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Annual Review 2O13 ANNUAL REVIEW 2O13 AXCEL ANNUAL REVIEW 2O13 WWW.AXCEL.DK FURTHER AXCEL IN BRIEF INFORMATION ABOUT AXCEL 40 10 CSR AT AXCEL AND ITS COMPANIES 35 WHAT THE PAST 20 YEARS HAVE TAUGHT AXCEL’S MANAGEMENT US ABOUT ACTIVE OWNERSHIP AND INDUSTRIAL BOARDS SVERIGE 5.800 kw STRANDVÄGEN • STOCKHOLM 6 38 20 YEARS OF AXCEL HOW DO WE BOOST INVESTMENT AND GROWTH IN DANISH INDUSTRY? 12 SKT ANNÆ PLADS • COPENHAGEN 30 2 AXCEL ANNUAL REVIEW 2O13 JB EDUCATION PRIVATE EQUITY AXCEL’S FUNDS FUNDS IN DENMARK – FROM CURIOSITY TO KEY PLAYER 20 26 NEWS FOREWORD 8 4 AXCEL’S AXCEL’S COMPANIES – INVESTORS STRATEGY AND KEY FIGURES 28 22 AXCEL’S INVESTMENT RESULTS 5 WWW.AXCEL.DK 3 HAPPY 20TH ANNIVERSARY After a long period of low growth, limited investment and weak domestic demand, there is much to suggest that Denmark is headed for better times. Employment is rising, and large parts of the business sector are growing, especially on the export-oriented side of the economy. The euro area also seems to have stabilised and begun to take small steps forward. The strength of the Nordic countries is that we have made it through We also welcomed a new member to the board, Coloplast CEO Lars the financial crisis without the enormous social costs seen in southern Rasmussen. He has considerable industrial expertise, and we look Europe. On the other hand, jobs in industry are continuing to disap- forward to working with him. pear, as cost levels are still on the high side. This is particularly the case in Denmark, which has been hit somewhat harder by the crisis Finally, I would like to congratulate Axcel on its 20th anniversary. than Sweden, especially when it comes to investment in industry. You can read more about how things have gone in this year’s Annual Review, so here I would just like to highlight that Axcel has now In March 2014 Axcelfuture again hosted a conference on the Danish made more than 40 investments and 55 significant bolt-on acquisi- investment climate. The background to this was that we still find our- tions in Denmark and Sweden, including a series of successful suc- selves in a historic growth crisis, and that it is mainly small and me- cession processes. Exciting new Nordic, European and global market dium-sized companies that are struggling to grow, while large com- leaders in a range of industries have been created thanks to active panies are performing well. Many have suggested that the reason is a ownership and investors willing to take risks. Given that the overall shortage of credit, but Axcelfuture’s analyses indicate that it is more return on the funds has also been on the high side, we can conclude a shortage of equity. If companies are not adequately capitalised they that we have largely succeeded in our mission to date. There is there- cannot grow, because equity levels are among the criteria that banks fore good reason to wave the flag, and I look forward to the next 20 assess when deciding whether to finance their growth plans. years. There is no obvious solution to the problem, but one thing is clear: growth will not take off properly unless we can get small companies on board, and this depends on us making it more attractive to invest in them. As I said, large companies have not been affected to the same extent, and this is one reason why the stock market performed well again in 2013. This also helped Axcel, which delivered an investment profit of DKK 4.6bn in 2013. Much of this was due to the rise in PANDORA’s share price, as PANDORA was one of the year’s best performers on the Copenhagen exchange. Many of Axcel’s other companies also fared well, while others continued to be hit by weak demand in Den- NIELS B. CHRISTIANSEN mark. CHAIRMAN 2013 was a busy year for new investments. Axcel IV made three new acquisitions and is therefore well on its way. We look forward now to preparing for the formation of a fifth fund. 4 AXCEL ANNUAL REVIEW 2O13 AXCEL DELIVERS INVESTMENT PROFIT OF DKK 4.6BN IN 2013 Axcel generated an investment profit of just over DKK 4.6bn in 2013, the second-highest in its 20-year history and some DKK 2bn more than in 2012. Once again it was movements in PANDORA’s share price and sales As at the end of 2013, Axcel III and IV had invested DKK 4.3bn in 18 of shares in PANDORA that dominated the year’s results. The jewel- companies. These investments had a combined value of DKK 18.9bn, lery company’s share price gained 136% in 2013, from DKK 124.5 including almost DKK 11.5bn in realised sales proceeds. With a re- at the beginning of the year to DKK 294 at the end of December, turn of more than six times invested capital, Axcel III is among the and has continued to climb this year to around DKK 350 on 1 April. absolute elite of European funds, and Axcel IV is also well placed Axcel IV’s investments also contributed an investment profit of al- given its youth. most DKK 150m, giving a return of 13%. The total return on invested capital was 79% in 2013. Axcel also continues to manage Axcel I and II, which have three re- maining investments in their portfolios. The value of these companies Transactions in 2013 was unchanged in 2013. Annual reports for all four funds can be or- With investments in Sweden’s Netel, Finland’s Delete and Denmark’s dered by contacting Axcel. EG in 2013, Axcel IV grew into a Nordic fund, but still with its primary focus on Denmark and Sweden. Meanwhile Cimbria became the first Axcel’s investments had a combined market value of almost DKK company to be sold by the fund. 7.5bn at the end of 2013, up from just over DKK 5.9bn a year earlier. These figures reflect the estimated value of Axcel’s portfolio com- Axcel III carried out two transactions: 80% of the shares in IDdesign panies and the market price of the holding in PANDORA. Although were sold to JYSK, and Swedish school operator JB Education was the valuation of Axcel’s investments uses market-based valuation wound up. Both transactions were made at a loss for Axcel. Axcel III methods as much as possible, the measurement of their value is asso- also reduced its holding in the listed company PANDORA from 32% ciated with uncertainty, and it is only when all of a fund’s investments to 18%. have been sold that its performance can be definitively ascertained. Altogether, more than DKK 1bn was invested in 2013, while sales of shares during the year generated proceeds of more than DKK 4.2bn, which has been paid out to the funds’ investors. AXCEL’S INVESTMENT RESULTS – FIVE-YEAR SUMMARY AXCEL’S INVESTMENTS AND VALUE OF INVESTED CAPITAL AS AT 31.12.13 (DKKm) 2013 2012 2011 2010 2009 (DKKm) AXCEL I AXCEL II AXCEL III AXCEL IV TOTAL AXCEL I 0 -126 1 - 13 INVESTED CAPITAL 1,352* 2,023 2,609 1,736 7,704 AXCEL II -6 -95 43 -1 -49 PROCEEDS FROM INVESTED CAPITAL 2,107 3,322 10,850 622 16,901 AXCEL III 4,509 2,274 -6,971 11,588 1,889 VALUATION OF COMPANIES 0 24 5,821 1,650 7,495 AXCEL IV 146 390 VALUE OF INVESTED CAPITAL 2,107 3,346 16,671 2,272 24,396 TOTAL 4,649 2,443 -6,927 11,587 1,853 REMAINING COMPANIES 1 2 6** 6 * Total paid in by investors is DKK 1,001m. WWW.AXCEL.DK ** Excludes PANDORA, which is a listed company. 5 WHAT THE PAST 20 YEARS HAVE TAUGHT US ABOUT ACTIVE OWNERSHIP Axcel was founded on 9 May 1994 and is therefore now 20 years old, making this a good time for a status report. What have we done to make our mark on the companies we have owned during this time? What results have we achieved? And how has the outside world changed since we started? These are the questions we aim to shed light on in this year’s Annual Review. Axcel came about when a group of investors, banks and company Expansionary monetary policy in the new millennium brought further owners saw a need for a new type of owner that could help small and decreases in interest rates and massive liquidity in the credit mar- medium-sized companies in particular, providing not only capital but ket, causing some to forget that risks and returns are generally very also expertise – what we now know as active ownership. The com- closely intertwined. panies would then be sold on, so the idea was for Axcel to have a medium-term ownership horizon. Looking back, though, there are few examples of PE funds bailing out on their companies. Most, including Axcel, prefer to stick with In particular, a large number of family-owned companies needed to healthy companies through thick and thin. Some of the investments undergo a succession process but did not know where to turn. Some made in the run-up to the financial crisis and subsequent recession of the pension funds had previously got involved, but with mixed nevertheless faced an uphill battle – not because the companies them- results. selves were unsound, but because many were hit by a drop in sales that went far beyond what was believed possible.
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