HgCapital Trust (HGT) Q3 2024 earnings summary

Executive summary

• Net assets and market capitalisation stood at £2.4 billion as of 30 September 2024, with a share price of 515.0p and NAV per share of 521.3p.

• Delivered a 20.1% annualized share price return over 10 years, significantly outperforming the FTSE All-Share Index.

• Portfolio is diversified by sector, geography, and investment vintage, with top 20 investments representing 76% of value and strong presence in Tax & Accounting, ERP & Payroll, and Legal & Regulatory Compliance.

• Provides access to a private software portfolio valued at over $150bn EV, focused on resilient, high-margin, recurring revenue business models.

• Portfolio performance was strong at the company level, but adverse FX movements offset gains, resulting in a marginally negative NAV performance for Q3.

Financial highlights

• Share price total return of 20.1% p.a. and NAV per share return of 18.4% p.a. over 10 years to 30 September 2024.

• £349m of realisations YTD 2024 (14% of opening portfolio), with average uplift of 16% to carrying value.

• £523m invested YTD 2024, a significant increase from £46m in YTD 2023, including £109m of fee-free co-investment.

• LTM sales growth for top 20 investments: 20%; LTM EBITDA growth: 24%; 34% EBITDA margin.

• 20-year total share price return: 2,141%; annualised NAV per share total return: 15.9% p.a.; annualised share price total return: 16.8% p.a.

Outlook and guidance

• Resilient trading performance expected to continue, supported by the mission-critical nature of portfolio companies' products and services.

• Double-digit sector earnings growth anticipated for 2024, with robust organic growth as the long-term value driver.

• Improving deal environment and steady earnings growth expected to drive further investment activity and liquidity events.

• Q4 2024 newsflow expected to be lukewarm due to tough comparators, but underlying software spend drivers remain strong.

• Long-term opportunity remains strong as automation and software adoption rise to address productivity and labor cost challenges.