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Transcript of Presentation of the Central America Small Enterprise Investment Fund´s experience Buenos Aires,...
Presentation of the Central America Small
Enterprise Investment
Fund´s experience
Buenos Aires, Argentine Oct 21, 2005
Management company
ContentsContents
Financial results Financial results
ofof CASEIF/LIM CASEIF/LIM
Financial results Financial results
ofof CASEIF/LIM CASEIF/LIM
Summary of Summary of CASEIF CASEIF
andandLIM LIM
Summary of Summary of CASEIF CASEIF
andandLIM LIM
Success factors Success factors
of of CASEIFCASEIF
andandLIMLIM
Success factors Success factors
of of CASEIFCASEIF
andandLIMLIM
2
Fund SummaryFund Summary
3
Equity fund incorporated in October 18, 2000 after initiative by MIF and NORFUND. The life of the fund is 10 years.
The shareholders of CASEIF are MIF, NORFUND; NDF and LAFISE.
Covering all 7 countries in Central America, with HQ in Managua, Nicaragua.
Focus on the SME sectors - companies with fewer than 100 employees and less than US$ 3 million in sales/assets, thereby having a stronger development impact with more poverty reduction.
Investment amount per company: US$ 250,000 up to US$ 1.5 million.
The Fund is being managed by Lafise Investment Management, a JV between NORFUND and LAFISE.
The LAFISE Group – with presence in 10 countries and more The LAFISE Group – with presence in 10 countries and more than of 20 years of experience into a successful than of 20 years of experience into a successful
organization of 1,800 employees organization of 1,800 employees
4
The LAFISE Group – a complete portfolio of The LAFISE Group – a complete portfolio of services and solutions services and solutions
5
Banking (4 banks in the region)
Brokerage services
Trading
Securities
Corporate finance
Insurances
Commodites Broker/Dealer
Warehouse
Currency exchange
Leasing
What represents the Lafise Group for CASEIF/LIM?What represents the Lafise Group for CASEIF/LIM?
6
• Knowlodgement and expertise of the region
• Contacts and relations with authorities, multinational companies, financial system
• Reference of new deals
• Check of references of companies and sponsors
• Support from the corporative team lawyers
• Facilities of logistic
• Help CASEIF´s investees in trading activities, to find clients and suppliers, strategic alliances.
• Reference of potential buyers/investors for the companies in the Portfolio.
• Follow up and supervision of the CASEIF’s investees in each country.
CASEIF financial resultsCASEIF financial results
7
Historical Income/Net profit
-400,000
-200,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
2000 2001 2002 2003 2004 Sep-05
US
$
Income Net(loss) profit
US$ Sep-05Income 1,253,391Net(loss) profit 914,751Acc. net(loss) profit 9,729
Break even
CASEIF financial resultsCASEIF financial results
8
• The ROE is 12%.
• Stock redemption of US$ 1.8million. It represents that 19% of the investors contribution has been reimbursed to the CASEIF’s shareholders.
• Before the expiration of the investment period 2 exits has been done and 2 more are on the way for the end of 2005. With this on hands, a 49% of the of the investors contribution will be reimbursed to the CASEIF’s shareholders.
• Given that the investment period is ended, LIM is on position to establish a second fund.
LIM financial resultsLIM financial results
9
US$ 2000 2001 2002 2003 2004 Sep 05Income 62.343 324.726 316.014 464.238 503.341 394.999Net(loss) profit 42.553 74.263 4.791 2.093 92.268 96.614Source: Audited Figures
LIM Net(loss) profit
0
20.000
40.000
60.000
80.000
100.000
120.000
2002 2003 2004 Sep 05
Model of deal structureModel of deal structure
10
Banking modelBanking model Private Equity model
Private Equity model
Hybrid modelConvertible debtHybrid model
Convertible debt
It allows:• To generate income (interests) during the grace period• Security for the loan – to recover the funds• Legal rights like a lender • Time for evaluate a conversion • To extend the conversion period if it is required • Time to establish strong relationship with sponsors• A way of early exit
• Dividends• 1 share with preferential rights• To have the full upside in the exit
11
2002 2003 2004 2005Original Investment -450,000Additional capital contribution -37,210 -165,985Sell of CASEIF'shares 1,839,570Net cash flow -450,000 -37,210 -165,985 1,839,570
CASEIF IRR 50%Capital gain 1,150,050
Example 1: First exit of CASEIF - MetroredExample 1: First exit of CASEIF - Metrored
US$
Lessons learned:• Opportune moment to begin the exit process andtalk about it with sponsors
• To make your own valuation of the company and to discuss it in the Board of Directors
• To participates actively in the due diligence and negotiations meetings
• To look for different alternatives
Example 2: Colección 2000 Example 2: Colección 2000
12
Currency: US$Jan-Dec 2003 First semester 2004 Second semester 2004
Units solds 893,322 765,074 456,064Average Unit price US$ 1.80 US$ 1.91 1.91Total sales 1,610,042 1,459,717 871,063Cost of Good sales 1,205,761 1,020,590 693,340operacional expenses 462,495 268,137 266,293EBITDA -58,202 171,522 -81,761Interest expenses 205,589 121,729 125,718Depretiation 100,018 48,998 48,998Net income (loss) 305 794 -256,284
Coleccion 2000 average unit price: US$ 1.80
Chinese average unit price: US$ 1.15
13
Example 3: Second exit of CASEIF - ConsultelExample 3: Second exit of CASEIF - Consultel
• Contractor of Ericsson for different projects of telecommunications
• Contracts of short term and high profitability.
Lessons learned:
• Not use money of long term for short term projects
• To have an appropiate legal structure focused on the cash control
• To request collaterals not related to the company (personnal assets
from sponsors)
The way to follow up of investeesThe way to follow up of investees
14
• To establish strong relationship with sponsors since the initial conversations
• Coaching/mentoring
• To provide value added
• To improve the corporate governance
• Monthly certification of financial statements
• To help in ISO 9000/HACCP certifications • TA Funds – NORAD
• Follow up of environmental issues
• Follow up of laboral rights
To become in a strategic partner
Where to invest? - CASEIF Portfolio Sep, 05Where to invest? - CASEIF Portfolio Sep, 05
Commitment capital US$ M
Delfiplastelfiplast S.A.S.A.Delfiplastelfiplast S.A.S.A.
Country Sector/activity
1.00 Nicaragua ISP/Carrier 0.50 Nicaragua Fishing/value added products 0.51 Costa Rica Niche of Special plastics products 1.30 El Salvador Tourism
0.95 Honduras Niche of special plastic products
15
S.A. Muebles 0.80 Honduras Exports of furnitures of high value to USA 0.50 Costa Rica Processing prepared food and canned products