REG - Literacy Capital PLC - Quarterly trading update and NAV announcement

Literacy CapitalAnnouncement

26/10/2023 07:00

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RNS Number : 3222R  Literacy Capital PLC  26 October 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The information contained in this announcement is restricted and is not for
publication, release or distribution in the United States of America, any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.

 

26 October 2023

 

Literacy Capital plc

 

Quarterly trading update and NAV announcement for Q3 2023

 

Continued growth and investment across BOOK's portfolio companies results

in a NAV return of +0.9% in Q3 and an uplift over the last twelve months of
+28.0%

 

Literacy Capital plc ("Literacy", "BOOK" or the "Company"), a listed
investment trust primarily focused on investing directly into private
businesses based in the UK, today announces its quarterly trading update and
NAV update for the three months ending 30 September 2023.

 

Q3 Highlights:

 

 ●    Total return in the quarter of +0.9%, an uplift of £2.6m (4.3p per share),
      taking net asset value ("NAV") per share of 492.8p (Q2'23: 488.5p), or NAV of
      £295.7m (Q2'23: £293.1m).
 ●    BOOK and its portfolio companies made good headway in Q3 despite less
      favourable market conditions, reporting strong growth year-on-year; as ever
      our focus remains on long-term value creation.
 ●    The Butternut Box transaction received regulatory approval in October (after
      the quarter end), as a result of which the sale of BOOK's stake completed.
      £21.8m is expected to be received this week.
 ●    Share price performance was strong in the quarter (rising 8.4%), and
      outperforming its benchmark indices.
 ●    Total charitable donations since the inception of Literacy Capital now amount
      to £7.8m, including a charitable donation provision of £694k in the quarter.

 

Commenting on the Q3 performance, CEO of BOOK's investment manager, Richard
Pindar, said:

 

"BOOK and its portfolio companies made good headway in Q3 despite less
favourable market conditions in some sectors. This progress translated into an
uplift in NAV of +0.9%. But as ever, our focus remains on scaling our
businesses and creating substantial value over the longer term.

 

In Q3, revenue grew in eight of BOOK's largest ten companies, compared to a
year earlier. Several of our leading companies made significant investments to
build scale in the period, including, for example making eight C-suite
appointments. Most of these appointments comprise newly created roles that
ensure our companies' teams have the right talent to thrive.

 

We are confident that these investments will have a positive impact in making
our businesses more valuable and attractive to acquirers in due course, not
least given the level of interest from PE firms in several BOOK assets
already."

 

Net Asset Value

 

The Company announces that as at 30 September 2023, the NAV per ordinary share
was 492.8 pence. This represents a 0.9%, or 4.3p per share, uplift since 30
June 2023 when NAV per ordinary share was 488.5p.

 

                         At 30 Sep 23  At 30 Jun 23  At 30 Sep 22
 Net asset value         £295.7m       £293.1m       £231.0m
 NAV per ordinary share  492.8p        488.5p        384.9p

 

 

The above NAV calculation is based on the Company's issued ordinary share
capital as at 30 September 2023 of 60,000,000 ordinary shares of £0.001 each.
This NAV calculation includes the cost to ordinary shareholders of the 600,000
warrants in issue. This cost is accrued on a straight-line basis over the
vesting period of the warrants.

 

Portfolio company performance

 

The growth and KPIs across BOOK's portfolio companies remain healthy, with
year-on-year sales growth of 57% reported at the end of Q3. The businesses
continue to successfully scale and gain market share in their sectors.

 

Whilst this overall revenue growth is strong, earnings grew less quickly due
to increased investment, less favourable market conditions and lower
contributions from M&A activity. This increased investment, principally in
people and technology, remains the best route to create long-term value for
BOOK shareholders. Headcount in BOOK's ten largest investments (as at the end
of Q3) has increased by more than 350 so far this year.

 

Thus far in 2023, two significant and highly successful exits have completed;
both achieved close to 10x return on investment for BOOK. We are optimistic
that further upside and cash inflows can be generated for BOOK in the rest of
this year and in 2024, given the level of interest from PE firms in several
BOOK assets.

 

Transactions and investments

 

Despite no new investments completing in the quarter, the pipeline for new
investment opportunities has remained strong.

 

However, follow-on funding amounting to £5.2m was in invested in the quarter.
This funding was provided to several portfolio companies to support their
growth, as well as to acquire additional equity in certain portfolio
companies.

 

BOOK and its portfolio companies continue to assess many M&A and
investment opportunities, some of which we expect to complete before the end
of 2023.

 

Cash & liquidity

 

Cash inflows in Q3 amounted to £2.8m, with the largest component being a
dividend from Grayce, and the balance being distributions from fund interests.

 

Since 30 September, BOOK's sale of its investment in Butternut Box has
completed which sees the Company receive £21.8m this week. This transaction
has no impact on NAV, as the uplift was recognised on exchange of the
transaction in Q2.

 

The RCF was £22.75m drawn at 30 September 2023 (£17.0m on 30 June 2023).
Before the end of October, net debt will be below £1m, following completion
of the sale of BOOK's shareholding in Butternut Box and receipt of £21.8m.

 

Post-balance sheet events

 

No events occurred between the end of Q3 and the publication of the factsheet
requiring reported NAV to be revised.

 

Factsheet

 

The Company's factsheet for the three months to 30 September 2023 is now
available on the Company's website: www.literacycapital.com/investors
(http://www.literacycapital.com/investors)

 

Investment Manager's name change

 

In order to reduce any confusion between Literacy Capital plc and its
Investment Manager, the Investment Manager was renamed in September 2023 from
Literacy Capital Asset Management LLP to Book Asset Management LLP. There
remains no intention for the Investment Manager to manage or launch any other
fund, nor has there been any change in personnel or strategy.

 

Investment restrictions

 

Literacy Capital plc is announcing a minor amendment to its investment
restrictions, which is not expected to impact BOOK's investment activities or
strategy. This has been requested by certain institutional investors, who
require this clarification to acquire and hold shares in BOOK. The investment
restrictions are now as follows;

 

The Company will voluntarily comply with the investment restrictions set out
below and will continue to do so for so long as they remain requirements of
the FCA for closed ended funds subject to the Listing Rules:

 

 ·    neither the Company nor any of its subsidiaries will conduct any
 trading activity which is significant in the context of the group as a whole;
 ·    the Company must, at all times, invest and manage its assets in a way
 which is consistent with its objective of spreading investment risk and in
 accordance with the published investment policy; and
 ·    not more than 10 per cent of the Gross Assets at the time an
 investment is made will be invested in other closed-ended investment funds
 which are listed on the Official List.

 

 

-ENDS-

 

 

For further information, please contact:

 

Literacy Capital plc / Book Asset Management LLP

Tom Vernon / Richard Pindar

+44 (0) 20 3960 0280

 

MHP Group

Reg Hoare / Ollie Hoare / Matthew Taylor

book@mhpgroup.com

+44 (0) 20 3128 8100

 

Singer Capital Markets Securities Limited

Robert Peel

+44 (0) 20 7496 3000

 

About Literacy Capital plc

 

Literacy Capital (BOOK.L) is a closed-end investment company that was
co-founded by Paul Pindar and Richard Pindar in 2017 with £54m of capital.
Literacy listed on the London Stock Exchange's Main Market in June 2021,
before gaining Investment Trust status on 1 April 2022. The Company focuses on
opportunities to invest for the long-term in growing private businesses where
a clear route to creating additional value can be seen with its support.

 

It also has a unique charitable objective, to donate 0.9% of annual NAV to
charities focused on improving UK literacy in children. £7.8 million has been
donated or reserved for donation to charities since the trust's creation in
2017. For more information, please visit our website: www.literacycapital.com
(http://www.literacycapital.com) .

 

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

 

The information contained in this announcement regarding the Company's
investments has been provided by the relevant underlying portfolio company and
has not been independently verified by the Company. The information contained
herein is unaudited.

 

This announcement is for information purposes only and is not an offer to
invest. All investments are subject to risk.  Past performance is no
guarantee of future returns.  Prospective investors are advised to seek
expert legal, financial, tax and other professional advice before making any
investment decision.  The value of investments may fluctuate.  Results
achieved in the past are no guarantee of future results. Neither the content
of the Company's website, nor the content on any website accessible from
hyperlinks on its website for any other website, is incorporated into, or
forms part of, this announcement nor, unless previously published by means of
a recognised information service, should any such content be relied upon in
reaching a decision as to whether or not to acquire, continue to hold, or
dispose of, securities in the Company.

 

LEI: 2549006P3DFN5HLFGR54

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