REG - HgCapital Trust PLC - HgCapital Trust Interim Results 2022

HgCapital TrustAnnouncement

12/09/2022 07:00

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RNS Number : 0199Z  HgCapital Trust PLC  12 September 2022

HgCapital Trust plc

INTERIM Results FOR THE SIX MONTHS ENDED 30 JUNE 2022

 

CONTINUED POSITIVE NAV performance

delivered FROM a RESILIENT PORTFOLIO OF software and service businesses

 

London, 12 September 2022:  HgCapital Trust plc ('HGT'), today announces its
interim results for the six months ended 30 June 2022.

 

HGT provides investors with a listed vehicle to invest in unquoted businesses
managed by Hg, one of Europe's largest and fastest-growing investors in
software & service businesses.

The objective of HGT is to provide shareholders with consistent long‑term
returns in excess of the FTSE All‑Share Index by investing predominantly in
unquoted companies where value can be created through strategic and
operational change.

Highlights over the first six months of 2022 include:

 

¡ Strong portfolio trading and value creation continues to offset a decline
in valuation multiples of listed comparable companies, leading to a total
return NAV increase of 1.8% to a NAV per share of £4.43 and net assets of
more than £2 billion

 

¡ £71 million invested alongside Hg's other institutional clients, with an
estimated further £355m invested post-period

 

¡ £29 million of returns realised on behalf of HGT, with an estimated
further £465m returned post-period at an uplift of c. 29% to December book
value

 

¡ Continued strong long-term performance driven by robust trading

 

¡ Performance provided through access to Hg's investment platform, which in
aggregate represents the one of the largest and fastest growing technology
firms in Europe(( 1  (#_ftn1) )).

An investment of £1,000 made 20 years ago in HGT would now be worth £18,370,
a total return of 1,737% 2  (#_ftn2) . An equivalent investment in the FTSE
All-Share Index would be worth £3,521.

 

Jim Strang, Chairman of HGT, commented:

"Despite the obvious challenges and uncertainty presented by the current
macro-economic and geo-political environment, the Board remains optimistic
about the future prospects for HGT. The businesses within the portfolio are
resilient, and in such an environment as today's continue to provide critical
solutions to their clients and reduce the costs and complexity of doing
business. The long-term value creation prospects from owning such a portfolio
remains attractive."

 

SUMMARY performance

 

                       31 August  % Total     30 June   31 December  % Total

2022
return(2)
2022
2021
return(2)
 NAV per share         447.5p     2.7         443.2p    440.4p       +1.8
 Share price           374.0p     -10.0       330.5p    420.5p       -20.5
 FTSE All-Share Index             2.1                                -4.6
                                  YTD 2022                           H1 2022

Movement
Movement
 Net Asset Value       £2.05bn    +£44m       £2.03bn   £2.00bn      +£25m

Note: Hg undertakes full revaluations of the portfolio on a quarterly basis,
the next process being 30 September 2022, therefore the movement in unrealised
value of the portfolio to the end of August 2022 is attributable to any
post-period transactions and FX only.

 

Performance overview

Net assets of more than £2.0 billion, with continued outperformance of the
FTSE All-Share over the long-term:

-     NAV per share of 443.2p, a total return of 1.8% to 30 June 2022.

-     Share price total return decrease of 20.5% over the period.

-     Interim dividend of 2.5p per share (2.0p 30 June 2021) to be paid in
October.

Strong growth in revenue and EBITDA continues across the portfolio offset by
declines in valuation multiples:

-     Revenue and EBITDA growth of 31% and 26% respectively across the top
20 investments (79% of the portfolio) over the last twelve months.

-     A 13% uplift in the portfolio value was driven by strong trading
performance and partially offset by an 8% reduction, primarily due to a
decline in the trading multiples of publicly listed peers within the
comparable basket of companies.

-     Valuation multiple (EV/EBITDA) of 27.1x and net debt to EBITDA ratio
of 7.5x for the top 20 investments (79% of the portfolio).

-     £29m of cash returned to HGT from liquidity events in the period

Continued investment and commitments to drive future value:

-     Investment activity continues, despite challenging market conditions
with £71 million invested on behalf of HGT into companies with proven,
resilience that align to Hg's investment model and where relationships have
been formed over many years.

-     New commitments made to the Hg Saturn 3 and Hg Genesis 10 funds,
totalling £530 million.

-     Total outstanding commitments at 30 June 2022 of £1.6 billion
(December 2021: £992 million), expected to be drawn down over the next three
to four years.

Credit facility and new equity issuance:

-     In 2021, the Board of HGT agreed a further £50 million
multi-currency revolving credit facility bringing the total facility to £250
million, of which £136 million was drawn at 30 June 2022.

-     The Board will look to increase further the facility over the course
of 2022.

-     £12 million of new equity raised over 2022 via tap issuance.

 

-     HGT retains the ability to opt out of any new investment without
penalty, should it not have the cash available to invest.

 

POST PERIOD EVENTS AS AT 31 AUGUST 2022

§ Pro-forma NAV of 447.5p, YTD performance of +2.7%

§ Pro-forma Net assets of £2.05 billion.

§ Share price of 374.0p, YTD performance of -10.0%.

§ Estimated £355 million realised post-period at a c.29% uplift to December
book value.

§ Estimated £465 million invested post-period

§ Available liquid resources (including undrawn balance of credit facility),
post-completion of all announced transactions and the interim year dividend
payable in October 2022, are £366 million (18% of 31 August pro-forma NAV).

§ Outstanding commitments of £1.1 billion (54% of 31 August pro-forma NAV)
expected to be drawn down over the next three to four years.

Outlook

 

David Toms, Head of Research at Hg, commented:

"Increasingly, we see this environment as one of opportunity, as short-term
valuations create space for greater long-term performance for those who have
and will continue to maintain a disciplined approach and strategy."

 

Portfolio

§ Positive trading outlook underpinned by increasing digitalisation of
business processes

§ Resilient business models with recurring revenues and pricing power

 

Robust balance sheet

§ Multiple levers in place to manage balance sheet efficiently

§ Further liquidity events expected over next six to 12 months

 

Investment activity

§ Recent commitments to Hg funds ensure access to deal flow and support long
term NAV growth

§ Attractive pipeline of investment opportunities in Hg's target 'clusters'

 

- Ends -

 

The Company's 2022 Interim Report, an animated and full presentation to
accompany the results are available to view at:
http://www.hgcapitaltrust.com/ (http://www.hgcapitaltrust.com/) .

 

 

For further details:

 HgCapital Trust plc
 Laura Dixon (Senior Investor Relations Manager, Hg)  +44 (0) 78 2459 2894
 Brunswick
 Azadeh Varzi                                           +44 (0)20 7404 5959

About HgCapital Trust plc

 

HgCapital Trust plc, whose shares are listed on the London Stock Exchange
(ticker: HGT.L), gives investors exposure through a liquid vehicle to a
portfolio of high-growth private companies in the software and services
sector. The selection of new investments and creation of value in these
businesses are managed by Hg, an experienced and well-resourced private equity
firm with a long-term track record of delivering superior risk-adjusted
returns for its investors. For further details, please see
www.hgcapitaltrust.com.

 

For further details, see www.hgcapitaltrust.com
(http://www.hgcapitaltrust.com) and www.hgcapital.com
(http://www.hgcapital.com)

 1  By Enterprise Value, Source: Hg, Factset

 2  All references to total return allow for all historic dividends being
reinvested

Please note: Past performance is not a reliable indicator of future results.
The value of shares and the income from them can go down as well as up as a
result of market and currency fluctuations. You may not get back the amount
you invest.

 

(#_ftnref2)

 

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