Strategic Equity Capital plc · LSE:SEC
Strategic Equity Capital — Q4 2021 Earnings Presentation
25 slides from Strategic Equity Capital's earnings presentation, January 2022
Slide 1: Strategic Equity Capital plc Q4 2021
Strategic Equity Capital plc (SEC.LN) Q4 2021 January 2022
Slide 2: Risk Warnings
RISK WARNINGS You should not rely on any information or opinions contained in this presentation in making an investment or other decision but should obtain appropriate and specific professional advice of your own. Nothing contained in this presentation constitutes or should be construed to constitut
Slide 3: Important Information
IMPORTANT INFORMATION Gresham House Asset Management Limited (GHAM) is the Investment manager to and invests on behalf of No undertaking, representation, warranty, or other assurance, express or implied, is made or given by or on behalf Strategic Equity Capital plc (“SEC”, the “Trust” or the “Fund”)
Slide 4: Executive Summary
EXECUTIVE SUMMARY Q4 2021 shareholder update ▪ Strong performance (NAV/share +2.1%)1, outperforming the FTSE Small Cap index (-0.5%), driven by takeover approaches for both Clinigen and River & Mercantile during the period. Total NAV return of 49% since September 2020 despite no exposure to 'macro-r
Slide 5: Strategic Equity Capital plc (SEC)
STRATEGIC EQUITY CAPITAL PLC (SEC) Application of private equity techniques to small public companies ▪ Differentiated strategy with highly-concentrated portfolio, deep research focus and engaged approach ▪ Genuine small cap - a structurally overlooked part of the market ▪ Long term investment horiz
Slide 6: Specialists in Alternatives
SPECIALISTS IN ALTERNATIVES Gresham House plc (Gresham House) is a London Stock Exchange-quoted specialist alternative asset management group (GHE.LN), providing funds, direct investments and tailored investment solutions, including co-investment. → Specialists in five areas of alternative investmen
Slide 7: Fund Strategies Spanning Business Lifecycle
FUND STRATEGIES SPANNING BUSINESS LIFECYCLE A suite of private and public equity products with the capability to support a company throughout its lifecycle. ▪ Public Equity - offers investors exposure to UK smaller public companies through a long term investment philosophy, using private equity tech
Slide 8: Well-Invested Specialist Small Company Investment Platform
WELL-INVESTED SPECIALIST SMALL COMPANY INVESTMENT PLATFORM Public Equity team - 6 investment professionals Private Equity team - 20 investment professionals Ken Wotton Brendan Gulston Adam Khanbhai Laurence Hulse Amber Stone-Brown Cassie Herlihy Bevan Duncan Clive Austin Trevor Hope Managing Directo
Slide 9: Portfolio Evolution
PORTFOLIO EVOLUTION Significant progress in evolving portfolio over the last 15 months1; lower levels of activity in Q4 following a busy Q3 Q4 2020 to Q4 2021 Q4 2020 to Q4 2021 £75.7m purchases (£9.3m in Q4) £76.5m sales (£15.8m in Q4) 34% Closing NAV (4% Closing NAV - Q4) 50% Opening NAV (10% Open
Slide 10: Portfolio & Pipeline Themes
PORTFOLIO & PIPELINE THEMES Healthcare and Regulation and High-quality cyclical / Pensions and savings Digitisation and data Covid recovery Sustainability / Energy pharmaceutical compliance services ▪ Increasing complexity of ▪ AI and ‘Big Data’ Transition ▪ Growing regulatory burden ▪ Niche, high I
Slide 11: Performance Summary
PERFORMANCE SUMMARY Annualised 35 31.3 29.5 30 26.6 25 20 18.0 15.6 16.2 15 13.5 % 10.0 9.4 10 5 2.1 0 -0.5 -1.7 -5 Q4 2021 3 yr 5 yr SEC NAV Total Return FTSE Small Cap x IT Total Return IT UK Smaller Companies Total Return Past performance is not necessarily a guide to future performance. Portfoli
Slide 12: Q4 Attribution Analysis
Q4 ATTRIBUTION ANALYSIS Positive attribution Negative attribution Company % pts Comment Company % pts Comment ▪ Shares derated on Omicron concerns; recovered ▪ Recommended bid for company by private these losses in early Q1 equity firm, Triton Partners ▪ Reported full year results with a beat on net
Slide 13: ESG Focus: Public Equity
ESG FOCUS: PUBLIC EQUITY As long-term investors with a focus on small and ESG implementation micro-cap companies in the UK equity market, we are active stock pickers applying a private equity 01 Initial assessment 04 Holding period Investment one pager Shareholder responsibilities approach to quoted
Slide 14: ESG in Action
ESG IN ACTION Case study Changing the way businesses purchase and use energy We invested in the company when it first listed in 2011 but worked with the management team before 2011 The business this point on areas such as Board composition and Initially we took a management incentives prior to IPO.1
Slide 15: Portfolio Characteristics
PORTFOLIO CHARACTERISTICS Portfolio vs Small Cap Index ▪ High-quality companies trading at discount to historic valuation range and precedent M&A ▪ Higher growth potential with lower gearing and higher margins than the index ▪ Targeting profit recovery & accelerating earnings growth ▪ Accelerated ca
Slide 16: UK Small-Cap Discount
UK SMALL-CAP DISCOUNT Valuation discount opportunity ▪ Small caps are trading at multi-year discounts relative to larger companies ▪ We believe this is owing to concerns over liquidity, perceived risk, and a reduction in resources devoted to this area of the market. This provides a distinct opportun
Slide 17: Private Equity Outlook
PRIVATE EQUITY OUTLOOK Private Equity has built up over $1.6tn ‘dry powder’ This is starting to be deployed in UK listed equities Private Equity: Assets under management 2009-2020 5500 5000 Assets under management ($bn) 4500 4000 3500 UK listed companies subject to confirmed 3000 2500 $1.6trn! ? or
Slide 18: Discount Reduction Plan
DISCOUNT REDUCTION PLAN Narrowing the share price discount to NAV is a key strategic priority to be achieved over time through a package of measures that are now in place and starting to have traction. ▪ Appointment of Ken Wotton as Lead Fund Manager, and focus on leveraging the wider Gresham House
Slide 19: Conclusion & Outlook
CONCLUSION & OUTLOOK ▪ Covid-19 - the emergence of the Omicron variant illustrates the fragile nature of the recovery from Covid-19. Whilst the general direction of travel is expected to be positive over the coming year, further periods of uncertainty and associated market volatility will likely rem
Slide 20: Appendix
APPENDIX
Slide 21: Morningstar Small Cap Investment Trust Overlap Analysis
MORNINGSTAR SMALL CAP INVESTMENT TRUST OVERLAP ANALYSIS AUSC ASL BRSC THRG HSL IPU JMI MINI MTU OIT SEC abrdn UK Smaller Companies Growth Ord (AUSC) 100% 2% 58% 73% 37% 36% 44% 0% 41% 0% 2% Aberforth Smaller Companies Ord (ASL) 4% 100% 10% 6% 26% 16% 21% 2% 1% 2% 5% BlackRock Smaller Companies Ord (
Slide 22: Strategy Public Equity vs. Private Equity
STRATEGY PUBLIC EQUITY VS. PRIVATE EQUITY A hybrid model that provides many of the benefits of private equity with greater liquidity and lower leverage Typical Public Equity Strategic Public Equity Private Equity Underlying liquidity Due diligence Correlation to equity markets Conviction / concentra
Slide 23: Long-Term Track Record
LONG-TERM TRACK RECORD 800 750 Cumulative rebased total returns 700 CAGR¹ 650 SEC NAV 17.7% 600 550 FTSE Small Cap ex IT 13.2% Total return 500 450 400 350 300 250 200 150 100 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 1
Slide 24: Top Holdings - Investment Theses
TOP 10 HOLDINGS1 - INVESTMENT THESES Company Company Investment thesis Investment thesis and % of NAV and % of NAV ▪ A niche market leader in the UK teleradiology sector which is acyclical and is ▪ International provider of B2B data and training in the compliance, insurance, growing rapidly driven b
Slide 25: Fund Overview
FUND OVERVIEW Strategic Equity Capital plc 1 Shares in issue 63,296,844 Governance London Stock Exchange listed, UK domiciled investment trust, independent Board Corporate broker Liberum Capital Authorisation to purchase 14.99% of own shares for cancellation or to be held in treasury Contingent tend
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