HgCapital Trust Annual Results 2020
HgCapital Trust plc
ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020
London, 15 March 2021: HgCapital Trust plc ("HGT"), today announces its annual results for the year ended 31 December 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 second largest and the fastest growing technology firm in Europe1.
ROBUST PERFORMANCE shown by portfolio DURING 2020
WITH a NAV INCREASE of 24% to a new high of 310 PENCE per share
with net assets of £1.29 billion
RECORD LEVELS OF PORTFOLIO activity OVER THE YEAR WITH £403 MILLION INVESTED and £364 Million realised on behalf OF HGT
continued AND SIGNIFICANT outperformance of the FTSE All-share over
one, three, five, ten and twenty-year periods
NAV per share
FTSE All-Share Index
Net Asset Value
Source: Hg, Factset
Note: Hg undertakes full revaluations of the portfolio on a quarterly basis, the next process being 31 March 2021, therefore the movement in unrealised value of the portfolio to the end of February 2021 is attributable to FX only.
Jim Strang, Chairman of HGT, commented:
"This last year has proven to be a uniquely challenging one with great difficulties, many hardships and sadly, for many, personal tragedy. Against this background HGT 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, HGT 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, Hg, commented:
"We are pleased that all of our most recent platform investments across our three fund families have been into companies where founders and management teams own significant stakes in their 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."
KEY HIGHLIGHTS 2020
¡ Net assets of close to £1.3 billion, with continued outperformance of the FTSE All-Share over one, three, five, ten and twenty-year periods
- NAV per share of 310p, a total return of 24% to 31 December 2020.
- Share price total return of +21% over the year.
- Proposed final dividend of 3.0p per share (full year dividend of 5.0p per share).
- An investment of £1,000 made 20 years ago would now be worth £14,799, a total return of 1,380%. An equivalent investment in the FTSE All-Share Index would be worth £2,4632.
¡ Strong double-digit growth from the realised and unrealised portfolio
- Revenue and EBITDA growth of 22% and 31% respectively across the top 20 investments (83% of the portfolio) over the last twelve months.
- £364 million of cash returned to HGT through realisations at uplifts to book value and refinancings.
- Valuation multiple (EV/EBITDA) of 22.1x and net debt to EBITDA ratio of 6.4x for the top 20 investments.
¡ Continued investment and commitments to drive future value
- Continued investment with £403 million invested 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 £750 million, with total outstanding commitments at 31 December 2020 of £647 million (December 2019: £336 million). These will be deployed over the next three to four years.
§ Credit facility and new equity issuance
- In October, the Board of HGT completed a new £200 million multi-currency revolving credit facility.
- £25 million of new equity raised over 2020 via tap issues.
POST PERIOD EVENTS AS AT 28 FEBRUARY 2021
§ NAV of 305.2p, YTD performance of -1.7% reflecting FX movements.
§ Current net assets of £1.27 billion.
§ Share price of 332.5p, YTD performance of 9.0%.
§ Estimated £42 million from the sale of TeamSystem and A-Plan.
§ Estimated £72 million invested by HGT into Benevity, Geomatikk, Prophix and TeamSystem.
§ Liquid resources post-completion of all announced transactions and the full year dividend payable in May 2021, are £102 million (8% of 28 February pro-forma NAV).
§ Outstanding commitments of £543 million (43% of 28 February pro-forma NAV). We expect these to be drawn down over the next three to four years.
Commentary from Hg (the Manager):
The combination of the long-term nature of listed private equity investment with the types of business that Hg invests in, and robust double-digit trading will continue to drive long-term growth
§ Against the backdrop of COVID-19, Hg's portfolio has performed well and contributed positively to stakeholders' livelihoods and retirements.
§ The overall portfolio valuations were up over 25% for the year to 31 December 2020, returning over £4 billion of liquidity to Hg investors, including £364 million to HGT.
§ As highlighted previously, COVID-19 has had a limited direct impact on the portfolio, given its defensive growth characteristics and we believe our investments will continue to benefit from ongoing trends in the digitalisation of business processes, across sectors and geographies.
§ The Hg UK-based businesses have seen limited direct consequences from Brexit. Where regulatory complexity exists, software typically provides part of the solution and we are seeing several instances of this across the portfolio.
§ The portfolio 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.
§ Across our funds, we expect investment activity in the next 12 months to continue - cautiously and with discipline - into businesses that we have tracked for many years.
§ It has been a record year for realisations and further liquidity events are expected over the next twelve months.
§ 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.
- Ends -
The Company's 2020 Annual Report and a video from the Chairman and Hg 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)
+44 (0) 78 2459 2894
+44 (0)20 7404 5959
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.
1 By Enterprise Value, Source: Hg, Factset
2 All references to total return allow for all historic dividends being reinvested