Herald Investment Trust PLC · LSE:HRI
Herald Investment Trust — Shareholder Meeting (April 2020)
25 slides from Herald Investment Trust's shareholder meeting presentation, Apr 17, 2020
Slide 1: Herald Investment Trust plc
Herald Investment Trust plc 17th April 2020
Slide 2: Important information and data source
You should remember that past performance is not necessarily a guide to the future. You should determine for yourself what weight, if any, to place on such past performance. Markets and currency movements may cause the value of shares, and the income from them, to fall as well as rise, and you may g
Slide 3: Manager commentary: don't panic
I have been managing Herald Investment Trust from inception in 1994. The current headache always seems to be the worst. People looked over the edge fearing the collapse of the banks in 2008, but it did not happen – they were rescued, and in hindsight little damage was done to most people’s lives. Th
Slide 4: Technology use during lockdown
With a significant proportion of the population in the developed world now in lockdown, many people are using technology at home to work, for communication, for shopping and leisure. It is evident how much the internet and cloud computing are alleviating the challenges of social distancing, thus mit
Slide 5: Herald Investment Trust introduction
INTRODUCTION Herald Investment Trust (HIT) launched in 1994 Herald Global small cap TMT Investment Median market cap c. £180m (31/12/2019) Trust Significant provider of primary capital to emerging business, £511m since inception Long term performance - NAV up >15x Intellectual property important in
Slide 6: Full year 2019 highlights
HIGHLIGHTS Full year 2019 highlights NAV UK IRR N AMERICA IRR +27.5% +30.2% +39.5% 2019 - High levels of takeover activity, leading to high cash levels 2019 HIGHLIGHTS: PLACINGS PLACINGS IPOS TAKEOVERS* £39.6m 58 4 £106.1m * Includes £16.8m of Mellanox deal which is awaiting regulatory approval Sour
Slide 7: Performance figures
HIGHLIGHTS Performance figures Reporting Period: 31/03/2020 31/12/2007- Inception to date * Q1 2020 FY 2019 TWR TWR IRR 31/03/2020 All figures stated as % returns TWR Annualised Annualised Asia* -16.6 30.1 200.6 643.2 8.7 5.9 Europe Middle East and Africa -20.6 38.8 348.1 2,521.6 13.3 10.7 North Ame
Slide 8: Q1 Highlights and commentary
HIGHLIGHTS Q1 Highlights and commentary NAV Numis ex INV Trust plus AIM Russell 2000 Technology -16.6% -32.7% -16.9% • Lessons from past crisis – stick to quality management teams who can navigate the challenges • Tech sector relatively better positioned – modest leverage, high element of recurring
Slide 9: COVID-19 portfolio impact
COVID-19 COVID-19 portfolio impact Negatives Positives Advertising Conferencing Corporate Digital Customer Bankruptcies Experience CapEx Delays Video Streaming & Home Entertainment Supply Constraints Ecommerce Cash Flow Issues Internet Bandwidth Physical Events Datacentre Retail Computer Gaming Econ
Slide 10: HIT performance since inception
HIGHLIGHTS HIT performance since inception Total return rebased to 100 at Feb-1994 15x NAV TOTAL RETURN SINCE INCEPTION 11.0% NAV ANNUALISED RETURN SINCE INCEPTION HERALD INVESTMENT TRUST 10 Source: Refinitiv graph to 31/03/2020
Slide 11: Summary
SUMMARY TMT attractive in world of remote working and social distancing Cash to deploy in challenging economy Smaller companies disproportionately benefit by ability to rent low cost global cloud infrastructure Summary Small caps can provide more value, investment trust an ideal structure for an ill
Slide 12: Geographic Returns
Geographic Returns HERALD INVESTMENT TRUST 12
Slide 13: Geographical returns – 2017 to 2019
GEOGRAPHICAL DETAIL Geographical returns – 2017 to 2019 NORTH UK EMEA ASIA HIT 60 AMERICA GEOGRAPHICAL RETURN* (STERLING, %) 52.4 50 38.8 40 35.2 36.5 30.4 30.1 30 26.9 27.5 24.7 20 17.8 11.8 10 2019 2019 2019 2019 2019 2017 2018 2017 2017 2017 2017 0 2018 2018 2018 2018 -4.9 -10 -9.4 -9.2 -20 -22.7
Slide 14: Geographical weightings
GEOGRAPHICAL DETAIL Geographical weightings GEOGRAPHICAL SPREAD OF EQUITY INVESTMENTS AS AT 31 MAR 2020* NORTH UNITED AMERICA KINGDOM EMEA 25.0% 48.3% 5.5% 2019: 6.0% ASIA 2019: 23.0% 2019: 52.2% 7.6% 2019: 6.8% *Comparative year figures to 31/12/2019 HERALD INVESTMENT TRUST 14
Slide 15: TMT Disruption
TMT Disruption Technology sector offers exciting emerging companies HERALD INVESTMENT TRUST 15
Slide 16: TMT investment characteristics
TMT DISRUPTION • Relevant in a world of work from home and social distancing • Disruptive technologies open up new markets TMT • Sector has unusual ability to earn super-normal margins investment (software, semiconductor, internet) • Attractive growing end markets characteristics • Scalable business
Slide 17: Diverse portfolio exposure
TMT DISRUPTION Diverse portfolio exposure IoT SECURITY TELECOMS & NETWORKING SEMICONDUCTORS SOFTWARE INTERNET & MEDIA Portfolio companies engaged in disruptive markets HERALD INVESTMENT TRUST 17
Slide 18: Broad technology drivers
TMT DISRUPTION Broad technology drivers ADAS – Driver Monitoring Robotics Cloud 5G 15.5% WORLDWIDE TOTAL RETURN PER ANNUM Machine Learning & Digital Media NFV and SDN Digital Transformation Artificial Intelligence Energy Storage and Cyber Security AI and Analytics Advance Semiconductors 13.3% Hydrog
Slide 19: The Herald Approach
The Herald Approach HERALD INVESTMENT TRUST 19
Slide 20: Achieving Capital Growth
INTRODUCTION Achieving Capital Growth Herald invests, generally on a long term basis, using fundamental analysis. The technology, media and What we do telecommunications sector comprises of over 5,000 quoted companies, and many more unquoted. The manager, Herald Investment Management Limited (HIML),
Slide 21: What we do and history of the company
INTRODUCTION WHAT WE DO Analysis entails a prolific number of development capital, then holding meetings with companies, either at Herald’s investments for long periods, regularly offices, site visits or at conferences globally, providing further capital when needed. as well as broker hosted meeting
Slide 22: The Herald Approach
HERALD APPROACH • Comprehensive mosaic of contacts and information in the sector globally gained through: • A team of 7 with >125 years TMT experience The Herald • Over 1,500 meetings per year with company management Approach • 20 year in-house research database of meeting notes on 4,000+ companies
Slide 23: Investment landscape and approach
HERALD APPROACH Investment landscape and approach INVESTMENT UNIVERSE Global TMT c. 5,000+ Stocks All Cap/Small Cap Public Companies IDEA GENERATION Company Meetings Publications & Market Data In-House Database STOCK SELECTION Financials Market Dynamics Management Attractive Valuation HIT PORTFOLIO
Slide 24: Investment Selection
HERALD APPROACH • Fundamental long term analysis • Idea generation from: • Meeting companies (suppliers, customers and Investment competitors) • Sell-side conferences and analyst meetings Selection • Brokers’ research • Industry events and analyst meetings • Public information: websites, annual repo
Slide 25: The Team
HERALD APPROACH The Team Specialist global team with over 82 years of Herald experience. The responsibilities of the team are split by sector and geography. Katie Potts Katie founded Herald in 1994, she is the lead fund manager. Prior to founding Herald she worked at Barings Investment Management an
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