HGCapital Trust PLC · LSE:HGT
HGCapital Trust — FY2019 Earnings Presentation
33 slides from HGCapital Trust's earnings presentation, March 2020
Slide 1: Listed access to the 4th largest software business in Europe
Listed access to the 4th largest software Listed access to the 4th largest software business in Europe business in Europe December 2019 Get connected To a universe of software and service businesses This document accompanies the Interim Report & Accounts for the third quarter ended 30 September 2019
Slide 2: Contents
Contents About the Manager 03 Investment strategy 04 About HGT 10 Key financial highlights 12 Portfolio activity 20 Outlook 23 Appendix 24 Note: References in this presentation to HgCapital Trust plc have been abbreviated to ‘HgCapital Trust’ or ‘HGT’. Hg refers to the trading name of Hg Pooled © Co
Slide 3: Hg is Europe's largest investor in software & services
About the Manager Hg is Europe’s largest investor in software & services 25+ years of investing ▪ Investment offices in London, Munich and New York 200 employees 30+ platform investments ▪ $10bn of software + services proceeds returned at 2.6x/34% IRR €31 billion aggregate EV ..making Hg If quoted,
Slide 4: Focus on Western Europe, with experience building global businesses
Investment strategy Focus on Western Europe, with experience building global businesses Hg is Europe’s largest investor in software & services Hg offices Portfolio company headquarters Intelerad Visma IT Relation Global businesses Commify Eucon Access Group Citation MediFox Sovos Achilles Lyniate Al
Slide 5: Unique competitive position in Europe
Investment strategy Unique competitive position in Europe ‘Hg Inc’ would be the #4 technology firm in Europe (by EV), …and few specialised firms are based in the region with the fastest growth… US EUR $433 b $637 b 2019 Software and €159bn 2.3% 3.3% GDP Services Spend GDP ~$156bn Est. dry powder (DP
Slide 6: Targeting "Hg sweet-spot" business models in specific end-market clusters
Investment strategy Targeting “Hg sweet-spot” business models in specific end- market clusters DEEP SECTOR KNOWLEDGE… BUSINESS MODEL ATTRIBUTES Tax & Accounting ERP & Payroll Business critical need delivered as software or service Legal and Compliance Automotive Subscription or repeat revenue model
Slide 7: Single strategy across three funds - delivering broad market coverage
Investment strategy Single strategy across three funds - delivering broad market coverage Strategy Lower-mid market Mid-market Upper mid-market Target enterprise value €100 - 500 million €500 - €1,500 million >€1,500 million Target investment equity €50 - 200 million €200 - 600 million >€600 million
Slide 8: Portfolio team set up to grow and support Hg businesses
Investment strategy Portfolio team set up to grow and support Hg businesses GROWTH TECHNOLOGY, TALENT & DATA & PRODUCT & ORGANISATION ANALYTICS OFFSHORING FINANCE & PROGRAMME ESG & REPORTING & M&A DIRECTORS SUSTAINABILITY COMMUNITIES © Copyright Hg 2019 8
Slide 9: Growing sustainable businesses which are great employers
Investment strategy Growing sustainable businesses which are great employers Hg ESG and Sustainability at a glance ~190 >30 4.5 27% AA++ 1% Employees Nationalities Average Women in Hg’s 2018 UNPRI of LLP profit donated to across three offices across Hg’s team Glassdoor score executive team rating ch
Slide 10: HGT is Hg's largest client
About HgCapital Trust plc HGT is Hg’s largest client Investing alongside some of the world’s largest institutional investors c. £1.4bn Invested capital, cash c. £11bn Invested capital and and and undrawn commitments undrawn commitments c. £11bn £1.1bn Invested capital and Portfolio value, cash & und
Slide 11: 2019 was a transformational year for HGT
About HgCapital Trust plc 2019 was a transformational year for HGT ▪ £75 million in new equity raised ▪ Over £1 billion net assets ▪ 10:1 share split ▪ Increased liquidity ▪ Increased transparency through quarterly reporting ▪ $400 million commitment made to Hg Saturn 2 ▪ Continued outperformance of
Slide 12: Key financial highlights 2019
Key financial highlights Key financial highlights 2019 Performance Portfolio activity Top 20 trading Balance sheet* +48% £117m +24% £536m (52% of NAV) Share price invested LTM sales commitments +21% £117m +35% £82m (8% of NAV) NAV per share realised LTM profits liquid resources 4.8p Further £129m 19
Slide 13: Performance
Key financial highlights Performance Consistent compounding outperformance across market cycles 200% 1600% 183% 1452% 180% 1400% 160% 1073% 1200% 140% 129% 1000% 120% 100% 800% 82% 80% 68% 600% 60% 48% 44% 400% 305% 40% 252% 19% 21% 22% 155% 20% 118% 200% 0% 0% 1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEA
Slide 14: Performance
Key financial highlights Performance Over the past 10 years the net assets of HGT have grown by c £691 million (13% p.a. CAGR) to > £1 billion Consistent, compounding growth across all market cycles © Copyright Hg 2020 14
Slide 15: Top 20 trading
Key financial highlights Top 20 trading The portfolio is growing faster than ever before since Hg has honed and enhanced its disciplined investment strategy Hg’s portfolio has seen positive trading performance across all market cycles, further accelerated in the past few years through its investment
Slide 16: Top 20 trading
Key financial highlights Top 20 trading Each company is valued individually, based on the trading multiples of comparable businesses and recent M&A There remains a continued shift in the portfolio to higher growth software businesses © Copyright Hg 2020 16
Slide 17: LTM EV to EBITDA multiple
Key financial highlights Top 20 trading HGT portfolio valuation vs US market 21 19.8 HGT S&P software & services S&P500 19 LTM EV to EBITDA multiple 17.3 17 16.4 15 14.5 14.2 13.2 13 11.6 10.8 11 10.2 9.7 9 7.7 7 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 The S&P500 software index has be
Slide 18: The balance sheet
Key financial highlights The balance sheet Levers in place to help manage the balance sheet, commitments underpinned by future realisations 600 £285m commitment 140% to Genesis 6 £200m £80m 120% 500 commitment £150m £60m commitment to Genesis 7 commitment $400m commitment to Mercury 2 to Saturn 1 co
Slide 19: Ongoing charges
Key financial highlights Ongoing charges The Board and Manager aim to have co-investments represent 10-15% of NAV going forward, reducing overall fees 3% 2.3% 2.0% 2.0% 2% 1.9% 1.6% 1.6% 1.5% 2% 1% 1% 0% 2013 2014 2015 2016 2017 2018 2019 15% of the NAV is currently in co-investment free of manageme
Slide 20: Hg continues to selectively invest…
Portfolio activity Hg continues to selectively invest… £246m invested in the last 12 months into 10 companies across 6 Hg clusters, 10% into co-investment 23% of NAV o/w £25m into co-investment free of fees and carried interest 12% 32% 11% of NAV of NAV 17% of NAV of NAV 25% 18% 18% of NAV of NAV 10
Slide 21: …and return cash to HGT
Portfolio activity …and return cash to HGT £119m returned to the Company over the past 12 months through both realisations and refinancings 34% of NAV 31% of NAV 22% of NAV 11% of NAV 24% 18% 17% of NAV 18% of NAV 15% of NAV 12% of NAV of NAV of NAV 3% of NAV n/a £8m £82m £62m £80m £66m £83m £64m £1
Slide 22: Significant realisations over the last 2 years
Portfolio activity Significant realisations over the last 2 years £334m returned to HGT over 2018 and 2019 at good uplifts to book value 27% 47% 18% 56% 29% 22% 31% 66% 43% 37% 79% 30% 4.9x 4.7x 4.3x 4.2x 4.2x 3.6x 3.6x 3.0x 3.0x 2.6x 2.6x 2.1x 2.1x 1.7x 1.4x 1.3x 1.3x 0.9x 1.0x 0.9x 0.9x 1.0x 0.6x
Slide 23: Outlook
Outlook Outlook We believe our investment strategy works and the portfolio will continue to see robust growth ▪ A very strong year of performance for HGT with the portfolio seeing consistent double-digit growth ▪ Hg continues to invest in “sweet-spot” businesses in eight end-markets, or “clusters”,
Slide 24: Appendix: The team
Listed access to the 4th largest software business in Europe December 2019 Appendix: The This document team 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
Slide 25: Large and well-resourced investment "machine"
Key financial highlights Large and well-resourced investment “machine” GOVERNANCE Hg LLP BOARD INVESTMENT COMMITTEE REALISATION COMMITTEE • Chaired by Nic Humphries • Chaired by Matthew Brockman • Chaired by Andrew Land Partners Directors & Principals Associates & Analysts Total 5 5 7 17 10 10 23 43
Slide 26: Appendix: Top 20 investments
Appendix: Top 20 Listed access to the 4th largest software business in Europe investments December 2019 December 2019 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
Slide 27: The top 20 portfolio at 31 December 2019
Appendix The top 20 portfolio at 31 December 2019 The top 10 buy-out investments represent 72% of the total value Residual Total Portfolio Cumulative Change in Year of Cost valuation value value value over Investment investment Cluster Location £’000 £’000 % % 2019 Tax & Accountancy/ 1 Visma 2014 Sc
Slide 28: The top 20 portfolio at 31 December 2019 (continued)
Appendix The top 20 portfolio at 31 December 2019 (continued) The top 20 buy-out investments represent 92% of the total value Residual Total Portfolio Cumulative Change in Year of Cost valuation value value value over Investment investment Sector Location £’000 £’000 % % 2019 Legal & Regulatory 11 C
Slide 29: Appendix: Miscellaneous
Listed access to the 4th largest software business in Europe December 2019 Appendix: Miscellaneous 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 ful
Slide 30: One of the top performing ISA eligible investment companies over the last 20 years
Appendix One of the top 10 performing ISA eligible investment companies over the last 20 years The AIC’s research shows that if an investor had invested each year’s maximum ISA limit from 1999 to 2018 – an investment of £206,560 in total – HgCapital Trust would have turned it into £873,222. Company
Slide 31: Contact
Appendix Contact For further information on HgCapital Trust plc, please visit our website: www.hgcapitaltrust.com Or contact Laura Dixon +44 (0)20 7089 7888 laura.dixon@hgcapitaltrust.com © Copyright Hg 2020 31
Slide 32: Disclaimer
Appendix 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
Slide 33: Disclaimer
Appendix 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 terminolo