HGCapital Trust PLC · LSE:HGT
HGCapital Trust — Q1 2020 Earnings Presentation
31 slides from HGCapital Trust's earnings presentation, May 2020
Slide 1: Get connected
2020 Money Observer private equity and growth capital trust Listed access to the 3rd largest software business in access to the 4th largest software business in Europe Listed Europe Get connected December 2019 May 2020 To a universe of software and service businesses This document accompanies the In
Slide 2: Contents
Contents Key financial highlights 03 Portfolio activity 09 Summary and outlook 13 About the Manager 14 Investment strategy 16 Appendix 22 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 © Cop
Slide 3: Key financial highlights – NAV, share price and trading
Key financial highlights – update to 31 March 2020 NAV, share price and trading Continuing to outperform the FTSE All Share, with consistent strong trading from the portfolio Performance FY 2019 Performance Q1 2020 Top 20 (92%) FY 2019 Top 20 (88%) Q1 2020 +21% -6.1% +24% +24% NAV per share LTM sale
Slide 4: Software has outperformed the overall public market
Key financial highlights – update to 31 March 2020 Software has outperformed the overall public market Down <10% year-to-date vs broader market down 11-23% 120 110 S&P S&S 100 0% SAP 90 -9% S&P 80 -11% 70 FTSE 100 -23% 60 S&P500 Software and Services S&P500 FTSE 100 SAP Source: Factset, 28/4/20..S&P
Slide 5: Historical total return performance
Key financial highlights – update to 31 March 2020 Historical total return performance Consistent compounding outperformance of the FTSE All Share across market cycles +14% share price and 12% NAV per share CAGR over 20 years v. +4% FTSE All Share CAGR over the same period An investment of £1,000 ma
Slide 6: Performance attribution
Key financial highlights – update to 31 March 2020 Performance attribution Growth in profits contributed to a 5% increase over the quarter offset by a 11% fall in due to lower market multiples Between our December and March valuations, the overall multiple used on a like- for-like (i.e. excluding th
Slide 7: Top 20 trading LTM to 31 March 2020
Key financial highlights – update to 31 March 2020 Top 20 (88% of the portfolio) trading LTM to 31 March 2020 The portfolio continues to grow 24% LTM sales growth 32% 19.6x 6.5x LTM EBITDA growth EV to EBITDA multiple* Debt to EBITDA ratio *Between our December and March valuations, the overall mult
Slide 8: Balance sheet
Key financial highlights – update to 31 March 2020 Balance sheet Further commitments made to Hg funds ensuring the future long-term growth of HGT Balance sheet Balance sheet $400m commitment to Hg Saturn 2 in March 2020 as at 29 February 2020 as at 31 March 2020 New commitments of €360m made to Hg G
Slide 9: Balance sheet
Key financial highlights – update to 31 March 2020 Balance sheet Further commitments made to Hg funds ensuring the future long-term growth of HGT © Copyright Hg 2020 9
Slide 10: 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 11: …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 12: 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 13: Summary and Outlook
Outlook Summary and Outlook Robust double-digit trading performance continues to underpin the ongoing growth of a defensive portfolio. ▪ As highlighted in March, we expect the pandemic to have only a limited direct impact on Hg’s portfolio, given the defensive growth characteristics of the portfolio
Slide 14: HGT is Hg's largest client
About the Manager HGT is Hg’s largest client Investing alongside some of the world’s largest institutional investors c. £2bn Invested capital, cash > £11bn Invested capital and and and undrawn commitments undrawn commitments c. £11bn £1.1bn Invested capital and Portfolio value, cash & undrawn commit
Slide 15: 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 16: Focus on Western Europe, with experience building global businesses
Investment strategy Focus on Western Europe, with experience building global businesses Intelerad Visma IT Relation Global businesses Commify Eucon Access Group Citation MediFox Sovos Achilles Lyniate Allocate A-Plan Mobility Holding Argus Media Project Rocket Litera CogitalGroup STP Project Delta T
Slide 17: Unique competitive position in Europe
Investment strategy Unique competitive position in Europe ‘Hg Inc’ would be the #3 technology firm in Europe (by EV), …and few specialised firms are based in the region with the fastest growth… US EUR €129bn $433 bn $637 bn 2019 Software and Services spend 2.3% 3.3% GDP GDP ~$156bn Est. dry powder O
Slide 18: 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 Business critical need delivered as software or service ERP & Payroll Legal and Compliance Automotive Subscription or repeat revenue model
Slide 19: Single strategy across three funds
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 20: 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 2020 20
Slide 21: Growing sustainable businesses which are great employers
Investment strategy Growing sustainable businesses which are great employers Hg ESG and Sustainability at a glance c 200 >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 c
Slide 22: 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 23: 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 24: 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 25: 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 26: 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 27: 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 28: One of the top performing ISA eligible investment companies over 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 29: 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 29
Slide 30: 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 31: 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