TIDMBOOK
RNS Number : 5016K
Literacy Capital PLC
29 August 2023
The information contained in this announcement is restricted and
is not for publication, release or distribution in the United
States of America, any member state of the European Economic Area,
Canada, Australia, Japan or the Republic of South Africa.
This announcement contains inside information.
29 August 2023
Literacy Capital plc
Quarterly trading update and NAV announcement for Q2 2023
"Another transaction at a significant premium to carrying value
helps to deliver
a NAV return of +4.5% in Q2 and a twelve month return of
+41.3%"
Literacy Capital plc ("Literacy", "BOOK" or the "Company"), a
listed investment trust primarily focused on investing directly
into private businesses based in the UK, today announces its
quarterly trading update and NAV update for the three months ending
30 June 2023.
Q2 Highlights:
-- Net asset value ("NAV") per share of 488.5p (Q1'23: 467.3p)
and NAV of GBP293.1m (Q1'23: GBP280.4m).
-- Total NAV return (after all fees and charitable donation
provisions) of +4.5% in the last three months, a net uplift
of GBP12.7m (21.2p per share). The NAV return over the
last twelve months is +41.3%.
-- The uplift generated from the asset we agreed to sell
was the largest contributor in Q2, with its valuation
uplifted to match the terms of the transaction that was
announced today. The sale represented a 53.8% premium
to the March 2023 carrying value, adding GBP7.6m to NAV
in Q2. The remaining portfolio companies also contributed
positively overall in the quarter.
-- Cash proceeds over the rest of the year will be healthy,
exceeding the amounts received in H1. The cash from the
sale announced today will be used to fully repay the RCF
once it is received, before it is recycled into new investment
opportunities.
-- Share price performance was strong in the quarter, rising
16.4%, and outperforming its benchmark indices again.
The trust will have net cash in H2 and will consider buying
back shares, if the share price fails to keep pace with
NAV.
Commenting on the Q2 performance, CEO of BOOK's investment
manager, Richard Pindar, said:
"Literacy Capital continued to make good progress in Q2,
generating a 4.5% NAV return in the three month period. The NAV
return over the last twelve months exceeds 41%.
The largest contribution to this performance in the quarter was
from the uplift on the transaction announced today. The sale of
this investment is further validation of BOOK's model and
investment strategy. The sale, coming just five months after the
transaction involving Kernel Global, was important for several
reasons:
1) The transaction completed valuing BOOK's holding at a
more than 50% premium to the 31 March carrying value.
This helps to give further comfort and another reference
point regarding the prudence of BOOK's valuations.
2) BOOK generated a return of more than 10x its investment,
and an IRR higher than 50%, evidencing the value our approach
can generate. The Kernel transaction in March achieved
a 9.8x return (IRR of 65.5%), whilst also completing at
a 48.9% premium to carrying value.
3) The sale results in BOOK receiving more than GBP20m in
cash. Importantly, this can be used to fully repay the
RCF and be recycled into new, attractive investment opportunities.
Trading across the portfolio in Q2 was largely positive. There
were signs in two businesses, that traded very strongly in 2022, of
demand cooling from post-Covid highs. Out of prudence, these two
companies were marked down in the quarter.
We continue to view BOOK's prospects very positively and the
current environment is creating many interesting investment
opportunities to redeploy capital. We do not believe that a
discount fairly values BOOK's current portfolio or prospects. As
such, if the share price does not keep pace with NAV in the coming
months, we will also allocate cash to buying back shares in the
trust alongside committing capital to new opportunities."
Net Asset Value
The Company announces that as at 30 June 2023, the NAV per
ordinary share was 488.5 pence. This represents a 4.5%, or 21.2p
per share, uplift since 31 March 2023 when NAV per ordinary share
was 467.3p.
At 30 Jun 23 At 31 Mar 23 At 30 Jun 22
Net asset value GBP293.1m GBP280.4m GBP207.4m
================== ============= ============= =============
NAV per ordinary
share 488.5p 467.3p 345.7p
================== ============= ============= =============
The above NAV calculation is based on the Company's issued
ordinary share capital as at 30 June 2023 of 60,000,000 ordinary
shares of GBP0.001 each. This NAV calculation includes the cost to
ordinary shareholders of the 600,000 warrants in issue. This cost
is accrued on a straight-line basis over the vesting period of the
warrants.
Portfolio company performance
The portfolio continues to show strong growth year-on-year, with
sales growth up 69%. EBITDA growth has been slightly more measured
(+30%) but remains healthy.
Whilst these figures remain strong, revenue growth has been less
substantial than expected, as market conditions in some sectors
have been less ebullient than in 2022. Lower than budgeted sales
growth impacts margins and EBITDA growth, given the investment and
hires the portfolio companies have made to support their expected
expansion. To illustrate this, BOOK's portfolio companies continue
to create jobs and opportunities across the UK, with the top ten
investments adding more than 300 employees in three months to close
the quarter with combined headcount of 4,235. We expect these hires
and investments to pay off in H2 2023 and into 2024.
As has been consistently referenced in recent factsheets,
interest in BOOK's portfolio companies from prospective acquirors
remains very high, even after the two recent sales. More
realisations can be expected over the next 18 months.
Transactions and investments
The pipeline for new investment opportunities has remained
strong, with GBP15.0m invested in the three months to 30 June 2023.
This is the largest amount invested in a quarter since BOOK listed
in June 2021.
Two new investments were completed in the quarter. A small
growth capital investment in Cadro, a wealth management platform,
completed in April. The following month, a second, more substantial
new investment was finalised into Cubo Work. Cubo is a provider of
workspaces in several UK cities. Additional funding was provided as
part of this deal to accelerate growth, with the expectation that
the number of sites will double within six months.
Follow-on funding was also provided to several existing BOOK
portfolio companies to support their growth plans. BOOK received no
capital calls from PE funds in Q2.
Cash & liquidity
GBP0.3m was received in Q2. This followed a record GBP21.1m in
Q1, which was the largest amount received by BOOK in a single
quarter. This record quarterly figure will be exceeded in H2 2023,
following the sale announced today, plus other expected
inflows.
The RCF was GBP17.0m drawn on 30 June 2023 (up from GBP2.9m on
31 March) and this will be fully repaid from the proceeds received
from the sale.
Cash generation is expected to remain strong in H2 2023, given
the health and maturity of the portfolio.
Post-balance sheet events
The uplift from the sale announced today is reflected in the 30
June 2023 valuation. No other events occurred between the end of Q2
and the publication of this factsheet requiring reported NAV to be
revised.
Factsheet
The Company's factsheet for the three months to 30 June 2023 is
now available on the Company's website:
www.literacycapital.com/investors
-S-
For further information, please contact:
Literacy Capital plc / Literacy Capital Asset Management LLP
Tom Vernon / Richard Pindar
+44 (0) 20 3960 0280
MHP Group
Reg Hoare / Ollie Hoare / Matthew Taylor
book@mhpgroup.com
+44 (0) 20 3128 8404
Singer Capital Markets Securities Limited
Robert Peel
+44 (0) 20 7496 3000
About Literacy Capital plc
Literacy Capital (BOOK.L) is a closed-end investment company
that was co-founded by Paul Pindar and Richard Pindar in 2017 with
GBP54m of capital. Literacy listed on the London Stock Exchange's
Main Market in June 2021, before gaining Investment Trust status on
1 April 2022. The Company focuses on opportunities to invest for
the long-term in growing private businesses where a clear route to
creating additional value can be seen with its support.
It also has a unique charitable objective, to donate 0.9% of
annual NAV to charities focused on improving UK literacy in
children. GBP7.1 million has been donated or reserved for donation
to charities since the trust's creation in 2017, meaning over 13%
of the capital raised from investors has been given away. For more
information, please visit our website: www.literacycapital.com.
A copy of this announcement will be available on the Company's
website at www.literacycapital.com.
The information contained in this announcement regarding the
Company's investments has been provided by the relevant underlying
portfolio company and has not been independently verified by the
Company. The information contained herein is unaudited.
This announcement is for information purposes only and is not an
offer to invest. All investments are subject to risk. Past
performance is no guarantee of future returns. Prospective
investors are advised to seek expert legal, financial, tax and
other professional advice before making any investment decision.
The value of investments may fluctuate. Results achieved in the
past are no guarantee of future results. Neither the content of the
Company's website, nor the content on any website accessible from
hyperlinks on its website for any other website, is incorporated
into, or forms part of, this announcement nor, unless previously
published by means of a recognised information service, should any
such content be relied upon in reaching a decision as to whether or
not to acquire, continue to hold, or dispose of, securities in the
Company.
LEI: 2549006P3DFN5HLFGR54
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