HGCapital Trust PLC · LSE:HGT
HGCapital Trust — Q1 2023 Earnings Presentation
27 slides from HGCapital Trust's earnings presentation, May 2023
Slide 1: Q1 Update: Get connected
HgCapital Trust plc Get connected to a combined enterprise value of >€100bn of software Q1 Update and tech-enabled services businesses This document accompanies the accompanies the Q1 report to 31 March 2022 and the Annual report to 31 December 2022. The information in this May 2023 document contain
Slide 2: HGT overview
HGT overview FTSE 250 investment company listed on the main market of the London Stock Exchange Objective to provide consistent, long-term returns through investment in unquoted companies Board of 6 NEDs with a complementary range of skills and experience, and a strong focus on governance, that make
Slide 3: Compounding growth: the power of a long-term investment strategy
Compounding growth: the power of a long-term investment strategy 10Y CAGR of +17.0% p.a. NAV per share +14.4% p.a. share price +5.8% p.a. FTSE All-Share Note: All performance figures are based on total return assuming that all historic dividends have been re-invested as at 31 March 2023. All figures
Slide 4: Q1 2023: Resilient NAV performance in a challenging environment
Q1 2023: Resilient NAV performance in a challenging environment Q1 NAV total return: +4.0% FY 2022: +5.4% ▪ Positive NAV performance in Q1 2023 driven by continued strong trading NAV per share: 470.6p 31 December: 456.6p ▪ Multiples have been stable in Q1 2023 following a significant contraction whi
Slide 5: Portfolio attribution analysis
Portfolio attribution analysis Attribution analysis of movements in the value of investments Continued strong trading was the largest contributor to the positive portfolio development Source: Hg Past performance is not a reliable indicator of future results. The value of shares and the income from t
Slide 6: Trading performance has continued to drive portfolio growth
Trading performance has continued to drive portfolio growth LTM sales and EBITDA growth for top 20 portfolio companies* 35% 31% 30% 27.3x LTM* 25% 27% EV/EBITDA Multiple compression typically assumed at investment stage, limited compression at exit due to business models with tailwinds for businesse
Slide 7: Returning cash to HGT with realisations at significant uplifts to book value
Returning cash to HGT with realisations at significant uplifts to book value £404m of realisations during 2022 Full exits of Medifox, Register and Transporeon to trade buyers reflect the strategic value of HGT’s portfolio companies £232m £48m £33m Full exits during 2022: £32m • Average multiple of 3
Slide 8: Investment activity: £527m invested on behalf of HGT during 2022
Investment activity: £527m invested on behalf of HGT during 2022 Seven new companies added to the portfolio, as well as significant further investment in existing portfolio companies to drive future growth and capitalise on potential accretive M&A opportunities £141m £134m £69m £38m £27m £19m £288m
Slide 9: Robust balance sheet supports future investment activity
Robust balance sheet supports future investment activity “Toolbox” to manage liquidity across market cycles: Available liquid £647m Commitments to all Hg funds: foundation of HGT investment strategy; resources Incl. undrawn bank visibility over future capital deployment facility of £350m (30% of NAV
Slide 10: HGT is Hg's largest client, committed to all Hg funds
HGT is Hg’s largest client, committed to all Hg funds Pension Plans, SWFs, Endowments, Insurance Cos etc c. $63bn Hg’s portfolio Hg’s largest companies LP investor HGT’s underlying HGT provides listed listed investor access to “the free base c. £3bn float” of $120bn EV of Hg Software “Inc” HGT provi
Slide 11: Hg Inc is the #2 largest software firm in Europe
‘Hg Inc’ is the #2 largest software firm in Europe, and one of the fastest growing >25 Aggregate EV ($m) years of investing $129bn >175 $120bn investments 5 investment offices across Europe and the US >350 Staff including c. 220 professionals >$60bn funds under $48bn management $27bn >55k portfolio
Slide 12: Strong organic growth and M&A from Hg's largest portfolio companies
Strong organic growth and M&A from Hg’s largest portfolio companies 43% increase in pro forma revenue during year of rising profits and strong organic growth • FY22 pro forma revenues of £685 million, up by 43%. 89% of revenue now recurring • FY22 pro forma adjusted EBITDAC of £256 million, up 42% •
Slide 13: Targeting robust and resilient 'Hg sweet-spot' business models
Targeting robust and resilient ‘Hg sweet-spot’ business models with unique scale in European tech Tax & Accounting Business critical software or service ERP & Payroll Legal and Compliance Subscription / repeat revenue model BUSINESS DEEP MODEL Sweet-spot SECTOR Automation and Engineering ATTRIBUTES
Slide 14: Invested across all Hg portfolio companies
A long-term focused approach has driven deep sub-sector knowledge and networks TAX & ACCOUNTING ERP & PAYROLL LEGAL & REGULATORY AUTOMATION & ENGINEERING >18 years >18 years >15 years >14 years SME TECHNOLOGY SERVICES CAPITAL MKTS AND WEALTH MGT IT INSURANCE HEALTHCARE IT >12 years >9 years >8 years
Slide 15: What drives returns in software
What drives returns in software ▪ Earnings, earnings and more earnings. Earnings drive consistent returns. Multiples are much more volatile 60% 800% 20-yr cumulative return 750% - all from earnings 600% 40% 400% 20% 200% Cumulative return Annual return 0% 0% -200% -20% 2020/21 – brief period Multipl
Slide 16: Hg's historic returns driven primarily from growth in the portfolio companies
Hg’s historic returns driven primarily from growth in the portfolio companies (0.6x) 0.9x 3.3x 0.4x Hg levers businesses but Hg typically assumes often pursues mid- multiple compression in investment recaps to its Investment Cases, optimise capital although has structures, drive fund traditionally s
Slide 17: 60+ operational experts across a wide range of areas
We have 60+ operational experts across a wide range of areas, reflecting where we see repeat value creation opportunities Growth Tech, Product, Cyber Data Sales R&D and tech platform BI, warehousing, snowballs Marketing Right-shoring Data cleansing & enrichment Pricing Product management ML driven o
Slide 18: Driving a material value impact across the Hg portfolio
Driving a material value impact across the Hg portfolio GROWTH >$75M+ EBITDA uplift enabled via projects in last 3y DATA TECH >$100m ARR uplift enabled via R&D projects in >£10m EBITDA from AI-driven process optimisations last 3 years (eg SaaS transformation) £30m+ ARR from past 3 Data Monetization
Slide 19: Longstanding commitment to ESG & Sustainability
Longstanding commitment to ESG & Sustainability AA++ 100% Goal to be net zero by UNPRI rating carbon neutral a signatory since 2012 since 2019 2050 48% 35% >40 female employees women in Hg’s nationalities investment team Signatory to ILPA Diversity in Action One of first PE firms $400k Initiative &
Slide 20: Maintaining a disciplined approach in the current environment
Maintaining a disciplined approach in the current environment to drive HGT’s long-term performance Portfolio Leading software and technology-enabled business service companies with resilient business models and pricing power Positive trading outlook underpinned by long-term shift towards digitalisat
Slide 21: Appendices
Listed access to the 4th largest software business in Europe December 2019 Appendices © Copyright Hg 2023 21 21
Slide 22: Top 10 portfolio companies
Top 10 portfolio companies (c. 55% of the total portfolio) Company Cluster Location Description % Portfolio ▪ A leading provider of mission-critical, integrated business-management software to SME's in the UK and APAC ERP & Payroll UK 12.6 ▪ Helps >60k businesses, public-sector and not-for-profit or
Slide 23: Portfolio split by cluster, vintage and geography
Portfolio split by cluster, vintage and geography Note: As at 31 March 2023 © Copyright Hg 2023 23
Slide 24: Large and well-resourced investment machine
Large and well-resourced investment “machine” GOVERNANCE Hg LLP BOARD INVESTMENT COMMITTEE REALISATION COMMITTEE • Nic Humphries (Chair) • Matthew Brockman (Chair) • Andrew Land (Chair) • Matthew Brockman • Nic Humphries • Justin von Simson • Justin von Simson • Sebastien Briens • Steven Batchelor •
Slide 25: Contact
Contact For further information on HgCapital Trust plc, please visit our website: www.hgcapitaltrust.com Or contact our Investor Relations Team at: investorrelations@hgcapitaltrust.com Laura Dixon George Crowe Hannah Brown +44 (0)20 8396 0930 You can also follow us: Linkedin at www.linkedin.com/comp
Slide 26: Disclaimer
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, CANADA,
Slide 27: Disclaimer
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 terminology, inclu