Interim Management Statement
HgCapital Trust plc
Interim Management Statement
10 May 2011
HgCapital Trust plc (the `Trust'), today issues its Interim Management
Statement in accordance with FSA Disclosure and Transparency Rule 4.3. This
statement relates to the period from 1 January 2011 to 9 May 2011 and
incorporates the Trust's calculation of its Net Asset Value (NAV) at 30 April
2011, in the same form as is issued following the end of each month. The NAV at
30 April 2011 is based on the valuations of unquoted investments as at 31
December 2010, as set out in the annual report issued on 18 March 2011, with
any subsequent investment completed by the date of the announcement accounted
for at cost; adjustments are made for realisations, exchange rates, changes in
the value of quoted securities, dividends payable and net revenues during the
period.
The reader's attention is drawn to the announcement made on 4 April 2011 of the
realisation of the Trust's investment in SLV Group. When completed (expected in
June 2011), it is estimated that this will add 31.8 pence to the 30 April 2011
basic net asset value per share (26.5 pence to the 30 April 2011 diluted net
asset per share). Further information is contained in this statement.
Activity during the period
Investment Environment
During the period, there has been an increase in activity across the private
equity market in the core territories in which our Manager, HgCapital, invests.
After deploying a significant amount of capital in seven new buyout companies
during 2010 and one in this period, the Board and the Manager anticipate a
period in which work will focus on absorbing recent acquisitions, with some
bolt-on acquisitions being made where appropriate. At the same time, increasing
interest amongst trade buyers and from larger PE houses may lead to further
realisations.
The financing market has improved dramatically in recent months. There have
been several examples recently where private equity firms have made investments
with very high leverage. At the moment, these levels of leverage are only being
offered on selected, high quality transactions, but there are some signs that
banks' willingness to lend is increasing across the board.
New and further investments
Since 31 December 2010, alongside other clients of the Manager, the Trust has
participated in one new buyout investment and one further investment for a
total consideration of £10.7 million.
The acquisition of ATC that was previously announced in November 2010,
completed in March 2011 for £66.1 million. The Trust contributed £9.9 million
of the total consideration. ATC is the leading independent provider of
fiduciary, management and administration services to multinational corporations
and financial institutions.
Realisations
On 10 February 2011, the Manager announced the sale of Elite Holding SA
(trading as SiTel), the Netherlands-based producer of products targeted
primarily at the home wireless voice and data applications market, to Dialog
Semiconductor Plc for an enterprise value of $86.5 million. The Trust realised
cash proceeds of £9.5 million, an uplift over its valuation at 31 December 2010
of 13.1 pence per share (basic) and 10.9 pence per share (diluted), and
representing a multiple of nearly 2.4x original cost.
On 4 April 2011, the Manager announced the sale of the SLV Group. The sale is
expected to complete in June 2011, subject to regulatory clearance, and the
Trust will realise estimated cash proceeds of £25.0 million. This compares to a
carrying value of £15.2 million at 30 April 2011, an uplift of £9.8 million
(31.8 pence per share basic; 26.5 pence per share fully diluted), and an
original cost of £6.0 million, representing a multiple of 4.2x original cost.
In April 2011, the refinancing of Stepstone Solutions was completed, returning
£34.3 million of capital to HgCapital clients and interest thereon of £3.0
million. The Trust's share of these receipts was £5.1 million and £0.5 million
respectively.
Performance relative to benchmark
Since 31 December the total return (NAV plus dividend) increased by 3.2%,
compared with a 4.2% increase in the FTSE All-Share Index. The Trust's share
price at 30 April 2011 was 1,130.0 pence, a premium of 0.3% against the basic
NAV of 1,127.0 pence per share and a premium of 3.0% against the diluted NAV of
1,097.5p. The Trust's share price (on a total return basis) increased by 15.1%
over the four months to 30 April 2011, in a period when the FTSE All-Share
Index increased by 4.2%.
These calculations of NAV are based on valuations of the portfolio as at 31
December 2010, using market multiples at that date, and therefore do not
reflect changes in the ratings of comparable listed companies between 1 January
2011 and 30 April 2011. The book value of the unquoted portfolio will next be
reviewed, as usual, at 30 June 2011 in accordance with IPEV guidelines, taking
account of each Trust's maintainable earnings and ratings of comparable
businesses in the relevant listed markets at that time.
Current trading
The Manager is represented on the board of every material investment in the
portfolio and receives monthly management accounts from all the buyouts in
which the Trust is invested. These are regularly discussed with the Board,
together with other information about the trading environment, strategy,
prospects and leadership of each business, and the actions that the Manager is
taking to effect improvements. The latest available trading figures for
companies in the portfolio are for the period ended March 2011.
The top 20 companies have seen average sales growth in the last twelve months
of 16% up from 13% as reported in the annual results. Of these investments, 11
increased sales by greater than 10%, including 6 by more than 20%. Only 2
companies reported a decline in sales growth, which was by no more than 2%.
Average sales growth has accelerated over the last three months to 21%.
During the last twelve months, average growth in EBITDA of the top 20
investments increased by 15%, down from 16% as reported in the annual results.
Of these investments, 12 increased EBITDA by more than 10%, including 8 by more
than 20%. Only 2 companies reported a decline in EBITDA. The last three months
has seen average EBITDA growth accelerate to 17%.
The Trust has a significant exposure to euro denominated assets. As at 30 April
2011, the appreciation of the euro against sterling, by 3.7% since 31 December
2010, has resulted in an increase in the valuation of that portion of the
portfolio. Similarly, the appreciation of Norwegian Kroner and Swedish Kroner
against sterling of 4.0% and 4.5% respectively, has resulted in an increase in
the sterling valuation of assets denominated in those currencies.
Investment objective
The Trust gives investors access to a private equity portfolio run by an
experienced and well-resourced manager that makes investments in private
companies across Northern Europe, principally in the Healthcare, Industrials,
Services and TMT sectors.
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.
The Trust's benchmark is the FTSE All-Share Index.
Performance
All information is at 30 April 2011 and is unaudited.
Performance at month end with net income reinvested
One month Three One year Three Five Ten years
months years years
NAV per Ordinary 0.5% 3.3% 28.0% 21.0% 96.2% 225.9%
share (basic)
NAV per Ordinary 0.8% 3.1% 23.6% 17.8% 91.1% 217.4%
share (diluted)
Ordinary Share 7.7% 20.0% 38.8% 39.6% 91.0% 302.4%
price
FTSE All-Share 3.1% 4.7% 13.7% 13.6% 22.4% 40.0%
Index
Sources: HgCapital, Factset
Results
At 30 April 2011(1)
Net asset value per share:*
-Basic 1,127.0p
-Diluted (2) 1,097.5p
Share price - ordinary shares: 1,130.0p
Ordinary share price premium to 0.3%
NAV (basic):
Ordinary share price premium to 3.0%
NAV (diluted):
Share price - subscription 178.0p
shares:
Total net assets: £350.5m
Net yield:** 2.5%
Gearing: Nil%
Ordinary shares in issue: 31,103,915
Subscription shares in issue: 6,220,783
* includes 4 months net revenue of 10.0p.
** based on a dividend of 28.0p announced on 18 March 2011, with an
ex-dividend date of 6 April 2011 and payable on 13 May 2011.
Ticker codes:
Ordinary shares HGT
Subscription shares HGTS
1. Following the sale of SLV (expected to be completed in June 2011), the
basic NAV is estimated to be £360.4 million (1,158.8 pence per share basic;
1,124.0 pence per share diluted) and cash and other liquid assets is
estimated to be 29.5% (after the proposed dividend to be paid in May 2011)
of total adjusted net assets. The ordinary share price is trading at a 2.5%
discount to the adjusted basic NAV of 1,158.8 pence per share, and at a
0.5% premium to the adjusted diluted NAV of 1,124.0 pence per share.
2. The diluted net asset value per share calculation is based on the
assumption that all Subscription shares in issue are exercised at their
minimum price of 950 pence per share.
Unaudited Net Asset Value per Share
The investment portfolio has not been revalued at 30 April 2011. The unaudited
Net Asset Value at 30 April 2011 is based on the Net Asset Value at 31 December
2010, adjusted to reflect purchases and sales of investments, currency
movements and market prices (at bid) in respect of listed investments.
Net revenue for the four months to 30 April 2011 was 10.0p.
Balance Sheet
At 30 April 2011 the Trust's summary balance sheet was as follows:
£m %
Unquoted investments 240.8 68.7
Accrued income on 27.9 8.0
investments
Total investment 268.7 76.7
portfolio
Cash and other liquid 81.4 23.2
assets (1)
Other net assets 0.4 0.1
Net Asset Value 350.5 100.0
1. As at 30 April 2011, the undrawn commitment to Hg6, Hg5, RPP and RPP2 is £
207.0 million.
Portfolio
Twenty largest investments at 30 April 2011 (at valuation including accrued
interest):
Investment % of Sector
Total
Assets
1 TeamSystem 7.4 TMT
2 VISMA 6.9 TMT
3 Frosunda 4.6 Healthcare
4 SLV Electronik 4.3 Industrials
5 SHL 4.2 Services
6 Stepstone Solutions 4.1 TMT
7 Mondo Minerals 3.9 Industrials
8 Achilles 3.7 TMT
9 Hg Renewable Power Partners 3.6 Renewable Energy
LP
10 Midas (Goldshield) 3.5 Healthcare
11 JLA 3.5 Services
12 Manx Telecom 3.1 TMT
13 SimonsVoss 3.1 Industrials
14 ATC 3.0 Services
15 Teufel 2.8 Industrials
16 Epyx 2.8 TMT
17 Schleich 2.5 Consumer & Leisure
18 Americana 2.4 Consumer & Leisure
19 Sporting Index 1.9 Consumer & Leisure
20 Voyage 1.5 Healthcare
Total 72.8
Sector % of
Total
Assets
TMT 28.3
Industrials 12.0
Services 10.4
Healthcare 9.7
Consumer & Leisure 4.3
Renewable Energy 4.3
Other 7.8
Cash and other liquid assets 23.2
Total 100.0
This statement is a general description of the financial position and
performance of the Trust for the period from 1 January 2011 to 10 May 2011. It
does not contain any profit forecast or forward looking information. Future
performance and share price are likely to be affected by a number of factors,
including (but not limited to) general economic and market conditions and
specific factors affecting the financial performance or prospects of individual
investments within the Trust's portfolio.
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