HGCapital Trust PLC · LSE:HGT
HGCapital Trust — FY2012 Earnings Presentation
36 slides from HGCapital Trust's earnings presentation, March 2013
Slide 1: HgCapital Trust plc Full Year Results December 2012
HgCapital Trust plc Full Year Results December 2012 This document accompanies the Annual Report & Accounts for the year ended 31 December 2012 and contains a summary of information set out in that document. Reference should be made to the full Report & Accounts rather than relying on this summary. T
Slide 2: Contents
HgCapital Contents Trust plc PAGE Overview 3 Financial highlights 4 Portfolio activity 5 Portfolio review 6 Balance sheet 11 Top 20 buyout investments 12 Renewable energy 14 Conclusion 15 Appendices 17 Sector expert investors supporting management to grow industry champions © Copyright 2013 HgCapita
Slide 3: Overview: Continuing to reward the patient investor
Overview HgCapital Trust Plc Continuing to reward the patient investor Quality businesses remain in demand; SHL realised at 3.1x cost, Mercury Pharma realised at 4.2x cost Whilst we remain relatively cautious on new investment, we expect to deploy capital into a number of investments over the ne
Slide 4: Financial Highlights
Financial HgCapital Trust plc Highlights Year ended December 2012 PERFORMANCE NAV per share (diluted); total return +15.3% over the year; increasing to 1,221.7p Share price performance in 2012 disappointing; +5.8% on a total return basis to 1,016.0p; good start to 2013 Dividend of 23.0p per sh
Slide 5: Portfolio Activity: Investments and Realisations
Portfolio Investments and Realisations Activity Investing in growth and realising for value CASH REALISED IN 2012 £80M CASH DEPLOYED IN 2012 £38M 2 buyout exits return £62m to the Trust with average uplift over book 3 new buyout investments completed in the year totalling £21m value of 68% £4m
Slide 6: Trading Performance of Top 20 Buyout Investments
Portfolio Trading Performance of Top 20 Buyout Investments Review Twelve months to 31 December 2012 SALES +9% p.a. Over 90% by value of the top 20 buyouts saw sales growth over the last 12 months Combined sales of £2.0 billion 45% of the top 20 buyout companies have increased sales by >10% p.a
Slide 7: Trading Performance of Top 20 Buyout Investments
Portfolio Trading Performance of Top 20 Buyout Investments Review 87% of the portfolio value as at 31 December 2012 INVESTMENT FOR FUTURE GROWTH IMPACTING STRONG DOUBLE-DIGIT GROWTH SHORT-TERM PROFIT GROWTH (39% OF THE TOP 20 BY VALUE) (34% OF THE TOP 20 BY VALUE) Investments in the UK Parts Allianc
Slide 8: Valuation and Gearing - Top 20 Buyout Investments
Portfolio Valuation and Gearing ‐ Top 20 Buyout Investments Review as at 31 December 2012 EBITDA MULTIPLE 10.8x Valuation multiple increased from 10.2x (Dec 2011) to 10.8x Multiple reflects - Investment strategy focusing on high growth niches - Increase in ratings of market comps DEBT TO EBITDA
Slide 9: Key drivers of valuation change
Portfolio Key drivers of valuation change Review Year ended 31 December 2012 VALUATION CHANGE IN YEAR TO COMPANY PRINCIPAL DRIVER OF CHANGE IN VALUATION 31 DECEMBER 2012 Largest increases Visma +£9.6m Strong profit growth, debt reduced Atlas +£6.8m Strong organic profit growth and improved ratings J
Slide 10: HgCapital Trust plc Portfolio Analysis
Portfolio HgCapital Trust plc Portfolio Analysis Review as at 31 December 2012 * Representing aggregate realised proceeds and unrealised valuations of an investment Sector expert investors supporting management to grow industry champions © Copyright 2013 HgCapital 10
Slide 11: Liquid Resources and Outstanding Commitments
Balance Liquid Resources and Outstanding Commitments Sheet Multiple levers in place to manage the balance sheet AS AT AS AT 31 DEC 2012 30 DEC 2011 % of £m % of NAV £m NAV HgCapital 6(1) 64.5 14.8% 85.9 24.8% Hg Mercury 55.3 12.6% 59.0 17.0% Hg RPP2(2) 22.0 5.1% 27.2 7.8% HgT 15.8 3.6% 17.1 4.9% HgC
Slide 12: Top Buyout Investment Portfolio
Top 20 Buyout Investment Portfolio Review The top 10 buy‐out investments represent 61% of the portfolio value RESIDUAL TOTAL PORTFOLIO CUM. CHANGE YEAR OF COST VALUATION(1) VALUE VALUE IN VALUE INVESTMENT INVESTMENT SECTOR LOCATION £’000 £’000 % % OVER 12M 1 2006 TMT Nordic Region 701 32,718 10.0% 1
Slide 13: Top Buyout Investment Portfolio
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 % % OVER 12M 11 2006 Healthcare UK 15,067 13,134 4.0% 65
Slide 14: 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 is invested via limited partnership interests in HgCapital’s two Renewable Energy Funds, RPP1 (2006) and RPP2 (2010) RPP gives investors expo
Slide 15: Conclusion: Manager Update
Conclusion Manager Update March 2013 The Hg Mercury Fund, focused on lower mid-market TMT buyouts, closed at the end of January 2013 with funds raised of £380 million; one investment completed to date, with an interesting pipeline of current opportunities Over the course of 2012 HgCapital contin
Slide 16: Outlook & Prospects
Conclusion Outlook & Prospects March 2013 Despite the weak macro-economic environment across Western Europe, we believe that our investment strategy of identifying high quality growth companies in market niches will continue to benefit the performance of our portfolio Whilst we remain relatively
Slide 17: Appendices Contents
Appendices Contents PAGE Performance 18 Realised and unrealised movements in the portfolio 21 Analysis of NAV movements 22 Investment activity 24 Portfolio by sector 26 The Manager and Investment Strategy 29 Contact 34 Sector expert investors supporting management to grow industry champions © Copyri
Slide 18: The Trust continues to deliver long term growth
Appendix The Trust continues to deliver long term growth Outperforming the FTSE by 2.6x over the last 10 years on a total return basis TOTAL RETURN SHARE PRICE PERFORMANCE OVER TEN YEARS 10 year share price total return of +19.5% p.a. for the Trust vs. +8.8% p.a. for the FTSE All-Share Index 10
Slide 19: Total Return
Appendix Total Return as at 31 December 2012 £1,000 invested 10 years ago would now be worth £5,930 on a total return basis 1 YEAR 3 YEARS 5 YEARS 7 YEARS 10 YEARS % % P.A. % P.A. % P.A. % P.A. Net asset value (diluted) 15.3 11.5 7.6 12.5 16.1 Share price 5.8 8.7 8.0 10.7 19.5 FTSE All-Share Index 1
Slide 20: NAV and Share Price Summary
Appendix NAV and Share Price Summary Performance for year ended 31 December 2012 % TOTAL AS AT AS AT RETURN TO AS AT 28 FEB 2012 31 DEC 2012 31 DEC 2012 31 DEC 2011 Net assets (£’000) 450,538 437,956 n/a 346,832 Net assets per share – diluted 1,255.4p 1,221.7p +15.3% 1,069.3p – basic 1,266.8p 1,231.
Slide 21: Realised and unrealised movements in investment portfolio
Appendix Realised and unrealised movements in investment portfolio (including accrued interest) for year ended 31 December 2012 Sector expert investors supporting management to grow industry champions © Copyright 2013 HgCapital 21
Slide 22: Analysis of Net Asset Value movements
Appendix Analysis of Net Asset Value movements for year ended 31 December 2012 Sector expert investors supporting management to grow industry champions © Copyright 2013 HgCapital 22
Slide 23: Attribution analysis of unrealised movements in the portfolio
Appendix Attribution analysis of unrealised movements in the portfolio (including accrued interest movement of £9.2m) for the year ended 31 December 2012 Sector expert investors supporting management to grow industry champions © Copyright 2013 HgCapital 23
Slide 24: Investment Activity
Appendix Investment Activity £38m invested in 2012 DEAL COST COMPANY SECTOR GEOGRAPHY ACTIVITY TYPE £’000 Qundis Industrials Germany Provider of sub-metering devices and systems Buyout 11,552 Investments in the UK Parts Alliance Services UK Aftermarket car parts distributor Buyout 6,654 Valueworks T
Slide 25: Realisations
Appendix Realisations £80m realised from the portfolio in 2012 CURRENT CUMULATIVE YEAR COST PROCEEDS(1) GAIN/(LOSS)(2) GAIN/(LOSS)(3) COMPANY SECTOR EXIT ROUTE £'000 £'000 £'000 £'000 Mercury Pharma Healthcare Secondary sale 8,545 35,339 26,794 19,331 SHL Services Trade sale 7,991 27,036 19,045 5,95
Slide 26: Portfolio by Sector
Appendix Portfolio by Sector as at 31 December 2012 RESIDUAL TOTAL PORTFOLIO YEAR OF VALUATION COST VALUATION(1) VALUE INVESTMENT INVESTMENT BASIS £'000 £'000 % TMT investments Visma 2006 Earnings 701 32,718 10.0% Iris Software Group 2011 Earnings 25,598 25,607 7.9% TeamSystem 2010 Earnings 24,432 2
Slide 27: Portfolio by Sector
Appendix Portfolio by Sector as at 31 December 2012 (continued) RESIDUAL TOTAL PORTFOLIO YEAR OF VALUATION COST VALUATION(1) VALUE INVESTMENT INVESTMENT BASIS £'000 £'000 % Healthcare investments Voyage 2006 Written down 15,067 13,134 4.0% Frösunda 2010 Written-down 14,296 7,975 2.5% Mainio Vire 201
Slide 28: Portfolio by Sector
Appendix Portfolio by Sector as at 31 December 2012 (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 9,503 10,434 3.2% Total Secondary buyout investments 9,503 10,434
Slide 29: HgCapital at a glance
Appendix 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 £3.7 billion client assets managed, wholly ow
Slide 30: A number of our investments in different sectors share similar characteristics
A number of our investments in different sectors share similar Appendix characteristics HGCAPITAL SECTOR TMT SERVICES INDUSTRIALS HEALTHCARE Software for accountancy Commercial laundry B2B lighting systems Sale of niche prescription off- DESCRIPTION practices and payroll distribution and services di
Slide 31: Sector focus – regulatory SME software example
Appendix Sector focus – regulatory SME software example HgCAPITAL REGULATORY SME SOFTWARE DEALS In 2002, HgCapital identified regulatory- driven software for SME’s as attractive Accounting, legal and Business software Strategic HR software Accounting, legal and growth sub-sector: business so
Slide 32: Mercury Pharma – 2012 Disposal
Appendix Mercury Pharma – 2012 Disposal £35.3m realised and £1.0m unrealised at 4.2x multiple of cost BACKGROUND Pharmaceutical company based in the UK distributing niche generic medicines with a particular strength in pain relief products and hospital supply. Primarily focused on serving the UK
Slide 33: The Manager – Investment Strategy
Appendix The Manager – Investment Strategy Value creation from picking growth & driving operational improvements VALUE CREATION ANALYSIS: MUST 4, HgCAPITAL 5 AND HgCAPITAL 6 REALISED PORTFOLIO 3.0x 0.2x 2.5x 0.6x MULTIPLE OF ORIGINAL COST (x) 2.0x 1.5x 1.1x 2.7x 1.0x (0.1x) c.1.6x top-line and profi
Slide 34: Contact
Appendix Contact For further information on HgCapital Trust plc, please visit our website: www.hgcapitaltrust.com Or contact Laura Dixon +44 (0)20 7089 7888 investorrelations@hgcapitaltrust.com For more information on Listed Private Equity, please visit the LPEQ website www.lpeq.com Sector expert in
Slide 35: Disclaimer
HgCapital Disclaimer Trust plc This document accompanies the Annual Report and Accounts for the twelve months ended 31 December 2012 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 do
Slide 36: 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