The key message from ICG Enterprise Trust plc (LON:ICGT) 1HFY’25 results (to July) is the continued strength of the operating companies, which delivered an average 14% LTM EBITDA growth. Margins have widened by ca.5% (average revenue growth 9.4%), which should help allay some concerns over the impact of the higher-rate environment. New investment is accelerating, and realisation activity continued with an average 26% uplift to carrying values on exit. A degree of short-term volatility is to be expected, and the five- and 10-year total annualised NAV per share return (12.5% and 13.2%, respectively) are a good reflection of what investors are getting from ICGT’s defensive growth strategy. ICGT has a balanced capital return policy.
- 1H numbers: ICGT’’s constant currency portfolio return was 3.8% (£: 2.6%) and the NAV per share total return 2.8%. A narrowing discount saw a share price return of 10.3%. New investments were £104m (the third consecutive six-month period increase), new fund commitments £72m, and proceeds received £86m.
- Capital allocation: Shareholders saw 1H dividends of 17p (prior year 1H: 16p) and a reiterated intention to pay 35p (+6%) in the whole year. Buybacks of £21m (average discount 37.8%) were executed for both the long-term (£11m) and the opportunistic (£10m) programmes. These added 19p to the NAV p/sh..
- Valuation: ICG Enterprise Trust’s NAV valuations are conservative, demonstrated by continued realisations above reported book values. The ratings are undemanding. The 39% discount to NAV is anomalous, we believe, with defensive, market-beating returns, and twice the levels seen pre-COVID-19. The 2024E yield is 2.8%.
- Risks: PE is an above-average cost model, but post-expense returns have consistently beaten public markets. Actual experience has been of continued NAV outperformance in economic downturns, but sentiment may be adverse. ICGT’s permanent capital structure is right for unquoted/illiquid assets.
- Investment summary: ICG Enterprise Trust has consistently generated superior returns, by adding value in an attractive market, having a strategic focus on defensive growth and leveraging synergies from being part of ICG since 2016. Valuations appear conservative, and governance is strong. ICGT focuses on delivering resilient, risk-adjusted returns, and balancing risk and reward. The risks are primarily sentiment-driven on costs, cyclicality and the underlying assets’ liquidity. A 39% discount to NAV appears anomalous with ICGT’s performance.
