HGCapital Trust PLC · LSE:HGT
HGCapital Trust — H1 2023 Earnings Presentation
29 slides from HGCapital Trust's earnings presentation, September 2023
Slide 1: HgCapital Trust plc 2023 interim results
HgCapital Trust plc Get connected 2023 interim results to a combined enterprise value of >$120bn of software and tech-enabled services businesses September 2023 This document accompanies the Interim report to 30 June 2023. The information in this document contains a summary of information set out in
Slide 2: HGT is a FTSE 250 investment company managed by Hg
HGT is a FTSE 250 investment company listed on the main market of the London Stock Exchange and managed by Hg HGT is Hg’s largest and longest standing investor Objective to provide consistent, long-term returns to shareholders through investment in private companies located in Europe and North Ameri
Slide 3: Hg's portfolio is amongst the world's leading compounding platforms
Hg’s portfolio is amongst the world’s leading compounding platforms Fastest growing companies of EV >$100bn, globally, all sectors 70% 62% 60% Average Revenue Growth rate 50% 40% 38% 36% 30% 27% 25% 24% 18% 17% 16% 20% 16% 10% 0% Note: Illustrative comparison to show how Hg portfolio compares to the
Slide 4: Compounding growth: the power of a long-term investment strategy
Compounding growth: the power of a long-term investment strategy 18% NAV per share and 16% share price CAGR over the past 10 years v. 6% CAGR from the FTSE All-Share generated from consistently strong trading and realisations above book value 2,500 500 450 2,000 400 350 Indexed total return Net asse
Slide 5: Resilient performance in H1 2023 driven by continued strong trading
Resilient performance in H1 2023 driven by continued strong trading +4.6% £2.2bn 2.0p NAV per share (473.1p) Net assets Interim dividend 31 December 2022: (456.6p) 31 December 2022: £2.1bn 30 June 2022: 2.5p +7.1% £1.7bn 1.6% Share price (370.5p) Market capitalisation Total annualised ongoing charge
Slide 6: Software market update: continued and resilient growth from 'Typical Hg Businesses'
Software market update: continued and resilient growth from ‘Typical Hg Businesses’ Growth rate expectations, segmented by December 2020 expectation 5-15% 15%+ 30% 25% High growth, low margin 20% 15% Typical Hg business 10% 5% Dec-20 Mar-21 Jun-21 Sept-21 Dec-21 Mar-22 Jun-22 Sept-22 Dec-22 Mar-23 J
Slide 7: Software market update: in the long run, earnings growth is all that matters
Software market update: in the long run, earnings growth is all that matters Earnings drive consistent returns. Multiples are much more volatile 60% 800% 600% 40% 400% 20% 200% Cumulative return Annual return 0% 0% -200% -20% -400% -40% Returns from earnings -600% Returns from multiples -60% -800% 2
Slide 8: Trading performance has continued to drive portfolio growth
Trading performance has continued to drive portfolio growth LTM sales, EBITDA growth and margin for top 20 portfolio companies* Trading was responsible for 86% of the increase in portfolio valuation during H1 2023 EBITDA margin 28% 32% 30% 31% 30% 35% 31% 30% 14% 29% 27% 27% 26% 26% 23% 20% 86% Trad
Slide 9: Continuing to return cash to HGT with realisations at significant uplifts
Continuing to return cash to HGT with realisations at significant uplifts to book value, despite market turbulence Track record of generating liquidity across market cycles. £303m of proceeds YTD 2023, with an average uplift on Average uplift of 39% on all realisations since 2017 realisations of 34%
Slide 10: Slowed pace of new platform investments, portfolio M&A at all-time high
In an uncertain macro environment, we have deliberately slowed down the pace of new platform investments, but not our portfolio M&A activity £47m invested YTD 2023 Portfolio M&A at all-time high £25m of follow- on investment • Combination of a difficult macro and motivated sellers have led to attrac
Slide 11: Robust capital structures of underlying portfolio companies
Robust capital structures of underlying portfolio companies Valuation and net debt multiples for top 20 portfolio companies (76% of portfolio) ▪ Hg focuses on software and services businesses with high recurring revenues and strong cash conversion to service debt ▪ 26.2x Hg Capital Markets team acti
Slide 12: Robust balance sheet supports future investment activity
Robust balance sheet supports future investment activity Pro-forma undrawn commitments and available New commitments and increased credit facility liquid resources • New €125m commitment to Hg Mercury 4 in H1, with a further €50m committed post-period Undrawn commitments of £1.1bn • HGT maintains a
Slide 13: 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. $65bn Hg’s portfolio Hg’s largest companies LP investor HGT’s underlying HGT provides listed listed investor access to “the free base c. £3bn float” of >$120bn EV of Hg Software “Inc” HGT prov
Slide 14: Targeting robust and resilient 'Hg sweet-spot' business models
Targeting robust and resilient ‘Hg sweet-spot’ business models 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 KNOWLEDGE Insurance Years of accumu
Slide 15: A long-term focused approach has driven deep sub-sector knowledge
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 TECHNOLOGY SERVICES CAPITAL MKTS AND WEALTH MGT IT INSURANCE HEALTHCARE IT >12 years >9 years >8 years >7
Slide 16: 60+ operational experts across a wide range of areas
We have 60+ operational experts across a wide range of areas, reflecting where we see repeat value creation opportunities Growth Tech, Product, Cyber Data AI and GPT Sales R&D and tech platform BI, warehousing, snowballs Marketing Right-shoring Data cleansing & enrichment Pricing Product management
Slide 17: Driving a material value impact across the Hg portfolio
Driving a material value impact across the Hg portfolio GROWTH >$100M in EBITDA lift from pricing in FY TECH DATA >$100m ARR uplift enabled via R&D projects >£10m EBITDA from AI-driven process optimisations in last 3 years (e.g., SaaS transformation) £30m+ ARR from past 3 Data monetisation Projects
Slide 18: Longstanding commitment to ESG & Sustainability
Longstanding commitment to ESG & Sustainability UNPRI Signatory since 2012 ★★★★★ Direct – PE 100% Goal to be net zero by ★★★★☆ Investment & carbon neutral Stewardship since 2019 2050 42% 38% 48 female employees women in Hg’s nationalities investment team Signatory to ILPA Diversity in Action One of
Slide 19: Maintaining a disciplined approach in the current environment
Maintaining a disciplined approach in the current environment to drive HGT’s long-term performance Portfolio • Portfolio companies remain focused on selling business-critical and non-discretionary software and services to their underlying business customers, delivering predictable levels of recurrin
Slide 20: Appendices
Listed access to the 4th largest software business in Europe December 2019 Appendices © Copyright Hg 2023 20 20
Slide 21: Top 10 portfolio companies
Top 10 portfolio companies (c. 55% of the total portfolio) Company Cluster Location Description % Portfolio ▪ A leading provider of mission-critical, integrated business-management software to SME's in the UK and APAC ERP & Payroll UK 12.4 ▪ Helps >60k businesses, public-sector and not-for-profit or
Slide 22: Portfolio diversified by cluster, vintage and geography
Portfolio diversified by cluster, vintage and geography Note: As at 30 June 2023 © Copyright Hg 2023 22
Slide 23: Portfolio analysis (I/II)
Portfolio analysis (I/II) LTM sales growth: +29% LTM EBITDA growth: +30% Note: Top 20 (76% of the portfolio at 30 June 2023). Figures are calculated on a NAV-weighted basis. © Copyright Hg 2023 23
Slide 24: Portfolio analysis (II/II)
Portfolio analysis (II/II) EV to EBITDA valuation multiple: 26.2x Net debt to EBITDA ratios: 7.4x Note: Top 20 (76% of the portfolio at 30 June 2023). Figures are calculated on a NAV-weighted basis. © Copyright Hg 2023 24
Slide 25: Realised and unrealised movements in the value of investments
Realised and unrealised movements in the value of investments Movements in realised and unrealised valuation over the six months ending 30 June 2023. 1. Other includes movements across portfolio companies not shown. © Copyright Hg 2023 25
Slide 26: Global team of c.370 professionals across five offices
Global team of c.370 professionals across five offices GOVERNANCE 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 Ba
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 +44 78 2459 2894 George Crowe +44 20 8152 5880 Hannah Brown +44 20 8078 9144 You can also follow us: Li
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