PORTFOLIO REVIEWINVESTING IN OUR PORTFOLIOcreating longterm valueMUSIC MAGPIEANTLERThe root motivation of our team at <strong>LDC</strong> is to support theambitions of the management teams we back in growingtheir businesses and fulfilling their potential.Throughout 2012 and acrossour portfolio, we were ableto evidence that commitment,investing in our portfolio todeliver improved financialperformance, enhancedcompetitiveness, jobcreation, forward growthopportunities and long-termshareholder value.In the year to date, forexample, we’ve provided over£40m of additional investmentto enable investee companiesto make strategically importantacquisitions, creating newservices, new vertical marketsand new overseas territoriesfor our portfolio. This takes ourtwo-year total funding forbolt-on acquisitions to morethan £100m.Combined with initiativesto drive expansion, weare particularly pleased toreport that 61 per cent ofour portfolio companies aretrading ahead of last year,despite the headwinds of a lowgrowth domestic economy andwidespread uncertaintyin the eurozone, the UK’smain trading partner.This, more than anything,demonstrates the calibre ofmanagement teams that weback and underlines theirpassion to drive performance.Collectively, this group of 80companies now generates anaggregate turnover of £3bn,a figure that would place it inthe top 10 of Britain’s largestprivately owned companies,and has a book value of morethan £2bn. It employs some30,000 people and generatesannual profits of £430m.As importantly, given theincreased focus on export-ledgrowth, our portfolio continuesto increase the proportionof sales to overseas markets,generating over £450m ofcombined revenue fromnon-UK markets.These achievements have beenrecognised throughout the yearin several key league tables.We were delighted to beranked once again as the mostsuccessful buyout house in TheSunday Times Buyout Track,which ranks the fast growingUK private equity backedbusinesses by profits (EBITDA).Despite the prevailing lowgrowth environment, seven<strong>LDC</strong> portfolio companiesfeatured in the 2012 leaguetable of 100 businesses.Elsewhere, three of ourinvestments were ranked in TheSunday Times’ Tech Track 100,the definitive list of Britain’sfastest-growing tech-drivenbusinesses. Congratulations tomusicmagpie.co.uk, the onlinebuyer and re-seller of CDs,DVDs and video games (6th),hosting services group UK2.net(53rd) and fast-growinginternet service providerMetronet (87th).Meanwhile, six of ourmanagement teams wereranked in the top 200businesses in the UK for fastestgrowing international salesin The Sunday TimesInternational Track.With senior debt standingat 1.5xEBITDA within theportfolio, this also demonstratesthat our exposure to financialrisk is relatively low, withsubsequent savings from debtservicing costs enabling us tomake further investment in theportfolio to support organicand acquisitive growth.Across the piece, the role ofour Value EnhancementGroup in helping managementteams deliver such marketleadingperformance hasbeen key. From integrationsupport for acquisitions, ITinfrastructure re-design, drivingefficiency savings throughsmarter procurement, the teamcontinues to help differentiate<strong>LDC</strong> in the market as a providerof added value support tomanagement teams, both at astrategic and operational level.10<strong>REFLECTIONS</strong>
CASE STUDIESCASE STUDY: A-GASIn April 2011, <strong>LDC</strong> invested inspecial gases and chemicalsbusiness A-Gas, as part of a£70m deal. Since the originalinvestment, we have helpedto execute the company’srapid expansion strategyby supporting five bolt-onacquisitions in the UK andinternationally.While A-Gas enjoys a marketleading position in the UK,Australia and South Africa,the Americas and AsiaPacific markets represent asignificant growth opportunityfor the business. In September2012, A-Gas completed theacquisition of leading Texasbasedrefrigeration supplierand distributor, Coolgas,which further cemented thebusiness’ position in the US.The transaction followed theacquisition of Ohio refrigerantreclaimer and halocarbonmanagement specialist, RemTecInternational, in July 2012.The business also strengthenedits Australia operations withthe acquisition of Melbournebasedrefrigerant repacker,Technochem, in March 2012.The subsequent buyout ofAdelaide supplier of pestmanagement and fumigationproducts and services businessSA Rural in April 2012 will formpart of the Group’s IndustrialSpecial Products offering. In thesame month, A-Gas acquiredA-Zone Technologies in the UK.The company doubled its sizein 2012, now employing 237people across the enlargedgroup and recorded annualturnover of circa £130m. Theacquisitions have strengthenedA-Gas’ portfolio acrossrefrigerant distribution, reclaimand the carbon credit market,but also expanded its footprintin the US, the largest refrigerantmarket in the world.Following the acquisitions,the highly experiencedmanagement team hasreinforced its market leadingposition and benefits fromgreater economies of scaleand a wider geographicalspread. A-Gas has a wellinvestedasset base and isideally placed to capitaliseon increasing worldwidedemand for air conditioningand food refrigeration.CASE STUDY: ANTLER<strong>LDC</strong> backed the managementbuyout of the UK’s number oneluggage brand, Antler, in May2010. The investmenthas since supported thebusiness’ rapid expansioninto key international markets,through product developmentand the expansion of retaildistribution networks.Antler designs, sources andsupplies a wide range of casualbags, suitcases, cabin luggageand business cases underthe iconic Antler brand.The business has become oneof the most recognised brandsin luggage, accounting foralmost a quarter of all UKsales, the largest market sharefor any luggage brand. Since<strong>LDC</strong>’s investment, Antler hasexpanded its international salesto account for 26 per cent ofturnover, penetrating marketsin South America, the Far Eastand India, including an exportdeal with Mexico’s leadingdepartment store, as wellbolstering its existing presencein the USA and Australia.Antler has developed productsthat match trends within highgrowthinternational markets,including brightly-colouredcases for Far Eastern consumersand compact on-board cases inresponse to the increased useof budget airlines in Europe.Antler now employs 427members of staff across itsheadquarters in Bury andoperations in Chicago andShanghai. The business’successful implementation ofits international expansionstrategy has cemented thebrand as a market leader in theglobal travel goods sector andpositioned it for further growth.CASE STUDY: UK2 GROUP & ONAPP<strong>LDC</strong> acquired a majoritystake in UK2 Group, aninternational hosting company,for £47m in partnership withits management team in April2011. The investment wasearmarked to aid the businessin expanding its portfolio ofhosting products andbuilding on UK2.net’sposition in the market.UK2 Group is a leadinginternational provider ofdomain name registration andweb-site hosting services tocustomers globally throughmultiple brands, from datacentres in the UK and theUS. In September 2012, thebusiness was ranked as oneof the UK’s fastest growingtechnology companies in thelatest The Sunday Times TechTrack 100 (53rd position),having recorded revenuesapproaching £30m.To maintain growth momentum,it is essential that we play arole in supporting managementteams with strategicappointments. Coincidingwith our original investment,we brought in former ChiefStrategy Officer at Cableand Wireless Worldwide PhilMale as Executive Chairman.Working with the existingmanagement, Phil has focusedon driving the launch of newservices and on growing thebusiness organically andthrough potential acquisitions.Since Phil’s arrival, formerMessage Labs CEO AdrianChamberlain was appointedas a non-executive director tobolster the board.We also identified anopportunity to provide furtherbacking to OnApp, a spin outfrom UK2.net, which providesthe only cloud deploymentand management softwaredesigned specifically for thehosting industry. The divisioncompleted the successfulspin-off from the Group inApril 2011 and receivedindependent investmentfrom <strong>LDC</strong>.OnApp has since grown toemploy over 80 employees andcontractors in the UK, USA,Malaysia and Ukraine, andhas launched its latest product,OnApp Storage, in March2012, which is estimated topower one in three public cloudnetworks around the world.WINTER 2012 11