From a national economic perspective, 2011 will be a year that most of us would prefer to forget. Real GDP grew at the anemic rate of a little over 1%. The S&P 500 index ended the year right where it started, which is hardly a worthwhile return for the inherent risks and volatility in the equity markets. On the jobs front, the US did make some progress as the unemployment rate fell from 9.4% to 8.5%, but that metric remains at its highest level since the early 1980s.
Despite this difficult environment, we strongly believe there are still significant economic opportunities in the US economy. And although the political pundits suggest that the Private Equity Industry is about high leverage and cutting jobs, we vehemently disagree.
In support of our contention, let me offer you a few facts about the portfolio companies of RLH. In 2011 their aggregate revenue grew organically by more than 20% while total operating profits grew by over 30%. Our most recent fund had even better results, as the total revenue and operating profits of its portfolio companies grew by over 30% and 40%, respectively. Importantly, these large percentage increases are measured against a strong prior year, as over 85% of our portfolio companies had record results in 2010. At the same time, this stellar performance has generated significant new jobs! Since 2007, our portfolio companies have collectively increased their employee base at over a 20% compound annual growth rate, more than doubling headcount during that period despite the economic downturn.
We congratulate our portfolio company leadership teams for having generated compelling results for the past several years, notwithstanding the weak overall economy. Their outcomes are a testament to our belief in the power of combining excellent management with a low leverage balance sheet and a tight focus on a few select growth initiatives.
We also want to highlight well-deserved industry awards that two of our portfolio companies received in 2011.
- maxIT Healthcare was selected by Modern Healthcare as one of the nation’s Top 50 Best Places to Work. The Company also was ranked as the Top Overall Professional Services Firm in the healthcare information technology industry in KLAS Enterprise's 2011 ranking of Software and Services providers.
- The Apothecary Shops was recognized at the Arizona Corporate Excellence Awards as the 5th fastest growing company in Arizona and its CEO, John Musil, received the CEO of the Year Award.
With the high caliber performance that our portfolio enjoyed in 2011, it was indeed a year to remember. Looking ahead to 2012, we will continue to build great enterprises and create jobs through strong organic growth, as has been the focus of our investment efforts for over 30 years.
Sincerely, |
