HgCapital (HGT) had an excellent 2019 with its NAV and shares increasing by 20.8% and 47.5% (both total return) over the year to 31 December 2019.
HGT noted revenue and EBITDA growth of 24% and 35% across the top 20 investments (92% of the portfolio) over the last twelve months. £117m of cash was returned to HGT through realisations at uplifts to book value and refinancings.and the portfolio had a valuation multiple (EV/EBITDA) of 19.8x and net debt to EBITDA ratio of 6.2x for the top 20 investments.
Manager’s outlook
The manager made the following points in the outlook section of the report released this morning:
- HGT continues to invest in “sweet-spot” businesses in eight end-markets, or “clusters”, where it has many years’ knowledge;
- A focus on operational improvement continues to drive performance and deliver significant network benefits;
- Further liquidity events expected over the next twelve months through both exits and refinancings; and
- Robust double-digit trading performance underpins confidence in the ongoing growth of a strong portfolio.
The company also noted: “We have never seen more opportunity to back great software and tech-enabled service companies that are changing how we all do business.
We continue to see the impact of positive trends driving technology growth for the next 10 to 20 years, including:
- the automation of routine tasks; Software used to save time and improve accuracy in business processes;
- the rise of software interconnectivity; through the use of application program interfaces (‘APIs’) that let software talk to software, thereby exponentially increasing the amount of usable data available for businesses; and
- increased desire from governments for regulatory visibility on businesses (and citizens); in almost all B2B software there are compliance and government tailwinds.
HGT: HgCapital reports on excellent year