HgCapital Trust plc Regulatory News (HGT)

9 Mar 2005 07:00

HG Capital Trust PLC09 March 2005 HgCapital Trust plc Preliminary announcement of results in respect of the year ended 31 December 2004 HIGHLIGHTS • Net asset value per share ("NAV") rose over the year by 23.8%, from 385.0p at the beginning of the year to 476.5p on 31 December 2004. • The total return (NAV plus dividend) rose by 25.8% compared with the FTSE All-Share Index and the FTSE SmallCap Index which rose by 12.8% and 14.0% respectively. • Share price rose over the year by 56% from 289.5p at the beginning of the year to 451.5p on 31 December 2004. • Earnings per share of 10.5p (2003: 15.8p). • Dividend of 8.0p (2003: 12.0p). • The NAV was 481.9p at 31 January 2005 and 480.3p at 28 February 2005. • The Company invested £21.9 million (2003: £29.6 million) in new and follow-on investments. • The Company realised £47.1 million in cash (2003: £16.1 million). • The Company ended the year with £13.1 million of liquid resources (2003: net debt £3 million). • Revenue before taxation of £3.7 million (2003: £5.7 million). David Bucks, the Chairman, comments: "Overall 2004 has been a successful year for HgCapital Trust plc. Whilst we live in times of considerable political andeconomic uncertainty, from which no business can be totally insulated, I believe that HgCapital Trust plc is in astrong position. "Turning now to my own position, I have been a director and chairman for 13 years and during the year reached my 70thbirthday. I therefore propose to retire from the Board at the conclusion of the forthcoming AGM in April. The Board hasappointed Roger Mountford to succeed me as chairman and he will assume this role on my retirement. I hand over to mysuccessor with confidence in the Company's future." Analysis of net asset value movements during the year. Attribution analysis of current year movements in net asset value £'000Opening net asset value as at 1 January 2004 96,965Gross revenue 4,905Expenditure (3,339)Taxation (416)Dividend payable (2,015)Realised proceeds in excess of 31 December 2003 book value (excludes gross revenue) 12,132Unrealised movements on investments 11,793Closing net asset value as at 31 December 2004 120,025 Realised and unrealised movements in net asset value during 2004 Realised Unrealised Proceeds * Movements** Total £'m £'m £'mRaymarine 8.0 3.7 11.7FTE 3.3 6.9 10.2Xtx 0.6 3.4 4.0Tunstall 3.3 3.3Rolfe & Nolan 2.2 2.2Castlebeck 1.6 1.6Hoseasons 0.7 0.7The Sanctuary 0.6 0.6Bertram 0.6 0.6Other 0.5 0.2 0.7Paddy Power 0.4 0.4WatchMark-Comnitel (0.7) (0.7)Profiad (0.7) (0.7)Burns e-Commerce (0.9) (0.9)Match (2.5) (2.5)Acuid (3.3) (3.3)PBR (4.0) (4.0)Total 12.1 11.8 23.9 *Realised proceeds in excess of 31 December 2003 book value (excludes gross revenue) **Unrealised movements on investments The Company's net asset value during the year increased from £97.0 million to £120.0 million. This mainly arose fromrealised proceeds in excess of 31 December 2003 book value of £12.1 million and unrealised movements of £11.8 million,following strong earnings growth by companies within the portfolio. The IPOs of Raymarine and Xtx significantly increased the values of those businesses, allowing us to realise aproportion of our shareholding in each. FTE, Tunstall and Rolfe & Nolan were recapitalised, each having achieved strongyear-on--year profit growth. Castlebeck, Bertram and The Sanctuary also have shown a good increase in profits. These companies' achievements considerably outweighed some poor performances within the portfolio. Three healthcarecompanies, Match, Profiad and PBR, experienced trading difficulties during the year; early-stage technology companies,Acuid and Burns e-Commerce Solutions, fell behind their milestones; and we sold our interest in WatchMark-Comnitel to asecondary investor following a decision not to participate in a highly-dilutive fundraising. The Company invests alongside other clients of HgCapital. Typically, the Company's holding forms part of a much largerstake in buy-outs of companies with enterprise values of between £25 million and £250 million, controlled by HgCapital.The Company currently has an allocation of some 19% in new investments made by HgCapital. During the year, the Company invested a total of £21.9 million (2003: £29.6 million) and participated in five newinvestments, three of which were management buy-outs. The €115 million MBO of Hirschmann Electronics earlier in theyear was HgCapital's fourth acquisition in Germany in fourteen months; the £50 million MBO of Clarion Events its secondmedia investment in less than a year; and the £102 million MBO of Iris Software its third technology investment infourteen months. In line with HgCapital's expanded investment strategy to include renewable energy projects, theCompany participated in the £21.6 million acquisition and construction of Tir Mostyn wind farm in Wales. The healthcaresector provided the final new investment of the year, the acquisition of a 23% stake in Dutch mail-order pharmacy,DocMorris. The Company realised significant proceeds during the year, amounting to £47.1 million (2003: £16.1 million), whicharose principally from the redemption of loan stock and the sale of stock in Raymarine following its flotation on theLondon Stock Exchange and from the recapitalisation of FTE Automotive. Portfolio Analysis Sector by valuation Sector by number Valuation basisHealthcare 27% Healthcare 11 Earnings 37%Technology 24% Technology 10 Cost 30%Industrials 17% Industrials 5 Mid-market price 17%Media 14% Media 3 Written down 8%Leisure 8% Leisure 3 Net assets 6%Consumer 6% Consumer 2 Third-party transaction 2%Renewable Energy 1% Renewable Energy 1Other 3% Other 11 Deal type Geographical spread Asset classBuy-out 86% UK and Ireland 75% Unquoted 71%Expansion 6% Continental Europe 23% Quoted 15%Venture 6% United States 2% Cash and other assets 14%Fund 2% Vintage by valuation Vintage by number2004 16% 2004 52003 29% 2003 52002 13% 2002 32001 12% 2001 62000 7% 2000 51999 15% 1999 7Pre-1999 8% Pre-1999 15 At the end of 2004 the Company's portfolio consisted of 46 investments (2003: 47), of which the fifteen principalinvestments represented over 80% of the portfolio valuation. The portfolio's valuation increased over the year to£103.3 million, benefiting from profit growth and positive cash flow, particularly in the buy-out companies, which ledto lower gearing, and from two flotations. 58% of the portfolio by value is less than three years old. Five new investments were made during the year: three management buy-outs, one expansion financing and one renewableenergy acquisition. Two of the investments were in companies based in Germany and Holland, which, in line withHgCapital's investment policy, increased further the Company's exposure to Continental Europe. Six investments were fully realised and 18 were partially realised. In addition deferred sales proceeds amounting to£0.3 million were received from Biocode and Zarina, which were sold in 2003 and 1999 respectively. In aggregate,capital proceeds from these realisations produced a 23% uplift over carrying value and a 77% uplift over cost. Thistrend should continue during 2005 as a further number of significant investments reach maturity. Proceeds from realisations resulted in the Company ending the year with £13.1 million of liquid resources. Theseresources combined with a £25 million borrowing facility position the Company well to capitalise on new investmentopportunities over the next year. Investments in the year Company Sector Activity Deal Type Cost £'000 Blue Minerva Ltd t/a Iris Technology Accounting and business MBO 6,626Software software Clarion Events Ltd Media Exhibition and events organiser MBO 4,257 Hirschmann Electronics Industrials Electronics equipment MBO 2,669Holdings SA Doc M Sarl t/a DocMorris Healthcare Direct-mail pharmacy Replacement 1,956 capital Hg Renewable UK Holdings I Ltd Renewable Wind farm New build 1,015t/a Tir Mostyn* Energy New investments 16,523 ClinPhone Holdings Ltd Healthcare Pharmaceutical and clinical Expansion 1,748 research services PBR Holding SA Healthcare Clinical trials MBO 1,028 Acuid Ltd Technology High-speed communication Expansion 747 technology Tunstall Holdings Ltd Healthcare Security alarms MBO 703 Other (6) 1,188 Further investments 5,414 Total investments 21,937 * A further £0.4 million has been committed. Blue Minerva t/a Iris Software The £102 million management buy-out of Iris Software completed in July 2004. Iris is the UK's leading provider offinancial, practice management and tax software to accountancy practices with ICAEW research confirming it has the bestproduct, largest number of customers and strongest reputation for customer support. The company also provides payroll,book-keeping and HR application software to 20,000 small businesses. Clarion Events The £50 million management buy-out of Clarion Events, the largest independent exhibition and events business in the UK,completed in October 2004. The company owns, develops and exploits a portfolio of 30 business and consumer showsincluding the 'Top Drawer' giftware trade shows and the 'Fine Art & Antiques', 'Baby', 'Caravan & Outdoor' and 'House &Garden' shows. It also organises third party events, such as show-jumping championships. Since new management took overin 2001, Clarion Events has doubled in size by expanding existing and launching new shows. Hirschmann Electronics The €115 million management buy-out of Hirschmann Electronics from Rheinmetall AG completed in March 2004. Hirschmannis a group of four individual businesses, with some world--leading positions, that supply electronics equipment andcomponents. Principal products include industrial ethernet and networking equipment, sophisticated car-antennaelectronics, television transmission equipment, and safety systems for mobile plant equipment such as cranes.Hirschmann has manufacturing plants in Germany and Hungary as well as sales and services operations in Europe, the USA,the Far East and South America. Doc M t/a DocMorris The acquisition of a 23% stake in DocMorris completed in December 2004. Founded in 2000, DocMorris has grown to becomethe largest pharmacy serving the German market, with over 500,000 customers. Its direct-mail service offersprescription drugs at attractive prices by sourcing direct from pharmaceutical manufacturers, enabling patients andhealth insurers to save money. Hg Renewable UK t/a Tir Mostyn The acquisition of Tir Mostyn wind farm in Wales completed in December 2004 in a transaction valued at £21.6 million,including construction costs. Situated in a prime location, the 21.25mw wind farm will produce enough power from 25wind turbines to light 15,500 homes, saving approximately 47,000 tonnes a year in greenhouse gas emissions measuredagainst equivalent fossil fuel generation. The facility will become operational in the autumn of 2005 and power will besold under a 12-year fixed-price index-linked contract with the Non-Fossil Fuel Purchasing Agency. Further Investments Further investments were made to acquire increased holdings in ClinPhone and Tunstall and to fund the development ofAcuid and PBR. Realisations in the year Company Sector Exit route Cost Proceeds+ Total £'000 £'000 return+ £'000 Raymarine plc* Consumer IPO 5,828 18,420 12,592FTE Automotive GmbH Industrials Recapitalisation 6,805 11,702 4,897Tunstall Holdings Ltd Healthcare Recapitalisation - 3,283 3,283Rolfe & Nolan Holdings plc Technology Recapitalisation 2,680 3,208 528Travelsphere Holdings Ltd Leisure Recapitalisation 146 1,692 1,546Xtx Ltd t/a Xyratex** Technology IPO 982 1,603 621Other (12) 886 1,219 333 Partial realisations 17,327 41,127 23,800 Patientline plc* Healthcare Sale of quoted 413 3,747 3,334 stockPaddy Power plc*** Leisure Sale of quoted 223 1,743 1,520 stockWatchMark-Comnitel Corporation Technology Secondary sale 2,405 111 (2,294) Other (3) + + 1,008 331 (677) Full realisations 4,049 5,932 1,883 Total realisations 21,376 47,059 25,683 * Listed on the London Stock Exchange. ** Xyratex is traded on NASDAQ. *** Listed on the London and Dublin Stock Exchanges. + Includes gross revenue received during the year. + + Includes £0.3 million of deferred proceeds from Biocode and Zarina. Raymarine In December 2004 Raymarine floated on the London Stock Exchange at a market capitalisation of £125.5 million, achievinga value of four times original investment. We have retained a stake of around 27% in Raymarine and a seat on the board. FTE Automotive In September 2004, FTE Automotive completed a €225 million recapitalisation. We realised 1.7 times cost and increasedour shareholding in the company. Tunstall A recapitalisation of Tunstall in October 2004, following a sustained period of strong trading, enabled the company torepay all of its accrued loan stock interest. Rolfe & Nolan In December 2004 Rolfe & Nolan completed a recapitalisation, which allowed the repayment of all loan stock and accruedinterest. Proceeds from the recapitalisation equate to a return of 1.4 times cost. We retain a 73% holding in thecompany. Travelsphere In November 2004 Travelsphere acquired one of its principal competitors, Page & Moy. We took the opportunity toreleverage the business and realised over 50% of the original cost of investment. Xtx t/a Xyratex In June 2004, Xyratex completed an initial public offering on NASDAQ. We received proceeds of £10.2 million from aplacing of stock and retain over 82% of our original shareholding. Patientline In July 2004 we realised our investment in Patientline. We first invested in Patientline in 1996, when it was anearly-stage company, and supported its growth with a further two rounds of financing. In 2001 it floated on theAlternative Investment Market and, two years later, gained a full listing on the London Stock Exchange. Patientline isnow a market leader in the provision of communication and entertainment services to the NHS. Over the life of theinvestment, we have realised a profit of £17.5 million, which equates to a return of 2.6 times cost. Paddy Power In September 2004 we completed the realisation of our investment in Paddy Power, with the sale of the final tranche ofshares. We have been a shareholder in Paddy Power, Ireland's largest chain of bookmakers, since June 2000 and supportedthe company's flotation on the London and Dublin Stock Exchanges in December of that year. During that time we haveachieved a profit of £15.6 million, equating to a return of 5.3 times cost. WatchMark-Comnitel Corporation We acquired a holding in WatchMark-Comnitel Corporation through the sale in November 2003 of Comnitel, a supplier ofoperational support systems software for wireless communications operators. We declined to participate in a newfinancing of the company and sold our shareholding to an existing investor. Review of Principal Investments by Value Company Sector Turnover+ Cost Valuation Valuation Cumulative £'000 £'000 % %Tunstall Holdings Ltd Healthcare £69.1 m 6,998 10,950 10.6 10.6Xtx Ltd t/a Xyratex** Technology $335.1m 6,995 10,386 10.1 20.7W.E.T. Automotive Systems AG Industrials €188.1m 7,623 7,816 7.6 28.3FTE Automotive GmbH Industrials €300.4m - 7,132 6.9 35.2Blue Minerva Ltd t/a Iris Technology £19.9m 6,626 6,626 6.5 41.7SoftwareClassic Copyright (Holdings) Media £28.0m 6,033 6,033 5.8 47.5Ltdt/a Boosey & HawkesRaymarine plc* Consumer £151.7m 187 5,413 5.2 52.7Castlebeck Group Ltd Healthcare £15.3m 3,731 5,375 5.2 57.9Clarion Events Ltd Media £25.9m 4,257 4,257 4.1 62.0Eagle Rock Entertainment Ltd Media £30.2m 3,856 4,236 4.1 66.1Travelsphere Holdings Ltd Leisure £88.9m 3,899 4,018 3.9 70.0ClinPhone Holdings Ltd Healthcare £22.4m 2,361 3,648 3.5 73.5Hoseasons Group Ltd Leisure £21.7m 2,147 2,850 2.8 76.3Hirschmann Electronics Industrials €242.6m 2,669 2,792 2.7 79.0Holdings SARolfe & Nolan Holdings plc Technology £21.8m 238 2,408 2.3 81.3 57,620 83,940 81.3 * Listed on the London Stock Exchange. ** Xyratex is traded on NASDAQ. + Last audited accounts Investment Listing Company Activity Cost Valuation Year of Value £'000 £'000 investment % ACT Venture Capital Ltd Irish venture fund - 103 1994 0.1Acuid Ltd High-speed communication technology 4,448 539 2001 0.5Axiom Holdings Ltd Communications software 1,721 983 2001 1.0Azinger Ltd Grocery importer and distributor 211 - 1993 -Bertram Group Holdings Ltd+ Wholesale supplier of books 2,848 548 1999 0.5Biovector Therapeutics SA Biopharmaceuticals 998 - 1997 -Blue Minerva Ltd t/a Iris Accounting and business software 6,626 6,626 2004 6.5Software+Bottomline Technologies, Inc** B2B electronic banking software 952 1,582 1999 1.5Burns e-Commerce Solutions+ B2B electronic payments software 3,244 222 2001 0.2Castlebeck Group Ltd+ Care homes 3,731 5,375 2002 5.2Clarion Events Ltd+ Exhibition and events organiser 4,257 4,257 2004 4.1Classic Copyright (Holdings) Ltd Classical music publisher 6,033 6,033 2003 5.8t/a Boosey & Hawkes+ClinPhone Holdings Ltd Pharmaceutical and clinical research services 2,361 3,648 1996 3.5Doc M Sarl t/a DocMorris Direct-mail pharmacy 1,956 1,951 2004 1.9Eagle Rock Entertainment Ltd+ Entertainment intellectual property 3,856 4,236 2001 4.1 rightsEuroknights III LP European venture fund 1,457 525 1996 0.5Euroknights International Ltd European venture fund 83 - 1990 -FTE Automotive GmbH+ Clutch and brake components - 7,132 2002 6.9Global People Network Ltd On-line staffing software 510 - 1999 -Hg Renewable UK Holdings I Ltd t/a Tir Mostyn+ Wind farm 1,015 1,015 2004 1.0Hirschmann Electronics Holdings Electronics equipment 2,669 2,792 2004 2.7SA+Hoseasons Group Ltd+ Self-catering holidays 2,147 2,850 2003 2.8Luxfer Holdings plc Aluminium products 46 - 1996 -Match Holdings Ltd Staffing services to NHS trust 3,854 2,284 1999 2.2 hospitalsMedNova Ltd Medical devices 82 221 1998 0.2Newchurch Ltd+ IT services for the healthcare 2,366 1,220 2000 1.2 industryOrbis plc* Void property management 3,378 20 1997 -Orbiscom Ltd Secure card-based payments 3,063 681 2001 0.7 technologyPARC Group Ltd Manpower leasing 48 360 1995 0.4PBR Holding SA+ Clinical trials 4,973 1,308 2002 1.3Profiad Ltd+ Patient recruitment for clinical 1,653 - 1999 - trialsRaymarine plc* Recreational marine electronics 187 5,413 2001 5.2Rolfe & Nolan Holdings plc+ Back-office banking software 238 2,408 2003 2.3SGI (Holdings) Ltd+ Outsourced services for the property sector 2,469 - 1999 -The Sanctuary Spa Group Ltd+ Day spa 119 1,380 1995 1.3South Wharf plc formerly Ardagh Property developer 47 229 1992 0.2plc***Trados, Inc Software for the translation 2,492 858 2000 0.8 industryTravelsphere Holdings Ltd Overseas coach tour holiday 3,899 4,018 2000 3.9 operatorTunstall Holdings Ltd+ Security alarms for the elderly and 6,998 10,950 1999 10.6 infirmVerigen AG Tissue repair technology 3,463 1,330 2000 1.3W.E.T. Automotive Systems AG+ Car seat-heating systems 7,623 7,816 2003 7.6Wand Equity Portfolio II, LP US LBO fund 651 360 1998 0.3Weston Presidio Capital II, LP US venture fund - 85 1995 0.1Weston Presidio Capital III, LP US venture fund 2,288 1,374 1998 1.3Worldmark International Ltd Product identification systems 2,389 154 2000 0.2Xtx Ltd t/a Xyratex** Data storage and network technology 6,995 10,386 2003 10.1 110,444 103,272 100.00* Listed on the London Stock Exchange.*** Listed on the London and Dublin Stock Exchanges.** Traded on NASDAQ.+ HgCapital, through its management of the Company and other funds, controls more than 50% of the voting equity shares. Historic Total Return Performance One year Three years Five years Seven years Ten years % pa % pa % pa % pa % paShare price 62.0 19.3 13.0 16.3 16.1Net asset value 25.8 10.4 9.2 11.7 14.8FTSE All-Share Index 12.8 1.8 (3.0) 2.8 8.1FTSE SmallCap Index 14.0 4.9 0.2 5.2 7.6 Based on the Company's share price at 31 December 2004 and allowing for dividends to be reinvested, aninvestment of £1,000 ten years ago would now be worth £4,445. An equivalent FTSE All-Share Indexreturn would be worth £2,171. Over the last ten years, the Company has consistently achieved strong returns. Its long-term performance and lowvolatility originate from exposure to a diversified portfolio of small-cap stocks. Private equity is the medium to long--term financing of unquoted companies that have potential for significant growthin value. Investment can be at many stages of the life of the company, from early stage to expansion, to leveragedbuy-outs of established companies. The objective is to increase value through effective stock selection and active management before realising theinvestment by way of a trade sale or flotation on the public markets, typically within three to five years. Establishedprivate equity managers enjoy a high level of expertise and quality deal flow. Private equity investments by their nature are relatively long-term and illiquid. However, they can produce veryattractive returns. Since 1987 cumulative private equity returns have outperformed all principal UK comparative assetclasses. Individual private equity investments may be perceived as high-risk. However, a diversified portfolio of establishedbusinesses significantly mitigates this risk. A private equity investment trust offers the opportunity to participate in a portfolio of mainly unlisted companiesthat are generally valued at a discount to their quoted peers. By buying shares in an investment trust, which arefreely traded, the investor also benefits from liquidity of stock. Compared with investment in the public markets, a private equity investor has significant advantages: - a far greater choice of companies in which to invest - the ability to conduct detailed market, financial, legal and management due diligence before investment - on average a lower valuation entry price compared with quoted markets - the ability to act like an owner rather than a fund manager, with the benefit of representation on the board - the ability to attract high-calibre management relative to the size of the business and to align management's interests to the success of the investment by the prospect of high rewards for realising strong capital gain performance - the longer-term nature of private equity enables the investor to buy when they see good value, develop the company to become attractive to new owners and to sell when demand is high. Not all investment trusts will provide high returns. Nevertheless, the selection of a well-resourced manager with acarefully thought out investment strategy that offers a diversified portfolio of companies, across a number ofindustrial sectors and geographies, should significantly increase the likelihood of success and reward the patientinvestor. The Investment Manager's Strategy Our goal is to produce high absolute returns over the long term from a well-diversified portfolio of investments inWestern Europe, which are superior to the returns generated by public equity markets. Over the past ten years we have achieved our goal. Most of our capital is deployed in management buy-outs ofestablished companies that have values ranging from £25 million to £250 million. In nearly 90% of cases we holdmajority positions. This allows us to influence and control events, particularly the method and timing of exit fromwhich the greatest part of the investment return is derived, as well as the development of the business. We aim to put capital to work in fundamentally attractive businesses that are undergoing change, which operate inmarkets that are sound and rational. We back the best managers who can take advantage of the opportunities thrown up bychange. We believe that shareholders benefit when the management of their companies are also partners or co-owners and havetheir own capital at risk. When managers do own a meaningful stake in the company they run, they behave differently;they act like owners and performance improves. Making money in today's competitive economy demands that private equity managers acquire superior knowledge and applyit to all they do. HgCapital's business is built around investment teams that are each exclusively dedicated to theindustrial sector they follow. We believe that deep sector knowledge gives HgCapital a competitive edge. Our business is also resourced to apply our knowledge for the benefit of the companies in which we invest. We areactive investors and focus companies on strategic and operational change, designed to accelerate profit growth andsecure attractive exit ratings. Naturally, our business and investment strategy evolves in a manner that allows our clients to take advantage ofchanges in the business environment. Six years ago we began building a business in Germany, seen as a difficultmarket. Over the past five years, the German private equity market has grown faster than all other private equitymarkets in Western Europe to become the second largest. Two years ago we identified renewable energy as an interestingsector. In 2004 we invested in our first wind power generation project. We believe that demand for private equity will continue to grow. More important is our belief that the inherent marketimperfections that exist in private equity combined with a model that allies ownership and management, that is directedby experienced and sector-focused private equity managers, will continue to deliver attractive returns. For further information please contact: David Bucks - Chairman, HgCapital Trust plcTel: 020 7603 0466 Ian Armitage - Chief Executive, HgCapitalTel: 020 7089 7979 David Bick - Holborn Public RelationsTel: 020 7929 5599 REVENUE STATEMENTfor the year ended 31 December 2004 Year ended Year ended 31 December 31 December 2004 2003 £'000 £'000 (audited) (audited) Income 4,905 7,106 Investment management fee (604) (475)Other expenses (484) (925) Net revenue before finance costs and taxation 3,817 5,706Interest payable and similar charges (110) (11) Revenue on ordinary activities before taxation 3,707 5,695Taxation on ordinary activities (1,058) (1,726) Revenue on ordinary activities after taxation 2,649 3,969Dividend in respect of equity shares (2,015) (3,022) Transfer to reserves 634 947 TOTAL RETURN PER ORDINARY SHAREfor the year ended 31 December 2004 Year ended Year ended 31 December 31 December 2004 2003 (audited) (audited) Earnings 10.52p 15.76pCapital return 89.04p 48.36pTotal return 99.56p 64.12p Dividend per ordinary share 8.00p 12.00p BALANCE SHEETas at 31 December 2004 31 December 31 December 2004 2003 £'000 £'000 (audited) (audited)Fixed assetsInvestments- Listed 17,630 6,120- Unlisted 85,642 89,231 103,272 95,351 Current assetsDebtors 6,808 9,393Government securities 11,884 17Cash 1,180 546 19,872 9,956Creditors - amounts falling due within one year (3,119) (8,342)Net current assets 16,753 1,614Net assets 120,025 96,965 Capital and reservesCalled up share capital 6,296 6,296Share premium account 14,123 14,123Capital redemption reserve 1,248 1,248Capital reserve - realised 100,834 85,734Capital reserve - unrealised (7,207) (14,533)Revenue reserve 4,731 4,097Total equity shareholders' funds 120,025 96,965 Net asset value per ordinary share 476.5p 385.0p CASH FLOW STATEMENTfor the year ended 31 December 2004 Year ended Year ended 31 December 31 December 2004 2003 £'000 £'000 (audited) (audited) Net cash inflow/(outflow) from operating activities 4,257 (1,269) Returns on investment and servicing of finance (110) (11) Taxation (paid)/received (1,604) 355 Capital expenditure and financial investmentPurchase of fixed asset investments (21,937) (29,637)Proceeds from the sale of fixed asset investments 38,153 15,006 Net cash inflow/(outflow) for capital expenditure and financialinvestment 16,216 (14,631) Equity dividends paid (3,022) (2,015) Net cash inflow/(outflow) before management of liquid resources 15,737 (17,571) Management of liquid resourcesPurchase of government securities (11,620) (14,784)Sale and redemption of government securities 17 28,370 Net cash (outflow)/inflow from management of liquid resources (11,603) 13,586 Net cash (outflow)/inflow from repayment of loans (3,500) 3,500 Increase/(decrease) in cash in the year 634 (485) RECONCILIATION OF NET REVENUE RETURN BEFORE FINANCE COSTS AND TAXATION TO NET CASH FLOW FROM OPERATING ACTIVITIES Year ended Year ended 31 December 31 December 2004 2003 £'000 £'000 (audited) (audited) Net revenue return before finance costs and taxation 3,817 5,706 Investment management fee and finance costs capitalised (2,141) (1,458) Decrease/(increase) in accrued income 4,088 (5,785) Increase in creditors 133 98 Effective yield adjustment - 225 Tax on investment income included within gross income (1,640) (55) Net cash inflow/(outflow) from operating activities 4,257 (1,269) GEARING The Company did not have any outstanding borrowings at 31 December 2004 (2003: £3,500,000). NOTES ON THE PRELIMINARY RESULTS 1. Principal activity The principal activity of the Company is that of an investment company within the meaning of section 266 of the Companies Act 1985. 2. Basis of preparation The preliminary financial statements have been prepared on the basis of the accounting policies set out in the Company's financial statements as at 31 December 2004. Income and operating expenses have been accrued in accordance with the same principles used in the preparation of the previous year's financial statements. The taxation charge has been calculated by applying an estimate of the annual effective tax rate to the profit for the period. 3. Income 2004 2003 £'000 £'000 Income from investments UK unquoted investment income 4,550 6,730 Overseas dividends 172 46 4,722 6,776 Other income Gilt interest 34 276 Deposit interest 61 54 Underwriting commission 88 - 183 330 Total income 4,905 7,106 Total income comprises: Dividends 172 46 Interest 4,645 7,060 Underwriting commission 88 - 4,905 7,106 4. Dividend The directors have proposed a final dividend of 8.00p per share (2003: 12.00p). The dividend will be paid on 29 April 2005 to shareholders on the register of members at the close of business on 18 March 2005. The shares will be quoted ex-dividend on 16 March 2005. 5. Investment management fee Revenue Capital Total 2004 2003 2004 2003 2004 2003 £'000 £'000 £'000 £'000 £'000 £'000 Investment management fee 514 404 1,542 1,214 2,056 1,618Irrecoverable VAT thereon 90 71 270 212 360 283 604 475 1,812 1,426 2,416 1,901 The investment management fee is levied quarterly in arrears and is charged 25% to the revenue account and 75% tocapital reserve - realised. 6. Ordinary shares 31 December 2004 31 December 2003 The number of ordinary shares in issue at the end of theperiod on which net asset value per share was calculated was: 25,186,755 25,186,755 Share price 451.5p 289.5p 7. Publication of non-statutory accounts The financial information contained in this preliminary statement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. 8. The figures set out above have been reported upon by the independent auditor. The comparative figures are derived from the audited financial statements of HgCapital Trust plc for the year ended 31 December 2003 which have been filed with the Registrar of Companies. The report of the independent auditor for the years ended 31 December 2003 and 2004 contain no qualification or statement under section 237(2) or (3) of the Companies Act 1985. 9. The full annual report and financial statements for the year ended 31 December 2004 will be filed with the Registrar of Companies after the Annual General Meeting. 10. The Annual General Meeting of the Company will be held at the offices of HgCapital Trust plc, Third Floor, Minerva House, 3-5 Montague Close, London SE1 9BB on Tuesday 19 April 2005 at 12.00 noon. 11. Copies of the annual report will be sent to members shortly and will be available from c/o The Company Secretary, HgCapital Trust plc, 33 King William Street, London EC4R 9AS. 8 March 2005Minerva House, 3-5 Montague Close,London SE1 9BB RN/mh/HgT/standard/stockexchangeann../prelim-ann-2005 This information is provided by RNS The company news service from the London Stock Exchange