- Net asset value up 1.8% in the first half
- Performance exceeds Stifel’s NAV forecast
- Access main driver of positive returns
Shares in HgCapital Trust (HGT) rallied 3.6% to 381.6p after the private equity investor reported a continued positive net asset value (NAV) performance for the half ended 30 June, despite rising inflation and interest rates impacting the valuations of technology and unquoted companies.
The FTSE 250 trust’s robust performance was driven by strong operational performance and exits at uplifts to carrying values, with valuation gains stemming from the refinancing of business management software group Access helping to offset multiple compression elsewhere within the portfolio.
NAV UP 1.8%
HgCapital Trust, which invests in unquoted software and services businesses with strong growth prospects and resilient business models, delivered a 1.8% NAV increase to 443.2p per share in the half, during which net assets increased by £25 million to £2.03 billion.
Access, the main driver of positive returns, is now the portfolio’s standout heavyweight investment, representing over 20% of NAV.
While HgCapital Trust’s share price total return for the half was negative at 20.5%, this beat the 4.6% negative total return from the FTSE All-Share index.
PERFORMANCE REMAINS ROBUST
HgCapital Trust insisted its performance has remained robust with over 95% of the companies that make up the portfolio demonstrating strong, profitable growth.
Turning to the outlook David Toms, Head of Research at Hg, commented: ‘Increasingly, we see this environment as one of opportunity, as short-term valuations create space for greater long-term performance for those who have and will continue to maintain a disciplined approach and strategy.’
HgCapital Trust said its portfolio companies have a positive trading outlook, benefiting from recurring revenue and pricing power.
ANALYST VIEWS
Stifel’s Iain Scouller said: ‘This is a strong result given the weakness in comparable quoted technology companies over H1, with companies in the portfolio trading well. This outcome is ahead of the Stifel expectation of a 400p to 430p NAV. Assuming no significant fall in comparable listed companies in the period to 31 December 2022, our expectation is for a year end NAV of 435p to 465p.’
Numis believes this was a good performance from the trust ‘given the volatile equity market backdrop with multiple contraction offset by strong operational performance and exits at uplifts to carrying values. HgCapital Trust delivered NAV total returns of 1.8% in H1 2022, including a total return of 2.3% in Q2. The robust performance should give investors’ confidence at time when they have been asking questions about valuations across the listed private equity sector.’
