Quarterly trading update and NAV announcement

Literacy Capital PLC

26 October 2023

 

The information contained in this announcement is restricted and is not for publication, release or distribution in the United States of America, any member state of the European Economic Area, Canada, Australia, Japan or the Republic of South Africa.

This announcement contains inside information.

26 October 2023

Literacy Capital plc

Quarterly trading update and NAV announcement for Q3 2023

Continued growth and investment across BOOK's portfolio companies results

in a NAV return of +0.9% in Q3 and an uplift over the last twelve months of +28.0%

Literacy Capital plc ("Literacy", "BOOK" or the "Company"), a listed investment trust primarily focused on investing directly into private businesses based in the UK, today announces its quarterly trading update and NAV update for the three months ending 30 September 2023.

Q3 Highlights:

●	Total return in the quarter of +0.9%, an uplift of £2.6m (4.3p per share), taking net asset value ("NAV") per share of 492.8p (Q2'23: 488.5p), or NAV of £295.7m (Q2'23: £293.1m).
●	BOOK and its portfolio companies made good headway in Q3 despite less favourable market conditions, reporting strong growth year-on-year; as ever our focus remains on long-term value creation.
●	The Butternut Box transaction received regulatory approval in October (after the quarter end), as a result of which the sale of BOOK's stake completed. £21.8m is expected to be received this week.
●	Share price performance was strong in the quarter (rising 8.4%), and outperforming its benchmark indices.
●	Total charitable donations since the inception of Literacy Capital now amount to £7.8m, including a charitable donation provision of £694k in the quarter.

Commenting on the Q3 performance, CEO of BOOK's investment manager, Richard Pindar, said:

"BOOK and its portfolio companies made good headway in Q3 despite less favourable market conditions in some sectors. This progress translated into an uplift in NAV of +0.9%. But as ever, our focus remains on scaling our businesses and creating substantial value over the longer term.

In Q3, revenue grew in eight of BOOK's largest ten companies, compared to a year earlier. Several of our leading companies made significant investments to build scale in the period, including, for example making eight C-suite appointments. Most of these appointments comprise newly created roles that ensure our companies' teams have the right talent to thrive.

We are confident that these investments will have a positive impact in making our businesses more valuable and attractive to acquirers in due course, not least given the level of interest from PE firms in several BOOK assets already."

Net Asset Value

The Company announces that as at 30 September 2023, the NAV per ordinary share was 492.8 pence. This represents a 0.9%, or 4.3p per share, uplift since 30 June 2023 when NAV per ordinary share was 488.5p.

	At 30 Sep 23	At 30 Jun 23	At 30 Sep 22
Net asset value	£295.7m	£293.1m	£231.0m
NAV per ordinary share	492.8p	488.5p	384.9p

The above NAV calculation is based on the Company's issued ordinary share capital as at 30 September 2023 of 60,000,000 ordinary shares of £0.001 each. This NAV calculation includes the cost to ordinary shareholders of the 600,000 warrants in issue. This cost is accrued on a straight-line basis over the vesting period of the warrants.

Portfolio company performance

The growth and KPIs across BOOK's portfolio companies remain healthy, with year-on-year sales growth of 57% reported at the end of Q3. The businesses continue to successfully scale and gain market share in their sectors.

Whilst this overall revenue growth is strong, earnings grew less quickly due to increased investment, less favourable market conditions and lower contributions from M&A activity. This increased investment, principally in people and technology, remains the best route to create long-term value for BOOK shareholders. Headcount in BOOK's ten largest investments (as at the end of Q3) has increased by more than 350 so far this year. 

Thus far in 2023, two significant and highly successful exits have completed; both achieved close to 10x return on investment for BOOK. We are optimistic that further upside and cash inflows can be generated for BOOK in the rest of this year and in 2024, given the level of interest from PE firms in several BOOK assets.

Transactions and investments

Despite no new investments completing in the quarter, the pipeline for new investment opportunities has remained strong.

However, follow-on funding amounting to £5.2m was in invested in the quarter. This funding was provided to several portfolio companies to support their growth, as well as to acquire additional equity in certain portfolio companies.

BOOK and its portfolio companies continue to assess many M&A and investment opportunities, some of which we expect to complete before the end of 2023.

Cash & liquidity

Cash inflows in Q3 amounted to £2.8m, with the largest component being a dividend from Grayce, and the balance being distributions from fund interests.

Since 30 September, BOOK's sale of its investment in Butternut Box has completed which sees the Company receive £21.8m this week. This transaction has no impact on NAV, as the uplift was recognised on exchange of the transaction in Q2.

The RCF was £22.75m drawn at 30 September 2023 (£17.0m on 30 June 2023). Before the end of October, net debt will be below £1m, following completion of the sale of BOOK's shareholding in Butternut Box and receipt of £21.8m.

Post-balance sheet events

No events occurred between the end of Q3 and the publication of the factsheet requiring reported NAV to be revised.

Factsheet

The Company's factsheet for the three months to 30 September 2023 is now available on the Company's website: www.literacycapital.com/investors

Investment Manager's name change

In order to reduce any confusion between Literacy Capital plc and its Investment Manager, the Investment Manager was renamed in September 2023 from Literacy Capital Asset Management LLP to Book Asset Management LLP. There remains no intention for the Investment Manager to manage or launch any other fund, nor has there been any change in personnel or strategy.

Investment restrictions

Literacy Capital plc is announcing a minor amendment to its investment restrictions, which is not expected to impact BOOK's investment activities or strategy. This has been requested by certain institutional investors, who require this clarification to acquire and hold shares in BOOK. The investment restrictions are now as follows;

The Company will voluntarily comply with the investment restrictions set out below and will continue to do so for so long as they remain requirements of the FCA for closed ended funds subject to the Listing Rules:

·    neither the Company nor any of its subsidiaries will conduct any trading activity which is significant in the context of the group as a whole;

·    the Company must, at all times, invest and manage its assets in a way which is consistent with its objective of spreading investment risk and in accordance with the published investment policy; and

·    not more than 10 per cent of the Gross Assets at the time an investment is made will be invested in other closed-ended investment funds which are listed on the Official List.

-ENDS-

For further information, please contact:

Literacy Capital plc / Book Asset Management LLP

Tom Vernon / Richard Pindar

[phone]

MHP Group

Reg Hoare / Ollie Hoare / Matthew Taylor

[e-mail]

[phone]

Singer Capital Markets Securities Limited

Robert Peel

[phone]

About Literacy Capital plc

Literacy Capital (BOOK.L) is a closed-end investment company that was co-founded by Paul Pindar and Richard Pindar in 2017 with £54m of capital. Literacy listed on the London Stock Exchange's Main Market in June 2021, before gaining Investment Trust status on 1 April 2022. The Company focuses on opportunities to invest for the long-term in growing private businesses where a clear route to creating additional value can be seen with its support.

It also has a unique charitable objective, to donate 0.9% of annual NAV to charities focused on improving UK literacy in children. £7.8 million has been donated or reserved for donation to charities since the trust's creation in 2017. For more information, please visit our website: www.literacycapital.com.

A copy of this announcement will be available on the Company's website at www.literacycapital.com.

The information contained in this announcement regarding the Company's investments has been provided by the relevant underlying portfolio company and has not been independently verified by the Company. The information contained herein is unaudited.

This announcement is for information purposes only and is not an offer to invest. All investments are subject to risk.  Past performance is no guarantee of future returns.  Prospective investors are advised to seek expert legal, financial, tax and other professional advice before making any investment decision.  The value of investments may fluctuate.  Results achieved in the past are no guarantee of future results. Neither the content of the Company's website, nor the content on any website accessible from hyperlinks on its website for any other website, is incorporated into, or forms part of, this announcement nor, unless previously published by means of a recognised information service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.

LEI: 2549006P3DFN5HLFGR54

 

END