A “resilient” first half performance saw ICG Enterprise Trust (ICGT) post a 3.3% total investment return in the six months to 31 July.
At a time when markets are gripped by the rapid rollout of artificial intelligence and unnerved by rising inflation and government debts, the £1.3bn private equity portfolio said its growth was driven across “multiple investment areas”.
Overall, portfolio companies continued to grow with revenue and operating profits up 11% and 16% respectively over 12 months. The global portfolio is diversified with its top 30 holdings accounting for 37% of assets.
Direct investments, where ICGT invests in private companies alongside a fund manager, returned 6.8%, while “primary” investments in private equity funds bought at launch grew 2.6%. These were offset by a 3.2% decline in “secondary” stakes in private equity funds bought from other investors.
The investment trust’s best three performers in the half year were all US companies: Brooks Automation, a semiconductor support services provider, pest controller Greenix and New York-based accountants CohnReznick.
Portfolio manager Oliver Gardey continued to recycle capital, making £84m of further disposals, the biggest of which was the £23m exit from Boston-based Curium Pharma.
A further £70m of proceeds may come in the second half from the exit of Exail, a French provider of autonomous systems for the aerospace and maritime sectors that is its biggest holding at 3.4%.
The 3%-yielder returned £20m through share buybacks and declared a second quarterly dividend of 9.5p per share as part of its 42p target for the financial year, a rise of 8% on last year.
It made £65m of new investments and £104m of new fund commitments to its in-house manager Intermediate Capital Group (ICG) and other external managers including Gridiron, TJC and Archimed.
This left it with total cash and untapped borrowing of just over £190m.
“With high liquidity and low net debt, ICGT has flexibility for new investments, buybacks and dividends to continue to optimise returns for shareholders,” said Gardey. The company cut its annual management fee to ICG by 20% in June.
ICGT said its five-year growth in net asset value (NAV) of 49% had supported a 52% total return to shareholders equivalent to 8.7% a year. At £13.82, the shares stand 34% below NAV per share of £20.91 at 31 July. The wide discount reduces its market value to £829m.
Our view
Richard Williams, senior analyst at QuotedData, said: “A more encouraging half for ICGT, with its 3.3% NAV return reversing the decline recorded in the comparable period last year. Healthy earnings growth from the underlying portfolio companies and the 24 full exits achieving an average 9.4% premium to carrying value were positives. However, with the share price down 4.8% over the half despite improving NAV performance, the disconnect between underlying portfolio progress and investor sentiment remains frustrating. Continued realisations above carrying value, alongside disciplined capital allocation, should help make the case for a narrower discount.”
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