction that returned a gross money multiple of 2.5x and an IRR of 44%.

In the case of Facile, Italy's leading online price comparison site, Fund II has exited the business generating a gross money multiple of 3.7x and IRR 51% and returning €58.8m (£51.6m) to OCI. Concurrent with Fund II's sale of Facile, Fund III took a stake in the company in order to participate in further upside from the next phase of Facile's growth.

Subsequent to the reporting period, Fund II agreed to sell its stake in telecoms company Damovo in a deal in which OCI received an additional €14.0m (£12.6m) in August.

These transactions bear the hallmarks of             typical Oakley deals: sectors and geographies in which Oakley has proven expertise, complex primary deals which require proven capabilities, sourced through Oakley's network of entrepreneurs and managers, often on a bilateral basis at attractive entry valuations.

Disciplined investment in a competitive market

Fund III also completed an investment in Career Partner Group, one of the fastest growing and most highly ranked private providers of higher education and personnel development in Germany, in which Fund III invested €84.6m for a 67% stake.

Additionally, post the period-end Fund III signed an agreement to invest in cPanel through WebPros BV, which is the holding company that owns Plesk and Solus. cPanel provides one of the internet infrastructure industry's most reliable and intuitive control panel software platforms.

OCI continues to benefit from Oakley's ability to source attractive opportunities in a market that has continued to be characterised by high valuations and associated leverage levels. OCI believes that Oakley's cautious approach to entry multiples and a focus in recent years on more defensive sectors such as education, will prove to be strong mitigating factors in the event of an economic downturn.

With Fund III now 69% deployed post cPanel, and the pipeline of new investments looking strong, it is anticipated that Oakley will seek to begin raising funds for a new vehicle within the next six months.

Time Out - key milestones ahead

While the majority of the portfolio is exceeding growth expectations, the transition of Time Out is ongoing. It is showing signs of positive momentum in the Time Out Markets concept, which has proved successful in Lisbon. Time Out Markets are scheduled to roll-out in New York and Miami in 2018 followed by Boston, Chicago and Montreal in 2019.

Governance and transparency

As part of a commitment to be best-in-class in terms of transparency and reporting, OCI continues to improve the level and standard of its disclosure and has already committed to further improvements for the year-end report and accounts. In addition, OCI has continued to improve standards of investor engagement throughout the year and taken further steps to develop its internal governance by bolstering its Management Engagement Committee.

Funding and commitments

As a result of these new investments, OCI invested a further €50.7m (£44.4m) equity in the Oakley Funds: of this, €18.1m (£15.7m) in Oakley Fund II and €32.6m (£28.6m) in Oakley Fund III. OCI's remaining unfunded commitments are €2.6m (£2.3m) for Oakley Fund I, €13.3m (£11.8m) for Oakley Fund II and €169.4m (£149.9m) for Oakley Fund III. It is expected that these outstanding commitments will be funded by existing cash as well as by future cashflows from Oakley Fund II portfolio realisations.

Looking forward

We offer the opportunity to share in the growth and profitability of carefully selected businesses, across the TMT, Consumer Digital and Education sectors. Looking to the second half of 2018, we believe OCI remains well placed to deliver meaningful returns to our investors through further portfolio realisations and investment in future Oakley Funds.

 

Christopher Wetherhill

Chairman

 

Market Overview

 

European macro recovery continues

The healthy growth of the economic backdrop in 2017 is expected to continue through 2018 and 2019 with forecast European GDP growth of 2.3% and 2.0% respectively (source: European Economic Forecast Spring 2018). This economic performance is offset by continued EU political uncertainty and a return to more protectionist economic policies on a global basis.

Buyout boom led by mid-market

The European buyout market continues to flourish with record levels invested in the first half of the year (source: Dealogic). In 2017, the market surpassed pre-crisis levels in terms of the amount of companies backed and it is now set to overtake previous records in terms of equity invested.

This growth is being led by mid-market transactions, which accounted for 56.6% of European buyout value in 2017 and have been continually growing over the last five years. (source: EVCA / Invest Europe 2017 Private Equity Data (May 2018)).

Surging valuations

After record fundraising in 2017, H1 2018 fundraising was off to a slower start, but record levels of dry powder remain available in the PE market. The combination of a large equity overhang, record stock-market valuations and ready access to financing has progressively pushed up entry multiples in PE transactions.

Regional under penetration

Despite this growth in global buyouts, Oakley's target markets display relatively low private equity market penetration. According to 2017 figures from Invest Europe, European PE investment as a percentage of GDP was 0.3% compared to the US total at 0.9%. Some of the core Oakley target markets were lower still, with Germany at 0.26%, and Italy at 0.19%.

A disciplined approach in frothy markets

Oakley's strong European network of entrepreneurs and advisers, combined with the ability to execute more complex transactions, continues to provide a differentiated pipeline of investment opportunities. This access to more off-market transactions has consistently enabled the Oakley Funds to acquire quality companies at attractive prices. Seven companies were acquired in the last 18 months, with a total cost invested of €410.5m. As importantly, they were acquired at lower entry levels to its peers, 10.7x EV/EBITDA, compared with a peer group average of 14.1x.

 

Performance Overview

 

During the period, OCI's NAV increased by £27.7m to £529.7m, an increase of 6% since 31 December 2017.

Net earnings were £32.3m for the year, comprising:

·      Gross revenue of £3.7m arising from interest income earned on the debt facilities provided by OCI, and other income.

·      Net expenses of £2.5m and £1.8m of foreign exchange gains. Expenses includes fees paid to the Administrative Agent.

·      Realised gains of £92.7m earned from the realisations that occurred in the Oakley Funds. Net change in unrealised depreciation on investments of £63.4m, driven predominantly by the decline in the Time Out share price.

A final dividend for the year ended 31 December 2017 of 2.25p per share, totalling £4.6m, was paid to shareholders in April 2018.

At 30 June 2018, outstanding commitments to the Oakley Funds were £162.8m, and liquid resources were £149.8m. The Board anticipates that the majority of these outstanding commitments will be drawn down over the next three to five years and are likely to be partly financed by future cash flows from realisations in Oakley Fund II. In light of these expected cashflows, the Board is satisfied that OCI will be able to meet its unfunded commitments.

 

 

30 Jun 2018
£m

31 Dec 2017

£m

Opening net asset value at the start of the period

502.0

438.4

Gross revenue

3.7

7.7

Other expenditure

(2.5)

(6.2)

Net foreign currency gains/(losses)

1.8

(0.8)

Realised gain on investments

92.7

23.9

Net change in unrealised (depreciation)/appreciation on investments

(63.4)

20.3

Treasury shares sold

-

23.3

Dividend

(4.6)

(4.6)

Closing net asset value at the end of the period

529.7

502.0

Number of shares in issue

204.8

204.8

NAV per share

£2.59

£2.45

 

Portfolio Overview

 

The transactional activity for OCI's investment portfolio for the period is summarised below:

INVESTMENT

30 Jun 2018

Fair value

£m

31 Dec 2017

Fair value
£m

Investment in Oakley Funds

249.6

282.7

 

249.6

282.7

CO-INVESTMENTS

 

 

Equity securities - quoted

28.6

41.2

Equity securities - unquoted

32.1

26.2

Debt securities - unquoted

71.2

69.5

 

131.9

136.9

Total investments

381.5

419.6

 

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

 

Portfolio Review

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

26.3

 

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

26.3

 

Other assets and liabilities

(1.6)

 

OCI's investment in Oakley Fund I

24.8

 

 

 

 

 

 

 

 

 

Fund II

North Sails

Consumer

Global

2014

35.4

37.9

 

Fund II

Inspired

Education

Global

2014

12.4

23.8

 

Fund II

Damovo

TMT

Germany

2015

2.9

15.4

 

Fund II

Daisy

TMT

UK

2015

10.2

16.3

 

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

93.5

 

Other assets and liabilities

(10.0)

 

OCI's investment in Oakley Fund II

83.4

 

 

 

 

 

 

 

 

 

Fund III

Casa & atHome

Consumer

Italy / Lux

2017

26.3

41.1

 

Fund III

Schülerhilfe

Education

Germany

2017

30.8

34.8

 

Fund III

Plesk

TMT

Switzerland

2017

9.4

15.7

 

Fund III

TechInsights

TMT

Canada

2017

4.3

18.3

 

Fund III

AMOS

Education

France

2017

6.8

11.1

 

Fund III

Career Partner Group

Education

Germany

2018

30.5

30.5

 

Fund III

Facile

Consumer

Italy

2018

28.9

28.9

 

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

180.4

 

Other assets and liabilities

(39.0)

 

OCI's investment in Oakley Fund III

141.4

 

 

 

 

 

 

 

 

 

Co-investment:

 

 

 

 

 

 

 

Equity

Time Out

Consumer

Global

2014

47.2

28.6

 

Equity

Inspired

Education

Global

2017

13.0

32.1

 

Debt

Daisy

TMT

UK

2015

23.2

29.5

 

Debt

North Sails

Consumer

Global

2014

25.9

32.8

 

Debt

Fund Facilities

n/a

n/a

n/a

n/a

8.9

 

OCI's co-investments (both equity and debt)

131.9

 

Total OCI investments

381.5

 

 

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.

 

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. OCI held a 40.7 % stake in Oakley Fund III.

 

OAKLEY FUND III

30 Jun 2018

Fair value

€m

31 Dec 2017

Fair value

€m

Casa & atHome

119.5

140.4

Schülerhilfe

98.2

85.9

Career Partner Group

84.6

-

Facile

80.3

-

TechInsights

56.5

33.4

Plesk

46.2

40.7

AMOS

32.6

17.4

Total investments

517.8

317.8

 

Distributions during 2018

€m

Casa & atHome

28.9

Total distributions

28.9

 

Oakley Fund III had another active investment period, completing two further acquisitions and adding to the current five investments, bringing the total cost invested for Oakley Fund III to €410.5m.

In January 2018, Oakley Fund III completed its acquisition of Career Partner Group ("CPG") from Apollo Education Group. The cost invested was €84.6m. CPG will build upon Oakley's experience in the education and digital consumer sectors. 

In June 2018, Oakley Fund III acquired Facile to continue its investment in this high growth, market leading digital business. The total cost invested was €80.3m.   

CPG and Facile are held at fair value which approximates to their respective total cost invested, in aggregate €164.9m. 

Casa & atHome secured €28.9m of further debt financing in March 2018 which was distributed back to Limited Partners with OCI receiving proceeds of €12.0m (£10.7m). 

There was an overall uplift of 25% (calculated on a like-for-like basis), in the portfolio from 31 December 2017. This is due to strong performances and growth in the period from the portfolio, especially from TechInsights and AMOS.

Oakley Fund III has called €156.4m (£138.4m) to date from the Company, representing 48% of OCI's total committed capital. 

 

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. OCI holds a 36.2% stake in Oakley Fund II.

 

OAKLEY FUND II

30 Jun 2018

Fair value

€m

31 Dec 2017

Fair value

€m

North Sails

118.4

106.1

Inspired

82.8

67.3

Daisy

54.0

55.5

Damovo

56.6

49.6

Facile

-

123.7

Parship Elite Group

-

111.9

Verivox

-

36.8

Total investments

311.8

550.9

 

Distributions during 2018

€m

Facile

198.4

Parship Elite Group

137.9

Verivox

53.5

Other

0.6

Total distributions

390.4

 

Oakley Fund II is in the realisation stage, and had an active divestment period with three exits, totalling distributions of €390.4m. A further exit, Damovo, was completed post-period end with an initial distribution of €45.1m returned to Limited Partners in August 2018 with OCI receiving €14.0m (£12.6m). Further consideration of up to €25.0m remains conditional on Damovo's trading results in the year ending 31 January 2019.    

In April 2018, Oakley Fund II completed the sale of Parship Elite Group and Verivox to NuCom Group, ProSiebensat.1's commercial unit, and returned proceeds to OCI of €58.4m (£50.9m).

In June 2018, Oakley Fund II completed the realisation of Facile to EQT with proceeds returning to OCI of €58.5m (£51.6m). 

There was further capital of €9.0m invested by Oakley Fund II; €8.7m in North Sails to fund the development of North Sails Apparel and for M&A activities; €0.1m in Facile and €0.2m in Inspired for working capital purposes.  

Inspired continues to grow rapidly through acquisition and organically, with expansion into the Middle East, and further acquisitions of schools in Costa Rica and Spain. The enrolment levels and current trading are in line with expectations. This is reflected in the €15.5m uplift in fair value since 31 December 2017.   

With these significant and successful realisations, the Oakley Fund II realised portfolio returns stand at 3.2x gross money multiple and 63% IRR as at 30 June 2018. The overall gross portfolio returns for Fund II are 2.3x money multiple and 41% IRR, one of the top performing funds in its vintage.  

 

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.  OCI holds a 65.5% stake in Oakley Fund I.

 

OAKLEY FUND I 

30 Jun 2018

Fair value

€m

31 Dec 2017

Fair value

€m

Time Out

45.5

64.3

Broadstone

0.6

0.6

Total investments

46.1

64.9

 

Time Out is listed on AIM of the London Stock Exchange, and its fair value is determined by a mark-to-market valuation, based on a share price of £0.91 at 30 June 2018. 

Time Out's share price has fallen by 31% from £1.31 at 31 December 2017 to £0.91 at 30 June 2018. Time Out is showing signs of positive momentum in the Time Out Markets concept, which has proved successful in Lisbon. Time Out Markets are scheduled to roll-out in New York and Miami in 2018 followed by Boston, Chicago and Montreal in 2019. 

As at 30 June 2018, Oakley Fund I had called €198.8m (£176.7m) from OCI, including recycling of €13.0m (£11.4m).

 

Portfolio Review

Co-investment activity

 

CO-INVESTMENTS

30 Jun 2018

Fair value

€m

31 Dec 2017

Fair value

€m

Equity Securities

 

 

OCPEE Feeder

32.1

26.2

Time Out

28.6

41.2

Debt Securities

 

 

North Sails

32.8

27.8

Daisy

29.5

28.2

Fund Facilities

8.9

13.5

Total co-investments

131.8

136.9

 

Equity Securities

Inspired, held by OCPEE Feeder, continues to grow rapidly through acquisition and organically, with expansion into the Middle East, and further acquisitions of schools in Costa Rica and Spain. The enrolment levels and current trading are in line with expectations. This is reflected in the uplift in fair value since 31 December 2017.

Time Out's share price has fallen by 31% from £1.31 at 31 December 2017 to £0.91 at 30 June 2018. Time Out is showing signs of positive momentum in the Time Out Markets concept, which has proved successful in Lisbon. Time Out Markets are scheduled to roll-out in New York and Miami in 2018 followed by Boston, Chicago and Montreal in 2019. 

 

Debt Securities

OCI provides debt facilities to certain underlying entities and portfolio companies. These debt facilities are provided on an arm's-length basis at competitive market interest rates. The interest income generated from these facilities exceeds the interest earned on OCI's bank deposits, allowing OCI to earn higher returns on part of its cash reserves. During the period, OCI has earned £2.2m interest from the debt facilities provided.

During the period, the debt facility provided to North Sails was increased by £3.2m. This loan was used to provide additional working capital to North Sails Apparel. OCI continues to support the turnaround of North Sails and in the future growth and earnings that are expected.

Post period-end, the Daisy loan was repaid with OCI receiving £14.9m, including accrued interest. The remaining balance payable is £14.6m. In July 2018, Time Out drew £15.0m on the £20.0m loan facility provided by OCI. This facility bears 10% interest and is repayable on 31 October 2019. 

OCI also provides revolving credit facilities to each of 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 of the Oakley Funds. As at 30 June 2018, OCI had outstanding debt facilities of £8.9m to the Oakley Funds, including accrued interest, a decrease of £4.6m from 31 December 2017, primarily due to repayments of the Oakley Fund II and Fund III facilities.

 

Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2018

 

 

Notes

Unaudited

six months ended 30 June 2018
£'000

Unaudited

six months ended 30 June 2017
£'000

Income

 

 

 

Interest income

 

 3,511 

 4,544 

Net realised gains on investments at fair value through profit and loss

6, 7

 92,667 

 6,168 

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

6, 7

 (63,408)

 1,999 

Net foreign currency gains

 

 1,750 

 1,965 

Other income

 

 187 

 246 

Total income

 

 34,707 

 14,922 

Expenses

9

 (2,310)

 (4,008)

Operating profit 

 

 32,397 

 10,914 

Interest expense

 

 (97)

 (30)

Profit attributable to equity shareholders/total comprehensive income

 

 32,300 

 10,884 

Earnings per share

 

 

 

Basic and diluted earnings per share

10

 £0.16 

 £0.05 

 

The Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

Consolidated Balance Sheet

for the six months ended 30 June 2018

 

 

 

Notes

Unaudited six months ended 

30 June 2018
£'000

Audited
 year ended 

31 Dec 2017
£'000

Unaudited six months ended

 30 June 2017
£'000

Assets

 

 

 

 

Non-current assets

 

 

 

 

Investments

6, 7

 381,526 

 419,627 

 451,394 

 

 

 381,526 

 419,627 

 451,394 

Current assets

 

 

 

 

Trade and other receivables

 

 117 

 668 

 743 

Cash and cash equivalents

 

 149,760 

 117,836 

 71,767 

 

 

 149,877 

 118,504 

 72,510 

Total assets

 

 531,403 

 538,131 

 523,904 

Liabilities

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

 1,671 

 36,091 

 51,297 

Total liabilities

 

 1,671 

 36,091 

 51,297 

Net assets attributable to shareholders

 

 529,732 

 502,040 

 472,607 

Equity 

 

 

 

 

Share capital 

12

 2,048 

 2,048 

 2,048 

Share premium

12

 244,533 

 244,533 

 244,533 

Retained earnings

 

 283,151 

 255,459 

 226,026 

Total shareholders' equity

 

 529,732 

 502,040 

 472,607 

Net asset per ordinary share

 

 

 

 

Basic and diluted net assets per share

11

 £2.59 

 £2.45 

 £2.31 

Ordinary shares in issue 

 

 204,804 

 204,804 

 204,804 

 

The Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

Consolidated Statement of Changes in Equity

for the six months ended 30 June 2018

 

 

 

Share
capital
£'000

Share
premium
£'000

Treasury
shares
£'000

Retained
earnings
£'000

Total
shareholders'
equity
£'000

For the six months ended 30 June 2018

 

 

 

 

 

Balance at 1 January 2018

 2,048 

 244,533 

 -   

 255,459 

 502,040 

Profit for the period/total comprehensive income

 -   

 -   

 -   

 32,300 

 32,300 

Dividends 

 -   

 -   

 -   

 (4,608)

 (4,608)

Total transactions with equity shareholders

 -   

 -   

 -   

 (4,608)

 (4,608)

Balance at 30 June 2018

 2,048 

 244,533 

 -   

 283,151 

 529,732 

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 

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 

 

The Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

Consolidated Statement of Cash Flows

for the six months ended 30 June 2018

 

 

 

Unaudited six months ended 

30 June 2018
£'000

Unaudited six months ended 

30 June 2017
£'000

Cash flows from operating activities

 

 

Purchases of investments

 (90,125)

 (103,888)

Sales of investments

 126,106 

 51,016 

Interest income received

 433 

 4,548 

Expenses paid

 (1,722)

 (3,350)

Finance cost paid

 (97)

 (30)

Other income received

 187 

 246 

Net cash provided by/ (used in) operating activities

 34,782 

 (51,458)

Cash flows from financing activities

 

 

Proceeds from treasury shares sold

 -   

 23,291 

Dividends paid

 (4,608)

 (8,540)

Net cash provided by/ (used in) financing activities

 (4,608)

 14,751 

Net increase in cash and cash equivalents

 30,174 

 (36,707)

Cash and cash equivalents at the beginning of the period

 117,836 

 106,509 

Effect of foreign exchange rate changes

 1,750 

 1,965 

Cash and cash equivalents at the end of the period

 149,760 

 71,767 

 

The Notes to the Consolidated Financial Statements are an integral part of these financial statements.

 

Notes to the Consolidated Interim Financial Statements

for the six months ended 30 June 2018

 

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 AIM 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.

The Directors consider that it is appropriate to adopt the going concern basis of accounting in preparing these condensed interim financial statements. In reaching this assessment, the Directors have considered a wide range of information relating to the present and future conditions, including the condensed statement of financial position, future projections, cash flows and the longer-term strategy of the Company.

 

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 2017, 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 3 September 2018 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

The accounting policies used are consistent with those applied in the latest annual consolidated financial statements, except for the adoption of new standards effective as of 1 January 2018. 

The changes in accounting policies are also expected to be reflected in the Company's annual consolidated financial statements as at and for the year ending 31 December 2018.

The Company has adopted IFRS 9 Financial Instruments and IFRIC 22 Foreign Currency Transactions and Advance Consideration. As required by IAS 34, the nature and effect of these changes have been disclosed below:

A.      IFRS 9 Financial Instruments

IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting. It includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39.

   i.        Classification and measurement of financial assets and financial liabilities

IFRS 9 contains a new classification and measurement approach for financial assets with three principal classification categories for financial assets: measured at amortised cost, fair value through other comprehensive income and fair value through profit and loss. It eliminates the existing IAS 39 categories of held to maturity, loans and receivables and available for sale. The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics.

IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities as the new requirements affect only the accounting of financial liabilities specifically classified at fair value through profit or loss. The Company does not have such liabilities.

The adoption of IFRS 9 has not had a significant effect on the Company's accounting policies relating to financial assets or financial liabilities. 

Under IAS 39, the Company classified its investments in private equity funds, direct investments and loans to the Funds, portfolio companies and other loans (herein referred to as "unquoted debt securities") as financial assets held at fair value through profit and loss. These investments were managed on a fair value basis and their performances were monitored on this basis. The Company has elected to continue to classify these investments as financial assets held at fair value through profit and loss under IFRS 9 and no changes to retained earnings are required.

Trade and other receivables were classified at amortised cost under IAS 39.  The Company continues to classify it as amortised cost under IFRS 9 and no adjustments to the consolidated interim financial statements are required.

   ii.       Impairment of financial assets

IFRS 9 replaces the 'incurred loss' model in IAS 39 with a forward looking 'expected credit loss' model. The new impairment model applies to financial assets measured at amortised cost and debt investments at fair value through other comprehensive income, but not to investments in equity instruments. Under IFRS 9, credit losses are recognised earlier than under IAS 39.

The financial assets held by the Company at amortised cost consist of trade receivables and cash and cash equivalents. Due to the nature of these financial assets, the Company does not believe that the risk of impairment is significant and has determined that the credit risk at the reporting date is low and does not significantly increase after initial recognition.

   iii.      Hedge accounting

The new hedge accounting model introduced by IFRS 9 requires hedge accounting relationships to be aligned with the Company's risk management strategy and objectives, and to apply a more qualitative and forward-looking approach to assessing their effectiveness. Hedge accounting relationships are to be discontinued only when the relationships no longer qualify for hedge accounting.

The Company does not currently apply hedge accounting and changes to hedge accounting due to IFRS 9 does not affect the Company.

The Company has elected to apply IFRS 9 retrospectively.

B.      IFRIC 22 Foreign Currency Transactions and Advance Consideration

IFRIC 22 (the "Interpretation") clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. The Interpretation clarifies that, in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine a date of the transactions for each payment or receipt of advance consideration. 

This Interpretation does not have any impact on the Company's consolidated interim financial statements.

Several other amendments and interpretations apply for the first time effective 1 January 2018 but do not have a material effect on the Company's consolidated interim financial statements and did not require retrospective adjustments. 

A number of standards have been issued but are not yet effective as at the period end. 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 reported results of the Company are sensitive to the accounting policies, assumptions and estimates that underlie the preparation of its consolidated interim financial statements. IFRS require the Board of Directors, in preparing the Company's consolidated interim financial statements, to select suitable accounting policies, apply them consistently and make judgments and estimates that are reasonable and prudent. The Company's estimates and assumptions are based on historical experience and the Board of Directors' expectation of future events and are reviewed periodically. The actual outcome may be materially different from that anticipated. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods.

The judgments, assumptions and estimates involved in the Company's accounting policies that are considered by the Board of Directors to be most important to the Company's results and financial condition are the fair valuation of the investments and the assessment regarding investment entities. 

In preparing the condensed consolidated interim financial statements, the significant judgments made 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 2017 except for new significant judgments and key sources of estimation uncertainty related to the application of IFRS 9 and IFRIC 22, which are described in Note 3.

(a)        Fair valuation of investments

The fair values assigned to investments held at fair value through profit and loss are based upon 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 relevant IFRS requirements. 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 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 Board of Directors, the Company's Risk Committee (the "Risk Committee") and Oakley Capital Limited (the "Investment Adviser") attribute great importance to professional risk management, proper understanding and negotiation of appropriate terms and conditions and active monitoring, including a thorough analysis of reports and financial statements and ongoing review of investments made. It is also key to structure the investment portfolio taking into account issues such as liquidity and tax. The Company has investment guidelines that set out its overall business strategies, its tolerance for risk and its general risk management philosophy and has established processes to monitor and control the economic impact of these risks. The Investment Adviser provides the Board of Directors with recommendations as to the Company's asset allocation and annual investment levels that are consistent with the Company's objectives. The Risk Committee reviews and agrees policies for managing the risks.

The Company has exposures to the following risks from financial instruments: credit risk, liquidity risk and market risk (including interest rate risk, currency risk and price risk). The Company's overall risk management process focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance.

There have been no changes to the membership of the Risk Committee nor to any of the Company's risk policies since 31 December 2017 and as a result the condensed consolidated interim financial statements do not include all financial risk management information and disclosures required in the annual consolidated 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 2017.

 

6. Investments

Investments as at 30 June 2018:

 

31 Dec 2017 

Fair value
£'000

Purchases/ capital
calls
£'000

Total sales*/ distributions
£'000

Realised gains /(losses)
£'000

Interest and other
£'000

Change in unrealised gains/ (losses)
£'000

30 June 2018 

Fair value
£'000

Oakley funds

 

 

 

 

 

 

 

Fund I

 36,551 

 -   

 -   

 -   

 -   

 (11,795)

 24,756 

Fund II

 137,054 

 15,732 

 (102,748)

 94,476 

 -   

 (61,031)

 83,483 

Fund III

 109,058 

 28,613 

 (10,644)

 (1,809)

 -   

 16,220 

 141,438 

Total Oakley funds

 282,663 

 44,345 

 (113,392)

 92,667 

 -   

 (56,606)

 249,677 

Co-Investment funds

 

 

 

 

 

 

 

OCPE Education (Feeder) LP

 26,280 

 32 

 -   

 -   

 -   

 5,773 

 32,085 

Total Co-Investment funds

 26,280 

 32 

 -   

 -   

 -   

 5,773 

 32,085 

Total funds

 308,943 

 44,377 

 (113,392)

 92,667 

 -   

 (50,833)

 281,762 

Quoted equity securities

 

 

 

 

 

 

 

Time Out Group plc

 41,182 

 -   

 -   

 -   

 -   

 (12,575)

 28,607 

Total quoted equity securities

 41,182 

 -   

 -   

 -   

 -   

 (12,575)

 28,607 

Unquoted debt securities

 

 

 

 

 

 

 

Daisy Group Holdings Limited

 12,701 

 -   

 -   

 -   

 830 

 -   

 13,531 

Ellisfield (Bermuda) Limited

 15,455 

 -   

 -   

 -   

 470 

 -   

 15,925 

Fund I

 6,351 

 918 

 (1,474)

 -   

 198 

 -   

 5,993 

Fund II

 -   

 7,159 

 (7,224)

 -   

 65 

 -   

 -   

NSG Apparel BV

 24,615 

 -   

 -   

 -   

 1,450 

 -   

 26,065 

Oakley Capital III Limited

 7,168 

 -   

 (4,452)

 -   

 234 

 -   

 2,950 

Oakley NS (Bermuda) LP

 3,212 

 3,213 

 -   

 -   

 268 

 -   

 6,693 

Total unquoted debt securities

 69,502 

 11,290 

 (13,150)

 -   

 3,515 

 -   

 71,157 

Total investments

 419,627 

 55,667 

 (126,542)

 92,667 

 3,515 

 (63,408)

 381,526 

 

*Total sales include redemptions, loan repayments and transfers

 

Investments as at 30 June 2017:

 

31 Dec 2016
Fair value
£'000

Purchases /capital calls
£'000

Total
sales*/ distributions
£'000

Realised gains/ (losses) £'000

Interest and other
£'000

Change in unrealised gains/ (losses)
£'000

30 June 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 include 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, 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 2018   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

-

281,762

281,762

Quoted equity securities

28,607

-

28,607

Unquoted debt securities

-

71,157

71,157

Total investments measured at fair value

28,607

352,919

381,526

 

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

 

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 2018 or 30 June 2017.

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 Valuation Guidelines with reference to the most appropriate information available at the time of measurement. The condensed consolidated interim financial statements as of 30 June 2018 include Level III investments in the amount of £352,918,501; representing approximately 66.62% of equity (2017: £409,112,256; 86.56%). 

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 2018, 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

30,146

112,993

210,866

35,987

Loans

(4,437)

(12,623)

(48,401)

-

Provisional profit allocation

-

(7,358)

(6,940)

-

Other net assets

2,269

1,341

4,328

273

Total value of the Fund attributable to the Company 

27,978

94,353

159,853

36,260

 

£'000

£'000

£'000

£'000

Total value of the Fund attributable to the Company 

24,756

83,483

141,438

32,085

 

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

 

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 Board of Directors performing ongoing monitoring procedures, primarily discussions with the Investment Adviser;

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

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

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 2018 a 10% adjustment to the fair value of the unquoted portfolio companies held by the Funds would result in a 5.4% movement in net assets attributable to shareholders (2017: 6.9%). A 10% decrease to the fair value of the unquoted portfolio companies held by the Funds would have an equal and opposite effect.

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 2018 a 1% adjustment would result in a 0.1% movement in net assets attributable to shareholders (2017: 0.3%). A 1% decrease to the discount factor would have an equal and opposite effect.

Transfers between levels

There were no transfers between the Levels during the period ended 30 June 2018 and 2017. 

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 2018 and 2017, are as follows:

Level I Investments:

Quoted equity securities

As at 30 June

 2018
£'000

As at 30 June

2017
£'000

Fair value at the beginning of the period

41,182

43,854

Net change in unrealised gains/(losses) on investments

(12,575)

(1,572)

Fair value of Level I investments at the end of the period

28,607

42,282

 

Level III Investments:

For the six months ended 30 June 2018

Funds
£'000

Unquoted debt securities
£'000

Total
£'000

Fair value at the beginning of the period

308,943

69,502

378,445

Purchases 

44,377

11,290

55,667

Proceeds on disposals (including interest)

(113,392)

(13,150)

(126,542)

Realised gain on sale

92,667

-

92,667

Interest income and other fee income

-

3,515

3,515

Net change in unrealised gains/(losses) on investments

(50,833)

-

(50,833)

Fair value at the end of the period

281,762

71,157

352,919

For the six months ended 30 June 2017

Funds
£'000

Unquoted debt securities
£'000

Total
£'000

Fair value at the 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 the end of the period

320,293

88,819

409,112

 

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 June

 2018
£'000

As at 30 June

 2017
£'000

Cash and cash equivalents

149,760

71,767

Trade and other receivables

117

743

Trade and other payables

1,671

51,297

 

As at 30 June 2017, 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.

 

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.   With the exception of capital calls payable, 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 2018 and 2017.

 

The segment information for the period ended 30 June 2018 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

 92,667 

 -   

 92,667 

 -   

 92,667 

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

 (50,833)

 (12,575)

 (63,408)

 -   

 (63,408)

Interest income

 -   

 3,455 

 3,455 

 56 

 3,511 

Net foreign currency gains/(losses)

 -   

 -   

 -   

 1,750 

 1,750 

Other income

 -   

 60 

 60 

 127 

 187 

Expenses

 -   

 -   

 -   

 (2,310)

 (2,310)

Interest expense

 -   

 -   

 -   

 (97)

 (97)

Profit /(loss) for the period

 41,834 

 (9,060)

 32,774 

 (474)

 32,300 

Total assets

 281,762 

 99,764 

 381,526 

 149,877 

 531,403 

Total liabilities

 -   

 -   

 -   

 (1,671)

 (1,671)

Net assets

 281,762 

 99,764 

 381,526 

 148,206 

 529,732 

Total assets include:

 

 

 

 

 

Financial assets at fair value through profit and loss

 281,762 

 99,764 

 381,526 

 -   

 381,526 

Cash and others

 -   

 -   

 -   

 149,877 

 149,877 

 

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)

Interest expense

 -   

 -   

 -   

 (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 others

 -   

 -   

 -   

 72,510 

 72,510 

 

9. Expenses

 

Six months ended 30 June 2018
£'000

Six months ended 30 June 2017
£'000

Management fees

-

535

Operational and advisory fees

1,234

1,227

Professional fees

378

337

Performance fees

198

1,079

Other expenses

500

830

 

2,310

4,008

 

10. Earnings per share

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

 

Six months ended 30 June 2018

Six months ended 30 June 2017

Basic and diluted earnings per share

£0.16 

£0.05 

Profit for the period ('000)

£32,300 

£10,884 

Weighted average number of shares outstanding ('000)

204,804

202,898

 

11. 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 June 2018

As at 30 June 2017

Basic and diluted net asset value per share

£2.59 

£2.31 

Net assets attributable to shareholders ('000)

£529,732 

£472,607 

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

204,804

204,804

 

12. 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 2018, the Company's issued and fully paid share capital was 204,804,036 Ordinary shares (2017: 204,804,036). 

 

As at 30 June 2018
'000

As at 30 June 2017
'000

Ordinary shares outstanding at the beginning of the period

204,804

189,804

Ordinary shares issued and fully paid

-

-

Treasury shares purchased

-

-

Treasury shares sold

-

15,000

Ordinary shares outstanding at the end of the period

204,804

204,804

 

13. Commitments

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

 

As at 30 June

 2018
€'000

As at 30 June

 2017
€'000

 

Fund I

 

 

Total capital commitment (2018: £166,694; 2017: £165,450)

188,398

188,398

Called capital, beginning of the period

185,760

178,978

Capital calls during the period (2018: 0%; 2017: 3.6%)

-

6,782

Called capital, end of the period (2018: £164,360; 2017: £163,134)

185,760

185,760

Unfunded capital commitment (2018: £2,334; 2017: £2,316)

2,638

2,638

Aggregate recycled commitment

13,000

13,000

 

Fund II

 

 

Total capital commitment (2018: £168,112; 2017: £175,639)

190,000

200,000

Called capital, beginning of the period

158,650

153,000

Capital calls during the period (2018: 9.5%; 2017: 7%)

18,050

14,000

Called capital, end of the period (2018: £156,344; 2017: £146,659)

176,700

167,000

Unfunded capital commitment (2018: £11,768; 2017: £28,980)

13,300

33,000

 

Fund III

 

 

Total capital commitment (2018: £288,250; 2017: £285,413)

325,780

325,000

Called capital, beginning of the period

123,797

9,750

Capital calls during the period (2018: 10%; 2017: 23%)

32,578

74,750

Called capital, end of the period (2018: £138,360; 2017: £74,207)

156,375

84,500

Unfunded capital commitment (2018: £149,889; 2017: £211,206)

169,405

240,500

Total unfunded capital commitments (2018: £163,991; 2017: £242,502)

185,343

276,137

 

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

 

As at 30 June 2018
£'000

As at 30 June 2017
£'000

 

Total revolving loan facility commitments:

 

 

Fund I

5,000

5,000

Fund II

20,000

20,000

Fund III

20,000

20,000

Time Out Group plc

20,000

-

Oakley NS (Bermuda) LP

7,850

3,000

 

72,850

48,000

 

Total unfunded loan commitments:

 

 

Fund I 

2,575

-

Fund II 

20,000

2,227

Fund III

20,000

20,000

Time Out Group plc

20,000

-

Oakley NS (Bermuda) LP

1,637

700

 

64,212

22,927

 

14. 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.

As per the management agreement dated 30 July 2007, the Company appointed Oakley Capital (Bermuda) Limited (the "Manager") to provide management services. On 31 March 2017, the management agreement was terminated.

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 Company.

The Investment Adviser and the Administrative Agent are considered related parties to the Company given the direct and indirect control and transactions with them. Until 31 March 2017, the Manager was considered a related party to the Company given the direct and indirect control and transactions with the Manager. 

Management fees and performance fees paid to the Manager and operational fees, advisory fees and performance fees paid to the Administrative Agent are disclosed in Note 9. Under the Operational Services Agreement, the Administrative Agent may also recharge costs incurred, either directly or indirectly by its contracted advisors, primarily the Investment Adviser, on behalf of the Company.  For the period ended 30 June 2018, the Administrative Agent recharged other costs to the Company totalling £367,793 (2017: £218,829) and is included in other expenses in Note 9. The agreements between the Company and these service providers are based on normal commercial terms. 

During the period ended 30 June 2018, the Investment Adviser did not directly recharge staff costs or overheads to the Company (2017: staff costs of £409,722 and overheads of £2,343 and are included in other expenses in Note 9). 

As part of the Company's investment in Fund III, the Company agreed to pay Oakley Capital Manager Limited, the manager of Fund III (the "Fund III Manager"), an option fee of €1,500,000 to secure the option to increase the Company's commitment in Fund III by an additional €150,000,000 at any time on or prior to 31 December 2016. Under the terms of the option agreement, the Fund III Manager would repay the option fee in the event that the Company exercises the option. In November 2016, the Company exercised 50% of the option when it committed an additional €75,000,000 to Fund III. The Fund III Manager repaid 50% of the option fee to the Company at that time. In December 2016, it was agreed that the Fund III Manager would repay the remaining 50% of the option fee. The Company did not exercise the remaining portion of the option and the option agreement expired on 31 December 2016. During the period ended 30 June 2018, the Fund III Manager repaid the remaining 50% of the option fee of €750,000, along with accrued interest. As at 30 June 2018 no balance is receivable from the Fund III Manager (2017: €750,000 (£639,300) which is included in trade and other receivables in the consolidated balance sheet).

One Director of the Company is also a director of the Investment Adviser and Oakley Advisory Limited, entities which provide services to, and receive compensation from, the Company. Until 31 March 2017, one Director of the Company was also a director of the Manager, an entity that provided services to, and received compensation from, the Company. The agreements between the Company and these service providers were and are based on normal commercial terms. 

Throughout the period ended 30 June 2018, no Director of the Company had a personal interest in any transaction of significance for the Company (2017: none).

Fund I is considered a related party due to the investment the Company has in Fund I.  During the year ended 31 December 2017, the Company acquired an interest in OCPE Education L.P. from most limited partners of Fund I and paid €23,492,217 (£20,795,311) for such additional interests in OCPE Education L.P.  

 

15. Events after balance sheet date

The Board of Directors has evaluated subsequent events from the period ended 30 June 2018 to 3 September 2018, which is the date the condensed consolidated interim financial statements were approved. The following events have been identified for disclosure:

On 1 July 2018, the Company agreed to consolidate all of the outstanding balances, including accrued interest, of its loans to Fund I. The Company issued a £6,023,377 loan facility, repayable 28 June 2019. 

On 5 July 2018, the Company received a repayment of £700,000 principal and accrued interest of £151,602 from Oakley Capital III Limited. 

On 6 July 2018, the Company paid a capital call of €631,925 (£558,432) to OCPE Education (Feeder) L.P.

On 16 July 2018, Daisy Group Limited repaid, in full, its £9,000,000 loan facility with the Company.

On 3 August 2018, Time Out Group plc drew £15,000,000 on a £20,000,000 loan facility.  The Company entered into a loan facility on 27 March 2018.  The facility bears interest of 10%   and is repayable on 31 October 2019.

On 30 August 2018, the Company received a distribution of €14,046,963 (£12,588,888) from Fund II arising from the sale of Damovo.

On 3 September 2018, the Board of Directors declared and approved payment of an interim dividend of 2.25 pence per ordinary share which will result in a dividend payment of £4,608,091 payable on 25 October 2018. 

 


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Half-year Report - RNS