28th Aug 2008 07:00
HgCapital Trust plc
Private equity investment trust of the year
Investment Week Awards 2005, 2006 and 2007
Half yearly report and accounts
30 June 2008
London, 28 August 2008: HgCapital Trust plc ("the Trust" or "the Company"), thePrivate Equity Investment Trust managed by HgCapital (or the "Manager"), theEuropean sector-focused private equity investor, announces interim results forthe six months ended 30 June 2008.
Financial highlights
* Another strong performance: NAV increased by 8.9% to ‚£260.0 million (31
December 2007: ‚£238.8 million).
* Total return to shareholders (NAV plus dividend) over the period was 11.6%
compared with -11.1% for the FTSE All-Share Index and -14.9% for the FTSE
Small-Cap Index.
* Consistent returns: share price growth (total return) over ten-year period
of +15.8% per annum against +3.5% per annum for the FTSE All-Share Index
for the same period.
* ‚£115 million in liquid resources (c. 44% of net assets) puts Company in a
good position to take advantage of improving conditions for investment as
they arise. Operational highlights
* A strong period for realisations, including The Sanctuary Spa, Clarion
Events and Boosey & Hawkes, with ‚£66.5 million in proceeds
* Invested ‚£15.9 million selectively against increasingly adverse economic
conditions. * Investments during the period included Casa Reha, a leading German care provider, and a further stake in Pulse Staffing Limited, the agency for temporary specialist healthcare staff.
Post period end
* NAV at 31 July 2008 was 1,037.8p per share (30 June: 1,032.2p)
* Invested ‚£5.2 million in Achilles, a global leader in procurement services,
as part of total ‚£42 million investment by HgCapital clients.
* Sold stake in Rolfe & Nolan: this will add 0.8p per share to the 30 June
2008 NAV.
Roger Mountford, Chairman of HgCapital Trust plc, commented:
"It is pleasing to report that HgCapital Trust has continued to achieve significant growth against a background of ongoing weakness in listed markets. This outperformance underlines the Manager's ability to deliver robust performance in the face of wider economic uncertainty.
"While credit markets remain tight, the mid-market in which HgCapital specialises is less affected. At the same time, as the Company has disposed of virtually all its mature investments, it has reduced exposure to financial buyers.
"With strong liquid reserves, the Company is well-placed to take advantage ofimproving conditions for investment as they arise. The Board is confident thatthe Manager's sector-led strategy will continue to identify attractiveinvestment opportunities to the benefit of our shareholders."
About HgCapital
HgCapital is a private equity investor in the European mid-market. We focus oninvestments with an enterprise value in the range of ‚£50-500 million. Ourbusiness model combines sector specialisation with dedicated, proactive supportto our portfolio companies as well as the corresponding management expertiseacross all phases of the investment process. HgCapital manages more than ¢â€š¬2.0billion for some of the world's leading institutional and private investors.Our goal is to achieve outstanding results for our investors, management teamand intermediaries.
For further details, see www.hgcapital.com
For further details:HgCapital Trust Roger Mountford, Chairman +44 (0)7799 662601 HgCapital Stephen Bough, Partner +44 (0)20 7089 7888 Maitland +44 (0)20 7379 5151 Neil Bennett/Rowan Brown
______________________________________________________________________
Investment objective
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.
Financial highlights
of the first six months of 2008
+11.6% Strong growth in net assets (total return) continues
+12.8% Share price and dividend (total return) versus a fall in the FTSE All-Share Index of 11.1%
+15.8% Ten year total performance p.a. versus 3.5% p.a. from the FTSE All-Share Index
>4x Ten year investment return for every ‚£1 invested
‚£67m A strong first half for proceeds from realisations
‚£16m Invested selectively during a period of falling prices
Chairman's statement
Performance
I am pleased to report that in the first six months of 2008 the Company continued to deliver growth in NAV against a background of continuing weakness in listed markets.
Net asset value (NAV) per share increased by 8.9% and total return to shareholders (NAV plus dividend) over the period was 11.6% compared with -11.1% for the FTSE All-Share Index and -14.9% for the FTSE Small-Cap Index. The Company's share price rose by 10.5% from 775p to 856.5p at 30 June.
During the period, and despite weakening market conditions, the Managercontinued successfully to negotiate sales from the portfolio. In anticipationof lower prices in the months to come, the Manager made only one investment. Asa result, the Company ended the period with liquid funds of ‚£115 million,representing 44% of net assets.
Since the end of the period under review the Company's shares have remained broadly stable; this reflects the quality of its portfolio, a further successful realisation and the defensive value of the Company's high liquidity.
Directors have valued all the Company's investments at 30 June. Over one thirdof the investments in the portfolio are held at cost, as they are recentpurchases and are performing in line with expectations. Most of the others arevalued by applying a market multiple to historic earnings and deductingthird-party debt; a discount of between 20% and 30% is then applied inaccordance with the guidelines of the European Venture Capital Association.Overall, the portfolio appreciated in unrealised value by some ‚£10 million.Revenue return per share was 29.1p, compared with 12.4p in the same period lastyear, reflecting in part the receipt of income from Boosey & Hawkes notpreviously included in the net asset value. As explained in earlier reports toshareholders, the Company's revenue will vary from year to year in accordancewith the structure of the underlying investments and the Company's holding ofliquid funds awaiting reinvestment.
Realisations
The Company made ten full and four partial realisations, yielding proceeds of ‚£66.5 million and contributing (excluding gross revenue) ‚£16.8 million to thegrowth in NAV. Three investments were sold at prices well ahead of originalcost and valuation at 31 December and another, which had previously beenwritten down, was also sold at a price in excess of original cost; others,which had previously been written down or off, were sold in order to realisevalue and reduce ongoing commitments. The Board recognises that in a privateequity portfolio some investments will fall short of expectations; however, inall these cases the Manager had worked hard to protect and rebuild value, andthe Directors support the Manager's decision to sell these assets and free upresources for redeployment.
Since the period end, the Company has sold its interest in Rolfe and Nolan. Completion of this transaction has added 0.8p per share to the Directors' valuation at 30 June.
Investments
Investment activity was lower than previously: the Manager anticipates that,given the adverse trends in economic and market conditions, good businesseswill become available for purchase at more attractive prices. The Company hassubstantial liquid funds available to be deployed in this increasinglyattractive environment for investment.Since the period end, the Company has made one investment of ‚£5.2 million inAchilles, a global leader in procurement services. Further information on thisand all the Company's principal investments can be found on the Trust's websiteat www.hgcapitaltrust.com or in the Investment manager's review.
Outlook
This section of my statement sets out the Directors' views on the short andlong term prospects of the Company and, as now required by the Disclosure andTransparency Rules, the principal risks and uncertainties facing the Company inthe second half of the year.Faced by a combination of worrying trends - falling growth expectations,wholesale and retail inflation, and reduced confidence in financialinstitutions - investors have retreated from equity markets, preferring cash orother low-risk asset classes. If these conditions worsen there is risk that themarket multiples to be applied in valuing the portfolio will be affected.Market weakness has already affected the share prices of all private equityinvestment trusts and discounts to NAV have widened markedly. However, theCompany has itself converted almost all of its mature investments into cash: itis therefore well placed to protect the value of shareholders' interests duringa period of correction.Credit markets remain tight, especially in the market for the syndication ofdebt in large, highly leveraged acquisitions and refinancings; however, themid-market in which HgCapital specialises is less affected. The tightening ofthe credit markets may reduce the competition that has pushed up acquisitionprices in recent years. At the same time, as the Company has disposed ofvirtually all its mature investments, reducing exposure to financial buyers.The Company's current portfolio has mostly been acquired within the last twoyears and is generally performing according to expectations. Some businessesare more exposed to changing economic conditions than others and there is riskthat this could affect their trading, and valuations, in the months to come.However, the Board believes that the mid-market businesses in which the Companyinvests may be less exposed to general downturns in markets than businesseswith larger market share. The Manager is represented on the board of everyinvestment, enabling it to identify adverse trends early, and to ensure thatmanagement takes appropriate action. The Board receives regular reports on eachinvestment and its prospects. The portfolio is also well diversified by sectorand geographically, with 37% by value in the UK and 59% in northern Europe,principally Germany.The Company is ungeared and with its strong liquidity is in a good position totake advantage of a new environment for investment. To maintain its long-termrecord of performance it will be important for the Company to deploy its liquidfunds efficiently. The Board is confident that the Manager's specialist sectorteams are well placed to identify a strong flow of opportunities. The Boardbelieves that having substantial liquid funds at this point places the Companyin a strong position to take advantage of improving conditions for investmentas they arise, and thus to continue to reward long-term investment in theCompany's shares.Roger MountfordChairman26 August 2008
Introduction and responsibility statement
Interim management report
This Half yearly report is the first published by the Company under the Disclosure and Transparency Rules ("DTR"). The Company is required to make a number of new disclosures, including those on
this page.
The important events that have occurred during the period under review are setout in the Chairman's statement and in the Investment manager's review, whichalso include the key factors influencing the financial statements.
The principle risks and uncertainties for the remaining six months of the financial year are reviewed in the Outlook section of the Chairman's statement.
HgCapital, as Investment manager of the Company, is considered to be a relatedparty by virtue of its management contract with the Company. During the period,services with a total value of ‚£1,939,000(30 June 2007: ‚£1,736,000; 31 December 2007: ‚£3,595,000) were purchased by theCompany from HgCapital. At 30 June 2008, the amount due to HgCapital, disclosedunder creditors, was ‚£988,000 (30 June 2007: ‚£877,000; 31 December 2007: ‚£858,000). Where applicable, amounts are inclusive of VAT.‚
Responsibility statement
The Directors confirm that to the best of their knowledge:
¢â‚¬¢ - The condensed set of financial statements has been prepared in accordancewith the Statement on Half Yearly Financial Reports issued by the UK AccountingStandards Board;
¢â‚¬¢ - The Interim management report includes a full review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication ofimportant events that have occurred during the first six months of thefinancial year and their impact on the condensed set of financial statements;and a description of the principal risks and uncertainties for the remainingsix months of the year; and(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related partytransactions that have taken place in the first six months of the currentfinancial year and that have materially affected the financial position orperformance of the entity during that period; and any changes in the relatedparty transactions described in the last annual report that could do so.
This Half yearly report was approved by the Board of Directors on 26 August 2008 and the above Responsibility statement was signed on its behalf by Roger Mountford, Chairman.
HgCapital Trust plc gives the investor access to a private equity portfolio run by an experienced and well-resourced Manager who makes investments in fast growing companies over a number of geographies and sectors.
We believe our approach will continue to reward investors with superiorperformance, both relative to the public markets and its peers over the longterm.Performance recordFinancial highlights Assets at: 30.6.08 31.12.07 % (unaudited) (audited) change Net assets (‚£'000) 259,985 238,817 +8.9 Net assets per share 1,032.2p 948.2p +8.9 Share price (mid-market) 856.5p 775.0p +10.5 Revenue six months ended: 30.6.08 30.6.07 % (unaudited) (unaudited) change Net revenue (‚£'000) 7,333 3,118 +135.2 Earnings per share 29.1p 12.4p +135.2
Historical total return* performance
One year Three Five Seven Ten years years years years % p.a. % p.a. % p.a. % p.a. % p.a. Net asset value 25.9 24.6 27.0 16.6 15.8 Share price 5.6 19.4 31.7 15.3 15.8 FTSE All-Share Index (13.0) 7.2 11.3 4.0 3.5 FTSE Small-Cap Index (26.8) 1.6 8.8 2.1 3.5 Based on the Company's share price at 30 June 2008 and allowing for dividends to be reinvested, an investment of ‚£1,000 ten years ago would now be worth ‚£ 4,338. An equivalent FTSE All-Share Index return would be worth ‚£1,405. \* Total return assumes all dividends have been reinvested. Source: Capital
Economics Investment manager's review
Analysis of movements in net asset value for the six months ended 30 June 2008
Opening net asset value as at 1 January 2008 238,817 Gross revenue 11,136 Expenditure (2,161) Taxation (2,601) Dividends paid (6,297) Realised proceeds in excess of 31 December 2007 book value (excludes 16,786gross revenue) Net unrealised appreciation of investments
10,100
Carried interest provision
(5,795)
Closing net asset value as at 30 June 2008
259,985
Portfolio
The Company invests alongside other clients of HgCapital. Typically, the Company's holding forms part of a much larger stake in predominantly buyout investments of between ‚£50 million and ‚£500 million enterprise value ("EV"), controlled by HgCapital.
The Investment manager's EV generally refers to each transaction in its entirety, apart from the tables which detail the Company's participation, and where this review specifically states otherwise.
The Company's net asset value increased from ‚£238.8 million to ‚£260.0 millionduring the period under review. This arose from realised proceeds in excess ofthe book value of assets sold in the period of ‚£16.8 million and unrealisedmovements on revaluation of ‚£10.1 million, following continued strong earningsgrowth and cash generation by companies within the portfolio.
The Company realised proceeds during the period amounting to ‚£66.5 million. These proceeds arose principally from the sale of The Sanctuary Spa Group, Clarion Events, Hofmann Menƒ¼ and Boosey & Hawkes.
During the period, the Company invested a total of ‚£15.9 million including participation in one new buyout investment. This new investment was made in Casa Reha (Germany, ¢â€š¬327 million EV).
A small number of the Company's investments performed below expectations. WET has suffered from difficult market conditions, with continued pressure on margins in the car seat heating industry. The divestiture of non-core activities has been completed and a number of new initiatives are underway, including a profit improvement programme.
Activity since the period end
Since the period end, the Company has completed the acquisition of Achilles, a global leader in services for sustainable procurement. HgCapital clients invested a total of ‚£42 million.
The Company's investment in Rolfe & Nolan has been fully realised since the period end. An incremental ‚£1.4 million was distributed to the Company in addition to the ‚£6.2 million already realised and distributed from this investment. Overall, this investment achieved a 2.6x money multiple and a 41% IRR.
Realised and unrealised movements in net asset value during the period
Net unrealised Realised proceeds in appreciation of excess of 31 December 2007 investments ‚£'m book value ‚£'m (excludes gross revenue) The Sanctuary Spa - 9.0 Boosey & Hawkes - 4.5 Addison 3.8 - Clarion Events - 3.2 Visma 2.1 - Forex Gains 2.0 - Clinphone 1.4 - Pulse 1.0 - PRA 0.9 - Other and Gilts 0.4 0.1 WET (1.5) - Total 10.1 16.8Outlook
We have taken advantage of high pricing to secure our realisations at attractive prices and have sought to withdraw early from excessively price competitive new investment situations.
We believe that we are about to enter a prolonged cyclical downturn in the global economy and in capital markets. Capital is scarce and the profits and ratings of many businesses will fall. This will present a good buying opportunity for investors who are knowledgeable about the companies in the sectors they have selected for investment and, indeed, for companies whose strategy includes growth by acquisition.
The Company's portfolio is now compact and most companies are performing welland have strong teams at their helm. Accordingly they are well-placed to takeadvantage of any weaknesses in their competitors. In addition, the Company hasliquid resources of ‚£115 million, representing 44% of net assets, and will beable to exploit the weakness in pricing that we believe will arise over thenext two years.
Portfolio analysis
A diverse portfolio, invested along sector lines, with an increasing exposure to Continental Europe
At 30 June 2008 the Company's portfolio consisted of 42 investments, of which the 20 principal investments represented over 94% of the portfolio valuation.
The Company offers both sector and geographic diversification in a portfolio offast-growing small cap stocks. The valuation of the Company's unrealisedportfolio as at 30 June 2008 was ‚£154.4 million, representing 52% of netassets, which reflects the strong stream of realisations made. The Portfolio isnow relatively young, with 67% of investments acquired within the last two anda half years.
One substantial new investment was made during the period: the management buyout of Casa Reha, a leading care home operator in Germany.
Ten investments were fully realised and four partially realised, primarily through trade sales and sales to financial buyers. In aggregate, capital proceeds from these realisations produced a 60% uplift over the carrying value and a 108% uplift over cost.
Proceeds from realisations resulted in the Company ending the period with ‚£115 million of liquid assets, of which over ‚£5 million has been invested in Achilles since the period end.
Having access to substantial liquidity positions the Company well to take advantage of changing market conditions and to exploit new investment opportunities as these arise.
Asset class + Portfolio - unquoted 52% - Quoted 1% Cash & other assets 47% Valuation basis++ Earnings 45% Cost 35% Written down 7% Third party 6% Net assets 4% Quoted 2% Other 1% Sector by value++ TMT 30% Healthcare 18% Industrials 17% Services 16% Consumer & Leisure 15% Renewable energy 3% Fund 1% Deal type by value++ Buyout 91% Expansion 4% Fund 4% Venture 1% Geographic spread by value++ UK 37% Germany 23% Nordic Region 17% Benelux 11% Rest of Europe 3% North America 3% Ireland 1% Vintage by value ++ 2008 7% 2007 29% 2006 31% 2005 23% Pre 2005 10%
+Percentages are based on net assets
++Percentages are based on fixed assets and are shown by value
Investments
In the six months ended 30 June 2008 HgCapital invested ‚£84 million on behalf of its clients, including ‚£15.9 million on behalf of the Company
Company Sector Activity Deal Type Cost ‚£'000 Casa Reha Healthcare Care home operator Buyout 8,140 Other 620 New investments 8,760 Pulse Staffing Healthcare Flexible staffing services Buyout 3,008Limited in the healthcare sector Portfolio purchase Portfolio Secondary purchase of Secondary 2,710 private equity assets Other 1,423 Further investments 7,141 Total investment by 15,901the Company
Figures below refer to the total size of each acquisition, including debt raised from third parties, made by HgCapital on behalf of its clients, including the Company.
NEW INVESTMENTSCasa Reha
In January 2008, HgCapital completed the ¢â€š¬327 million buyout of Casa Reha. HgCapital clients invested a total of ¢â€š¬65 million.
Casa Reha is one of the leading German providers of elderly care services bysize, growth, and profitability. The company has a demonstrable track record ofefficiently operating and opening care homes and of growth. Furthermore themanagement team has made one successful acquisition of a sizeable competitor,Sozialkonzept. Casa Reha's current portfolio numbers 49 homes, of which sevenare new and accepting their initial residents. In addition, the company hasfive homes under construction. The group generated sales and EBITDA of ¢â€š¬123.4million and ¢â€š¬16.1 million respectively in 2007. A portion of this investmentwas syndicated to co-investors in June 2008.
FURTHER INVESTMENTS
Pulse Staffing Limited
In May 2008 HgCapital bought an additional 42% share in Pulse Staffing Limited from Bridgepoint. HgCapital clients invested a total of ‚£6.0 million.
Pulse is a leading agency provider (the second largest in the UK) of temporaryqualified healthcare staff to NHS hospitals. Around 75% of Pulse's business iswith the NHS, although other social care and private sector contracts areincreasing as a proportion of the business. Activity levels are currentlyrising, driven mainly by shortages of staff in some key specialist groups ofnurses and doctors.Portfolio purchase
The Trust took the opportunity to buy a portfolio of assets from another HgCapital client. The majority of these add to the company's existing holdings.
Realisations
In the six months ended 30 June 2008 HgCapital realised total proceeds of ‚£283 million on behalf of its clients including ‚£66.5 million for the Company
Company Sector Activity Cost Proceeds ¢â‚¬ 2008 return ¢â‚¬ ‚£'000 ‚£'000 ‚£'000 The Sanctuary Spa Consumer & Trade sale 2,401 22,435 20,034 Leisure Clarion Events TMT Financial 4,965 12,614 7,649 sale Hofmann Menƒ¼ Industrials Financial 4,747 11,413 6,666 sale Boosey & Hawkes TMT Financial 6,033 8,803 2,770 sale Other (6) 9,745 5,615 (4,130) Full realisations 27,891 60,880 32,989 Fabory Services Syndication 3,812 4,171 359 Other 322 1,477 1,155 Partial realisations 4,134 5,648 1,514 Total realisations 32,025 66,528 34,503 ¢â‚¬ Includes gross revenue received during the period. Figures below refer to the total value of each realisation, including, whereappropriate, repayment of third party debt. Proceeds to clients including theCompany are stated net of any such repayment.
FULL REALISATIONS
The Sanctuary Spa
The Sanctuary Spa operates the women's day spa `The Sanctuary', based in CoventGarden, and also owns a range of beauty products distributed through the spaand Boots the Chemist.
In January 2008 the business was sold to PZ Cussons for ‚£75 million, returning ‚£50 million to clients, which represents 4.6x original cost and an IRR of 45%.
Clarion Events
Clarion Events is the largest independent exhibition and events business in theUK. The company has a portfolio of fifty business and consumer shows, includingthe `Top Drawer' giftware trade shows, `Fine Art and Antiques', `Baby',`Caravan & Outdoor' and `House & Garden'.
In February 2008 the business was sold to a financial buyer, returning ‚£74 million to clients, which represents 2.5x original cost and an IRR of 34%.
Hofmann Menƒ¼
Hofmann Menƒ¼ is a market-leading provider of frozen food products as well asrelated on-site catering for small business canteens and social organisationssuch as care homes, hospitals and schools in Germany. Hofmann differentiatesitself from its competition by focusing on quality and a wide choice ofhealthy, tasty menus.
In January 2008 the business was sold to a financial buyer, returning ‚£58.4 million to clients, which represents 2.4x original cost and an IRR of 51%.
Boosey & Hawkes
Boosey & Hawkes is the world's leading classical music publisher. It owns, develops and exploits the largest catalogue of classical music copyrights in the world, including works by composers such as Britten, Prokofieff, Rachmaninoff, Ravel, Shostakovich and Stravinsky.
In April 2008 the business was sold to Imagem Music, returning ‚£55.8 million to clients, which represents 1.5x original cost and an IRR of 11%.
Other
Other disposals included our quoted shares in Xyratex and PRA International.Azinger Ltd, Profiad Ltd and Burns e-Commerce Solutions were also realised.These had previously been written off. Axiom, which had been underperforming inrecent years, was sold to a trade buyer in Finland.
PARTIAL REALISATIONS
Fabory
Fabory is a full-line wholesale distributor of industrial fasteners with a market-leading position in the Benelux markets. The initial investment completed in October 2007; a portion of this investment was syndicated to co-investors during February 2008.
Other
Other partial realisations included the release of escrow proceeds in respectof Schenck and PBR and the sale of the Company's interest in Biffa plc, whichwas tendered at the acquiring consortium's offer price.
Review of principal investments
1 VISMA
Sector: TMT Location: Norway Year of investment: 2006 www.visma.com
In May 2006, HgCapital completed the ‚£382 million buyout of Visma, the leadingprovider of business software in the Nordic region. HgCapital's clients hold a57% stake in this business.Headquartered in Oslo, with significant revenues throughout the Nordic region,the company provides its customer base of over 200,000 enterprises withaccounting, resource planning and payroll software, outsourced book-keeping andpayroll services in addition to debt collection and procurement.
2 Addison
Sector: TMT Location: Germany Year of investment: 2005 www.addison.de
The ¢â€š¬78 million buyout of Addison was completed in June 2005. HgCapital's clients have a 93% equity stake in the business.
Addison is a leading German applications software company that provides business-critical solutions for tax accountants and SMEs. It develops, licences and manages standard and sector-specific software for bookkeeping, accounts production, tax, cost accounting, payroll administration and corporate planning.
In December 2005, HgCapital made a further investment in Addison of ¢â€š¬14 millionto fund the acquisition of its competitor PBSG, and in November 2007 arecapitalisation of the business was completed, returning ‚£28 million toclients. This recapitalisation included an acquisition facility to enable thecompany to pursue its growth strategy.
3 Voyage Group
Sector: Healthcare Location: UK Year of investment: 2006 www.milburycare.com
In April 2006, HgCapital completed the ‚£322 million buyout of Voyage Group (formally known as Paragon Healthcare). HgCapital's clients have a 52% stake in this business.
Voyage owns and operates small community-based homes for adults with learningdisabilities and associated physical disabilities, autistic spectrum disorders,complex needs and acquired brain injury.
The company currently operates 1,750 places in 242 homes across England and Scotland.
4 Casa Reha
Sector: Healthcare Location: Germany Year of investment: 2008 www.casa-reha.de
In January 2008, HgCapital completed the ¢â€š¬327 million buyout of Casa Reha. HgCapital's clients have a 36.9% stake in the business.
Casa Reha is one of the leading German providers of elderly care services bysize, growth, and profitability. The company has a demonstrable track recordof efficiently operating and opening care homes. It has also successfullyacquired a sizeable competitor, Sozialkonzept. Casa Reha's current portfolionumbers 49 homes, of which seven are new and accepting their initialresidents. In addition, the company has five homes under construction. Thegroup generated sales and EBITDA of ¢â€š¬123.4 million and ¢â€š¬16.1 millionrespectively in 2007. In June 2008 a portion of this investment was syndicatedto co-investors.5 Atlas
Sector: Services Location: UK Year of investment: 2007 www.atlasinteractive.co.uk
In November 2007, HgCapital completed the ‚£25 million acquisition of PetrolearnLimited, also known as Atlas Interactive. HgCapital's clients have a 57% stakein the business.Atlas interactive is a global business providing Health, Safety andEnvironmental and other regulatory and technical compliance services to theglobal energy sector. Based in Aberdeen, it is the largest player in the NorthSea region with more than 30% market share and its global operations extend toSouth America, Africa, the Middle East and the Caspian region. It benefits fromdeep-rooted customer relationships with all of the major oil and gas companies,which subscribe to Atlas's suite of intellectual property-protected e-learningcontent and training services. Atlas is currently responsible for ensuring thatapproximately 250,000 oil and gas workers stay up to date with safety-criticalbest practice and technical knowledge, ensuring that they are fit for offshorework.6 Fabory
Sector: Services Location: Benelux Year of investment: 2007 www.fabory.com
In October 2007, HgCapital acquired Fabory from AAC Capital Partners for a consideration of ¢â€š¬345 million. HgCapital's clients hold a 52% stake in this business.
Fabory is a full-line wholesale distributor of industrial fasteners with amarket-leading position in the Benelux markets. Key features of Fabory'sbusiness model are its well-invested infrastructure and very high service andavailability levels, enabling it to charge premium prices to a relativelyprice-insensitive customer base. Fabory delivers fasteners direct to customersor through its B2B retail concept (`Fabory Centres'). The company plans to rollout the Fabory Centre concept in the high growth economies of Central & EasternEurope.
In February 2008 a portion of this investment was syndicated to co-investors.
7 Mondo Minerals
Sector: Industrials Location: Nordic region Year of investment: 2007 www.mondominerals.com
In November 2007, HgCapital completed the ¢â€š¬230 million acquisition of Mondo Minerals OY. HgCapital's clients have a 91% stake in the business.
Mondo is the world number two in talc mining and processing with 2007 revenuesof ¢â€š¬134 million. The core markets for Mondo are the paper and paint industries,where it holds a market share of 65% and 40% respectively in Europe. Mondosupplies the majority of the talc demand for paper producers in Finland, ahighly regional market. Talc is a base chemical with multiple provenapplications and Mondo has secure raw material reserves representing more than40 years' production.8 Sporting Index
Sector: Consumer & Leisure Location: UK Year of investment: 2005 www.sportingindex.com
The ‚£75.8 million buyout of Sporting Index was completed in November 2005. HgCapital's clients acquired a 70% equity stake in the business.
Founded in 1992, Sporting Index is the recognised leader in sports spreadbetting, with a market share of approximately 70% in the UK. It offers agreater variety of bets (approximately 23,000) and more choice than any othersports spread betting company. It is also the only sports spread bettingcompany to offer continuous 24-hour betting and sports spread betting on SkyTV. It is regulated by the FSA and
does not have a US presence.
9 SLV
Sector: Industrials Location: Germany Year of investment: 2007 www.slv.de
In August 2007, HgCapital completed the ¢â€š¬320 million acquisition of SLV Group. HgCapital's clients have a 67% stake in the business.
SLV is a fast-growing and highly profitable German provider of innovativelighting systems. Since 2000, the company has established a unique businessmodel focused on B2B. SLV has a competitive advantage in the areas of productdevelopment and design, production, warehousing, and logistics anddistribution. The company is positioned at the lower end of the premium market,providing superior quality at attractive prices. Today SLV generates 45% ofsales abroad. Manufacturing is outsourced predominately to China, providing aconsiderable cost advantage. The company also benefits from long-establishedrelationships with suppliers.
10 SHL
Sector: Services Location: UK Year of investment: 2006 www.shl.com
In November 2006, HgCapital completed the ‚£100 million buyout of SHL. HgCapital's clients have a 72% stake in the business.
SHL is the UK market leader in objective psychometric testing and has a globalpresence, with a network of offices spanning 25 countries. The core businessconsists of the development and sale of 300 psychometric tests to corporateclients, covering areas such as numerical ability, verbal reasoning andpersonality fit. In excess of 50% of sales are online and on-demand, the easeand practicality of which is transforming the psychometric testing market. SHLalso provides psychologists for the administration and interpretation of tests.
The Company's top 20 investments by value
Investment portfolio Company Sector Residual Valuation Year of Portfolio Cum cost ‚£ ‚£'000 investment value % Value '000 % 1 VISMA Holdings TMT 13,326 16,015 2006 11.7% 11.7% 2 Addison Luxembourg TMT 2,296 11,312 2005 8.3% 20.0% SA 3 Voyage Group Ltd Healthcare 8,755 8,755 2006 6.4% 26.4% 4 Casa Reha SARL Healthcare 8,140 8,659 2008 6.3% 32.7% 5 Atlas Energy Group Services 8,153 8,153 2007 6.0% 38.7% Ltd 6 BMFCO UA (t/a Services 7,059 7,998 2007 5.8% 44.5% Fabory) 7 Mondo Minerals Industrials 7,004 7,931 2007 5.8% 50.3% Co-op 8 Sporting Index Consumer & 7,186 7,186 2005 5.3% 55.6% Group Ltd Leisure
9 SLV Electronik SARL Industrials 5,962 6,939 2007 5.1% 60.7%
10 SHL Group Holdings Services 6,489 6,889 2006 5.0% 65.7% 1 Ltd 11 Elite Holding SA TMT 5,749 6,162 2005 4.5% 70.2% (t/a Sitel Semiconductor) 12 Schleich Luxembourg Consumer & 4,634 5,452 2006 4.0% 74.2% SA Leisure 13 Americana Consumer & 4,619 4,618 2007 3.4% 77.6% International Leisure Holdings Ltd
14 Pulse Staffing Ltd Healthcare 3,457 4,285 1999 3.1% 80.7%
15 Cornish Bakehouse Consumer & 4,200 4,200 2007 3.1% 83.8% Investments Ltd Leisure 16 W.E.T Holding Industrials 7,590 3,892 2005 2.8% 86.6% Luxembourg SA 17 Hg Renewable Power Renewable 4,409 3,811 2006 2.8% 89.4% Partners LP energy 18 Software (Cayman), TMT 530 2,511 2006 1.8% 91.2% LP - re IRIS 19 Clinphone Plc* Healthcare 315 2,224 1996 1.6% 92.8% 20 FTSA Holdings Ltd Industrials 6,813 1,962 2004 1.4% 94.2% Total (Top 20 116,686 128,954 94.2% 94.2% Investments) Other investments 15,732 7,889 5.8% 100.0% (22) Total All 132,418 136,843 100.0% 100.0% investments (42)
*Listed on the London Stock Exchange
Income statement
for the six months ended 30 June 2008
Note Revenue return Capital return Total return Six months Year Six months Year Six months Year ended ended ended ended ended ended 30.06.08 30.06.07 31.12.07 30.06.08 30.06.07
31.12.07 30.06.08 30.06.07 31.12.07
‚£'000 ‚£'000 ‚£'000 ‚£'000
‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000
(unaudited) (unaudited) (audited) (unaudited) (unaudited)
(audited) (unaudited) (audited) (unaudited)
Gains on - - - 26,886 31,046 55,714 26,886 31,046 55,714investments and government securities Carried - - - (5,795) (5,252) (6,189) (5,795) (5,252) (6,189)interest provision Income 5 11,136 5,195 12,129 - - - 11,136 5,195 12,129 Investment 6 (450) (407) (840) (1,350) (1,222) (2,519) (1,800) (1,629) (3,359)management fee Other 7 (361) (352) (669) - - - (361) (352) (669)expenses (a) Net return 10,325 4,436 10,620 19,741 24,572 47,006 30,066 29,008 57,626on ordinary activities before taxation Taxation on (2,992) (1,318) (3,174) 391 367 756 (2,601) (951) (2,418)ordinary activities Transfer to 7,333 3,118 7,446 20,132 24,939 47,762 27,465 28,057 55,208reserve Return per 29.11p 12.4p 29.56p 79.93p 99.0p 189.63p 109.04p 111.4p 219.19pordinary share The total column of this statement represents the Company's income statement. The supplementary revenue and capital return columns are both prepared under guidance published by the Association of Investment Companies ("AIC"). All
recognised gains and losses are disclosed in the revenue and capital columns of the income statement and as a consequence no statement of total recognised
gains and losses has been presented. All revenue and capital items in the above statement derive from continuing
operations.
Final dividend for the year ended 31 December 2007 of 25.00p (‚£6,297,000) declared on 13 March 2008 and paid on 12 May 2008. Final dividend for the year ended 31 December 2006 of 14.00p (‚£3,526,000) declared on 13 March 2007 and paid on 1 May 2007.
Balance sheetas at 30 June 2008 30.6.08 30.6.07 31.12.07 ‚£'000 ‚£'000 ‚£'000 (unaudited) (unaudited) (audited)Fixed assets
Investments held at fair value
Quoted at market valuation 2,224 7,321 6,482 Unquoted at Directors' valuation 134,619 146,918 147,885 Total 136,843 154,239 154,367 Current assets Debtors 17,655 12,684 13,906 Government securities 112,203 50,203 79,723 Cash 2,742 4,098 117 Total 132,600 66,985 93,746 Creditors - amounts falling due within (9,458) (9,558) (9,296)one year Net current assets 123,142 57,427 84,450 Net assets 259,985 211,666 238,817 Capital and reserves Called up share capital 6,296 6,296 6,296 Share premium account 14,123 14,123 14,123 Capital redemption reserve 1,248 1,248 1,248 Capital reserve - realised 219,922 164,354 197,852 Capital reserve - unrealised 3,744 16,357 5,682 Revenue reserve 14,652 9,288 13,616 Total equity shareholders' funds 259,985 211,666
238,817
Net asset value per ordinary share 1,032.2p 840.4p
948.2p
Cash flow statement
for the six months ended 30 June 2008
Note Six months Six months Year ended ended ended 31.12.07 30.6.08 30.6.07 ‚£'000 ‚£'000 ‚£'000 (audited) (unaudited) (unaudited) Net cash inflow (outflow) from 7(b) 18 (5,387) (2,259)operating activities Taxation paid (3,026) (8) (2,137)
Capital expenditure and financial
investment Purchase of fixed asset investments (15,901) -
(50,757)
Proceeds from the sale of fixed asset 61,340 38,390 103,283investments Net cash inflow from capital 45,439 27,309 52,526
expenditure and financial investment
Equity dividends paid (6,297) (3,526) (3,526) Net cash inflow before management of 36,134 18,388 44,604liquid resources Management of liquid resources (33,509) (16,558)
(46,755)
Increase in cash in the period 2,625 1,830
(2,151)
Reconciliation of movements in shareholders' funds
for the six months ended 30 June 2008
Note Share Share Capital Capital Revenue Total capital premium redemption reserves reserve ‚£'000 ‚£'000 account reserve ‚£'000 ‚£'000 ‚£'000 ‚£'000 At 31 December 2007 6,296 14,123 1,248 203,534 13,616 238,817 Net return from ordinary - - - 20,132 7,333 27,465activities(1) Dividends paid(2) 3 - - - - (6,297) (6,297) At 30 June 2008 6,296 14,123 1,248 223,666 14,652 259,985 At 31 December 2006 6,296 14,123 1,248 155,772 9,696 187,135 Net return from ordinary - - - 47,762 7,446 55,208activities Dividends paid(3) 3 - - - - (3,526) (3,526) At 31 December 2007 6,296 14,123 1,248 203,534 13,616 238,817 1 Unaudited.
2 Final dividend for the year ended 31 December 2007 of 25.00p (‚£6,297,000) declared on 13 March 2008 and paid on 12 May 2008.
3 Final dividend for the year ended 31 December 2006 of 14.00p (‚£3,526,000) declared on 13 March 2007 and paid on 1 May 2007.
Notes to the financial statements
1. Principal activity
The principal activity of the Company is that of an investment company within the meaning of section 833 of the Companies Act 2006.
2. Basis of preparation
The accounts have been prepared in accordance with applicable AccountingStandards and with the Statement of Recommended Practice `Financial Statementsof Investment Trust Companies' (SORP), dated January 2003 and revised inDecember 2005. All of the Company's operations are of a continuing nature. Thesame accounting policies used for the year ended 31 December 2007 have beenapplied.
3. Dividends
It is intended that dividends will be declared and paid annually in respect ofeach accounting period. A dividend of 25.00p per share, declared on 13 March2008 as a final dividend, was paid on 12 May 2008 in respect of the year ended31 December 2007 (year ended 31 December 2006: 14.00p per share, declared on 13March 2007 and paid on 1 May 2007).
4. Issued share capital
There were 25,186,755 ordinary shares in issue for the six months ended 30 June 2008 and 30 June 2007; and the year ended 31 December 2007.
5. Income Six months Six months Year ended ended ended 31.12.07 30.6.08 30.6.07 ‚£'000 ‚£'000 ‚£'000 (audited) (unaudited) (unaudited) Income from investments UK and overseas unquoted investment 8,765 3,567 8,305income
UK dividends from unquoted investments 6 42
41 8,771 3,609 8,346 Other income Gilt interest 2,271 1,539 3,650 Deposit interest 94 47 133 2,365 1,586 3,783 Total income 11,136 5,195 12,1296. Investment management fee Revenue return Capital return
Investment management Six months Six months Year Six months Six
months Yearfee ended ended ended ended ended ended 30.6.08 30.6.07 31.12.07 30.6.08 30.6.07 31.12.07 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) Investment management fee 450 347 745 1,350 1,040 2,235 Irrecoverable VAT thereon - 60 95 - 182 284 450 407 840 1,350 1,222 2,519The investment management fee is levied quarterly in arrears. Investmentmanagement fees are charged 75% to capital and 25% to revenue. VAT on theInvestment manager's fees in prior years is subject to a claim but the outcomeis uncertain and no revenue arising from this claim has been recognised at
thisstage.7. Other expenses(a) Operating expenses Six months Six months Year ended ended ended 31.12.07 30.6.08 30.6.07 ‚£'000 ‚£'000 ‚£'000 (audited) (unaudited) (unaudited)
Custodian and administration fees 146 111
249 Other administration costs 215 241 420 361 352 669(b) Reconciliation of net revenue return before taxation to net cash flow fromoperation activities Six months Six months Year ended ended ended 31.12.07 30.6.08 30.6.07 ‚£'000 ‚£'000 ‚£'000 (audited) (unaudited) (unaudited) Net return before taxation 30,066 29,008 57,626 Gains on investments held at fair value (26,886) (31,046) (55,714) Carried interest provision (394) 515 1,452 Increase in accrued income (3,754) (4,000) (5,237) Decrease in debtors 5 - 15 Increase/(Decrease) in creditors 981 139
(397)
Tax on investment income included - (3)
(4)within gross income Net cash inflow/(outflow) from 18 (5,387) (2,259)operating activities 8. Capital commitments
At 30 June 2008, investment purchases of ‚£12,048,000 (30 June 2007: ‚£11,426,000 and 31 December 2007: ‚£11,900,000) had been authorised and contractually committed, including an undrawn commitment to Hg Renewable Power Partners LP.
9. Publication of non-statutory accounts
The financial information contained in this Half yearly report does notconstitute statutory accounts as defined in Section 240 of the Companies Act1985. The financial information for the six months ended 30 June 2008 and 2007has not been audited. The information for the year ended 31 December 2007 hasbeen extracted from the latest published audited financial statements, whichhave been filed with the Registrar of Companies. The report of the auditors onthose accounts contained no qualification or statement under section 237(2) or(3) of the Companies Act 1985.
10. Annual results
The Board expects to announce the results for the year ending 31 December 2008 in March 2009.
The Annual report should be available by the end of March 2009, with the Annual General Meeting being held in May 2009.
Independent review report
to HgCapital Trust plc
Introduction
We have been engaged by the Company to review the condensed set of financialstatements in the Half yearly financial report for the six months ended 30 June2008 which comprises the Income statement, Balance sheet, Cash flow statement,Reconciliation of movements in shareholders' funds and the related notes 1 to10. We have read the other information contained in the Half yearly financialreport and considered whether it contains any apparent misstatements ormaterial inconsistencies with the information in the condensed set of financialstatements.This report is made solely to the company in accordance with guidance containedin ISRE 2410 (UK and Ireland) "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board. To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the company, for our work, for thisreport, or for the conclusions we have formed.
Directors' responsibilities
The Half yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 2, the annual financial statements of the company are prepared in accordance with United Kingdom Generally Accepted Accounting Practice. The condensed set of financial statements included in this Half yearly financial report has been prepared in accordance with the Accounting Standards Board Statement "Half-Yearly Financial Reports".
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensedset of financial statements in the Half yearly financial report based on ourreview.Scope of review
We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly,we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us tobelieve that the condensed set of financial statements in the Half yearlyfinancial report for the six months ended 30 June 2008 is not prepared, in allmaterial respects, in accordance with the Accounting Standards Board Statement"Half-Yearly Financial Reports" and the Disclosure and Transparency Rules ofthe United Kingdom's Financial Services Authority.Ernst & Young LLPLondon26 August 2008
Management and administration
Board of DirectorsRoger Mountford (Chairman)Timothy AmiesPiers BrookeRichard BroomanPeter GaleAndrew MurisonHgCapital Trust plc2 More London RiversideLondonSE1 2APwww.hgcapitaltrust.comRegistered office(Registered in England No. 1525583)2 More London RiversideLondonSE1 2APInvestment managerHgCapital* ¢â‚¬ 2 More London RiversideLondonSE1 2APTelephone: 020 7089 7888www.hgcapital.comSecretary and administratorHgCapital* ¢â‚¬ 2 More London RiversideLondonSE1 2APTelephone: 020 7089 7888StockbrokerWinterflood Securities*The Atrium BuildingCannon Bridge25 Dowgate HillLondonEC4R 2EATelephone: 020 7621 0004www.winsresearch.co.ukRegistrarComputershare Investor Services PLC*The PavilionsBridgwater RoadBristolBS99 6ZYTelephone: 0870 702 0131Independent auditorErnst & Young LLP1 More London PlaceLondonSE1 2AFAICAssociation of Investment Companieswww.theaic.co.uk
HgCapital Trust is a member of the Association of Investment Companies
iPEIT
Initiative for Private Equity Investment Trustswww.ipeit.comHgCapital Trust is a founder member of the Initiative for Private EquityInvestment Trusts (iPEIT). This group of UK-listed PEITs was formed to raiseawareness and increase understanding of what PEITs are and how PEITs enable allinvestors - not just institutions - to invest in private equity. iPEIT providesinformation on PEITs and private equity in general, undertakes and publishesresearch on the PEIT sector and works to improve levels of knowledge aboutPEITs among investors and their advisors.
*Authorised and regulated by the Financial Services Authority.
¢â‚¬ HgCapital is the trading name of Hg Pooled Management Limited
vendorRelated Shares:
HgCapital Trust plc