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MULTIPLE OF COST OF REALISATIONS
Year ended 31 January 2019
Continued strong realisation activity at significant uplifts to carrying value and cost
The Portfolio continued to be highly cash generative in the year as our underlying managers took advantage of the sustained favourable exit environment, generating proceeds of £153m1. While this is lower than the record £217m, generated in the year to January 2018, at 26%1 of the opening Portfolio, cash generation remained relatively high.
The realisations of 60 companies completed at an average uplift of 35%2 to the previous carrying value, which is consistent with the long term trend of significant uplifts being generated when companies are sold. The average return multiple of 2.4x cost was also strong, reflecting a number of highly successful investments realised in the year with over a third, by number, being sold for more than 3.0x cost. Over the last five years exits have averaged 33% uplift to carrying value and a multiple of 2.3x cost.
The sale of Cambium by the ICG Strategic Equity team was by far the most significant realisation in terms of both total proceeds (£18.6m) and the gain in the year (+113%). Cambium, which provides educational software for US schools, was acquired as part of a fund restructuring transaction in 2016 and was sold in December 2018 for 4.8x the original cost, a gross IRR of 82%.
IPOs also contributed to performance, with three companies listed during the year. The most significant of these was Ceridian, a global human capital management software company, in which we co-invested in 2007 alongside Thomas H Lee. The company floated in April 2018 at $22 per share and at the year end the share price had risen to $41. Over the course of the year the value of our holding in Ceridian increased by 178% which moved it from the 27th largest underlying company at the start of the year to the 8th at January 2019.
In addition to sales by our underlying managers, we completed a secondary sale of our interest in GCP Europe Fund II and the co-investment in Frontier Medical alongside it, which generated a further £10m of proceeds. These investments have performed well and we took the opportunity to lock-in a strong return at a time when we perceived the downside risks to outweigh the further upside potential. This transaction highlights our active approach to managing the portfolio.
From our largest 30 underlying companies at the start of the year, six were fully realised including: Cambium from the ICG portfolio; The Laine Pub Company, Swiss Education and Frontier Medical, from our third party co-investment portfolio; and CeramTec and TMF from the third party funds portfolio, including a secondary investment in the latter company.
1 Refers to proceeds generated from underlying portfolio (excludes secondary sales)
2 Uplift figure excludes publically listed companies that were exited via multiple share sales