2018 Interim Results September 2018

Transcription

1 2018 Interim Results September 2018 This document accompanies the Interim Report & Accounts for the six months ended 30 June 2018 and contains a summary of information set out in that document. Reference should be made to the full Report & Accounts rather than relying on this summary. The reader s attention is also drawn to the provisions on pages 30 and 31. References in this document to HgCapital Trust plc have been abbreviated to the Company.

2 Contents 2 HgCapital Trust plc YTD review 06 Key financial highlights 07 Portfolio activity 10 Hg investment strategy 13 Portfolio review 21 Outlook 22 Appendix 23 Note: References in this presentation to HgCapital Trust plc have been abbreviated to HgCapital Trust or the Company. Hg refers to the trading name of Hg Pooled Management Limited and HgCapital LLP. Hg Pooled Management Limited is the Manager. Building businesses that change how we all do business

3 HgCapital Trust plc 3 Listed access to unquoted tech and tech-enabled businesses A long-term investment vehicle that is delivering consistent, compounding growth and continues to outperform the FTSE All-Share Index 18% 24% p.a. 14% p.a. Share price total return over the past Share price total return CAGR over the past Share price total return CAGR over the past 1 year 3 years 20 years

4 HgCapital Trust plc 4 HgCapital Trust plc The Company is a direct investor and only invests alongside Hg institutional investors across multiple funds and vintages

5 HgCapital Trust plc 5 About the Company Exposure to a network of more than 30 unquoted tech and tech-enabled businesses with consistent strong growth in sales and EBITDA and high cash generation Businesses are sourced by Hg using a deep sector focus to identify companies with specific business model types that can perform across the economic cycle The Company is Hg s largest investor with a fully independent Board that makes all decisions on commitments to invest alongside Hg Funds The Company is a direct investor and only invests alongside Hg institutional investors across multiple funds and vintages

6 REALISATIONS INVESTMENTS HgCapital Trust plc 6 Portfolio activity YTD An active period with realisations made at an average 2.4x investment multiple / 22% gross IRR and 38% uplift to book value new Investments c. 123 million further Investments c. 60 million realisations c. 190 million refinancings c. 21 million SIX MONTHS TO 30 JUNE 2018 POST PERIOD END JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER Q SIX MONTHS TO 30 JUNE 2018 POST PERIOD END Note: All figures relate to HgCapital Trust plc returns and investments, all dates refer to completion or expected completion.

7 Key financial highlights 7 The balance sheet Multiple levers in place to manage liquid resources and outstanding commitments AS AT 30 JUNE 2018 PRO-FORMA AS AT 31 AUGUST m 575m 154m 475m Liquid resources (20% of NAV) Outstanding commitments (75% of NAV) Liquid resources (20% of NAV) Outstanding commitments (61% of NAV) Liquid resources are supported by an undrawn bank facility of 80 million Liquid resources likely to increase in the short term. Commitments will be drawn down over the next two to three years ( ), an average cash outflow of c. 190 million p.a. The Company can opt out of a new investment without penalty, should it not have the cash available to invest

8 Key financial highlights 8 Six months to 30 June 2018 Performance Strong trading and exits above book value continued to drive positive performance from the portfolio +11% +8% 16p Share price total return growth NAV per share total return growth Interim dividend As at 30 June 2018, the share price was 19.35, market capitalisation of 722 million As at 31 August 2018, share price of 19.40, market capitalisation of 724 million Share price total return of 12% YTD As at 30 June 2018, NAV per share of 20.59, net assets of 769 million Driven by strong trading across the unrealised investments and exits above book value As at 31 August 2018, NAV per share of 20.70, net assets of 773 million NAV per share total return of 9% YTD Ten year dividend yield average of 2.9% Payable in October 2018 The Board anticipates a floor of 46p per share full dividend p.a.

9 Key financial highlights 9 The top 20 Top 20 currently represents 90% of the portfolio by value, aggregate sales of 3.0bn, EBITDA of 829m and margins of 28% +23% +19% LTM sales growth LTM EBITDA growth Note: Sales and EBITDA growth have been calculated on a weighted basis based on the respective values of the underlying investments. Previously these were calculated on an unweighted basis and the equivalent figures using the previous methodology are 18% for Sales and 19% for EBITDA 16.8x 5.3x EV to EBITDA multiple Multiple reflects holdings in high growth businesses primarily in technology Overall exits made at higher multiples to valuations Debt to EBITDA ratio Predictable revenues, strong earnings growth and high cash generation enable Hg to use debt to gear returns 7.6 million returned to the Company over the first half of 2018 from refinancings Note: As at 30 June 2018.

10 8m 45m 26m 51m 30m 38m 62m 87m 80m 65m 87m 73m 106m 92m 82m 62m 80m 66m 83m 64m 111m 104m 135m 180m 224m 210m Portfolio activity 10 Historic realisation and investment activity Continued strong realisation and investment activity NET SELLERS NET BUYERS NET SELLERS 55% 20% YTD Invested Realised Cash as % of NAV Note: Figures relate to HgCapital Trust s share of transactions

11 Portfolio activity 11 Significant realisations YTD 210m returned to the Company with a gross investment multiple of 2.4x / 22% gross IRR 47% 29% 4.3x 4.9x 22% 4.2x 66% 4.7x 27% 2.1x 3.0x 2.6x 3.6x 18% 56% 0.9x 1.0x 0.9x 1.4x 3.6x 1.3x 31% 1.7x 3.0x 43% 0.6x 0.9x Last valuation date Exit

12 Portfolio activity 12 Continuing to selectively invest Investing with a cautious and disciplined strategy Investing in companies we have known and owned for many years Making repeatable investments in the types of companies and clusters that we have invested in before 18% of NAV 18% of NAV 80m 87m 12% of NAV 65m 17% of NAV 104m 10% of NAV 73m 65m 115m Saturn 8% of NAV Hg8 and Mercury 2 15% of NAV YTD Note: Figures relate to HgCapital Trust s share of transactions, % figures show proportion of cash invested to year-end net assets.

13 Hg 13 Building businesses that change how we all do business Sector specialist investor in B2B technology and tech-enabled companies Harnessing a network effect through true specialisation and a large, homogenous portfolio c. 140 employees with c. 85 investment professionals and 15 Operating Partners Largest technology PE team in Europe with >25 year tech investment track record

14 Hg 14 HgCapital Trust plc is Hg s largest single investor Assets Under Management 46% Leading Global Institutional LPs Commitments to Hg funds 40% c. 10bn Invested capital and undrawn commitments NAV 8% Undrawn commitments to Hg funds 6% 1.3bn Portfolio value, cash & commitments to Hg Note: Figures as at 31 March 2018.

15 NON-CONTROL INTERESTS LOWER MID-MARKET CONTROL BUYOUTS MID-MARKET LARGE-CAP Hg Investment Strategy 15 One strategy over four funds Currently investing across the size range in technology and tech-enabled businesses SATURN 1 EV focus: > 1bn HgT commitment: 150m Fund size: 1.5 billion Target # of investments per fund: c. 4 HGT typical equity hold: million Hg8 EV focus: 250m-750m HgT commitment: 350m Fund size: 2.5bn Target # of investments per fund: c. 12 HGT typical equity hold: million MERCURY 2 EV focus: m HgT commitment: 80m Fund size: 575m Target # of investments per fund: c. 12 HGT typical equity hold: million TRANSITION CAPITAL EV focus: m HgT commitment: 75m Fund size: 75m Target # of investments per fund: c. 3 HGT typical equity hold: million COMPANY MATURITY Note: Hg does not take part in venture capital or development investments

16 Hg Investment Strategy 16 A reminder of our investment strategy Focused on businesses with specific characteristics across technology and technology-enabled services BUSINESS MODEL HG SWEET SPOT ATTRIBUTES DEEP SECTOR KNOWLEDGE FOCUSED ON END MARKET CLUSTERS Business critical need delivered as software, service or component Subscription or repeat revenue model Utilising years of accumulated IP > high margins Fragmented customer base SWEET SPOT Technology Services Industrial Tech Tax & Accounting Legal & Compliance Human Capital Management Automotive Insurance SME Tech Services Financial Data and FinTech Healthcare

17 Hg Investment Strategy 17 focused on eight distinct end-market clusters End-market specialisation helps us to build deep know-how Tax & Accounting Legal & Compliance Human Capital Management Automotive Financial Data and FinTech Insurance SME Tech Services Healthcare Current Exited 2018 investment activity

18 Hg Investment Strategy 18 Hg Software Inc If Hg Software Inc were listed as a single group, it would be one of the largest in Europe In aggregate, Hg s current tech investments have over 2.6 billion revenues 751 million EBITDA 13.1 billion enterprise value one of the top 4 software groups in Europe If quoted, Hg s software portfolio would be a FTSE 100 company With more than 25,000 employees LARGEST EUROPEAN SOFTWARE COMPANIES BY EV ( M) 1 100,627m 6% growth 27,617m 9% growth 25,789m 6% growth 11,545m Growing revenues and profits at c. 20% CAGR, 2x-3x the rate of comparable quoted companies Generating consistent returns of 20-30% IRR 17% growth 8,692m 7,310m 6,197m -9% growth 9% growth 16% growth Note: As of 30 June Source FactSet, converted at relevant FX rates. Micro Focus revenue pro-forma adjusted for HPE software acquisition in May 2017 and sale of SUSE in July 2018 Hg data as at 30 June 2018, adjusted pro forma for events post quarter end

19 Hg Investment Strategy 19 Creating value through growth Businesses we support create value primarily through growing revenue VALUE CREATION: ALL REALISED DEALS WITHIN OUR CORE SECTORS MoC 3.0x -0.1x 2.5x 0.3x 0.6x Additional investments e.g. to fund M&A 2.0x 1.5x 1.0x 2.8x 1.0x 0.5x 1.0x Inorganic Customer wins, up-sell, pricing, M&A 0x Entry value Revenue growth Margin expansion Multiple expansion Deleveraging Total proceeds As at June Includes 34 full buyout exits from MUST 4, Hg 5 and Hg 6, Hg 7, Mercury 1 in current sectors (Tech, Services and Industrial Tech). Discrepancies may exist due to sweet equity, loan notes and rounding

20 Hg Investment Strategy 20 OI playbook driving short and medium-term value In 2018 the OI team has organised 14 events enabling hundreds of people from our portfolio companies to harness the power of the Hg community and share ideas across a range of business areas led by a team of 18 professionals with an aggregate of more than 200 years of relevant experience Proposition & pricing Digital demand Sales excellence Customer success Analytics & systems Organisation & talent M&A Responsible business

21 Portfolio review 21 Trading performance Top 20 (currently representing 83% by value of our investments), had aggregate sales of 3.0bn, EBITDA of 829m and margins of 28% over the year, these companies have grown LTM revenues at 23% and LTM EBITDA at 19% Pre m Strong performance 87% by value * * * * 11 64m Lower growth 10% by value 16 (Residual holding) 20 (Residual holding) * * 17m Behind plan 3% by value 12 Note: all figures as a proportion of the top 20 as at 31 December 2017, Sales and EBITDA growth have been calculated on a weighted basis based on the respective values of the underlying investments. * Refinancings over 2018

22 HgCapital Trust plc 22 Outlook Strong trading of the underlying businesses, combined with capital returns from exits above book value, will continue to drive value for our investors It has been another strong six months for realisations, Hg expects to see further liquidity events over the next six months While the primary focus has been on exits, Hg has also continued to selectively invest, in situations where it has a unique angle and has developed many years knowledge of the business Robust double-digit trading performance from the unrealised businesses underpins Hg s confidence in the quality of these investments and ongoing growth A focus on operational improvement, coordinated by the dedicated Operations Innovation team, continues to drive the performance of the businesses, and deliver network benefits Strong earnings, realisations at uplifts to book value and supporting the management teams of the underlying portfolio will continue to drive value for shareholders in HgCapital Trust plc

23 Appendix 23 The top 20 portfolio 24 Case study - Intelliflo 26 Renewables 27 Hg funds snapshot 28 Contact 29 Disclaimers 30

24 Appendix 24 The top 20 portfolio at 30 June 2018 The top 10 buy-out investments represent 72% of the total value Investment Year of investment Sector Location Residual Cost 000 Total valuation 000 Portfolio value % Cumulative value % Change in value over Visma Technology Scandinavia 70, , % 19.3% 2 IRIS 2011 Technology UK 21,654 92, % 32.5% 3 Sovos Technology North America 38,508 79, % 43.8% 4 JLA* 2010 Services UK 3,511 34, % 48.7% 5 CogitalGroup Services UK 20,966 32, % 53.3% 6 Access 2018 Technology UK 30,491 30, % 57.7% 7 Mobility Holding 2018 Technology Germany 24,285 25, % 61.3% 8 Raet 2016 Technology Netherlands 16,127 25, % 64.9% 9 A-Plan 2015 Services UK 10,447 24, % 68.4% 10 Mitratech Technology North America 22,258 22, % 71.6% Top 10 Investments 258, , % 1 Including co-investment of 20 million 2 Including co-investment of 13 million 3 Including co-investment of 5 million 4 Including co-investment of 6 million All figures as at 30 June 2018 * Refinancings over 2018

25 Appendix 25 The top 20 portfolio at 30 June 2018 (cont.) The top 20 buy-out investments represent 90% of the total value Investment Year of investment Sector Location Residual Cost 000 Total valuation 000 Portfolio value % Cumulative value % Change in value over Commify Technology UK 12,309 19, % 74.4% 12 Achilles Technology UK 17,298 17, % 76.9% 13 Foundry 2015 Technology UK 15,142 15, % 79.1% 14 DADA* 2017 Technology Italy 9,513 14, % 81.1% 15 Citation 2016 Services UK 10,892 12, % 82.9% 16 TeamSystem 2010 Technology Italy , % 84.5% 17 Trace One* 2016 Technology France 4,489 10, % 86.0% 18 STP* 2016 Technology Germany 5,422 8, % 87.3% 19 P&I Technology Germany 1,796 8, % 88.5% 20 Atlas 2007 Services UK 12,542 7, % 89.6% Top 20 Investments 348, , % 4 Including co-investment of 6 million 5 Including co-investment of 10 million 6 Including co-investment of 5 million All figures as at 30 June 2018 * Refinancings over 2018

26 Case study x 39% Investment Multiple +66% Gross IRR Uplift to book value Headquartered in the UK, Intelliflo is a provider of front and back office software solutions to financial intermediaries, including IFAs, wealth managers, adviser networks, insurance/life companies and brokers. In June 2018 the business was sold to Invesco, the Atlanta-based global investment management company. Over the past five years, Hg has supported Intelliflo to implement best in class SaaS practices in development, operations, sales and marketing.

27 Appendix 27 Asper renewable energy High quality European renewable energy projects currently representing 2.8% of the portfolio value ( 19.7 million) The Company invested via LP interests in Asper s two Renewable Energy Funds, RPP1 (2006) and RPP2 (2010) Exposure to renewable power assets anticipated to deliver returns through yield during operation and capital gain at exit By bringing individual investments together into platforms, Asper can enhance value through economies of scale, shared expertise and aggregated generation capacity The UK wind portfolio was fully exited in 2013, resulting in an overall investment multiple of 1.8x and a gross IRR of 17% p.a. Three successful exits in 2017 (in Ireland, Sweden and the UK) and the robust operating performance of the rest of the portfolio contributed to a substantial uplift of over 30% in the NAV of Asper RPP II over The Asper team is hard at work to increase NAV further and crystallize value over the next years. NAV in 2018 has increased thanks to positive developments of the arbitrations against Spain, including successful investor awards in similar claims. Note: For further information please see

28 Appendix 28 Hg funds snapshot Targeting consistent performance across market cycles REALISED RETURNS (GROSS) % INVESTED RETURNED IN CASH OVERALL RETURNS (GROSS) Hg5 958 million 2006 Hg6 1.9 billion 2009 Mercury million 2012 Phase: Realisation 11 out of 12 investments realised 1.4 billion in proceeds Phase: Realisation 18 out of 19 investments realised 3.7 billion in proceeds Phase: End of Investment 85% invested across 12 companies 6 out of 12 investments realised 2.1x / 17% 195% 2.1x / 16% 2.3x / 20% 208% 2.2x / 18% 3.4x / 44% 163% 2.5x / 41% Hg7 2.0 billion 2013 Phase: End of Investment 100% invested across 13 companies 2.6x / 35% 41% 1.7x / 26% 3 exits to date 1 Mercury million 2017 Hg8 2,500 million 2017 Hg Saturn 1,500 million 2018 Phase: Investing c. 37% invested in 4 companies Focus on strong investment pipeline Phase: Investing c. 27% invested in 4 companies Focus on strong investment pipeline Phase: Investing c. 40% invested in 2 companies Focus on strong investment pipeline n/a 12% 1.1x / 118% n/a 0% 1.0x / 13% n/a 0% 1.0x / 2% As at 31st December Adjusted pro forma for events post-period end

29 Appendix 29 Contact For further information on HgCapital Trust plc, please visit our website: Or contact Laura Dixon +44 (0)

30 Appendix 30 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, SOUTH AFRICA, OR JAPAN. RECIPIENTS OF THIS DOCUMENT AND THE PRESENTATION (THE "MATERIALS") IN JURISDICTIONS OUTSIDE THE UK SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY APPLICABLE LEGAL REQUIREMENTS IN THEIR JURISDICTIONS. IN PARTICULAR, THE DISTRIBUTION OF THE MATERIALS MAY BE RESTRICTED BY LAW IN CERTAIN JURISDICTIONS. ACCORDINGLY, RECIPIENTS REPRESENT THAT THEY ARE ABLE TO RECEIVE THE MATERIALS WITHOUT CONTRAVENTION OF ANY APPLICABLE LEGAL OR REGULATORY RESTRICTIONS IN THE JURSIDICTION IN WHICH THEY RESIDE OR CONDUCT BUSINESS. This document accompanies the Interim Report and Accounts for the six months ended 30 June 2018 of HgCapital Trust plc and contains a summary of the information set out in that document. Reference should be made to the full Interim Report and Accounts rather than relying on this summary. It does not constitute an advertisement and is not a prospectus. It does not constitute an offer to sell or a solicitation of an offer to buy any securities described herein in the United States or in any other jurisdiction, nor shall it, by the fact of its distribution, form the basis if, or be relied upon, in connection with any such contract. No offer, invitation or inducement to acquire shares or other securities in HgCapital Trust plc ( Shares ) is being made by or in connection with this document. The information presented herein is not an offer for sale within the United States of any equity shares or other securities of HgCapital Trust plc. HgCapital Trust plc has not been and will not be registered under the US Investment Company Act of 1940, as amended (the Investment Company Act"). In addition, the Shares have not been and will not be registered under the Securities Act or any other applicable law of the United States. Consequently, the Shares may not be offered or sold or otherwise transferred within the United States, or to, or for the account or benefit of, US Persons, except pursuant to an exemption from the registration requirements of the Securities Act and under circumstances which will not require HgCapital Trust plc to register under the Investment Company Act. No public offering of the Shares is being made in the United States. The Shares may only be resold or transferred in accordance with the restrictions set forth in the Prospectus to be published in connection with any proposed offering and related subscription documents. This communication should not be distributed, forwarded, transferred, reproduced, or otherwise transmitted, directly or indirectly, to any persons within the United States or to any US Persons unless it is lawful to do so. This document is being issued by Hg Pooled Management Limited to accompany the Interim Report and Accounts. The information and opinions contained in this document are for background purposes only, do not purport to be full or complete and do not constitute investment advice. Subject to Hg Pooled Management Limited 's regulatory requirements and responsibilities, no reliance may be placed for any purpose on the information and opinions contained in this document or their accuracy or completeness and no representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information or opinions contained in this document by Hg Pooled Management Limited or any of its members or employees and no liability is accepted by such persons for the accuracy or completeness of any such information or opinions. This information is not intended to provide, and should not be relied upon, for accounting, legal, tax advice or investment recommendations. You should consult your tax, legal, accounting or other professional advisors about the issues discussed herein. The descriptions contained herein are summaries and are not intended to be complete and neither Hg Pooled Management Limited nor any of its affiliates undertakes any obligation to update or correct any errors or inaccuracies in any of the information presented herein. The information in these materials and any other information discussed at the presentation is subject to change. This document does not constitute or form part of any offer to issue or sell, or any solicitation of any offer to subscribe or purchase any investment nor shall it or the fact of its distribution form the basis of, or be relied on in connection with, any contract thereof.

31 Appendix 31 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 forwardlooking statements may be identified by the use of forward-looking terminology, including the terms "targets", "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. They appear in a number of places throughout these materials and include statements regarding the intentions, beliefs or current expectations of Hg Pooled Management Limited and/or its members or employees concerning, among other things, the trading performance, results of operations, financial condition, liquidity, prospects and investment policy of HgCapital Trust plc. By their nature, these forward-looking statements as well as those included in any other material discussed at any presentation involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. 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 revise any such forward-looking statement. In light of these risks, uncertainties and assumptions, the events or circumstances referred to in the forward-looking statements may not occur. None of the future projections, expectations, estimates or prospects in this document should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects have been prepared are correct or exhaustive or, in the case of the assumptions, fully stated in the document. No-one undertakes to publicly update or revise any such forward-looking statement, whether as a result of new information, future events or otherwise. As a result of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements as a prediction of actual results or otherwise. Return targets are targets only and are based over the long-term on the performance projections of the investment strategy and market conditions at the time of modelling and are therefore subject to change. There is no guarantee that any target return can be achieved. Investors should not place any reliance on such target return in deciding whether to invest in HgCapital Trust plc. Past performance is not necessarily a reliable indicator of future results. To the extent available, the industry, market and competitive position data contained in these materials come from official or third party sources. Third party industry publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no guarantee of the accuracy or completeness of such data. The contents of this document have not been independently verified, are not comprehensive, does not contain all the information that a prospective purchaser of securities may desire or require in deciding whether or not to offer to purchase such securities and do not constitute a due diligence review and should not be construed as such. Subject to Hg Pooled Management Limited's regulatory requirements and responsibilities, no undertaking, representation, warranty or other assurance, express or implied, is made or given by or on behalf of Hg Pooled Management Limited or any of its members, employees, agents or advisers or any other person as to the accuracy, completeness or fairness of the information, forward-looking statements or opinions contained in this document and no responsibility or liability is accepted by any of them for any such information, forward-looking statements or opinions or in respect of any omission, and this document is distributed expressly on the basis that it shall not give rise to any liability or obligation if, for whatever reason, any of its contents are or become inaccurate, incomplete or misleading and neither Hg Pooled Management Limited nor any such persons undertakes any obligation to provide the recipient with access to additional information or to correct any inaccuracies herein which may become apparent. Hg Pooled Management Limited, Registered office: 2 More London Riverside, London SE1 2AP. Authorised and regulated by the Financial Conduct Authority..