HGT Hg Capital Trust Plc

TIDMHGT

RNS Number : 6822M

HgCapital Trust PLC

18 September 2023

H gCapital Trust plc

INTERIM RESULTS FOR THE PERIODED 30 JUNE 2023

Resilient NAV performance and continued realisation activity in a challenging macro environment

London, 18 September 2023: HgCapital Trust plc ('HGT'), today announces its interim results for the period ended 30 June 2023.

HGT provides investors with a listed vehicle to invest in unquoted businesses managed by Hg, Europe's largest investor in software & technology-enabled services businesses.

The objective of HGT is to provide shareholders with consistent long -- term returns in excess of the FTSE All -- Share Index by investing predominantly in unquoted companies where value can be created through strategic and operational change.

Highlights over the first half of 2023 include:

! Strong portfolio trading continued to be the main driver of performance, contributing to a total return NAV increase of 4.6%, closing the period at 473.1p NAV per share and net assets of GBP2.2 billion

! Share price total return of +7.1% over the period, closing at 370.50p per share and a market capitalisation of GBP1.7 billion

! Against an uncertain macro environment, Hg maintained a disciplined approach to new investment, deploying GBP33 million on behalf of HGT, including one new investment and several follow-on investments in the portfolio to finance bolt-on M&A

! GBP229 million returned to HGT, including the full realisation of Transporeon

! Continued and significant long-term NAV outperformance of the FTSE All-Share

! Performance provided through access to Hg's investments, which would in aggregate represent the second largest and the fastest growing technology firm in Europe ([1])

An investment of GBP1,000 made 20 years ago in HGT would now be worth GBP24,963, a total return of 2,396%. An equivalent investment in the FTSE All-Share Index would be worth GBP4,208[2]

Jim Strang, Chairman of HGT, commented:

"Your Company has delivered a resilient performance over the first six months of the year. The portfolio continued to deliver strong underlying performance with sales and EBITDA across the top 20 investments (76% of the portfolio) growing at 29% and 30% respectively. Investment activity was noticeably slower in the first half of 2023 as the Manager took a cautious stance on adding to the portfolio. Conditions for transactions in the second half of the year appear more supportive."

David Toms, Head of Research at Hg, commented:

" Our portfolio continues to be driven by growth from existing customers, itself supported by strong renewal rates, cross and up-sell. We enhance this with consistent M&A, which remains a powerful accelerant of our performance."

SUMMARY performance

 
                    31 August     % Total    30 June    31 December     % Total 
                         2023      return       2023           2022      return 
----------------  -----------  ----------  ---------  -------------  ---------- 
NAV per share          473.3p       +4.7%     473.1p         456.6p       +4.6% 
Share price            389.0p      +12.4%     370.5p         350.5p       +7.1% 
FTSE All-Share 
 Index                              +2.7%                                 +2.6% 
----------------  -----------  ----------  ---------  -------------  ---------- 
                                 YTD 2023                               H1 2023 
                                 Movement                              Movement 
Net Asset Value      GBP2.2bn     +GBP77m   GBP2.2bn       GBP2.1bn     +GBP76m 
----------------  -----------  ----------  ---------  -------------  ---------- 
 

Source: Hg, Factset. All references to total return allow for all historic dividends being reinvested

Note: Hg undertakes full revaluations of the portfolio on a quarterly basis, the next process being 30 September 2023, therefore the movement in unrealised value of the portfolio to the end of August 2023 is attributable to post-period transactions and FX only.

Performance overview

Net assets of GBP2.2 billion, with continued long-term outperformance of the FTSE All-Share over one, three, five, ten and twenty-year periods:

   -     NAV per share of 473.1p, a total return of +4.6% for the six months to 30 June 2023. 
   -     Share price total return of +7.1% over the year 
   -     Proposed interim dividend of 2.0p per share 

Strong double-digit growth from the realised and unrealised portfolio:

- Revenue and EBITDA growth of 29% and 30% respectively across the top 20 investments (76% of the portfolio) over the last twelve months.

- GBP229 million of cash returned to HGT primarily through the realisation of Transporeon and secondary fund transactions

- Valuation multiple (EV/ LTM EBITDA) of 26.2x and net debt to LTM EBITDA ratio of 7.4x for the top 20 investments (76% of the portfolio)

Continued investment and commitments to drive future value:

- GBP33 million invested on behalf of HGT into one new platform investment, and several follow-on investments to support the growth of existing portfolio companies

- New commitment of EUR125 million to Hg Mercury 4. Total outstanding commitments at 30 June 2023 of GBP1.1 billion (December 2022: GBP1.2 billion). These will be deployed over the next three to four years

- HGT's strong liquidity position coupled with commitments across the most recent vintage of Hg funds ensure that the company is well-positioned to take advantage of investment opportunities as they arise

Credit facility increase:

- The Board of HGT agreed a c.GBP60 million increase to the multi-currency revolving credit facility bringing the total facility to GBP350 million, the full balance of which was available at period-end

POST PERIOD EVENTS

-- NAV of 473.3p at 31 August , YTD performance of 4.7% reflecting post-period transactions and FX movements.

-- Net assets of GBP2.2 billion at 31 August.

-- Share price of 389.0p at 31 August , YTD performance of +12.4%.

-- Estimated gross proceeds of GBP55 million from the full exit of Commify, and partial exits of Azets and TeamSystem to be received post period, at an average uplift to carrying value of 39%.

-- New investment of GBP6m in Nomadia

-- Further EUR50m commitment to Hg Mercury 4 (EUR175 million total commitment)

-- Available liquid resources (including the credit facility) post-completion of all announced transactions and the interim dividend payable in October 2023, are GBP657 million (30% of 31 August pro-forma NAV).

-- Outstanding commitments of GBP1.1 billion (49% of 31 August pro-forma NAV). We expect these to be drawn down over the next three to four years.

Outlook

Commentary from Hg (the Manager):

We believe the combination of the long-term nature of listed private equity investment with the types of business that Hg invests in, and robust double-digit growth in trading, can continue to drive long-term performance

-- Against a challenging macro environment, Hg's portfolio has demonstrated resilient performance

-- The portfolio companies remain focused on selling business-critical and non-discretionary software and services to their underlying business customers, delivering predictable levels of recurring revenue

-- Positive trading outlook underpinned by long-term drivers for workplace automation and digitisation which are set to transform the workplace for professionals for decades to come

-- While we continue to screen a number of attractive investment opportunities, we remain cautious given the ongoing macro uncertainty. Bolt-on M&A remains a key focus to deploy capital and create incremental equity value in the portfolio

-- During the first half of 2023, we remained focused on returning capital to Hg clients, distributing c.GBP1 billion of liquidity, including GBP109 million to HGT. This followed an exceptionally strong 2022, when we returned a total of GBP4 billion, of which HGT's share was GBP404 million. Further liquidity events are expected over the next twelve months

- Ends -

The Company's 2023 Interim Report and an animated presentation from Hg to accompany the results are available to view at: http://www.hgcapitaltrust.com/ .

For further details:

 
  HgCapital Trust plc 
  Laura Dixon                                 +44 (0) 78 2459 2894 
   George Crowe                               +44 (0) 20 8152 5880 
 Brunswick 
 Azadeh Varzi                                  +44 (0)20 7404 5959 
 
 

About HgCapital Trust plc

HgCapital Trust plc is an investment company whose shares are listed on the London Stock Exchange (HGT.L). HGT gives investors exposure, through a liquid vehicle, to a portfolio of high-growth unquoted companies, managed by Hg, 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

[1] By Enterprise Value, Source: Hg, Factset

[2] All references to total return allow for all historic dividends being reinvested

Please note: Past performance is not a reliable indicator of future results. The value of shares and the income from them can go down as well as up as a result of market and currency fluctuations and investors may not get back the amount they originally invested.

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September 18, 2023 02:00 ET (06:00 GMT)