HgCapital Trust plc Regulatory News (HGT)

7 May 2009 07:00



HgCapital Trust plc

Interim Management Statement 7 May 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 January 2009 to 6 May 2009 and incorporates the Company's calculation of its net asset value at 30 April 2009, in the same form as is issued following the end of each month. The Net Asset Value (NAV) at April is based on the valuations of unquoted investments as at 31 December, as set out in the annual report issued in March, but is adjusted for realisations, exchange rates, changes in value of quoted securities, dividends payable and net revenues during the period.

Transaction activity during the period

Against a background of continuing volatility in equity markets and a weakening world economy, investment activity was subdued during the period under review. Since 31 December 2008 the Company has made no new investments. 

A number of small further investments totalling £3 million have been made in portfolio companies. £1.5 million was invested in SHL to fund the restructuring of its cost base and to provide headroom in liquidity during a period of challenging trading; at the same time agreement was reached with banks to reset covenants. An investment of £1.3 million was made in Visma to provide funding for a bolt-on acquisition of Teemuaho, a Finnish provider of accounting BPO services, which Visma acquired for €18 million.

The Company has also made two payments totalling £3 million to Hg Renewable Power Partners LP, representing the Company's share of the following three new investments made within the fund:

Mercurio Solar - a portfolio of three operational solar photovoltaic projects in Spain. 

Wind Direct Solutia - two turbine wind project at the Solutia (formerly Monsanto) chemical site in Newport, South Wales. 

Bargas Solar - solar PV plant in Spain and sister project of the above Mercurio Solar investment.

Also in the period, Hg Renewable Power Partners LP sold its investment in Sorne Wind on 5 March 2009, realising €10.1 million gross proceeds. The sale generated a 2.3x cost multiple return and a 43% IRR (gross). The Company received a distribution of £0.6 million for its investment share.

Newchurch, an investment which had been fully written off, was sold to the Tribal Group plc, realising proceeds of £0.1 million and shares in the latter, currently valued at £0.1 million. Furthermore, interest of £0.3 million was received during the period.

Performance since the 31 December 2008

Since 31 December the total return (NAV plus dividend) decreased by 0.8%, compared with no growth in the FTSE All-Share Index. The Company's share price at the end of April was 805.0 pence, a discount of 10.3% against the NAV of 897.2 pence. The Company's share price (on a total return basis) increased by 24.2% over the four months to 30 April 2009, in a period when the FTSE All-Share Index and FTSE SmallCap Index increased by nil% and 20.5% respectively.

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 and prospects of each business. 

The latest available trading figures, to the end of March, show that the effects to date of the recession have varied widely from one business to another. Overall, sales across the portfolio are marginally down and profits at the EBITDA level about 10% below the same period in the prior year. Bank covenants have been reset by agreement with the banks in one case; in a small number of other investments, bank covenants require close monitoring by the manager.

Of the Company's top ten private equity investments (excluding Hg Renewable Power Partners) by value at 30 April 2009, seven have reported sales from the start of their financial year to 31 March 2009 ahead of the corresponding period in the prior year, while the remainder have suffered falls in sales. Half of the top ten reported profits at the EBITDA level ahead of the prior year; of the others, in two cases a decline in profitability was anticipated and the businesses are trading ahead of budget; and three investments, while profitable, are performing below expectations. 

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 UK private equity investment trusts. This may reflect the Company's holdings of cash and other liquid assets which represent over 50% of the net assets. The book value of the unquoted portfolio will next be reviewed, as usual, at 30 June 2009 in accordance with IPEVCA guidelines, taking account of each company's maintainable earnings and ratings of comparable businesses in the relevant listed markets at that time.

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 April 2009 and is unaudited.

Performance at month end with net income reinvested

Sources: HgCapital, Factset

Results

At 30 April 2009

Unaudited Net Asset Value per Share 

The investment portfolio has not been revalued at 30 April 2009. The unaudited Net Asset Value at 30 April 2009 is based on the Net Asset Value at 31 December 2008 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 April 2009 was 897.2 pence per share by comparison with 929.4 pence at 31 December 2008, a decrease of 3.5%. The NAV includes a provision for a dividend of 25.0 pence per share, payable on the 11th May 2009; on a Total return basis after adding this back, the NAV decreased by 0.8% over the period.

Net revenue for the four months to 30 April 2009 was 5.3p.

Balance Sheet

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

Portfolio

Ten Largest Investments (at valuation including accrued interest) 

This statement is a general description of the financial position and performance of the Company for the period from 1 January 2009 to 30 April 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.