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

Literacy CapitalAnnouncement

28/02/2025 07:00

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RNS Number : 7712Y  Literacy Capital PLC  28 February 2025

The information contained in this announcement is restricted and is not for
publication, release or distribution in the United States of America, any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.

 

28 February 2025

Literacy Capital plc

 

Quarterly trading update and NAV announcement for Q4 2024

 

BOOK continues to recycle capital to maximise returns whilst focusing on and
actively managing investments with strong growth potential

 

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 and NAV
update for the three months ending 31 December 2024.

 

Q4 Highlights:

 

 ●    Q4'24 Net asset value ("NAV") of £296.6m, equating to NAV of 492.8 pence per
      share, and a (1.5)% decline in annual NAV.

      o  NAV, adjusted for the post-period end event (Halsbury Travel's bolt-on
      acquisition), of £300.4m or 499.2 pence per share, 1.1% lower than the NAV
      per share of the previous quarter (Q3'24: 504.7 pence). This figure would
      result in a 2024 NAV return of (0.2)%.
 ●    Velociti was the strongest contributor in Q4 and became BOOK's third largest
      holding due to its positive performance. Live Business, an investment
      completed in 2024, also performed well and joined the top ten holdings.
 ●    The reduction in the weighted average EV / EBITDA carrying multiple to 8.8x
      was the primary driver of the slight reduction in NAV, rather than weaker
      portfolio company trading performance. The year-on-year growth in earnings
      improved compared to recent factsheets, closing 2024 at its peak, as a result
      of measures taken by portfolio companies to manage their costs.
 ●    BOOK deployed £9.1m of capital in Q4'24, including one new investment. This
      reflected the completion of a minority investment in amplify5, an outsourcing
      business with offshore operations based in Cape Town, South Africa.
 ●    A focus on actively managing and recycling capital from the portfolio remains.
      It is expected that the refinancing of two portfolio companies will complete
      in Q1'25. Cash receipts are expected to be strong in 2025, subject to
      geopolitical and macroeconomic instability.
 ●    Total charitable donations since the inception of Literacy Capital now amount
      to £11.2m, including a charitable donation provision of £641k in Q4'24.

 

Commenting on the Q4 performance, CEO of BOOK's investment manager, Richard
Pindar, said:

 

"BOOK's NAV performance in the latter part of 2024 was, as mentioned in our Q3
update in October 2024, the first adverse movement since Q1 2020, which was
heavily impacted by Covid-19.

 

The primary impediment to a better NAV return was the adverse movement in
carrying value of two larger assets, as first reported in October 2024. Both
had previously performed well and contributed very strongly to NAV growth.
This reversed in 2024 reflecting the reduced UK business confidence, which by
December 2024 was the lowest since July 2020 1  (#_ftn1) .

 

Some patience will be needed to overcome these challenges and for portfolio
companies to recoup the impact of tax rises or policy changes affecting UK
businesses. However, our companies are well-led and able to adapt swiftly.
This is demonstrated by the resilience of the aggregated earnings growth
figures our portfolio companies have generated. Additionally, when trading
conditions are weakest, there tends to be more and better new investment
opportunities, which bodes well for future NAV uplifts from new investments.

 

We note BOOK's relative share price weakness during Q4 and early 2025. We
believe this is unwarranted and will take action to address this discount if
it persists following publication of the FY24 results, which we expect to
issue in mid-March 2025."

 

Net Asset Value

 

The Company announces that, as at 31 December 2024, the NAV per ordinary share
was 492.8 pence.

 

Inclusive of the post-period end adjusting event as described below, the NAV
per share was 499.2 pence, a reduction of 1.1% since 30 September 2024 (Q3 NAV
per share: 504.7p).

 

                                 At 31 Dec 24  At 30 Sep 24  At 31 Dec 23
 Net asset value (£m)            296.6         303.7         300.3
 NAV per ordinary share (pence)  492.8         504.7         500.4

 

The above NAV calculation is based on the Company's issued ordinary share
capital as at 31 December 2024 of 60,175,000 ordinary shares of £0.001 each.
This NAV calculation includes the cost to ordinary shareholders of the 612,500
warrants in issue. This cost is accrued on a straight-line basis over the
vesting period of the warrants.

 

Portfolio company performance

 

Double digit revenue and earnings growth across BOOK's top ten holdings was
achieved in Q4, with earnings growth reaching its highest point in 2024. Most
of BOOK's largest holdings traded in line or ahead of budget. The two
businesses that saw their valuations decline in Q4 were relatively large
holdings (19.3% of NAV on 30 September 2024), which resulted in the overall
decline in NAV. Otherwise, the performance of BOOK's largest portfolio
companies remained on track.

 

Velociti and Live Business were the two strongest contributors in Q4 and were
marked up as a result of positive trading. Both continue to demonstrate
progress and remain strong prospects for 2025.

 

The improvement in the reported EBITDA growth and margins is encouraging
considering how weak recent UK economic data and business confidence was in H2
2024. It also demonstrates the strength of leadership across BOOK's portfolio
companies and the ability they have to swiftly implement change to improve
trading performance.

 

BOOK's modest exposure to private equity fund interests continues to reduce as
a proportion of NAV, as the funds sell their underlying portfolio companies
and return cash to their investors. During Q4, BOOK also completed the sale of
one of its fund interests, receiving £2.8m in cash in October 2024 (at an
8.2% premium to its previous carrying value).

 

Transactions and investments

 

£9.1m was invested by BOOK in aggregate during Q4. One new platform
investment was completed in the quarter, with Literacy taking a significant
minority stake in amplify5, a provider of tailored offshoring solutions to
large enterprises and SMEs across the UK, Europe and the US. The rest of this
capital investment was injected into the existing portfolio. The largest
recipients of additional capital were Oxygen, Grayce and our fund interests;
which include two of BOOK's top five investments with respect to carrying
value.

 

Cash & liquidity

 

Cash inflows amounted to £3.0m in Q4. These receipts related to the sale of
one of our fund interests (£2.8m) as described above, with the balance
(£0.2m) received courtesy of other distributions from third-party fund
investments.

 

Literacy's RCF was £30.1m drawn as at 31 December 2024 (£19.9m drawn on 30
September 2024). During the quarter, the fund extended its committed portion
of the facility with OakNorth Bank plc to £35m, on the same three-year term.
The overall limit on the facility remains £40m.

 

The combination of good growth rates and low leverage at a portfolio company
level mean that several assets are likely to be refinanced or sold in the next
six months, which would generate healthy cash inflows for BOOK.

 

Post-balance sheet events

 

During January 2025, Halsbury Travel completed the bolt-on acquisition of two
entities. These were two profitable businesses bought from a parent company
that had entered administration. This post-period end event is considered to
have an impact on NAV that is worthy of adjustment.

 

As a result, adjusted NAV and NAV per share figures are presented within the
Q4 factsheet to include the impact of this event, given completion of the
acquisitions took place before the release of this announcement.

 

Factsheet

 

The Company's factsheet for the three months to 31 December 2024 is now
available on the Company's website: www.literacycapital.com/investors
(https://protect.checkpoint.com/v2/___http:/www.literacycapital.com/investors___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzphNjUwYWQxZDUwODhlOWQ3MmI2NDdhYTkzOTJmNjA0Mzo2OmM0NWE6MTBkZjJiZmU3NGNhNmQwYTc2ZTQ2YjBlNjM2OGJlNTk0N2MyMDZmNzFhNzcxY2ZhOTcxMDVhNGEzNjgwYjhhYjpwOlQ6Tg)
.

 

 

 

-ENDS-

 

 

For further information, please contact:

 

Literacy Capital plc / Book Asset Management LLP

Richard Pindar / Aasha Tailor

+44 (0) 20 3960 0280

 

MHP Group

Reg Hoare / Ollie Hoare / Matthew Taylor

book@mhpgroup.com

+44 (0) 7817 458 804 / + 44 (0) 7827 662 831

 

Singer Capital Markets Securities Limited

Alaina Wong

+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 0.5% of annual NAV to
charities focused on improving UK literacy in children. £11.2 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
(https://protect.checkpoint.com/v2/___http:/www.literacycapital.com___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzphNjUwYWQxZDUwODhlOWQ3MmI2NDdhYTkzOTJmNjA0Mzo2OmViNjk6ZTY1ZGRjZjU4MjE2YTJmMjU5YmYzMWZjOTYwMDBjMTI4MzY0YTIxYzQ1YzZkODczYzMwNzQ1YzM1YzI0NTg5YTpwOlQ6Tg)
.

 

A copy of this announcement will be available on the Company's website at
www.literacycapital.com
(https://protect.checkpoint.com/v2/___http:/www.literacycapital.com___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzphNjUwYWQxZDUwODhlOWQ3MmI2NDdhYTkzOTJmNjA0Mzo2OmViNjk6ZTY1ZGRjZjU4MjE2YTJmMjU5YmYzMWZjOTYwMDBjMTI4MzY0YTIxYzQ1YzZkODczYzMwNzQ1YzM1YzI0NTg5YTpwOlQ6Tg)
.

 

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

 1  (#_ftnref1) OECD Business Confidence Index, December 2024

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