HgCapital has bumper 2020, turns negative at start of new year

HgCapital reported net assets of £1.29bn in its full-year results on Monday, marking growth of £252m over 2020, and still outperforming the FTSE All-Share index over one, three, five, 10 and 20-year periods, although its fortunes thus far in 2021 were not looking so positive.

The FTSE 250 investment trust said its net asset value stood at 310p per share as at 31 December, making for a total return of 24% over the year, while the share price total return stood at 21%.

Its board proposed a final dividend of 3p per share, resulting in a total full-year dividend of 5p per share.

Performance in 2021 to date was a different story, however, as its net asset value per share was down 1.7% at 305.2p as at 28 February, while the FTSE All-Share index was up 1.2%.

The board noted that revenue and EBITDA growth across its top 20 investments, making up 83% of the portfolio, was 22% and 31% respectively, while £364m of cash was returned to HgCapital through realisations at uplifts to book value and refinancings.

Its enterprise value-to-EBITDA valuation multiple was 22.1x, and net debt-to-EBITDA was 6.4x for the firm’s top 20 investments.

During the year, new commitments were made to the Hg Saturn 2, Hg Genesis 9, and Hg Mercury 3 funds, totalling £750m, with total outstanding commitments as at 31 December of £647m, up from £336m at the start of the year, which would be deployed over the next three to four years.

The board also noted that in October, it completed a new £200m multi-currency revolving credit facility, while £25m of new equity was raised over 2020 via tap issues.

“This last year has proven to be a uniquely challenging one with great difficulties, many hardships and sadly, for many, personal tragedy,” said chairman Jim Strang.

“Against this background, HgCapital Trust has performed extremely well, as the resilience and attractiveness of the investment model and the underlying investments have been proven.

“While 2021 seems set to be a year of further challenges, HgCapital Trust is well placed to continue the progress of recent years in what will hopefully be an improving climate.”

Luke Finch, partner and head of client services, at the trust’s investment manager Hg, said the most recent platform investments across the three fund families had been into companies where founders and management teams owned “significant” stakes in the businesses.

“They have chosen to partner with Hg, and we believe this is testament to the focused scale and expertise which we have built in our defined end market 'clusters' and the strong network effect which has developed across the portfolio over the last two decades.”

At 0842 GMT, shares in HgCapital Trust were down 8.57% at 314.99p.