REG - Literacy Capital PLC - Literacy Capital announces sale

Literacy CapitalAnnouncement

14/03/2023 07:15

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RNS Number : 7952S  Literacy Capital PLC  14 March 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The information contained in this announcement is restricted and is not for
publication, release or distribution in the United States of America, any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.

 

14 March 2023

 

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

 

Portfolio disposal at significant premium

 

Disposal highlights

 

·    Sale of Kernel Global at a 48.9% premium to carrying value

·    Literacy's interest valued at £28.6m, resulting in a £9.4m (3.7%)
uplift to Literacy's NAV

·    Literacy receives £19m in cash as part of the transaction, whilst it
also retains a residual stake in the business

·    The sale delivers a 9.8x return, with no carried interest payable by
Literacy

·    Cash proceeds shall be used to repay the RCF and recycled into new
investments

 

Portfolio update

 

Literacy is pleased to announce a transaction involving its portfolio company,
Kernel Global ("Kernel"), funded by Three Hills Capital Partners. Kernel is a
high quality recruitment group, comprised of two trading brands, that Literacy
invested into in June 2018.

 

On 31 December 2022 (the date of Literacy's most recent quarterly factsheet
and NAV update), Kernel was Literacy's fourth largest investment (equating to
7.6% of NAV).

 

The transaction values Literacy's stake in Kernel at £28.6 million, a 48.9%
premium to the carrying value on 31 December 2022 of £19.2 million.

 

Had Kernel been valued on 31 December 2022 in line with the valuation in this
announcement, the Company's estimated net asset value per share would have
been 15.7p per share, or 3.7%, higher at 436.2p (31 December 2022: 420.6p as
announced on 26 January 2023).

 

Of the £28.6 million of value at completion to Literacy, £19.0 million is
payable in cash, with the balance remaining invested in the business.
Literacy's total (gross and net) return from this investment is 9.8x cost,
before any future uplifts.

 

In addition to the £19.0 million of cash received from this transaction,
Literacy previously received £0.7 million from an earlier refinancing of the
business. Therefore, cash proceeds received by Literacy in aggregate from its
investment in Kernel amount to £19.7 million, or 6.7x cost.

 

Literacy intends to use the cash proceeds to repay the amounts drawn under its
Revolving Credit Facility, before recycling these proceeds into new
investments. This represents a highly profitable and successful investment for
Literacy, demonstrating the team's commitment to actively managing the
portfolio and recycling proceeds to fund new investments in the pipeline.

 

The transaction has exchanged, with completion and the receipt of cash
expected before the end of March.

 

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

 

"This transaction sees Literacy realising the majority of its investment in
Kernel, which delivers a significant return for the fund and its shareholders,
whilst also providing a substantial amount of capital to fund new investment
opportunities.

 

"We are very proud of the strong performance of the business led by Logan
Naidu since Literacy's investment in 2018, which has grown substantially with
our support. The business has grown from approximately 50 employees to almost
300 in a little over four and a half years and now operates in five countries
across three continents. We wish Logan, Darren and the rest of the team the
best as they seek to continue this success in the future.

 

"We are happy to have been able to support the wishes of Kernel's management
team to sell the business and we are pleased to retain a small stake, allowing
Literacy to continue benefiting from growth of the business in the future.

 

"Generating cash inflows from the portfolio is important to ensure Literacy
has capital available to fund new investments in our pipeline, and we expect
cash proceeds received by the Company in 2023 to be substantially higher than
in previous years. We are very pleased that we have been able to generate a
strong return for Literacy's shareholders and we plan to achieve similar
upside and returns for our investors from the remaining portfolio companies
and new investments. The premium achieved to carrying value also provides
further evidence of consistent prudence in the approach to valuing Literacy's
assets."

 

Notes

 

This announcement does not constitute or describe an updated NAV for the
Company. Shareholders should take note that the calculation of the NAV per
share as at 31 March 2023 will take account of the latest valuations of all
the Company's investments as at this date.

 

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. £5.8 million has been donated or reserved for
donation to charities since the trust's creation in 2017 up until the end of
2022. 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) .

 

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