REG - Literacy Capital PLC - Further detail on Literacy Capital's recent sale

Literacy CapitalAnnouncement

05/09/2023 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230905:nRSE3351La&default-theme=true

RNS Number : 3351L  Literacy Capital PLC  05 September 2023

The information contained in this announcement is restricted and is not for
publication, release or distribution in the United States of America, any
member state of the European Economic Area, Canada, Australia, Japan or the
Republic of South Africa.

 

This announcement contains inside information.

 

5 September 2023

 

Literacy Capital plc ("Literacy" or the "Company")

 

Disclosure of information relating to the sale of Butternut Box,

which was initially announced on 29 August 2023

 

Transaction highlights

 

·    Sale of another of Literacy's largest assets at a substantial
premium; 53.8% above carrying value

·    Literacy sells its entire interest in Butternut Box, receiving
£21.8m in cash

·    £7.6m uplift to the asset's 31 March 2023 carrying value

·    The sale delivers a 10.2x return for shareholders, with no carried
interest payable by Literacy

·    Cash proceeds will be used to repay Literacy's RCF and recycled into
new investments

 

Portfolio update

 

Literacy is pleased to announce that Butternut Box, a business providing
healthy, fresh dog food on a subscription to dog owners' homes, has finalised
a funding round led by General Atlantic and L Catterton. This is to raise
further equity to support the continued growth of the business, as well as
facilitate the exit of earlier investors.

 

The transaction values Literacy's stake in Butternut Box at £21.8 million, a
53.8% premium to the most recent carrying value of £14.2 million. Literacy is
selling its stake in Butternut Box in full as part of the transaction. As a
result, it will receive £21.8 million in cash and have no residual interest
in Butternut Box. Literacy's total and final return from this investment is
10.2x cost (IRR: approx. 54%).

 

On 31 March 2023 (the date of Literacy's most recent quarterly factsheet and
NAV update at the time the transaction was agreed), Butternut Box was
Literacy's fifth largest investment (equating to 5.1% of NAV).

 

Had Butternut Box been valued on 31 March 2023 in line with the valuation in
this announcement, the Company's estimated net asset value per share would
have been 12.7p per share, or 2.6%, higher at 480.0p (31 March 2023: 467.3p as
announced on 27 April 2023).

 

Literacy intends to use the cash proceeds to fully repay the amounts drawn
under its Revolving Credit Facility, before recycling these proceeds into new
investments. This represents another highly profitable and successful
investment for Literacy, demonstrating the growing maturity and interest from
large institutional investors in Literacy's portfolio companies. It also shows
the Investment Manager's ability to generate strong returns and commitment to
actively manage the portfolio to recycle proceeds into new investments in the
pipeline.

 

The growth of the business since Literacy first invested in January 2018,
driven by the team's strong performance, has resulted in Butternut Box being
another successful investment for Literacy, with this transaction marking a
full exit for the fund. Following the transaction involving Kernel Global in
March 2023, this is another example of the progress made by a portfolio
company since Literacy's investment and the growing interest from larger
third-party investors in the fund's assets. This transaction provides further
comfort regarding the fund's carrying valuations, with the sale completing at
a significant 53.8% premium to the previously reported carrying value. This
follows the sale of Kernel in March, which delivered a 48.9% uplift.

 

As recently announced, the transaction exchanged in August with clearance
required from the EU Commission to complete. Completion and the transfer of
cash is expected by the end of October.

 

Richard Pindar, CEO of the Investment Manager and Director of Literacy Capital
plc, commented:

 

"When we first met David and Kevin in 2017, Butternut Box was feeding several
hundred dogs. Since then, the progress that the business has made as a result
of the focus and calibre of the team, has been remarkable. Their commitment to
delivering excellent customer service and products to dog owners, enabling
dogs to live healthy and happy lives, has been unwavering.

 

"We are extremely proud of the heights the team has been able to reach since
our investment five and a half years ago, with the business now arguably the
leading dog food brand in Europe, and attracting capital from the largest and
most respected, global institutional investors.

 

"The cash proceeds from this transaction will be used to pay down the fund's
drawn debt and redeployed into new investments in our pipeline, where we hope
to generate similarly strong returns for shareholders. As previously
indicated, we expected cash inflows received by the Company in 2023 to be
substantially higher than previous years and we anticipate this will continue
for the rest of the year and into 2024."

 

 

Enquiries

For further information, please contact:

 

 Literacy Capital plc / Literacy Capital Asset Management LLP:

 Richard Pindar / Tom Vernon                                    +44 (0) 20 3960 0280

 MHP Communications:

 Reg Hoare / Ollie Hoare / Matthew Taylor                       +44 (0) 20 3128 8276

                                                                book@mhpgroup.com (mailto:book@mhpgroup.com)
 Singer Capital Markets Securities Limited:

 Robert Peel                                                    +44 (0) 20 7496 3000

About Literacy Capital:

 

Literacy Capital (BOOK.L) is an investment trust that was launched in 2017 by
Paul Pindar and Richard Pindar, before it listed on the London Stock
Exchange's main market in June 2021. The Company focuses on opportunities to
invest for the long-term in growing private UK businesses where a clear route
to creating additional value can be seen. It also has a unique charitable
objective to donate 0.9% of annual NAV to charities focused on improving
literacy in UK children. £7.1 million has been donated or reserved for
donation to charities since the trust's creation in 2017 up until 30 June
2023. For more information, please visit our website: www.literacycapital.com
(http://www.literacycapital.com) .

 

 

Website:

www.literacycapital.com

 

LEI: 2549006P3DFN5HLFGR54

 

A copy of this announcement will be available on the Company's website at
www.literacycapital.com (http://www.literacycapital.com) .

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  DISEAFNLESLDEAA