Pershing Square Holdings, Ltd. Public Class USD Accum.Shs · LSE:PSH
Pershing Square Holdings, Ltd. Public Class USD Accum.Shs — Pershing Square Holdings — Investor Presentation (February 2020)
62 slides from Pershing Square Holdings, Ltd. Public Class USD Accum.Shs's investor presentation, Feb 5, 2020
Slide 1: Annual Investor Presentation
Annual Investor Presentation February 5, 2020
Slide 2: Disclaimer
Disclaimer All information provided herein is for informational purposes only and should not be deemed as a recommendation to buy or sell any security mentioned. Pershing Square Capital Management, L.P. (“Pershing Square”) believes this presentation contains a balanced presentation of the performanc
Slide 3: Agenda
Agenda Chairman’s Introduction 2019 PSH Performance Review Business & Organizational Update Portfolio Update Q&A 3
Slide 4: Chairman's Introduction
Chairman’s Introduction
Slide 5: Board of Directors of PSH
Board of Directors of PSH All directors are independent of Manager other than Nicholas Botta Board Director Summary Experience Anne Farlow ‾ Former Partner, Providence Equity Partners, Electra Private Equity Partners, JF Electra Ltd Independent Director ‾ Morgan Stanley, New York Chairman of the Boa
Slide 6: PSH Board Process
PSH Board Process Quarterly in-person meetings, telephonic meetings as needed Board Committees (membership limited to independent directors) Audit Committee Management Engagement Committee Nomination Committee Remuneration Committee Review and Monitor Investment performance and portf
Slide 7: PSH Corporate Action History
PSH Corporate Action History December 31, 2012 Launched as private fund Announced ongoing quarterly dividend February 13, 2019 of $0.10 per share, a 2.5% yield to the PSH share price at the time2 October 13, 2014 Listed on Euronext Amsterdam Announced share buyback program of June 19, 2019 $
Slide 8: Overview of 2019 Performance
Overview of 2019 Performance 2019 was a productive year for PSH with NAV appreciation of 58.1% and a total share return of 51.2%. Despite strong performance, PSH’s discount to NAV widened from 25.2% to 28.9% PSH NAV Performance and Total Share Return Since 12/31/2018 | Discount to NAV: 70% (20.0%) 6
Slide 9: 2019 Corporate Actions: Initiated Dividend
2019 Corporate Actions: Initiated Dividend Beginning in Q1 2019, PSH initiated a quarterly dividend of $0.10 per share, a 2.0% yield at the current PSH share price1 PSH’s current dividend yield is similar to that of the S&P 500 Expands the universe of potential PSH investors who prefer or requir
Slide 10: 2019 Corporate Actions: Share Buyback Programs
2019 Corporate Actions: Share Buyback Programs Over the course of 2019, PSH instituted share buyback programs totaling $300 million 2019 Share Buyback Cumulative Shares Programs Repurchased Since Inception Jun. 19, 2019 to Feb. 4, 2020 May 2, 2017 to Feb. 4, 2020 $ Shares Repurchased $224 million $6
Slide 11: 2019 Corporate Actions: New Bond Issuance
2019 Corporate Actions: New Bond Issuance In July 2019, PSH issued $400 million of unsecured bonds with a coupon of 4.950%, maturing on July 15, 20391 Opportunistic issuance at a highly attractive interest rate Interest rate of 2039 bonds is materially below what was implied by the then-trading
Slide 12: PSH Service Providers
PSH Service Providers Investment Manager Pershing Square Capital Management, L.P. Jefferies International Limited Corporate Broker Corporate broker, advisor, buyback agent and sponsor for LSE listing Elysium Fund Management, Ltd. Fund Administrator Sub-administrator: Morgan Stanley Fund Services (Be
Slide 13: 2019 Performance Review
2019 Performance Review
Slide 14: Substantial Outperformance in 2019
Substantial Outperformance in 2019 1 2019 PSH Net Returns vs. Benchmark Indices 58.1% 31.5% 28.4% 16.3% 10.7% PSH S&P 500 MSCI World HFRX ED: Activist HFRX Equity Hedge Fund Index1 Fund Index2 PSH Outperformance 2,660 bps 2,970 bps 4,180 bps 4,740 bps Past performance is not necessarily indicative o
Slide 15: PSLP / PSH Annual Net Returns
Pershing Square L.P. (“PSLP”) / PSH Annual Net Returns PSH’s 58.1% net return in 2019 was the fifth time Pershing Square funds generated net returns of 39% or more (on average, every third year) Annual Net Returns Year S&P 500 PSLP / PSH 2004 10.9% 42.6% 2005 4.9% 39.9% 2006 15.8% 22.5% 2007 5.5% 22
Slide 16: PSLP / PSH Cumulative Net Returns Since Inception
PSLP / PSH Cumulative Net Returns Since Inception (1/1/04) PSLP / PSH Net Returns vs. S&P 500 through December 31, 2019 PSLP / PSH: 750.0% Launch of PSH 745.3% December 31, 2012 700.0% 650.0% 600.0% 550.0% 500.0% 450.0% 400.0% 350.0% S&P 500: 300.0% 303.2% 250.0% 200.0% 150.0% 100.0% 50.0% 0.0% (50.
Slide 17: 2019 Contributors (Gross Returns)
2019 Contributors (Gross Returns) Contributors PSH Chipotle Mexican Grill 14.7% Hilton Worldwide 9.0% Fannie Mae & Freddie Mac 7.2% Starbucks 5.7% Lowe's 5.3% Restaurant Brands International 4.5% Automatic Data Processing 4.4% Howard Hughes Corporation 2.6% United Technologies 2.4% Agilent Technolog
Slide 18: 2019 Detractors (Gross Returns)
2019 Detractors (Gross Returns) We did not have any detractors in 2019. Every portfolio company generated positive returns Past performance is not necessarily indicative of future results. All investments involve the possibility of profit and the risk of loss, including the loss of principal. Please
Slide 19: Total Assets Under Management
Total Assets Under Management 1 1 As of 12/31/2019 ($ in millions) Total AUM Equity AUM Pershing Square Holdings ("PSH") $7,121 $5,721 Pershing Square, L.P. ("PSLP") 727 727 Pershing Square International ("PSI") 726 726 Total Core Funds $8,573 $7,173 Assets under management are net of any capital re
Slide 20: Business and Organizational Update
Business and Organizational Update
Slide 21: Return to Our Roots Drove Substantial Progress
Return to Our Roots Drove Substantial Progress We believe our improved recent performance is a direct result of our renewed focus on our core investment strategy and organizational changes we implemented at Pershing Square Opportunistically redeployed capital into two new positions that are well a
Slide 22: New Idea Generation Remains Robust
New Idea Generation Remains Robust In 2019, Pershing Square established two new investment positions that reflect our core investment principles Analytical measurement company with a leading market position in an attractive industry with strong secular growth tailwinds Substantial margin improve
Slide 23: Pershing Square's Varied Approach to Activism
Pershing Square’s Varied Approach to Activism Our approach to activism varies depending on the situation. We seek to engage with our portfolio companies in a manner that will maximize the certainty and magnitude of shareholder value creation Range of Activist Engagement... …To Help Effectuate Change
Slide 24: Our Competitive Advantages as an Activist
Our Competitive Advantages as an Activist Stable and Long-Term Capital Base PSH represents ~80%1 of equity of Pershing Square core funds and 83%1 of assets under management (including PSH bond proceeds) Pershing Square can provide management teams with the required runway and long-term backing t
Slide 25: Creating Value Through Activism
Creating Value Through Activism Bill has served as Chairman of HHC’s Board since 2010 After a thorough strategic review process, the Board announced, in October 2019, that the company will execute a transformation plan Appointed Paul Layne as new CEO, and announced $2bn in asset sales and a gr
Slide 26: Organizational Update
Organizational Update Initiatives we took in 2017 and 2018 to restructure Pershing Square into a smaller, investment-centric organization have created a strong foundation for a stable path forward Moved to our new headquarters at 787 11th Avenue in May 2019 Highly effective and focused team with
Slide 27: Organizational Chart
Organizational Chart William Ackman CEO & Portfolio Manager Nicholas Botta President INVESTMENT TEAM [ | T | T | LEGAL & COMPLIANCE —_ INVESTOR RELATIONS. TRADING FINANCE HUMAN RESOURCES PUBLIC RELATIONS TECHNOLOGY | | l | | | l , js Fi McGill Bharath Alamanda Halit Coussin te ry AS Ramy Saad Michae
Slide 28: Investment Team Bios
Investment Team Bios Career PSCM Employee Education and Summary Prior Experience Experience Tenure (Years) (Years) William Ackman Gotham Partners, Co-founder and Portfolio Manager (1992 - 2003) CEO / Portfolio Manager M.B.A., Harvard Business School, 1992 30 16 A.B., Harvard College, magna cum laude
Slide 29: Portfolio Update
Portfolio Update
Slide 30: New Investment in Agilent ("A")
New Investment in Agilent (“A”) Leading analytical measurement company Sells instruments, consumables and services to identify, quantify and analyze molecular properties of substances and products Products and services enable mission-critical testing across a diversified set of end markets Tic
Slide 31: Agilent Investment Thesis
Agilent Investment Thesis Market leader in an oligopolistic industry with multiple barriers to entry #1 player with ~20% share; top 5 participants account for ~75% market share Regulatory requirements and high-touch nature of aftermarket services limit customer switching Instrument IP and pe
Slide 32: Substantial Opportunity Ahead
Substantial Opportunity Ahead While Agilent has delivered solid business performance over the last five years, we believe there is substantial opportunity for further improvement Significant Margin Expansion Management is targeting 50 to 70bps of annual margin expansion over next few years We es
Slide 33: Large Margin Gap Relative to Closest Peer
Large Margin Gap Relative to Closest Peer Agilent’s margins are significantly below its closest peer, Waters, despite being more than twice its size Revenue EBITDA Margin $5.2bn 34.8% 930 2.1x bps 25.5% Revenue $2.4bn Note: Figures above reflect LTM financials. LTM financials are as of fiscal year 2
Slide 34: Underlevered Relative to Peers
Underlevered Relative to Peers Agilent can now increase its leverage to peer levels due to the positive benefits of tax reform, improved margins, higher mix of recurring revenue and reduced cyclicality Net Debt / LTM EBITDA: Pro forma for GE BioPharma acquisition1 Mgmt. guided >3.5x 'near-term' leve
Slide 35: Agilent Share Price Performance Since Inception
Agilent Share Price Performance Since Inception Agilent’s share price including dividends increased 12% from our average cost at inception to December 31, 2019, and decreased 2% year-to-date in 20201 Agilent share price performance from 9/4/2019 to 2/4/2020 $95 $90 12/9/19: Pershing Square announces
Slide 36: Berkshire Hathaway ("BRK")
Berkshire Hathaway (“BRK”) Warren Buffett’s iconic holding company has significant excess cash and is trading at a cheap valuation Collection of world-class insurance businesses Robust growth in insurance “float” balance over the past decade Attractive long-term returns on invested float balance
Slide 37: BRK.B Share Price Performance Since Inception
BRK.B Share Price Performance Since Inception BRK’s share price increased 10% from our average cost at inception to December 31, 2019, and decreased 1% year-to-date in 20201 BRK.B share price performance from 5/23/2019 to 2/4/2020 $240 $230 11/2/19: BRK reports Q3 results which feature significant a
Slide 38: Chipotle Mexican Grill ("CMG")
Chipotle Mexican Grill (“CMG”) CMG management reignited sales and profit growth in 2019. CMG has an extensive pipeline of initiatives to drive growth for years to come 2019 was an outstanding year for all Chipotle stakeholders Same-store sales growth of 11% in 2019, including 7% transaction growth
Slide 39: CMG Share Price Performance Since Inception
CMG Share Price Performance Since Inception CMG’s share price increased 94% in 2019 and 6% year-to-date in 20201 CMG share price performance from 8/4/2016 to 2/4/2020 9/17/19: Carne asada launched $900 $885 9/6/16: Pershing Square $800 files 13D after market 2/6/19: CMG reports Q4’18 earnings close
Slide 40: Hilton Worldwide ("HLT")
Hilton Worldwide (“HLT”) Hilton’s unique asset-light model and unit growth opportunity should allow it to sustainably grow earnings at a mid-teens rate Strong business performance in 20191 9% Adjusted EBITDA growth, 13% growth in economic earnings per share1 7% net unit growth 5% reduction of
Slide 41: HLT Share Price Performance Since Inception
HLT Share Price Performance Since Inception HLT’s share price including dividends increased 55% in 2019 and is flat year-to-date in 20201 HLT share price performance from 10/8/2018 to 2/4/2020 $120 10/23/19: HLT Q3 2019 earnings call. Despite weaker RevPAR trends HLT reports a “beat and $110 2/13/19
Slide 42: Restaurant Brands International ("QSR")
Restaurant Brands International (“QSR”) QSR is a high-quality business with significant long-term growth potential trading at a discounted valuation Continued strong business performance in 20191 Net unit growth of +5%, including +6% at Burger King Healthy same-store sales growth at Burger King
Slide 43: QSR Share Price Performance Since Inception
QSR Share Price Performance Since Inception QSR’s share price including dividends increased 26% in 2019 and decreased 3% year-to-date in 20201 QSR share price performance from 6/19/2012 to 2/4/2020 $80 1/23/19: QSR announces leadership transition, elevating Daniel Schwartz to Executive Chairman and
Slide 44: Lowe's ("LOW")
Lowe’s (“LOW”) Lowe’s is a high-quality business with significant long-term earnings growth potential Lowe’s is laying the foundation for a multi-year transformation Improving customer service and product merchandising Reducing structural costs and achieving labor efficiencies Modernizing IT s
Slide 45: LOW Share Price Performance Since Inception
LOW Share Price Performance Since Inception LOW’s share price including dividends increased 32% in 2019 and is flat year-to-date in 20201 LOW share price performance from 4/6/2018 to 2/4/2020 11/20/2019: Q3’19 results $125 show continued 5/22/2019: Announces unexpected gross improvement across margi
Slide 46: Howard Hughes Corporation ("HHC")
Howard Hughes Corporation (“HHC”) Under new leadership, HHC is executing a business transformation to focus the company on the vast long-term value creation opportunity within its core master planned communities (MPCs) 2019 was a year of significant organizational change In June 2019, HHC’s Board
Slide 47: HHC's Three Pillar Transformation Plan
HHC’s Three Pillar Transformation Plan I. Streamlined Organizational Structure $50mm per annum reduction in overhead expenses Decentralized regional management supported by a lean corporate footprint Overhead expense savings increase free-cash-flow generation and reduce reliance on land sales
Slide 48: Pershing Square Increased its Ownership in HHC
Pershing Square Increased its Ownership in HHC In December 2019, PSH sold its total return swap position in HHC and acquired common stock and equity forward contracts. Pershing Square now has a 15% beneficial ownership interest in HHC Previously, PSH’s HHC position was held through total return sw
Slide 49: HHC Share Price Performance Since Inception
HHC Share Price Performance Since Inception HHC’s share price increased 30% in 2019 and decreased 3% year-to-date in 20201 HHC’s share price performance from 11/9/2010 to 2/4/2020 10/21/19: HHC Board concludes $170 strategic review process and announces transformation plan $150 and new leadership $1
Slide 50: Fannie Mae ("FNMA") and Freddie Mac ("FMCC")
Fannie Mae (“FNMA”) and Freddie Mac (“FMCC”) We believe Fannie and Freddie are firmly on a path towards exiting conservatorship Major progress achieved over the last twelve months New FHFA Director Mark Calabria appointed April 4th for a five-year term Treasury Housing Finance Reform plan releas
Slide 51: FNMA and FMCC Performance Since Inception
FNMA and FMCC Performance Since Inception FNMA and FMCC share prices increased 194% and 183%, respectively, in 2019. FNMA increased 2% and FMCC is flat, year-to-date in 20201 FNMA and FMCC share price performance from 10/7/2013 to 2/4/2020 $6 5/5/14: Pershing Square 12/21/17: UST and FHFA 9/5/19: US
Slide 52: Exited Positions
Exited Positions
Slide 53: Starbucks ("SBUX")
Starbucks (“SBUX”) SBUX should continue to generate robust earnings growth through one of the world’s most dominant, attractive and profitable brands Starbucks is now firing on all cylinders after a successful turnaround U.S. same-store sales have surpassed the high end of our expectations Avera
Slide 54: SBUX Share Price Performance Since Inception
SBUX Share Price Performance Since Inception SBUX’s share price including dividends increased 39% in 2019 and decreased 4% year-to-date in 2020 through our last share sale on January 31, 2020 SBUX share price performance from 7/13/2018 to 1/31/2020 $100 $95 $90 12/13/18: SBUX hosts $85 11/1/18: SBUX
Slide 55: Automatic Data Processing ("ADP")
Automatic Data Processing (“ADP”) Pershing Square remained actively engaged with ADP following the 2017 proxy contest, holding ADP accountable for achieving its potential ADP embraced a comprehensive Business Transformation Accelerated next-generation platforms Broadened and accelerated the comp
Slide 56: ADP Share Price Performance Since Inception
ADP Share Price Performance Since Inception ADP’s share price including dividends increased 28% year-to-date in 2019 through our last share sale on July 31, 2019 ADP share price performance from 5/10/2017 to 7/31/2019 $170 6/12/18: ADP hosts Analyst Day; 3/7/2019: ADP announces increases long-term f
Slide 57: United Technologies ("UTX")
United Technologies (“UTX”) We exited our position in UTX after the company announced a value-destructive merger with Raytheon Investment thesis to unlock the conglomerate discount was on track High-quality industrial conglomerate with market-leading businesses in aerospace, elevators and HVAC tha
Slide 58: UTX Share Price Performance Since Inception
UTX Share Price Performance Since Inception UTX’s share price including dividends increased 22% year-to-date in 2019 through our last share sale on June 10, 2019 UTX share price performance from 2/6/2018 to 6/10/2019 6/9/2019: Rumors regarding Raytheon transaction 5/17/2018: Pershing Square reported
Slide 59: PAH Share Price Performance Since Inception
PAH Share Price Performance Since Inception PAH’s share price increased 14% year-to-date in 2019 through our last share sale on February 4, 2019 PAH share price performance from 5/16/2013 to 2/4/2019 $30 $25 1/28/2019: PAH appoints $20 12/16/15: PAH Ben Gliklich as new CEO Share price appoints Rakes
Slide 60: Q&A
Q&A
Slide 61: Additional Disclaimers and Notes to Performance Results
Additional Disclaimers and Notes to Performance Results The performance results of PSH and Pershing Square, L.P., the Pershing Square fund with the longest performance track record, included in this presentation are presented on a gross and net-of- fees basis. Gross and net performance include the r
Slide 62: Additional Disclaimers and Notes to Performance Results
Additional Disclaimers and Notes to Performance Results Average cost basis is determined using a methodology that takes into account not only the cost of outright purchases of stock (typically over a period of time) but also a per share cost of the shares underlying certain derivative instruments ac
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