Private equity investor HgCapital Trust (HGT) delivered its sixth consecutive year of double-digit net asset value (NAV) growth in 2019 as its portfolio continued to motor.

While shares in the trust were unable to escape the wider equity markets carnage on Monday, being marked down 5% to 234p, the manager issued a confident outlook nonetheless.

Hg said that ‘strong earnings, realisations at uplifts to book value and supporting the management teams of the underlying portfolio businesses will continue to drive value for shareholders’.

A listed investment trust that puts money to work with unquoted software and service businesses across Europe, HgCapital Trust seeks to provide shareholders with consistent long-term returns in excess of the FTSE All-Share.

It is managed by private equity outfit Hg, which backs unquoted software firms where it can create value through strategic and operational change.

The fund invests in companies that provide business critical software generating predictable, recurring revenues through subscription based business models.

The trust continues to outperform by investing in what Hg describes as ‘sweet-spot’ businesses in eight end markets or ‘clusters’, one example being regulatory software, where the manager has amassed years’ of knowledge.

Results for the 2019 calendar year showed 20.8% growth in NAV per share to £2.55 as net assets grew to more than £1bn.

In fact, an investment of £1,000 in HgCapital Trust 20 years ago would have morphed into £15,516 today, representing a total return of 1,452%. That compares with £2,569 from an equivalent investment in the FTSE All-Share two decades ago.

Annual sales growth for the trust’s top 20 holdings was 24% last year, while earnings growth was 35%.

Most of the trust’s largest holdings were written up in value on the back of this continued strong earnings growth - some of the largest valuation changes included Visma, Access and Sovos - while realised gains contributed £183.6m to annual NAV growth.

During the year, HgCapital Trust implemented a ten for one share-split to raise levels of liquidity and also raised £75m of new equity by issuing shares at a premium to fund further investments.

2019 proved a stellar year for HgCapital, although Numis cautioned ‘similar levels of growth are perhaps hard to sustain and multiples may come down’.


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Issue Date: 09 Mar 2020