HGCapital Trust PLC · LSE:HGT
HGCapital Trust — FY2010 Earnings Presentation
41 slides from HGCapital Trust's earnings presentation, March 2011
Slide 1: Year end results 31 December 2010
HgCapital Trust plc Year end results 31 December 2010
Slide 2: Contents
HgCapital Contents Trust plc Summary 3 Performance 5 Balance Sheet Analysis 10 Investment Activity 11 Portfolio Review 15 Manager Update 22 Events since year end 23 Conclusion 24 Appendices 26 © Copyright 2011 HgCapital 2
Slide 3: Summary: In Better Shape Than Ever
In Better Shape Than Ever Summary Another good year for the Trust with further funds raised and strong returns on realisations Performance Share price total return +23% in year. 10 year annual compound growth of 14% p.a. vs FTSE All-Share +3.7% p.a. Portfolio Top 20 buyouts (92% of value) growing ea
Slide 4: Summary Financial Highlights
Summary Financial Highlights % CHANGE OVER YEAR ASSETS AT 28 FEB 2011 AT 31 DEC 2010* AT 31 DEC 2009 TO 31 DEC 2010 Net assets (£’000) 351,923 347,993 236,044 47.4%* Net assets per share – basic 1,131.4p 1,118.8p 937.2p 19.4% – diluted 1,101.2p 1,090.7p n/a n/a Liquid resources per share 316.2p 289.
Slide 5: Performance: Net Asset Value up £112m to £348m
Performance Net Asset Value up £112m to £348m Analysis of Net Asset Value (NAV) movements for the year ending 31 December 2010 © Copyright 2011 HgCapital 5
Slide 6: NAV Breakdown – £111m increase in the invested portfolio
Performance NAV Breakdown – £111m increase in the invested portfolio AT 28 FEB 2011 AT 31 DEC 2010 AT 31 DEC 2009 £m % £m % £m % Investments 255.4 72.6% 258.8 74.4% 147.8 62.6% Liquid Resources 98.3 27.9% 90.2 25.9% 87.7 37.2% Other net (liabilities)/assets (1.8) (0.5%) (1.0) (0.3%) 0.5 0.2% Net ass
Slide 7: More capital put to work coupled with revaluation of the portfolio
Performance More capital put to work coupled with revaluation of the portfolio Analysis of unrealised movements in investment portfolio (including accrued interest movement of £6.4 million) for the year ending 31 December 2010 © Copyright 2011 HgCapital 7
Slide 8: Realised and unrealised movements in investment portfolio
Realised and unrealised movements in investment portfolio Performance (excluding accrued interest) during the year ending 31 December 2010 © Copyright 2011 HgCapital 8
Slide 9: Key drivers of the valuation change in the year
Performance Key drivers of the valuation change in the year Acquisitions less Valuations as at Valuation changes in Valuations as at realisations at value to 31 Dec 2010 year Principal drivers of valuation changes 31 Dec 2009 31 Dec 2010 Company £m £m £m £m Earnings Gearing Ratings Fx Significant in
Slide 10: Liquid Resources and Outstanding Commitments
Balance Sheet Liquid Resources and Outstanding Commitments Analysis POST PENDING AT 28 FEB 2011 AT 31 DEC 2010 TRANSACTIONS** £m % of NAV £m % of NAV £m % of NAV Total liquid resources 88.4 25.1% 98.3 27.9% 90.2 25.9% Outstanding Commitments 201.8 57.3% 211.7 60.1% 212.0 60.9% Hg5 Vintage 22.3 22.3
Slide 11: New Investments made in 2010 performing well
Investment New Investments made in 2010 performing well Activity INVESTMENT BY COMPANY HgCAPITAL TRUST PLC SECTOR GEOGRAPHY ACTIVITY DEAL TYPE COST New Investments £’000 TeamSystem TMT Italy Accounting software and services business Buyout 24,432 Stepstone TMT UK Global provider of strategic HR soft
Slide 12: Further Investments made in 2010
Investment Further Investments made in 2010 Activity INVESTMENT BY REASON FOR HgCAPITAL TRUST PLC COMPANY SECTOR GEOGRAPHY ACTIVITY COST INVESTMENT Further Investments £’000 Reduction in Voyage Healthcare UK Care home operator 4,380 gearing RPP1 Fund Renewable Energy Europe Renewable energy fund Acq
Slide 13: Realisations in 2010 delivering strong returns
Investment Realisations in 2010 delivering strong returns Activity CUMULATIVE CURRENT YEAR GAIN/(LOSS)** GAIN/(LOSS)*** COST PROCEEDS* COMPANY SECTOR EXIT ROUTE £’000 £’000 £’000 £’000 Full Realisations Visma TMT Secondary sale 16,470 39,365 22,895 21,757+ Pulse Healthcare Trade sale 6,131 31,186 25
Slide 14: Investment Environment and Prospects
Investment Investment Environment and Prospects Activity The shallow buyer’s market of 2009-10 has turned into a healthy two-way market with balanced buyer and seller interest. We will probably invest less in 2011 than 2010 because we believe value will be harder to find. We will bed down recent acq
Slide 15: Portfolio as at 31 December 2010 (top 10)
Portfolio Portfolio as at 31 December 2010 Review The top 10 buy-out investments represent 62% of the portfolio value Year of Residual Cost Total valuation* Portfolio Cumulative Investment Investment Sector Location £’000 £’000 value % Value % 1. TeamSystem 2010 TMT Italy 24,432 25,136 9.7% 9.7% 2.
Slide 16: Portfolio as at 31 December 2010 (top 20)
Portfolio Portfolio as at 31 December 2010 Review The top 20 buy-out investments represent 92% of the portfolio value Year of Residual Cost Total valuation* Portfolio Cumulative Investment Investment Sector Location £’000 £’000 value % Value % 11. Manx 2010 TMT UK 11,033 11,033 4.3% 66.2% 12. Simons
Slide 17: Trading Performance of Top Buyout Investments
Portfolio Trading Performance of Top 20 Buyout Investments LTM to Review December 2010 Aggregate sales and EBITDA were £1.9bn and £470m respectively, giving year on year sales and EBITDA growth of 13% and 16% respectively Sales Growth Profit Growth © Copyright 2011 HgCapital 17
Slide 18: Gearing
Portfolio Gearing Review Average Net Debt/EBITDA of the Top 20 buyout investments was 3.6x Net Debt/EBITDA EBITDA (Cash)/ Net Debt Portfolio Value Band Number £m £m £m (1.0) to 0x 3 25 (12) 34.8 0x to 2.0x 3 69 117 29.3 2.0x to 3.0x 5 75 196 55.8 3.0x to 4.0x 4 81 291 42.3 4.0x to 5.0x 3 125 559 45.
Slide 19: Valuation multiple
Portfolio Valuation multiple Review Average EV/EBITDA multiple used at 31 December 2010 was 9.7x for the Top 20 buyout investments. Average proceeds over book value on exit has been 1.8x on last 30 exits. Band Number % of Top 20 Portfolio Value Portfolio £m <6.0x 2 7% 17.3 6.0x to 7.5x 5 17% 39.4 7.
Slide 20: Renewable Energy Fund Investments
Portfolio Portfolio as at 31 December 2010 Review Renewable Energy Fund Investments The Trust holds an investment via limited partnership interests in the Manager’s two Renewable Energy Funds, RPP1 and RPP2. Investment Vintage Valuation Portfolio Value The Funds give investors an exposure to renewab
Slide 21: Renewable Energy Fund Investments (cont'd)
Portfolio Portfolio as at 31 December 2010 Review Renewable Energy Fund Investments (cont’d) RPP 1 PLATFORM STRATEGY RPP 1 PERFORMANCE Investments aggregated around three utility scale platforms to Strong performance across the portfolio since start of drive operational cost synergies and maximise e
Slide 22: Manager Update
HgCapital Manager Update Trust plc Our current buyout fund, Hg6 (£1.9bn), has now made ten investments and is 47.0% drawn. We are in the process of raising our second renewable energy fund with targeted commitments of €500m. The Trust has committed €40m to this fund. We continue to selectively stren
Slide 23: Events since year end
HgCapital Events since year end 31 December 2010 Trust plc Net asset value per share as at 31 January 2011 and 28 February 2011 was 1,118.8 pence per share (1,090.7 pence per share diluted) and 1,131.4 pence per share (1,101.2 pence per share diluted) respectively. In February 2011, we sold Sitel Se
Slide 24: Conclusion
HgCapital Conclusion Trust plc New investments made in 2010 are on the whole performing in line with our investment plan showing strong growth year on year. Short term NAV growth will be driven by potential realisation activity from our 2006 vintage fund and continued strong trading performance of t
Slide 25: Total Return
HgCapital Total Return* Trust plc Consistent and significant outperformance of the Index 1 YEAR TO 3 YEARS TO 5 YEARS TO 7 YEARS TO 10 YEARS TO 31 DEC 2010 31 DEC 2010 31 DEC 2010 31 DEC 2010 31 DEC 2010 Net asset value (basic) 22.6% 8.5% 15.0% 18.6% 12.8% Net asset value (diluted) 19.5% 7.6% 14.5%
Slide 26: HgCapital Trust has rewarded the patient investor
HgCapital Trust has rewarded the patient investor – Appendices outperforming the FTSE All-Share Index by 2.8x and listed PE peers by 3.1x over the last 10 years +11.0% p.a. share price appreciation for HgCT vs. -2.1% p.a. for LPE Peers, 0.3% p.a. for the FTSE All-Share Index 10 year total return of
Slide 27: Outperforming its listed PE peers
Appendices HgCapital Trust – Outperforming its listed PE peers HgCapital Trust outperformed key competitors by an average of 3.1x over the last 10 years Best performing peer Electra was outperformed by 1.6x and worst performing 3i by >6.8x 300% 284% HgCapital Trust Pantheon Electra 250% SVG Graphite
Slide 28: Analysis of Movement in NAV
Appendices Analysis of Movement in NAV £’000 Opening net asset value as at 1 January 2010 236,044 Net proceeds from share issue 48,863 Realised proceeds in excess of book value at 31 December 2009 (excludes gross revenue, 28,769 including gilts results) Net unrealised appreciation of investments (ex
Slide 29: Valuation Basis and Vintage
Appendices Valuation Basis and Vintage As at 31 Dec 2010 by value VALUATION BASIS VINTAGE Year Year2009 2009 Pre Pre 2005 2005 12%12% 15% 15% Year Year 2008 2008 12% 12% Year Year 2005 2005 10% 10% Year Year2007 2007 23% 23% Year Year2006 2006 28%28% © Copyright 2011 HgCapital 29
Slide 30: Sector Coverage of Investments
Appendices Sector Coverage of Investments As at 31 Dec 2010 by value BY VALUE BY NUMBER © Copyright 2011 HgCapital 30
Slide 31: Geography and Stage
Appendices Geography and Stage As at 31 Dec 2010 BY GEOGRAPHY BY STAGE © Copyright 2011 HgCapital 31
Slide 32: Portfolio by Sector: 31 December 2010
Appendices Portfolio by Sector: 31 December 2010 Investment Year of investment Valuation basis Residual cost Total valuation* Portfolio value £'000 £'000 % TMT investments Teamsystem 2010 Cost 24,432 25,136 9.7% Visma 2006 Third party transaction 701 23,116 8.9% Stepstone 2010 Cost 19,316 19,085 7.4
Slide 33: Portfolio by Sector (continued)
Appendices Portfolio by Sector: 31 December 2010 (continued) Year of Investment investment Valuation basis Residual cost Total valuation* Portfolio value £'000 £'000 % Industrials investments SLV 2007 Earnings 5,999 14,532 5.6% Mondo 2007 Earnings 6,987 12,676 4.9% SimonsVoss 2010 Cost 10,065 10,360
Slide 34: Portfolio by Sector (continued)
Appendices Portfolio by Sector: 31 December 2010 (continued) Year of Investment investment Valuation basis Residual cost Total valuation* Portfolio value £'000 £'000 % Fund investments Weston Presidio III 1998 Net assets 2,104 639 0.2% ACT 1994 Net assets 26 28 - Total Fund investments 2,130 667 0.2
Slide 35: HgCapital – Strategic relevance
Appendices HgCapital – Strategic relevance STRATEGY Mid-Market £50 million - £500 million EV buyouts/buy-ins: − Consistently strong deal-flow. − Multiple exit options. − Not overly dependent on capital markets (for returns, financing or exit). − Defensible market positions / proven records. − Abilit
Slide 36: Tactics
Appendices Tactics TACTICS Sector-focused 5 dedicated sector teams (developed over 12 years) covering c.70% of the market. Annual business planning process drives agenda for each team. Strategy superseding geography in investment targeting. Intensive post-transaction planning and management Company
Slide 37: HgCapital's strategy and tactics have been effective
HgCapital’s strategy and tactics have been effective and are well Appendices suited to the next stage in the life of Private Equity Multiple value levers. MID-MARKET AND PAN REGIONAL Conservative capital structures. (UK, Germany, Northern Europe) Multiple exit options not overly dependent on capital
Slide 38: Relationship between HgCapital, HgCapital Trust and the HgCapital 6 fund
Relationship between HgCapital (“the Manager”), HgCapital Appendices Trust and the HgCapital 6 fund £1.9bn Manages investment portfolio HgCapital Other investors The Manager Trust in HgCapital 6 £285m £1,615m Same terms (management fee, etc.) Sources, arranges and manages investment Investment Inves
Slide 39: Average Holding Value Multiple
Appendices Average Holding Value Multiple 7.5 7 Orbiscom 6.5 Classic Copyright 6 5.5 5 4.5 4 3.5 Blue Minerva Average Holding Value Multiple: 1.8x 3 Worldmark Doc-M Elite 2.5 Hofmann Menu Castlebeck CSG ClinPhone Schenck The Sanctuary Hoseasons 2 Eagle Rock Tunstall Clarion Events Visma 1.5 PBR Hirs
Slide 40: Disclaimer
HgCapital Disclaimer This document accompanies the Annual Report and Accounts for the year ended 31 December 2010 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 does not constitute a
Slide 41: Disclaimer
HgCapital Disclaimer 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 update or re