HgCapital Trust, the listed investment trust that invests in all HgCapital deals, has seen a 5.8 percent uplift in its net asset value to £455.5 million (€569 million, $754 million), it said in its half-year results.
The NAV uplift was “primarily due to the good performance in the unrealised portfolio and to some realisations above book [value]”, Laura Dixon, head of investor relations, told Private Equity International.
The trust had an active start of the year, it said, having committed £77 million primarily into four portfolio companies. The trust also saw £22 million of cash returned, with a further £46 million estimated to be received once the sale of Schleich, a German toy business, and Visma, a software management business, are completed.
In April, London-based Hg sold its existing stake in Visma, generating a 5.2x return for HgCapital 5 and an internal rate of return of 34 percent, and then bought a larger stake using HgCapital 7, the £2 billion fund, in which HgCapital Trust has invested £200 million. As a result of this deal, HgCapital Trust will pay its shareholders a one-off dividend of 9 pence per share in September, Dixon said.
As well as exiting Visma and Schleich, HgCapital Trust also sold Voyage and listed Manx Telecom. Stephen Bough, chief financial officer at the trust, told PEI that it had been a good time to sell, but that the trust is not necessarily in exit mode. “The exit market is buoyant. We do get lots of interest in the portfolio, but we will sell the business at the right stage of their development and at the right price.”
However, rising valuations are a concern as the market environment “is clearly very hot”, he said. “Competition for assets is intense and that has been fueling prices, because you have buyers ranging from private equity funds to trade [players], and the public markets are being receptive to IPOs. We clearly have to remain cautious.”
So far this year, the trust has invested in Visma, Zenith, Ullink, Relay Software and Sequel Business Solutions. It anticipates making a few investments in the next six months, Bough said. As it only looks to do three or four acquisitions per year, “we can afford to be very selective,” he added.
The trust saw strong revenue growth of 10 percent and EBITDA growth of 9 percent across its top 20 primary mid-cap buyout investments over the last twelve months to 30 June 2014.
HgCapital Trust has delivered a total return of 14.6 percent per annum over the past 10 years to 31 May 2014, versus 8.9 percent from the FTSE All-Share Index, it said.
At 10.30am BST, HgCapital Trust shares were trading at 1,051p, up 3.55 percent, giving the trust a market capitalisation of £392.3 million.