TIDMHGT
HgCapital Trust plc
Press release - Interim Results for the six months ended 30 June 2011
London, 25 August 2011: HgCapital Trust plc ("the Trust"), which
provides investors with a listed vehicle to invest in all private equity deals
managed by HgCapital, today announces its interim results for the six months
ended 30 June 2011.
HGCAPITAL TRUST PLC CONTINUES TO DELIVER LONG TERM OUTPERFORMANCE
Financial Highlights for the above period
% Total 30 June 31 December
return* 2011 2010
Share price +16.1% 1,140.0p 1,006.0p
NAV per share (basic) +6.3% 1,160.4p 1,118.8p
(diluted) +6.1% 1,129.3p 1,090.7p
FTSE All-Share +3.0%
Index
Movement
NAV +GBP21.0m GBP369.0m GBP348.0m
Market Cap +GBP49.6m GBP362.5m GBP312.9m
* Assuming reinvestment of all dividends
- +14.7% p.a. 10-year compound annual growth rate of the share
price on a total return basis* vs. 4.8% p.a. from the FTSE All-Share Index on
a total return basis* to 30 June 2011.
- Strong sales and EBITDA growth from top 20 buyout investments of
+17% and +12% respectively over last 12 months to 30 June 2011.
- Liquid resources were GBP94m (26% of NAV) with outstanding
commitments of GBP191m (52% of NAV).
Operational Highlights
- GBP29m deployed over the period, principally in two new buyout
investments.
- GBP40m of cash proceeds from realisations generated over the
period; exits at a 71% uplift to book value as at 31 December 2010.
Events since 30 June 2011
- NAV per share at 31 July 2011 was 1,142.6p (basic) and 1,114.1p
(diluted); movement from June mainly due to foreign exchange fluctuations.
- Sale of Mondo agreed, with cash proceeds of GBP14m expected in H2.
- The Trust has finalised a GBP40m three-year standby facility with
Lloyds TSB Bank plc, on an unsecured basis.
- New commitments totalling GBP75m made since period end, consisting
of a GBP15m secondary commitment to Hg6 and a GBP60m commitment to the Manager's
Mercury fund that invests in smaller companies in the TMT sector.
- Numis Securities Limited appointed as joint corporate broker.
Outlook
- Economic weakness likely to create opportunities for buyout
investments.
- Existing portfolio companies will continue to strengthen
management capabilities, market position, operational and financial
performance and balance sheets.
- Continued confidence in HgCapital's thematic investing approach
using sector expertise to identify industry `champions' and focus on
delivering long-term profit growth ahead of the market.
Roger Mountford, Chairman of the Trust, commented:
The Trust has performed well in the first half. Again, the Trust
has significantly exceeded its benchmark, the FTSE All Share Index.
Encouragingly, most of the Trust's top 20 buyout investments grew both sales
and EBITDA.
On-going macroeconomic instability does create opportunities for
private equity and we remain confident in the Manager's dedicated thematic
approach to identify and invest in outstanding companies. We also believe
HgCapital has the skill and resource to participate actively in portfolio
companies, enabling value to be protected and grown through trading while
minimising balance sheet risk.
It is also important to ensure that additional risk is not being
taken at the level of the investment vehicle. Transparent reporting enables
the investor to assess these factors. The Board remains confident that the
Trust offers an attractive proposition to the long-term investor.
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HgCapital Trust plc
INTERIM REPORT AND ACCOUNTS
30 June 2011
The objective of the Trust is to provide shareholders with long-term capital
appreciation in excess of the FTSE All-Share Index by investing in unquoted
companies.
The Trust provides investors with exposure to a diversified portfolio of
private equity investments primarily in the UK and Continental Europe.
References in this interim report and accounts to HgCapital Trust plc have
been abbreviated to 'HgCapital Trust' or the 'Trust'.HgCapital refers to
the trading name of HgPooled Management Limited and HgCapital LLP, who act
as the 'Manager'.
PERIOD PERFORMANCE
MARKET CAPITALISATION GBP363 MILLION
The ordinary share price rose from GBP10.06 to GBP11.40 over the period.
An increase (on a total return basis) of +16%
NET ASSET VALUE (`NAV') GBP369 MILLION
The NAV (basic) per ordinary share rose from GBP11.19 to GBP11.60 over the period.
An increase (on a total return basis) of +6%
LONG-TERM PERFORMANCE - 10 YEAR TOTAL RETURN
COMPOUND ANNUAL GROWTH RATE
14.7% p.a. - The compound annual growth rate of the HgCapital Trust plc share
price over the last 10 years.
10 YEAR RETURN ON GBP1,000
GBP3,925 - How much an investment of GBP1,000 in HgCapital Trust plc ten years
ago would now be worth.*
An equivalent investment in the FTSE All-Share Index* would be worth GBP1,591.
*Assuming reinvestment of all dividends
THE PORTFOLIO
HgCapital Trust plc gives investors access to a private equity portfolio of
currently 32 companies, run by an experienced and well-resourced Manager that
makes investments in private companies across Northern Europe in the
Healthcare, Industrials, Services and TMT sectors.
Investment in HgCapital Trust plc provides exposure to a portfolio of
primarily fast growing companies*. The top 20 buyout investments currently
account for 90% of the portfolio value. These companies achieved aggregate
revenues of GBP2.1 billion and profits of GBP475 million over the last twelve
month period to 30 June 2011.
In addition, the Trust invests in renewable energy power generation through
two renewable energy funds managed by HgCapital.
+17% p.a. revenue growth - The average growth in revenue of the top 20 buyout
investments for the 12 months ending 30 June 2011.
+12% p.a. profit growth - The average growth in profit of the top 20 buyout
investments for the 12 months ending 30 June 2011.
9.3x EV/EBITDA multiple - The average valuation multiple used to value the top
20 buyout investments at 30 June 2011.
3.3x Net debt/EBITDA - The average net debt/EBITDA multiple of the top 20
buyout investments at 30 June 2011.
*References in this interim report and accounts to the `portfolio',
`investments', `companies' or `businesses', refer to a number of buyout
investments, held indirectly by the Trust through its direct investments in
fund limited partnerships (HGT LP and HGT6 LP) of which the Trust is the sole
limited partner, and direct investments in renewable energy fund limited
partnerships (HgRenewable Power Partners LP (`RPP1') and HgCapital Renewable
Power Partners 2 C LP (`RPP2')), of which the Trust is a limited partner.
CHAIRMAN'S STATEMENT
Performance in the first half
In the six months ended 30 June 2011 the total return (NAV plus dividend) was
6.3% (basic) or 6.1% (diluted for the effect of future exercise of the Trust's
outstanding subscription shares). This compares well against a total return on
the Trust's benchmark, the FTSE All Share Index, of 3.0%. The basic NAV per
ordinary share increased over the periodto a record GBP11.60 (GBP11.29 diluted).
Following our issue of ordinary and subscription shares last year, the Trust's
shares continued to perform well in the first half. Total return during the
half-year, in terms of share price plus dividend, was 16.1%. As a result, the
ten-year total return to shareholders continues to exceed the benchmark by
approximately 10% p.a., underpinning the Board's conviction that an allocation
to the Trust's shares should be considered by investors seeking long-term
growth. An investment of GBP1,000 made ten years earlier, with dividends
reinvested, would now have a value of GBP3,925, compared with GBP1,591 if invested
in the FTSE All Share Index.
Revenue return per ordinary share in the six months was 11.0 pence, compared
with 13.0 pence in the same period last year.
Portfolio
Over the twelve months ended 30 June 2011, most of the Trust's top 20 buyout
investments (which represent some 90% of the Trust's total investment
portfolio, excluding cash and cash equivalents) grew in both sales and EBITDA.
In the last twelve months, the top 20 buyout investments' average revenues
grew by 17% while their average profits rose by 12%.
As usual, the Board has valued each investment in the portfolio as at 30 June,
after considering analytical data and draft valuations prepared by the
Manager, in accordance with IPEV guidelines. The top 20 buyout investments
have been valued using EBITDA multiples that average 9.3x across these
investments. Investments in renewable energy projects have been valued using
cash flow assumptions and discount rates that the Board has reviewed.
A full analysis of the valuation multiples and gearing of the top 20 buyout
investments is set out in the Manager's Review later in this document. This
shows that the top 20 investments had moderate leverage, with an average of
3.3x EBITDA.
The Manager's Review contains detailed commentary on the top 10 buyout
investments, which represent some 60% of the total investment portfolio.
During the period the Trust invested GBP22 million in two new buyouts in the
healthcare and services sectors, in Finland and Benelux respectively. A
further GBP7 million was invested in renewable energy and in support of two
existing buyouts.
The Trust realised nearly GBP34 million from three full realisations that
delivered an uplift of 71% over the book value at 31 December 2010.
Further realisations of GBP6 million were received, mainly from the refinancing
of an investment.
Shareholder value was further created by the unrealised revaluation of
portfolio investments by a net gain of GBP19 million. The Board is pleased to
observe that, as shown in the Manager's attribution analysis, once again the
largest contributor to increases in value was the growth in profits of the
businesses in the Trust's buyout portfolio. This was partly offset by adverse
movements in the market multiples of comparable companies. The weakness of
sterling, against the currencies in which some investments are denominated,
contributed further to the uplift in valuations.
Corporate developments
As part of the Trust's fund-raising in early 2010, it issued a total of over 6
million subscription shares. Each subscription share entitles the holder to
subscribe to one new ordinary share. The first exercise date was in May 2011
and I am pleased to report that 695,810 shares were exercised at a price of
GBP9.50 per share, raising some GBP6.6 million. The next opportunities to exercise
the subscription shares will be in October 2011, May 2012 and October 2012, at
the same price of GBP9.50 per share; the final exercise date will be in May
2013, at a price of GBP10.25. If all the remaining subscription shares are
exercised in full, this will raise additional funds for the Trust of between
GBP52.5 million and GBP56.6 million, and will further enhance the liquidity of the
market in the Trust's shares.
The Board has agreed to co-invest up to GBP60 million alongside HgCapital's
Mercury fund. This fund will invest exclusively in the TMT sector in the UK
and Continental Europe, with which HgCapital is very familiar. It will differ
from HgCapital 6 (`Hg6') in its focus on smaller companies, with an enterprise
value at acquisition of between GBP20 million and GBP80 million. This is the
segment of the buyout market where HgCapital originally established itself as
a successful investor. The Board is pleased to note that, although HgCapital
has like other managers moved up in the scale of its activities and deals, it
has not vacated this profitable segment of the market. It is anticipated that
over the life of this fund the Trust will take up 15% of each new investment,
but the Trust's commitment is capped at first, so as to ensure that it does
not take up a disproportionately large holding.
Since the end of the period, the Trust announced the acquisition of a GBP15
million limited partnership interest in Hg6; this was bought from an investor
of HgCapital who had decided to withdraw entirely from investment in private
equity. The transaction comprised a payment of GBP7.8 million for funds already
invested, with the balance by way of a further commitment to invest in future
deals. The acquisition from other investors of interests in funds managed by
HgCapital, with which the Trust's Board is of course very familiar, represents
a further means to optimise the deployment of the Trust's resources. The Board
may from time to time make further such acquisitions, or indeed might sell an
interest, if this were appropriate in the strategic management of the Trust.
In the 2010 Annual Report the Board set out a comprehensive description of the
Trust's investment objective and policy, its rationale and business model.
This has not changed and is reproduced in this interim report for
shareholders' convenience.
In the business model the Board stated that, while it does not currently see
any advantage in using a further level of structural borrowing by the Trust,
it does from time to time arrange bank facilities to assist with short-term
cash-flow management. At 30 June the Trust held GBP94 million in cash and liquid
funds available for deployment, in line with its strategy of maintaining an
appropriate level of liquidity against future commitments and for investment
when market conditions favour buyers. The Board regularly considers long-term
cash flow projections in order to manage the Trust's resources carefully. To
give the Board further flexibility the Trust has recently finalised a GBP40
million three-year standby facility with Lloyds TSB Bank plc, on an unsecured
basis.
This facility represents another lever available to the Board in its
management of the Trust's resources and commitments with the objective of
building shareholder value without, adding undue risk. Other levers include:
the opt-out in relation to Hg6 acquisitions; rights to be excluded from any
specific investment in RPP2 or Mercury if it would jeopardise our status as an
investment trust; the ongoing exercise of subscription shares raising new
funds; the Trust's proven ability to issue new ordinary shares; and the option
of buying or selling interests in our underlying investments.
Reporting
This interim report reflects the Board's commitment to continuous improvement
in the transparency and the clarity of our reporting to shareholders. It is
larger than previous interim reports so as to contain not only the interim
financial statements but all the key analytical data disclosed in the annual
report and new analysis of the Trust's commitments. The report contains
descriptions and up-to-date information about the top 10 buyout investments.
Further information is available on the Manager's website, www.hgcapital.com
and from the Trust's website www.hgcapitaltrust.com.
In line with this policy of transparency, the Manager also publishes a
pre-close statement on the website just prior to the half-year and year-end.
Prospects
In my statement in March, I warned that the strong trading of almost all of
our buyouts remained subject to continuing stability in European economies and
a return to economic growth. Renewed anxiety about the international effects
of slow economic growth in the USA, combined with unwelcome if not unexpected
turmoil in the eurozone, clearly create some risk around the portfolio we
hold. The latest available management figures for our underlying investments
indicate that most are holding up well, but with pressure on margins in some
cases. The Trust's portfolio is concentrated in the UK, Germany and the Nordic
region and has no investments in Greece or Portugal, only one investment in
Italy and renewable assets in Spain. Leverage in the portfolio is at a
moderate level, giving no cause for concern.
Meanwhile, the recapitalisation of the banks active in funding private equity
transactions has resulted in improved conditions for experienced private
equity managers such as HgCapital to raise sensible amounts of leverage so as
to take advantage of opportunities to acquire businesses at attractive prices.
These improved conditions in the banking market and the moderate levels of
gearing in our portfolio are also evidenced by the Trust's ability to raise
unsecured bank funding.
In a period of financial instability and weak economic growth, investment in
private equity still has a role to play in the portfolio of the long-term
investor. However, attention must be paid to the expertise of the manager and
to the strategy of the investment vehicle. It is important to select a private
equity manager who has the skills and resources to participate actively in
portfolio companies, to identify opportunities for value enhancement or
incipient problems and work with local management to effect change, or if
necessary to appoint new management. This permits value to be protected and
grown through trading, rather than by taking added risk through financial
engineering or high levels of borrowing. It is also important to ensure that
additional risk is not being taken at the level of the investment vehicle.
Transparent reporting enables the investor to assess these factors.
Both HgCapital and the Board of the Trust understand these imperatives and
engage in regular and detailed dialogue on the strategy and operation of the
Trust. The Board remains confident that the Trust offers an attractive
proposition to a wide range of investors.
Roger Mountford
Chairman
24 August 2011
INTERIM MANAGEMENT REPORT AND RESPONSIBILITY STATEMENT
Interim management report
The important events that have occurred during the period under review are set
out in the Chairman's statement and in the Manager's review, which also
include the key factors influencing the financial statements.
The Directors do not consider that the principal risks and uncertainties have
changed since the publication of the annual report for the year ended 31
December 2010. A detailed explanation of the risks summarised below can be
found on page 77 of the annual report which is available at
www.hgcapitaltrust.com.
Performance risk
The Board is responsible for deciding the investment strategy to fulfil the
Trust's objective and for monitoring the performance of the Manager. An
inappropriate strategy may lead to poor performance.
Regulatory risk
The Trust operates as an investment trust in accordance with Sections 1158 and
1159 of CTA 2010. As such, the Trust is exempt from corporation tax on any
capital gains realised from the sale of its investments so the loss of
investment trust status would represent a significant risk to the Trust.
Operational risk
In common with most other investment trust companies, the Trust has no
employees. The Trust therefore relies upon the services provided by third
parties and is dependent upon the internal control systems of the Manager and
the Trust's other service providers.
Financial risk
The Trust's investment activities expose it to a variety of financial risks
that include valuation risk, liquidity risk, market price risk, credit risk,
foreign exchange risk and interest rate risk.
Liquidity risk
The Trust, by the very nature of its investment objective, invests in unquoted
companies, and liquidity in their securities can be constrained, potentially
making the investments difficult to realise at, or near, the Directors'
published valuation at any one point in time.
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 and gives a true and fair view of the assets,
liabilities, financial position and profit of the Trust;
- The interim management report (incorporating the Chairman's Statement and
the Manager's Review of the Period) includes a fair 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 Trust during that period; and any changes in the related
party transactions described in the last annual report that could do so. There
were no related party transactions during the period.
This half-yearly financial report was approved by the Board of Directors on 24
August 2011 and the above responsibility statement was signed on its behalf by
Roger Mountford, Chairman.
LONG-TERM PERFORMANCE RECORD
HgCapital Trust plc's share price has consistently delivered significant
outperformance against its benchmark across one, three, five, seven and
ten-year periods.
Historical Total Return* Performance
Six months One year Three Five years Seven Ten years
to 30 June % p.a. years % p.a. years % p.a.
2011 % p.a. % p.a.
%
Share price 16.1 46.3 13.1 15.2 20.8 14.7
Net Asset Value (basic) 6.3 26.7 6.7 13.5 18.5 13.5
Net Asset Value (diluted) 6.1 23.1 5.8 12.9 18.0 13.2
FTSE All Share Index 3.0 25.6 6.6 4.5 8.5 4.8
Share price outperformance
per annum against the FTSE 13.1 20.7 6.5 10.7 12.3 9.9
All Share Index
*Total return assumes all dividends have been reinvested
THE TRUST'S INVESTMENT OBJECTIVE AND INVESTMENT POLICY
INVESTMENT OBJECTIVE
The Investment Objective of the Trust is to provide shareholders with
long-term capital appreciation in excess of the FTSE All-Share Index by
investing in unquoted companies. If the Board proposes to amend the Trust's
Investment Objective, it will seek the approval of shareholders in a general
meeting.
INVESTMENT POLICY
The principal policy of the Trust is to invest in a portfolio of unlisted
companies that are expected to grow organically or by acquisition. Any
material change to the Trust's Investment Policy will be made only with the
approval of shareholders in a general meeting.
The Trust's maximum exposure to unlisted investments is 100% of gross assets.
At the time of acquisition no single investment will exceed a maximum of 15%
of gross assets. The Trust may invest in assets other than companies, so long
as the Manager believes that its expertise in private equity investment can be
profitably applied. The Trust may invest in unlisted funds, whether managed by
HgCapital or not, up to a maximum at the time of acquisition of 15% of gross
assets. The Trust may invest in other listed investment companies, including
investment trusts, up to a maximum at the time of acquisition of 15% of gross
assets.
The Trust may invest its liquid funds in government or corporate securities,
or in bank deposits, in each case with an investment grade rating, or in
managed funds that hold investments of a similar quality.
Range and diversification
The Trust invests primarily in companies whose operations are headquartered or
substantially based in or which serve markets in Europe. The Trust invests in
companies operating in a range of countries, but there is no policy of making
allocations to specific countries or markets. The Trust invests across a range
of sectors, but there is no policy of making allocations to sectors.
Gearing
Underlying investments or funds are typically leveraged to enhance value
creation, but it is impractical to set a maximum for such gearing. The Trust
may over-commit to invest in underlying assets in order to maintain the
proportion of gross assets that are invested at any time. The Trust has the
power to borrow and to charge its assets as security.
The Articles currently restrict the Trust's ability to borrow no more than,
broadly, twice the aggregate of the Trust's paid up share capital and reserves
(without shareholder approval).
Hedging
The Trust may use derivatives to hedge its exposure to interest rates,
currencies, equity markets or specific investments for the purposes of
efficient portfolio management.
RATIONALE AND BUSINESS MODEL
The Board has a clear view of the rationale for investing in private equity
through an investment trust and this informs its decisions on the operation of
the Trust and the evolution of the Board's Business Model.
RATIONALE
The Board believes that there is a convincing rationale for investing in
well-researched private businesses with potential for growth, especially where
the Investment Manager and the management of the business can work together to
implement strategic change or operational efficiency. These can result in
higher rates of growth in sales and enhanced profits, offering investors
capital gains on realisation. Many large institutional investors allocate a
proportion of their assets to this asset class, but it is difficult for
private investors and small institutions to invest in private equity due to
the large commitments required over long periods of time. The Trust provides
an opportunity for investors to hold shares listed on the London Stock
Exchange through which they can invest in private equity transactions not
otherwise accessible.
BUSINESS MODEL
Working within the constraints of the Trust's Investment Policy, the Board and
the Manager have together developed a Business Model, which is kept under
regular review. The Business Model evolves as market conditions change and new
opportunities appear.
Asset class
The Trust invests directly into unquoted businesses in the UK and Continental
Europe alongside other institutional clients of HgCapital, an experienced
private equity manager whose principal business is to invest in, and manage,
leveraged buyouts.
Private equity investments are normally held through partnerships that provide
legal and taxation advantages. Most of the Trust's investments are held
through partnerships of which it is the sole limited partner and which invest
alongside pooled funds managed by HgCapital (currently its Hg6 fund) on the
same terms as institutional investors. The Trust normally acquires a 15%
interest in each business in which Hg6 invests. The Manager is organised in
investment teams that focus on well researched business sectors, but it does
not make top-down allocations to these sectors or to particular countries; the
balance may change as investment opportunities appear and portfolio companies
are sold. The Trust is not a fund of funds and does not invest in other
managers' funds. The Trust's strategy of making direct investments into
businesses provides greater transparency for the Board and shareholders in the
Trust and avoids the double fees inherent in a fund of funds.
The Board of the Trust decides, after consultation with the Manager, on the
timing, amount and terms of each commitment it makes to invest in or alongside
any of the Manager's funds. Such commitments are normally drawn down over five
years as investment opportunities arise.
The Board agrees each commitment at a level it believes the Trust will be able
to fund from its own resources or from temporary borrowing. However, to
protect the Trust from the risk of being unable to fund any drawdown under its
commitment the Board has negotiated a right to `opt-out', without penalty, of
any HGT 6 LP investment where certain conditions exist (see note 12 to the
financial statements).
In addition, the Trust has invested in renewable power generating projects, an
area where the Manager has developed its skills and built a specialist team.
This sector provides the Trust with an element of diversification, as it has
fundamentally different drivers of risk and return, but is expected to deliver
comparable risk-adjusted returns. In this sector, it is advantageous to the
Trust to participate with other institutional clients of HgCapital as limited
partners in HgCapital's two renewable energy funds.
Cash and borrowing
The Board and the Manager agree that prudent use of borrowing to fund
acquisitions can increase diversification within the portfolio and yield rates
of return superior to the market in listed shares. Businesses in the
underlying portfolio are acquired with the benefit of bank borrowing at levels
that can be serviced from the cash flows generated within that business. The
Board does not currently see any advantage in using a further level of
structural borrowing by the Trust, as this would add risk without any
certainty of enhancing returns. From time to time, the Board arranges a bank
facility on which it can draw to meet short-term needs, between making an
investment and receiving the proceeds from a realisation.
At certain points in the investment cycle the Trust may hold substantial cash
awaiting investment, which it holds in bank deposits or invests in short-dated
government bonds. If there appears to be surplus capital and conditions for
new investment appear to be unfavourable, the Board will consider returning
capital to shareholders, probably through the market purchase of shares.
Hedging
The Trust offers exposure to a range of businesses operating in the UK, the
eurozone and the Nordic region. The Trust does not strategically hedge
investments back into sterling. From time to time, the Manager may use
derivatives approved by the Board to hedge tactically with the object of
protecting the anticipated sterling value of proceeds from realising
investments in other currencies.
Benchmark
For most shareholders, their investment in the Trust represents a small
allocation of funds that would otherwise be invested in UK equities. The
Trust's benchmark is therefore the FTSE All-Share Index.
To assess the Manager's performance relative to other private equity managers,
the Board regularly compares the NAV and share price performance against a
basket of peers listed on the London Stock Exchange and against the UK and
pan- European indices of listed private equity companies published by LPX.
Priorities as a listed investment company
As the rationale for the Trust is to provide investors with a way to invest in
an illiquid asset class, through a liquid listed vehicle, the Board has a
number of priorities including: retaining the status of an investment trust;
maintaining a liquid market in its shares; providing shareholders with
transparent reports on the underlying portfolio; adopting prudent valuations;
and avoiding adding risk at the Trust level.
Valuation
The Board values each investment in the portfolio after considering analytical
data and draft valuations prepared by its Manager. Valuations are carried out
in accordance with the International Private Equity and Venture Capital
(`IPEV') Valuation Guidelines, September 2009 edition. Further information can
be found at www.privateequityvaluation.com.
Net asset value and trading in the Trust's shares
The Board values the portfolio and publishes the Trust's NAV as at 30 June and
31 December. Each month, following these valuations, the NAV figure is
published after adjustment for realisations and movements in foreign exchange
and the market prices of any listed securities. The Trust's shares trade on
the London Stock Exchange at prices that are independent of the Trust's NAV
but reflect the NAV and expectations of future changes in it. The shares have
traded at a discount to the NAV and at times at a premium to it. The Board has
not attempted to manage any discount through repurchase of shares, which it
believes usually has only temporary effect. The Board believes that discounts
to NAV are minimised through consistent long-term returns, transparent
reporting, rigorous valuation and avoidance of risk at Trust level.
Dividends
The Board does not structure the Trust's balance sheet or underlying
investments in order to deliver any target level of dividend. To maintain the
Trust's status as an investment trust, annual net revenue return retained,
after dividend distributions in respect of that financial year, may not exceed
15% of the annual total income earned from investments. The level of the net
revenue return varies from year to year according to the level of the Trust's
liquid funds and the structure of the buy-outs held at the time. Accordingly,
dividends may vary from year to year. The Trust has elected to `stream' its
income from interest-bearing investments as dividends that will be taxed in
the hands of shareholders as interest income; this minimises the tax charge
payable by the Trust.
THE MANAGER
HgCapital is a private equity investor focused on the European middle market.
Its business model combines sector-specific thematic investing with dedicated
portfolio management support. HgCapital invests in growth companies in
expanding sectors via leveraged buyouts and in renewable energy generating
projects across Western Europe.
HgCapital's vision is to be the most sought after private equity manager in
Europe, being a partner of choice for management teams and renewable power
developers producing consistent top quartile returns for our clients and
providing a rewarding environment for our staff.
INTRODUCTION TO THE MANAGER
HgCapital began life as Mercury Private Equity (MPE), the private equity arm
of Mercury Asset Management plc, a long established listed UK-based asset
management firm. Mercury was bought by Merrill Lynch in 1997 and, in December
2000, MPE negotiated its independence as HgCapital and became a fully
independent firm, owned by its partners.
HgCapital has progressively invested in and strengthened its business over the
years to establish a significant competitive advantage in making money for its
clients.
With some 85 employees in two investment offices in the UK and Germany,
HgCapital has assets under management of GBP3.6 billion serving a range of
highly regarded institutional investors, including private and public pension
funds, charitable endowments, insurance companies and banks.
HgCapital's largest client is HgCapital Trust plc. Established in 1989, the
Trust appointed HgCapital as its Investment Manager in 1994. It offers
investors a liquid investment vehicle, through which they can obtain an
exposure to our diversified portfolio of private equity investments with
minimal administrative burdens, no long-term lock-up or minimum size of
investment.
THEMATIC INVESTMENT
HgCapital's five sector teams combine the domain knowledge and expertise of a
trade buyer - giving them superior credibility and the ability to make quick
decisions - with the flexibility of a financial investor - leading to high
conversion rates on deals we like.
This deep sector focus is channelled through a rigorous research-based
approach and disciplined thematic investment processes, whereby the most
attractive segments of the European mid-market can be systematically
identified and then repeatedly invested in, optimising deal flow and improving
returns.
Following each investment HgCapital's specialist portfolio management team
works to protect and enhance value, ensuring clear strategies for growth and a
realisation that adds further value.
With substantial resources, and a structure that focuses on delivering value,
HgCapital has the tools and ability to succeed consistently.
THE MANAGER'S STRATEGY AND TACTICS
Middle-market focus
HgCapital focuses on middle market buyouts with enterprise values of between
GBP50 million and GBP500 million and renewable power generating projects using
proven technologies. The middle market offers a high volume of companies with
proven financial performance and defensible market positions.
These companies are small enough to provide opportunities for operational
improvement, yet large enough to attract quality management and offer multiple
exit options across market cycles.
European focus
HgCapital primarily focuses its buyout investments in the UK, Germany and the
Nordic Region, as well as Switzerland, Italy and Benelux.
Our renewable energy investments are focused on the British Isles, the Nordic
region and Spain.
All investments are managed by specialist sector and portfolio management
teams located in London and Munich who work with a common purpose and culture,
applying consistent processes.
Clear investment criteria
HgCapital applies a rigorous and commercial investment approach when
evaluating all investment opportunities. Our objective is to complete the most
attractive investments rather than be constrained by a top-down asset
allocation.
For buyouts, HgCapital seeks companies with protected business models and
predictable revenues, which offer a platform for growing market share or have
the potential for significant performance improvement. HgCapital targets
situations where significant change is taking place and where the Manager's
specialist knowledge and skills can make a real difference.
Broad coverage
HgCapital's dedicated sector teams provide investors with access to the
substantial majority of private equity activity within their target size range
and across their chosen geographies.
Active portfolio management
Our sole objective is to ensure that all businesses in which we invest
maximise their long-term potential and reward all of their stakeholders. As a
result, HgCapital typically invests as the lead, majority shareholder and
appoints HgCapital executives to the companies' boards to ensure that each
firm applies active, results-oriented corporate governance.
Experienced HgCapital professionals work with the management of our portfolio
companies to develop, execute and monitor value enhancement strategies for
each business.
Accordingly, HgCapital is in a position to review the performance of all of
its investments, quickly identify any issues that demand attention and see
that appropriate action is taken.
Deep resources
Our practice of employing specialisation - both in investment selection and
management - places significant demands on our time. Accordingly, we have
built a deeply resourced business employing some 85 staff including 50 investment
professionals.
Investing in businesses, many of which have a global footprint and which are
located across Europe, requires time and, of course, a deep understanding of
local cultures. Accordingly, our people come from around the globe including
ten Western European countries. Our investment professionals have on average
16 years' experience in private equity management.
MANAGER'S REVIEW OF THE PERIOD
References in this interim report and accounts to the `portfolio',
`investments', `companies' or `businesses', refer to a number of buyout
investments, held indirectly by the Trust through its direct investments in
fund limited partnerships (HGT LP and HGT6 LP) of which the Trust is the sole
limited partner, and direct investments in renewable energy fund limited
partnerships (HgRenewable Power Partners LP (`RPP1') and HgCapital Renewable
Power Partners 2 C LP (`RPP2')), of which the Trust is a limited partner.
Summary
The basic NAV of the Trust increased by 6.0% (6.3% on a total return basis)
from GBP348.0 million to GBP369.0 million in the first half of the current year.
Total return on the share price was stronger at 16.1%, reflecting growing
investor interest in private equity in general and the Trust's shares in
particular.
As expected, new investment activity was subdued with two new buyouts
completed (ATC and Mainio Vire) and more investments made into renewable
energy opportunities.
The Trust had two full realisations with the sale of SLV, a German lighting
company, and SiTel, a Dutch semi-conductor company. These sales delivered a
healthy multiple of cost, a significant share of NAV growth in the half-year
and a 71% uplift on the December book value. In addition, we have exchanged
contracts for the sale of Mondo Minerals, the seventh largest holding at 30
June. Details of these realisations are provided below.
The 20 largest buyouts represent over 90% of the portfolio value and the GBP22
million investment in renewable power-generating assets accounts for another
8.1%. Our buyout portfolio continues to increase revenues and earnings, and
the renewable power assets are generating cash, repaying debt and producing
growing income flows.
At 30 June, the Trust had net liquid resources of GBP94.3 million and
outstanding commitments to HgCapital funds of about GBP191 million. Net
outstanding commitments less liquid resources as a percentage of net assets
have fallen from 35% in December 2010 to 26% at June 2011.
We do business in an environment marked by sovereign debt problems, a weakened
financial system and decelerating growth. Our portfolio composition is marked
by businesses where demand tends to out-strip nominal GDP and where revenues
are not particularly sensitive to the cycle. Just as important, these
companies are led by a strong cadre of managers who have the ambition, ability
and every incentive to outperform their peers. Over time their efforts should
deliver shareholders a satisfactory return.
Of course investor sentiment today is very volatile. Markets, including the
M&A market in which we operate, oscillate in short cycles. We believe that
these conditions are the friends of the patient investor, taking a focused
approach and sticking to tested fundamental principles.
Performance
We prefer to be measured over periods of 3, 5, 7 and 10 years because this
frequency is consistent with the long-term nature of private equity investment
and our patient investment strategy. Over three years, the Trust has
out-performed the FTSE All-Share index by 6.5% p.a., over five years by 10.7%
p.a., over seven years by 12.3% p.a., and over 10 years by 9.9% p.a. net of
all costs, all on a total return basis.
GBP1,000 invested in June 2001 would be worth GBP3,925 in June 2011 if invested in
the Trust and GBP1,591 if invested in the FTSE All-Share Index, and assuming for
both that all dividends are reinvested.
In the first six months of 2011, the share price total return (including a
dividend of 28 pence per share, paid in May 2011) was 16.1%, which compared
with 3.0% for the FTSE All-Share Index.
The growth in NAV per share is a driver of share price performance over the
long run. During the first six months of 2011 it rose by 6.3% (basic), or 6.1%
(diluted), which is mainly attributed to realised capital proceeds in excess
of the 31 December 2010 book value adding 3% to the NAV, unrealised
appreciation contributing 2% and gross revenue adding 3% before meeting
expenditure and payments to the Manager. This unrealised appreciation is
mostly due to rising earnings, debt reduction and favourable foreign exchange
movements, more than offsetting the unrealised depreciation from falling
ratings.
Trading performance
The first six months of 2011 were marked by a slowdown in global growth and
saw the first effects of governments attempting to rein in their deficits. The
portfolio continued to grow revenues and profits and invest in initiatives to
improve the quality of profits and the earnings potential of our businesses.
In the twelve months to 30 June 2011, for the top 20 companies, revenues grew
by 17% and EBITDA by 12%, comfortably exceeding the growth in nominal GDP.
Eleven companies grew revenues in excess of 15% and half of the top 20 grew
profits by over 10%.
Whilst still growing revenues and profits, some companies (Voyage and Casa
Reha) were adversely affected by a margin reduction caused by high wage
inflation and prices being squeezed by cut-backs in UK health spending or held
back by regulatory pressure in Germany. In others (Americana, Teufel,
SimonsVoss and Schleich), combinations of inflation in supplier prices from
China and/or increased marketing and new product development expenditure have
naturally reduced net margins. In addition, a small percentage of the
portfolio (Atlas and Sporting Index) experienced profits declining between
nearly 20% and 30% compared with last year.
Valuation and Concentration Analysis
The portfolio is valued consistently from year to year, applying the IPEV
Valuation Guidelines. Our valuation of each company has produced an average
EBITDA multiple for the top 20 buyout investments (90% of the investment
portfolio) of 9.3x EBITDA.
Where we have invested in businesses operating in cyclical markets that were
adversely affected by the recession, we wrote down their values early and
heavily and, in most cases, have not written them back; so they represent a
minimal share of NAV. In some cases, like businesses in the UK with a heavy
exposure to public sector spending, valuations have been reduced quite sharply
as market ratings for comparable businesses have fallen, discounting future
pressure on margins. This accounts for the reduction in book value of JLA and
Voyage. In other cases, very strong growth in revenues, profits and cash flow
support the application of ratings from other companies with similar growth
profiles.
Our two largest investments are TeamSystem and Visma, which together represent
18.3% of the buyout portfolio value (13.8% of NAV). Both are providers of
accounting software packages to large and diversified customer bases of SMEs.
They provide an exposure to steady growth, strong cash conversion and are
platforms for bolt-on acquisitions and operational improvements. They use a
business model we know well and which has been very rewarding for our
investors. Accordingly, we are happy to run this level of concentration in our
portfolio.
Valuation Basis*
39% Earnings
35% Cost
9% Third party transaction
9% Written down
8% Net assets
*Percentages are based on fixed assets (excluding hedges) and accrued interest
and are shown by value
Balance Sheet
The net assets of the Trust increased by GBP21.0 million (6%) from GBP348.0
million to GBP369.0 million during the period under review. A dividend of 28.0
pence per share was paid in May 2011, decreasing the NAV by GBP8.7 million,
following which the NAV increased after the exercise of Subscription Shares on
31 May 2011, raising GBP6.6 million at a Subscription price of GBP9.50 per
Ordinary Share.
The remaining increase was due to performance, with realised capital gains
producing GBP12.4 million, unrealised gains amounting to GBP8.0 million and GBP9.1
million of income received or accrued. Total expenditure and other charges,
including the Manager's remuneration, resulted in a GBP6.3 million decrease in
the NAV. In summary, the NAV per share rose by 6.3% (basic) on a total return
basis.
The Trust was also able to put the proceeds of the share issue to work, so
that 75% of net assets were invested at 30 June 2011. Cash and government
securities totalled GBP94.3 million, which compares with outstanding but undrawn
commitments of GBP190.9 million on Hg5, Hg6, RPP1 and RPP2. This represents an
improvement with commitments less cash and government securities, representing
26% of NAV compared with 35% at 31 December 2010.
The Trust has an opt-out for capital calls on Hg6, without incurring the
normal penalties that apply to most limited partners. The balance sheet has
sufficient free capital to continue to exploit any good opportunities we might
uncover, both by financing bolt-on acquisitions from existing portfolio
companies and through financing new transactions. It remains our belief that
`available capital' is a critical factor in the long-term investor's armoury.
Analysis of movements in net asset value for the six months ended 30 June 2011 GBP'000
Opening net asset value as at 1 January 2011 347,993
Dividend paid (8,709)
Proceeds from exercise of subscription shares 6,610
Gross revenue 9,086
Realised proceeds in excess of 31 December 2010 book value (excludes gross 12,352
revenue)
Net unrealised appreciation of investments (excludes gross revenue) 8,045
Expenditure and taxation (532)
Priority profit share (3,434)
Carried interest (2,393)
Closing net asset value as at 30 June 2011 369,018
Realised and unrealised movements in investment portfolio
(excluding accrued interest) for the six months ended 30 June 2011
Investment name and Net unrealised Realised proceeds in
ranking within top 20 appreciation/(depreciation) excess of 31 December
investment portfolio at 30 of investments GBP'm 2010 book value GBP'm
June 2011 (excludes gross
revenue)
SLV (sold) - 8.9
Fx on Hg6 investments at 4.0 -
cost
Elite (sold) - 3.5
SHL (3) 3.4 -
Goldshield (6) 2.4 -
RPP1 and RPP2 2.2 -
Visma (fx increase) (2) 1.3 -
Mondo (7) 1.1 -
Achilles (8) 1.1 -
Epyx (12) 1.0 -
Other (0.2) -
Euro Hedge (1.0) -
Voyage (20) (1.1) -
JLA (17) (6.2) -
Over the period, the NAV of the Trust increased by 6% from GBP348 million to
GBP369.0 million. There were three main drivers of this movement. Firstly, there
was the raising of GBP6.6 million from the exercise of Subscription Shares in
June 2011. Secondly, it can be attributed to the revaluation of the unquoted
portfolio - itself driven by strong trading performance. Lastly, NAV increased
by over GBP12 million as a result of realisations in excess of book value
(excluding gross revenue).
During the period, the value of the unrealised portfolio increased by just
over GBP19 million. This change can be attributed to a number of factors: the
increase of GBP4 million from acquisitions and disposals; growth driven by
strong trading performance; the reduction of debt from cashflow generated by
the portfolio; and favourable foreign exchange movements.
Outstanding commitments
Fund Vintage Original Outstanding Outstanding
commitment commitments commitments
GBP' million as at 30 June 2011 as at 31 December 2010
GBP' million %of NAV GBP' million %of NAV
HGT LP pre-2009 120.0 25.2 6.8% 22.3 6.4%
HGT 6 LP (1) 2009 285.0 136.4 37.0% 155.9 44.8%
Hg RPP LP 2006 19.5(2) 1.9 0.5% 1.8 0.5%
Hg RPP2 C LP 2010 36.1(3) 27.4 7.4% 32.0 9.2%
Total 190.9 51.7% 212.0 60.9%
Total liquid 94.3 25.6% 90.2 25.9%
resources
Net outstanding 96.6 26.1% 121.8 35.0%
commitments less
liquid resources
(1) HgCapital Trust plc has the benefit of an investment opt-out provision in its
commitment to invest alongside HgCapital 6, so that it can opt-out of a new
investment without penalty should it not have the cash available to invest.
(2) Sterling equivalent of EUR21.6 million
(3) Sterling equivalent of EUR40.0 million
Post period end
On 19 July 2011, the Trust announced the acquisition from a third party of a
GBP15 million limited partnership interest in HgCapital 6 E LP(`Hg6 E'), one of
the partnerships in the current buyout fund (Hg6) of its Manager, HgCapital.
The Trust paid GBP7.8 million in cash for the funds already invested. This
represents a 2% premium above the NAV of Hg6 E as at 31 December 2010,
adjusted for subsequent cash flows to the date of completion. The balance of
the Trust's new investment represents a commitment of GBP7.2 million which will
be invested alongside the other limited partnership interests held by
institutional clients of HgCapital in their Hg6 fund.
A GBP60 million commitment to the Manager's Mercury fund has been agreed by the
Board. Mercury will invest exclusively in the TMT sector in the UK and
Continental Europe focusing on smaller companies with an EV of between GBP20
million and GBP80 million.
The Trust has recently finalised a GBP40 million, three-year standby facility
with Lloyds TSB Bank plc, on an unsecured basis.
Investment portfolio
The Manager's strategy is to invest in five sectors, four of them by way of
buyouts of businesses (representing 92% of the portfolio by value at 30 June
2011). Investment in the fifth sector, renewable power generation (8%), is
made into projects through RPP1 and RPP2.
Buyout portfolio
As at 30 June 2011, the Trust's buyout portfolio included ten investments with
either a value of under GBP1 million or residual interests in companies we had
sold, which were mostly valued at or close to zero, or investments which had
performed poorly and been written down to zero in previous periods or which
represent interests in escrow accounts from the sale of investments. This
section therefore only covers those companies with material value.
TMT represented 38% of the total investment portfolio. Over 95% of this value
was represented by companies that are all users of technology, rather than
developers of technology with the associated frequent challenges of new
product development. They included two accounting software companies, a fixed
and mobile incumbent telecom network operator, two private electronic market
places and a vendor of strategic HR software, sold as a service (`SaaS'). The
common themes that run through each one are highly visible revenues, strong
market positions and strong cash conversion that permits debt repayment whilst
the businesses expand and grow. Achilles and Epyx both grew very strongly as
did the new investment in Lumesse. Visma and a new investment, TeamSystem,
also continued to grow solidly and Manx Telecom started to implement its
buyout strategy which involves investment in new service lines.
Industrials represented 13% of the total investment portfolio. Here, the
common theme is that we are backing companies that own and develop high
quality technology/design mostly in Germany but manufacture in low cost
locations.
The first half of 2011 saw strong order intake and an increase in sales across
all geographies for SimonsVoss, our electronic locking systems provider. The
company continues to invest in product line development. Meanwhile, we agreed
the sale of our industrial minerals business, Mondo, which should complete
later in the year.
Healthcare represented 18% of the total investment portfolio. We currently
like two areas: long-term care where the payer risk is low, with a preference
for specialist care of people with acute disabilities; and low cost
pharmaceuticals.
Performance for the four companies in the first category was mixed. Casa Reha
(Germany) and Voyage (UK) bowed to the margin pressures of wage inflation and
cuts in health-spending despite trading ahead of last year while Frösunda
(Sweden) and our new addition, Mainio Vire (Finland) both increased earnings
strongly. Strong cash generation and higher core earnings continued to
increase the value of our pharmaceutical business, Goldshield.
Services investments represented 15% of the total investment portfolio. Of our
two HR and compliance services companies, SHL performed strongly in both sales
and EBITDA as the predicted cost synergies born of its merger with US
competitor, PreVisor, were realised. The other, Atlas, invested in revenue
growth and experienced an increase in sales at the cost of tighter margins and
a reduction in earnings.
Our third investment, made in 2010, is JLA, a provider of laundry equipment,
including financing and maintenance services, to care homes, universities and
hotels. Management succession changes have been made and the first bolt-on
acquisitions identified. However, as yet profits have been flat and reflecting the
exposure of its revenues to public sector spending, ratings used to value this
business have been reduced, leading us to write down the book value of this
investment by 50%.
ATC Group, a Dutch corporate administration services company, is experiencing
strong profit and sales growth as the Netherlands picks up, although foreign
exchange movements are tempering the success of its Carribean office.Finally,
our legacy Consumer and Leisure portfolio represented 8% of the investment
portfolio. Americana designs and sells branded clothing; Schleich designs and
markets toy figurines and Sporting Index is a sports spread betting firm.
Sporting Index's profits, which can be volatile, fell, year on year, as most
of the positive effects of last year's World Cup fell into the prior period
and it experienced a bad run at the end of the 2011 football season.
Sector by value*
38% TMT
18% Healthcare
15% Services
13% Industrials
8% Renewable energy
8% Consumer & Leisure
Sector by class**
75% Unquoted
25% Cash & other assets
*Percentages are based on fixed assets (excluding hedges) and accrued interest
and are shown by value
**Percentages are based on net assets
Renewable Power
The Trust invests in renewable energy through RPP1 and RPP2, separate UK funds
managed by our dedicated team of seven specialists. The underlying portfolios
are divided into four platforms: UK onshore wind, Swedish onshore wind,
Spanish hydro and Spanish solar. The assets are split into onshore wind at 57%
of value, hydro at 19% and solar at 24% of value. All employ proven,
commercially viable technologies within the framework of current power price
regimes across Europe. We eschew off-shore power generation, as we believe it
to be operationally unproven.
Each of the platforms' operating performance continues to be in line with our
investment cases since inception, notwithstanding a period of exceptionally
low winds by historic standards. Against this robust financial performance we
suffered a decision by the Spanish government to change unilaterally the terms
of 25-year contracts with power generators. These changes reduced the income
our assets will receive over the next three years.
Accordingly, our valuations of these Spanish assets are based on our updated
estimates of reduced net cash flow to equity and on an increased discount rate
to reflect the peculiar factors the market now attaches to Spanish sovereign
risk and our own addition to reflect Spanish regulatory risk.
The investment case for power generation remains positive as Western Europe
faces both a huge need to re-equip its creaking power infrastructure and to
reduce its CO2 emissions.
Geography, Vintage Analysis
At the balance sheet date, the geographical weighting of the portfolio had
moved marginally away from the UK (down from 45% in December 2010 to 42%) and
Germany (down from 18% in December 2010 to 12%), towards the Nordic and
Benelux regions (up from 22% in December 2010 to 29%). We are certainly
exposed to developments in each of these economies but also exposed to growth
sectors and to the global economy too, as many companies are exporters. We have
retained a weather eye on the periphery of the eurozone economy, which is set
for uncertain times ahead, whereas the core saver economies of the Nordic
region and Germany are performing strongly at present.
The distribution of the portfolio across the years shows that our exposure to
the vintages of 2007 and 2008, which may prove to have been poor years for
investment, in retrospect, is quite low at 16%.
Geographic spread by value*
42% UK
24% Nordic Region
12% Germany
9% Italy
8% Europe (RPP)
5% Benelux
Vintage by value*
8% 2011
39% 2010
9% 2009
6% 2008
10% 2007
25% 2006
3% pre 2006
Deal type by value*
92% Buyout
8% Renewable energy
*Percentages are based on fixed assets (excluding hedges) and accrued interest
and are shown by value
Investment portfolio
THE TOP 20 BUYOUT INVESTMENTS ACCOUNT FOR 90% OF THE PORTFOLIO BY VALUE
Buyout investments Sector Location Year of Residual Total Portfolio Cum.
(in order of value) investment Cost valuation** value Value %
GBP'000 GBP'000 %
1 TeamSystem Luxco SARL TMT Italy 2010 24,432 26,491 9.5% 9.5%
2 Visma Norway Holdco TMT Nordic 2006 701 24,421 8.8% 18.3%
Region
3 SHL Group Holdings 1 Services UK 2006 7,984 18,244 6.6% 24.9%
Limited
4 Frösunda Luxco SARL Healthcare Nordic 2010 14,296 16,019 5.8% 30.7%
Region
5 Lumesse Holdings SARL TMT UK 2010 14,281 15,409 5.5% 36.2%
6 Midas Equity Co SARL Healthcare UK 2009 8,545 14,899 5.4% 41.6%
(t/a Goldshield)
7 Mondo Minerals Co-op Industrials Nordic 2007 6,923 14,724 5.3% 46.9%
Region
8 Achilles Group TMT UK 2008 5,226 14,171 5.1% 52.0%
Holdings Limited
9 Mainio Vire SARL Healthcare Nordic 2011 12,329 12,456 4.5% 56.5%
Region
10 Manx Telecom Limited TMT UK 2010 11,033 11,033 4.0% 60.5%
11 SimonsVoss Luxco SARL Industrials Germany 2010 10,065 10,918 3.9% 64.4%
12 Epyx Investments TMT UK 2009 6,388 10,869 3.9% 68.3%
Limited
13 ATC Holdco SARL Services Benelux 2011 9,913 10,731 3.9% 72.2%
14 Teufel Holdco SARL Industrials Germany 2010 9,401 10,104 3.6% 75.8%
15 Schleich Luxembourg SA Consumer & Germany 2006 4,648 9,092 3.3% 79.1%
Leisure
16 Americana Consumer & UK 2007 4,625 8,013 2.9% 82.0%
International Holdings Leisure
Limited
17 JLA Equityco Limited Services UK 2010 12,227 7,197 2.6% 84.6%
18 Sporting Index Group Consumer & UK 2005 6,502 6,152 2.2% 86.8%
Limited Leisure
19 Atlas Energy Group Services UK 2007 9,597 4,298 1.5% 88.3%
Limited
20 Voyage Holdings Healthcare UK 2006 13,136 4,149 1.5% 89.8%
Limited
21 Casa Reha SARL Healthcare Germany 2008 8,293 3,452 1.2% 91.0%
22 Software (Cayman), LP TMT UK 2006 530 2,122 0.8% 91.8%
- re Blue Minerva
23 Software (Cayman), LP TMT UK 2007 253 979 0.4% 92.2%
- re Guildford
24 Tiger Capital Limited TMT UK 2008 632 468 0.2% 92.4%
25 Weston Presidio Fund North 1998 1,725 359 0.1% 92.5%
Capital III, LP America
26 Doc M SARL Healthcare Germany 2004 - 254 0.1% 92.6%
27 Elite Holding SA (t/a TMT Benelux 2005 - 245 0.1% 92.7%
SiTel)
28 ACT Venture Capital Fund Ireland 1994 27 38 - 92.7%
Limited
29 BMFCO UA (t/a Fabory) Services Benelux 2007 - - - 92.7%
30 Cornish Bakehouse Consumer & UK 2007 4,200 - - 92.7%
Investments Limited Leisure
31 KVT Coinvest SARL Industrials Switzerland 2008 5,827 - - 92.7%
32 W.E.T Holding Industrials Germany 2003 7,774 - - 92.7%
Luxembourg SA
NOK / GBP Hedge n/a n/a n/a 849 343 0.1% 92.8%
Hg5 Euro Hedge n/a n/a n/a - (2,224) (0.9%) 91.9%
Total buyout 222,362 255,425 91.9%
investments*
Renewable energy
investments
1 RPP1 Fund Renewable Europe 2006 14,831 14,655 5.3% 5.3%
energy
2 RPP2 Fund Renewable Europe 2010 8,378 7,850 2.8% 8.1%
energy
Total renewable energy 23,209 22,505 8.1%
investments
Total all investments 245,571 277,931 100.0%
(34)
* Buyout investments are held through the Trust's investment in HGT LP and HGT 6 LP. See note
3 to the financial statements.
**Including investment valuation of GBP249,905,000 and accrued interest of GBP28,026,000.
INVESTMENTS
GBP29 million investedTwo new buyout investments were made with a total enterprise value of GBP252
million, using GBP148 million of equity from our clients, with the Trust's share
being GBP22 million. In each case, we have applied the knowledge acquired in our
research into various investment themes. These are: compliance and mission
critical services and long-term acute care.
In the renewable power business, two new investments with total project values
of GBP155 million required GBP39 million of equity from RPP2. The Trust's share of
these new investments, other further investments and their share of fees
payable via the fund was GBP6.1 million. The first of these investments was into
the mliden wind farm in Västerbotten, Sweden, adding to the existing Swedish
wind platform. The second, Xana, is a collection of small hydroelectric plants
located across four river basins in Spain. This is the first building block of
RPP2's second investment platform, Spanish mini-hydro.
INVESTMENTS MADE DURING THE PERIOD*
Company Sector Geography Activity Deal Type Cost
GBP'000
Mainio Vire Healthcare Nordic Provider of specialist Buyout 12,329
Region disability care
ATC Services Benelux Provider of corporate Buyout 9,913
services
New investments 22,242
RPP2 Fund Renewable Europe Renewable energy fund Fund 6,064
energy
JLA Services UK Provision of Buyout 751
on-premise laundry
services and
commercial machine
sales
Sporting Index Consumer & UK Sports spread betting Buyout 332
Leisure firm
Other investments 46
Further 7,193
investments
Total investment 29,435
by the Trust
*The numbers in the table relate to the Trust's share of transactions
REALISATIONS
Three full realisations for GBP33.6 million at a 71% uplift over book value in
December 2010
Two investments, SLV Elektronik, a B2B lighting business, and Sitel
Semiconductor (held under Elite Holding SA), a designer of
application-specific microprocessors for voice applications, were realised in
the first half of 2011. Together, they returned GBP241 million of proceeds for
our clients, the Trust's share being GBP33.6 million, resulting in an average
life to date multiple of cost of 2.9x and a combined uplift over book value,
at 31 December 2010, of 71%.
In addition, the investment in Fabory, the Dutch industrial fasteners
distributor, was restructured into a new holding company, in which HgCapital
clients now only have a 3% equity holding, valued at nil.
Since the period end, we announced the intention to sell Mondo Minerals, a
talc mining company. Upon the sale, which is anticipated to complete before
the year-end, the Trust expects to realise initial cash proceeds of GBP13.7
million and a further amount of up to GBP2.8 million over the next two years.
This compares with a carrying value of GBP14.7 million in the NAV of the Trust
at 30 June 2011 and an original cost of GBP7.0 million.
During July 2011, we completed the sale of Cornish Bakehouse, returning GBP0.7
million of proceeds to the Trust. This investment was previously fully
written-off.
REALISATIONS MADE DURING THE PERIOD*
Company Sector Exit route Cost Proceeds(1) Cumulative Current year
GBP'000 GBP'000 gain/(loss)(2) gain(3)
GBP'000 GBP'000
SLV TMT Secondary 5,999 24,170 18,171 9,638
sale
Elite Industrials Trade sale 3,540 9,441 5,901 4,325
Fabory Industrials Liquidation 7,474 - (7,474) -
Full realisations 17,013 33,611 16,598 13,963
Lumesse TMT Refinancing 5,035 5,601 566 626
Other 1,478 546 (932) 36
Partial 6,513 6,147 (366) 662
realisations
Total realisations 23,526 39,758 16,232 14,625
*The numbers in the table relate to the Trust's share of transactions
(1) Includes gross revenue received during the period
(2) Realised proceeds including gross revenue received, in excess of historic cost
(3) Realised proceeds including gross revenue received, in excess of 31 December
2010 book value and accrued interest
Prospects
A weakened global financial system exposed to sovereign debt risk presents
real challenges for businesses and investors, especially as the potential for
traditional government intervention without inflation is limited. However,
this backdrop offers opportunities for further investment in both our
portfolio companies and for new investments.
Our approach is to use our sector expertise to identify companies that are
"champions" within their industry, that provide a product or service which is
genuinely differentiated and valued by their customers and vital to their
customers. These companies tend to out-perform their competitors and can
out-perform throughout the economic cycle, as they have a fundamental
advantage which allows them to grow revenues, invest during downturns,
innovate, and create jobs and new products.
We will preserve and build our flexibility to exploit the opportunities that
arise over the coming years. Within the portfolio companies this means
continuing work to strengthen management capabilities, the market positions of
each business, their operational and financial performance and to improve
balance sheets. Within HgCapital we will continue to seek to acquire
high-quality businesses that fit our thematic investment strategy.
Management teams that remain ambitious and focused will deliver long term
profit growth ahead of the market and, with sustained diligence and discipline
in executing our plans, we believe that we will continue to reward the Trust's
shareholders with long term out-performance.
TOP 10 BUYOUT INVESTMENTS
representing more than 60% of the total portfolio
Buyout investments are held through limited partnerships of which HgCapital
Trust plc (the `Trust') is the sole limited partner. The Trust invests
alongside other clients of HgCapital. Typically, the Trust's holding forms
part of a much larger majority interest held by HgCapital clients in buyout
investments in companies with an enterprise value (`EV') of between GBP50
million and GBP500 million. The Manager's review generally refers to each
transaction in its entirety, apart from the tables detailing the Trust's
participation or where it specifically says otherwise.
1 TeamSystem
Website: www.teamsystem.com
Original enterprise value: EUR570 million
HgCapital clients' total equity: 53.3%
Business description
TeamSystem is a leading market provider of business-critical, daily-use SME
software products in Italy. Headquartered in Pesaro, the company has a diverse
base of over 80,000 customers. It has 27 offices in Italy and employs
approximately 800 people.
Why did we invest?
TeamSystem is HgCapital's seventh investment into business-critical back
office software (via two platforms). The company has a track record of solid
performance and delivered organic revenue growth of 6% p.a. between 2007 and
2009, trading resiliently through the downturn. Its stable nature (with more
than 50% of revenues by way of annual subscriptions), strong cash generation
and potential for growth in both the business and its market, all supported
our decision.
How do we intend to create value?
Alongside organic growth, management intends to cross-sell products to
TeamSystem's existing client base through the use of add-on modules such as
reporting, analytics and payroll.
The potential to complete a number of add-on acquisitions of complementary
software businesses in Italy has also been identified.
What has been achieved?
Our normal post-acquisition review has identified several improvement projects
that have been put into action, including improved reporting and pricing,
investment into the M&A process and finding new ways to address the micro-SME
customer base in Italy.
How is it performing?
Trading has been sound with growth in revenue and profits. We can look forward
to further positive movement when tax laws change later in 2011, crystallising
a demand for upgrades.
How will we crystallise value?
We see a diverse range of exit options for TeamSystem, with interest from
trade and financial buyers expected and an IPO on the Italian stock market a
possibility.
To support an attractive exit rating for the business, we will look for faster
organic growth by increasing the revenue per customer from the sale of new
products and services.
Trust's Investment - TeamSystem
Sector Location Date of Residual Unrealised Accrued Total Valuation
investment cost GBP'000 value interest value methodology
GBP'000 GBP'000 GBP'000
TMT Italy Sept 2010 24,432 26,491 - 26,491 Cost
The difference between cost and valuation is due to foreign exchange rate
movements
2 Visma
Website: www.visma.com
Original enterprise value: NOK4.3 billion
HgCapital clients' total equity: 16.3%
Business description
VISMA is the number one provider of business software and related services to
small and medium-sized enterprises in the Nordic region.
The company provides accounting, resource planning and payroll software,
outsourced book-keeping, payroll services and transaction process outsourcing.
Why did we invest?
Visma is an early example of HgCapital's focus on business critical `software
as a service' firms operating within a fast growing marketplace.
The company enjoys high levels of predictable recurring revenue resulting from
a subscription payment model.
Room for improvement was identified in profit margins that were below those of
most of its competitors. This was due to significant investment in the
business and a delay in the benefits expected from a number of recent
acquisitions.
How do we intend to create value?
In September 2010, a 64% stake in the business was sold to KKR. This valued
the business at GBP1.2 billion, of which our clients' stake was worth GBP380.0
million (an investment multiple of 3.7x). HgCapital continues to hold a stake
and hopes to benefit from further potential in the next few years.
What has been achieved?
During the course of the investment, the company has made several bolt-on
acquisitions including Accountview, Sirius IT and Teemuaho. These deals
bolstered organic growth from innovation in new services and products while
margins were improved through rethinking Visma's internal processes.
How is it performing?
There was continued growth in the first half of 2011 with growth in both sales
and EBITDA up on prior year, mostly the result of acquisitions.
How will we crystallise value?
The business has a scale and growth profile which will make it an attractive
IPO candidate, as well as a target for trade buyers.
Trust's Investment - Visma
Sector Location Date of Residual Unrealised Accrued Total Valuation
investment cost GBP'000 value interest value methodology
GBP'000 GBP'000 GBP'000
TMT Nordic May 2006 701 24,421 - 24,421 Third party
region transaction
3 SHL
Website: www.shl.com
Original enterprise value: GBP102 million
HgCapital clients' total equity: 50.3%
Business description
SHL is the global market leader in objective psychometric testing and has a
world-wide presence.
The business consists of the development and sale of 300 different types of
psychometric tests to corporate clients and the provision of psychologists for
the administration and interpretation of tests.
Why did we invest?
SHL's position at the head of a growth market with a blue chip customer base
provided an opportunity to invest aggressively to increase SHL's share of
customer spend and access high growth geographies through focusing on new
technology and products.
How do we intend to create value?
The plan is to invest in new sales resources, to focus the business on higher
margin web sales and to invest in new technology to increase product
performance.
What has been achieved?
Following a tough year in 2009 when revenues fell and costs were cut rapidly,
productivity increased and the business has rebounded strongly, with profits
and revenues increasing significantly. A merger with US-based Previsor was
completed in January 2011.
The deal was executed on an all-equity basis, with a rollover of all existing
management ownership into the combined business, and no additional funding
requirement from clients. HgCapital retains a 50.3% stake of the enlarged
group, with Veronis Suhler Stevenson, the private equity investor in PreVisor,
holding a minority position.
The merged company will be able to provide a broad range of assessment
solutions across both blue and white-collar roles to support both recruitment
and development decisions. Its offering will be available in more languages
and countries than any other talent management provider in the world.
How is it performing?
The year so far has seen the business performing strongly with both sales and
EBITDA ahead of last year. Most of the cost synergies predicted pre-merger
have been delivered.
How will we crystallise value?
Following the merger, the focus is on achieving the target cost and revenue
synergies of the combined businesses. The business will be one of the largest
and most profitable in the human capital market and should be an attractive
acquisition target as well as potential IPO candidate.
Trust's Investment - SHL
Sector Location Date of Residual Unrealised Accrued Total Valuation
investment cost GBP'000 value interest value methodology
GBP'000 GBP'000 GBP'000
Services UK Oct 2006 7,984 13,866 4,378 18,224 Earnings
4 Frösunda
Website: www.frosunda.de
Original enterprise value: SEK1.5 billion
HgCapital clients' total equity: 87.8%
Business description
Frösunda provides specialist care and personal assistance for people with
physical or mental disabilities. It also has an emerging psychiatric and
schools business.
Headquartered in Solna, Sweden, Frösunda employs around 3,700 and cares for
over 1,600 people.
Why did we invest?
Sweden offers an attractive market opportunity as its government finances and
the economy are in good shape. Frösunda represents HgCapital's fourth
investment into healthcare services. It is one of the leaders in Sweden in a
sub-segment of the healthcare market growing at over 10% p.a. and protected by
intensifying regulation and high patient care requirements.
The business benefits from visible recurring revenue and low customer churn.
There are clear opportunities to improve margins through economies of scale.
There is also potential to expand into adjacent market segments, as the
company has already demonstrated through recent acquisitions.
How do we intend to create value?
HgCapital will work with management to develop its management team and grow
the business organically while broadening into adjacent markets where the
company can apply its expertise by acquisition. Several bolt-on investments
have already been made.
What has been achieved?
Following the implementation of a 100-day plan, the focus of management has
been on sales force effectiveness, sharing best-practice, improved reporting,
the introduction of new products and investment in staff in M&A, legal and
property.
How is it performing?
Sales force initiatives have boosted the sales pipeline and productivity
levels leading to growth in sales and EBITDA compared to the prior year.
How will we crystallise value?
We expect Frösunda to appeal to one of the large Swedish healthcare
conglomerates, another financial buyer, or to the public through an IPO.
Trust's Investment - Frösunda
Sector Location Date of Residual Unrealised Accrued Total Valuation
investment cost GBP'000 value interest value methodology
GBP'000 GBP'000 GBP'000
Healthcare Nordic Jun 2010 14,296 16,019 - 16,019 Cost
region
The difference between cost and valuation is due to foreign exchange rate movements
5 Lumesse
Website: www.lumesse.com
Original enterprise value: EUR110 million
HgCapital clients' total equity: 79.4%
Lumesse was formerly known as Stepstone Solutions; the company has rebranded
in accordance with the terms of the acquisition agreement.
Business description
Lumesse is a leading provider of strategic HR software (recruiting and talent
management) to medium and large enterprises in Europe, operating in 16
countries with 430 full-time employees.
The business operates a subscription-based model (more than 60% of total
revenue) with a strong recurring consulting element. Customer retention rates
are high at around 95%.
Why did we invest?
Lumesse lies within the sub-sector focus on `software as a service' (e.g.
Visma) where companies experience high levels of recurring revenue from
long-term customers, which leads to stability and high margins. The company
has achieved strong organic growth, with scope for further margin improvement
in a market growing at 15%-20% p.a. There is also the opportunity to
consolidate the market by acquiring local players.
How do we intend to create value?
Lumesse's management intends to drive subscription revenue growth by
capitalising on their cutting-edge technology, improving cross- and up-selling
into the existing customer base and investigating partnerships with HgCapital
portfolio companies.
There is also an increased focus on costs to improve margins and on
strengthening the company's international presence both organically and
through bolt-on acquisitions.
What has been achieved?
A first bolt-on acquisition, Mr. Ted, has been made and its global Talentlink
product has been added to the Lumesse range of services. Investment in the
sales force has helped to drive organic growth. An initial cost saving
programme has been successfully completed.
How is it performing?
Trading is ahead of last year in both sales and EBITDA. Revenue outperformance
has been driven mainly by increased demand for consulting services.
How will we crystallise value?
Multiple options are available as there is high demand for vertical technology
companies. Lumesse has received strong interest from trade buyers but we may
also contemplate an IPO or a sale to another private equity buyer.
Trust's Investment - Lumesse
Sector Location Date of Residual Unrealised Accrued Total Valuation
investment cost GBP'000 value interest value methodology
GBP'000 GBP'000 GBP'000
TMT UK May 2010 14,281 13,931 1,478 15,409 Earnings
6 Goldshield
Website: www.goldshield-pharmaceuticals.com
Original enterprise value: GBP179 million
HgCapital clients' total equity: 53.2%
Business description
Goldshield is a profitable niche pharmaceutical and consumer health products
company focused on the UK.
The pharmaceutical division sells mature branded products and niche generics,
typically re-formulating them to extend their lives. It is primarily focused
on serving the UK, where demand for its products benefits from attempts to
reduce prescription costs.
Goldshield also had a small, loss-making consumer health division which sold a
range of weight management and consumer health products. This was sold during
the first half of 2011.
Why did we invest?
The business operates in a protected niche of the pharmaceuticals market and
can act as a platform for acquisition-based growth.
It benefits from having a lean operating model which delivers attractive
margins and strong cash conversion. We believe that surplus cash can be used
to acquire new products and to finance licensing deals that will extend the
product portfolio and deliver continued growth.
How do we intend to create value?
The business can be simplified by withdrawing from unprofitable activities and
grown by acquiring/licensing more products in the pharmaceutical business.
What has been achieved?
A new management team has been recruited including a Chairman, CEO and Heads
of Operations and Business Development. The streamlining process has been
completed with the disposal of the Consumer Health division and other non-core
assets. The new executives are driving improvements in their respective areas
particularly Quality Assurance, Product Development/Acquisition and
Operations.
How is it performing?
Pharmaceutical sales are growing and, following the divestment of the
underperforming Consumer Health division, EBITDA is strongly ahead of the
prior year.
How will we crystallise value?
The most likely exit route is a trade sale to a larger pharmaceutical company.
Trust's Investment - Goldshield
Sector Location Date of Residual Unrealised Accrued Total Valuation
investment cost GBP'000 value interest value methodology
GBP'000 GBP'000 GBP'000
Healthcare UK Dec 2009 8,545 13,287 1,612 14,899 Earnings
7 Mondo Minerals
Website: www.mondominerals.com
Original enterprise value: EUR230 million
HgCapital clients' total equity: 90.8%
Business description
Mondo is the European number two in talc mining and processing. Its core
markets are the paper and paint industries. It supplies the majority of talc
for paper producers in Finland, the rest of the Nordic region and Northern
Europe.
Why did we invest?
Mondo's core customer base offers long-term demand. The product is a critical
but low cost technical component in its customers' manufacturing processes.
Due to the specific characteristics of talc, an opportunity exists to push
into other high margin applications and increase the size of the non-paper
business. There is also opportunity for margin improvement through process
change.
How do we intend to create value?
The strategy is to grow sales in higher margin applications, reduce costs
through better procurement and processes, and enter new expanding BRIC markets
through acquisition and joint ventures.
What has been achieved?
Sales in non-paper applications have increased, processes improved, milling
operations have switched from oil to electricity, and Mondo has expanded
alongside its customers to serve their global needs.
How is it performing?
The introduction of an experienced COO in 2010 led to increases in volumes,
sales and profit. In May 2011, he succeeded the retiring CEO and Mondo
continues to trade well with sales and EBITDA growing against prior year.
How will we crystallise value?
At the beginning of July 2011, Mondo Minerals was sold to Advent
International. The sale is anticipated to complete in the second half of 2011
following employee consultations. During HgCapital's period of ownership,
Mondo has delivered EBITDA growth of approximately 50% and increased employee
headcount by 12% despite challenging trading conditions throughout the
recession.
Trust's Investment - Mondo Minerals
Sector Location Date of Residual Unrealised Accrued Total Valuation
investment cost GBP'000 value interest value methodology
GBP'000 GBP'000 GBP'000
Industrials Nordic Oct 2007 6,923 10,229 4,425 14,724 Earnings
region
8 Achilles
Website: www.achilles.com
Original enterprise value: GBP75 million
HgCapital clients' total equity: 63.2%
Business description
Achilles operates schemes whereby buyers require their suppliers to subscribe
and to provide information to the Achilles online database; for suppliers it
is mandatory to join the scheme if they wish to supply to the buyer group and
both buyers and suppliers pay annual subscription fees.
Achilles currently operates more than 30 schemes across 22 countries.
Why did we invest?
Achilles is a prime example of HgCapital's subscription-based thematic
investment strategy. It is a market leader in the regulatory compliance
industry, with significant recurring revenue streams.
How do we intend to create value?
With high levels of contracted revenue, Achilles' position as global market
leader with a scalable business model reveals considerable potential in
revenue and margin growth.
What has been achieved?
Achilles' senior management team has been strengthened with significant new
hires, while internal process projects on pricing, back-office management and
sales practices are beginning to bear fruit.
There has also been considerable investment in a new common IT system, used
across all areas of the business.
How is it performing?
Performance has been significantly up on the prior year with good growth in
both sales and EBITDA.
How will we crystallise value?
There has been strong interest from the private equity community and Achilles'
protected revenue base will maintain this interest throughout the economic
cycle. A trade sale or IPO are also attractive outcomes with an IPO likely to
offer the best long-term value.
Trust's Investment - Achilles
Sector Location Date of Residual Unrealised Accrued Total Valuation
investment cost GBP'000 value interest value methodology
GBP'000 GBP'000 GBP'000
TMT UK Jul 2008 5,226 12,548 1,623 14,171 Earnings
9 Mainio Vire
Website: www.mainiovire.fi
Original enterprise value: EUR92 million
HgCapital clients' total equity: 83.0%
Business description
Founded in 1997, Mainio Vire was one of the first private social care
companies in Finland. It has grown rapidly, via a combination of opening new
care homes and selected small acquisitions, to become the market leader in
Finland.
Mainio Vire serves four business areas: elderly care, mental health, child
day-care and home services. The company operates 47 care homes with 1,675 beds
and seven child day-care centres with 360 places. Mainio Vire has one of the
widest geographic footprints in the sector and is strongest in the regional
economic centres located in the southern and central parts of Finland.
Approximately 1,150 people work at the company, including more than 800 who
hold relevant formal qualifications.
Why did we invest?
The Healthcare Team views the Nordic region as an attractive place to invest
given the favourable demographics, fragmented competition, and the strong
trend towards private provision of care. Our in-depth analysis of the Finnish
market suggested that there were a number of highly attractive segments and
Mainio Vire offers a highly attractive platform to benefit from these trends.
Mainio Vire is a strong, high quality business with sustainable organic
growth. It is a quality-oriented company with ISO certification and has a very
experienced, operationally focused management team.
How do we intend to create value?
There are a number of paths to increased value, including expected organic
growth, movements into adjacent and emerging sectors, and through further
acquisitions.
How is it performing?
The company is performing well with sales and profits growing year-on-year.
How will we crystallise value?
The most likely exit route is a sale to a larger Nordic healthcare group or to
a private equity buyer.
Trust's Investment - Mainio Vire
Sector Location Date of Residual Unrealised Accrued Total Valuation
investment cost GBP'000 value interest value methodology
GBP'000 GBP'000 GBP'000
Healthcare Nordic Jun 2011 12,329 12,456 - 12,456 Cost
region
The difference between cost and valuation is due to foreign exchange rate movements
10 Manx Telecom
Website: www.manxtelecom.com
Original enterprise value: GBP159 million
HgCapital clients' total equity: 79.5%
Business description
Manx Telecom is the primary fixed and mobile telecom operator on the Isle of
Man. A former monopoly, it provides telecommunication and data services to
commercial and consumer customers.
In addition to its on-island activities, the company has developed a number of
niche off-island voice and data hosting businesses which are delivering
further growth.
Why did we invest?
Manx Telecom is the incumbent operator in a high growth economy where quality
telecoms are critical for many businesses and spending in the sector has
historically grown above real GDP.
The company enjoys a leading market position and a favourable regulatory
environment which encourages infrastructure investment.
How do we intend to create value?
HgCapital will continue to invest in the network to drive growth in the core
business while further investment in the Isle of Man's infrastructure through
the development of a new data hosting centre will support continued growth in
this high margin business area.
We will pursue margin improvement to levels in line with leading small island
telecoms operators and management will be supported in the continued growth of
new off-island opportunities. There is potential for bolt-on acquisitions to
further expand the business.
What has been achieved?
Investment in management, working with local regulators and improvements in
reporting and KPI monitoring processes has begun to reap rewards. A strategic
review has been carried out identifying key areas for future growth, with
planning for construction of a new data centre and roll out of high speed
broadband well underway. At the beginning of the year, Manx Telecom was listed
in the Sunday Times 100 Best Companies To Work For.
How is it performing?
Revenues continue to rise compared to last year but there has been some
underperformance in profits as a result of significant investment into the
business which should show long-term benefits.
How will we crystallise value?
The business in its current form is expected to be attractive to a number of
trade and financial buyers. Successful growth in the scale of the business
through acquisitions will make the business attractive to larger private
equity investors who have a successful track record in the telecoms space.
Trust's Investment - Manx Telecom
Sector Location Date of Residual Unrealised Accrued Total Valuation
investment cost GBP'000 value interest value methodology
GBP'000 GBP'000 GBP'000
TMT UK Jun 2010 11,033 11,033 - 11,033 Cost
INVESTMENTS IN RENEWABLE ENERGY
Business description
HgCapital's Renewable Energy sector team uses private equity skills to
identify and acquire renewable energy projects, usually based on wind or solar
energy, in Western Europe. These projects run across two funds and are grouped
into platforms with the current portfolio comprising:
- UK Onshore Wind: one of the ten largest independently-owned onshore wind
portfolios in the UK with 113MW of capacity in operation;
- Swedish Onshore Wind: the largest owner of onshore wind farms in the Nordic
region with total capacity of 181MW in three projects, developed and built by
Renewable Energy Systems Limited, one of the world's most experienced
developers of wind farms;
- Spanish Solar: the fourth largest operator of solar PV in Europe with
capacity of 61MW in seven projects in Spain; and
- Spanish Hydro: 14 projects of 55MW operating with 16MW to be built in the
next 12 months.
As at 30 June 2011, electricity equivalent to the power consumption of more
than 200,000 homes is generated from the operational energy plants in the
portfolio.
Why do we invest?
Investment in renewable energy offers good, risk-adjusted returns, delivering
inflation-protected and non-GDP linked revenue streams from high quality
assets.
It is the fastest growing part of the European electric power sector, and is
expected to account for the majority of new European energy asset investment
over the next ten years. This growing demand is driven by renewable energy's
increasing cost competitiveness, legally binding carbon reduction targets set
by the EU, the need to replace ageing generation capacity, and to increase the
security of energy supplies in Europe.
The sector shares the attractive characteristics, including downside
protection, of core infrastructure projects with the potential for
significantly higher returns on equity.
How do we intend to create value?
Investment returns are anticipated through a combination of yield during
operation and capital gain at refinancing or exit, providing a return profile
that should complement returns from its core investments in leveraged buyouts.
By bringing individual investments together into platforms, we can enhance
value through economies of scale, shared expertise and aggregated generation
capacity.
How will we crystallise value?
HgCapital is developing groups of projects based on the three platforms
described below. These platforms can then be refinanced efficiently or sold as
portfolios of closely related projects to industry buyers or financial
investors.
Principal investments by platform Total Portfolio
Valuation value
GBP'000 %
UK Wind 6,488 2.3
Spanish Solar 4,943 1.8
Swedish Wind 3,111 1.1
Other 113 0.1
RPP1 Fund 14,655 5.3
Spanish Mini-Hydro 3,905 1.4
Swedish Wind 1,716 0.6
Liquid assets* 2,229 0.8
RPP2 Fund 7,850 2.8
Total renewable energy investments 22,505 8.1
*for pending investments
DIVERSIFICATION BY VALUE
Geography
43% Spain
32% UK
24% Sweden
1% France
Resource
57% Onshore wind
24% Solar
19% Hydro
FINANCIAL STATEMENTS
INCOME STATEMENT
for the six months ended 30 June 2011
Revenue return Capital return Total return
Note
Six months Year Six months Year Six months Year
ended ended ended ended ended ended
30.06.11 30.06.10 31.12.10 30.06.11 30.06.10 31.12.10 30.06.11 30.06.10 31.12.10
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(un- (un- (audited) (un- (un- (audited) (un- (un- (audited)
audited) audited) audited) audited) audited) audited)
Gains on - - - 18,004 11,558 63,529 18,004 11,558 63,529
investments and
government
securities
Gains/(losses) 7(a) - - - 1,690 (1,850) (4,199) 1,690 (1,850) (4,199)
on loans
receivable from
General Partner
Net income 6 3,962 4,818 12,165 - - - 3,962 4,818 12,165
Other expenses 8 (218) (1,187) (2,062) - - - (218) (1,187) (2,062)
Net return on 3,744 3,631 10,103 19,694 9,708 59,330 23,438 13,339 69,433
ordinary
activities
before taxation
Taxation on 10 (314) - (50) - - - (314) - (50)
ordinary
activities
Transfer to 3,430 3,631 10,053 19,694 9,708 59,330 23,124 13,339 69,383
reserves
Return per 11(a) 10.99p 12.98p 34.02p 63.08p 34.69p 200.77p 74.07p 47.67p 234.79p
Ordinary share
The Total Return column of this statement represents the Trust'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.
No operations were acquired or discontinued during the period.
BALANCE SHEET
as at 30 June 2011
Note 30.6.11 30.6.10 31.12.10
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Fixed assets
Investments held at fair value
Quoted at market valuation - - -
Unquoted at Directors' valuation 249,905 207,023 232,184
Total fixed assets 249,905 207,023 232,184
Current assets - amounts receivable after
one year
Accrued income on fixed assets 28,026 21,569 26,606
Current assets - amounts receivable within
one year
Debtors 245 2,069 1,826
Government securities 91,938 60,913 86,498
Cash 2,143 2,073 3,473
Total current assets 122,352 86,624 118,403
Creditors - amounts falling due within one (3,239) (1,706) (2,594)
year
Net current assets 119,113 84,918 115,809
Net assets 369,018 291,941 347,993
Capital and reserves
Called up share capital 8,005 7,838 7,838
Share premium account 67,887 61,436 61,444
Capital redemption reserve 1,248 1,248 1,248
Capital reserve - realised 280,935 232,462 274,913
Capital reserve - unrealised (3,149) (23,992) (16,821)
Revenue reserve 14,092 12,949 19,371
Total equity shareholders' funds 369,018 291,941 347,993
Basic net asset value per Ordinary share 11(b) 1,160.4p 938.6p 1,118.8p
Diluted net asset value per Ordinary share 11(b) 1,129.3p 940.5p 1,090.7p
CASH FLOW STATEMENT
for the six months ended 30 June 2011
Note Six months Six months Year
ended ended ended
30.6.11 30.6.10 31.12.10
GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited)
Net cash inflow from operating activities 9 3,240 5,653 4,311
Taxation received/(paid) 1,581 - (10)
Capital expenditure and financial
investment
Purchase of fixed asset investments (29,435) (73,992) (111,418)
Proceeds from the sale of fixed asset 32,165 4,891 72,600
investments
Net cash inflow/(outflow) from capital 2,730 (69,101) (38,818)
expenditure and financial investment
Financing activities
Proceeds from issue of share capital 6,610 50,000 50,000
Fees paid on issue of share capital - (1,145) (1,137)
Equity dividends paid (8,709) (6,297) (6,297)
Net cash (outflow)/inflow from financing (2,099) 42,558 42,566
activities
Net cash inflow/(outflow) before 5,452 (20,890) 8,049
management of liquid resources
Management of liquid resources
Purchase of government securities (33,737) (114,874) (205,535)
Sale/redemption of government securities 26,955 134,964 198,086
Net cash (outflow)/inflow from management (6,782) 20,090 (7,449)
of liquid resources
(Decrease)/increase in cash and cash (1,330) (800) 600
equivalents in the period
Cash and cash equivalents at 1 January 3,473 2,873 2,873
Cash and cash equivalents at 30 June / 31 2,143 2,073 3,473
December
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the six months ended 30 June 2011
Share Capital
Note Share premium redemption Capital Revenue
capital account reserve reserves reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2010 7,838 61,444 1,248 258,092 19,371 347,993
Issue of Ordinary shares 5 174 6,443 - - - 6,617
Conversion of Subscription 5 (7) - - - - (7)
shares
Net return from ordinary - - - 19,694 3,430 23,124
activities
Dividends paid 4 - - - - (8,709) (8,709)
At 30 June 2011 8,005 67,887 1,248 277,786 14,092 369,018
At 31 December 2009 6,296 14,123 1,248 198,762 15,615 236,044
Issue of Ordinary shares 1,480 48,520 - - - 50,000
Issue of Subscription shares 62 (62) - - - -
Cost of share issue - (1,137) - - - (1,137)
Net return from ordinary - - - 59,330 10,053 69,383
activities
Dividends paid 4 - - - - (6,297) (6,297)
At 31 December 2010 7,838 61,444 1,248 258,092 19,371 347,993
NOTES TO THE FINANCIAL STATEMENTS
1. Principal activity
The principal activity of the Trust is that of an investment trust company.
The Trust is an investment company as defined by Section 833 of the Companies
Act 2006 and an investment trust within the meaning of Sections 1158 and 1159
of the Corporation Tax Act 2010 (`CTA 2010').
2. Basis of preparation
The accounts have been prepared under the historical cost convention, except
for the revaluation of financial instruments at fair value as permitted by the
Companies Act 2006, and in accordance with applicable UK law and UK Accounting
Standards (`UK GAAP') and with the Statement of Recommended Practice
`Financial Statements of Investment Trust Companies' (`SORP'), dated January
2009. All of the Trust's operations are of a continuing nature.
The Trust has considerable financial resources and, as a consequence, the
Directors believe that the Trust is well placed to manage its business risks
successfully despite the current uncertain economic outlook. After making
enquiries, the Directors have a reasonable expectation that the Trust will
have adequate resources to continue in operational existence for the
foreseeable future.
Accordingly, they continue to adopt the going concern basis in preparing the
interim report and accounts.
The same accounting policies, presentation and methods of computation are
followed in these financial statements as applied in the Trust's previous
annual audited financial statements.
3. Organisational structure, manager arrangements and accounting policies
Partnerships
In May 2003 (subsequently revised in January 2009) and January 2009, the Trust
entered into two separate partnership agreements with general and founder
partners, at which point investment holding limited partnerships were
established to carry on the business of an investor, with the Trust being the
sole limited partner in these entities.
The purpose of these partnerships, HGT LP and HGT 6 LP (together the `buyout
funds') is to hold all the Trust's investments in buyouts and other
investments, other than liquid funds and renewable energy projects (see
below).
Under the partnership agreements, the Trust made capital commitments into the
buyout funds with the result that the Trust now holds direct investments in
the buyout funds and an indirect investment in the fixed asset investments
that are held by these funds, as it is the sole limited partner. The fixed
asset investments on the balance sheet and the investment portfolio (see
above) comprise the underlying investments held by these buyout funds.
The Trust also entered into partnership agreements with the purpose of
investing in renewable energy projects by making capital commitments alongside
other limited partners in Hg Renewable Power Partners LP and HgCapital
Renewable Power Partners 2 C LP (together the `renewable funds'). These are
direct investments in the renewable funds, as shown on the balance sheet and
the investment portfolio above.
Priority profit share and carried interest per the buyout limited partnership
agreements
Under the terms of the buyout fund limited partnership agreements (`LPAs'),
the general partner is entitled to appropriate, as a first charge on the net
income of the funds, an amount equivalent to its priority profit share
(`PPS'). The Trust is entitled to net income from the funds, after payment of
the PPS.
In years in which these funds have not yet earned sufficient net income to
satisfy the PPS, the entitlement is carried forward to the following years.
The PPS is payable quarterly in advance, even if insufficient net income has
been earned. Where the cash amount paid exceeds the net income, an interest
free loan is advanced to the general partner by these buyout funds, which is
funded via a loan from the Trust. Such loan is only recoverable from the
general partner by an appropriation of net income; until net income is earned,
no value is attributed to this loan.
Furthermore, under the buyout funds' LPAs, the founder partner is entitled to
a carried interest distribution once certain preferred returns are met. The
LPAs stipulate that the buyout funds' capital gains (or net income), after
payment of the carried interest, are distributed to the Trust.
Accordingly, the Trust's entitlement to net income and net capital gains are
shown in the appropriate lines of the income statement. Notes 6, 7 and 8 to
the financial statements and the cash flow statement disclose the gross income
and gross capital gains of the buyout funds (including the associated cash
flows) and also reflect the proportion of net income and capital gains in the
buyout funds that have been paid to the general partner and founder partner as
its PPS and carried interest, where applicable.
The PPS paid from net income is charged to the revenue account in the income
statement, whereas PPS paid as an interest-free loan, if any, is charged as an
unrealised depreciation to the capital return on the income statement.
4. Dividends
It is intended that dividends will be declared and paid annually in respect of
each accounting period. A dividend of 28.0p per share was paid on 13 May 2011
in respect of the year ended 31 December 2010 (year ended 31 December 2009:
interim dividend of 25.0p per share). Shareholders should note that the Trust
has been advised that its dividend in respect of the financial year ended 31
December 2010 was paid as a lawful interim dividend and not as a final
dividend approved by shareholders.
5. Issued share capital
Six months ended Six months ended Year ended
30.06.11 30.06.10 31.12.10
(unaudited) (unaudited) (audited)
No. `000 GBP'000 No. `000 GBP'000 No. `000 GBP'000
Ordinary shares of 25p each
Allotted, called up and fully
paid:
At 1 January 31,104 7,776 25,187 6,296 25,187 6,296
Issued as part of placing and - - 5,917 1,480 5,917 1,480
open offer
Issued following exercise of 696 174 - - - -
Subscription rights
At 30 June / 31 December 31,800 7,950 31,104 7,776 31,104 7,776
The Trust's issued share capital at the beginning of the year consisted of
31,103,915 ordinary shares. On 10 June 2011, 695,810 new Ordinary shares were
issued pursuant to the exercise of Subscription rights by Subscription
shareholders. The Subscription price paid per Ordinary share was GBP9.50 and
total proceeds of GBP6.6 million were received by the Trust.
Six months ended Six months ended Year ended
30.06.11 30.06.10 31.12.10
(unaudited) (unaudited) (audited)
No. `000 GBP'000 No. `000 GBP'000 No. `000 GBP'000
Subscription shares of 1p each
Allotted, called up and fully
paid:
At 1 January 6,221 62 - - - -
Issued as part of placing and - - 6,221 62 6,221 62
open offer and bonus
Conversion into Ordinary shares (696) (7) - - - -
At 30 June / 31 December 5,525 55 6,221 62 6,221 62
On 7 April 2010, 5,037,351 subscription shares were issued as part of the
qualifying bonus issue, representing one subscription share for every five
existing ordinary shares held. A further 1,183,432 subscription shares were
issued, attached to the placing and open offer, representing one subscription
share for every five new ordinary shares issued.
Each subscription share entitles the holder to subscribe for one ordinary
share upon exercise of their subscription right and payment of the
subscription price. The first opportunity to exercise such right was on 31 May
2011, when 695,810 Ordinary shares were issued following the exercise of
Subscription rights on the same number of Subscription shares. The Ordinary
shares issued commenced trading on 15 June 2011. The next opportunity to exercise
Subscription rights is on 31 October 2011 and, thereafter, 31 May 2012 and 31
October 2012, at a price of GBP9.50 per ordinary share. The final exercise date
is on 31 May 2013 at a subscription price of GBP10.25 per ordinary share.
6. Income
Six months Six months Year ended
ended ended 31.12.10
30.6.11 30.6.10 GBP'000
GBP'000 GBP'000 (audited)
(unaudited) (unaudited)
Income from investments held by HGT LP and
HGT 6 LP
UK unquoted investment income 4,075 3,604 7,672
Foreign unquoted investment income 4,938 2,265 6,267
UK dividends - 909 1,396
Gilt interest less amortisation of premium 42 (419) (472)
9,055 6,359 14,863
Other income
Deposit interest 11 25 27
Other interest income 20 126 136
31 151 163
Total income 9,086 6,510 15,026
Priority profit share attribution (5,124) (1,692) (2,861)
Total net income 3,962 4,818 12,165
Total net income comprises:
Dividends - 909 1,396
Interest 3,962 3,909 10,769
Total net income 3,962 4,818 12,165
7. Fees, priority profit share and carried interest paid to Manager
(a) Priority profit share
Revenue return
Six months Six months Year ended
ended ended 31.12.10
30.6.11 30.6.10 GBP'000
GBP'000 GBP'000 (audited)
(unaudited) (unaudited)
Priority profit share to General Partners
funded by:
Share of investment income 5,124 1,692 2,861
Loan (recovered from)/advanced to General (1,690) 1,850 4,199
Partner
3,434 3,542 7,060
The priority profit share payable on HGT LP and HGT 6 LP rank as a first
appropriation of net income from investments held in HGT LP and HGT 6 LP
respectively and is deducted prior to such income being attributed to the
Trust in its capacity as a Limited Partner. The net income of HGT LP and HGT 6
LP earned during the period, after the deduction of the priority profit share,
is shown on the income statement.
(b) Carried interest
Capital return
Six months Six months Year ended
ended ended 31.12.10
30.6.11 30.6.10 GBP'000
GBP'000 GBP'000 (audited)
(unaudited) (unaudited)
Carried interest payable to Founder
Partner funded by:
Share of gains on investments 2,393 - 1,136
2,393 - 1,136
The carried interest payable ranks as a first distribution of capital gains on
the investments held in HGT LP and HGT 6 LP, a limited partnership established
solely to hold the Trust's investments, and is deducted prior to such gains
being paid to the Trust in its capacity as a Limited Partner. The net amount
of capital gains of HGT LP and HGT 6 LP during the period, after the deduction
of carried interest, is shown on the income statement
8. Other expenses
Revenue return
Six months Six months Year ended
ended ended 31.12.10
30.6.11 30.6.10 GBP'000
GBP'000 GBP'000 (audited)
(unaudited) (unaudited)
Custodian and administration fees 206 138 324
Other administration costs 12 1,049 1,738
218 1,187 2,062
9. Cash flow from operating activities
Six months Six months Year ended
ended ended 31.12.10
30.6.11 30.6.10 GBP'000
GBP'000 GBP'000 (audited)
(unaudited) (unaudited)
Net return before taxation 23,438 13,339 69,433
Gains on investments held at fair value (22,087) (9,708) (60,466)
Priority profit share recovered/(advanced) 1,690 (1,850) (4,199)
Movement on carried interest 1,257 (1,062) 74
Amortisation of premium on government 1,288 2,664 3,980
securities
Increase in prepayments and accrued income (1,438) (1,069) (5,919)
Decrease in debtors 17 2,675 2,691
(Decrease)/increase in creditors (925) 671 (1,276)
Tax on investment income included within - (7) (7)
gross income
Net cash inflow from operating activities 3,240 5,653 4,311
10. Taxation
Tax for the six month period is charged at 28% to 31 March 2011 and 26% from 1
April 2011 (31 December 2010: 28%), representing the best estimate of the
average annual effective tax rate expected for the full year, applied to the
pre-tax income of the six month period.
In the opinion of the Directors, the Trust has complied with the requirements
of Section 1158 and Section 1159 of the CTA 2010 and will therefore be exempt
from corporation tax on any capital gains made in the year. The Trust expects
to designate all of any dividend declared in respect of this financial year as
an interest distribution to its shareholders. This distribution is treated as
a tax deduction against taxable income, resulting in no corporation tax being
payable by the Trust on the interest income designated as a dividend.
11. Return and net asset value per ordinary share
(a) Return per Ordinary share
Revenue return Capital return
Six months Six months Year Six months Six months Year
ended ended ended ended ended ended
30.6.11 30.6.10 31.12.10 30.6.11 30.6.10 31.12.10
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
Earnings (GBP`000):
Return on ordinary activities 3,430 3,631 10,053 19,694 9,708 59,330
after taxation
Number of shares (`000)
Weighted average number of 31,223 27,983 29,552 31,223 27,983 29,552
shares in issue
Return per Ordinary share 10.99 12.98 34.02 63.08 34.69 200.77
(pence)
(b) Net asset value per share
Six months Six months Year ended
ended ended 31.12.10
30.6.11 30.6.10 GBP'000
GBP'000 GBP'000 (audited)
(unaudited) (unaudited)
Net asset value (GBP'000)
Net assets 369,018 291,941 347,993
Assuming exercise of all Subscription 52,487 59,097 59,097
shares (at minimum price)
Fully diluted net asset value 421,505 351,038 407,090
Number of shares (`000)
Number of shares in issue 31,800 31,104 31,104
Potential issue of Subscription shares 5,525 6,221 6,221
Shares in issue following exercise of 37,325 37,325 37,325
Subscription shares
Basic net asset value per share (pence) 1,160.4 938.6 1,118.8
Diluted net asset value per share (pence) 1,129.3 940.5 1,090.7
12. Capital commitments
The Trust has committed through HGT 6 LP to invest GBP285 million alongside the
Manager's latest buyout fund, Hg6. The Trust will be entitled, without
penalty, to opt out of any investment which could cause the Trust to lose its
status as an investment trust, result in the Trust not having the cash
resources to meet any of its projected liabilities or expenses, or result in
it not being able to pay dividends or undertake any intended share buy-back.
At 30 June 2011, GBP136,426,000 (30 June 2010: GBP198,951,000; 31 December 2010:
GBP155,884,000) of this commitment was uncalled.
The Trust has also committed through HGT LP to invest GBP120 million alongside
the Manager's previous buyout fund, Hg5. At 30 June 2011, GBP25,210,000 (30 June
2010: GBP20,464,000; 31 December 2010: GBP22,350,000) of this commitment was
uncalled. The Trust's derivative financial instruments, held through HGT LP
for the purpose of foreign exchange hedging, expire on 29 August 2012. In
order to meet any potential liability arising on this date, an amount of
GBP6,260,000 has been reserved for this purpose at the HGT LP level. This amount
is therefore callable from the Trust at this or any earlier date and will,
when called, reduce the above uncalled commitment to HGT LP.
During 2010, the Trust committed to invest EUR40 million in the Manager's latest
renewable energy fund, HgCapital Renewable Power Partners 2 C LP. As at 30
June 2011, EUR30,390,000 (GBP27,445,000) (30 June 2010: EUR11,735,000 (GBP9,608,000);
31 December 2010: EUR37,302,000 (GBP31,964,000)) of this commitment was uncalled.
During 2006, the Trust committed EUR21.6 million in the Manager's first
renewable energy fund, Hg Renewable Power Partners LP. As at 30 June 2011,
EUR2,127,000 (GBP1,921,000) (30 June 2010: EUR2,140,000 (GBP1,752,000); 31 December
2010: EUR2,127,000 (GBP1,823,000)) of this commitment was uncalled.
13. Publication of non-statutory accounts
The financial information contained in this half-yearly financial report does
not constitute statutory accounts as defined in Section 435 of the Companies
Act 2006. The financial information for the six months ended 30 June 2011 and
30 June 2010 has not been audited. The information for the year ended 31
December 2010 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 498 (2) or (3) of the Companies Act 2006.
14. Annual results
The Board expects to announce the results for the year ending 31 December 2011
in March 2012. The Annual Report should be available by the end of March 2012,
with the Annual General Meeting being held in May 2012.
BOARD, MANAGEMENT AND ADMINISTRATION
Board of Directors
Roger Mountford (Chairman)
Piers Brooke
Richard Brooman (Chairman of the Audit & Valuation Committee)
Peter Gale (Deputy Chairman and Senior Independent Director)
Andrew Murison
Mark Powell
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
Manager
HgCapital**
2 More London Riverside
London
SE1 2AP
Telephone: 020 7089 7888
www.hgcapital.com
Secretary and administrator
Hg Pooled Management Limited*
2 More London Riverside
London
SE1 2AP
Telephone: 020 7089 7888
www.hgcapital.com
Stockbrokers
RBS Hoare Govett Limited*
250 Bishopsgate
London
EC2M 4AA
Telephone: 020 7678 8000
www.rbs.com/hoaregovett
Numis Securities Ltd*
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Telephone: 020 7260 1000
www.numiscorp.com
Custodian
Hg Investment Managers Limited*
2 More London Riverside
London
SE1 2AP
Registrar
Computershare Investor Services PLC*
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone: 0870 707 1037
www-uk.computershare.com/investor
Independent auditor
Deloitte LLP
2 New Street Square
London EC4A 3BZ
AIC
Association of Investment Companies
www.theaic.co.uk
LPEQ
Listed Private Equity
www.lpeq.com
HgCapital Trust plc is a founder member of LPEQ (formerly iPEIT). LPEQ is a
group of private equity investment trusts and similar vehicles listed on the
London Stock Exchange and other major European stock markets, formed to raise
awareness and increase understanding of what listed private equity is and how
it enables all investors - not just institutions - to invest in private
equity.
LPEQ provides information on private equity in general, and the listed sector
in particular, undertaking and publishing research and working to improve
levels of knowledge about the asset class among investors and their advisers.
*Authorised and regulated by the Financial Services Authority.
**HgCapital is the trading name of Hg Pooled Management Limited and HgCapital
LLP
The full Interim Results and a webcast describing the results are available at
http://www.hgcapitaltrust.com
For further details:
HgCapital
Ian Armitage (Chairman, HgCapital) +44 (0)20 7089 7888
Roger Mountford (Chairman, HgCapital Trust plc) +44 (0)77 99 66 26 01
Maitland
Rowan Brown +44 (0)20 7379 5151
George Hudson
About HgCapital Trust plc
HgCapital Trust plc is an investment trust whose shares are listed
on the London Stock Exchange. The Trust gives investors exposure, through a
liquid vehicle, to a portfolio of high-growth private companies, managed by
HgCapital, an experienced and well-resourced private equity firm with a
long-term track record of delivering superior risk-adjusted returns for its
investors.
For further details, see www.hgcapitaltrust.com and
www.hgcapital.com
Neither the contents of HgCapital's website, HgCapital Trust's website nor the
contents of any website accessible from hyperlinks on the websites (or any
other website) is incorporated into, or forms part of, this announcement.
END
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