SVG Capital. Annual Results 2016

Transcription

1 SVG Capital Annual Results 2016

2 Highlights 12 months to 31 January 2016 Sixth consecutive year of double digit growth +11% NAV growth NAV of 654p 1 Driven by a 9% total return from investment portfolio augmented by accretive share buybacks and tender offers Strong performance of investment portfolio Performance driven by investments made under the new strategy and non core assets +19% total return from post 2012 investments +24% total return from non core investments 1% total return on pre 2012 investments Progress against strategic priorities Continued development of post 2012 investment portfolio $100m commitment to leading US mid market private equity manager, AEA Investors Six leading private equity managers four in the US and two in Europe 94m of calls paid; funding 16 new investments Significant exit activity in more mature investments Distributions of 486m received a number of larger more mature investments realised Focus on shareholder returns Strong balance sheet 291m of net cash Good coverage of 332m of uncalled commitments 167m of share buyback and tenders during the year Continues to be highly accretive, adding 19p to NAV 67m of debt repayment 2 1. Fully diluted

3 3 Investment portfolio

4 Net investment portfolio ( 763m) January 2016 Strong performance of the investment portfolio Weighting to post 2012 investments now 36% Calls Dist Core investments 521m (68%) Post 2012 investments 279m (36%) Portfolio of 45 companies, including four co investments +19% (+ 52m) total return in the 12 months Performance driven by strong underlying earnings growth and two realisations LTM earnings and revenue growth of 10% and 11% respectively In particular, we have seen very strong growth from our underlying companies in the Healthcare and TMT sectors 92m 47m Investment portfolio 763m Pre 2012 investments 242m (32%) Predominantly made up of NXP Semiconductors and Platform Specialty Products 1% ( 7m) total return in the 12 months Performance driven by movements in the share prices of some of the quoted holdings and realisation activity NXP Semiconductors and Platform Specialty Products are in exit processes 382m Non core investments 242m (32%) Diamond funds 193m (25%) Other 49m (7%) Diamond fund of funds programme +24% (+ 45m) total return in the 12 months Performance driven by strong underlying investment performance, realisation activity and for the later funds, enhanced through the leverage within the structures Other funds +24% (+ 14m) total return in the 12 months 2m 57m 4

5 Core investment portfolio ( 521m) January 2016 Concentration declining and post 2012 investments performing strongly Core portfolio Manager Date of initial investment 31 Jan 17 Mar (roll forward for movement in quoteds, realisations and FX) 1 NXP Semiconductors (Freescale) Permira m 79m 2 Platform Specialty Products (Arysta LifeScience) Permira m N/A 3 The Hillman Group 2 CCMP m N/A 4 TeamViewer 2 Permira m N/A 5 Visma 2 Cinven m N/A 6 Eyemart Express 2 FFL m N/A 7 Jetro Cash & Carry CCMP m N/A 8 Synlab Cinven m N/A 9 Informatica Permira m N/A 10 PQ Corporation CCMP m N/A 11 Genesys Permira m N/A 12 Brand Energy & Infrastructure CD&R m N/A 13 CeramTec Cinven m N/A 14 Acromas (Saga) Permira m 7m 15 GFKL/Lowell Permira m N/A Top 15 companies (gross) 364m In exit processes Permira sold 33% of holding in Freescale in March c. 38m of proceeds expected Co investment portfolio Valued at 1.2x cost in aggregate TeamViewer written up to 25m (1.4x cost) Building a portfolio of strategically attractive assets Other top 15 clearly identified value creation strategies Defensive, structural growth Jetro Cash & Carry, Informatica, CeramTec Operational and strategic change Synlab, PQ Corporation, Brand Energy & Infrastructure, GFKL/Lowell December 2015 valuations rolled forward for cash flow, movements in quoted share prices and foreign exchange 2. Combined co investment and pro rata share of fund investment 5

6 Core investment portfolio post 2012 investments ( 279m) January 2016 Strong performance to date and well positioned for continued growth Strong realised and unrealised performance by vintage year Weighted towards growth sectors 3.0x 2.5x 2.5x Realised Unreaslised Healthcare Financial TMT Multiple of cost 2.0x 1.5x 1.0x 0.5x 0.0x 0.8x 1.4x 1.3x 1.1x 1.7x 1.2x 1.1x 1.1x 0.1x 0.2x Industrials Consumer Business/Support services 2012: 10m invested, three companies Strong performance driven by partial realisation of AMCo 2013: 19m invested, three companies Bulk of performance driven by healthcare and TMT end markets 2014: 147m invested, 23 companies Early realisation of PharMEDium at a significant multiple to cost 2015: 82m invested, 16 companies Selective investments with clear value creation strategies Portfolio bias towards more defensive, structural growth sectors, with Healthcare, TMT and Business Services sectors representing 60% of the portfolio Within consumer sector, the portfolio is weighted towards more defensive subsectors such as health products and optical retailing Co investments have increased defensive, structural growth bias Very limited direct exposure to commodity driven end markets 6

7 Core investment portfolio post 2012 investments ( 279m) January 2016 Strong investment pipeline Six manager relationships to date; expect to make two to three new commitments this year US Commitments to six managers and four co investments to date US $490m across four commitments $37m across two co investments Bias to mid market significant depth of opportunity Europe Europe 225m across two commitments 30m across two co investments Existing managers fundraising this year Targeting about eight to 10 manager relationships Strong pipeline of opportunities Will remain highly selective Portfolio construction considerations Targeting a well balanced portfolio by geography and sector Strength and risk profile of track record Vintage year exposure and pipeline of opportunities Partnership relationship access to co investment, advisory board Funds under consideration Funds diligenced but not invested 7 Source: SVG Capital Size of bubble represents fund size, with larger transactions represented by bubble further up the chart in Europe and the US Grey represents fund due diligenced but not invested in. Purple bubbles are funds that are under consideration

8 8 Outlook

9 Outlook January 2016 Well placed to take advantage of opportunities Continued strong performance Investments made under the new strategy now the largest part of the portfolio Strong early performance; well positioned for future growth Concentration declining as legacy investment sold Managers have taken advantage of the environment to generate exits; expect to continue to benefit from exit activity, albeit distributions will not be as large as in recent years Well positioned to deliver shareholder value Good visibility on investment pipeline over the next 12 to 18 months Expect to make two to three commitments this year Strong balance sheet well placed to meet our uncalled commitments and support our future investment programme Will continue to optimise shareholder returns Challenging economic and geopolitical outlook; we expect volatility to continue Well placed in a challenging environment Private equity environment remains competitive but attractive investment opportunities remain We continue to be highly selective Our managers have shown strong investment discipline in deploying capital Current repricing of risk in credit markets should in time lead to an increasingly attractive equity investment environment Beginning to see compelling investment opportunities across the asset class 9

10 10 Supplementary information

11 Balance sheet January 2016 Strong balance sheet well placed to take advantage of opportunities 31 Jan 16 m 31 Jan 15 m Net investment portfolio 763 1,053 Cash Other assets 1 43 Total assets 1,094 1,231 Bank facility 1 Convertible bonds 2 (39) (97) Other liabilities (3) (7) Shareholders funds 1,052 1,127 NAV per share 654p 588p Net (cash)/debt as % of Shareholders funds (28%) (3%) Uncalled commitments 31 Jan 16 Core portfolio AEA Investors Fund VI 70m Clayton, Dubilier & Rice Fund IX 62m CCMP Capital Investors III 54m FFL Capital Partners IV 51m The Fifth Cinven Fund 25m Permira V 32m Permira IV 13m Non core portfolio 25m Total 332m Net (cash)/debt as a % of Shareholders funds inc. uncalled commitments 4% 29% LTV ratio (maximum 30%) 3 Uncalled commitments 332m 367m Coverage of uncalled commitments of 1.6x net cash coverage of 0.9x Expect to make two to three new commitments this year Coverage 4 1.6x 0.7x Total facility of 300m with a maturity of m payable in June Flexibility to go up to 40% for one three month period 4. Coverage based on short term liquidity over uncalled commitments

12 Supplementary information Core investment portfolio analysis Core investment portfolio vintage year analysis m and before Earnings Quoted Cost Third party Written down earnings Valuation % Geography % Sector % Cost Written down earnings Continental Europe UK Business/support services Healthcare Financial Third party Earnings North America Global Consumer TMT Quoted Industrials 12

13 Supplementary information AEA Investors 13

14 AEA Investors Operational and strategic improvement of market leading companies SVG Capital committed $100m to AEA Investors Fund VI Strategy AEA makes control investments in global mid market companies, primarily headquartered in the United States Typical enterprise value of $200m to $2bn Sector focus Focus on valued added industrials, specialty chemicals, consumer/retail and business services Team Investment model Rationale for investment Team of over 40 investment professionals across offices in New York, London, Munich and Shanghai, supported by a participant network of over 75 senior business executives, industrial families and government leaders Through a sector led approach, identify well positioned companies with good free cash flow generation where significant change led by their operating partners and participants can accelerate growth and profitability Strong and consistent returns across the cycle Focus on market leading businesses that have the potential for operational, strategic and financial improvement US middle market is an attractive area for investment Co investment opportunities 14

15 Supplementary information CCMP Capital 15

16 CCMP Capital Fully integrated operating and investing team model SVG Capital committed $150m to CCMP Capital Investors III Strategy Enhance the value of middle market companies in North America and Europe through an active approach to operational transformation in leading buyout and growth equity investments Typical enterprise value of $250m $2bn Sector focus Focus on four sectors: consumer/retail, industrial, healthcare and chemicals/energy Team 31 full time investment professionals with offices in New York, Houston and London Investment model Rationale for investment Combines proprietary, research driven sourcing capability with a fully integrated operating and investment partner team Fully integrated operating and investment partner model US middle market is an attractive area for investment Strong track record Co investment opportunities 16

17 CCMP Capital III portfolio Six equity investments to date; 49% called Sector 1 % Company Sector Consumer Jamieson Laboratories The Hillman Group Consumer Business/Support services Business/ Support services Jetro Eco Services Business/Support services Industrials Industrials Geography 1 % PQ Corporation Shoes For Crews US$25m co investment alongside the fund, total exposure to the investment of 27m 2 Industrials Consumer Global North America 1. Based on CCMP Capital III s commitments at 31 January Combined co investment and pro rata share of fund investment at 31 January 2016 exchange rates 17

18 Co investment Hillman case study 27m SVG Capital value at 31 January 2016 Investment date: August 2014 An investment thesis based on accelerated growth through expansion into adjacent product categories, product innovation, operating cost optimisation and international expansion in partnership with a strong management team. Company background Founded in 1964 and headquartered in Cincinnati, Ohio, The Hillman Group (Hillman) is a leading value added distributor of fasteners, key duplication systems, engraved tags and related hardware items to approximately 26,000 active customers in the US, Canada, Mexico, South America and Australia, including home improvement centres, mass merchants, national and regional hardware stores, pet supply stores and other retailers. Hillman provides a comprehensive solution to its retail customers for managing SKU intensive, complex home improvement categories. Hillman also offers its customers additional services, such as inventory management and in store merchandising services. Initial investment thesis Accelerate growth by partnering with a strong management team Ability to utilise CCMP s operating expertise to partner with management to expand penetration of key customers, end markets and geographies Leverage differentiated value added field sales, distribution and support resources to grow profitable core hardware categories Pursue sizeable adjacent product categories that suit Hillman s sourcing, distribution and merchandising capabilities Potential to consolidate fragmented industry via targeted M&A by building on Hillman s proven M&A capability Attractive positioning: Core business expected to benefit from projected home remodelling and repair growth and macroeconomic tailwinds. Value creation plan Core and adjacent category growth Accelerate market share gains in core categories by utilising 900+ person differentiated, high touch sales platform Push expansion into targeted adjacent categories including Builder s Hardware, Nail, Deck and Drywall, Plumbing, Rope/Chain Electrical Product innovation: Introduce innovative products in do it yourself channel to enhance mix and value for customers. International expansion: Execute on select international expansion opportunities into Mexico and parts of Latin America, as well as additional penetration in Canada. Operational improvement: Drive continuous margin improvement through strategic sourcing initiatives and operational improvement of recently acquired businesses. 18

19 Supplementary information Cinven 19

20 Cinven Leading European private equity manager SVG Capital committed 100m to The Fifth Cinven Fund Strategy Invest in buyouts headquartered in or with significant strategies in Europe, typically with an enterprise value of greater than 300m Sector focus Focus on six core sectors: business services, consumer, financial services, healthcare, industrials and TMT Team 66 investment staff operating from offices in Guernsey, London, Frankfurt, Paris, Milan, Madrid, Luxembourg and its Portfolio team offices New York and Hong Kong Investment model Cinven s approach to growing its portfolio is based on two main pillars: Revenue growth, via both expansion into new markets and execution of buy and build strategies Applying global best practices across the portfolio Rationale for investment Strong and consistent track record Clear strategy to generate growth through operational and strategic initiatives Co investment opportunities 20

21 The Fifth Cinven Fund portfolio 13 investments to date; 68% called Sector 1 % Company Sector Financial services Business services Healthcare Prezioso Pronet AMCo CeramTec Business services Business services Healthcare Industrials Industrials Host Europe Group TMT Heidelberger Leben Financial services Geography 1 % TMT Medpace Visma Ufinet Healthcare TMT TMT Northgate Public Services TMT Premium Credit Limited Financial services Global Synlab Healthcare Continental Europe Tractel Industrials Co investment alongside the fund, total exposure to the investment of 18m 2 1. Based on The Fifth Cinven Fund s commitments at 31 January Combined co investment and pro rata share of fund investment at 31 January 2016 exchange rates 21

22 Co investment Visma case study 18m SVG Capital value at 31 January 2016 Investment date: August 2014 An investment thesis based on supporting the existing management team to accelerate growth through transition to Software as a Service (SaaS) and continued M&A. Company background Visma was formed in 1996 through the merger of three companies and has since grown organically and via acquisitions to become the leading provider of business management software and business process outsourcing (BPO) services in the Nordic region. Visma delivers software and services including accounting, invoicing, tax and CRM to over 400,000 SME customers, retailers and local authorities across the Nordic region. The group comprises three divisions, Software SMB (small and medium size businesses), BPO (accounting, payroll and consulting services) and Software GLA (Government & Large Accounts). Initial investment thesis Market leadership: Leading provider of ERP software in the Nordic region with leading positions in Norway, Sweden and Finland with market shares of 20 40%. Attractive financial profile: Exceptional long term track record of growth, with 70%+ of revenues recurring and excellent cash conversion. SaaS growth potential: Through substantial and early investment Visma is leading the transition to SaaS across the Nordics which will accelerate growth in the medium term. Value creation plan Transition to SaaS: Investment in products with market leading functionality and pro actively managing migration of the customer base. Improve BPO offering: Drive efficiencies through division and increase valueadd advisory revenues. Continued M&A: Execute on existing pipeline of opportunities and examine larger potential targets and geographic expansion. Proven M&A expertise: Strong history of value accretive bolt on acquisitions supported by advantageous market position to acquire smaller software companies, ongoing pipeline of opportunities. 22

23 Supplementary information Clayton, Dubilier & Rice 23

24 Clayton, Dubilier & Rice Consistent strategy underpinned by operational skill set SVG Capital committed $140m to Clayton, Dubilier & Rice IX Strategy Control investments in upper mid market companies in the US and Europe (Germany, France and the UK) Typical enterprise value of between $1bn and $5bn Sector focus Primarily concentrating on industrials, business services, healthcare and consumer/retail Team 50 professionals, based in New York and London Investment model Rationale for investment Focused on operational improvement within portfolio companies Utilises the combined skills of operating partners, who are former CEOs or other senior corporate leaders, and private equity investment executives Strong long term track record Consistent strategy focused on the partnership between investment judgement and operating skills runs right through deal process from origination through to due diligence and post investment value creation stages Co investment opportunities 24

25 CD&R IX portfolio Eight investments to date; 37% called Sector 1 % Consumer Company Brand Energy & Infrastructure Sector Support services Healthcare Support services PharMEDium Services Solenis Healthcare Industrials Mauser Industrials Industrials Healogics Healthcare Geography 1 % UK CHC Group Motor Fuel Group Support services Consumer Vets First Choice Support services North America Global 1. Based on CD&R IX s commitments at 31 January

26 Supplementary information FFL 26

27 FFL Growth oriented investment underpinned by macro and thematic research SVG Capital committed $100m to FFL Capital Partners IV Strategy Deliver superior risk adjusted returns through investment in US middle market companies Typical enterprise value of $100m to $500m Sector focus Core sectors of business services, consumer, financial and healthcare services Team Investment model Rationale for investment Team of 31 professionals led by Tully Friedman and Spencer Fleischer Operates from a single office in San Francisco Top down macro and industry thematic research and a flexible approach to structuring deals Focus on active company involvement Strong long term track record Combination of macro and sector research led process, flexible deal structuring and active company involvement US middle market is an attractive area for investment Co investment opportunities 27

28 FFL Capital Partners IV portfolio Four investments to date; 27% called Sector 1 % Support services Consumer Company Eyemart Express Enjoy Beer Clarkson Eyecare Interactive Health Sector Consumer Consumer Consumer Support services Geography 1 % US$12m co investment alongside the fund, total exposure to the investment of 15m 2 Global North America 1. Based on FFL Capital IV s commitments at 31 January Combined co investment and pro rata share of fund investment at 31 January 2016 exchange rates 28

29 Co investment Eyemart Express case study 15m SVG Capital value at 31 January 2016 Investment date: December 2014 An investment made following two years of research into the optical retail sector, supporting the existing management team to accelerate growth through new store openings and the implementation of retail best practices. Company background Eyemart Express is the second largest independent value focused optical retailer in the U.S. and the seventh largest overall operating in more than 30 states. The company, founded in 1990 by Dr. Doug Barnes, provides a broad selection of high quality private label and branded frames with convenient one hour service in all locations at an attractive price point. Initial investment thesis Strong secular growth in a stable industry The value segment has consistently grown in excess of the broader optical retail industry which itself has supportive demand drivers as a nondiscretionary purchase and through an ageing US population Differentiated business model with very attractive financial metrics Eyemart offers a very compelling customer proposition through its price position and industry leading convenience through order turn around times, which has led to the #1 net promoter score ( NPS ) among independent U.S. optical chains Highly efficient retail business model with strong unit economics and less than 1 year payback Value creation plan Strengthen platform for growth: Investment in group functions to create a platform to enable delivery of significant growth opportunity. New store openings: Accelerate new store opening programme within a more disciplined framework to maximise returns on investment. Advertising and marketing: Increase sophistication applied to advertising and marketing practices to drive sales growth. Significant growth opportunity through new store openings From an existing base of 159 stores Eyemart has a significant growth opportunity across the US, with an identified incremental opportunity in excess of 500 stores 29

30 Supplementary information Permira 30

31 Permira Global coverage with strong sector focus SVG Capital committed 125m to Permira V Strategy Invests primarily in mid to large cap buyouts with exposure to faster growing global markets and sectors, typically with an enterprise value of up to 3bn At least 70% of Permira V will be invested in businesses which have or intend to have significant activities in Europe Sector focus Focus on five sectors: Consumer, Technology, Industrials, Financial Services and Healthcare Team Team of 137 professionals operating from 14 offices Europe London, Frankfurt, Madrid, Milan, Paris, Guernsey, Stockholm and Luxembourg US Menlo Park and New York Asia Hong Kong, Tokyo, Seoul and Shanghai Investment model Rationale for investment A thematic focus on acquiring businesses with resilient growth: Sub sector growth Potential to globalise Market leading positions Thematic, sub sector approach to identifying companies with strong growth prospects Focus on enhancing value creation through strategic change and development Strong long term track record Co investment opportunities 31

32 Permira V portfolio 14 investments to date; 66% called Sector 1 % Industrials Healthcare Company Dr Martens Atrium Innovations Sector Consumer Consumer LegalZoom TMT Financial services TMT Bestinvest TeamViewer Financial services TMT CABB Industrials Consumer Pantheon Metalogix Healthcare TMT Geography 1 % Teraco TMT UK Africa Informatica TMT North America GFKL/Lowell Tohapi Financial services Consumer Continental Europe Global BFY Holdings Magento 15m co investment alongside the fund, total exposure to the investment of 25m 2 Consumer TMT 1. Based on Permira V s commitments at 31 January Combined co investment and pro rata share of fund investment at 31 January 2016 exchange rates 32

33 Co investment TeamViewer case study 25m SVG Capital value at 31 January 2016 Investment date: July 2014 An investment thesis based on the build up of dedicated outbound and key account sales teams to increase customer monetisation, the optimisation of pricing & packaging including an enterprise offering, an improved conversion rate from free usage to paying customers, and the development of new products with cross selling potential. Company background Founded in 2005 and headquartered near Stuttgart, Germany, TeamViewer is a leading global provider of secure remote support software with a focus on the small and medium sized business ( SMB ) market. The company offers an easy to install and use solution encompassing remote access administration, multi user webconferencing, desktop and file sharing. The software is charged as a licence to corporate/business customers but is free for personal/private use, which drives product awareness and commercial adoption. It is currently used in more than 220 countries and is available in 34 languages. Initial investment thesis Market leadership: Global leader in secure remote support software with unique viral distribution approach. TeamViewer has been installed on more than 814 million devices and serves more than 300,000 commercial customers. As at 31 December 2015, this has now grown to over 1 billion devices and 340,000 commercial customers. Attractive market fundamentals: Remote support market is subject to attractive double digit growth dynamics driven by mobile workforce, device proliferation, Bring Your Own Device and IT Outsourcing. Scalable and high margin business model: SaaS like business model with high share of recurring revenues. Limited capex and working capital requirements. Value creation plan Sales & marketing: Build up of dedicated outbound and key account sales team to increase customer monetisation. Pricing & packaging: Review and optimisation of existing pricing and packaging approach. Enterprise: Develop enterprise offering for large customers with initial focus on US market. Conversion: Increase the conversion rate from free usage to paying customers. New products: Development of new products such as Monitis, airbackup, IT brain and helpdesk to progress cross selling opportunities. 33

34 Important information The information in this presentation is issued by SVG Capital plc ("SVG Capital"), whose registered office is at 6 Kean Street, London, WC2B 4AS. SVG Capital is registered in England: No The information contained in this presentation is not intended to make any offer, inducement, invitation or commitment to purchase, subscribe to, provide or sell any securities, service or product or to provide any recommendations for financial, securities, investment or other advice or to take any decision. You should seek individual advice from your personal, financial, legal and other advisers before making any investment or financial decisions or purchasing any financial, securities or investment related service or product. The information contained in this presentation is provided for general information and is not comprehensive and has not been prepared for any other purpose. Any financial, securities or investment related service or product referred to may not be available to all customers or in all cases; may be available only where specifically requested and agreed upon; may be associated with certain specific fees and conditions and may be materially different than as described. Certain information in this presentation has been obtained from third party sources that are believed by SVG Capital to be reliable. However, such information may be incorrect, incomplete or condensed; SVG Capital does not accept any responsibility for, or guarantee, its accuracy. Accordingly, no representation or warranty, expressed or implied, as to the fairness, correctness, accuracy or completeness of such information (or any part of it) is made by any party and no reliance may be placed on such information. None of SVG Capital, its respective members, directors, officers, agents or representatives, or any other person accepts any obligation or responsibility to advise any person of changes in the information set forth herein after the date hereof. This presentation contains certain forward looking statements with respect to the portfolio of investments of SVG Capital. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. Nothing in this presentation should be construed as a profit forecast. 34

35 Risk considerations You should remember that the value of investments, and the income from them, may go down as well as up, and is not guaranteed, and investors may not get back the amount of money invested. Past performance cannot be relied on as a guide to future performance. Exchange rate changes may cause the value of overseas investments or investments denominated in different currencies to rise or fall. In addition, there is no guarantee that the market price of shares will fully reflect their underlying net asset value and it is not uncommon for the market price of such shares to trade at a substantial discount to their net asset value. These are not all the risks of an investment in SVG Capital shares. Investors should take advice from their own independent, professional financial advisers before making an investment decision and are responsible for ascertaining any income tax or other tax consequences which may affect their acquisition of any investment. For further information please contact: Alice Kain Head of Communications and Investor Relations SVG Capital Kean House 6 Kean Street London WC2B 4AS Tel: