HGCapital Trust PLC · LSE:HGT
HGCapital Trust — H1 2012 Earnings Presentation
35 slides from HGCapital Trust's earnings presentation, August 2012
Slide 1: HgCapital Trust plc Interim Results 30 June 2012
HgCapital Trust plc Interim Results 30 June 2012 This document accompanies the Interim Report & Accounts for the six months ended 30 June 2012 and contains a summary of information set out in that document. Reference should be made to the full Report & Accounts rather than relying on this summary. T
Slide 2: Contents
HgCapital Contents Trust plc PAGE Overview 3 Financial highlights 4 Portfolio review 5 Balance sheet 9 Case studies 10 Top 20 buyout investments 12 Renewable energy 14 Conclusion 15 Appendices 16 Sector expert investors supporting management to grow industry champions © Copyright 2012 HgCapital 2
Slide 3: Overview: Delivering sustainable growth in all economic environments
Overview HgCapital Trust plc Delivering sustainable growth in all economic environments HgCapital continues to create shareholder value by picking growth companies and driving operational improvements Top 20 buyouts give exposure to £2.1 billion of sales and £0.5 billion of EBITDA - margins of 2
Slide 4: Financial Highlights
Financial HgCapital Trust plc Highlights Six months to 30 June 2012 NAV per share (diluted) total return +7.4% to 1,138.3p, total NAV increased to £372.6m Pro-forma NAV per share (diluted) total return of +10.1% to 1,166.9p, pro-forma NAV increased to £383.3m Share price performance over H1 ha
Slide 5: Trading Performance of Top 20 Buyout Investments
Portfolio Trading Performance of Top 20 Buyout Investments Review Robust performance remains well in excess of nominal GDP growth SALES +11% p.a. Nearly 90% by value of the top 20 buyouts saw sales growth over the last 12 months Combined sales of £2.1 billion Nearly half of the top 20 buyout c
Slide 6: Valuation and Gearing - Top 20 Buyout Investments
Portfolio Valuation and Gearing ‐ Top 20 Buyout Investments Review as at 30 June 2012 EBITDA MULTIPLE 10.6x Valuation multiple increased from 10.2x to 10.6x reflecting high growth characteristics of portfolio DEBT TO EBITDA RATIO 3.4x Strong cash generation from profit growth has led to the port
Slide 7: Key drivers of valuation change
Portfolio Key drivers of valuation change Review Six months to 30 June 2012 VALUATION CHANGE IN SIX COMPANY PRINCIPAL DRIVER OF CHANGE IN VALUATION MONTHS TO 30 JUNE 2012 Largest increases Mercury Pharma(1) +£10.2m Strong profit growth and cash generation SHL +£5.7m Exit secured at good uplift to De
Slide 8: Portfolio Analysis
Portfolio HgCapital Trust plc Portfolio Analysis Review as at 30 June 2012 1Percentages are based on fixed assets (excluding hedges) and accrued interest and are shown by value 2Percentages are based on net assets Sector expert investors supporting management to grow industry champions © Copyright 2
Slide 9: Liquid Resources and Outstanding Commitments
Balance Liquid Resources and Outstanding Commitments Sheet Multiple levers in place to manage the balance sheet (3) PRO-FORMA AS AT YTD 2012 30 JUNE 2012 £m % of NAV £m % of NAV HgCapital 6(1) 78.2 20.4% 78.2 21.0% Hg Mercury 58.5 15.2% 58.5 15.7% Hg RPP2(2) 23.1 6.0% 23.1 6.2% HgCapital 5 14.8 3.9%
Slide 10: SHL – 2012 Disposal
Case Studies SHL – 2012 Disposal £26.8m realised at 3.1x multiple of cost BACKGROUND Leading psychometric testing business for recruitment with opportunities for expansion growing organically at c. 9% p.a. Acquired in October 2006 in a Public to Private transaction, EV £102m DEVELOPMENT Tough
Slide 11: JLA: Accelerating growth
Case Studies JLA Accelerating growth A leading provider of critical asset maintenance and repair services, historically for the UK on-premises laundry market to more than 18,000 UK SMEs. Today JLA provides equivalent services to customers requiring catering or energy related equipment. WHY WE INVEST
Slide 12: Top Buyout Investment Portfolio (1-10)
Top 20 Buyout Investment Portfolio Review The top 10 buy‐out investments represent 61% of the portfolio value RESIDUAL TOTAL PORTFOLIO CUM. CHANGE YEAR OF COST VALUATION(1) VALUE VALUE IN VALUE INVESTMENT INVESTMENT SECTOR LOCATION £’000 £’000 % % OVER 6M 1 Visma 2006 TMT Nordic Region 701 28,055 8.
Slide 13: Top Buyout Investment Portfolio (11-20)
Top 20 Buyout Investment Portfolio Review The top 20 buy‐out investments represent 86% of the portfolio value RESIDUAL TOTAL PORTFOLIO CUM. CHANGE YEAR OF COST VALUATION(1) VALUE VALUE IN VALUE INVESTMENT INVESTMENT SECTOR LOCATION £’000 £’000 % % OVER 6M 11 Epyx 2009 TMT UK 6,388 12,368 3.6% 64.4%
Slide 14: Renewable Energy Fund Investments
Renewable Renewable Energy Fund Investments Energy Good risk adjusted returns, delivering inflation‐protected and non‐GDP linked revenue streams The Trust is invested via limited partnership interests in HgCapital’s two Renewable Energy Funds, RPP1 (2006) and RPP2 (2010) RPP gives investors expo
Slide 15: Conclusion: Outlook & Prospects
Conclusion Outlook & Prospects August 2012 Despite the weak macro-economic environment across Western Europe we believe that our investment strategy of identifying high quality growth companies in market niches will continue to benefit the performance of our portfolio We remain relatively cautio
Slide 16: Appendix Contents
Appendix Contents PAGE Performance 17 Analysis of NAV movements 20 Realised and unrealised movements in the portfolio 21 Investment activity 23 Portfolio by sector 25 The Manager and Investment Strategy 28 Sector expert investors supporting management to grow industry champions © Copyright 2012 HgCa
Slide 17: The Trust continues to deliver long term growth
Appendix The Trust continues to deliver long term growth Outperforming the FTSE by 2.1x over the last 10 years on a total return basis SHARE PRICE PERFORMANCE OVER TEN YEARS TOTAL RETURN 10 year share price total return of +14.4% p.a. for the Trust vs. +6.1% p.a. for the FTSE All- Share Index 10
Slide 18: Total Return
Appendix Total Return as at 30 June 2012 £1,000 invested 10 years ago would now be worth £3,854 on a total return basis SIX MONTHS TO 1 YEAR 3 YEARS 5 YEARS 7 YEARS 10 YEARS 30.6.12 % % P.A. % P.A. % P.A. % P.A. Net asset value (diluted) (1) 7.4 1.7 11.3 8.7 12.8 14.5 Net asset value (basic) 8.4 1.8
Slide 19: NAV and Share Price Summary
Appendix NAV and Share Price Summary Performance for six months to 30 June and pro‐forma results following post‐period realisations % TOTAL % TOTAL RETURN TO AS AT RETURN TO AS AT PRO-FORMA PRO-FORMA 30 JUN 2012 30 JUNE 2012 31 DEC 2011 Net assets (£’000)* 383,313 +11.5% 372,637 +8.4% 346,832 Net as
Slide 20: Analysis of Net Asset Value movements
Appendix Analysis of Net Asset Value movements for the six months to 30 June 2012 Sector expert investors supporting management to grow industry champions © Copyright 2012 HgCapital 20
Slide 21: Attribution analysis of unrealised movements in the portfolio
Appendix Attribution analysis of unrealised movements in the portfolio (including accrued interest movement of £12.1m) for the six months to 30 June 2012 Sector expert investors supporting management to grow industry champions © Copyright 2012 HgCapital 21
Slide 22: Realised and unrealised movements in investment portfolio
Appendix Realised and unrealised movements in investment portfolio (including accrued interest) for six months ended 30 June 2012 Note: The announced realisation of Mercury Pharma in August was at a £10.2m uplift to the June valuation Sector expert investors supporting management to grow industry ch
Slide 23: Investment Activity
Appendix Investment Activity £19.7m invested in H1 2012 COMPANY SECTOR GEOGRAPHY ACTIVITY DEAL TYPE COST £’000 Qundis Industrials Germany Provider of sub-metering devices and systems Buyout 11,527 New investments 11,527 RPP2 Fund Renewable energy Europe Renewable energy fund Fund 3,292 Voyage Health
Slide 24: Realisations
Appendix Realisations Realised £8.1m from current investments in H1 2012 and £69.1m post period end CURRENT CUMULATIVE YEAR COST PROCEEDS(1) GAIN/(LOSS)(2) GAIN/(LOSS)(3) COMPANY SECTOR EXIT ROUTE £'000 £'000 £'000 £'000 Mainio Vire Healthcare Refinancing 4,022 3,683 (339) (78) Group NBT TMT Syndica
Slide 25: Portfolio by Sector
Appendix Portfolio by Sector as at 30 June 2012 RESIDUAL TOTAL PORTFOLIO YEAR OF VALUATION COST VALUATION(1) VALUE INVESTMENT INVESTMENT BASIS £'000 £'000 % TMT investments Visma 2006 Earnings 701 28,055 8.1% IAS 2011 Price of recent investment 25,598 25,598 7.4% TeamSystem 2010 Earnings 24,432 25,3
Slide 26: Portfolio by Sector (continued)
Appendix Portfolio by Sector as at 30 June 2012 (continued) RESIDUAL TOTAL PORTFOLIO YEAR OF VALUATION COST VALUATION(1) VALUE INVESTMENT INVESTMENT BASIS £'000 £'000 % Healthcare investments Mercury Pharma (formerly Goldshield) 2009 Earnings 8,545 26,204 7.6% Voyage 2006 Written down 15,067 11,413
Slide 27: Portfolio by Sector (continued)
Appendix Portfolio by Sector as at 30 June 2012 (continued) RESIDUAL TOTAL PORTFOLIO YEAR OF VALUATION COST VALUATION(1) VALUE INVESTMENT INVESTMENT BASIS £'000 £'000 % Secondary buyout investments HgCapital 6 E LP 2011 Net assets 10,706 10,555 3.1% Total Renewable energy investments 10,706 10,555 3
Slide 28: HgCapital at a glance
Appendix HgCapital at a glance Sector expert private equity investor in European mid‐market OVERVIEW Established 1990, independent since HgCapital spun out of Merrill Lynch in 2000 (formerly Mercury Private Equity) Mid-market private equity firm with £3.8 billion client assets managed, wholly ow
Slide 29: The Manager - Investment Strategy: Sector focused investor
Appendix The Manager ‐ Investment Strategy Sector focused investor SUSTAINABLE Pick sustainable growth sub-sectors based on years GROWTH of bottom up research and expertise SUBSECTORS Established processes to constantly challenge and refine which sub sectors BEHAVE MORE BRING BENEFIT OF TRADE TH
Slide 30: The Manager – Investment Strategy: Sector focus
Appendix The Manager – Investment Strategy Sector focus HgCAPITAL REGULATORY DRIVEN SME SOFTWARE DEALS In 2002, HgCapital identified the regulatory-driven SME software market as Accounting, legal and Business software and Strategic HR software Accounting, legal and an attractive Investment
Slide 31: Selection of sub-sectors and industry leaders drives outperformance
The Manager – Investment Strategy Appendix Selection of sub‐sectors and industry leaders drives outperformance 2008 – 2011 REVENUE AND EBITDA GROWTH Selecting industry leaders and catalysing growth – outgrowing publicly traded peers 15% Selecting growth themes –outpacing the general market 11% 2008
Slide 32: Value creation from picking growth & driving operational improvements
Appendix The Manager – Investment Strategy Value creation from picking growth & driving operational improvements MUST 4 AND HgCAPITAL 5 REALISED PORTFOLIO 3.0x 0.2x 2.5x 0.6x MULTIPLE OF ORIGINAL COST (x) 2.0x 1.5x 1.1x 2.7x 1.0x (0.1x) c.1.6x top-line and profit growth 0.5x 1.0x 0 Entry value Delev
Slide 33: Focusing on growth sub-sectors less dependent on market cycles
The Manager – Investment Strategy Appendix Focusing on growth sub‐sectors allows us to be less dependent on market cycles HgCAPITAL 5 & 6 REVENUE GROWTH (UNREALISED PORTFOLIO AS AT DECEMBER 2011) VS. PUBLIC MARKETS AND WIDER ECONOMY 2007 – 2011 Revenue CAGR 200 16% 175 150 7% 125 100 0% 75 2007 2008
Slide 34: Disclaimer
HgCapital Disclaimer Trust plc This document accompanies the Interim Report and Accounts for the six months ended 30 June 2012 and contains a summary of the information set out in that document. Reference should be made to the full Report and Accounts rather than relying on this summary. It does not
Slide 35: Disclaimer
HgCapital Disclaimer Trust plc Forward-looking statements are not guarantees of future performance. A number of important factors could cause actual results or outcomes to differ materially from those expressed, projected or implied in any forward- looking statements. No one undertakes publicly to u