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In our note, FY’24: portfolio companies performing strongly, we noted the key message from ICGT’s FY’24 results is the continued strength of the operating companies, which delivered mid-teen EBITDA growth. Despite challenging markets, margins have widened, allaying any concerns about the higher-rate environment. New investment target returns are “broadly unchanged”. FY’24 saw about half the usual investment and realisation activity. The 5- and 10-year total annualised NAV per share return (14.6% and 13.2%, respectively) show what investors get from the defensive growth strategy. ICGT has a balanced capital return policy. Register here for ICGT’s 18 June institutional CM Day.

  • ICGT’s investment approach: In our note, we detailed how ICGT’s defensive growth strategy worked in practice in FY’24 and why it has delivered long-term outperformance. Consistency in performance greatly enhances compounding effects and the double-digit share price returns (five-year 11.2% annualised).
  • Capital allocation: Shareholders saw distributions of £35m (FY’23 £22m) with a 10% increase in dividend, to 33p, and an increase in the long-term buyback programme. It also announced an opportunistic up-to £25m buyback programme to take advantage of the current, unusually high, level of discount.
  • Valuation: ICGT’s NAV valuations are conservative (realisation uplifts). The ratings are undemanding, and the ongoing carry value against cost is modest. The 36% discount to NAV is anomalous, we believe, with defensive, market-beating returns, and is above the levels seen pre COVID-19. The 2024E yield is 2.7%.
  • Risks: PE’s post-expense returns are consistently market-beating, but this is an above-average cost model. Even though actual experience has been of continued NAV outperformance in economic downturns, sentiment is likely to be adverse. We believe ICGT’s permanent capital structure is right for unquoted and illiquid assets.
  • Investment summary: ICGT has consistently generated superior returns, by adding value in an attractive market, having a strategic focus on defensive growth and exploiting ICG synergies. Valuations appear conservative, and governance is strong. ICGT focuses on delivering resilient, risk-adjusted returns. The risks are primarily sentiment-driven on costs and cyclicality, and on the underlying assets’ liquidity. It seems anomalous to have a consistent record of outperformance and to trade at a 36% discount to NAV.
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