ICG Entperise Trust plc (LON:ICGT) recently hosted two webinars to answer questions submitted by Hardman & Co readers. In Part 1, the manager discussed the trust’s approach to PE investing, and its positioning in uncertain times through its defensive growth strategy. He also reviewed recent market challenges, the outlook for transaction activity/exit uplifts, AI opportunities and risks (including the impact on software). Part 2 covered ICGT’s gearing and interest-rate sensitivity, dividend policy, share buybacks and the sector-wide persistent discounts to NAV, the sustainability of shareholder returns and demand for shares.
- 1HFY’27 results: The key takeaways from ICG Entperise Trust’s results and presentation were i) strong and accelerating operating company EBITDA and revenue growth 16% and 11%, respectively, ii) through-cycle interest from buyers (24 exits at 3.0x cost multiple, 9.4% uplift on exit), and iii) modest software exposure.
- Other issues: i) diverse growth drivers, ii) strong, flexible balance sheet to both invest and return capital, iii) 64% of portfolio pre 2022 vintage (high exit potential), iv) stable EV/EBITDA 15.8x and debt to EBITDA 4.8x, v) proceeds of £84m and investments £65m, vi) five-year portfolio return cont. ccy. 10.2%.
- Valuation: ICGT’s NAV valuations are conservative (regular realisation uplifts), the ratings undemanding, and the ongoing carry value against cost is modest. The 34% discount to NAV is anomalous, we believe, with defensive, market-beating returns, and is above pre-COVID-19 levels. The 2027E yield is 3.0%.
- Risks: PE’s post-expense, long-term returns are market-beating, but it is an above-average cost model. Sector sentiment may be adverse to the perceived interest rate risk, IPO market, and performance in economic slowdowns. We believe ICGT’s permanent capital structure is right for illiquid assets.
- Investment summary: ICG Entperise Trust has consistently generated superior returns, by identifying managers and investments where value can be added, with a strategic focus on defensive growth and exploiting ICG synergies. Valuations appear conservative, and governance is strong. It seems anomalous, in our view, to have this record of outperformance and to trade at a discount to NAV.
