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Hg Capital NAV surpasses £1bn over third quarter

Hg Capital NAV surpasses £1bn over third quarter – Hg Capital (HGT) has provided an update covering the third quarter period to 30 September 2019. Over the year to date, the company’s total return shares and NAV have returned 32% and 18%, respectively. HGT’s NAV went past £1bn over the period.

Q3 investments and realisations

  • On the investments front, a further £2m was invested on HGT’s behalf by the Hg Mercury 2 Fund into Rhapsody. In September, the Hg Mercury 2 Fund made a further bolt-on investment in Rhapsody. Headquartered in Boston, USA, Rhapsody is a global leader in healthcare interoperability and data liquidity solutions. Their software serves public and private hospitals, health systems, health information exchanges, OEM vendors, public health departments and federal government organisations.
  • Elswhere, another bolt-on investment saw a further £1m invested in Teamblue, a leading mass hosting business in Belgium and Denmark, acquired Register (formerly DADA), a pan-European mass hosting company.
  • On the realisations front, £16m was returned to the company from its investment in Register (a leading
    mass hosting business in Belgium and Denmark) and £11m was returned from Asper (HGT’s interest in the Asper RPP II was sold to two strategic buyers, as part of a wider
    secondary sale process.

In its outlook statement, HGT said: “We continue to have an active pipeline of investments and over Q3 2019 this has been demonstrated with the investment into Argus Media announced in October. Over the period we have put further money to work into team.blue to fund further M&A. A total of £4 million has been deployed during the period on behalf of the company. We believe that, especially in the current market environment, the clarity and distinctive focus of our strategy as a disciplined investor provides us with several clear advantages. Specifically, we will continue to concentrate on companies that provide non-discretionary, business-critical products or services, to fragmented customer bases, and which benefit from strong contracted or recurring revenues. This should enable us to identify opportunities that will generate strong, risk adjusted returns for our clients across market cycles.

Despite the persisting heat of the current market, we do continue to see attractive investment opportunities in our target clusters, just as we did in the closing stages of the last period of high valuations, in 2005 to 2008. Hg will continue to invest selectively, capitalising on situations where we have a specific angle and have built many years of knowledge of the business and its end market clusters, and strong relationships with the founders and management teams. Indeed, the relative de-risking of our existing portfolio over the past two years gives our investment teams more time and space to consider attractive new investments in our core areas of focus, across our funds and the size spectrum.

We also remain highly focused in this market environment on making accretive bolt-on acquisitions into our existing portfolio companies. In Q3 2019, we have supported bolt on activity at Rhapsody and team.blue. We expect this portfolio M&A activity to continue in line with recent activity levels.

Over the third quarter of 2019, Hg has returned over £27 million to the company through the sale of register and a partial sale of the renewable assets. In addition, we have seen further returns
from the refinancings of Commify and EidosMedia. Going forward we will continue to focus on opportunities to crystallise value across our portfolio, with further exit and refinancing processes currently underway.

The portfolio is in good health overall and growing strongly. Trading over the last twelve months has continued to generate double digit sales and EBITDA growth across almost all the businesses we are invested in. Given their defensive growth characteristics and our focus on protected business models, we believe our current investments are well positioned to continue to create value on both an absolute and relative basis going forward, even if macro-economic conditions deteriorate.”

HGT: Hg Capital NAV surpasses £1bn over third quarter

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