HgCapital Trust plc
Private equity investment trust of the year
Investment Week Awards 2005, 2006 and 2007
Half yearly report and accounts
30 June 2008
London, 28 August 2008: HgCapital Trust plc ("the Trust" or "the Company"), the
Private Equity Investment Trust managed by HgCapital (or the "Manager"), the
European sector-focused private equity investor, announces interim results for
the six months ended 30 June 2008.
Financial highlights
* Another strong performance: NAV increased by 8.9% to �260.0 million (31
December 2007: �238.8 million).
* Total return to shareholders (NAV plus dividend) over the period was 11.6%
compared with -11.1% for the FTSE All-Share Index and -14.9% for the FTSE
Small-Cap Index.
* Consistent returns: share price growth (total return) over ten-year period
of +15.8% per annum against +3.5% per annum for the FTSE All-Share Index
for the same period.
* �115 million in liquid resources (c. 44% of net assets) puts Company in a
good position to take advantage of improving conditions for investment as
they arise.
Operational highlights
* A strong period for realisations, including The Sanctuary Spa, Clarion
Events and Boosey & Hawkes, with �66.5 million in proceeds
* Invested �15.9 million selectively against increasingly adverse economic
conditions.
* Investments during the period included Casa Reha, a leading German care
provider, and a further stake in Pulse Staffing Limited, the agency for
temporary specialist healthcare staff.
Post period end
* NAV at 31 July 2008 was 1,037.8p per share (30 June: 1,032.2p)
* Invested �5.2 million in Achilles, a global leader in procurement services,
as part of total �42 million investment by HgCapital clients.
* Sold stake in Rolfe & Nolan: this will add 0.8p per share to the 30 June
2008 NAV.
Roger Mountford, Chairman of HgCapital Trust plc, commented:
"It is pleasing to report that HgCapital Trust has continued to achieve
significant growth against a background of ongoing weakness in listed markets.
This outperformance underlines the Manager's ability to deliver robust
performance in the face of wider economic uncertainty.
"While credit markets remain tight, the mid-market in which HgCapital
specialises is less affected. At the same time, as the Company has disposed of
virtually all its mature investments, it has reduced exposure to financial
buyers.
"With strong liquid reserves, the Company is well-placed to take advantage of
improving conditions for investment as they arise. The Board is confident that
the Manager's sector-led strategy will continue to identify attractive
investment opportunities to the benefit of our shareholders."
About HgCapital
HgCapital is a private equity investor in the European mid-market. We focus on
investments with an enterprise value in the range of �50-500 million. Our
business model combines sector specialisation with dedicated, proactive support
to our portfolio companies as well as the corresponding management expertise
across all phases of the investment process. HgCapital manages more than Euro2.0
billion for some of the world's leading institutional and private investors.
Our goal is to achieve outstanding results for our investors, management team
and intermediaries.
For further details, see www.hgcapital.com
For further details:
HgCapital Trust
Roger Mountford, Chairman +44 (0)7799 662601
HgCapital
Stephen Bough, Partner +44 (0)20 7089 7888
Maitland +44 (0)20 7379 5151
Neil Bennett/Rowan Brown
______________________________________________________________________
Investment objective
The objective of the Company is to provide shareholders with long-term capital
appreciation in excess of the FTSE All-Share Index by investing in unquoted
companies.
The Company provides investors with exposure to a diversified portfolio of
private equity investments primarily in the UK and Continental Europe.
Financial highlights
of the first six months of 2008
+11.6% Strong growth in net assets (total return) continues
+12.8% Share price and dividend (total return) versus a fall in the FTSE
All-Share Index of 11.1%
+15.8% Ten year total performance p.a. versus 3.5% p.a. from the FTSE All-Share
Index
>4x Ten year investment return for every �1 invested
�67m A strong first half for proceeds from realisations
�16m Invested selectively during a period of falling prices
Chairman's statement
Performance
I am pleased to report that in the first six months of 2008 the Company
continued to deliver growth in NAV against a background of continuing weakness
in listed markets.
Net asset value (NAV) per share increased by 8.9% and total return to
shareholders (NAV plus dividend) over the period was 11.6% compared with -11.1%
for the FTSE All-Share Index and -14.9% for the FTSE Small-Cap Index. The
Company's share price rose by 10.5% from 775p to 856.5p at 30 June.
During the period, and despite weakening market conditions, the Manager
continued successfully to negotiate sales from the portfolio. In anticipation
of lower prices in the months to come, the Manager made only one investment. As
a result, the Company ended the period with liquid funds of �115 million,
representing 44% of net assets.
Since the end of the period under review the Company's shares have remained
broadly stable; this reflects the quality of its portfolio, a further
successful realisation and the defensive value of the Company's high liquidity.
Directors have valued all the Company's investments at 30 June. Over one third
of the investments in the portfolio are held at cost, as they are recent
purchases and are performing in line with expectations. Most of the others are
valued by applying a market multiple to historic earnings and deducting
third-party debt; a discount of between 20% and 30% is then applied in
accordance with the guidelines of the European Venture Capital Association.
Overall, the portfolio appreciated in unrealised value by some �10 million.
Revenue return per share was 29.1p, compared with 12.4p in the same period last
year, reflecting in part the receipt of income from Boosey & Hawkes not
previously included in the net asset value. As explained in earlier reports to
shareholders, the Company's revenue will vary from year to year in accordance
with the structure of the underlying investments and the Company's holding of
liquid funds awaiting reinvestment.
Realisations
The Company made ten full and four partial realisations, yielding proceeds of �
66.5 million and contributing (excluding gross revenue) �16.8 million to the
growth in NAV. Three investments were sold at prices well ahead of original
cost and valuation at 31 December and another, which had previously been
written down, was also sold at a price in excess of original cost; others,
which had previously been written down or off, were sold in order to realise
value and reduce ongoing commitments. The Board recognises that in a private
equity portfolio some investments will fall short of expectations; however, in
all these cases the Manager had worked hard to protect and rebuild value, and
the Directors support the Manager's decision to sell these assets and free up
resources for redeployment.
Since the period end, the Company has sold its interest in Rolfe and Nolan.
Completion of this transaction has added 0.8p per share to the Directors'
valuation at 30 June.
Investments
Investment activity was lower than previously: the Manager anticipates that,
given the adverse trends in economic and market conditions, good businesses
will become available for purchase at more attractive prices. The Company has
substantial liquid funds available to be deployed in this increasingly
attractive environment for investment.
Since the period end, the Company has made one investment of �5.2 million in
Achilles, a global leader in procurement services. Further information on this
and all the Company's principal investments can be found on the Trust's website
at www.hgcapitaltrust.com or in the Investment manager's review.
Outlook
This section of my statement sets out the Directors' views on the short and
long term prospects of the Company and, as now required by the Disclosure and
Transparency Rules, the principal risks and uncertainties facing the Company in
the second half of the year.
Faced by a combination of worrying trends - falling growth expectations,
wholesale and retail inflation, and reduced confidence in financial
institutions - investors have retreated from equity markets, preferring cash or
other low-risk asset classes. If these conditions worsen there is risk that the
market multiples to be applied in valuing the portfolio will be affected.
Market weakness has already affected the share prices of all private equity
investment trusts and discounts to NAV have widened markedly. However, the
Company has itself converted almost all of its mature investments into cash: it
is therefore well placed to protect the value of shareholders' interests during
a period of correction.
Credit markets remain tight, especially in the market for the syndication of
debt in large, highly leveraged acquisitions and refinancings; however, the
mid-market in which HgCapital specialises is less affected. The tightening of
the credit markets may reduce the competition that has pushed up acquisition
prices in recent years. At the same time, as the Company has disposed of
virtually all its mature investments, reducing exposure to financial buyers.
The Company's current portfolio has mostly been acquired within the last two
years and is generally performing according to expectations. Some businesses
are more exposed to changing economic conditions than others and there is risk
that this could affect their trading, and valuations, in the months to come.
However, the Board believes that the mid-market businesses in which the Company
invests may be less exposed to general downturns in markets than businesses
with larger market share. The Manager is represented on the board of every
investment, enabling it to identify adverse trends early, and to ensure that
management takes appropriate action. The Board receives regular reports on each
investment and its prospects. The portfolio is also well diversified by sector
and geographically, with 37% by value in the UK and 59% in northern Europe,
principally Germany.
The Company is ungeared and with its strong liquidity is in a good position to
take advantage of a new environment for investment. To maintain its long-term
record of performance it will be important for the Company to deploy its liquid
funds efficiently. The Board is confident that the Manager's specialist sector
teams are well placed to identify a strong flow of opportunities. The Board
believes that having substantial liquid funds at this point places the Company
in a strong position to take advantage of improving conditions for investment
as they arise, and thus to continue to reward long-term investment in the
Company's shares.
Roger Mountford
Chairman
26 August 2008
Introduction and responsibility statement
Interim management report
This Half yearly report is the first published by the Company under the
Disclosure and Transparency Rules ("DTR"). The Company is required to make a
number of new disclosures, including those on
this page.
The important events that have occurred during the period under review are set
out in the Chairman's statement and in the Investment manager's review, which
also include the key factors influencing the financial statements.
The principle risks and uncertainties for the remaining six months of the
financial year are reviewed in the Outlook section of the Chairman's statement.
HgCapital, as Investment manager of the Company, is considered to be a related
party by virtue of its management contract with the Company. During the period,
services with a total value of �1,939,000
(30 June 2007: �1,736,000; 31 December 2007: �3,595,000) were purchased by the
Company from HgCapital. At 30 June 2008, the amount due to HgCapital, disclosed
under creditors, was �988,000 (30 June 2007: �877,000; 31 December 2007: �
858,000). Where applicable, amounts are inclusive of VAT.�
Responsibility statement
The Directors confirm that to the best of their knowledge:
* - The condensed set of financial statements has been prepared in accordance
with the Statement on Half Yearly Financial Reports issued by the UK Accounting
Standards Board;
* - The Interim management report includes a full review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the remaining
six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
This Half yearly report was approved by the Board of Directors on 26 August
2008 and the above Responsibility statement was signed on its behalf by Roger
Mountford, Chairman.
HgCapital Trust plc gives the investor access to a private equity portfolio run
by an experienced and well-resourced Manager who makes investments in fast
growing companies over a number of geographies and sectors.
We believe our approach will continue to reward investors with superior
performance, both relative to the public markets and its peers over the long
term.
Performance record
Financial highlights
Assets at: 30.6.08 31.12.07 %
(unaudited) (audited) change
Net assets (�'000) 259,985 238,817 +8.9
Net assets per share 1,032.2p 948.2p +8.9
Share price (mid-market) 856.5p 775.0p +10.5
Revenue six months ended: 30.6.08 30.6.07 %
(unaudited) (unaudited) change
Net revenue (�'000) 7,333 3,118 +135.2
Earnings per share 29.1p 12.4p +135.2
Historical total return* performance
One year Three Five Seven Ten years
years years years
% p.a. % p.a.
% p.a. % p.a. % p.a.
Net asset value 25.9 24.6 27.0 16.6 15.8
Share price 5.6 19.4 31.7 15.3 15.8
FTSE All-Share Index (13.0) 7.2 11.3 4.0 3.5
FTSE Small-Cap Index (26.8) 1.6 8.8 2.1 3.5
Based on the Company's share price at 30 June 2008 and allowing for dividends
to be reinvested, an investment of �1,000 ten years ago would now be worth �
4,338. An equivalent FTSE All-Share Index return would be worth �1,405.
*Total return assumes all dividends have been reinvested. Source: Capital
Economics
Investment manager's review
Analysis of movements in net asset value for the six months ended 30 June 2008
Opening net asset value as at 1 January 2008 238,817
Gross revenue 11,136
Expenditure (2,161)
Taxation (2,601)
Dividends paid (6,297)
Realised proceeds in excess of 31 December 2007 book value (excludes 16,786
gross revenue)
Net unrealised appreciation of investments 10,100
Carried interest provision (5,795)
Closing net asset value as at 30 June 2008 259,985
Portfolio
The Company invests alongside other clients of HgCapital. Typically, the
Company's holding forms part of a much larger stake in predominantly buyout
investments of between �50 million and �500 million enterprise value ("EV"),
controlled by HgCapital.
The Investment manager's EV generally refers to each transaction in its
entirety, apart from the tables which detail the Company's participation, and
where this review specifically states otherwise.
The Company's net asset value increased from �238.8 million to �260.0 million
during the period under review. This arose from realised proceeds in excess of
the book value of assets sold in the period of �16.8 million and unrealised
movements on revaluation of �10.1 million, following continued strong earnings
growth and cash generation by companies within the portfolio.
The Company realised proceeds during the period amounting to �66.5 million.
These proceeds arose principally from the sale of The Sanctuary Spa Group,
Clarion Events, Hofmann Men� and Boosey & Hawkes.
During the period, the Company invested a total of �15.9 million including
participation in one new buyout investment. This new investment was made in
Casa Reha (Germany, Euro327 million EV).
A small number of the Company's investments performed below expectations. WET
has suffered from difficult market conditions, with continued pressure on
margins in the car seat heating industry. The divestiture of non-core
activities has been completed and a number of new initiatives are underway,
including a profit improvement programme.
Activity since the period end
Since the period end, the Company has completed the acquisition of Achilles, a
global leader in services for sustainable procurement. HgCapital clients
invested a total of �42 million.
The Company's investment in Rolfe & Nolan has been fully realised since the
period end. An incremental �1.4 million was distributed to the Company in
addition to the �6.2 million already realised and distributed from this
investment. Overall, this investment achieved a 2.6x money multiple and a 41%
IRR.
Realised and unrealised movements in net asset value during the period
Net unrealised Realised proceeds in
appreciation of excess of 31 December 2007
investments �'m book value �'m (excludes
gross revenue)
The Sanctuary Spa - 9.0
Boosey & Hawkes - 4.5
Addison 3.8 -
Clarion Events - 3.2
Visma 2.1 -
Forex Gains 2.0 -
Clinphone 1.4 -
Pulse 1.0 -
PRA 0.9 -
Other and Gilts 0.4 0.1
WET (1.5) -
Total 10.1 16.8
Outlook
We have taken advantage of high pricing to secure our realisations at
attractive prices and have sought to withdraw early from excessively price
competitive new investment situations.
We believe that we are about to enter a prolonged cyclical downturn in the
global economy and in capital markets. Capital is scarce and the profits and
ratings of many businesses will fall. This will present a good buying
opportunity for investors who are knowledgeable about the companies in the
sectors they have selected for investment and, indeed, for companies whose
strategy includes growth by acquisition.
The Company's portfolio is now compact and most companies are performing well
and have strong teams at their helm. Accordingly they are well-placed to take
advantage of any weaknesses in their competitors. In addition, the Company has
liquid resources of �115 million, representing 44% of net assets, and will be
able to exploit the weakness in pricing that we believe will arise over the
next two years.
Portfolio analysis
A diverse portfolio, invested along sector lines, with an increasing exposure
to Continental Europe
At 30 June 2008 the Company's portfolio consisted of 42 investments, of which
the 20 principal investments represented over 94% of the portfolio valuation.
The Company offers both sector and geographic diversification in a portfolio of
fast-growing small cap stocks. The valuation of the Company's unrealised
portfolio as at 30 June 2008 was �154.4 million, representing 52% of net
assets, which reflects the strong stream of realisations made. The Portfolio is
now relatively young, with 67% of investments acquired within the last two and
a half years.
One substantial new investment was made during the period: the management
buyout of Casa Reha, a leading care home operator in Germany.
Ten investments were fully realised and four partially realised, primarily
through trade sales and sales to financial buyers. In aggregate, capital
proceeds from these realisations produced a 60% uplift over the carrying value
and a 108% uplift over cost.
Proceeds from realisations resulted in the Company ending the period with �115
million of liquid assets, of which over �5 million has been invested in
Achilles since the period end.
Having access to substantial liquidity positions the Company well to take
advantage of changing market conditions and to exploit new investment
opportunities as these arise.
Asset class +
Portfolio
- unquoted 52%
- Quoted 1%
Cash & other assets 47%
Valuation basis++
Earnings 45%
Cost 35%
Written down 7%
Third party 6%
Net assets 4%
Quoted 2%
Other 1%
Sector by value++
TMT 30%
Healthcare 18%
Industrials 17%
Services 16%
Consumer & Leisure 15%
Renewable energy 3%
Fund 1%
Deal type by value++
Buyout 91%
Expansion 4%
Fund 4%
Venture 1%
Geographic spread by
value++
UK 37%
Germany 23%
Nordic Region 17%
Benelux 11%
Rest of Europe 3%
North America 3%
Ireland 1%
Vintage by value ++
2008 7%
2007 29%
2006 31%
2005 23%
Pre 2005 10%
+Percentages are based on net assets
++Percentages are based on fixed assets and are shown by value
Investments
In the six months ended 30 June 2008 HgCapital invested �84 million on behalf
of its clients, including �15.9 million on behalf of the Company
Company Sector Activity Deal Type Cost
�'000
Casa Reha Healthcare Care home operator Buyout 8,140
Other 620
New investments 8,760
Pulse Staffing Healthcare Flexible staffing services Buyout 3,008
Limited in the healthcare sector
Portfolio purchase Portfolio Secondary purchase of Secondary 2,710
private equity assets
Other 1,423
Further investments 7,141
Total investment by 15,901
the Company
Figures below refer to the total size of each acquisition, including debt
raised from third parties, made by HgCapital on behalf of its clients,
including the Company.
NEW INVESTMENTS
Casa Reha
In January 2008, HgCapital completed the Euro327 million buyout of Casa Reha.
HgCapital clients invested a total of Euro65 million.
Casa Reha is one of the leading German providers of elderly care services by
size, growth, and profitability. The company has a demonstrable track record of
efficiently operating and opening care homes and of growth. Furthermore the
management team has made one successful acquisition of a sizeable competitor,
Sozialkonzept. Casa Reha's current portfolio numbers 49 homes, of which seven
are new and accepting their initial residents. In addition, the company has
five homes under construction. The group generated sales and EBITDA of Euro123.4
million and Euro16.1 million respectively in 2007. A portion of this investment
was syndicated to co-investors in June 2008.
FURTHER INVESTMENTS
Pulse Staffing Limited
In May 2008 HgCapital bought an additional 42% share in Pulse Staffing Limited
from Bridgepoint. HgCapital clients invested a total of �6.0 million.
Pulse is a leading agency provider (the second largest in the UK) of temporary
qualified healthcare staff to NHS hospitals. Around 75% of Pulse's business is
with the NHS, although other social care and private sector contracts are
increasing as a proportion of the business. Activity levels are currently
rising, driven mainly by shortages of staff in some key specialist groups of
nurses and doctors.
Portfolio purchase
The Trust took the opportunity to buy a portfolio of assets from another
HgCapital client. The majority of these add to the company's existing holdings.
Realisations
In the six months ended 30 June 2008 HgCapital realised total proceeds of �283
million on behalf of its clients including �66.5 million for the Company
Company Sector Activity Cost Proceeds * 2008
return *
�'000 �'000 �'000
The Sanctuary Spa Consumer & Trade sale 2,401 22,435 20,034
Leisure
Clarion Events TMT Financial 4,965 12,614 7,649
sale
Hofmann Men� Industrials Financial 4,747 11,413 6,666
sale
Boosey & Hawkes TMT Financial 6,033 8,803 2,770
sale
Other (6) 9,745 5,615 (4,130)
Full realisations 27,891 60,880 32,989
Fabory Services Syndication 3,812 4,171 359
Other 322 1,477 1,155
Partial realisations 4,134 5,648 1,514
Total realisations 32,025 66,528 34,503
* Includes gross revenue received during the period.
Figures below refer to the total value of each realisation, including, where
appropriate, repayment of third party debt. Proceeds to clients including the
Company are stated net of any such repayment.
FULL REALISATIONS
The Sanctuary Spa
The Sanctuary Spa operates the women's day spa `The Sanctuary', based in Covent
Garden, and also owns a range of beauty products distributed through the spa
and Boots the Chemist.
In January 2008 the business was sold to PZ Cussons for �75 million, returning
�50 million to clients, which represents 4.6x original cost and an IRR of 45%.
Clarion Events
Clarion Events is the largest independent exhibition and events business in the
UK. The company has a portfolio of fifty business and consumer shows, including
the `Top Drawer' giftware trade shows, `Fine Art and Antiques', `Baby',
`Caravan & Outdoor' and `House & Garden'.
In February 2008 the business was sold to a financial buyer, returning �74
million to clients, which represents 2.5x original cost and an IRR of 34%.
Hofmann Men�
Hofmann Men� is a market-leading provider of frozen food products as well as
related on-site catering for small business canteens and social organisations
such as care homes, hospitals and schools in Germany. Hofmann differentiates
itself from its competition by focusing on quality and a wide choice of
healthy, tasty menus.
In January 2008 the business was sold to a financial buyer, returning �58.4
million to clients, which represents 2.4x original cost and an IRR of 51%.
Boosey & Hawkes
Boosey & Hawkes is the world's leading classical music publisher. It owns,
develops and exploits the largest catalogue of classical music copyrights in
the world, including works by composers such as Britten, Prokofieff,
Rachmaninoff, Ravel, Shostakovich and Stravinsky.
In April 2008 the business was sold to Imagem Music, returning �55.8 million to
clients, which represents 1.5x original cost and an IRR of 11%.
Other
Other disposals included our quoted shares in Xyratex and PRA International.
Azinger Ltd, Profiad Ltd and Burns e-Commerce Solutions were also realised.
These had previously been written off. Axiom, which had been underperforming in
recent years, was sold to a trade buyer in Finland.
PARTIAL REALISATIONS
Fabory
Fabory is a full-line wholesale distributor of industrial fasteners with a
market-leading position in the Benelux markets. The initial investment
completed in October 2007; a portion of this investment was syndicated to
co-investors during February 2008.
Other
Other partial realisations included the release of escrow proceeds in respect
of Schenck and PBR and the sale of the Company's interest in Biffa plc, which
was tendered at the acquiring consortium's offer price.
Review of principal investments
1 VISMA
Sector: TMT Location: Norway Year of investment: 2006 www.visma.com
In May 2006, HgCapital completed the �382 million buyout of Visma, the leading
provider of business software in the Nordic region. HgCapital's clients hold a
57% stake in this business.
Headquartered in Oslo, with significant revenues throughout the Nordic region,
the company provides its customer base of over 200,000 enterprises with
accounting, resource planning and payroll software, outsourced book-keeping and
payroll services in addition to debt collection and procurement.
2 Addison
Sector: TMT Location: Germany Year of investment: 2005 www.addison.de
The Euro78 million buyout of Addison was completed in June 2005. HgCapital's
clients have a 93% equity stake in the business.
Addison is a leading German applications software company that provides
business-critical solutions for tax accountants and SMEs. It develops, licences
and manages standard and sector-specific software for bookkeeping, accounts
production, tax, cost accounting, payroll administration and corporate
planning.
In December 2005, HgCapital made a further investment in Addison of Euro14 million
to fund the acquisition of its competitor PBSG, and in November 2007 a
recapitalisation of the business was completed, returning �28 million to
clients. This recapitalisation included an acquisition facility to enable the
company to pursue its growth strategy.
3 Voyage Group
Sector: Healthcare Location: UK Year of investment: 2006 www.milburycare.com
In April 2006, HgCapital completed the �322 million buyout of Voyage Group
(formally known as Paragon Healthcare). HgCapital's clients have a 52% stake in
this business.
Voyage owns and operates small community-based homes for adults with learning
disabilities and associated physical disabilities, autistic spectrum disorders,
complex needs and acquired brain injury.
The company currently operates 1,750 places in 242 homes across England and
Scotland.
4 Casa Reha
Sector: Healthcare Location: Germany Year of investment: 2008 www.casa-reha.de
In January 2008, HgCapital completed the Euro327 million buyout of Casa Reha.
HgCapital's clients have a 36.9% stake in the business.
Casa Reha is one of the leading German providers of elderly care services by
size, growth, and profitability. The company has a demonstrable track record
of efficiently operating and opening care homes. It has also successfully
acquired a sizeable competitor, Sozialkonzept. Casa Reha's current portfolio
numbers 49 homes, of which seven are new and accepting their initial
residents. In addition, the company has five homes under construction. The
group generated sales and EBITDA of Euro123.4 million and Euro16.1 million
respectively in 2007. In June 2008 a portion of this investment was syndicated
to co-investors.
5 Atlas
Sector: Services Location: UK Year of investment: 2007
www.atlasinteractive.co.uk
In November 2007, HgCapital completed the �25 million acquisition of Petrolearn
Limited, also known as Atlas Interactive. HgCapital's clients have a 57% stake
in the business.
Atlas interactive is a global business providing Health, Safety and
Environmental and other regulatory and technical compliance services to the
global energy sector. Based in Aberdeen, it is the largest player in the North
Sea region with more than 30% market share and its global operations extend to
South America, Africa, the Middle East and the Caspian region. It benefits from
deep-rooted customer relationships with all of the major oil and gas companies,
which subscribe to Atlas's suite of intellectual property-protected e-learning
content and training services. Atlas is currently responsible for ensuring that
approximately 250,000 oil and gas workers stay up to date with safety-critical
best practice and technical knowledge, ensuring that they are fit for offshore
work.
6 Fabory
Sector: Services Location: Benelux Year of investment: 2007 www.fabory.com
In October 2007, HgCapital acquired Fabory from AAC Capital Partners for a
consideration of Euro345 million. HgCapital's clients hold a 52% stake in this
business.
Fabory is a full-line wholesale distributor of industrial fasteners with a
market-leading position in the Benelux markets. Key features of Fabory's
business model are its well-invested infrastructure and very high service and
availability levels, enabling it to charge premium prices to a relatively
price-insensitive customer base. Fabory delivers fasteners direct to customers
or through its B2B retail concept (`Fabory Centres'). The company plans to roll
out the Fabory Centre concept in the high growth economies of Central & Eastern
Europe.
In February 2008 a portion of this investment was syndicated to co-investors.
7 Mondo Minerals
Sector: Industrials Location: Nordic region Year of investment: 2007
www.mondominerals.com
In November 2007, HgCapital completed the Euro230 million acquisition of Mondo
Minerals OY. HgCapital's clients have a 91% stake in the business.
Mondo is the world number two in talc mining and processing with 2007 revenues
of Euro134 million. The core markets for Mondo are the paper and paint industries,
where it holds a market share of 65% and 40% respectively in Europe. Mondo
supplies the majority of the talc demand for paper producers in Finland, a
highly regional market. Talc is a base chemical with multiple proven
applications and Mondo has secure raw material reserves representing more than
40 years' production.
8 Sporting Index
Sector: Consumer & Leisure Location: UK Year of investment: 2005
www.sportingindex.com
The �75.8 million buyout of Sporting Index was completed in November 2005.
HgCapital's clients acquired a 70% equity stake in the business.
Founded in 1992, Sporting Index is the recognised leader in sports spread
betting, with a market share of approximately 70% in the UK. It offers a
greater variety of bets (approximately 23,000) and more choice than any other
sports spread betting company. It is also the only sports spread betting
company to offer continuous 24-hour betting and sports spread betting on Sky
TV. It is regulated by the FSA and
does not have a US presence.
9 SLV
Sector: Industrials Location: Germany Year of investment: 2007 www.slv.de
In August 2007, HgCapital completed the Euro320 million acquisition of SLV Group.
HgCapital's clients have a 67% stake in the business.
SLV is a fast-growing and highly profitable German provider of innovative
lighting systems. Since 2000, the company has established a unique business
model focused on B2B. SLV has a competitive advantage in the areas of product
development and design, production, warehousing, and logistics and
distribution. The company is positioned at the lower end of the premium market,
providing superior quality at attractive prices. Today SLV generates 45% of
sales abroad. Manufacturing is outsourced predominately to China, providing a
considerable cost advantage. The company also benefits from long-established
relationships with suppliers.
10 SHL
Sector: Services Location: UK Year of investment: 2006 www.shl.com
In November 2006, HgCapital completed the �100 million buyout of SHL.
HgCapital's clients have a 72% stake in the business.
SHL is the UK market leader in objective psychometric testing and has a global
presence, with a network of offices spanning 25 countries. The core business
consists of the development and sale of 300 psychometric tests to corporate
clients, covering areas such as numerical ability, verbal reasoning and
personality fit. In excess of 50% of sales are online and on-demand, the ease
and practicality of which is transforming the psychometric testing market. SHL
also provides psychologists for the administration and interpretation of tests.
The Company's top 20 investments by value
Investment portfolio
Company Sector Residual Valuation Year of Portfolio Cum
cost � �'000 investment value % Value
'000 %
1 VISMA Holdings TMT 13,326 16,015 2006 11.7% 11.7%
2 Addison Luxembourg TMT 2,296 11,312 2005 8.3% 20.0%
SA
3 Voyage Group Ltd Healthcare 8,755 8,755 2006 6.4% 26.4%
4 Casa Reha SARL Healthcare 8,140 8,659 2008 6.3% 32.7%
5 Atlas Energy Group Services 8,153 8,153 2007 6.0% 38.7%
Ltd
6 BMFCO UA (t/a Services 7,059 7,998 2007 5.8% 44.5%
Fabory)
7 Mondo Minerals Industrials 7,004 7,931 2007 5.8% 50.3%
Co-op
8 Sporting Index Consumer & 7,186 7,186 2005 5.3% 55.6%
Group Ltd Leisure
9 SLV Electronik SARL Industrials 5,962 6,939 2007 5.1% 60.7%
10 SHL Group Holdings Services 6,489 6,889 2006 5.0% 65.7%
1 Ltd
11 Elite Holding SA TMT 5,749 6,162 2005 4.5% 70.2%
(t/a Sitel
Semiconductor)
12 Schleich Luxembourg Consumer & 4,634 5,452 2006 4.0% 74.2%
SA Leisure
13 Americana Consumer & 4,619 4,618 2007 3.4% 77.6%
International Leisure
Holdings Ltd
14 Pulse Staffing Ltd Healthcare 3,457 4,285 1999 3.1% 80.7%
15 Cornish Bakehouse Consumer & 4,200 4,200 2007 3.1% 83.8%
Investments Ltd Leisure
16 W.E.T Holding Industrials 7,590 3,892 2005 2.8% 86.6%
Luxembourg SA
17 Hg Renewable Power Renewable 4,409 3,811 2006 2.8% 89.4%
Partners LP energy
18 Software (Cayman), TMT 530 2,511 2006 1.8% 91.2%
LP - re IRIS
19 Clinphone Plc* Healthcare 315 2,224 1996 1.6% 92.8%
20 FTSA Holdings Ltd Industrials 6,813 1,962 2004 1.4% 94.2%
Total (Top 20 116,686 128,954 94.2% 94.2%
Investments)
Other investments 15,732 7,889 5.8% 100.0%
(22)
Total All 132,418 136,843 100.0% 100.0%
investments (42)
*Listed on the London Stock Exchange
Income statement
for the six months ended 30 June 2008
Note Revenue return Capital return Total return
Six months Year Six months Year Six months Year
ended ended ended ended ended ended
30.06.08 30.06.07 31.12.07 30.06.08 30.06.07 31.12.07 30.06.08 30.06.07 31.12.07
�'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
(unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (audited) (unaudited)
Gains on - - - 26,886 31,046 55,714 26,886 31,046 55,714
investments
and
government
securities
Carried - - - (5,795) (5,252) (6,189) (5,795) (5,252) (6,189)
interest
provision
Income 5 11,136 5,195 12,129 - - - 11,136 5,195 12,129
Investment 6 (450) (407) (840) (1,350) (1,222) (2,519) (1,800) (1,629) (3,359)
management
fee
Other 7 (361) (352) (669) - - - (361) (352) (669)
expenses (a)
Net return 10,325 4,436 10,620 19,741 24,572 47,006 30,066 29,008 57,626
on ordinary
activities
before
taxation
Taxation on (2,992) (1,318) (3,174) 391 367 756 (2,601) (951) (2,418)
ordinary
activities
Transfer to 7,333 3,118 7,446 20,132 24,939 47,762 27,465 28,057 55,208
reserve
Return per 29.11p 12.4p 29.56p 79.93p 99.0p 189.63p 109.04p 111.4p 219.19p
ordinary
share
The total column of this statement represents the Company's income statement.
The supplementary revenue and capital return columns are both prepared under
guidance published by the Association of Investment Companies ("AIC"). All
recognised gains and losses are disclosed in the revenue and capital columns of
the income statement and as a consequence no statement of total recognised
gains and losses has been presented.
All revenue and capital items in the above statement derive from continuing
operations.
Final dividend for the year ended 31 December 2007 of 25.00p (�6,297,000)
declared on 13 March 2008 and paid on 12 May 2008.
Final dividend for the year ended 31 December 2006 of 14.00p (�3,526,000)
declared on 13 March 2007 and paid on 1 May 2007.
Balance sheet
as at 30 June 2008
30.6.08 30.6.07 31.12.07
�'000 �'000 �'000
(unaudited) (unaudited) (audited)
Fixed assets
Investments held at fair value
Quoted at market valuation 2,224 7,321 6,482
Unquoted at Directors' valuation 134,619 146,918 147,885
Total 136,843 154,239 154,367
Current assets
Debtors 17,655 12,684 13,906
Government securities 112,203 50,203 79,723
Cash 2,742 4,098 117
Total 132,600 66,985 93,746
Creditors - amounts falling due within (9,458) (9,558) (9,296)
one year
Net current assets 123,142 57,427 84,450
Net assets 259,985 211,666 238,817
Capital and reserves
Called up share capital 6,296 6,296 6,296
Share premium account 14,123 14,123 14,123
Capital redemption reserve 1,248 1,248 1,248
Capital reserve - realised 219,922 164,354 197,852
Capital reserve - unrealised 3,744 16,357 5,682
Revenue reserve 14,652 9,288 13,616
Total equity shareholders' funds 259,985 211,666 238,817
Net asset value per ordinary share 1,032.2p 840.4p 948.2p
Cash flow statement
for the six months ended 30 June 2008
Note Six months Six months Year ended
ended ended 31.12.07
30.6.08 30.6.07 �'000
�'000 �'000 (audited)
(unaudited) (unaudited)
Net cash inflow (outflow) from 7(b) 18 (5,387) (2,259)
operating activities
Taxation paid (3,026) (8) (2,137)
Capital expenditure and financial
investment
Purchase of fixed asset investments (15,901) - (50,757)
Proceeds from the sale of fixed asset 61,340 38,390 103,283
investments
Net cash inflow from capital 45,439 27,309 52,526
expenditure and financial investment
Equity dividends paid (6,297) (3,526) (3,526)
Net cash inflow before management of 36,134 18,388 44,604
liquid resources
Management of liquid resources (33,509) (16,558) (46,755)
Increase in cash in the period 2,625 1,830 (2,151)
Reconciliation of movements in shareholders' funds
for the six months ended 30 June 2008
Note Share Share Capital Capital Revenue Total
capital premium redemption reserves reserve �'000
�'000 account reserve �'000 �'000
�'000 �'000
At 31 December 2007 6,296 14,123 1,248 203,534 13,616 238,817
Net return from ordinary - - - 20,132 7,333 27,465
activities(1)
Dividends paid(2) 3 - - - - (6,297) (6,297)
At 30 June 2008 6,296 14,123 1,248 223,666 14,652 259,985
At 31 December 2006 6,296 14,123 1,248 155,772 9,696 187,135
Net return from ordinary - - - 47,762 7,446 55,208
activities
Dividends paid(3) 3 - - - - (3,526) (3,526)
At 31 December 2007 6,296 14,123 1,248 203,534 13,616 238,817
1 Unaudited.
2 Final dividend for the year ended 31 December 2007 of 25.00p (�6,297,000)
declared on 13 March 2008 and paid on 12 May 2008.
3 Final dividend for the year ended 31 December 2006 of 14.00p (�3,526,000)
declared on 13 March 2007 and paid on 1 May 2007.
Notes to the financial statements
1. Principal activity
The principal activity of the Company is that of an investment company within
the meaning of section 833 of the Companies Act 2006.
2. Basis of preparation
The accounts have been prepared in accordance with applicable Accounting
Standards and with the Statement of Recommended Practice `Financial Statements
of Investment Trust Companies' (SORP), dated January 2003 and revised in
December 2005. All of the Company's operations are of a continuing nature. The
same accounting policies used for the year ended 31 December 2007 have been
applied.
3. Dividends
It is intended that dividends will be declared and paid annually in respect of
each accounting period. A dividend of 25.00p per share, declared on 13 March
2008 as a final dividend, was paid on 12 May 2008 in respect of the year ended
31 December 2007 (year ended 31 December 2006: 14.00p per share, declared on 13
March 2007 and paid on 1 May 2007).
4. Issued share capital
There were 25,186,755 ordinary shares in issue for the six months ended 30 June
2008 and 30 June 2007; and the year ended 31 December 2007.
5. Income
Six months Six months Year ended
ended ended 31.12.07
30.6.08 30.6.07 �'000
�'000 �'000 (audited)
(unaudited) (unaudited)
Income from investments
UK and overseas unquoted investment 8,765 3,567 8,305
income
UK dividends from unquoted investments 6 42 41
8,771 3,609 8,346
Other income
Gilt interest 2,271 1,539 3,650
Deposit interest 94 47 133
2,365 1,586 3,783
Total income 11,136 5,195 12,129
6. Investment management fee
Revenue return Capital return
Investment management Six months Six months Year Six months Six months Year
fee ended ended ended ended ended ended
30.6.08 30.6.07 31.12.07 30.6.08 30.6.07 31.12.07
�'000 �'000 �'000 �'000 �'000 �'000
(unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
Investment management fee 450 347 745 1,350 1,040 2,235
Irrecoverable VAT thereon - 60 95 - 182 284
450 407 840 1,350 1,222 2,519
The investment management fee is levied quarterly in arrears. Investment
management fees are charged 75% to capital and 25% to revenue. VAT on the
Investment manager's fees in prior years is subject to a claim but the outcome
is uncertain and no revenue arising from this claim has been recognised at this
stage.
7. Other expenses
(a) Operating expenses
Six months Six months Year ended
ended ended 31.12.07
30.6.08 30.6.07 �'000
�'000 �'000 (audited)
(unaudited) (unaudited)
Custodian and administration fees 146 111 249
Other administration costs 215 241 420
361 352 669
(b) Reconciliation of net revenue return before taxation to net cash flow from
operation activities
Six months Six months Year ended
ended ended 31.12.07
30.6.08 30.6.07 �'000
�'000 �'000 (audited)
(unaudited) (unaudited)
Net return before taxation 30,066 29,008 57,626
Gains on investments held at fair value (26,886) (31,046) (55,714)
Carried interest provision (394) 515 1,452
Increase in accrued income (3,754) (4,000) (5,237)
Decrease in debtors 5 - 15
Increase/(Decrease) in creditors 981 139 (397)
Tax on investment income included - (3) (4)
within gross income
Net cash inflow/(outflow) from 18 (5,387) (2,259)
operating activities
8. Capital commitments
At 30 June 2008, investment purchases of �12,048,000 (30 June 2007: �11,426,000
and 31 December 2007: �11,900,000) had been authorised and contractually
committed, including an undrawn commitment to Hg Renewable Power Partners LP.
9. Publication of non-statutory accounts
The financial information contained in this Half yearly report does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985. The financial information for the six months ended 30 June 2008 and 2007
has not been audited. The information for the year ended 31 December 2007 has
been extracted from the latest published audited financial statements, which
have been filed with the Registrar of Companies. The report of the auditors on
those accounts contained no qualification or statement under section 237(2) or
(3) of the Companies Act 1985.
10. Annual results
The Board expects to announce the results for the year ending 31 December 2008
in March 2009.
The Annual report should be available by the end of March 2009, with the Annual
General Meeting being held in May 2009.
Independent review report
to HgCapital Trust plc
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the Half yearly financial report for the six months ended 30 June
2008 which comprises the Income statement, Balance sheet, Cash flow statement,
Reconciliation of movements in shareholders' funds and the related notes 1 to
10. We have read the other information contained in the Half yearly financial
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the company in accordance with guidance contained
in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company, for our work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The Half yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
Half yearly financial report in accordance with the Disclosure and Transparency
Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 2, the annual financial statements of the company are
prepared in accordance with United Kingdom Generally Accepted Accounting
Practice. The condensed set of financial statements included in this Half
yearly financial report has been prepared in accordance with the Accounting
Standards Board Statement "Half-Yearly Financial Reports".
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the Half yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the Half yearly
financial report for the six months ended 30 June 2008 is not prepared, in all
material respects, in accordance with the Accounting Standards Board Statement
"Half-Yearly Financial Reports" and the Disclosure and Transparency Rules of
the United Kingdom's Financial Services Authority.
Ernst & Young LLP
London
26 August 2008
Management and administration
Board of Directors
Roger Mountford (Chairman)
Timothy Amies
Piers Brooke
Richard Brooman
Peter Gale
Andrew Murison
HgCapital Trust plc
2 More London Riverside
London
SE1 2AP
www.hgcapitaltrust.com
Registered office
(Registered in England No. 1525583)
2 More London Riverside
London
SE1 2AP
Investment manager
HgCapital* *
2 More London Riverside
London
SE1 2AP
Telephone: 020 7089 7888
www.hgcapital.com
Secretary and administrator
HgCapital* *
2 More London Riverside
London
SE1 2AP
Telephone: 020 7089 7888
Stockbroker
Winterflood Securities*
The Atrium Building
Cannon Bridge
25 Dowgate Hill
London
EC4R 2EA
Telephone: 020 7621 0004
www.winsresearch.co.uk
Registrar
Computershare Investor Services PLC*
The Pavilions
Bridgwater Road
Bristol
BS99 6ZY
Telephone: 0870 702 0131
Independent auditor
Ernst & Young LLP
1 More London Place
London
SE1 2AF
AIC
Association of Investment Companies
www.theaic.co.uk
HgCapital Trust is a member of the Association of Investment Companies
iPEIT
Initiative for Private Equity Investment Trusts
www.ipeit.com
HgCapital Trust is a founder member of the Initiative for Private Equity
Investment Trusts (iPEIT). This group of UK-listed PEITs was formed to raise
awareness and increase understanding of what PEITs are and how PEITs enable all
investors - not just institutions - to invest in private equity. iPEIT provides
information on PEITs and private equity in general, undertakes and publishes
research on the PEIT sector and works to improve levels of knowledge about
PEITs among investors and their advisors.
*Authorised and regulated by the Financial Services Authority.
*HgCapital is the trading name of Hg Pooled Management Limited
END
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