CVC bucks the downturn with fees up 24%

Revenues roll at private equity firm thanks to fund management success and limited presence in US

The private equity firm CVC, which has stakes in the AA and Debenhams, has posted record revenues for the year to March 2008 as its fund management fees increased by 24 per cent to€£228m.

The Luxembourg-based business, run by Leeds-born Michael Smith, managed to steer through the credit crisis by having limited exposure to the US market, where it has just one office. This compares to 12 in Europe and six in Asia. It had total turnover of £230.7m, and although operating costs were up 43 per cent to £181.7m, even this is a sign of its success.

A doubling of staff costs to £65m accounts for the bulk of this increase. However, the company only took on 17 per cent more employees, indicating that hefty bonuses were paid out. This isn't surprising as, during the financial year, CVC announced that its latest investment fund, the £6bn European Fund IV, had achieved a 52.9 per cent internal rate of return – another record result for the company.

The market value of the business is hard to gauge. Traditional investment companies change hands for about 2 per cent of the funds that are under their management, but buyout firms should be worth more because they generate higher returns. So CVC could be worth as much as 5 per cent of the £23.6bn in funds it manages. This would put a £1.18bn price tag on the company.

Were it to change hands, the biggest beneficiaries would be its chairman Mr Smith and co-founder Donald Mackenzie. They both directly own 9.75 per cent stakes, which would be worth £115m each.

Their biggest returns come from gains in the size of CVC's funds, which is known in the buyout industry as "carried interest".

The company's 140 staff are paid an average of £465,000, which sent its operating profits down by 26 per cent. Despite this, CVC still managed to pump up its bottom line.

As CVC's results began their meteoric rise, it banked £47m in 2007 alone, taking its balance to £108.7m. It is now reaping the rewards as its interest income hit £77.3m this financial year.

Even this isn't sitting idle, as CVC invested £50m of its own money in Fund IV during 2007. It also recently raised the biggest-ever fund in the Asia Pacific region with a commitment of £2.6bn, and in July this year an interim close was put on its £10bn European Fund V.

During the financial year, a complex shuffle saw its business move to a new investment structure in Luxembourg, which is still owned by CVC's nominees. This move led to CVC registering a€£1.05bn profit as an extraordinary item, but stripping it out of the net result yields an after- tax profit of £96m, up 72 per cent on the previous year.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Louis Theroux: By Reason of Insanity takes him behind the bars again
tvBy Reason of Insanity, TV review
Arts and Entertainment
Cassetteboy's latest video is called Emperor's New Clothes rap
videoThe political parody genius duo strike again with new video
Seth Rollins cashes in his Money in the Bank contract to win the WWE World Heavyweight Championship
WWERollins wins the WWE World Heavyweight title in one of the greatest WrestleMania's ever seen
Arts and Entertainment
Jim Davidson performs his comedy show at Edinburgh Festival 2014
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor