HGCapital Trust PLC · LSE:HGT

HGCapital Trust — FY2008 Earnings Presentation

41 slides from HGCapital Trust's earnings presentation, March 2009

  1. Slide 1: HgCapital Trust plc Full Year Results to 31 December 2008

    HgCapital Trust plc Full Year Results to 31 December 2008

  2. Slide 2: Contents

    HgCapital Contents Trust plc Introduction Performance Valuations Investment Activity Portfolio Review Manager Update Conclusion Appendices © Copyright 2009 HgCapital 2

  3. Slide 3: Introduction

    HgCapital Introduction Trust plc ƒ Continued realisations in the year despite challenging market conditions. ƒ Positive NAV (total return basis) +0.5% ƒ 55% of net assets in cash. ƒ Compact portfolio, good earnings growth in 2008 and significant resources available. ƒ Expect a tough trading environm

  4. Slide 4: Contents

    HgCapital Contents Trust plc Introduction Performance Valuations Investment Activity Portfolio Review Manager Update Conclusion Appendices © Copyright 2009 HgCapital 4

  5. Slide 5: Performance Financial Highlights

    Performance Financial Highlights Assets AT 31 DEC 2008 AT 31 DEC 2007 % CHANGE Net assets (£’000) 234,094 238,817 (2.0%) Net assets per share 929.4p 948.2p (2.0%) Share price (mid-market) 668.5p 782.5p (14.6%) Discount (%) 28.1% 17.5% Revenue Net revenue (£’000) 7,445 7,446 - Earnings per share 29.6

  6. Slide 6: Performance Total Return

    Performance Total Return CONSISTENT LONG-TERM PERFORMANCE AND OUT PERFORMANCE OF BOTH THE INDEX AND QUOTED PEERS 1 YEAR TO 3 YEARS TO 5 YEARS TO 7 YEARS TO 10 YEARS TO 31 DEC 2008 31 DEC 2008 31 DEC 2008 31 DEC 2008 31 DEC 2008 Net asset value 0.5% 16.6% 21.1% 15.7% 16.0% Share price (12.0%) 6.8% 21

  7. Slide 7: Attribution Analysis of Movement in NAV

    Performance Attribution Analysis of Movement in NAV UNREALISED VALUES WRITTEN DOWN, AS RATINGS DROP SIGNIFICANTLY, OFFSET BY REALISATIONS CONSIDERABLY IN EXCESS OF BOOK VALUE £’000 Opening net asset value as at 1 January 2008 238,817 Realised proceeds in excess of book value at 31 December 2007 (exc

  8. Slide 8: Contents

    HgCapital Contents Trust plc Introduction Performance Valuations Investment Activity Portfolio Review Manager Update Conclusion Appendices © Copyright 2009 HgCapital 8

  9. Slide 9: Realised and unrealised movements in NAV during 2008

    Valuations Realised and unrealised movements in NAV during 2008 Addison 11.0 The Sanctuary 9.0 Pulse 6.9 Orbiscom 4.9 Classic Copyright 4.5 Clarion Events 3.2 Schleich 2.4 Clinphone 1.5 PBR (PRA International) 0.7 Rolfe & Nolan 0.6 Other (1.0) 0.4 FTSA (2.0) Cornish Bakehouse (2.3) SLV (2.6) Elite (

  10. Slide 10: Source of NAV movement for the year

    Valuations Source of NAV movement for the year £238.8m → £234.1m Actual NAV Actual NAV Actual NAV £238.8m £260.0m £234.1m 40,000 13,788 354 (40,033) 35,000 30,000 25,000 21,168 10,100 (5,181) 5,181 20,000 Changes in NAV £'000 15,000 579 16,786 10,000 5,000 (6,297) (4,723) 0 (5,000) (10,000) Dec Divi

  11. Slide 11: Analysis of unrealised movements in investments

    Analysis of unrealised movements in investments of £35.1 million Valuations for the year ending 31 December 2008 30,000 17,719 20,000 (10,608) 3,517 (5,181) 4,970 10,100 (47,889) (528) 10,000 (35,114) 0 Changes in unrealised NAV £'000 (10,000) (20,000) (30,000) (1,958) 4,844 (40,000) Trading Ratings

  12. Slide 12: Contents

    HgCapital Contents Trust plc Introduction Performance Valuations Investment Activity Portfolio Review Manager Update Conclusion Appendices © Copyright 2009 HgCapital 12

  13. Slide 13: Investment Activity: Investments

    Investment Investments Activity Selective investments in businesses which should perform through market cycles £26.0m invested (2007: £51m) COMPANY SECTOR ACTIVITY DEAL TYPE COST £’000 Casa Reha Healthcare Care home operator Buyout 8,140 King Luxembourg (KVT) Industrials Distributor of industrial fa

  14. Slide 14: Investment Activity: Realisations

    Investment Realisations Activity Realisations continued through the year. £92m realised (2007: £106m) CURRENT YEAR TOTAL MONEY RESIDUAL COMPANY SECTOR EXIT ROUTE PROCEEDS £’000 GAIN/(LOSS) OVER MULTIPLE OF COST £’000 BOOK VALUE £’000 ORIGINAL COST The Sanctuary Spa C&L Trade sale 2,409 22,435 9,029

  15. Slide 15: Contents

    HgCapital Contents Trust plc Introduction Performance Valuations Investment Activity Portfolio Review Manager Update Conclusion Appendices © Copyright 2009 HgCapital 15

  16. Slide 16: Portfolio Review: Top companies

    Portfolio Portfolio Review Top 10 companies represent over 75% of value *Value at *Value at Investment % of invested Cumulative Investment Sector 31/12/07 31/12/2008 Principal Reason for Change Date portfolio 31/12/08 value % £m £m Visma 2006 TMT 14.8 14.4 13.2% 13.2% Increased earnings, fall in rat

  17. Slide 17: Portfolio Review: NAV analysis

    Portfolio NAV analysis Review Cash weighting increased to 55% of net assets AT 31 DEC 2008 AT 31 DEC 2007 £m % £m % Unlisted Investments 108.9 46.5% 160.5 67.2% Listed Investments - - 6.5 2.7% Cash/Government securities 130.0 55.5% 79.8 33.4% Other net liabilities (4.8) (2.0%) (8.0) (3.3%) Net asset

  18. Slide 18: Valuation Basis and Vintage

    Portfolio Valuation Basis and Vintage Review As at 31 December 2008 by value VALUATION BASIS VINTAGE Year Year2009 2009 Pre Pre 2005 2005 Other Cost 12%12% 15% 15% Year 2008 Net assets 5% 1% Pre 2005 Year Year2008 2008 13% 6% Year Year2005 2005 17% 12% 12% 10% 10% Written down Year Year2007 2007 Yea

  19. Slide 19: Sector coverage of investments

    Portfolio Sector coverage of investments Review As at 31 December 2008 by BY VALUE BY NUMBER value Renewable energy Renewable energy PE Fund 4% PE Fund 1 2% Healthcare 4 Services Industrials 8% 25% 10 Services 4 Industrials 15% Consumer & Leisure TMT TMT 5 7 Consumer & Leisure 24% 22% Healthcare 6 ©

  20. Slide 20: Geography and Stage

    Portfolio Geography and Stage Review As at 31 December 2008 by BY GEOGRAPHY BY STAGE value Rest of Europe North America Funds 2% 4% Expansion 2% Switzerland 2% 1% Renewable energy Benelux 4% 7% UK 44% Germany 20% Buy-out Nordic Region 92% 22% © Copyright 2009 HgCapital 20

  21. Slide 21: Portfolio Outlook

    Portfolio Portfolio Outlook Review ƒ Average LTM EBITDA growth from the Top 10 investments was 14% but this will be very difficult to maintain in 2009. ƒ We expect 2009 to present major challenges for portfolio companies as the full impact of the recession bites. Every effort has been made to ensure

  22. Slide 22: Investment Prospects

    Portfolio Investment Prospects Review ƒ We believe current conditions will give rise to a strong vintage for new investment. This is from a combination of high levels of essential change and the increased price of equity. ƒ Debt markets are currently close to shut, although there is some capacity fo

  23. Slide 23: Events since the end of the year

    Portfolio Events since the end of the year Review ƒ Net asset value at 31 January 2009 and 28 February 2009 was 918.0p and 918.6p, the movements since the year end are mainly due to foreign currency movements. ƒ Balances at the end of February 2008, adjusted for the payment of the carried interest l

  24. Slide 24: Contents

    HgCapital Contents Trust plc Introduction Performance Valuations Investment Activity Portfolio Review Manager Update Conclusion Appendices © Copyright 2009 HgCapital 24

  25. Slide 25: HgCapital Update

    Manager HgCapital Update Update GEOGRAPHIC Remains unchanged yet with a greater focus: COVERAGE ƒ More resources put into the four core sectors where we have the strongest and deepest franchise: − TMT − Healthcare − Services − Industrials. ƒ Hands on leadership by seasoned investors. ƒ Consumer and

  26. Slide 26: Strategic relevance

    Manager Strategic relevance Update STRATEGY Mid-Market ƒ £50 million - £500 million EV buyouts/buy-ins: − Consistently strong deal-flow − Multiple exit options − Not overly dependent on capital markets (for returns, financing or exit) − Defensible market positions / proven records − Ability to attra

  27. Slide 27: Tactical advantage

    Manager Tactical advantage Update TACTICS Sector-focused ƒ 4 dedicated sector teams (developed over 11 years) covering c.70% of the market ƒ Annual business planning process drives agenda for each team ƒ Strategy superseding geography in investment targeting Intensive post-transaction planning and m

  28. Slide 28: Contents

    HgCapital Contents Trust plc Introduction Performance Valuations Investment Activity Portfolio Review Manager Update Conclusion Appendices © Copyright 2009 HgCapital 28

  29. Slide 29: Conclusion

    HgCapital Conclusion Trust plc ƒ Market conditions for the portfolio will remain challenging as the recession will be deep and recovery likely to be slow. ƒ Valuations of companies with geared equity structures will fall further if earnings weaken and ratings continue to fall. ƒ Significant cash res

  30. Slide 30: Contents

    HgCapital Contents Trust plc Introduction Performance Valuations Investment Activity Portfolio Review Manager Update Conclusion Appendices © Copyright 2009 HgCapital 30

  31. Slide 31: Multiple levers of value creation

    Manager Multiple levers of value creation Update Multiple identified Returns without Sector and stock sources of value Active management undue dependence selection growth on capital markets AGGREGATE RETURN 3.0x ATTRIBUTION 2.5x MUST 4 and HgCapital 5 buyout realisations to 2.0x date 1.5x 1.0x 0.5x

  32. Slide 32: Share Price and NAV Performance against the Index

    Appendices Share Price and NAV Performance against the Index (Total Return) Performance over 10 Years (total return) 600 550 500 450 Performance Index 400 350 300 250 200 150 100 50 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-0 5 Dec-06 Dec-07 Dec-08 NAV FTSE ALL SHARE PRICE FTSE Small CAP

  33. Slide 33: Performance of Private Equity Funds over years

    Appendices Performance of Private Equity Funds over 10 years (Price total return) 700 600 HgCapital 500 Candover SVG Capital Graphite Enterprise 400 Electra Priv.Equity Pantheon 300 Dunedin Enterprise 3i Group 200 F&C Private Equity Std Life Euro 100 0 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-9

  34. Slide 34: Performance of Private Equity Funds over years

    Appendices Performance of Private Equity Funds over 5 years (Price total return) 400 HG Capital 300 Candover Std Life Euro SVG Capital Electra 200 Graphite Enterprise Dunedin Enterprise Pantheon 3i Group 100 F&C Private Equity 0 D ec-03 A pr-04 A ug-04 D ec-04 A pr-05 A ug-05 D ec-05 A pr-06 A ug-06

  35. Slide 35: Portfolio: 31 December 2008

    Appendices Portfolio : 31 December 2008 Investment Year of investment Sector Location Residual cost Total valuation* Portfolio value Cum. value £'000 £’'000 % % 1 VISMA Holdings 2006 TMT Nordic Region 13,326 14,391 13.2% 13.2% 2 Pulse Staffing Ltd 1999 Healthcare UK 6,131 12,858 11.8% 25.0% 3 Mondo

  36. Slide 36: Portfolio: 31 December 2008

    Appendices Portfolio: 31 December 2008 Investment Year of investment Sector Location Residual cost Total Valuation* Portfolio value Cum. value £'000 £'000 % % 21 Hirschmann Electronics Holdings SA 2004 Industrials Germany - 1,129 1.0% 101.5% 22 Software (Cayman), LP - re Guildford 2007 TMT UK 253 58

  37. Slide 37: Portfolio by Sector: 31 December 2008

    Appendices Portfolio by Sector: 31 December 2008 Total Year Location Valuation Basis Residual Cost Valuation* Portfolio Value £'000 £'000 % TMT Investments VISMA Holdings 2006 Nordic Region Earnings 13,326 14,391 13.2% Achilles Group Holdings Limited 2008 UK Cost 5,226 5,226 4.8% Elite Holding SA 20

  38. Slide 38: Portfolio by Sector: 31 December 2008

    Appendices Portfolio by Sector: 31 December 2008 Total Year Location Valuation Basis Residual Cost Valuation* Portfolio Value Industrials Investments Mondo Minerals Co-op 2007 Nordic Region Earnings 7,004 9,768 9.0% SLV Electronik SARL 2007 Germany Written down 5,962 3,850 3.5% King Luxembourg Sarl

  39. Slide 39: Portfolio by Sector: 31 December 2008

    Appendices Portfolio by Sector: 31 December 2008 Total Year Location Valuation Basis Residual Cost Valuation* Portfolio Value Services Investments Atlas Energy Group Ltd 2007 UK Written down 8,153 4,261 3.9% BMFCO UA (t/a Fabory) 2007 Benelux Written down 7,391 2,964 2.7% SHL Group Holdings 1 Ltd (f

  40. Slide 40: Analysis of movements in unrealised portfolio including interest

    Appendices Analysis of movements in unrealised portfolio including interest Valuation* Movements Appreciation / App / (Depr) Investments Ccy Dec-07 Dec-08 Movement Transactions** Forex (depreciation) % movement Pulse Staffing GBP 0.2 12.9 12.6 5.7 - 6.9 117% Hoseasons GBP 1.0 2.1 1.2 - - 1.2 120% Sc

  41. Slide 41: Disclaimer

    Disclaimer HgCapital’s communications are only directed at eligible counterparties and professional clients. HgCapital acts for its investors an for no one else in relation to its business. It will not advise, provide services to or be responsible for providing customer protections to any other pers

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