HGCapital Trust PLC · LSE:HGT
HGCapital Trust — H1 2020 Earnings Presentation
36 slides from HGCapital Trust's earnings presentation, September 2020
Slide 1: Get connected: Interim Update September 2020
2020 Money Observer private equity and growth capital trust Listed access to the 3rd largest software Listed th business in access to the 4 largest software business in Europe Europe Get connected December 2019 September 2020 To a universe of software and service businesses This document accompanies
Slide 2: Contents
Contents About HgCapital Trust plc 03 About the Manager 05 Key financial highlights 07 Portfolio activity 14 Investment strategy 16 Summary and outlook 22 Appendix 23 Note: References in this presentation to HgCapital Trust plc have been abbreviated to ‘HgCapital Trust’ or ‘HGT’. Hg refers to the tr
Slide 3: About HgCapital Trust plc: Overview
About HgCapital Trust plc Overview A long-term investment into unquoted software and business service companies ▪ FTSE 250 investment company listed on the LSE ▪ Share price has seen compound growth of 13% p.a. over the last 20 years ▪ Providing listed access to the 3rd largest (unquoted) software c
Slide 4: HGT is the largest client of Hg
About HgCapital Trust plc HGT is the largest client of Investing alongside some of the world’s largest institutional investors > £2bn Invested capital, cash > $30bn Invested capital and and and undrawn commitments undrawn commitments c. £11bn £1.1bn Invested capital and Portfolio value, cash & undra
Slide 5: Hg is Europe's largest investor in software & business services
About the Manager Hg is Europe’s largest investor in software & business services Building businesses that change how we all do business 25+ years of investing ▪ Investment offices in London, Munich and New York 200+ employees 30+ platform investments ▪ > $30 billion funds under management €42 billi
Slide 6: Hg is a top tech firm in Europe with a unique competitive position
About the Manager is a top tech firm in Europe with a unique competitive position HGT provides access to these unquoted businesses through a listed investment company ‘Hg Inc’ would be the #3 technology firm in Europe (by EV), with the …and few specialised firms are based in the region fastest growt
Slide 7: Performance
Key financial highlights Performance NAV per share outperforming the FTSE All-Share by more than 30% over the first 8 months of 2020 Performance H1 2020 Pro-forma to 31.8.20 One Three Five +7% +12% year years % years NAV per share NAV per share % p.a. % p.a. NAV per share 19 18 20 -7% +8% Share pric
Slide 8: The power of long-term investing
Key financial highlights The power of long-term investing Long-term pro-forma performance to 31.8.20 +13% share price and NAV +14% CAGR over 20 years v. +4% FTSE All Share CAGR +16% over the same period An investment of £1,000 made 20 years ago would now be worth £12,362, a +6% total return of +1,13
Slide 9: Consistently strong trading drives positive performance
Key financial highlights Consistently strong trading drives positive performance … Top 20 (88% of the portfolio) trading to 30 June 2020 Distribution of top 20 LTM sales growth Distribution of top 20 LTM EBITDA growth Distribution of EV to EBITDA valuation multiples Distribution of net debt to EBITD
Slide 10: Performance attribution
Key financial highlights Performance attribution Majority of NAV growth (27p per share) from strong earnings in the unrealised portfolio valuation over H1 1 Including accrued income and excluding carried interest provision. 2 Before the deduction of the carried interest provision. 10 © Copyright Hg
Slide 11: Significant realisations over Q3 at good uplifts to BV
Key financial highlights … with significant realisations over Q3 at good uplifts to BV £479m gross proceeds returned to HGT over the last 18 months through refinancings, full and partial exits Average 44% 30% 79% 40% 26% 55% 22% uplift to book value 5.5x 4.3x 3.9x Average 3.6x multiple of 3.1x 2.8x
Slide 12: New commitments in 2020 made to ensure long-term growth
Key financial highlights … new commitments in 2020 made to ensure long-term growth £9 billion raised by Hg in 2020, HGT has committed to c. 8% of these funds, ensuring long-term future growth © Copyright Hg 2020 12
Slide 13: A healthy balance sheet
Key financial highlights A healthy balance sheet Several levers in place to aid balance sheet management Pro-forma balance sheet as at 31 August 2020 ▪ Commitments likely to be invested £814m (71% of NAV) over the next 5 to 6 years commitments (c. £180m p.a.) ▪ Hg Genesis 9 and Hg Mercury 3 £314m (2
Slide 14: Hg continues to selectively invest
Portfolio activity Hg continues to selectively invest… £259m invested in the last 8 months into 9 companies, 9% in co-investment £24m into co-investment Average 18% 24% free of fees and carried of NAV interest deployed p.a. over the 23% past 10 years 11% 32% 17% 25% 18% 18% 10% 12% 9% £111m £87m £38
Slide 15: …and return cash to HGT
Portfolio activity …and return cash to HGT £362m gross proceeds returned to the Company over the past 8 months through both realisations and refinancings Average 21% 33% of NAV p.a. realised over past 10 years 34% 31% 22% 11% 24% 18% 17% 18% 15% 12% £82m £62m £80m £66m £83m £64m £135m £224m £272m £1
Slide 16: Focused on Western Europe, building global businesses
Manager investment strategy is focused on Western Europe, with experience building global businesses Intelerad Visma IT Relation Global businesses Commify Eucon Access Group Citation MediFox Sovos Achilles Lyniate Allocate A-Plan Mobility Holding Litera Argus Media Project Road CogitalGroup F24 Silv
Slide 17: Targets robust and resilient 'Hg sweet-spot' business models
Manager investment strategy targets robust and resilient ‘Hg sweet-spot’ business models DEEP SECTOR KNOWLEDGE… BUSINESS MODEL ATTRIBUTES Tax & Accounting Business critical need delivered as software or service ERP & Payroll Legal and Compliance Automotive Subscription or repeat revenue model Insura
Slide 18: A single strategy across three funds
Manager investment strategy has a single strategy across three funds - delivering broad market coverage Strategy Lower-mid market Mid-market Upper mid-market Target enterprise value €100 - 500 million €500 - €1,500 million >€1,500 million Target investment equity €50 - 200 million €200 - 600 million
Slide 19: A portfolio team set up to support Hg portfolio companies
Manager investment strategy A portfolio team set up to support Hg portfolio companies The portfolio team has 30+ members and continues to grow Sharing best practice and resources with tailored teams of technical experts, Hg works closely with the portfolio to ensure they gain the tools and guidance
Slide 20: Grows sustainable businesses which are great employers
Manager investment strategy grows sustainable businesses which are great employers Hg ESG and Sustainability at a glance ~200 30 4.5 27% AA++ 1% Employees Nationalities Average Women in Hg’s 2020 UNPRI of LLP profit donated to across three offices across Hg’s team Glassdoor score executive team rati
Slide 21: Removing barriers to education & skills in technology
Manager investment strategy re-investing in communities in a focused and sustainable way ▪ Online tutoring pilot initiative across the UK ▪ Direct response to the Covid-19 pandemic, with evidence showing school closures is widening the attainment gap between disadvantaged children and their peers Re
Slide 22: Summary and Outlook
Outlook Summary and Outlook Robust double-digit trading performance continues to underpin the ongoing growth of a defensive portfolio. ▪ Our companies remain focused on selling business-critical and non-discretionary software and services to their underlying customers, typically with highly predicta
Slide 23: Appendix: The team
Listed access to the 4th largest software business in Europe December 2019 Appendix: The This document team accompanies the Interim Report & Accounts for the third quarter ended 30 September 2019 and contains a summary of information set out in that document. Reference should be made to the full and
Slide 24: Has a large and well-resourced investment machine
Appendix Has a large and well-resourced investment “machine” GOVERNANCE Hg LLP BOARD INVESTMENT COMMITTEE REALISATION COMMITTEE • Chaired by Nic Humphries • Chaired by Matthew Brockman • Chaired by Andrew Land DEAL EXECUTION Partners Directors & Principals Associates & Analysts Total 6 6 9 21 11 8 2
Slide 25: Appendix: Top 20 investments
Appendix: Listed access to the 4th largest software business in Europe Top 20 investments December 2019 June 2020 This document accompanies the Interim Report & Accounts for the third quarter ended 30 September 2019 and contains a summary of information set out in that document. Reference should be
Slide 26: The top 20 portfolio at 30 June 2020
Appendix The top 20 portfolio at 30 June 2020 Representing 88% or >£980 million of the total portfolio Investments Year of Residual cost Total valuation Portfolio Cum. Value Sector Location (in order of value) Investment £'000 £'000 value % % 1 Visma Tax & Accountancy/ERP & Payroll Scandinavia 2014
Slide 27: 2nd best performing ISA eligible investment company over the last 20 years
Appendix 2nd best performing ISA eligible investment company over the last 20 years – the power of long-term investing % Share price total Total at Rank Investment company AIC sector return 06/04/1999 29/02/2020 to 29/02/2020 1 Scottish Mortgage Global 945 £1,109,754 2 HgCapital Trust Private Equity
Slide 28: Appendix: Case studies
Listed access to the 4th largest software business in Europe December 2019 Appendix: Case This document studies accompanies the Interim Report & Accounts for the third quarter ended 30 September 2019 and contains a summary of information set out in that document. Reference should be made to the full
Slide 29: Visma: leading provider of mission-critical business software
BACKGROUND A leading provider of mission-critical ▪ Visma is a leading provider of mission critical business software to small and medium sized enterprises and the public sector in the Nordic and Benelux regions business software to SMEs and the ▪ It is the largest provider of cloud/SaaS to these ma
Slide 30: P&I: leading provider of payroll and HCM software
Leading provider of BACKGROUND payroll and HCM ▪ Founded in 1968, P&I is a full-suite provider of cloud-based HR software solutions. P&I’s mission-critical integrated SaaS software to mid- platforms allow HR functions to be managed efficiently, delivering strong value for its customers and a truly d
Slide 31: Argus: leading independent provider of energy and commodity price benchmarks
BACKGROUND Leading ▪ Leading price reporting agency (PRA), providing specialist pricing data and benchmarks to businesses in the global energy independent and commodity markets. Founded in 1970, global business with HQ in UK. Core benchmarks reflect physical commodity provider of trades and underpin
Slide 32: Litera: scale provider of workflow efficiency software tools
BACKGROUND Scale provider of ▪ Leading provider of end-to-end document lifecycle solutions to the legal and life sciences industries worldwide workflow efficiency software tools to ▪ Products used by thousands of lawyers every day to improve productivity / quality of document drafting lifecycle prof
Slide 33: smartTrade: leading supplier of currency and fixed income trading solutions
BACKGROUND Leading supplier of currency and fixed ▪ Founded in 1999, smartTrade is a managed services and hosted software provider for trading desks and is a global leader in this segment. smartTrade has particular expertise in providing software solutions for currency and fixed-income trading, inco
Slide 34: Contact
Appendix Contact For further information on HgCapital Trust plc, please visit our website: www.hgcapitaltrust.com Or contact Laura Dixon +44 78 2459 2894 laura.dixon@hgcapitaltrust.com © Copyright Hg 2020 34
Slide 35: 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 36: 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 terminol