HgCapital Trust Announces Strong FY23 Performance with Notable Earnings Growth and Realisations

HgCapital Trust (HgT) reported a considerable 11.1% NAV total return for the fiscal year 2023, affirming its strong performance with five- and ten-year returns at 20.4% and 18.4% per annum, respectively. This achievement is largely attributed to the significant earnings momentum across its investment portfolio. Despite a challenging environment for private equity exits, HgT successfully generated £345.9 million in total realisation proceeds, excluding carried interest, within the year.

A notable narrowing in the discount to NAV, now approximately 6% compared to about 22% at the end of 2022, reflects the market's positive response to HgT's financial achievements. The trust's commitment coverage ratio stands at a healthy 73%, showcasing its robust financial health. HgT's top 20 holdings demonstrated exceptional performance, with sales and EBITDA growth at 25% and 30% in 2023, respectively, including an organic EBITDA growth of 19%. This growth surpasses the 12% recorded by its listed US software and services counterparts, highlighting HgT's portfolio's superior quality and focus on margin improvements.

HgT's adherence to the 'Rule of 40', demonstrating both growth and profitability, is evident from an average margin of 31% across its top 20 holdings. This, paired with significant 'buy-and-build' activity, facilitated earnings growth and supported returns through advantageous multiples arbitrage.