Quarterly trading update and NAV announcement

Literacy Capital PLC

29 January 2024

 

The information contained in this announcement is restricted and is not for publication, release or distribution in the United States of America, any member state of the European Economic Area, Canada, Australia, Japan or the Republic of South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

29 January 2024

Literacy Capital plc

Quarterly trading update and NAV announcement for Q4 2023

NAV return of +1.6% in Q4 and an uplift of +19.0% during 2023

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 and NAV update for the three months ending 31 December 2023.

Q4 Highlights:

●	Total return in the quarter of +1.6%, an uplift of £4.6m (7.7p per share), taking net asset value ("NAV") per share to 500.4p (Q3'23: 492.8p), or NAV of £300.3m (Q3'23: £295.7m).
●	BOOK and the majority of its portfolio companies continue to perform well, despite more challenging UK macroeconomic conditions in H2 2023. Our focus remains on long-term value creation, rather than short-term targets.
●	Cash inflows in Q4 (£22.2m) were the highest of any quarter in Literacy's history. Most of this related to BOOK's sale of its stake in Butternut Box. Material sums of cash are expected to be received in 2024 as Literacy's assets mature.
●	Total charitable donations since the inception of Literacy Capital now amount to £8.5m, including a charitable donation provision of £732k in the quarter.

Commenting on the Q4 performance, CEO of BOOK's investment manager, Richard Pindar, said:

"BOOK continued to make good progress in the quarter, with NAV passing through £300m in Q4. We are pleased that eight of BOOK's ten largest portfolio companies contributed positively to NAV growth in Q4. However, it is clear that macro conditions in H2 2023 were more challenging, which has affected customer demand and short-term profit growth for some businesses. Regardless of this, we are confident that they are well-positioned for the opportunities that 2024 will bring."

Net Asset Value

The Company announces that as at 31 December 2023 the NAV per ordinary share was 500.4 pence. This represents a 1.6%, or 7.7p per share, uplift since 30 September 2023 when NAV per ordinary share was 492.8p.

	At 31 Dec 23	At 30 Sep 23	At 31 Dec 22
Net asset value	£300.3m	£295.7m	£252.4m
NAV per ordinary share	500.4p	492.8p	420.6p

The above NAV calculation is based on the Company's issued ordinary share capital as at 31 December 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

Growth across portfolio companies generally remains encouraging. However, as stated in our Q3 2023 trading update, market conditions have become less favourable for certain portfolio companies.

This has impacted the performance of two of BOOK's largest assets by value, Grayce and Techpoint. Accordingly, their valuations have been reduced to reflect the current environment and their performance in Q4 has diluted the rate of growth across the overall portfolio, due to their high weightings achieved from prior outperformance.

Techpoint had benefitted from inflated demand in 2022, because of supply chain constraints post-Covid. This excess demand unwound in 2023 and trading is now normalising.

Both management teams have been strengthened in the last quarter and we expect these actions to return the businesses to stronger growth in 2024.

Despite challenging market conditions, the progress made by the portfolio is positive and the companies will benefit when these conditions improve. We are confident that overall portfolio company earnings will grow in 2024.

Following the disposal of Butternut Box and receipt of cash in Q4, almost 100% of the portfolio is now weighted towards the buyout of profitable businesses and fund interests, in line with BOOK's investment strategy.

Transactions and investments

Whilst no new platform investments were made in the quarter, two of BOOK's existing portfolio companies made bolt-on acquisitions; Tyrefix and Halsbury Travel each made an acquisition to give them more scale in the markets that they operate.

In Q4, £9.0m was invested, with a proportion financing the acquisitions by Tyrefix and Halsbury Travel. Whilst funding was also provided to several other 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 several new acquisition opportunities.

Cash & liquidity

Cash inflows in Q4 amounted to £22.2m, the highest in any three-month period for Literacy. The largest component of this was £21.8m from the sale of BOOK's investment in Butternut Box, with the remaining amount being distributions from third party fund investments.

In November 2023, Literacy's credit facility limit was extended by £5m to £30m. It was £9.4m drawn at 31 December 2023 (£22.75m at 30 September 2023).

Post-balance sheet events

No events occurred between the end of Q4 and the publication of the factsheet requiring reported NAV to be revised.

Factsheet

The Company's factsheet for the three months to 31 December 2023 is now available on the Company's website: www.literacycapital.com/investors

-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. £8.5 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

 

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