HgCapital Trust plc. Full year results for the year ending 31 st December 2009

Transcription

1 HgCapital Trust plc Full year results for the year ending 31 st December 2009

2 HgCapital Trust plc Contents Summary Performance Portfolio Review Investment Activity Manager Update Events since the year end Conclusion Appendices 2

3 HgCapital Trust plc Summary The portfolio is compact, appropriately valued with significant potential. A conservative balance sheet with no debt and cash to invest. We anticipate a positive new deployment environment and a subdued exit environment. Replenishing of the transaction pipeline is becoming more visible and this will gather pace. 3

4 HgCapital Trust plc Contents Summary Performance Portfolio Review Investment Activity Manager Update Events since the year end Conclusion Appendices 4

5 Performance Financial Highlights ASSETS AT 28 FEB 2010 AT 31 DEC 2009 AT 30 JUNE 2009 AT 31 DEC 2008 % CHANGE OVER YEAR Net assets ( 000) 233,373* 236, , , % Net assets per share 926.6p 937.2p 878.1p 929.4p 0.8% Liquid resources per share 364.5p 348.0p 399.7p 515.6p (32.5%) Share price (mid-market) 837.5p 844.0p 786.0p 668.5p 26.2% Discount (%) 9.6% 9.9% 10.5% 28.1% n/a *After accruing a 25p per share dividend ( 6.3m). 5

6 Performance NAV Analysis AT 28 FEB 2010 AT 31 DEC 2009 AT 30 JUNE 2009 AT 31 DEC 2008 m % m % m % m % Unlisted Investments % % % % Listed Investments Liquid resources % % % % Other net assets/(liabilities) % % (1.0) (0.5%) (4.8) (2.0%) Net assets % % % % 6

7 Performance Total Return 1 YEAR TO 31 DEC YEARS TO 31 DEC YEARS TO 31 DEC YEARS TO 31 DEC YEARS TO 31 DEC 09 Share price 30.2% 7.7% 15.8% 24.4% 14.4% Net asset value 3.6% 10.6% 16.5% 18.2% 12.8% FTSE All-Share Index 30.1% (1.3%) 6.5% 9.3% 1.6% *Figures are annualised 7

8 Performance Analysis of net asset value (NAV) movements for the year ending 31 December

9 Performance Analysis of unrealised movements in investment portfolio (including accrued interest movement of 2.9 million) for the year ending 31 December

10 Performance Realised and unrealised movements in investment portfolio (including accrued interest) during the year ending 31 December

11 HgCapital Trust plc Contents Summary Performance Portfolio Review Investment Activity Manager Update Events since the year end Conclusion Appendices 11

12 Portfolio Review Portfolio Top 10 buy out investments and the RPP fund investment represent over 85% of value Investment Investment Date Sector *Value at 31/12/08 m *Value at 31/12/2009 m % of invested portfolio 31/12/09 Cumulative value % Principal Reason for Change Visma 2006 TMT % 18.8% Increased trading, further investment Pulse 1999 Healthcare % 35.3% Increased trading Goldshield (Midas Equityco) 2009 Healthcare n/a % 43.0% New investment Mondo 2007 Industrials % 50.1% Increased trading Sporting Index 2005 Consumer & Leisure % 55.5% Ratings Schleich 2006 Consumer & Leisure % 60.9% Foreign exchange SLV 2007 Industrials % 65.6% Increased trading Americana 2007 Consumer & Leisure % 70.0% Increased trading Epyx 2009 TMT n/a % 74.0% New investment Achilles 2008 TMT % 77.5% - Top 10 buyout investments % RPP Fund 2006 Renewable Energy % % *The valuation includes accrued interest 12

13 Portfolio Review Valuation Basis and Vintage As at 31 Dec 2009 by value VALUATION BASIS VINTAGE Cost 15% Net assets Year Year % 12% 9% Year Year % 12% Pre Pre % 15% Year Year % 10% pre % % % Written down Year Year % 23% Year Year % 28% % % 11% Earnings 65% % 13

14 Portfolio Review Sector coverage of investments As at 31 Dec 2009 by value BY VALUE BY NUMBER Services Renewable Energy 2% 8% Industrials 12% Fund 1% TMT 31% Fund 10% Renewable Energy Services 3% 10% Industrials 22% Consumer & Leisure 17% Consumer & Leisure 14% TMT 21% Healthcare 29% Healthcare 21% 14

15 Portfolio Review Geography and Stage As at 31 Dec 2009 by value BY GEOGRAPHY BY STAGE North Benelux Europe 3% 8% America 1% Expansion 1% Renewable Energy 8% Fund 1% Germany 12% UK 50% Nordic Region 26% Buyout 90% 15

16 Portfolio Review Portfolio Top 10 buyout investments circa. 78% of value continue to out-perform, year on year sales growth and EBITDA growth of circa. 7% and 18% respectively. Next 10 investments have been harder hit but this is reflected in the current values. Overall trading has stabilised in most companies and we are seeing signs of recovery over the last few months. We have significant capital reserved both offensively for value enhancing acquisitions and defensively if required to protect value. Average Value Weighted Debt/EBITDA in the Top 10 investments is 3.1x. Debt/EBITDA Band Number EBITDA m Debt m HgCT Value m Copyright HgCapital 16

17 Portfolio Review Top10 HgCapital Trust buyouts continue to out perform PERFORMANCE SUMMARY OF TOP10 INVESTMENTS COMMENTS Top10 HgCapital Trust buyouts outperformed UK GDP growth by ~4x in 2008 Crisis slowed down sales growth in 2009, but did not stop companies from adding sales 17

18 Portfolio Review Top10 HgCapital Trust buyouts continue to out perform PERFORMANCE SUMMARY OF TOP10 INVESTMENTS COMMENTS EBITDA has grown at rates of ~1.5-2x sales growth Restructuring during 2009 positioned portfolio well to take full advantage of improving economic climate (current degree of operating leverage ~3x) 18

19 Portfolio Review Existing portfolio valuations may be seen as a store of value Consistent Application of Valuation Policies Valuations conform with IPEV guidelines. Historic earnings when earnings are rising, forecast earnings when they are falling. Track record Average uplift over book value on exit has been 2x on 30 exits since mid Current Valuation Benchmarks Average value weighted EV/ EBITDA multiple used at 31 December 2009 was 7.7x for the top 10 investments, representing ~79% of portfolio by value. Average value weighted EV/ EBITDA multiple for FTSE All-Share Index at 31 December 2009 was 14.3x. 19

20 HgCapital Trust plc Contents Summary Performance Portfolio Review Investment Activity Manager Update Events since the year end Conclusion Appendices 20

21 Investment Activity Investments COMPANY SECTOR ACTIVITY DEAL TYPE COST 000 New Investments Goldshield Healthcare Markets pharmaceuticals and nutraceuticals in the UK Buyout 11,275 * Epyx TMT A private car fleet services electronic marketplace Buyout 5,942** Total new Investments 17,217 Further Investments HgRPP LP Renewable Energy Renewable Energy Fund Fund 7,578 NOK/GBP Hedge n/a Financial derivative instrument n/a 1,699 SHL Services Psychometric testing and assessment Buyout 1,503 Visma TMT Business application software Buyout 1,341 King Industrials Leading distribution of special fasteners and expanders Buyout 293 Other investments 232 Total further investments 12,646 Total investment by the Company 29,863 * 3.3 million has been repaid in January 2010 ** 4.9 million reduction since June 2009 due to HgCapital 6 fund equalisations 21

22 Investment Activity 2009 Realisations COMPANY SECTOR EXIT ROUTE RESIDUAL COST 000 BOOK VALUE AT 31 DEC PROCEEDS 000 CUMULATIVE GAIN/(LOSS)** 000 CURRENT YEAR GAIN/(LOSS)*** 000 Pulse staffing Healthcare Loan stock redemption, interest and dividend - 3,141 5,757 5,757 2,616 Hirschmann Industrials Release of escrow ,251 1, Other , Partial realisations 866 4,449 8,321 7,455 3,872 Total realisations 866 4,449 8,321 7,455 3,872 * Includes gross revenue received during the year ** Realised proceeds including gross revenue received, in excess of historic cost *** Realised proceeds including gross revenue received, in excess of 31 December 2008 book value and accrued interest. 22

23 Investment Activity Investment Environment and Prospects Our investment stance has been influenced by our concern that there will be a second leg to the recession. - Accordingly we have little interest in cyclical stories. - We are very focused on buying growth companies at valuations below long run averages. We anticipate the volume of investment opportunities will continue to pick up as - the process of deleveraging continues; - divestment of fallen angels by banks will pick up in 2010/11; - large wall of re-financings approaching. As confidence returns - corporates eventually forced to restructure; - private owners finally decide to sell. At a time when pricing conditions improve - valuations are inexpensive vs long run historical mean; - catalyst for re-rating coming from accelerating earnings growth. Yet many PE firms are troubled or distracted at best. Whilst financing conditions gradually ease for the better sponsors, like HgCapital. 23

24 HgCapital Trust plc Contents Summary Performance Portfolio Review Investment Activity Manager Update Events since the year end Conclusion Appendices 24

25 Manager Update Relationship between HgCapital ( the Manager ), HgCapital Trust and the HgCapital 6 fund 1.9bn The Manager Manages investment portfolio HgCapital Trust 280m Other investors in HgCapital 6 1,620m Sources, arranges and manages investment portfolio Same terms (management fee, etc.) Investment Investment HgCapital 6 Portfolio Note: HgCapital Trust plc has a unique investment opt-out (without penalty) 25

26 Manager Update HgCapital s strategy and tactics have been effective and are well suited to the next stage in the life of Private Equity MID-MARKET AND PAN REGIONAL (UK, Germany, Northern Europe) Multiple value levers. Conservative capital structures. Multiple exit options not overly dependent on capital markets. DEEP SECTOR KNOWLEDGE THROUGH SPECIALIST TEAMS Research-driven investment selection in TMT, Services, Healthcare & Industrials. Higher deal conversion. Optimizes exits. DEDICATED SPECIALIST PORTFOLIO MANAGEMENT Drive incremental growth and profit. Strengthen teams and franchises. BROAD BENCH OF PROFESSIONALS LED BY A COHERENT PARTNER GROUP 40+ investment executives with an average experience of 8+ years in private equity related workfields. Partners have worked 12 years together and enjoy an average experience of 16 years in private equity. Total team of 75 employees. LAUNCHING NEW PRODUCTS THAT EXPLOIT CORE COMPETENCIES Hg6: 1.9 billion flagship buy-out fund- similar focus, strategy and tactics to earlier funds. RPP1&2 : Expansion of successful Renewable Power Generation business. More research-led ideas that leverage core competences. 26

27 HgCapital Trust plc Contents Summary Performance Portfolio Review Investment Activity Manager Update Events since the year end Conclusion Appendices 27

28 HgCapital Trust plc Events since the year end Hoseasons sold in February for a multiple of 2.3x original cost. This represents a 105% uplift to the carrying value at 31 st December This equates to 10.3p per share. Net asset value per share for January 2010 and February 2010 was 932.5p and 926.6p (post provision for dividend). Liquid resources, after allowing for the dividend payment now represent 39% of Net Asset Value. The Board declared a 25p per share dividend in February, which will be paid in March As previously announced the Board is currently considering raising further funds. A further announcement will made in due course. 28

29 HgCapital Trust plc Contents Summary Performance Portfolio Review Investment Activity Manager Update Events since the year end Conclusion Appendices 29

30 HgCapital Trust plc Conclusion Sound portfolio with significant potential. A strong belief that we are entering a buyer s market because economic conditions will continue to be tough and equity is in short supply. We anticipate a subdued exit environment. HgCapital Trust well positioned to continue to outperform in the future. Copyright HgCapital 30

31 HgCapital Trust plc Contents Summary Performance Portfolio Review Investment Activity Manager Update Events since the year end Conclusion Appendices 31

32 Appendices HgCapital Trust has rewarded the patient investor outperforming the FTSE All Share Index by 3x and listed PE peers by 2.5 7x over the last 10 years +11.6% p.a. share price appreciation for HgCT vs. (3.5)% p.a. for LPE Peers, (0.6)% p.a. for the FTSE All-Share Index 10 year total return of 14.7% p.a. for HgCT vs. 2.7% p.a. for the FTSE All-Share Index 350% HgCapital Trust LPE Peer Index (1) FTSE All-Share 300% 299% 250% 200% 150% 100% 94% 50% 70% 0% Note: Chart shows share price return. Data as per 12 January 2010; (1) Equally weighted index of 3i Group, Candover, Electra, Graphite, and SVG Capital. 32

33 Appendices HgCapital Trust Outperforming its listed PE peers HgCapital Trust outperformed key competitors by an average of 4.5x over the last 10 years Best performing peer Electra was outperformed by 2.5x and worst performing SVG by >7x 350% HgCapital Trust Candover Electra SVG Graphite 3i Group 300% 299% 250% 200% 150% 100% 50% 121% 82% 62% 44% 42% 0% Note: Chart shows share price return. Data as per 12 January

34 Appendices Analysis of Movement in NAV 000 Opening net asset value as at 1 January ,094 Realised proceeds in excess of book value at 31 December 2008 (excludes gross revenue) 493 Net unrealised depreciation of investments (excluding accrued interest) 5,780 Gross revenue 9,682 Priority profit share to General Partners (6,401) VAT recovery on historic management fees 833 Other Expenditure (1,078) Dividend paid (6,297) Carried interest (1,062) Closing net asset value as at 31 December ,044 34

35 Appendices Portfolio by Sector: 31 December 2009 Investment Year of Investment Valuation basis Residual cost 000 Total valuation* 000 Portfolio value % TMT Investments Visma 2006 Earnings 14,609 27, % Epyx 2009 Cost 5,942 5, % Achilles 2008 Cost 5,226 5, % Elite 2005 Written down 5,749 5, % Software (Cayman), LP re Blue Minerva 2006 Earnings 530 1, % Software (Cayman), LP re Guildford 2007 Earnings % Tiger Capital 2008 Other % Addison 2005 Other Total TMT 32,941 46, % Healthcare Investments Pulse Goldshield (Midas Equityco) Earnings Cost 6,131 11,275 24,597 11, % 7.7% Voyage 2006 Written down 8,755 3, % Casa Reha 2008 Written down 8,151 2, % Doc M SARL 2004 Other % Tribal Group plc 2009 Quoted % PBR 2002 Other Total Healthcare 34,885 42, % *Including accrued interest 35

36 Appendices Portfolio by Sector: 31 December 2009 Investment Year of Investment Valuation basis Residual cost 000 Total valuation* 000 Portfolio value % Consumer & Leisure Investments Sporting Index 2005 Earnings 7,186 8, % Schleich 2006 Earnings 4,634 7, % Americana 2007 Earnings 4,625 6, % Hoseasons 2003 Earnings 2,197 2, % Cornish Bakehouse 2007 Written down 4,200 1, % Total Consumer & Leisure 22,842 26, % Industrial Investments Mondo 2007 Earnings 7,004 10, % SLV 2007 Earnings 5,962 6, % Hirschmann 2004 Other % W.E.T Written down 7, FTSA 2006 Written down 6, KVT (King) 2008 Written down 5, Hofmann 2005 Other Lantor plc (formerly South Wharf plc) 1992 Other Total Industrials 33,315 11, % *Including accrued interest 36

37 Appendices Portfolio by Sector: 31 December 2009 Investment Year of Investment Valuation basis Residual cost 000 Total valuation* 000 Portfolio value % Renewable Energy Investments HgRPP LP 2006 Net assets 11,987 11,620 7,9% Total Renewable Energy 11,987 11, % Services Investments SHL 2006 Written down 7,991 2, % Atlas Energy 2007 Written down 8, Fabory 2007 Written down 7, SGI 1999 Other 1, Total Services 25,287 2, % Legacy PE Fund Investments Weston Presidio Capital III, LP 1998 Net assets 2,320 1, % ACT Venture Capital 1994 Net assets Crest Avenue 1992 Net assets Wand / Yankelovich LP 1992 Net assets Total Fund 2,372 1, % Derivative Instrument Investments NOK / GBP Hedge n/a n/a 1,699 1, % Hg5 Euro Hedge n/a n/a - (1,917) (1.3%) (0.4%) Total Derivative Instrument 1,699 (595) Total Portfolio 165, , % *Including Accrued Interest 37

38 Appendices Realisation history since mid 2005 at 2x book value Holding Value Multiple (1) 7.5x 7.0x Orbiscom 6.5x 6.0x Classic Copyright 5.5x 5.0x 4.5x 4.0x 3.5x Blue Minerva 3.0x 2.5x 2.0x 1.5x 1.0x 0.5x Average Holding Value Multiple: 2x (2) FTE Tunstall Trados Travelsphere Clin- Phone PBR Castlebeck Bertram Doc-M Worldmark Hirschmann CSG Schenck Rolf e & Nolan Hofmann Menu Clarion Events Axiom Addison 0.0x Aug-04 Feb-05 Sep-05 Mar-06 Oct-06 Apr-07 Nov-07 Jun-08 Dec-08 Jul-09 Jan-10 Note: Bubble size reflects realisation proceeds; written-off assets not shown; (1) Exit proceeds as multiple of latest holding value pre-exit; (2) Includes written-off assets 38

39 Appendices HgCapital Strategic relevance STRATEGY Mid-Market. 50 million 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. Ability to attract high quality management teams. Return attribution potential to effect material operational improvements. Sole / lead / control investors. Seek multiple value levers. Conservative capital structures. Pan-Regional Primary coverage of northern Europe. Cultural affinity with management teams and business environments. Secondary coverage of other European markets via sector focus. 39

40 Appendices HgCapital Tactical advantage 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 and portfolio level activity (developed over 10 years). Dedicated resource and expertise (team of 8 professionals, plus support from other senior partners). Helps drive growth and optimise exits. Highly resourced. Favourable ratio of staff to deals - team of 75 with 19 active portfolio companies. Just under 3 billion AUM. Partners average 16 years of private equity experience / worked together for 12 years. 40

41 HgCapital Disclaimer This document constitutes 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 contract therefor. 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. Any offer, invitation or inducement to acquire Shares will be made solely by means of a prospectus published in connection with any offering (the "Prospectus") and any decision to buy Shares should be made solely on the basis of the information contained in the Prospectus. 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 US Securities Act of 1933, as amended (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 HgCapital and is for private circulation only. 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 HgCapital'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 HgCapital 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. HgCapital s communications are only directed at eligible counterparties and professional clients. HgCapital acts for its investors and for no one else in relation to its business. It will not advise, provide services to or be responsible for providing customer protections to any other person. 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 HgCapital 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 therefor. The distribution of these materials in certain jurisdictions may be restricted by law and persons into whose possession these materials come should inform themselves about and observe any relevant restrictions. In particular, these materials are not for publication or distribution, directly or indirectly, in, into or from the United States of America, Canada, Australia, Japan, New Zealand or the Republic of South Africa. Any failure to comply with the above restrictions may constitute a violation of such securities laws. This document is and may be communicated only to (and is directed only at) persons to whom such communication may lawfully be made. 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, 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 HgCapital 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. 41

42 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 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 or any fund established by HgCapital. 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 HgCapital's regulatory requirements and responsibilities, no undertaking, representation, warranty or other assurance, express or implied, is made or given by or on behalf of HgCapital 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 HgCapital 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. HgCapital is the trading name of HgCapital LLP and Hg Pooled Management Limited. Registered office: 2 More London Riverside, London SE1 2AP. Authorised and regulated by the Financial Services Authority. 42