REG - HgCapital Trust PLC - HGT Half-Year Report

HgCapital TrustAnnouncement

18/09/2023 07:00

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RNS Number : 6822M  HgCapital Trust PLC  18 September 2023

HgCapital Trust plc

INTERIM RESULTS FOR THE PERIOD ENDED 30 JUNE 2023

 

 Resilient NAV performance and continued realisation activity in a
challenging macro environment

 

London, 18 September 2023:  HgCapital Trust plc ('HGT'), today announces its
interim results for the period ended 30 June 2023.

 

HGT provides investors with a listed vehicle to invest in unquoted businesses
managed by Hg, Europe's largest investor in software & technology-enabled
services 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 half of 2023 include:

 

¡ Strong portfolio trading continued to be the main driver of performance,
contributing to a total return NAV increase of 4.6%, closing the period at
473.1p NAV per share and net assets of £2.2 billion

 

¡ Share price total return of +7.1% over the period, closing at 370.50p per
share and a market capitalisation of £1.7 billion

 

¡ Against an uncertain macro environment, Hg maintained a disciplined
approach to new investment, deploying £33 million on behalf of HGT, including
one new investment and several follow-on investments in the portfolio to
finance bolt-on M&A

 

¡ £229 million returned to HGT, including the full realisation of
Transporeon

 

¡ Continued and significant long-term NAV outperformance of the FTSE
All-Share

 

¡ Performance provided through access to Hg's investments, which would in
aggregate represent the second largest and the fastest growing technology firm
in Europe(( 1 ))

An investment of £1,000 made 20 years ago in HGT would now be worth £24,963,
a total return of 2,396%. An equivalent investment in the FTSE All-Share Index
would be worth £4,208 2 

Jim Strang, Chairman of HGT, commented:

"Your Company has delivered a resilient performance over the first six months
of the year. The portfolio continued to deliver strong underlying performance
with sales and EBITDA across the top 20 investments (76% of the portfolio)
growing at 29% and 30% respectively. Investment activity was noticeably slower
in the first half of 2023 as the Manager took a cautious stance on adding to
the portfolio. Conditions for transactions in the second half of the year
appear more supportive."

 

 

 

David Toms, Head of Research at Hg, commented:

"Our portfolio continues to be driven by growth from existing customers,
itself supported by strong renewal rates, cross and up-sell. We enhance this
with consistent M&A, which remains a powerful accelerant of our
performance."

 

SUMMARY performance

 

                       31 August  % Total    30 June  31 December  % Total
                       2023       return     2023     2022         return
 NAV per share         473.3p     +4.7%      473.1p   456.6p       +4.6%
 Share price           389.0p     +12.4%     370.5p   350.5p       +7.1%
 FTSE All-Share Index             +2.7%                            +2.6%
                                  YTD 2023                         H1 2023
                                  Movement                         Movement
 Net Asset Value       £2.2bn     +£77m      £2.2bn   £2.1bn       +£76m

Source: Hg, Factset. All references to total return allow for all historic
dividends being reinvested

Note: Hg undertakes full revaluations of the portfolio on a quarterly basis,
the next process being 30 September 2023, therefore the movement in unrealised
value of the portfolio to the end of August 2023 is attributable to
post-period transactions and FX only.

 

Performance overview

Net assets of £2.2 billion, with continued long-term outperformance of the
FTSE All-Share over one, three, five, ten and twenty-year periods:

-     NAV per share of 473.1p, a total return of +4.6% for the six months
to 30 June 2023.

-     Share price total return of +7.1% over the year

-     Proposed interim dividend of 2.0p per share

Strong double-digit growth from the realised and unrealised portfolio:

-     Revenue and EBITDA growth of 29% and 30% respectively across the top
20 investments (76% of the portfolio) over the last twelve months.

-     £229 million of cash returned to HGT primarily through the
realisation of Transporeon and secondary fund transactions

-     Valuation multiple (EV/ LTM EBITDA) of 26.2x and net debt to LTM
EBITDA ratio of 7.4x for the top 20 investments (76% of the portfolio)

Continued investment and commitments to drive future value:

-     £33 million invested on behalf of HGT into one new platform
investment, and several follow-on investments to support the growth of
existing portfolio companies

-     New commitment of €125 million to Hg Mercury 4. Total outstanding
commitments at 30 June 2023 of £1.1 billion (December 2022: £1.2 billion).
These will be deployed over the next three to four years

-     HGT's strong liquidity position coupled with commitments across the
most recent vintage of Hg funds ensure that the company is well-positioned to
take advantage of investment opportunities as they arise

Credit facility increase:

-     The Board of HGT agreed a c.£60 million increase to the
multi-currency revolving credit facility bringing the total facility to £350
million, the full balance of which was available at period-end

POST PERIOD EVENTS

§ NAV of 473.3p at 31 August, YTD performance of 4.7% reflecting post-period
transactions and FX movements.

§ Net assets of £2.2 billion at 31 August.

§ Share price of 389.0p at 31 August, YTD performance of +12.4%.

§ Estimated gross proceeds of £55 million from the full exit of Commify, and
partial exits of Azets and TeamSystem to be received post period, at an
average uplift to carrying value of 39%.

§ New investment of £6m in Nomadia

§ Further €50m commitment to Hg Mercury 4 (€175 million total commitment)

§ Available liquid resources (including the credit facility) post-completion
of all announced transactions and the interim dividend payable in October
2023, are £657 million (30% of 31 August pro-forma NAV).

§ Outstanding commitments of £1.1 billion (49% of 31 August pro-forma NAV).
We expect these to be drawn down over the next three to four years.

Outlook

Commentary from Hg (the Manager):

 

We believe the combination of the long-term nature of listed private equity
investment with the types of business that Hg invests in, and robust
double-digit growth in trading, can continue to drive long-term performance

 

§ Against a challenging macro environment, Hg's portfolio has demonstrated
resilient performance

 

§ The portfolio companies remain focused on selling business-critical and
non-discretionary software and services to their underlying business
customers, delivering predictable levels of recurring revenue

 

§ Positive trading outlook underpinned by long-term drivers for workplace
automation and digitisation which are set to transform the workplace for
professionals for decades to come

 

§ While we continue to screen a number of attractive investment
opportunities, we remain cautious given the ongoing macro uncertainty. Bolt-on
M&A remains a key focus to deploy capital and create incremental equity
value in the portfolio

 

§ During the first half of 2023, we remained focused on returning capital to
Hg clients, distributing c.£1 billion of liquidity, including £109 million
to HGT. This followed an exceptionally strong 2022, when we returned a total
of £4 billion, of which HGT's share was £404 million. Further liquidity
events are expected over the next twelve months

 

 

- Ends -

 

The Company's 2023 Interim Report and an animated presentation from Hg 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             +44 (0) 78 2459 2894

          George Crowe            +44 (0) 20 8152 5880
 Brunswick
 Azadeh Varzi           +44 (0)20 7404 5959

 

About HgCapital Trust plc

 

HgCapital Trust plc is an investment company whose shares are listed on the
London Stock Exchange (HGT.L). HGT gives investors exposure, through a liquid
vehicle, to a portfolio of high-growth unquoted companies, 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, 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 and investors may not get back the
amount they originally invested.

(#_ftnref2)

 

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