HgCapital Trust plc Regulatory News (HGT)

15 Oct 2009 07:00

HgCapital Trust plc

Interim Management Statement 15 October 2009

HgCapital Trust plc ('the Company'), today issues its Interim Management Statement in accordance with FSA Disclosure and Transparency Rule 4.3. This statement relates to the period from 1 July 2009 to 14 October 2009 and incorporates the Company's calculation of its net asset value at 30 September 2009, in the same form as is issued following the end of each month. The Net Asset Value (NAV) at 30 September is based on the valuations of unquoted investments as at 30 June, as set out in the half yearly report issued in August, but is adjusted for realisations, exchange rates, changes in value of quoted securities and net revenues during the period.

Transaction activity during the period

The market for new buy-out investment remains subdued as a result of a combination of factors: poor visibility of earnings; limited access to bank borrowing; over-commitment by some private equity managers; and unwillingness of owners to sell at prices that reflect current uncertainties. Although the Company has substantial liquid resources ready for investment it has made no new investment since the buy-out of Epyx Investments Limited, which was announced on 30 June 2009 and described in the interim report.

An offer has been announced to acquire the shares of the pharmaceuticals company Goldshield Group plc. Following this, the investment vehicle Midas Bidco has been funded by HgCapital via a loan and has acquired over 6.1 million shares in Goldshield, representing 16.66% ownership. The Company's share of this investment is 5.3 million.

The Company has also made a payment of 0.2 million to Hg Renewable Power Partners LP, representing the Company's share of two small further investments made within the fund in Bargas Solar and Ridge Wind.

Following the Company's long series of realisations no further sales have taken place during the period. However, a total of 5.7 million has been returned to the Company, including a 2.3 million dividend and 3.2 million of redeemed loan stock and interest thereon received from Pulse Staffing. The balance returned relates to deferred proceeds.

Performance relative to market indices

Since 30 June the total return (NAV plus dividend) increased by 1.4%, compared with a 22.4% increase in the FTSE All-Share Index. The Company's share price at the end of September was 860.0 pence, a discount of 3.5% against the NAV of 890.8 pence. The Company's share price (on a total return basis) increased by 9.4% over the three months to 30 September 2009, in a period when the FTSE All-Share Index and FTSE SmallCap Index increased by 22.4% and 30.0% respectively.

The total return (NAV plus dividend) since 1 January was -1.5%, compared with the total return of 23.4% of the FTSE All-Share Index. The Company's share price (on a total return basis) increased by 32.6% over the nine months to 30 September while the FTSE All-Share Index and FTSE SmallCap Index increased by 23.4% and 59.6% respectively.

These performance figures are based on valuations carried out as at 30 June, using market multiples at that date, and therefore do not reflect the rapid rise in stock market indices between 1 July and 30 September.

At 14 October the share price of the Company was 852.0 pence, a discount of 4.4% to the NAV at 30 September.

Current trading

The Company's manager, HgCapital, is represented on the board of every material investment in the portfolio and receives monthly management accounts from all the businesses in which the Company is invested. These are regularly discussed with the Board, together with other information about the strategy, prospects and leadership of each business, and the actions that the manager is taking to effect improvements. Where there is a risk that any bank covenant may be breached the manager is well placed to initiate negotiations well in advance.

The latest available trading figures to August 2009 show a mixed picture, with results for most companies varying from month to month, reflecting the poor visibility at this stage of the economic cycle. The top ten buy-out investments in the portfolio represent 43.1% of net assets: of these, eight are reporting sales ahead of the same period last year and seven are reporting profits ahead of last year. Most of the remaining unquoted investments, which were substantially written down in previous periods and which in aggregate represent 9.6% of net assets at 30 September, continued to suffer in the difficult trading conditions. In all cases the Manager continues to work actively with the management of these companies in order to build value for shareholders wherever possible.

Share price and valuation

The discount of the Company's share price against published Net Asset Value has narrowed substantially and is lower than that of all other quoted UK private equity investment trusts. This may reflect in part the Company's holdings of cash and other liquid assets which currently represent over 43% of the net assets but also prudent management demonstrated through the economic cycle. The book value of the unquoted portfolio will next be reviewed, as usual, at 31 December 2009 in accordance with IPEV guidelines, taking account of each company's maintainable earnings and ratings of comparable businesses in the relevant listed markets at that time.

The Company has a significant exposure to euro denominated assets as at 30 September, with the appreciation of the euro against sterling since 30 June resulting in an increase in the valuation.

Investment objective

HgCapital Trust plc gives the investor access to a private equity portfolio run by an experienced and well-resourced Manager that makes investments in fast growing companies over a number of geographies and sectors.

The objective of the Company is to provide shareholders with long-term capital appreciation in excess of the FTSE All-Share Index by investing in unquoted companies. The Company provides investors with exposure to a diversified portfolio of private equity investments primarily in the UK and Continental Europe.

The Company's Benchmark is the FTSE All-Share Index.

Performance

All information is at 30 September 2009 and is unaudited.

Performance at month end with net income reinvested

One Three One Three Five month months year years years

Net asset value 0.6% 1.4% (13.1%) 39.5% 133.8% Share price 9.3% 9.4% 12.1% 38.4% 159.7% FTSE All-Share 4.7% 22.4% 10.8% (3.4%) 38.4%Index Sources: HgCapital, FactsetResultsAt 30 September 2009Net asset value:* 890.8p Share price: 860.0p Discount 3.5% Net assets: GBP224.4m Net yield: 2.9% Gearing: Nil% Ordinary shares in issue: 25,186,755 * includes 9 months net revenue of 13.0p.

Unaudited Net Asset Value per Share

The investment portfolio has not been revalued at 30 September 2009. The unaudited Net Asset Value at 30 September 2009 is based on the Net Asset Value at 30 June 2009 adjusted to reflect purchases and sales of investments, currency movements and bid values in respect of listed investments. The unaudited Net Asset Value at 30 September 2009 was 890.8 pence per share by comparison with 929.4 pence at 31 December 2008, a decrease of 4.2%.

Net revenue per share for the nine months to 30 September 2009 was 13.0p.

Balance Sheet

At 30 September 2009, the Company's summary balance sheet was as follows:

GBPm % Unquoted 106.4 47.5 investments Quoted investments 0.1 - Total investment 106.5 47.5 portfolio Cash/Gilts 97.7 43.5 Other net assets 20.2 9.0 Net Asset Value 224.4 100.0 Portfolio

The largest investments in the portfolio (at valuation including accrued interest) and their share of net assets are shown below:

Company Net Assets Sector % VISMA 9.5 TMT Pulse Staffing 8.5 Healthcare Epyx 3.6 TMT Schleich Luxembourg 3.6 Consumer & Leisure Sporting Index 3.5 Consumer & Leisure Mondo Minerals Co-op 3.4 Industrials Voyage Healthcare 3.2 Healthcare Americana International 2.8 Consumer & Leisure Casa Reha 2.6 Healthcare Achilles 2.4 TMT Total Top 10 Buy-out 43.1 Hg Renewable Power 3.4 Renewable Partners LP Energy Other Buy-out Investments 9.6 Total Portfolio 56.1 Sector Net Assets % TMT 15.7 Healthcare 15.2 Consumer & 7.8Leisure Industrials 4.4 Services 1.8 Renewable Energy 3.4 Other (0.8) Fixed Interest 43.5and Cash Net current 9.0assets Total 100.0

This statement is a general description of the financial position and performance of the Company for the period from 1 July 2009 to 30 September 2009. It does not contain any profit forecast or forward looking information. Future performance and share price is likely to be affected by a number of factors, including (but not limited to) general economic and market conditions and specific factors affecting the financial performance or prospects of individual investments within the Company's portfolio.