HgCapital Trust plc Regulatory News (HGT)

16 Aug 2005 16:45

HG Capital Trust PLC16 August 2005 16 August 2005 HgCapital Trust plc Interim Results for the six months ended 30 June 2005 HIGHLIGHTS - Net asset value per share (NAV) increased by 16.9% in the six months to 30 June 2005 from 484.5p (as restated) to 566.2p. Over the same period, the FTSE All-Share Index rose by 8.2% and the FTSE SmallCap Index by 7.1%, all in total-return terms. - Share price rose by 18.5% from 451.5p at 31 December 2004 to 535.0p at 30 June 2005. - New and follow on investments amounted to £11.3 million. - Realisations amounted to £22.4 million in cash. - NAV was 575.5p at 31 July 2005. - Earnings per share of 7.6p (2004: 2.5p). Historical total return performance One year Three years Five years Seven years Ten years % pa % pa % pa % pa % paShare price 49.7 24.4 15.0 14.0 19.4Net asset value 39.4 18.6 9.4 12.3 17.1FTSE All-Share Index 18.7 7.8 -0.3 1.9 8.0FTSE SmallCap Index 15.6 10.8 -0.3 4.3 7.6 Based on the Company's share price at 30 June 2005 and allowing for dividends tobe reinvested, an investment of £1,000 ten years ago would now be worth £5,874.An equivalent FTSE All-Share Index return would be worth £2,152. The Chairman, Roger Mountford, comments: "Conditions in the European economy are favourable to investment in privateequity and the Board considers that this sector remains an attractive area. OurInvestment Manager has expanded its resources in both the UK and ContinentalEurope, in order to broaden its access to new investment opportunities." Investment Manager's Review Attribution analysis of movements in net asset value £'000Opening net asset value as at 1 January 2005 (restated) 122,040Gross revenue 2,937Expenditure (1,482)Taxation (192)2004 final dividend (2,015)Realised proceeds in excess of 31 December 2004 book value (excludes gross revenue) 6,991Unrealised movements on investments 14,341Closing net asset value as at 30 June 2005 142,620 Realised and unrealised movements in portfolio value Realised Proceeds Unrealised * Movements** Total £'m £'m £'m Verigen (1.3) (1.3)W.E.T. (1.1) (1.1)Hoseasons (0.7) (0.7)Acuid (0.5) (0.5) Bertram 0.5 0.5Other 0.8 0.8Match 0.8 0.8Rolfe & Nolan 0.9 0.9Eagle Rock 1.0 1.0Castlebeck 1.2 1.2Trados 1.3 1.3Xyratex 1.4 1.4ClinPhone 2.0 2.0Travelsphere 2.4 2.4Raymarine 1.9 1.0 2.9Tunstall 3.3 3.3FTE 6.4 6.4Total 7.0 14.3 21.3 * Realised proceeds in excess of 31 December 2004 book value (excludes gross revenue). ** Unrealised movements on investments. At 30 June 2005 the Company's portfolio consisted of 46 investments (31 December2004:46) and the twenty principal investments represented nearly 90% of theportfolio valuation. The portfolio's valuation increased over the six months to£115.4 million, reflecting continued strong trading in the majority of theprincipal investments, the improving fortunes of some under-performing companiesand increased values of quoted holdings. The Company's net asset value during the period increased from £122.0 million(as restated) to £142.6 million, arising from realised proceeds in excess of 31December 2004 book value of £7.0 million and unrealised movements of £14.3million. Significant proceeds were realised from the Company's investment in FTEAutomotive. The company has generated substantial earnings growth since itsacquisition in 2002, which culminated in its sale during the period. Inaddition, the sales of Tunstall and Trados were agreed, which resulted inincreased valuations. The value of quoted stock in Raymarine and Xyratex roseand we took the opportunity to realise a proportion of our shareholding inRaymarine. Travelsphere, ClinPhone, Castlebeck and Rolfe & Nolan all recorded agood increase in profits and the valuation of Eagle Rock Entertainment'scatalogue also increased, while Match and Bertram showed an improvement intrading. A small number of companies within the portfolio did not fare so well. Hoseasonsand W.E.T. Automotive Systems experienced an underperformance in trading; Acuidwas placed in liquidation having failed to achieve its milestones; and Verigen,which had been underperforming, was sold. During the six-month period theCompany invested a total of £11.3 million and participated in two managementbuy-outs of technology companies: SiTel Semiconductor BV and Addison Softwareund Service GmbH. Considerable proceeds were realised, amounting to £22.4 million. FTE Automotivewas sold and other proceeds arose mainly from a sale of quoted shares inRaymarine and a partial repayment of loan stock together with accrued interestby Castlebeck. Since the period end contracts have been exchanged for the sale of Tunstall andTrados has been sold, as has the final tranche of shares in BottomlineTechnologies; the Company has contributed £3.8 million to finance theacquisition of The Sanctuary Spa's products business; and has committed €0.8million to a new wind farm project, Sorne Wind, based in Ireland. Sorne Wind isHgCapital's second wind farm investment in less than a year following ouridentification of renewable energy as a sector offering attractive leveragedreturns. Tunstall's sale for £225.0 million follows a doubling of profits since ourinvestment, representing an annual year-on-year growth of 15%, and a 56%increase in turnover. Over the life of the investment, the Company has realiseda profit of £12.4 million, which equates to a return of 2.7 times cost. The sale of Trados for $60.0 million marks HgCapital's third exit from itsGerman portfolio. Since our investment this early-stage company has nearlytripled turnover and proceeds from the sale will broadly cover cost. Proceeds from realisations further increased the Company's liquid resources to£20.9 million, which will rise to around £38 million following the sales ofTunstall and Trados. These liquid resources, combined with a £25.0 millionborrowing facility, will allow the Company to take full advantage of a goodpipeline of new investment opportunities. In addition to our presence in London and Frankfurt, HgCapital has establishedan office in Amsterdam as we step up our focus on the Benelux region followingour continued success in the German market. Investments Company Deal Type Cost £'000Elite Holding SA t/a SiTel Semiconductor MBO 5,749Addison Luxembourg SA t/a Addison Software und Service MBO 4,633New investments 10,382Clarion Events Holdings Ltd MBO 709Other (4) 180Further investments 889Total investments 11,271 Two new investments were made during the first six months of the year, bothmanagement buyouts of technology companies based in Germany and Holland, thusreinforcing the Company's exposure to Continental Europe investments, in linewith HgCapital's investment policy. Follow-on funding was provided to fivecompanies. Elite t/a SiTel Semiconductor The $74.0 million management buy-out of the digital cordless business unit ofNational Semiconductor Corporation completed in June 2005. SiTel Semiconductor,which is based in Holland, creates system products targeted primarily for thehome wireless voice and data applications market. Its customers include theworld's leading manufacturers of cordless systems, such as Siemens andPanasonic. HgCapital's clients, including the Company, invested £29.0 millionin the acquisition. Addison Luxembourg t/a Addison Software und Service The €78.0 million management buy-out of Addison Software und Service completedin June 2005. Addison is a leading, privately-owned German application softwarecompany that provides business-critical solutions to two related markets - taxaccountants and SMEs. It develops, licenses and manages standard and sector-specific software for bookkeeping, accounts production, tax, cost accounting,payroll and administration. HgCapital's clients invested £24.0 million in theacquisition. Clarion Events In June 2005 Clarion Events, the largest independent exhibition and eventsbusiness in the UK, completed the £13.5 million acquisition of Amusement TradeExhibitions Group, the commercial exhibition, conference, publishing andservices subsidiary of the British Amusement Catering Trade Association. Clarion's portfolio now consists of 44 business and consumer events and threeleading publications. HgCapital's clients invested a further £4.2 million tosupport this transaction. Other A further investment was made to purchase most of Castlebeck's warrants as partof its recapitalisation. In addition funding was provided to Euroknights III tofinance a call of capital and we purchased management shares in Hoseasons andTunstall.Realisations Company Cost Proceeds+ £'000 £'000 £'000 FTE Automotive GmbH - 13,492 13,492Verigen AG 3,463 - (3,463)Full realisations 3,463 13,492 10,029Raymarine plc 84 4,356 4,272Castlebeck Group Ltd 2,469 3,332 863Rolfe & Nolan Holdings plc - 804 804Other (9) 300 454 154Partial realisations 2,853 8,946 6,093Total realisations 6,316 22,438 16,122 + Includes gross revenue received during the period Two investments were fully realised, both German companies, and twelveinvestments were partially realised. FTE Automotive In June 2005 FTE Automotive, the world's largest manufacturer of automotiveclutch and brake actuation systems, was sold to PAI Partners, a Paris-basedprivate equity firm, for €370.0 million. We acquired FTE Automotive for €180.0million in 2002. A year later it consolidated its global presence with theacquisition of Automotive Products, the leading manufacturer of hydraulic clutchactuation systems in North America. In September 2004 we completed a €225.0million recapitalisation, recouping 1.7 times original investment whilstincreasing our shareholding. The Company has realised an overall profit of£18.4 million, 2.7 times original cost, from its investment in FTE Automotive. Verigen In February 2005 Verigen was sold to Genzyme Corporation, a US biotechnologycompany. Initial proceeds of $2.7 million are being held in escrow pendingpotential warranty claims. Further proceeds of up to $20.7 million are dependenton the achievement of milestones. Raymarine Since the flotation of Raymarine in December 2004, the company has been tradingstrongly, achieving a 43% increase in the price of its stock. In March 2005, wesold a further tranche of shares having been released from our lock-inprovision. This investment has to date realised in excess of four times cost,including the value of the residual shareholding. Castlebeck In March 2005 we completed a £73.0 million recapitalisation of Castlebeck, theUK's leading independent provider of residential healthcare for people withlearning disabilities and severely challenging behaviours. The refinancingallowed the return of the majority of our original £20.0 million equityinvestment. Rolfe & Nolan A dividend repayment was received from Rolfe & Nolan. Portfolio Analysis Asset Class Geographic spreadUnquoted 68% UK and Ireland 76%Cash and other assets 19% Continental Europe 22%Quoted 13% United States 2% Valuation Basis Deal typeCost 29% Buy-out 86%Earnings 20% Expansion 7%Third party transaction 16% Venture 5%Bid-market price 15% Fund 2%Written down/off 13%Net assets 7% Sector by Valuation Vintage by valuationTechnology 33% 2005 9%Healthcare 27% 2004 15%Media 14% 2003 26%Industrials 9% 2002 5%Leisure 9% 2001 10%Consumer 4% 2000 9%Other 3% 1999 17%Renewable Energy 1% Pre-1999 9% Investment Listing Company Cost Valuation Year of Value Cumulative £'000 £'000 Investment % % Tunstall Holdings Ltd 7,000 14,231 1999 12.3 12.3Xtx Ltd t/a Xyratex** 6,995 11,827 2003 10.2 22.5W.E.T. Automotive Systems AG 7,609 6,658 2003 5.8 28.3Blue Minerva Ltd t/a Iris Software 6,626 6,626 2004 5.7 34.0Travelsphere Holdings Ltd 3,899 6,447 2000 5.6 39.6Classic Copyright (Holdings) Ltd 6,033 6,033 2003 5.2 44.8 t/a Boosey & HawkesElite Holding SA t/a SiTel 5,749 5,832 2005 5.1 49.9 Semiconductor, BV+ClinPhone Holdings Ltd 2,361 5,616 1996 4.9 54.8Eagle Rock Entertainment Ltd 3,856 5,270 2001 4.6 59.4Clarion Events Holdings Ltd 4,965 4,965 2004 4.3 63.7Addison Luxembourg SA t/a Addison Software und Services+ 4,633 4,677 2005 4.1 67.8Castlebeck Group Ltd 1,407 4,223 2002 3.7 71.5Raymarine plc* 103 3,994 2001 3.5 75.0Rolfe & Nolan Holdings plc 238 3,264 2003 2.8 77.8Match Holdings Ltd 3,854 3,045 1999 2.6 80.4Hirschmann Electronics Holdings SA 2,669 2,769 2004 2.4 82.8Trados Inc 2,492 2,187 2000 1.9 84.7Hoseasons Group Ltd 2,155 2,155 2003 1.9 86.6Doc M Sarl t/a DocMorris+ 1,956 1,861 2004 1.6 88.2The Sanctuary Spa Holdings Ltd 118 1,802 1995 1.6 89.8Other investments (26) 40,682 11,947 10.2 100.0Total 115,400 115,429 100 * Listed on the London Stock Exchange. ** Xyratex is traded on NASDAQ. + The difference between cost and valuation is due to foreign exchange rate movements. The Company invests alongside other clients of HgCapital. Typically, theCompany's holding forms part of a much larger stake in buy-outs of companieswith enterprise values of between £25 million and £250 million, controlled byclients of HgCapital. The Investment Manager's Review generally refers to eachtransaction in its entirety, apart from the tables, which reflect the Company'sparticipation, and where it specifically says otherwise. The Company currentlyhas an allocation of some 20% to new investments made by HgCapital. For further information please contact: Roger Mountford- Chairman, HgCapital Trust plcTel: 07799 662601www.hgcapitaltrust.net Ian Armitage - Partner, HgCapitalTel: 020 7089 7979www.hgcapital.net Suzanne Bartch, Peter OgdenThe Maitland ConsultancyTel: 020 7379 5151 REVENUE STATEMENTfor the six months ended 30 June 2005 Six months Six months Year ended ended ended 30.6.05 30.6.04 31.12.04 £'000 £'000 £'000 Notes (unaudited) (unaudited) (audited)* Income 6 2,937 1,460 4,905Investment management fee 7 (310) (296) (604)Other expenses 8 (241) (231) (484) Net revenue before finance costs and taxation 2,386 933 3,817 Interest payable and similar charges - (46) (110) Revenue on ordinary activities before taxation 2,386 887 3,707 Taxation on ordinary activities (471) (266) (1,058) Transfer to reserves 1,915 621 2,649 Return per ordinary share 7.60p 2.47p 10.52p * Restated: see note 3 The final dividend of 8.00p per share in respect of the year ended 31 December2004 was declared on 19 April 2005 and paid on 29 April 2005. RETURN PER ORDINARY SHARE Six months Six months Year ended ended ended 30.6.05 30.6.04 31.12.04 (unaudited) (unaudited) (audited) Earnings 7.60p 2.47p 10.52pCapital return 82.11p 25.56p 89.04p Total return 89.71p 28.03p 99.56p BALANCE SHEETas at 30 June 2005 30.6.05 30.6.04 31.12.04 £'000 £'000 £'000 (unaudited) (unaudited) (audited)* Fixed assetsInvestments Listed 17,832 15,411 17,630 Unquoted 97,597 90,681 85,642 115,429 106,092 103,272 Current assetsDebtors 7,058 10,673 6,808Government securities 16,104 - 11,884Cash 4,829 634 1,180 27,991 11,307 19,872 Creditors - amounts falling due within one year (800) (13,373) (1,104) Net current assets/(liabilities) 27,191 (2,066) 18,768 Net assets 142,620 104,026 122,040 Capital and reservesCalled up share capital 6,296 6,296 6,296Share premium account 14,123 14,123 14,123Capital redemption reserve 1,248 1,248 1,248Capital reserve - realised 114,366 85,016 100,834Capital reserve - unrealised (59) (7,375) (7,207)Revenue reserve 6,646 4,718 6,746 Total equity shareholders' funds 142,620 104,026 122,040 Net asset value per ordinary share 566.2p 413.0p 484.5p * Restated: see note 3 SUMMARISED CASH FLOW STATEMENTfor the six months to 30 June 2005 Six months Six months Year ended ended ended 30.6.05 30.6.04 31.12.04 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Net cash inflow/(outflow) from operating activities 655 (1,424) 4,257 Returns on investments and servicing of finance - (46) (110) Taxation received/(paid) 353 (822) (1,604) Capital expenditure and financial investment Purchase of fixed asset investments (11,271) (4,786) (21,937) Proceeds from the sale of fixed asset investments 20,640 1,421 38,153 Equity dividends paid (2,015) (3,022) (3,022) Management of liquid resources (4,713) 17 (11,603) Net cash inflow/(outflow) from drawdown/(repayment) ofloans - 8,750 (3,500) Increase in cash in the period 3,649 88 634 Reconciliation of net REVENUE return before finance costs and taxation to net cash flow from operating activities Six months Six months Year ended ended ended 30.6.05 30.6.04 31.12.04 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Net return before finance costs and taxation 2,386 933 3,817 Investment management fee and finance costs charged to capital (931) (1,025) (2,141) (Increase)/decrease in accrued income (599) (1,378) 4,088 (Decrease)/increase in creditors (28) 125 133 Tax on investment income included within gross income (173) (79) (1,640) Net cash inflow/(outflow) from operating activities 655 (1,424) 4,257 NOTES TO THE INTERIM ANNOUNCEMENT 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 accounts have been prepared under the historical cost convention, modified to include the revaluation of investments and in accordance with applicable Accounting Standards and with the Statement of Recommended Practice " Financial Statements of Investment Trust Companies" dated January 2003. All of the Company's operations are of a continuing nature. The same accounting policies used for the year ended 31 December 2004 have been applied with the following exception. Under FRS 21 - Events after the Balance Sheet Date, dividends should not be recognised in the accounts unless they have been declared and paid before the Balance Sheet date. Final dividends are therefore recognised in the period in which they are declared and paid. As a result of this change the accounts for the year ended 31 December 2004 and 31 December 2003 have been restated as per note 3 below. Additionally the Company has adopted a change in the basis of measurement of the valuation of listed investments to comply with FRS 26 Financial Instruments: Recognition and Measurement. Prior to 1 January 2005, listed investments were valued at fair value, based on middle market prices with marketability discounts applied where there was a risk the holding was not immediately saleable, or formal trading restrictions were in place. Following the introduction of FRS 26, listed investments are now valued at fair value which is based on bid market prices. Unlisted investments continue to be valued at fair value in accordance with the accounting policies set out in the year ended 31 December 2004 accounts. The effect of this change is to decrease the value of listed investments at 30 June 2005 and to decrease by £59,000 the net return on ordinary activities after taxation for the six months ended 30 June 2005. Comparatives have not been restated as the impact is deemed immaterial. 3. Restatement 3. Restatement in respect of final dividend (a) Statement of Total Return The Statement of Total Return no longer reflects payment of dividends. These are shown in note 3(c) below which sets out movements in capital and reserves, during the period in which they are declared and paid. The Statement of Total Return for the year ended 31 December 2004 has been restated accordingly. (b) Balance Sheet 31.12.04 31.12.03 per per ordinary ordinary £'000 share £'000 share Net assets as at 31 December as previously stated 120,025 476.5p 96,965 385.0p Add back final dividend declared and payable 2,015 8.0p 3,022 12.0p Restated net assets as at 31 December 122,040 484.5p 99,987 397.0p The balance sheet at 30 June 2004 remains unchanged. (c) Movements in capital and reserves Capital Share Share redemption Capital Revenue capital premium reserve reserve reserve Total Note £'000 £'000 £'000 £'000 £'000 £'000Net assets at 31 December 2004 * 6,296 14,123 1,248 93,627 6,746 122,040Net profit from ordinaryactivities - - - 20,680 1,915 22,595Dividends paid and declared 4 - - - (2,015) (2,015) --------- ---------- --------- ---------- --------- ---------Net Assets at 30 June 2005 6,296 14,123 1,248 114,307 6,646 142,620 ========= ========== ========= ========== ========= ========= Net assets at 31 December 2003 * 6,296 14,123 1,248 71,201 7,119 99,987Net profit from ordinaryactivities - - - 6,440 621 7,061Dividends paid and declared 4 - - - - (3,022) (3,022) --------- ---------- --------- ---------- --------- ---------Net Assets at 30 June 2004 6,296 14,123 1,248 77,641 4,718 104,026 ========= ========== ========= ========== ========= ========= Net assets at 31 December2003* 6,296 14,123 1,248 71,201 7,119 99,987Net profit from ordinaryactivities - - - 22,426 2,649 25,075Dividends paid and declared 4 - - - - (3,022) (3,022) --------- ---------- --------- ---------- --------- ---------Net Assets at 31 December 2004 6,296 14,123 1,248 93,627 6,746 122,040 ========= ========== ========= ========== ========= ========= * as restated 4. Dividend It is intended that dividends will be declared and paid annually in respect of each accounting period. A dividend of 8.00p per share, declared as a final dividend, was paid on 29 April 2005 in respect of the year ended 31 December 2004. 5. Issued share capital There were 25,186,755 ordinary shares in issue for the six months to 30 June 2005 (30 June 2004 and 31 December 2004: 25,186,755). 6. Income Six months Six months Year ended ended ended 30.6.05 30.6.04 31.12.04 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Income from investments UK unquoted investment income 1,484 1,358 4,550 UK dividends from listed companies 814 - - Overseas dividends 8 82 172 2,306 1,440 4,722 Other income Gilt interest 611 - 34 Deposit interest 20 20 61 Underwriting commission - - 88 631 20 183 Total income 2,937 1,460 4,905 7. Investment management fee Revenue Capital Six months Six months Year Six months Six months Year ended ended ended ended ended ended 30.06.05 30.06.04 31.12.04 30.06.05 30.06.04 31.12.04 £'000 £'000 £'000 £'000 £'000 £'000 (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)Investmentmanagement fee 264 252 514 792 756 1,542 Irrecoverable VAT thereon 46 44 90 139 132 270 310 296 604 931 888 1,812 The investment management fee is levied quarterly in arrears. Investmentmanagement fees are charged 75% to capital reserve - realised and 25% torevenue. 8. Other expenses Six months Six months Year ended ended ended 30.6.05 30.6.04 31.12.04 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Custodian and administration fees 52 61 126 Other administration costs 189 170 358 241 231 484 9. Capital commitments At 30 June 2005, investment purchases of £1,653,000 (30 June 2004: £2,461,000, 31 December 2004: 1,169,000) had been authorised and contractually committed. 10. Publication of non-statutory accounts The financial information contained in this interim report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the six months ended 30 June 2005 and 2004 has not been audited. The information for the year ended 31 December 2004 has been extracted from the latest published audited financial statements and amended to reflect the changes to accounting policies disclosed in note 3(c), which have been filed with the Registrar of Companies. The report of the independent auditor on those accounts contained no qualification or statement under sections 237(2) or (3) of the Companies Act 1985. 11. Annual results The Board expects to announce the results for the year ending 31 December 2005 at the beginning of March 2006. The annual report should be available by mid-March 2006, with the Annual General Meeting being held in April 2006. Third Floor, Minerva House3-5 Montague CloseLondon SE1 9BB 16 August 2005 RMN/cht/hgt/stock exchange announcements/intann-jun 2005 This information is provided by RNS The company news service from the London Stock Exchange