London, UK, 16 November 2022

Edison issues update on HgCapital Trust (HGT)

HgCapital Trust (HGT) posted a 2.3% increase in NAV per share total return (TR) in Q322, as positive earnings growth across the portfolio over the last 12 months (LTM) again outweighed multiple contraction. Despite the latter, the average EV/LTM EBITDA across HGT's top 20 holdings stands at 28.8x vs 27.4x at end-2021 (see our previous note for a discussion on HGT's valuations). The weaker global economy and tightening credit conditions weigh on both HGT's near-term portfolio performance outlook and private equity deal activity. Still, the secular digitalisation trend remains intact with, as Gartner forecasted in October 2022, growth in global software and IT services spending of 11.3% and 7.9% in 2023, respectively. HGT's shares trade at a 18% discount to NAV, while they traded close to NAV in 2021.

HGT closed £221m of new investments in Q322 (mostly related to IFS/Workwave and Ideagen). A further £231m was invested post period-end, though we note that most of it is the refinancing of Access (see our previous note for details) completed in October 2022, which overall resulted in net realisation proceeds (before carried interest) of c £84.0m for HGT. We calculate that HGT's net investment from the remaining transactions post end-September 2022 was c £66.5m. Except for the £9m investment in TrustQuay, a technology provider to the trust, corporate and fund services industry (completed in October 2022), all the other deals were already made public at the time of the H122 results release in September 2022. Meanwhile, HGT also announced the merger of Ideagen and ProcessMAP, two of its portfolio companies, resulting in a combined uplift of 6% to end-August 2022 valuations.  

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