Oakley Capital Investments Limited (OCL) has announced its annual results for the year ended 31 December 2015. During the second half of the year, the company’s NAV per share increased by 9.9% to £2.00 (30 June 2015: £1.82) but the company says that this fair value increase was countered by the expected short-term dilutive impact of the placing of 78.8 million new ordinary shares (raising £130m), so that NAV ended broadly in line with that at the end of the previous year (31 December 2014: £2.01).
Oakley Capital Investments Limited provides investors with access to the investment strategy being pursued by the investment manager’s limited partnership funds: Oakley Capital Private Equity (Fund I) and Oakley Capital Private Equity II (Fund II). OCL says that, during the year, there was a strong increase in the fair value across the Limited Partnership portfolio of 33.6%, measured on a like-for-like basis, which was largely driven by EBITDA growth. There was a high volume of deal activity across the Funds and through OCL’s co-investment programme.
OCL says that Fund I is now considered fully invested, with a realised gross IRR of 49.1% and gross money multiple of 3.6x invested cost (it has three investments remaining). OCL says that Fund II made further significant progress during the year and is now close to being fully invested The fund reportedly deployed €153.2m during the year in new and follow on investments bringing it to 72.5% invested (across nine companies). OCL says that 57% of its capital commitment of €200m to Fund II had been called at the 31 December 2015. Fund II made investments in: Damovo, Parship, Daisy, Verivox, Host Europe and Educas over the period. OCL says that, despite Fund II being relatively young (it closed in December 2014), it has a gross IRR of 53.0% and gross money multiple of 1.6x. OCL says that the exit of Verivox during the period generated a gross money multiple of 14.5x and a gross IRR of 71.4%. OCL also says that, post year end, OCL has made a commitment of €250m to Fund III, which will execute the same strategy as Funds I and II.
In terms of NAV breakdown, OCL says that its net asset value increased in the year by £125.2m to £382.1m. Of this total net asset value, £56.3m represents the fair value of its investment in Fund I, £102.1m represents the fair value of its investment in Fund II and £102.6m represents unquoted debt and equity securities provided directly to a certain number of the Funds’ portfolio companies and Bellwood Holdings Limited (a founder partner in Educas). The Company has short-term revolving credit facilities which, at 31 December 2015, had an aggregate of £12.9 million in principal outstanding. The net balance of £108.2 million was held by the Company as cash and cash equivalents and other net assets.
In terms of outlook, OCL says that the overall economic backdrop for the Funds has remained favourable to the Investment Adviser’s strategy. They say that there are increasing opportunities for buyout and cross-border M&A activity in the Funds’ core markets and that debt has become very inexpensive. However, in their view, the biggest challenge facing private equity firms is pricing and that despite increased volatility in capital markets asset valuations and investor confidence remains high. They consider that private equity firms are under pressure to deploy capital, but there is a general scarcity of primary deals especially in the UK mid-market. High valuations need not necessarily cause concern for private equity funds, since they tend to be more confident they can improve portfolio company performance and therefore valuations. However, in these conditions private equity firms may struggle to meet the growth expectations of investors if they cannot find a way to meet the pressure to deploy capital and the requirement to maintain pricing discipline.
Oakley Capital NAV increase offset by short-term impact of fund raising : OCL