HGCapital Trust PLC · LSE:HGT
HGCapital Trust — FY2011 Earnings Presentation
37 slides from HGCapital Trust's earnings presentation, March 2012
Slide 1: HgCapital Trust plc Full Year Results 31 December 2011
HgCapital Trust plc Full Year Results 31 December 2011 This document accompanies the Full Year Report & Accounts for the twelve months ended 31 December 2011 and contains a summary of information set out in that document. Reference should be made to the full Report & Accounts rather than relying on
Slide 2: Contents
HgCapital Contents Trust plc PAGE Overview 3 Financial Highlights 4 Investment Activity 5 Portfolio Review 8 Balance Sheet 12 Top 20 Buyout Investments 13 Renewable Energy 15 Outlook and Prospects 16 Appendix 17 Sector expert investors supporting management to grow industry champions © Copyright 201
Slide 3: Overview: Building the foundations for future growth
HgCapital Overview Trust plc Building the foundations for future growth Investment of £200m in 12 companies over the last 2 years, representing 60% of NAV. The portfolio continues to deliver double-digit revenue and profit growth rates, in excess of GDP. Exits made at significant uplifts to bo
Slide 4: Financial Highlights
HgCapital Financial Highlights Trust plc year to December 2011 PERFORMANCE NAV per share (diluted) total return(1) +0.5% over the year to 1,069.3p. Total NAV was £346.8m. Short term performance static, albeit outperforming public markets again. Share price (total return(1)) has grown +15.7% p.
Slide 5: Investments and Realisations
Investment Investments and Realisations Activity Investing in growth and realising for value CASH DEPLOYED IN 2011 £87M CASH REALISED IN 2011 £62M 5 new buyout investments completed in the year 7 exits in total with average uplift over book value of 56% Acquired a £15 million secondary interes
Slide 6: Iris Accountancy Software – 2011 Acquisition
Investment Iris Accountancy Software ‐ 2011 Acquisition Activity Continued strong organic growth through the recession BACKGROUND The market-leading provider of fully integrated accountancy software and services for UK accountancy practices. Well-known to HgCapital having first invested in IRIS
Slide 7: SLV – 2011 Disposal
Investment SLV – 2011 Disposal Activity £9.6m realised on 4.0x multiple of cost BACKGROUND Fast growing and highly profitable Mittelstand company providing lighting systems designed in Germany and made in China sold through well-known catalogues, operating partnerships and JVs in most European mar
Slide 8: Trading Performance of Top Buyout Investments
Portfolio Trading Performance of Top 20 Buyout Investments Review Robust performance remains in excess of nominal GDP growth SALES +13% p.a. Combined sales of £2.0 billion. Over half of the top 20 buyouts by value have increased sales by >10% p.a., with 37% of the portfolio growing by >15% p.a..
Slide 9: Valuation and Gearing – Top Buyout Investments
Portfolio Valuation and Gearing ‐ Top 20 Buyout Investments Review as at 31 December 2011 EBITDA MULTIPLE 10.2x Valuation multiple increased from 9.7x to 10.2x over the year predominantly due to prices paid for 2011 investments A premium paid for quality companies and platform opportunities DEBT
Slide 10: Key drivers of valuation change in 2011
Portfolio Key drivers of valuation change in 2011 Review COMPANY VALUATION CHANGE IN 2011 PRINCIPAL DRIVER OF CHANGE IN VALUATION Largest increases SHL +£6.8m Strong trading and benefits of merger with PreVisor ATC +£4.4m Robust earnings growth and cash generation Goldshield +£4.0m Strong cash gener
Slide 11: HgCapital Trust plc Portfolio Analysis
Portfolio HgCapital Trust plc Portfolio Analysis Review as at 31 December 2011 1Percentages are based on fixed assets (excluding hedges) and accrued interest and are shown by value 2Percentages are based on net assets Sector expert investors supporting management to grow industry champions © Copyrig
Slide 12: Liquid Resources and Outstanding Commitments
Balance Liquid Resources and Outstanding Commitments Sheet Multiple levers in place to manage the balance sheet AS AT 31 DECEMBER 2011 £m % of NAV HgCapital 5 17.1 4.9% HgCapital 6(1) 85.9 24.8% HgCapital 6 E 4.7 1.4% Hg Mercury 59.0 17.0% (2) Hg RPP1 1.2 0.3% (2) Hg RPP2 27.2 7.8% Outstanding commi
Slide 13: Top Buyout Investment Portfolio (1-10)
Top 20 Buyout Investment Portfolio Review The top 10 buy‐out investments represent 63% of the portfolio value RESIDUAL TOTAL PORTFOLIO CUM. CHANGE IN YEAR OF COST VALUATION(1) VALUE VALUE VALUE INVESTMENT INVESTMENT SECTOR LOCATION £’000 £’000 % % FROM 2010 1 TeamSystem 2010 TMT Italy 24,432 25,671
Slide 14: Top Buyout Investment Portfolio (11-20)
Top 20 Buyout Investment Portfolio Review The top 20 buy‐out investments represent 87% of the portfolio value RESIDUAL TOTAL PORTFOLIO CUM. CHANGE IN YEAR OF COST VALUATION(1) VALUE VALUE VALUE INVESTMENT INVESTMENT SECTOR LOCATION £’000 £’000 % % FROM 2010 11 Manx Telecom 2010 TMT UK 11,033 11,436
Slide 15: Renewable Energy Fund Investments
Renewable Renewable Energy Fund Investments Energy Good risk adjusted returns, delivering inflation‐protected and non‐GDP linked revenue streams The Trust holds an investment via limited partnership interests in the Manager’s two Renewable Energy Funds, RPP1 (2006) and RPP2 (2010). The Funds giv
Slide 16: Outlook & Prospects
Conclusion Outlook & Prospects March 2012 80% of the balance sheet invested in buyouts of which circa: - 80% is in companies with a low exposure to the cycle. - 20% is in companies where ratings and earnings are sensitive to the economy. Market leading businesses with low gearing, well placed fo
Slide 17: Appendix Contents
Appendix Contents PAGE Performance 18 NAV and share price summary 21 Analysis of NAV movements 22 Realised and unrealised movements in the portfolio 24 Investment activity 25 Portfolio by sector 27 The Manager and Investment Strategy 30 Sector expert investors supporting management to grow industry
Slide 18: Total Return
Appendix Total Return(1) as at 31 December 2011 £1,000 invested 10 years ago would now be worth £4,289 on a total return basis Consistent and significant 1 YEAR 3 YEARS 5 YEARS 7 YEARS 10 YEARS outperformance of the % % P.A. % P.A. % P.A. % P.A. FTSE All Share Index Share price (1.2) 16.4 8.6 14.2 1
Slide 19: The Trust continues to deliver long term growth
Appendix The Trust continues to deliver long term growth Outperforming the FTSE by 2.7x over the last 10 years(1) SHARE PRICE PERFORMANCE OVER TEN YEARS TOTAL RETURN(1) 10 year share price total return(1) of 15.7% p.a. for the Trust vs. 4.8% p.a. for the FTSE All-Share Index 10 year NAV per shar
Slide 20: Outperforming its listed peers
Conclusion Outperforming its listed peers Outperforming key competitors by 2.9x over the last 10 years SHARE PRICE PERFORMANCE OVER TEN YEARS vs. LISTED PEERS GRAPH HERE HgCapital Trust outperformed key competitors by an average of 2.9x over the last 10 years Best performing peer Electra was out
Slide 21: NAV and Share Price Summary
Appendix NAV and Share Price Summary % CHANGE AS AT AS AT AS AT OVER LAST 29 FEB 2011 31 DEC 2011 31 DEC 2010 12 MONTHS Net assets (£’000) 350,912 346,832 347,993 -0.3% Net assets per share – diluted 1,080.2p 1,069.3p 1,090.7p -2.0% – basic 1,102.7p 1,089.9p 1,118.8p -2.6% Share price (ordinary shar
Slide 22: Analysis of Net Asset Value movements
Appendix Analysis of Net Asset Value movements for the year to 31 December 2011 Sector expert investors supporting management to grow industry champions © Copyright 2012 HgCapital 22
Slide 23: Analysis of unrealised movements in the portfolio
Appendix Analysis of unrealised movements in the portfolio for the year to 31 December 2011 Sector expert investors supporting management to grow industry champions © Copyright 2012 HgCapital 23
Slide 24: Realised and unrealised movements in investment portfolio
Appendix Realised and unrealised movements in investment portfolio (including accrued interest) for year ended 31 December 2011 Sector expert investors supporting management to grow industry champions © Copyright 2012 HgCapital 24
Slide 25: New Investments
Appendix New Investments £87m invested in 2011 DEAL COMPANY SECTOR GEOGRAPHY ACTIVITY TYPE COST £’000 IAS TMT UK Accountancy software Buyout 25,298 Group NBT TMT UK Domain name management Buyout 16,623 Mainio Vire Healthcare Nordic Region Specialist disability care Buyout 12,330 ATC Services Benelux
Slide 26: Realisations
Appendix Realisations Seven investments realised at 56% uplift over carrying value at 31 December 2010 CUMULATIVE CURRENT YEAR COST PROCEEDS(1) GAIN/(LOSS)(2) GAIN(3) COMPANY SECTOR EXIT ROUTE £'000 £'000 £'000 £'000 SLV Industrials Secondary sale 5,999 24,170 18,171 9,638 Mondo Minerals Industrials
Slide 27: Portfolio by Sector
Appendix Portfolio by Sector as at 31 December 2011 RESIDUAL TOTAL PORTFOLIO YEAR OF VALUATION COST VALUATION(1) VALUE INVESTMENT INVESTMENT BASIS £'000 £'000 % TMT investments TeamSystem 2010 Earnings 24,432 25,671 8.7% IAS 2011 Cost 25,598 25,598 8.6% Visma 2006 Earnings 701 23,156 7.8% Group NBT
Slide 28: Portfolio by Sector (continued)
Appendix Portfolio by Sector as at 31 December 2011 (continued) RESIDUAL TOTAL PORTFOLIO YEAR OF VALUATION COST VALUATION(1) VALUE INVESTMENT INVESTMENT BASIS £'000 £'000 % Healthcare investments Goldshield 2009 Earnings 8,545 16,007 5.4% Mainio Vire 2011 Written-down 12,330 7,627 2.6% Frösunda 2010
Slide 29: Portfolio by Sector (continued)
Appendix Portfolio by Sector as at 31 December 2011 (continued) RESIDUAL TOTAL PORTFOLIO YEAR OF VALUATION COST VALUATION(1) VALUE INVESTMENT INVESTMENT BASIS £'000 £'000 % Secondary buyout investments HgCapital 6 E LP 2011 Net assets 10,087 9,444 3.2% Total Renewable energy investments 10,087 9,444
Slide 30: The Manager – HgCapital at a glance
Appendix The Manager – HgCapital at a glance Sector expert private equity investor in European mid‐market OVERVIEW Established 1990, independent since HgCapital spun out of Merrill Lynch in 2000 (formerly Mercury Private Equity) Mid-market private equity firm with £3.6 billion client assets mana
Slide 31: The Manager - Investment Strategy
Appendix The Manager ‐ Investment Strategy “Thematic Investing” SUSTAINABLE Pick sustainable growth sub-sectors based on years GROWTH of bottom up research and expertise SUBSECTORS Established processes to constantly challenge and refine which sub sectors BEHAVE MORE BRING BENEFIT OF TRADE THAN
Slide 32: The Manager - Investment Strategy: TMT sector example
Appendix The Manager ‐ Investment Strategy TMT sector example COMPANY DESCRIPTION GEOGRAPHY YEAR In 2002, HgCapital identified the regulatory-driven SME software Accounting, legal and UK 2004 market as an attractive Investment Theme, based on: business software − Sector growth ahead of GDP, driven
Slide 33: HgCapital Portfolio Growth vs. Public Comparables
Appendix HgCapital Portfolio Growth vs. Public Comparables 2008 – 2011 REVENUE AND EBITDA CAGR – Hg5 and Hg6 combined portfolio 20.0% 15% 15.0% 14% 2008 - 2011CAGR (%) 13% 11% 11% 10.0% 7% 8% 7% 5% 5.0% 4% 4% 2% 0% HgCapital 5 HgCapital 6 HgCapital 5 HgCapital 6 FTSE 350 Euro STOXX Mid comparables c
Slide 34: HgCapital strategy has generated consistent returns
HgCapital strategy has generated consistent returns from Appendix replicable sources Almost 100% of HgCapital’s value-creation in buyouts has been from operational improvements – picking strong companies and growing them (not leverage or deal-doing), OF WHICH 65% CAME FROM REVENUE GROWTH 3.0x Operat
Slide 35: Portfolio Performance Through the Downturn
Appendix Portfolio Performance Through the Downturn Picking Sustainable Growth Companies Clear outperformance through the cycle 20.0% 14.8% 13.5% 11.7% HgCapital Average: 8.3% 9.9% REVENUE GROWTH (%) 10.0% 1.5% 0.0% FTSE Average: (1.3%) (10.0%) (20.0%) (23.9%) (30.0%) 2009 2010 2011B HgCapital 5 & 6
Slide 36: Disclaimer
HgCapital Disclaimer Trust plc This document accompanies the Report and Accounts for twelve months ended 31 December 2011 and contains a summary of the information set out in that document. Reference should be made to the full Report and Accounts rather than relying on this summary. It does not cons
Slide 37: Disclaimer
HgCapital Disclaimer Trust plc Forward-looking statements are not guarantees of future performance. A number of important factors could cause actual results or outcomes to differ materially from those expressed, projected or implied in any forward- looking statements. No one undertakes publicly to u