Herald Investment Trust PLC · LSE:HRI
Herald Investment Trust — Investor Presentation (April 2021)
36 slides from Herald Investment Trust's investor presentation, April 2021
Slide 1: Herald Investment Trust plc 2021 Company presentation
Herald Investment Trust plc 2021 Company presentation
Slide 2: Important information and past performance warning
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: Introduction: Herald Investment Trust
INTRODUCTION Herald Investment Trust (HIT) launched in 1994 Herald Global small cap TMT Investment Median market cap c. £284m Trust Significant provider of primary capital to emerging business, £574m since inception Long term performance - NAV up > 25x Intellectual property important profit driver i
Slide 4: HIT performance since inception
INTRODUCTION HIT performance since inception Total return rebased to 100 at Feb-1994 25x NAV TOTAL RETURN SINCE INCEPTION 12.8% NAV ANNUALISED RETURN SINCE INCEPTION HERALD INVESTMENT TRUST 4 Source: Refinitiv graph to 31/03/2021
Slide 5: Geographical weightings
GEOGRAPHIC DETAIL Geographical weightings GEOGRAPHICAL SPREAD OF EQUITY INVESTMENTS AS AT 31 DEC 2020* NORTH UNITED AMERICA KINGDOM EMEA 24.4% 49.3% 8.6% 2019: 23.0% 2019: 6.0% ASIA 2019: 52.2% 10.1% 2019: 6.8% *Comparative year figures to 31/12/2019 Source: Herald Investment Management Limited 31/1
Slide 6: TMT investment characteristics
TMT DISRUPTION • Disruptive – technology innovation opens up new markets • Scalable – strong business models; sector has unusual TMT ability to earn super-normal margins (software, semiconductor, internet) investment • Structural Growth - attractive growing end markets characteristics • Recurring Re
Slide 7: Technology disruptors
TMT DISRUPTION Ubiquity of Collapsing Open-source internet and hardware software connectivity cost Technology disruptors Centralised vs. Subscription Cheap distributed model vs. energy compute & Capex storage Artificial intelligence and machine learning HERALD INVESTMENT TRUST 7
Slide 8: Diverse portfolio exposure
TMT DISRUPTION Diverse portfolio exposure BATTERY & CLEAN TECH SECURITY TELECOMS & NETWORKING SEMICONDUCTORS SOFTWARE INTERNET & MEDIA Portfolio companies engaged in disruptive markets HERALD INVESTMENT TRUST 8
Slide 9: Long Term Capital
Long Term Capital Steady and sustainable growth HERALD INVESTMENT TRUST 9
Slide 10: Portfolio lifecycle
LONG TERM CAPITAL Portfolio lifecycle • Capital growth - The portfolio aims to offer exposure to higher risk parts of the market through a portfolio that has lower risk through diversification. • Diversification is offered in three dimensions: geography, sub-sector and maturity of company. Large num
Slide 11: Life cycle throughout company history
LONG TERM CAPITAL Life cycle - throughout company history Cost Market Realised Unrealised Coupon / Total Gain/ Profit and Loss Summary (£m) Value (£m) G/L (£m) G/L (£m) Dividend Loss (£m) Top 20 Holdings 68.0 422.1 133.7 354.1 17.0 504.8 2nd 20 Holdings 54.9 229.5 52.1 174.6 17.1 243.8 Next 34 Holdi
Slide 12: HIT announced takeovers since 2007
LONG TERM CAPITAL HIT announced takeovers since 2007 120 20 £696m HIT Proceeds from Acquisition (£m) 18 100 in takeovers 16 In context negative 14 £82m of net outside 80 No. of completed and pending capital after circa 12 £177m of buybacks 60 10 £211m 8 40 bids 6 Net assets as at 4 20 31 Dec 2008 2
Slide 13: HIT participation in primary placings
LONG TERM CAPITAL HIT participation in primary placings 70 90 80 959 60 placings since 70 inception with a 50 value of Number of Placings / IPOs 60 £574m Value of Primary Capital (£m) 40 50 30 40 30 20 10 20 640 10 placings since Jan 2007 with a 0 0 value of 1997 2012 1994 1995 1996 1998 1999 2000 2
Slide 14: HIT share buybacks
LONG TERM CAPITAL HIT share buybacks £174m 45 of shares repurchased 40 since Jan 2007 35 Buyback Value (£m) 30 25 >22.4m 20 shares repurchased, 15 representing 10 5 25.6% of shares 0 outstanding as 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD of 1st Jan 2007 2021 Source:
Slide 15: The Herald Approach
The Herald Approach HERALD INVESTMENT TRUST 15
Slide 16: Achieving Capital Growth: What we do
HERALD APPROACH 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, foc
Slide 17: What we do and history of the company
HERALD APPROACH 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 meet
Slide 18: Herald and ESG: an integrated approach
HERALD APPROACH Herald and ESG: an integrated approach Actively Broad corporate Long term Technology engagement & shareholders and investing in sector naturally several green participation in advocates for low carbon governance issues management to adopt technologies sector stakeholder capitalism Co
Slide 19: Herald Investment Management
HERALD APPROACH • Team with in-depth knowledge of the technology sector: • Investment experience in large cap, small cap and unlisted companies • Global perspective Herald • Established team of 7 with >120 years TMT experience • Over 1,500 meetings per year with company Investment management with Te
Slide 20: Investment landscape and approach
HERALD APPROACH Investment landscape and approach INVESTMENT UNIVERSE Global TMT c. 5,000+ Stocks Small Cap Public Companies IDEA GENERATION Company Meetings Publications & Market Data Knowledge of the Sector STOCK SELECTION Financials Business fundamentals & growth prospects Strong management team
Slide 21: Investment Approach
HERALD APPROACH • Fundamental analysis – review of balance sheet • Understanding of supply chains & technology ecosystems • Knowledge of technology drivers • Bottom-up fundamental research – avoid chasing overcrowded niches • Fund manager intolerant of financial engineering and Investment greedy man
Slide 22: Understanding the technology value chain
HERALD APPROACH Understanding the technology value chain Investing across the technology value chain gives HERALD INVESTMENT TRUST 22 us unique insights
Slide 23: The Team
HERALD APPROACH The Team Specialist global team with over 85 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 a
Slide 24: External research and resources (post MiFID II)
HERALD APPROACH External research and resources (post MiFID II) Manager spending Contracts with over Coverage includes significant budget 70 brokers globally regional brokers in on research and c. 20 countries corporate access HERALD INVESTMENT TRUST 24
Slide 25: Summary
SUMMARY TMT sector attractive in a world of cheap money - higher growth margins & pricing power attainable Cash to deploy in uncertain markets Smaller companies disproportionately benefit by renting low cost global cloud infrastructure Small caps can provide more value and investment trust Summary a
Slide 26: Top Holdings
Top 20 Holdings HERALD INVESTMENT TRUST 26
Slide 27: Top holdings: GB Group
TOP 20 HOLDINGS GB Group GB Group (GBG) is a global leader in Identity Data Intelligence. GBG solutions help organisations quickly validate and verify the identities and locations of their customers, GBG’s products combine an unparalleled breadth of data from over 150 global partners, VALUATION £47.
Slide 28: Top holdings: Pegasystems, YouGov
TOP 20 HOLDINGS Pegasystems Pegasystems (Pega) is the leader in software for customer engagement and operational excellence. Pega’s adaptive, cloud-architected software – built on its unified Pega Platform – empowers people to rapidly deploy and easily extend and change applications VALUATION £29.3m
Slide 29: Top holdings: Future
TOP 20 HOLDINGS Future Future is a global multi-platform media company, organised into two divisions, Media and Magazines. The Media division focuses on being at the forefront of digital innovation, revenue streams include eCommerce, digital advertising, events, lead generation, newsletters and CRM,
Slide 30: Top holdings: Next Fifteen, S4 Capital
TOP 20 HOLDINGS Next Fifteen Communications Next Fifteen Communications (Next 15) is a family of marketing businesses spanning digital content, PR, consumer, technology, marketing software, market research, public affairs and policy communications. Founded in 1981, Next 15 are centered on the VALUAT
Slide 31: Top holdings: LivePerson
TOP 20 HOLDINGS Liveperson LivePerson facilities improved customer interactions through the use of Conversational AI. LivePerson technology empowers brands to give customers better experiences through AI-powered messaging instead of forcing them to waste time on hold or crawling through VALUATION £1
Slide 32: Top holdings: Volex
TOP 20 HOLDINGS Volex Volex is a leading integrated manufacturing specialist. Providing power and connectivity VALUATION £17.7m for both everyday items and complex machinery, from radiation oncology treatments, industrial lasers, right through to electric vehicles for the 21st century, Volex is inte
Slide 33: Top holdings: Varonis Systems
TOP 20 HOLDINGS Varonis Systems Varonis is a pioneer in data security and analytics, fighting a different battle than conventional cybersecurity companies. Varonis focuses on protecting enterprise data: sensitive files and emails; confidential customer, patient and employee data; financial VALUATION
Slide 34: Top holdings: IQE
TOP 20 HOLDINGS IQE IQE is the leading global supplier of compound semiconductor wafers that enable a diverse range of applications across: mobile handsets, global telecoms infrastructure, connected devices and infra-red and sensing applications. IQE has been particularly VALUATION £16.0m successful
Slide 35: Top holdings: Ilika
TOP 20 HOLDINGS Ilika Ilika plc is a UK pioneer in solid-state battery technology with their innovative Stereax micro batteries designed for Industrial IoT and MedTech markets, and their Goliath large format batteries for the electric vehicle and consumer electronics markets. Ilika has been VALUATIO
Slide 36: Top holdings: Esker, Kingdee
TOP 20 HOLDINGS Esker Esker helps organizations around the world streamline their business document processes. Esker was founded as a software company in 1985 with a direct and simple vision in mind — to help businesses deliver their paper documents electronically. Today, VALUATION £15.3m Esker is w
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