HgCAPITAL TRUST PLC INTERIM RESULTS

RNS Number : 8213Y

HgCapital Trust PLC

14 September 2020

 

H gCapital Trust plc

INTERIM Results FOR THE SIX MONTHS ENDED 30 JUNE 2020

London, 14 September 2020:   HgCapital Trust plc ("HGT"), today announces its interim results for the six months ended 30 June 2020. HGT provides investors with a listed vehicle to invest in unquoted businesses managed by Hg, Europe's largest investor in software & service 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.

HGT provides listed access to Hg's investments, which would in aggregate represent the third largest and the fastest growing technology firm in Europe.

ROBUST PERFORMANCE shown by portfolio DURING H1 2020

WITH a NAV Uplift of 7%

significant PORTFOLIO activity SINCE END OF PERIOD, RESULTING IN
Year-To-date uplift to 31 August 2020 of 12% to a new high of 282.2p per share
with current pro-forma net assets of £1.15 billion

HGT has shown continued outperformance of the FTSE All-share over one, three, five, ten and twenty-year periods

SUMMARY performance

	31 August 2020	% Total return2	30 June 2020	31 December 2019	% Total return2
NAV per share	282.2p	+12.0%	268.5p	255.1p	+6.6%
Share price	273.5p	+7.6%	235 . 5p	257.5p	-7.3%
FTSE All-Share Index		-18.5%			-17.5%
		YTD 2020 Movement			H1 2020 Movement
Net Asset Value	£1.15bn	+£113m	£1.10bn	£1.04bn	+£57m

Source: Hg, Factset

Jim Strang, Chairman of HGT, commented:

"HGT has delivered strong performance in the first half of the financial year, despite a very challenging external environment. The nature of the businesses in which we invest and the  operating model of the Manager, Hg, have served HGT well. While the COVID ‑ 19 crisis will have a material impact on the economies where our companies trade, the longer ‑ term prospects for HGT remain very sound."

Luke Finch, Partner and Head of Client Services, Hg, commented:

"The continued double-digit trading performance demonstrated by the Hg portfolio during a very challenging environment again reinforces our thinking and focus on software and service businesses selling critical and quality services. This focus has led to a very strong year-to-date for realisations, whilst also giving Hg the conviction to deploy significant capital during this period.  We expect headwinds from lower global growth in 2020, but believe that the portfolio will, in aggregate, continue to deliver growth over the long-term."
 

KEY HIGHLIGHTS of THE SIX MONTHS TO 30 JUNE 2020

¡ Net assets of more than £1 billion, with continued outperformance of the FTSE All-Share over one, three, five, ten and twenty-year periods

-  NAV per share of 268.5p, a total return of 6.6% to 30 June 2020.

-  Share price total return of -7.3% over the period.

-  Interim dividend of 2.0p per share (2019 interim dividend of 1.8p per share).

-  An investment of £1,000 made 20 years ago would now be worth £13,262, a total return of 1,226%. An equivalent investment in the FTSE All-Share Index would be worth £2,242.

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

-  Revenue and EBITDA growth of 23% and 27% respectively across the top 20 investments (88% of the portfolio) over the last twelve months.

-  £51 million of cash returned to HGT through realisations at uplifts to book value and refinancings.

-  Valuation multiple (EV/EBITDA) of 20.6x and net debt to EBITDA ratio of 6.1x for the top 20 investments.

¡ Continued investment and commitments to drive future value

-  Continued investment with £169 million deployed on behalf of HGT into companies that Hg (the Manager) has known for many years and have demonstrated a track record of strong performance across market cycles.

-  New commitments were made to the Hg Saturn 2, Hg Genesis 9, and Hg Mercury 3 funds, totalling £755 million, which led to total outstanding commitments at 30 June of £935 million (December 2019: £336 million). These will be deployed over the next four to five years. Portfolio activity over July and August has lowered this figure as detailed in the post-period section below.

POST PERIOD EVENTS AS AT 31 AUGUST 2020

¡ Significant transaction activity post 30 June 2020 has resulted in further NAV increase

-  Pro-forma NAV of 282.2p , YTD performance of 12.0%.

-  Current pro-forma net assets of £1.15 billion.

-  Share price of 273.5p , YTD performance of 7.6%.

-  Over £250 million (net of carried interest) returned to HGT through the full exits of Evaluate, Citation and Sovos in addition to the partial sale of Visma, all at strong uplifts to book value.

•     The partial sale of Visma was the world's largest-ever software buyout, valuing the company at US$12.2 billion, and represented an uplift of 22% over the Dec-19 book value.

• Sovos was exited at an uplift of 55% over the Dec-19 book value.

• The sale of Citation Group saw an uplift of 26% over the Dec-19 book value

-  Further £90m invested by HGT into companies well ‑ known to the Manager. These include Sovos, Visma, Evaluate and F24.

-  Pro-forma liquid resources post-completion of all announced transactions and the interim dividend payable in October 2020, are £314 million (27% of 31 August pro-forma NAV).

-  Pro-forma outstanding commitments of £814 million (71% of 31 August pro-forma NAV). We expect these to be drawn down over the next four to five years.

-      The Board of HGT are in advanced negotiations on a further £200m debt facility with term sheets approved. More updates will follow once this agreement has completed.

Outlook

Strong earnings, realisations at uplifts to book value and supporting the management teams of the underlying portfolio businesses will continue to drive value for shareholders in HGT.

Commentary from Hg (the Manager):

-  Robust double-digit trading performance continues to underpin the ongoing growth of a defensive portfolio.

-  Our companies remain focused on selling business-critical and non-discretionary software and services to their underlying customers, typically with highly predictable business models and robust levels of recurring revenue.

-  Given the defensive growth characteristics of the portfolio and our low exposure to the most immediately affected industries, the pandemic has had a limited direct impact on Hg's portfolio.

-  We expect headwinds from lower global growth in 2020, but believe that the portfolio will, in aggregate, continue to deliver growth over the long-term.

-  By the end of June 2020, the S&P500 Software and Services index, which has historically correlated well with our portfolio, was above December-2019 valuation multiples.

-  Across our funds, we expect investment activity in 2020 to continue - cautiously and with discipline - into companies that we have tracked for many years.

-  Bolt-ons and strategic M&A within the portfolio remain a key focus and across the current portfolio we have multiple live M&A situations.

-  The combination of the long-term nature of listed private equity investment with the types of business that Hg invests in, will continue to drive long-term growth.

-  Hg will maintain a focus on the best course of action for society, for employees, their families and for the staff and businesses in which they invest and continue to review the risk profile as the pandemic situation develops A focus on operational improvement continues to drive performance and deliver significant network benefits.

-  It has been a very strong year-to-date for realisations and further liquidity events are expected over the next twelve months through both exits and refinancings.

- Ends -

The Company's 2020 Interim Report and a video from the Chairman to accompany the results are available to view at:  http://www.hgcapitaltrust.com/ .

For further details:

	HgCapital Trust plc
	Laura Dixon (Senior Investor Relations Manager, Hg)		[phone]
Brunswick
Samantha Chiene		[phone]

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

 

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