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HgCapital cleans up and invests in Financial Express

15 May 2018

Manager of technology-focused private equity trust invests in fund data provider company Financial Express after sale of lucrative stake in laundry services company JLA.

Hg, the manager of HgCapital Trust (HGT), the technology-focused private equity trust, has invested in fund data provider company Financial Express following the sale of a stake in laundry services company JLA.

Terms of the investment in Financial Express were not disclosed other than that HgCapital will invest £7.5 million or 1% of net assets in the fund research company, which also owns the Trustnet website, as part of its £80 million commitment to Hg’s Mercury 2 fund.

Founded by Michael Holland and Craig Wilson and led by chief executive Neil Bradford, Financial Express operates a global database of retail funds. It said it would use Hg’s investment to fund the next stage of its growth.

Hg partner Sebastien Briens said the business enjoyed a good position and brand within the asset management software and data sector. ‘We have been following FE for a number of years, and have been impressed by the strength and depth of its data, products, team and vision,’ he added.

HgCapital had net assets of £712.8 million at the end of April, £145 million or 20% of which was in cash waiting to be invested plus an unused £80 million credit facility. The investment in Financial Express reduces its commitment to invest in Hg transactions over the next four-to-five years to £587 million.

The trust’s cash pile will have been increased by Hg’s sale of JLA to Cinven, another private equity investor, although Numis Securities said the rise would be ‘modest’ as the transaction triggered a payment of carried interest, or bonuses, to the fund managers.

Again financial terms were not disclosed, although HgCapital saw the value of its stake in JLA jump 29%, or £7.7 million, to £34.2 million from its last valuation. It said the company had delivered a 4.9 times return on investment and a 26% gross internal rate of return over the eight-years of the investment.

This is the fifth and so far largest exit for HgCapital this year, which is taking advantage of good market conditions to achieve good profits on its investments. The earlier sales of of stakes in workplace software provider Allocate Software, Swedish care provider Frosunda, German loudspeaker manufacturer Teufel, and Swiss expansion services provider Radius have raised nearly £58 million on uplifts of between 18% and 56%.

In its annual results in March HgCapital reported a total return of 21.5% on net assets and a total shareholder return of 19.5% for 2017, which it said were generated by strong revenue and profits growth in its portfolio as well as disposals on good valuations that would continue.

Since then the shares have re-rated with their discount to net asset value disappearing amid reports that Hg was preparing the £1 billion sale of Iris, the UK accountancy and payroll software business that is HgCapital’s biggest investment accounting for 10.9% of net assets.

Over one year, the trust ranks second in the AIC Private Equity sector with a total shareholder return of 30%. Over five years it has made 98.3%, 3% above its sector average.

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