HGCapital Trust PLC · LSE:HGT
HGCapital Trust — FY2022 Earnings Presentation
29 slides from HGCapital Trust's earnings presentation, March 2023
Slide 1: 2022 Full year results
HgCapital Trust plc Get connected 2022 Full year results to a combined enterprise value of >€100bn of software and tech-enabled services businesses March 2023 This document accompanies the Annual report to 31 December 2022. The information in this document contains a summary of information set out i
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 2,500 550 500 10Y CAGR of 2,000 450 +16.8% p.a. 400 NAV per share Indexed total return 1,500 350 £m 300 +16.3% p.a. 2,090 1,000 2,006 250 share price 200 1,291 500 1,039 150 721 805 +6.5% p.a. 616 441 477 530 100 FTSE All-Share - 50 De
Slide 4: Resilient NAV performance in a challenging environment
Resilient NAV performance in a challenging environment +5.4% £2.1bn ▪ Positive NAV performance driven by strong trading and uplifts NAV per share (456.6p) Net assets 31 December 2021: (440.5p) 31 December 2021: £2.0bn on realisations, offsetting the negative impact of valuation multiple contraction
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 Portfolio valuations including accrued income, and before the deduction of carried interest provision and fund-level
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% 27.2x LTM 27% 25% EV/EBITDA Multiple compression typically assumed at investment stage, limited compression at exit due to business models with tailwinds for businesses
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: • Average multiple of 3.9x c
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 accretive M&A opportunities £141m £134m £69m £38m £27m £19m £288m new invest
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 £606m • Fund commitments: foundation of HGT investment resources Incl. undrawn bank strategy. £630m of new commitments to Hg funds made facility of £350m (29% of NAV) in 2022
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. $55bn 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 >$55bn funds under $48bn management $27bn >55k portfolio
Slide 12: 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 13: 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 14: Software market update: long term returns driven almost entirely by earnings
Software market update: long term returns driven almost entirely by earnings Earnings drive consistent returns. Multiples are much more volatile 60% 800% 20 year cumulative return 750% - nearly all from earnings 600% 40% 400% 20% 200% Cumulative return Annual return 0% 0% -200% -20% 2020/21 – brief
Slide 15: 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 16: 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 17: 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 18: 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 19: 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 20: Appendices
Listed access to the 4th largest software business in Europe December 2019 Appendices © Copyright Hg 2023 20 20
Slide 21: 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 13.9 ▪ Helps >60k businesses, public-sector and not-for-profit or
Slide 22: Portfolio split by cluster, vintage and geography
Portfolio split by cluster, vintage and geography Note: As at 31 December 2022 © Copyright Hg 2023 22
Slide 23: Portfolio analysis (I/II)
Portfolio analysis (I/II) Note: Top 20 (77% of the portfolio at 31 December 2022). Figures are calculated on a NAV-weighted basis. © Copyright Hg 2023 23
Slide 24: Portfolio analysis (II/II)
Portfolio analysis (II/II) Note: Top 20 (77% of the portfolio at 31 December 2022). Figures are calculated on a NAV-weighted basis. © Copyright Hg 2023 24
Slide 25: Realised and unrealised movements in the value of investments
Realised and unrealised movements in the value of investments Investment name and ranking by value at 31 December 2022 Movements in realised and unrealised valuation over the year ending 31 December 2022. Other includes movements across portfolio companies not shown. © Copyright Hg 2023 25
Slide 26: 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 27: 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 Hannah Brown +44 78 2459 2894 +44 20 8078 9144 You can also follow us: Linkedin at www.linkedin.com/com
Slide 28: 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 29: 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