HGCapital Trust PLC · LSE:HGT

HGCapital Trust — Investor Day (2019)

146 slides from HGCapital Trust's investor day presentation, 2019

Slide 2: Agenda
Agenda Arrival and Registration 15.30 Introduction to Hg Luke Finch, Head of Client Services, Hg 15.45 Hg Saturn Nic Humphries, Senior Partner, Hg 15.55 Access and Sovos Jonathan Boyes, Partner, Hg 16.15 Allocate Software Jon Harston, CFO, Allocate 16.30 Tech Insight: Sassy SaaS David Toms, Technolo
Slide 7: Single strategy across the funds - delivering broad market coverage
Single strategy across the funds - delivering broad market coverage TARGET EVs FUND CHARACTERISTICS COMMON FEATURES >£1bn ▪ Deal Equity Requirement: >£500m ▪ Identical investment strategy (Larger-cap) ▪ Typical fund hold: £350m - £450m ▪ Dedicated execution teams per fund ▪ Deal equity requirements:
Slide 8: It has been a very active couple of years
It has been a very active couple of years £4.5 billion raised with significant commitments from HgCapital Trust Hg has been a significant net seller over the last 2 years c.70% of all Hg investments held at the start of 2017 have now been realised All new investments in target clusters (average 10 y
Slide 10: Recent realisations have resulted in an average portfolio age of <2 years
Recent realisations have resulted in an average portfolio age of <2 years 2017 – 2019 YTD Top 20 investments 21% 25% £3.9bn 33 LTM Revenue growth LTM EBITDA growth returned in cash liquidity events £1.5bn 13 new platform invested investments 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 201
Slide 11: New investments: Consistent focus on 'Hg Sweet-spot'
New investments: Consistent focus on “Hg Sweet-spot” business models Business critical need delivered as software, service or component Subscription or repeat revenue model Utilising years of accumulated IP > high margins Fragmented customer base © Copyright Hg 2019 11
Slide 12: Focus on core clusters – even more important in a late cycle environment
Focus on core clusters – even more important in a late cycle environment CURRENT REALISED CLUSTER PORTFOLIO NAV PROCEEDS MOIC TAX & ACCOUNTING £1,799m £1,630m 3.1x / 36% 15 years ERP & PAYROLL £1,122m £1,078m 3.3x / 27% 15 years LEGAL & REGULATORY COMPLIANCE £419m £370m 2.1x / 39%* 12 years AUTOMOTI
Slide 14: Investment overview
Investment overview Company: Company: Fund: Genesis7 Fund: Saturn Investment date: August 2014 Investment date: February 2018* Investment size: £343 million Investment size: £210 million Dec-18 gross multiple: 2.8x Dec-18 gross multiple: 1.3x Dec-18 gross IRR: 28% Dec-18 gross IRR: 20% Current momen
Slide 15: Intuit / Xero / Sage of Northern Europe
Intuit / Xero / Sage of Northern Europe SMB software (bookkeeping, payroll, HR) Headquartered in Oslo, Norway >8,500 Employees >3,400 Software Developers >900,000 Customers >$1bn in true Cloud revenue Core markets Nearshoring locations Visma presence © Copyright Hg 2019 15
Slide 16: Growing revenues and EBITDA since 2001, no down years
Growing revenues and EBITDA since 2001, no down years… 2001-2018 12.8 12.3 CAGR 18% 9.7 27% 8.3 7.1 6.5 5.7 5.1 4.2 3.4 2.7 3 2.7 3.0 2.3 2.2 1.7 1.9 1.7 1.2 1.4 1.3 1.5 0.8 0.8 0.9 1.1 0.5 0.6 0.7 0.1 0.1 0.2 0.2 0.3 0.3 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 201
Slide 18: How does Hg continue to make premium returns as businesses scale to EV $5bn+?
How does Hg continue to make premium returns as businesses scale to EV $5bn+? IRR TARGET CASE 23-25% IRR “BAU” CASE 20% IRR © Copyright Hg 2019 18
Slide 19: Hg Target Case 2014: value creation levers unique to Hg
Hg Target Case 2014: value creation levers unique to Hg 1 Boost SaaS from <10% to >25% of revenues – via organic and M&A (on the back of SaaS investments Hg and management made in 2010-14) 2 Divest lower margin BPO division to boost overall group revenue quality and % SaaS (more pureplay) 3 Prove la
Slide 20: SaaS: Management started experimenting in 2008-09
1 SaaS: Management started experimenting in 2008-09 Failing fast: Private equity owner (Hg) allows Visma to experiment (and fail several times) during GFC! Hg applying “startup within a buyout” mentality © Copyright Hg 2019 20
Slide 21: SaaS % grew from <10% to >35% in 4 years
1 SaaS % grew from <10% to >35% in 4 years Hg acquires e-conomic DK (2013) e-conomic acquired by Visma (2015) Increases Visma group SaaS % by over 10% Cloud e-invoicing leader, InExchange acquired by Hg-backed Visma (2013) Norway cloud ERP leader TRIPLETEX acquired by Visma (2016) © Copyright Hg 201
Slide 22: #1 SMB SaaS business in Europe
1 #1 SMB SaaS business in Europe +53% +20% 1,001 627 612 434 284 350 154 199 221 218 77 99 110 142 2012 2013 2014 2015 2016 2017 2018 In USD m Total Cloud Revenues Pure SaaS Revenues Note: 2012-15 total cloud revenues are a proxy; 2012-15 SaaS Revenues include Visma BPO © Copyright Hg 2019 22
Slide 23: Divested BPO in 2016 (Hg target case)
2 Divested BPO in 2016 (Hg target case) ▪ Accelerate SaaS transition (taking to >30% share of software revenues from SaaS) ▪ Allow management to focus entirely on software and SaaS Should increase EBITDA multiple on exit © Copyright Hg 2019 23
Slide 24: Divested Hosting in 2017 (ahead of target case)
2 Divested Hosting in 2017 (ahead of target case) ▪ Used proceeds to acquire more SaaS revenues (taking to >40% share of software revenues from SaaS) ▪ Allow management to focus entirely on software and SaaS Should increase EBITDA multiple on exit Should increase EBITDA multiple on exit © Copyright
Slide 25: Divested Retail in 2018 (ahead of target case)
2 Divested Retail in 2018 (ahead of target case) ▪ ▪ Accelerate Accelerate SaaS SaaStransition (taking transition Vismato (taking >40% share >65% of software share revenues of software from SaaS) revenues from SaaS) ▪ ▪ Allow Allow management management toto focus entirely focus on software/SaaS ent
Slide 26: Increasing focus on larger strategic M&A
3 Increasing focus on larger strategic M&A 2006 - Present 2015-17 2017 Target Case Great at bolt ons Larger strategic deals Transformative deals to expand TAM & seed 2025+ 70+ smaller acquisitions (average>€100m EV) growth (average <€10m EV each) Average 10/year €600m EV PUBLIC © Copyright Hg 2019 2
Slide 27: Actual investment results 2014-18 ahead of Target Case
Actual investment results 2014-18 ahead of Target Case IRR 2014-18 (unrealised) TARGET CASE 2.8x / 28% IRR 23-25% IRR “BAU” CASE 21% IRR © Copyright Hg 2019 27
Slide 28: 2019-2023: Next wave of upside initiatives
2019-2023: Next wave of upside initiatives not included in 2017 current base-case Artificial Intelligence Voice Financial Services © Copyright Hg 2019 28
Slide 29: Investment overview
Investment overview Company: Fund: Saturn Investment date: September 2018 Investment size: £374 million Dec-18 gross multiple: 1.2x Dec-18 gross IRR: 101% Current momentum: SME accounting software © Copyright Hg 2019 29
Slide 30: 20 years of uninterrupted Revenue & EBITDA growth
20 years of uninterrupted Revenue & EBITDA growth Hg6 investment £80m (purchase from H&F) 4.2x / 25% IRR Sold £64m MUST 4 investment to H&F (purchase from LDC) £52m 3.6x / 60% IRR £45m £41m £35m £30m £30m £31m £27m £24m £22m £17m £13m £11m £7m £8m £5m FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY1
Slide 31: Saturn investment: Co-led deal alongside ICG
Saturn investment: Co-led deal alongside ICG ▪ Ahead of plan and continues to perform strongly with organic growth of c.9% p.a. ▪ Proven M&A platform, will continue to acquire businesses at attractive multiples ▪ Superior metrics, high degrees of recurring revenues and cash flow conversion ▪ Base-ca
Slide 34: Vision: IRIS £3bn+ EV
Vision: IRIS £3bn+ EV…an opportunity to replicate what we know from Visma EV £100m EV £325m EV £425m EV £1.3bn EV £3bn-5bn? 2005 2006 2007 2010 2012 2014 2017-18 2022 - 25 EV £400m EV £1.2bn EV £2.2bn EV £5bn+ © Copyright Hg 2019 34
Slide 35: How do we make premium returns as businesses like IRIS scale to £2bn EV and more?
How do we make premium returns as businesses like IRIS scale to £2bn EV and more? IRR TARGET CASE 23-25% IRR “BAU” CASE 20% IRR © Copyright Hg 2019 35
Slide 36: Operational improvements, not just BAU
Operational improvements, not just BAU 1. Move up and down the customer stack from mid-market into “micro” and “larger enterprise” in core Accounting Practice market 2. Develop market-leading cloud “suite” in all divisions 3. Develop payments and/or financial services 4. Create a “4th leg” via M&A (
Slide 40: Have we just 'bought the software index' in a rising market?
Private Equity 4.0 – Industrial Strategy Have we just “bought the software index” in a rising market…? …or have we added real incremental value (alpha)? © Copyright Hg 2019 40
Slide 42: V&I average growth >15%
Visma and IRIS growth has been consistently above high quality tax & accounting peers over the past decade. V&I also accelerating faster. 8 Compounded EBITDA growth, 2009 = 1 7 22% 6 V&I average growth >15% 5 (>10% organic >5% M&A) 4 3 13% 2 T&A Peers 7% 1 - 2009 2010 2011 2012 2013 2014 2015 2016 2
Slide 43: What this means for investor returns over the last 10 years
What this means for investor returns over the last 10 years IRR VISMA & IRIS >30% IRR T&A sector 10-13% TSR Stock market 6-7% TSR © Copyright Hg 2019 43
Slide 44: Estimate Alpha (above market returns)
Estimate Alpha (above market returns) Hg investment selection Selecting T&A Cluster & operating skills further outperforms market by outperform by +4-6% >20% © Copyright Hg 2019 44
Slide 46: Why does HgT trade at a discount to NAV?
Why does HgT trade at a discount to NAV? 1 “LPE Investment Trusts always do” “THE WORLD IS FLAT” ARGUMENT 2 “You don’t manage the discount” WHY WOULD THEY WHEN WE CAN (by buying back shares) INVEST A LOT MORE CAPITAL AT PREMIUM RETURNS? 3 “PE is highly cyclical” MAYBE BUT Hg ISNT. LETS LOOK AT THE D
Slide 47: 'Hg Sweet-spot' business models highly protected in downturn
Cyclical? Investment strategy designed to avoid cyclicality 3 “Hg Sweet-spot” business models highly protected in downturn Business-critical need delivered as software, service or component Subscription or repeat revenue model Utilising years of accumulated IP > high margins Fragmented customer base
Slide 48: Consistent revenue & EBITDA growth across all market cycles
Cyclical? Consistent revenue & EBITDA growth across all market cycles, even during the GFC 24% 19% 19% 12% 13% Average 13% 11% 9% 9% 8% 2% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 LTM EBITDA growth of unrealised portfolio presented at each AGM from 2009 - 2018 © Copyright Hg 2019 48
Slide 49: Cyclical? 2005–2007 investments significantly outperformed the market
Cyclical? 2005 – 2007 investments (exited in 2008-2010) significantly out- performed the market >500% 25% 57% 33% ✓ 0% Loss Ratio 5.2x 3.7x 3.1x ✓ 3.9x / 40% realised returns 2.2x … and the current portfolio is better (measured by comparing key operating KPIs) © Copyright Hg 2019 49
Slide 50: Don't trust the valuations / think multiples are too high?
Don’t trust the valuations / think multiples are too high? ▪ ▪ Understanding Accelerate SaaS transition (taking Visma how EV/EBITDA >40% share multiples of software relate to growthrevenues from SaaS)quality and business ▪ ▪ Comparing Allow management Visma to & focus entirely on software/SaaS IRIS
Slide 51: Growth is a key driver of tech valuation
Growth is a key driver of tech valuation Broadly, EV/ NTM EBITDA multiple = “Organic growth rate + 10” for Tax & Accounting software sector 40 35 30 NTM EV:EBITDA multiple 25 20 15 10 5 0 <0% 0% - 5% 5% - 10% 10% - 15% 15% - 20% >20% Organic revenue growth rate © Copyright Hg 2019 51
Slide 52: Multiple is a clear reflection of organic growth
Multiple is a clear reflection of organic growth For T&A businesses, multiple is broadly “Growth + 10” 40 R² = 0.7863 35 30 25 NTM EV:EBITDA 20 15 10 5 - 0% 5% 10% 15% 20% 25% 30% Organic growth rate Source: Hg200, comparing c. 20 T&A companies to broader Hg200 NTM EV:EBITDA ex companies with EV:EBI
Slide 53: A reminder of Visma & IRIS growth versus their Tax & Accounting peers
A reminder of Visma & IRIS growth versus their Tax & Accounting peers over the past decade 8 Compounded EBITDA growth, 2009 = 1 7 22% 6 V&I average growth >15% 5 (>10% organic, >5% M&A) 4 3 13% 2 T&A Peers 7% 1 - 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Visma IRIS Tax & Accounting (1)
Slide 54: Using the T&A multiple regression: 'growth + 10' multiple
Using the T&A multiple regression: “growth + 10” multiple 40 T&A sector c.7% VISMA & IRIS >10% R² = 0.7863 35 organic growth organic growth → c.17x NTM → >20x NTM 30 25 NTM EV:EBITDA 20 15 Given valuation methodology 10 we must use, we cannot fully 5 reflect this in the HgCapital Trust NAV - 0% 5% 1
Slide 55: Serial 'buy & build' software strategics attract significant premia
Serial “buy & build” software strategics attract significant premia from the market EV:EBITDA vs 2019-20 growth 40 R² = 0.5928 35 30 NTM EV:EBITDA 25 20 3.7 15 10 Typical valuation for 3-6% organic growth = 10-14x 5 0 0% 5% 10% 15% 20% 25% 2019-20 organic revenue growth rate … 20-30% premia (4-6x EB
Slide 56: Visma & IRIS are also serial acquirors
Visma & IRIS have stronger organic growth than peers and are ALSO SERIAL ACQUIRORS 8 7 V&I average growth >15% (>10% organic, >5% M&A) 22% 6 5 4 Again, given our required 3 valuation methodology - 13% 2 “serial acquiror” premium T&A Peers 7% 1 is not specifically reflected in the HgCapital Trust NAV
Slide 57: >40% uplift to prior book value
But we do capture both of these premia when we exit businesses We have delivered >40% uplift to prior book value 3.7 On average Over last 30 realisations In software and services © Copyright Hg 2019 57
Slide 58: HgCapital Trust historic trading: average discount to NAV of 9%
HgCapital Trust historic trading: average discount to NAV of 9% HGT 10 Year Share Price / Discount 15 2400 10 5.2x2200 2000 5 1800 0 3.7 1600 -5 1400 (-9% average) -10 1200 -15 1000 800 -20 600 -25 400 -30 200 -35 0 Discount Avg Discount Share Price © Copyright Hg 2019 58
Slide 59: Summary – please tell us what we are doing wrong?
Summary – please tell us what we are doing wrong? HgCapital Trust trades at an average discount to NAV of c.9% despite: 1. Investments that are non-cyclical that grow through recessions 3.7 2. Valuation policies that are (appropriately) conservative, which value our top investments at discounts to t
Slide 60: Hg owns 3rd largest software business in Europe
Hg owns 3rd largest software business in Europe, growing at >4x its peers average. If listed, it would trade at a significant premium, not a c. 9% discount. HgCapital Trust owns c.12% of this business. +27% >£3.7bn revenue >£15bn EV © Copyright Hg 2019 60
Slide 62: Investment overview
Investment overview Tax compliance software solutions Company: Investment date: March 2016 Investment size: £262 million Dec-18 gross multiple: 2.1x Dec-18 gross IRR: 40% Current Trading: © Copyright Hg 2019 62
Slide 66: How has Sovos grabbed the B2G opportunity
How has Sovos grabbed the B2G opportunity B2G TECH & GO-TO-MARKET B2G ACQUISTIONS REVENUE GROWTH INVESTMENTS $0 million $50 million in 2 years NTM Growth +17% © Copyright Hg 2019 66
Slide 67: Sovos: 2016 vs Today
Sovos: 2016 vs Today GEOGRAPHY PRODUCT SALES FORCE NORTH AMERICA POINT SOLUTIONS PRODUCT-LED INDUSTRY- FULL TAX PRODUCT INTERNATIONAL FOCUSED, PROBLEM SUITE SOLVING © Copyright Hg 2019 67
Slide 69: Investment overview
Investment overview Company: Investment date: April 2018 Investment size: £222 million Dec-18 gross multiple: 1.2x Dec-18 gross IRR: 33% Current momentum: Business management software © Copyright Hg 2019 69
Slide 70: Access 'one stop shop' for UK SMEs
Access “one stop shop” for UK SMEs
Slide 71: Pattern recognition to identify value and quality
Pattern recognition to identify value and quality Recurring M&A track Functional Well integrated revenue record and best practice products transition capability © Copyright Hg 2019 71
Slide 72: Positive financial progress
Positive financial progress FY June-19 YTD Organic £12m EBITDA growth acquired at accretive multiples since Hg investment Revenue 14% Recurring Revenue 22% EBITDA 29% FY16 FY17 FY18 FY19F Revenue Cash EBITDA © Copyright Hg 2019 72
Slide 73: HgCapital investor event
HgCapital investor event April 2019 Jon Harston, CFO 73
Slide 74: Investment overview
Investment overview Workforce management software for Healthcare and regulated industries Company: Investment date: August 2018 Investment size: £102 million Dec-18 gross multiple: 1.0x Dec-18 gross IRR: N/A
Slide 75: 230 UK & Ireland Hospitals currently use Allocate software
230 UK & Ireland Hospitals currently use Allocate software 75
Slide 76: The journey of a typical NHS trust
The journey of a typical NHS trust Insight Analytics and reporting to authorities Community Staffing nurses Community working remotely Cloudstaff Staffing nurses across Cloudstaff Cloudstaff neighbouring hospitals New modules: In development Optima Medics Scheduling of Optima Medics Optima Medics Op
Slide 77: Strong financial performance
Strong financial performance +16% 79% 2015 - ’19E Recurring +20% recurring CAGR revenue growth +18% 76% Total revenue +13% recurring 76% recurring 14% 74% 71% recurring Recurring recurring revenue 17% 2015 2016 2017 2018 2019E 77
Slide 78: Opportunity to significantly simplify operations
Opportunity to significantly simplify operations Marketing CRM ERP 78
Slide 79: We care about helping people deliver the best Healthcare
“We care about helping people deliver the best Healthcare”
Slide 81: Cloud makes software even more pervasive
Tech Cloud makes software even more pervasive Insight But what does “Cloud” mean? Software delivered remotely where the customer has no involvement with the basic infrastructure (servers, storage, operating system etc.). Single tenant: Multi tenant: Unique application installation for each customer
Slide 82: In the beginning – software increased productivity…
In the beginning – Tech Insight software increased productivity… … and in exchange, it brought with it new pain points Selling/procuring ▪ Major capital purchase = slow procurement process ▪ High sales cost for vendor, recovered through price Installing ▪ Purchasing servers and other infrastructure
Slide 83: Cloud cures most pains
Tech Cloud cures most pains Insight Faster, cheaper, simpler – better for customers, vendors and investors ▪ Lower risk ▪ Lower capital intensity ▪ Frictionless deployment ▪ Focused on features customers use ▪ Cross buy vs cross sell Increase in Total Addressable Market (TAM) © Copyright Hg 2019 83
Slide 84: The datapoints are compelling
Tech The datapoints are compelling Insight SaaS fundamentally reduces friction of sales, installation, operation and upsell Cloud/SaaS ▪ 15-20% revenue uplift ▪ 100-150% renewal rate Product One harmonised ▪ 1.7 products per customer Support application, one single ▪ 50-80% new name customers Additi
Slide 85: For customers this is revolutionary
For customers this is revolutionary Tech Insight Thousands of disparate instances to manage locally vs. a single managed instance vs. Server Operating system Customer supplies Backups Vendor/specialist and operates: Disaster Recovery supplies and operates: Security infrastructure Updates © Copyright
Slide 86: The Total Addressable Market (TAM) increases
The Total Addressable Market (TAM) increases Tech Strong evidence that subscription and Cloud models attract new customers Insight “80% of Quickbooks Online customers are first-time users” Evolution of Quickbooks customer base Quickbooks SaaS vs non-SaaS revenue 900 7 800 6 Number of customers, m 70
Slide 87: Our experience mirrors the broader market
Tech Our experience mirrors the broader market Insight Visma has demonstrated stability of non-SaaS and growth of SaaS software revenue, SaaS vs. non-SaaS 9 8 7 6 Revenue, NOK bn 5 4 SaaS 3 2 1 Non-SaaS 0 2014 2015 2016 2017 2018 Source: Company filings, Hg analysis © Copyright Hg 2019 87
Slide 88: Cloud enables hitherto unseen levels of penetration
Cloud enables hitherto unseen Tech Insight levels of penetration Reduction in friction drives huge customer uptake 80% Market Penetration for leading vendor in key markets globally 70% % of ALL small businesses using product 60% 50% 40% 30% 20% 10% 0% 2012 2013 2014 2015 2016 2017 2018 Source: Compa
Slide 89: Cloud creates greater value in the customer base
Cloud creates greater value in the customer base Tech Insight Greater predictability, greater revenue, larger markets, lower costs Source: Intuit 2014 Capital Markets Day © Copyright Hg 2019 89
Slide 90: SaaS drives a new leg of growth
Tech SaaS drives a new leg of growth Insight This is “fully transitioned” growth rate, not “immediate rebound” Performance pre and post subscription/SaaS transition Post transition, 15% organic revenue growth Pre transition, 6% organic revenue growth © Copyright Hg 2019 90
Slide 91: This is evidenced by specific public valuations
Tech This is evidenced by specific public valuations Insight Subscription and SaaS drive expanding EV:Sales multiples EV:Sales vs % subscription revenue EV:Sales vs SaaS % Quickbooks 100% 16 50% 10 90% 45% 9 14 80% 40% 8 12 70% 35% 7 Quickbooks % SaaS revenue % subscription revenue 10 1-yr fwd EV:Sa
Slide 94: Fund 1 (2012 vintage - £380 million)
1 (2012 vintage - £380 million) 1.7x 6 / 12 DPI investments realised 3.4x / 44% 2.5x / 40% gross realised returns gross total returns As at 31 December 2018, pro forma for post period end investments and realisations © Copyright Hg 2019 94
Slide 96: Fund 2 (2017 vintage - £575 million)
2 (2017 vintage - £575 million) 37% 0.1x invested DPI n/a 1.4x / 138% gross realised returns gross total returns As at 31 December 2018, pro forma for post period end investments and realisations © Copyright Hg 2019 96
Slide 97: Fund 2 portfolio
2 portfolio INVESTMENT COMPANY SOURCING CLUSTER INVESTED COST GEOGRAPHY DATE Nov-17 P2P SME Tech Services £53 million Italy Oct-18 Secondary Healthcare Tech £61 million Germany Oct-18 P2P / Founder Healthcare Tech £50 million Transatlantic Nov-18 Founder FinTech £55 million UK © Copyright Hg 2019 97
Slide 98: Can you say what your strategy is?
CAN YOU SAY WHAT YOUR STRATEGY IS? It’s a dirty little secret: Most executives cannot articulate the objective, scope, and advantage of their business in a simple statement. If they can’t, neither can anyone else. © Copyright Hg 2019 98
Slide 99: Mercury influence on firm strategy
Mercury influence on firm strategy 2011 Return to investing in the lower mid-market 2012 Talent onboarding & sub-sector education 2013 bathtub model & OP programme 2016 Cluster development & trade relationships 2018 Deal flow / origination through adjacencies Today... RMS in European software © Copy
Slide 100: Driving scale in core investment clusters
Driving scale in core investment clusters TAX & ACCOUNTING ERP & PAYROLL LEGAL & COMPLIANCE INSURANCE CAPITAL MARKETS & WEALTH MANAGEMENT SME TECH SERVICES AUTOMOTIVE HEALTHCARE © Copyright Hg 2019 100
Slide 101: Mercury team continues to flourish
Mercury team continues to flourish PARTNERS DIRECTORS & PRINCIPALS Sebastian Nick David Hector Jonas Richard Yasemin Briens Jordan Issott Guinness Samlin Earnshaw Arik SENIOR ASSOCIATES ASSOCIATES & ANALYSTS David Thomas Andre Jean-Marie Katrin Xaviera Adrian Sun Martin Hillenbrand Wecker Vatiska Na
Slide 103: In the new world it is the fast fish which eats the slow fish
In the new world it is not the big fish which eats the small fish, it’s the fast fish which eats the slow fish Source: Klaus Schwab, Founder and Executive Chairman © Copyright Hg 2019 103 103 World Economic Forum
Slide 104: Market speed of change
What we hear… Slow internal New technology Management shifting the challenges Lack of speed of change industries focus on Competitors priority projects Market Lack of vision of the future Meeting growing/sales objectives out-innovating speed of Market consolidating Need to invest in Increasing aroun
Slide 110: Sales Benchmarks
Sales Benchmarks — Sales operations and processes Wedonothaveassles m Wehavaassles enablement slesaperstions at jonabiemont oroporations. funetton.butt Goes no elosoly work with 7) Sales operations function ortear Influence salesheade wa function Wedorithave consistent mf Wehavo.asinple approachto s
Slide 111: Marketing maturity benchmarking
Strategy & Planning Data & Measurement Customer Insight Funnel Management Content & Generation - Portfolio top quartile ALIGNMENT TO STRATEGY MARKETING PLANNING DATA ACCESS KPITRACKING CUSTOMER NEEDS ANALYSIS BUYER PERSONA ALIGNMENT SIRIUS WATERFALL FUNNEL RELATIONSHIP WITH SALES LEAD PRIORITISATION
Slide 112: Portfolio benchmarking: example company marketing scorecard
PORTFOLIO BENCHMARKING: Example company marketing scorecard ——— Overall marketing maturity level Best practice on all dimensions Portfolio top quartile Portfolio average Nascent Marketing maturity across 6 key areas 1 Strategy & planning 6 Demand [Yi 2 mrt | Data generation measurement 5K 3 Content
Slide 119: Investment overview
Investment overview Company: Investment date: October 2016 Investment size: £162 million Dec-18 gross multiple: 1.6x Dec-18 gross IRR: 24% Current momentum Business support, BPO, accounting and advisory services © Copyright Hg 2018 119
Slide 126: Investment overview
Investment overview Company: Investment date: April 2015 Investment size: £148 million Dec-18 gross multiple: 2.4x Dec-18 gross IRR: 29% Current trading: Insurance broker to SMEs and niche markets © Copyright Hg 2018 126
Slide 127: A-Plan
plan
Slide 128: The Group story
The Group story 128
Slide 129: Introduction to A-Plan
Introduction to A-Plan A-Plan is a non-life multichannel insurance broker, with a well proven service-led model underpinned by over 30 years of unbroken revenue growth 129
Slide 130: A-Plan: BEFORE Hg investment in December 2015
A-Plan: BEFORE Hg investment in December 2015 ▪ Market leading UK branch based general insurance broker ▪ Predominantly personal lines, with a growing commercial book, with life insurance delivered by Assured Futures ▪ High service model, delivered through 70 branches and specialist centres and onli
Slide 131: A-Plan: AFTER Hg investment
A-Plan: AFTER Hg investment • Multichannel distribution – branches, phone, online direct and online aggregators • Total number of branches now 94, with two more to open in next 3-6 months • Implementation of professionalised M&A team, with 25 ‘roll in’ acquisitions in 24 months – more in the pipelin
Slide 132: The A-Plan high touch client experience attracts and retains profitable clients
The A-Plan high touch client experience attracts and retains the more profitable client segment How does A-Plan compete against the PCWs? • Client-obtained PCW quotes are often incorrect • A-Plan provides high quality advice from well 35% presented local branches • A-Plan offers a high proportion of
Slide 133: The A-Plan 'secret sauce'
The A-Plan ‘secret sauce’ Great clients = lower loss ratios = competitive pricing from insurers, added with great client service = recommendations, low CPA, strong margins in the sustainable long-term future Attract valuable set of clients Low loss ratios Strong margins Competitive pricing Low CPA H
Slide 134: High NPS leads to stronger retention and recommendation rates
High NPS leads to stronger retention and recommendation rates 134
Slide 135: A-Plan became the largest advised broker in UK
A-Plan became the largest advised broker in UK… UK personal lines brokerage revenue market share Aggregator Direct 13% A-Plan is the largest advised broker in the UK 11% The top 5 (excl. A-Plan) are heavily reliant on PCWs 10% for volume, and the quality of business is generally lower than A-Plan (a
Slide 136: Unbroken track record of growth for 30+ years
…having had an unbroken track record of growth for 30+ years 175 53 Revenue (£m) 123 22 93 3 122 101 90 80 72 65 57 59 53 47 48 43 35 24 28 18 19 20 22 13 16 17 8 9 12 4 4 5 7 8 3 FY01 FY14 FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11
Slide 137: Key Group Strengths
Key Group Strengths A platform for long term, sustainable growth 1 High revenue visibility with an enviable and loyal client 6 base 2 Consistently strong financial performance with Close and supportive forecast £50m EBITDA in relationships with insurers FY19PF with cash including in-house conversion
Slide 140: The top 20 trading performance
Key financial highlights The top 20 trading performance Top 20 currently represents 89% of the portfolio by value LTM sales growth +25% (17% 2017) Aggregate sales of £3.0 billion LTM EBITDA growth +27% (15% 2017) Aggregate EBITDA of £832 million ➔ EV to EBITDA multiple 17.3x (15.9x 2017) Margins of
Slide 141: Key financial highlights 2019 YTD
Key financial highlights Key financial highlights 2019 YTD Share price reached record high of £21.20 in April 2019 Share price +18% ➔ £773 million market cap £64 million returned to the Company £63 million invested on behalf of the Company Note: As at 31 March 2019. © Copyright Hg 2019 141
Slide 142: The balance sheet as at 31 March 2019
Key financial highlights The balance sheet as at 31 March 2019 Levers have been put in place to manage commitments and balance sheet efficiency across the cycle Liquid resources £139 million (18% of NAV) Bank facility of £80 million, extended to 2022 Outstanding commitments £406 million (51% of NAV)
Slide 143: Listed access to unquoted technology and services
About the Company Listed access to unquoted technology and services A long-term investment delivering consistent, compounding growth continuing to outperform the FTSE All-Share Index 30 years old in 2019, 25 years managed by Hg Entry into FTSE 250 October 2018 One of the top 10 performing investment
Slide 144: Maintaining momentum
About the Company Maintaining momentum Targeting investments between £50m and > £1bn EV Clear sector focus in the same sectors invested over four strategies Current commitments are now c 40% invested Further commitments to Hg expected in early 2020 © Copyright Hg 2019 144
Slide 145: Outlook
Outlook Strong trading, combined with capital returns from exits above book value, will continue to drive value for our investors ▪ It has been another strong year of performance for the Company with a record number of realisations ▪ Hg has selectively invested in “sweet-spot” businesses in clusters

HgCapital Trust — Investor Day (2019) on 6ix

HGCapital Trust — Investor Day (2019)

Slide 1: Get connected to a universe of technology and service businesses

Slide 2: Agenda

Slide 3: Update

Slide 4: Renaming the 'Hg' mid-market fund

Slide 5: Renaming the 'Hg' mid-market fund

Slide 6: Mid-Market

Slide 7: Single strategy across the funds - delivering broad market coverage

Slide 8: It has been a very active couple of years

Slide 9: Liquidity events 2017-18

Slide 10: Recent realisations have resulted in an average portfolio age of <2 years

Slide 11: New investments: Consistent focus on 'Hg Sweet-spot'

Slide 12: Focus on core clusters – even more important in a late cycle environment

Slide 13: Visma and IRIS

Slide 14: Investment overview

Slide 15: Intuit / Xero / Sage of Northern Europe

Slide 16: Growing revenues and EBITDA since 2001, no down years

Slide 17: Europe's largest B2B cloud business

Slide 18: How does Hg continue to make premium returns as businesses scale to EV $5bn+?

Slide 19: Hg Target Case 2014: value creation levers unique to Hg

Slide 20: SaaS: Management started experimenting in 2008-09

Slide 21: SaaS % grew from <10% to >35% in 4 years

Slide 22: #1 SMB SaaS business in Europe

Slide 23: Divested BPO in 2016 (Hg target case)

Slide 24: Divested Hosting in 2017 (ahead of target case)

Slide 25: Divested Retail in 2018 (ahead of target case)

Slide 26: Increasing focus on larger strategic M&A

Slide 27: Actual investment results 2014-18 ahead of Target Case

Slide 28: 2019-2023: Next wave of upside initiatives

Slide 29: Investment overview

Slide 30: 20 years of uninterrupted Revenue & EBITDA growth

Slide 31: Saturn investment: Co-led deal alongside ICG

Slide 32: Back to the Future … a time machine

Slide 33: A cheaper time machine …

Slide 34: Vision: IRIS £3bn+ EV

Slide 35: How do we make premium returns as businesses like IRIS scale to £2bn EV and more?

Slide 36: Operational improvements, not just BAU

Slide 37: Private Equity 4.0 – An Industrial Strategy

Slide 38: Tax & Accounting cluster over 15 years

Slide 39: Realised returns £2.2 billion, 3.1x and 36% IRR

Slide 40: Have we just 'bought the software index' in a rising market?

Slide 41: Tax & Accounting Cluster

Slide 42: V&I average growth >15%

Slide 43: What this means for investor returns over the last 10 years

Slide 44: Estimate Alpha (above market returns)

Slide 45: Why does HgCapital Trust trade at a discount to NAV?

Slide 46: Why does HgT trade at a discount to NAV?

Slide 47: 'Hg Sweet-spot' business models highly protected in downturn

Slide 48: Consistent revenue & EBITDA growth across all market cycles

Slide 49: Cyclical? 2005–2007 investments significantly outperformed the market

Slide 50: Don't trust the valuations / think multiples are too high?

Slide 51: Growth is a key driver of tech valuation

Slide 52: Multiple is a clear reflection of organic growth

Slide 53: A reminder of Visma & IRIS growth versus their Tax & Accounting peers

Slide 54: Using the T&A multiple regression: 'growth + 10' multiple

Slide 55: Serial 'buy & build' software strategics attract significant premia

Slide 56: Visma & IRIS are also serial acquirors

Slide 57: >40% uplift to prior book value

Slide 58: HgCapital Trust historic trading: average discount to NAV of 9%

Slide 59: Summary – please tell us what we are doing wrong?

Slide 60: Hg owns 3rd largest software business in Europe

Slide 61: Sovos and Access

Slide 62: Investment overview

Slide 63: B2G: for Governments

Slide 64: B2G: for Corporates

Slide 65: B2G: for Sovos

Slide 66: How has Sovos grabbed the B2G opportunity

Slide 67: Sovos: 2016 vs Today

Slide 68: Positive financial progress

Slide 69: Investment overview

Slide 70: Access 'one stop shop' for UK SMEs

Slide 71: Pattern recognition to identify value and quality

Slide 72: Positive financial progress

Slide 73: HgCapital investor event

Slide 74: Investment overview

Slide 75: 230 UK & Ireland Hospitals currently use Allocate software

Slide 76: The journey of a typical NHS trust

Slide 77: Strong financial performance

Slide 78: Opportunity to significantly simplify operations

Slide 79: We care about helping people deliver the best Healthcare