HGCapital Trust PLC · LSE:HGT
HGCapital Trust — H1 2019 Earnings Presentation
31 slides from HGCapital Trust's earnings presentation, September 2019
Slide 1: Get connected
Get connected To a universe of software and service businesses Listed access to the 3rd largest software business in Europe September 2019 This document accompanies the Interim Report & Accounts for the half year ended 30 June 2019 and contains a summary of information set out in that document. Refe
Slide 2: About the Manager
About the Manager About Building businesses that change how we all do business One of the largest dedicated tech teams in Europe with >90 executives and operators >170 people and >25 nationalities across 3 offices Most active global technology PE investor in 2018 Realised returns of 2.6x / 34% gross
Slide 3: Single strategy across the funds - delivering broad sector coverage
About the Manager Single strategy across the funds - delivering broad sector coverage TARGET EVs FUND CHARACTERISTICS COMMON FEATURES ▪ Current vintage size: £1.5bn >£1bn ▪ Deal Equity Requirement: >£500m ▪ Identical investment strategy (Larger-cap) ▪ Typical fund hold: £350m - £450m ▪ Trust commitm
Slide 4: Targeting Hg “sweet-spot” business models
About the Manager Targeting Hg “sweet-spot” business models Focused on specific characteristics across software and service businesses Business critical need delivered as software, service or component Subscription or repeat revenue model Utilising years of accumulated IP > high margins Fragmented c
Slide 5: Focused on eight distinct end-market ‘clusters’
About the Manager …focused on eight distinct end-market ‘clusters’ End-market specialisation helps us to build deep know-how GROSS TOTAL CLUSTER CURRENT PORTFOLIO REALISED PROCEEDS RETURNS TAX & ACCOUNTING £1,643m 3.0x / 36% 15 years ERP & PAYROLL £1,077m 3.0x / 34% 15 years LEGAL & REGULATORY COMPL
Slide 6: ‘Hg Software Inc’
About the Manager ‘Hg Software Inc’ If ‘Hg Software Inc’ were listed as a single group, it would be the third largest and one of the fastest growing technology business in Europe £22.3bn 5.4 4.3 +3% REVENUE (£BN) growth 2.3 £4.5bn £4.0bn £3.1bn £2.9bn +5% £1.9bn +7% +20% +8% (5%) +7% £0.7bn +15% 5.4
Slide 7: Operations group driving value
About the Manager Operations group driving value In 2018, 14 events enabled > 700 people from our portfolio companies to ‘harness the power of the Hg community’ Growth capabilities Platform GROWTH TECHNOLOGY & TALENT FINANCE PRODUCT ANALYTICS OPERATING MODEL & RESPONSIBLE REPORTING & SYSTEMS BUSINES
Slide 8: Growing sustainable businesses which are great employers
About the Manager Growing sustainable businesses which are great employers >170 >25 4.5 27% AA+ 1% Employees Nationalities Average Women in Hg’s 2018 UNPRI of LLP profit donated to across three offices across Hg’s team Glassdoor score executive team rating charity annually Three core tenets to Hg’s
Slide 9: HgCapital Trust plc is Hg’s largest single investor
About the Company HgCapital Trust plc is Hg’s largest single investor Leading Global Institutional c. £10bn £1.2bn LPs Portfolio value, cash & Invested capital and commitments to Hg undrawn commitments ▪ Exposure to a network of highly cash generative software and service businesses with consistentl
Slide 10: Listed access to unquoted software and services
About the Company Listed access to unquoted software 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 c
Slide 11: Long-term outperformance of the FTSE All-Share
Key financial highlights Long-term outperformance of the FTSE All-Share Over the past 20 years strong trading and exits above book have continued to drive positive compounding performance NAV per share +14% p.a ➔ £975 million net assets Share price +15% p.a. ➔ £868 million market cap. Over the past
Slide 12: Long-term NAV growth
About the Company Long-term NAV growth Over the past 10 years the NAV of the Trust has grown by c £630 million (14% p.a. CAGR) to £975 million Note: As at 30 June 2019, all figures refer to performance on a total return basis, assuming all historic dividends have been reinvested. © Copyright Hg 2019
Slide 13: Key financial highlights 2019 YTD
Key financial highlights Key financial highlights 2019 YTD Share price reached record high in 2019 Share price +23% YTD ➔ £872 million market cap. NAV per share +14%YTD ➔ £984 million net assets Interim Dividend to be paid in October 1.8p (1.6p 2018) £102 million returned to the Company £108 million
Slide 14: The balance sheet as at 31 August 2019
Key financial highlights The balance sheet as at 31 August 2019 Levers have been put in place to manage liquid resources and outstanding commitments Liquid resources £166 million (17% of NAV) average over last 14 years 23% Undrawn bank facility of £80 million Outstanding commitments £342 million (35
Slide 15: The top 20 trading performance
Key financial highlights The top 20 trading performance Top 20 currently represents 88% of the portfolio by value LTM sales growth +26% (25% 2018) Aggregate sales of £3.7 billion LTM EBITDA growth +35% (27% 2018) Aggregate EBITDA of £1.0 billion ➔ EV to EBITDA multiple 19.5x (17.3x 2018) Margins of
Slide 16: Historic realisation and investment activity
Portfolio activity Historic realisation and investment activity Continued strong realisation and investment activity, net seller environment 2006 – 2008 2009 – 2015 2016 – 2019 NET SELLERS NET BUYERS NET SELLERS £272m 55% £224m £187m £135m £111m £108m £106m £104m £102m £92m £87m £87m £83m £82m £80m
Slide 17: Significant realisations over the last 18 months
Portfolio activity Significant realisations over the last 18 months Gross £272m returned to the Company over 2018 (£217 million net), further £102 million returned 2019 YTD, Foundry sold at 80% uplift to BV (2.1x) 27% 47% 18% 56% 29% 22% 31% 66% 43% 37% 79% 4.9x 4.7x 4.3x 4.2x 3.6x 3.6x 3.0x 3.0x 2.
Slide 18: Hg continues to selectively invest
Portfolio activity Hg continues to selectively invest Investing with a cautious and disciplined strategy into strategies we know well Making repeatable investments in the types of companies and ‘clusters’ that we have invested in before 23% of NAV 17% 11% of NAV of NAV 18% 18% of NAV 10% of NAV 12%
Slide 19: Outlook
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 period of performance for the Company with the underlying businesses continuing to see robust trading performance underpinning confid
Slide 20: Appendix: Team
Appendix: Team © Copyright Hg 2019 20
Slide 21: Large and well-resourced investment “machine”
About the Manager Large and well-resourced investment “machine” DEAL EXECUTION Directors & Associates & Partners Principals Analysts Total 5 5 8 18 10 11 22 43 3 5 7 15 Total: 76 OPERATIONS GROUP 32 professionals TRANSACTION SUPPORT EXECUTIVES Client Services - 9 Finance - 5 Legal - 3 Marketing & HR
Slide 22: Appendix: Portfolio (June 2019)
Appendix: Portfolio (June 2019) © Copyright Hg 2019 22
Slide 23: The top 20 portfolio at 30 June 2019
Appendix The top 20 portfolio at 30 June 2019 The top 10 buy-out investments represent 68% of the total value Residual Total Portfolio Cumulative Change in Year of Cost valuation value value value over Investment investment Sector Location £’000 £’000 % % 2019 YTD 1 Visma 2014 Software Scandinavia 8
Slide 24: The top 20 portfolio at 30 June 2019 (continued)
Appendix The top 20 portfolio at 30 June 2019 (continued) The top 20 buy-out investments represent 88% of the total value Residual Total Portfolio Cumulative Change in Year of Cost valuation value valuevalue over 2019 Investment investment Sector Location £’000 £’000 % % YTD 11 Register 2017 Softwar
Slide 25: Asper renewable energy
Appendix Asper renewable energy High quality European renewable energy projects managed by Asper Investment Management currently representing 2.6% of the portfolio value (£23 million) ▪ The Company invested via LP interests in Asper’s two Renewable Energy Funds, RPP1 (2006) and RPP2 (2010) ▪ Exposur
Slide 26: Appendix: Miscellaneous
Appendix: Miscellaneous © Copyright Hg 2019 26
Slide 27: Funds snapshot
Appendix funds snapshot All funds first or second quartile; improving as we have specialised Gross Fund % in Software & Services Realised Total Saturn I (2017) 100% - 1.4x / 53% £1.5 billion Mercury 2 (2017) 100% - 1.9x / 118% £575 million (Genesis)Hg8 (2017) 100% - 1.2x / 25% £2.5 billion (Genesis)
Slide 28: One of the top performing ISA eligible investment companies over the last 20 years
Appendix One of the top 10 performing ISA eligible investment companies over the last 20 years The AIC’s research shows that if an investor had invested each year’s maximum ISA limit from 1999 to 2018 – an investment of £206,560 in total – HgCapital Trust would have turned it into £873,222. Company
Slide 29: 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 © Copyright Hg 2019 29
Slide 30: Disclaimer
Appendix 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
Slide 31: Disclaimer
Appendix 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 terminolo