HGCapital Trust PLC · LSE:HGT
HGCapital Trust — H1 2022 Earnings Presentation
29 slides from HGCapital Trust's earnings presentation, September 2022
Slide 1: HgCapital Trust plc Interim Results: Get connected
HgCapital Trust plc Interim Results Get connected To the 2nd largest software business in Europe This document accompanies the interim report to 30 June 2022. The information in this document contains a summary of information set out September 2022 in this report. Reference should be made to the ful
Slide 2: Overview
Overview ▪ FTSE 250 investment company listed on the LSE STRUCTURE ▪ A Board of 6 NEDs with a wide range of skills, a strong focus on governance, that make all decisions on commitments ▪ Objective to provide consistent, long-term returns through investment in unquoted companies ▪ Largest LP investor
Slide 3: Compounding growth: the power of a long-term investment strategy
Compounding growth: the power of a long-term investment strategy 17% NAV per share and 17% share price CAGR over the past 10 years v. 7% CAGR from the FTSE All-Share generated from consistently strong trading and realisations above book value 2,500 550 500 2,000 450 400 Indexed total return 1,500 35
Slide 4: H1 2022: Continued positive NAV performance in a challenging environment
H1 2022: Continued positive NAV performance in a challenging environment +1.8% £2.0bn ▪ Positive NAV performance driven by strong trading and FX, offsetting the negative impact of valuation multiple contraction NAV per share (443.2p) Net assets in comparable listed companies 31 December 2021: (440.5
Slide 5: Not all software is the same: high growth/low profitability companies saw largest valuation drops
Not all software is the same: it is the high growth/low profitability companies which have seen the largest valuations drop EV:Sales multiple, based on profitability 16 14 12 10 8 Profitable: c. (10%) 6 4 Unprofitable: c. (66%) 2 0 Note; Based on Russell 3000 listed US software & Services sector, c
Slide 6: Realised and unrealised movements in the value of investments
Realised and unrealised movements in the value of investments Note: Largest movements in value of investments over the 6 months to 30 June 2022. © Copyright Hg 2022 6
Slide 7: Returning cash to HGT with significant realisations at uplifts to book value
Returning cash to HGT with significant realisations at uplifts to book value Estimated £384m realised YTD with average uplifts on exits to December 2021 value of c. 29% 62 realisations over L10Y at: £232m* Average multiple of cost 2.6x Average gross IRR £47m 26% £33m £28m £20m £16m £9m Average uplif
Slide 8: Hg has continued to selectively invest in companies tracked for many years
Hg has continued to selectively invest in companies tracked for many years Repeatable investments into companies with similar defensive business models building a store of future value for HGT £21m £16m Invested YTD H1 2022 by HGT £14m £12m £536m * £8m £2m £177m** £148m H2 2022 YTD £72m £32m £32m £5
Slide 9: H1 2022: Multiple levers in place to manage the balance sheet efficiently
H1 2022: Multiple levers in place to manage the balance sheet efficiently, with the flexibility to steer the pace of investment £550m at 30 June £366m at 31 August Available liquid resources (27% of NAV), incl. undrawn balance Available liquid resources (18% of August pro-forma NAV), incl. of £114m
Slide 10: Trading performance has continued to drive portfolio growth
Trading performance has continued to drive portfolio growth 35% 31% 27% 27% 23% 26% 23% 26% 27.1x EV/EBITDA 20% Multiple compression typically assumed at investment 19% stage, limited compression at exit due to business models with tailwinds for businesses in Hg's clusters 7.5x debt/EBITDA Optimisin
Slide 11: HGT is Hg's largest client, committed to all Hg funds
HGT is Hg’s largest client, committed to all Hg funds Pension Plans, SWFs, Endowments, Insurance Cos etc c. $55bn Hg’s portfolio Hg’s largest companies LP investor HGT HGT provides listed shareholders access to “the free float” of the $110bn EV of Hg Software “Inc” HGT provides shareholders with acc
Slide 12: Building businesses that change how we all do business
Building businesses that change how we all do business © Copyright Hg 2022 12 © Copyright Hg 2022
Slide 13: 'Hg Inc' is the #2 largest software firm in Europe
‘Hg Inc’ is the #2 largest software firm in Europe, and one of the fastest growing >25 Aggregate EV ($m) and LTM revenue growth (%) years of investing $121bn >170 $110bn investments 5 investment offices across Europe and the US >300 Staff including >170 professionals $50bn >$55bn funds under managem
Slide 14: Targeting robust and resilient 'Hg sweet-spot' business models
Targeting robust and resilient ‘Hg sweet-spot’ business models with unique scale in European tech Tax & Accounting Business critical software or service ERP & Payroll Legal and Compliance Subscription / repeat revenue model BUSINESS DEEP MODEL Sweet-spot SECTOR Automation and Engineering ATTRIBUTES
Slide 15: A long-term focused approach has driven deep sub-sector knowledge and networks
A long-term focused approach has driven deep sub-sector knowledge and networks TAX & ACCOUNTING ERP & PAYROLL LEGAL & REGULATORY AUTOMATION & ENGINEERING >18 years >18 years >15 years >14 years SME TECHNOLOGY SERVICES CAPITAL MKTS AND WEALTH MGT IT INSURANCE HEALTHCARE IT >12 years >9 years >8 years
Slide 16: Operational expertise with dedicated professionals across a wide range of areas
Operational expertise with 45 dedicated professionals across a wide range of areas reflecting core repeatable value creation opportunities Growth Tech, Product, Cyber Data Sales R&D and tech platform BI, warehousing, snowballs Marketing Right-shoring Data cleansing & enrichment Pricing Product manag
Slide 17: Longstanding commitment to ESG & Sustainability
Longstanding commitment to ESG & Sustainability AA++ 100% Goal to be net zero by UNPRI rating carbon neutral a signatory since 2012 2050 since 2019 48% 35% >40 female employees women in Hg’s nationalities investment team Signatory to ILPA Diversity in Action One of first PE firms $400k Initiative &
Slide 18: Maintaining a disciplined approach in the current environment
Maintaining a disciplined approach in the current environment to drive HGT’s long-term performance Portfolio Positive trading outlook underpinned by increasing digitalisation of business processes Resilient business models with recurring revenues and pricing power Robust balance sheet Multiple lever
Slide 19: Appendices
Listed access to the 4th largest software business in Europe December 2019 Appendices This document accompanies the Interim Report & Accounts for the third quarter ended 30 September 2019 and contains a summary of information set out in that document. Reference should be made to the full and Interim
Slide 20: Top 10 portfolio companies (c. 59% of the total portfolio)
Top 10 portfolio companies (c. 59% of the total portfolio) Company Cluster Location Description % Portfolio ▪ A leading ERP business, providing a range of software solutions to SME, mid-market and enterprise customers in ERP & Payroll UK the UK, Ireland and Australia 19.0 ▪ Helps >60k businesses, pu
Slide 21: Portfolio split by cluster, vintage and geography
Portfolio split by cluster, vintage and geography © Copyright Hg 2022 21
Slide 22: Portfolio analysis (I/II)
Portfolio analysis (I/II) Note: Top 20 (79% of the portfolio at 30 June 2022). These figures are calculated on a value-weighted basis (not a straight average). © Copyright Hg 2022 22
Slide 23: Portfolio analysis (II/II)
Portfolio analysis (II/II) Note: Top 20 (79% of the portfolio at 30 June 2022). These figures are calculated on a value-weighted basis (not a straight average). © Copyright Hg 2022 23
Slide 24: Appendices
Listed access to the 4th largest software business in Europe December 2019 Appendices This document accompanies the Interim Report & Accounts for the third quarter ended 30 September 2019 and contains a summary of information set out in that document. Reference should be made to the full and Interim
Slide 25: Large and well-resourced investment "machine"
Large and well-resourced investment “machine” Hg LLP BOARD INVESTMENT COMMITTEE REALISATION COMMITTEE • Nic Humphries (Chair) • Matthew Brockman (Chair) • Andrew Land (Chair) • Matthew Brockman • Nic Humphries • Justin von Simson • Justin von Simson • Sebastien Briens • Steven Batchelor • Steven Bat
Slide 26: Multi-layered investment processes to drive net fund returns
Multi-layered investment processes to drive net fund returns INVESTMENT COMMITTEE REALISATION COMMITTEE Approves investment decisions Approves exit and recap decisions Develop investment themes “MOMENT Monitor investment themes OF TRUTH REVIEW” IC (6-9 months in) RC Chaired by Matthew Brockman, Chai
Slide 27: Contact
Contact For further information on HgCapital Trust plc, please visit our website: www.hgcapitaltrust.com Or contact our Investor Relations Team at: investorrelations@hgcapitaltrust.com Laura Dixon Hannah Brown +44 78 2459 2894 +44 20 8078 9144 You can also follow us: Linkedin at www.linkedin.com/com
Slide 28: Disclaimer
Disclaimer NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, INTO OR WITHIN THE UNITED STATES OR TO “US PERSONS” (AS DEFINED IN REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR INTO OR WITHIN AUSTRALIA, CANADA,
Slide 29: Disclaimer
Disclaimer These materials include statements that are, or may be deemed to be, "forward-looking statements" which are based on current expectations and projections about future events. In some cases, these forward-looking statements may be identified by the use of forward-looking terminology, inclu