Icg Enterprise Trust Plc Gbp · LSE:ICGT
Icg Enterprise Trust Plc Gbp — ICG Enterprise Trust — H1 2018 Earnings Presentation
47 slides from Icg Enterprise Trust Plc Gbp's earnings presentation, October 2018
Slide 1: Interim results
Interim results For the six months to 31 July 2018
Slide 2: Introduction
Introduction Emma Osborne Pages Head of Private Equity Fund Investments Company overview 3-7 Results and performance 8-18 Kane Bayliss Managing Director Private Equity Fund Investments Case studies 19-25 Supplementary portfolio information 26-34 Colm Walsh Managing Director Private Equity Fund Inves
Slide 3: Company Overview
Company Overview ENTERPRISE TRU:
Slide 4: Company overview
Company overview A leading listed private equity investor £711m Net asset value (1,026p per share) 1981 > Focused on buyouts in Europe and the USA 37 year history of investing in private equity > Flexible and differentiated approach combining in-house and third-party managed investments: through fun
Slide 5: Manager overview
Manager overview A leading specialist manager in private debt, credit and equity €33 29 year track record of lending to and investing in private equity backed Stockholm businesses Amsterdam London Warsaw Paris Frankfurt New York Madrid Luxembourg San Francisco Tokyo to proprietary deal flow from the
Slide 6: Investment philosophy
Investment philosophy Defensive growth companies alongside leading PE managers All private equity Buyouts offer more consistent returns with lower risk Buyouts than other private equity strategies e.g. venture capital Developed markets have more established private Developed markets equity infrastru
Slide 7: Investment Strategy
Investment Strategy High conviction companies underpinned by a portfolio of leading funds 22% Underlying companies selected by ICG Enhances returns by increasing exposure to the most attractive assets Third-party direct 17% Increases control and enables greater flexibility in co-investments 44
Slide 8: Results and performance
Results and performance For the half year to 31 July 2018
Slide 9: Highlights for the half year
Highlights for the half year Strong performance and continued progress against strategic goals +8.1% Investment portfolio return of +10.4% in sterling Total Return ‒ +7.9% return in local currencies (+15.6% LTM) (1,026p NAV per share) Driven by continued strong operating performance and realisat
Slide 10: Performance
Performance Outperforming public markets through cycles NAV and share price performance (total return)* FTSE All-Share ICG Enterprise Share price ICG Enterprise NAV growth 142% 126% 114% 97% 67% 55% 55% 45% 30% 17% 12% 9% 1 year 3 years 5 years 10 years An investment in ICG Enterprise made on the ye
Slide 11: Consistently strong portfolio growth
Consistently strong portfolio growth 7.9% portfolio growth in local currencies over six months; 10.4% in Sterling Underlying portfolio growth High quality portfolio performing well 30.0% 28.9% - 7.9% local currency growth; 10.4% in Sterling - LTM 15.6% portfolio growth in local 25.0% currencies; 1
Slide 12: Highly cash generative portfolio
Highly cash generative portfolio Realisations at 31% uplift to carrying value; 2.3x cost Realisations £m 250 £85m of realisations 227 - 34 full realisations 200 - Cash proceeds 14% of opening portfolio value 150 163 120 Four realisations within the Top 30 companies 100 118 85 85 50 Average upl
Slide 13: Selective investment into compelling opportunities
Selective investment into compelling opportunities £76m invested; 61% into high conviction Investment activity £m 160 154 Cautious in deploying capital in the current 142 140 market 125 128 - High pricing and strong competition for good 120 quality assets - Maintaining discipline is key, as always
Slide 14: Finding value in the current market
Finding value in the current market Combining defensive growth with attractive deal dynamics Some of the growth drivers in the current market: Defensive growth Ageing population Strong market positions in growing markets • Healthcare Highly resilient businesses with relatively low correlation Pr
Slide 15: £102m of primary commitments
£102m of primary commitments Six new commitments; two new relationships Four new third-party primary commitments - Two existing relationships: Graphite Capital and Bain Capital €40.0m (£34.6m) £30.0m - Two new managers: €3.7bn European focus £470m UK mid-market buyouts ‒ Tailwind Capital - US
Slide 16: Top underlying companies – 47% of the portfolio
Top 30 underlying companies – 47% of the portfolio Value is concentrated in our high conviction investments Pre-Crisis 2009 - 2013 2014 - 2016 2017-18 High Conviction 741 Graphite primary 25% Third-party primary 1% 1 Percentages are of the top 30 value. High conviction includes ICG, direct co-invest
Slide 17: Top underlying companies – 47% of the portfolio
Top 30 underlying companies – 47% of the portfolio Strong revenue and earnings growth Revenue growth 15% 74% of Top 30 companies in high conviction portfolio 13% 10% 11% Consistently strong EBITDA growth 8% - LTM earnings growth of 14% ‒ Almost a third reporting EBITDA growth of >20% 5% 6% 5% -
Slide 18: Summary and outlook
Summary and outlook Well positioned to continue to generate shareholder value Continued outperformance of FTSE All-Share Index Continued strong performance Positive progress in the first half building on the continued strong performance of the portfolio Strong underlying profit growth High qua
Slide 19: Case studies
Case studies ENTERPRISE TRU:
Slide 20: Case study: Minimax
Case study: Minimax Co-investment alongside ICG Europe VI and VII – July 2018 €14m Co-investment by ICG Enterprise Background Rationale Outlook Leading global supplier of fire protection Largest pure play fire protection Positive current trading with systems and services, focused on solutions
Slide 21: Case study: Abode Healthcare
Case study: Abode Healthcare Co-investment alongside Tailwind Capital III – May 2018 $7m Total investment by ICG Enterprise Background Rationale Outlook Provider of at-home hospice care and other Tailwind knowledge and experience Company has made good early home care services in the United Sta
Slide 22: Case study: Jordan Company
Case study: Jordan Company Commitment to Resolute Fund IV – July 2018 $15m Committed by ICG Enterprise Background Rationale Outlook The Jordan Company is one of the oldest Experienced senior team with deep Current fund portfolio is US buyout managers, established in 1982 experience through mar
Slide 23: ICG European Mezzanine and Equity
ICG European Mezzanine and Equity Flexible strategy aiming for private equity returns with low downside risk Aiming for private equity returns (15-20% p.a. gross) with subordinated debt risk profile Objective Investing across the capital structure, often as sole institutional equity provider E
Slide 24: ICG Strategic Equity Strategy
ICG Strategic Equity Strategy Highly differentiated approach in a growing market segment Acquiring portfolios of private equity backed companies in mature funds Niche Offering liquidity for existing investors strategy Remaining companies require further time to realise potential value Strong
Slide 25: ICG North America Private Debt Fund II
ICG North America Private Debt Fund II Mid teens returns with an attractive risk profile in the US mid-market Invests primarily in second-lien/subordinated debt, with equity co-investment Distinctive Specialises in situations which require flexible capital structures strategy Targeting gross r
Slide 26: Supplementary portfolio information
Supplementary portfolio information
Slide 27: Detailed portfolio overview
Detailed portfolio overview Single fee on over half the portfolio ICG Graphite Third party Primary 62.5% 6.4% 14.2% 41.9% Secondary 11.0% 5.7% 0.4% 4.9% Co- Investment/ direct 26.5% 9.9% 2.2% 14.4% 100.0% 22.0% 16.8% 61.2% No management fee at ICGT level No management fee at underlying manager level
Slide 28: Top underlying companies #1-15
Top 30 underlying companies #1-15 Year of Value as a % of Company Manager Country investment Portfolio 1 DomusVi1 Operator of retirement homes ICG 2017 France 3.2% 2 City & Country Healthcare Group Provider of home care services Graphite Capital 2013 UK 3.2% 3 Visma1 Provider of accounting software
Slide 29: Top underlying companies #16-30
Top 30 underlying companies #16-30 Year of Value as a % Company Manager Country investment of Portfolio 16 System One1 Provider of specialty workforce solutions Thomas H Lee Partners 2016 USA 1.5% 17 Frontier Medical1 Manufacturer of medical devices Kester Capital 2013 UK 1.5% 18 Beck & Pollitzer Pr
Slide 30: Top underlying companies
Top 30 underlying companies Increase in valuation multiples and strong earnings growth EBITDA growth 100% 90% Earnings growth of 14% 80% - 38%1 reporting EBITDA growth of more than 70% 60% 10% 50% - A number of companies investing for growth, 40% expect to see the benefit of this over next 12- 30%
Slide 31: Realisations at significant uplifts to carrying value
31 Realisations at significant uplifts to carrying value Continued strong performance Percentage uplift to carrying value Weighted average 33% Four opening top 30 companies were sold 45 during the period: 40 35 40 - The Laine Pub Company (Graphite) 30 36 35 - Swiss Education Group (Invision) 25 31
Slide 32: Portfolio geographic focus
Portfolio geographic focus Increasing exposure to the US Movement in geographic split 0.3% 4.3% 100% Increasing exposure to the US market 14.1% 80% 24.0% - Largest most developed private equity market 40.5% Rest of World 60% - 24% of portfolio; up from 14% at Jan 16 39.7% US Europe - Expect US foc
Slide 33: Portfolio sector and deal size
Portfolio sector and deal size Focus on mid-large companies with a well balanced sector exposure Sector 5% 3% Healthcare and education 10% 24% Business services Well balanced sector exposure Consumer goods and - Bias to structural growth services 10% Industrials - Healthcare and education 24% Leis
Slide 34: Portfolio vintage year exposure
Portfolio vintage year exposure Attractive and well balanced maturity Investment vintage 25% Balance of near term realisations prospects with a strong pipeline of medium to longer term growth 20% 20% 20% Investments completed on or before 2014 – 37% of the portfolio 15% 14% - Likely to generate
Slide 35: Appendices
Appendices ENTERPRISE TRU:
Slide 36: Return attribution
Return attribution Strong portfolio gains NAV per share bridge 1100p Change in NAV Jul-18 1050p 83.9 (% of opening NAV) 1.6 Underlying portfolio return in local currencies 7.9% -5.5 -2.2 89.8 -11.0 1026.0 1000p Currency 2.5% Total portfolio valuation movement 10.4% 950p 959.1 -5.9 Effect of cash dra
Slide 37: Balance sheet
Balance sheet Strong balance sheet £m Jul 18 Jan 18 Cash balances decreased to £72m Investments 654 601 Cash 72 78 Undrawn commitments of £394m Other net assets/liabilities (15) (15) - If outstanding commitments were to follow a Net Assets 711 664 linear investment pace, estimate £90m of calls i
Slide 38: Balance sheet evolution
Balance sheet evolution History of conservative balance sheet management 800 600 400 654 601 428 594 432 433 265 415 192 231 357 378 200 £ million 133 140 113 104 55 69 90 78 72 43 46 39 0 -43 -46 -55 -69 -39 -113 -30 -90 -104 -78 -72 -133 -140 -59 -58 -98 -103 -111 -45 -26 -96 -104 -105 -97 -200 -1
Slide 39: Management fees and expenses
Management fees and expenses Effective management fee of 1.1% of NAV Costs as a % of investment portfolio Incentive (excluding cash) 3% Headline management fee of 1.4%1 of portfolio value plus 0.5% of undrawn commitments to funds in investment period Excludes funds managed by both ICG and Graphi
Slide 40: Incentive arrangements
Incentive arrangements Strong alignment of interest through co-investment scheme Incentive net payments as a % of cash proceeds Management fees Co-investment scheme in which the Manager 5% Incentive 10 year average invests 0.5% in every investment 4% Incentive of 10% provided the investment 3% e
Slide 41: Dividends and buybacks
Dividends and buybacks Continuing to return capital to shareholders Dividends and share buy backs Dividends 40 Buybacks The Board intends to pay a minimum dividend each year of 20.0p per share and to grow the annual Special div 35 dividend progressively Ordinary div Q2 dividend of 5p to be paid
Slide 42: ICG Enterprise Trust team
ICG Enterprise Trust team A strong combination of direct and fund investment experience Lead portfolio manager of Joined the investment Joined the investment ICG Enterprise for over 14 team in 2014 team in 2012 years Over 17 years of PE Over 10 years of PE Over 23 years of PE experience
Slide 43: ICG Enterprise Trust Board
ICG Enterprise Trust Board Private equity, investment and commercial experience Appointed to the Board in Appointed to the Board in Role of the Board: 2008 and became 2018 Chairman in 2017 Over 25 years of private • Ensure effective stewardship of the Extensive financial equity experience Co
Slide 44: How does private equity create value?
How does private equity create value? Active ownership model generating outperformance through cycles Long term outlook – Able to prioritise fundamental value creation over short term profit targets – Building an attractive business for the future acquirer Alignment of interests Due diligence and kn
Slide 45: Discount
Discount Discount does not reflect the long term performance Company vs sector long term discount Company NAV and share price vs FTSE All Share 10 500 450 450 - 400 413 -10 350 -20 300 300 -30 250 200 -40 150 -50 100 -60 50 -70 - 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Slide 46: Useful information
Useful information Structure: Company registered in England and Wales Ticker: ICGT.LON Investment trust tax status ISIN: GB0003292009 Registered company number: 01571089 SEDOL: 0329200 Listing: Premium London listing Website: www.icg-enterprise.co.uk Broker: Numis Securities Limited James Glass (Sal
Slide 47: Legal notice
Legal notice What this document is for This document has been prepared by ICG Alternative Investment Limited (“ICG AIL”) as manager of ICG Enterprise Trust plc (“ICG Enterprise”). The information and any views contained in this document are provided for general information only. It is not intended t