Nick Goodway: SVG is doing nicely, so perhaps its big critic should head for the exit


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The Independent Online

Anyone who bought into SVG Capital’s £173m rights issue and share placing at the start of 2009 has seen the 100p they paid then quadrupled to more than 400p today.

Not bad for a company that has regularly been under fire from its biggest shareholder, Coller Capital, which wanted it to sell off its investments and return all the cash to shareholders.

In fact, under the stewardship of its chief executive Lynn Fordham, SVG has already returned more than £200m to shareholders through share  buybacks since December 2011, and is on course to deliver  another £270m within the next three years.

SVG stopped paying dividends in 2008 and concentrated on capital growth. That has proved to be a sound policy.

It has also coincided with a period in which Permira (where pretty much all SVG’s money was invested five years ago) has seen some of its best private equity performance and, in particular, some spectacular realisations.

Those included the Far Eastern gaming group Galaxy Entertainment, the fashion group Valentino and TDC, the Danish communications group.

More recently, Permira – and by extension SVG – has benefited richly from the flotations of Hugo Boss, the snappy suits firm, and ProSiebenSat, the German media group.

SVG has even managed to rediscover value in New Look, the fashion retailer, which it wrote down to nil two years ago but reassessed as worth £10m today.

All this helped SVG’s net asset value jump 23 per cent to 480p a share in the last six months. That in a period when the FTSE 350’s total return was just 8 per cent and the MSCI World Index’s only 5 per cent.

But Ms Fordham has done far more than just reap the rewards of Permira’s management buy-out experts’ skills.

She sold 50.1 per cent of the in-house private equity manager SVG Advisers to Martin Gilbert’s Aberdeen Asset Management in one of those rare deals that makes sense for both sides. Latterly, she has agreed the sale of the small equity fund manager SVG Investment Managers in a deal that should realise just over £18m of cash.

Now Ms Fordham, with the backing of pretty much all SVG’s shareholders other than Coller’s 20 per cent, is realising a  strategy for the firm that does not match what its largest shareholder wanted.

To be more specific, she is investing new money into new private equity funds, and she is moving her eggs out of the one Permira basket to bring in rival Cinven. That achieves more of a balance, with the Permira fund looking at midsize to large  global buyouts while Cinven specialises more in the European buyout market.

At the moment, most of the action in private equity is in the United States but there are signs that in Northern Europe (away from those countries still being battered by the eurozone crisis) activity may be about to pick up.

Coller has attacked Ms Fordham at the company’s last two annual meetings. Don’t feel sorry for her – she can give every bit as good as she gets. SVG shares have pretty much been treading water for the past six months and, rather than priming its guns for next year’s annual meeting, perhaps now would be a sensible time for Coller to get out. Others might appreciate the strategy and current valuation of the shares more.

Time banks trimmed back more branches

Banks across the European Union closed 5,500 branches last year, according to data from the European Central Bank. That’s down from the 7,200 that were axed in 2011, and takes the total closed since the start of the financial crisis in 2008 to more than 20,000.

But with almost 219,000 bank branches open across the Continent, Europe is still horribly overbanked. There is one branch for every 2,300 citizens of the EU.

In the UK, we have 11,870 bank branches, which is one for every 5,100 of us. That is rather more efficient, not surprisingly, than Cyprus, which at the end of 2012 had a branch for every 1,256 of the island’s residents.

The UK’s total number of branches is not even a third of that of either France or Spain. But the fact is that this country is still overbanked. Conventional wisdom is that a successful UK bank – be it an incumbent or a challenger – would ideally have somewhere between 700 and 800 branches.

Interestingly, that’s not much more than the rediscovered TSB, whose 631 branches are about to hit our streets and will be floated off, under European Union state aid orders, by Lloyds Banking Group sometime next year.

Even taking into account the 1000-odd branches they have to sell or spin off, Lloyds will still have 2,260 branches and Royal Bank of Scotland (NatWest) 1,750. Barclays has more than 1,700, HSBC around 1,500 and Santander almost 1,200.

In the age of rapidly growing internet banking, it cannot make sense for our big banks to own so much bricks and mortar.

It’s hard to buy into Cath Kidston success

I know that I should be blowing the trumpet for a British business that has been as successful as Cath Kidston.

Its latest figures showed sales rose 19 per cent in the year to March to top £100m for the first time. It has no bank borrowings and earnings before interest, tax, depreciation and amortisation (the private equity-preferred version of profits) rose 13 per cent to £21m.

A laudable performance, and I should be waiting with bated breath for the opening of its new flagship store in London’s Piccadilly later this year.

But I can’t actually bring myself to praise all this. The stuff is ubiquitous, relentlessly twee  and just too downright bloody cheerful.