Literacy Capital (BOOK) has released its final results for the year to 31 December 2024. The private equity investment trust, which focuses on direct investments in smaller, privately owned UK businesses, reported a 1.5% decline in NAV per share over the year, closing at 492.8p. Including the impact of a post-period bolt-on acquisition by portfolio company Halsbury Travel, the adjusted NAV per share would have been 499.2p, reflecting an adjusted net asset base of £300.4m.
The share price declined by 5.4% during the year, underperforming the All-Share, which BOOK says returned 9.5%, and the All-Share Closed-End Investment Trust Index, which BOOK says returned 8.7%. While the reported figures mark a rare negative year for the trust, BOOK’s long-term performance remains impressive, with a total NAV return of +392.8% since inception in 2018, and +77.8% over the past three years.
Investment activity picks up; NAV impacted by two large holdings
During 2024, BOOK deployed £41.1m into new and existing holdings – a 22.3% increase over 2023. This included three new platform investments and several follow-ons to support portfolio growth. However, cash realisations were more muted, totalling £30.1m, compared to £46.3m in the previous year. Most of this was from the refinancing of two portfolio companies, while the sale of a private equity fund interest at an 8.2% premium helped reduce exposure to fund investments.
The trust’s NAV was weighed down by the performance of two significant holdings, which together accounted for £33.6m of NAV decline and nearly a quarter of the portfolio at the start of the year. Both businesses have since been restructured with new management teams and now represent a reduced 16% of NAV. BOOK says that the early signs in 2025 suggest their outlooks have stabilised.
Despite the disappointing short-term impact, CEO Richard Pindar emphasised that these events are “not unusual in private equity” and reiterated the importance of long-term thinking and value creation over multiple years.
“Our strategy has not changed. We continue to focus on smaller, often overlooked private companies where competition is limited, and where we can add significant value through operational improvement and leadership alignment.”
Conservative approach and low (albeit increased) fees remain a differentiator
At year-end, the weighted average EV/EBITDA multiple for Literacy’s top ten investments (representing 87.7% of NAV) was 8.8x, a modest decline from 9.4x at the end of 2023, reflecting a cautious stance given the UK macroeconomic backdrop. Net debt to EBITDA rose to 2.3x, up from 1.6x the year before, due primarily to refinancing activity.
The fund maintains its unique fee structure, with no performance fees and a historically low base management fee. From 1 January 2025, the base fee will increase from 0.9% to 1.5%, which BOOK is keen to emphasise is still below many peers investing directly in private equity. Pindar highlighted that the structure continues to align the interests of the management team with shareholders.
Charitable mission “remains integral”
Consistent with its founding principles, Literacy Capital continued to donate to educational causes, focusing on disadvantaged children in the UK. Total charitable contributions now stand at £11.2m since inception.
Outlook
The team says that it remains disciplined in capital deployment, with a strong pipeline of opportunities already building into 2025. Further refinancings are underway, which should support new investment activity and reduce reliance on short-term debt facilities. Pindar concluded: “We remain confident in our strategy and the portfolio’s positioning. The businesses we back are often under the radar but have strong fundamentals and long-term growth potential. The challenges of 2024 are not representative of the strength or trajectory of the fund.”
