Gresham House Strategic plc (GHS) Quoted Investment Company - PowerPoint PPT Presentation

Gresham House Strategic plc (GHS) Quoted Investment Company Strategic Public Equity – Actively engaged investing in smaller companies with value characteristics 31 January 2018 www.ghsplc.com

Gresham House Strategic plc - The Opportunity ▪ Compelling opportunity to buy at a 25% discount to NAV 1 ▪ Concentrated portfolio with considerable potential upside, Relative Performance 130 0% attractively valued and tracking in line with investment 125 -5% manager’s thesis 120 -10% 115 -15% 110 ▪ Portfolio of holdings with considerable upside trading at a -20% 105 discount to 25% NAV creates a ‘double discount’ -25% 100 -30% 95 -35% 90 ▪ Proven team - long term 20-year track record 3 85 -40% August 2015 January 2016 May 2016 October 2016 February 2017 July 2017 December 2017 GHS DISCOUNT GHS NAV/Share SMXX Index ASXX Index ▪ Right timing – Focused on undervalued areas (Small-Cap, Source: Bloomberg, as at 31 January 2018 Value) in a market that is increasingly favouring stock- pickers 4 Share price 2 845.0p NAV per share at beginning of mandate 987.8p ▪ Low relative volatility of returns NAV per share 2 1,131.3p ▪ Intention to continue dividend payments following maiden 15p dividend and share buyback in April 2017 1 Discount to NAV as of 31 January 2018 and using GHS mid-price of 845p 2 GHS mid-price of 845p and NAV per share as at 31 January 2018 3 See slide 9 “ Stock Pickers are poised to reap gains from falling correlations” Cormac Mullen, Bloomberg, 4 August 2017 4 2 B R I D G I N G T H E D I V I D E B E T W E E N P U B L I C A N D P R I V A T E M A R K E T S

Value stocks set to outperform Value Versus Growth 2.0 ▪ Relative performance of value versus growth +2 Std Dev 1.8 provides potentially strongest argument for value in +1 Std 1.6 Dev 40 years Trend 1.4 -1 Std Dev 1.2 -2 Std ▪ The UK Market is trading on valuation multiples Dev 1.0 towards the upper end of its historic range 0.8 0.6 ▪ Stocks with value characteristics have been over looked for much of the last five years Source: Bloomberg data to 29 December 2017 GHS Portfolio Metrics vs. Indices 2 ▪ GHS FTSE Small Cap FTSE All FTSE AIM Corporate profit margins are peaking, buoyed by GHS Curr. 3 F’cast. 3 Curr. Share Curr. Curr. quantitative easing and low cost of capital EV:Sales 0.8x 0.7x 1.1x 1.5x 1.7x 5.3x 4.3x 8.1x 8.7x 13.5x EV:EBITDA Sales Growth 16% N/A 5% 4% 9% ▪ Valuations have been driven by re-rating rather than Net. -0.3x -0.5x 2.0x 1.3x 0.5x Debt:EBITDA earnings growth and upgrades Source: Bloomberg Data for FTSE All-Share, Small Cap and AIM market, Company Accounts and House Broker Forecasts for GHS Portfolio Holdings as of 29 December 2017 2. FTSE Small Cap, AIM and All-Share used as comparable indices, GHS Portfolio Metrics calculated on a holding by holding basis weighted according to investment value relative to portfolio using GHS enterprise value which takes account of current discount to NAV 3. GHS Current and Forecast values strip out 3 investments that currently are private companies and do not have public forecasts and 1 public company that has forecasts under review (Quarto plc) 3 B R I D G I N G T H E D I V I D E B E T W E E N P U B L I C A N D P R I V A T E M A R K E T S

Smaller companies attractively priced FTSE All Share median EV/EBITDA multiple (x) ▪ The valuation differential between large stocks above 14.0 £250m and smaller, less liquid stocks is significant 11.8 12.0 9.5 10.0 8.0 ▪ The valuation dislocation has been increasing 6.0 4.0 2.0 ▪ Significant opportunity to generate superior long-term 0.0 Mkt Cap below £250m Mkt Cap above £250m returns investing in good quality, intrinsically undervalued smaller companies Source: Bloomberg 29 December 2017 25 GHS offers investors a portfolio of investments that are currently… 20 12M Forward P/E 17.9 16.1 15 3) Forecast to grow 1) Less expensive than 14.8 14.7 14.7 14.7 faster the market 10 2) Supported by 5 stronger balance sheets US France Japan UK Italy Germany 10Y Max 10Y Min Latest -12M Source: Panmure Gordon, 31 May 2017, Economic report 4 B R I D G I N G T H E D I V I D E B E T W E E N P U B L I C A N D P R I V A T E M A R K E T S

Strategic Public Equity- The Investment Strategy; Differentiated and Specialist Influential minority stakes (5%-25%) and active management of investments (Board introductions, advisory) Highly engaged strategy Adding value as an active investor supporting strong management teams Targeting inefficient areas of public markets Smaller companies (illiquid, under researched, barriers to growth capital) Focus on profitable, cash generative companies Which are intrinsically undervalued and can benefit from strategic, operational or management initiatives Thorough diligence to identify value creation catalysts Improved return on capital, profit growth, multiple expansion, debt reduction and cash returns Flexible mandate up to 30% can be invested in unquoted Pre-IPO, direct private equity, P2P, preferred positions 5 B R I D G I N G T H E D I V I D E B E T W E E N P U B L I C A N D P R I V A T E M A R K E T S

Value enhancement through engagement ▪ Strategic objectives and ▪ Cornerstone and underwrite milestones new issue of equity Strategic and Provision of ▪ Finance and operations ▪ Provision of growth capital corporate capital advice ▪ M&A and due diligence over the long-term (permanent capital) Access to ▪ Debt financing and preferred Operational sector positions improvement experts and directors Investor ▪ Value enhancement team of ▪ Industry experts spanning Relations and market consultants and in-house public and private markets engagement ▪ Broad capabilities; banking, experts plc, private equity, turnaround, ▪ Introduction to advisers M&A, fund management ▪ Messaging of equity story ▪ Investor relations, market insight 6 B R I D G I N G T H E D I V I D E B E T W E E N P U B L I C A N D P R I V A T E M A R K E T S

Discount to NAV and Strategy offer a ‘Double Discount’ 1. GHS plc shares currently trade at a 25% 1 discount to NAV 2. The NAV represents a concentrated portfolio of stocks which GHAM believes to be trading below intrinsic value: ▪ Gresham House Investment theses for the portfolio holdings identifies key value creation drivers to realize intrinsic value over the medium to long term. Capturing the ‘double discount’ Re-rating Value NAV uplift - Realisation of investments with Cash generation Portfolio’s intrinsic value intrinsic upside Earnings growth GHS share GHS share price price long term today potential Cash invested in strong pipeline 25% Discount to Discount to NAV closed NAV Portfolio management 1 Discount to NAV as of 31 January 2018 and using GHS mid-price of 845p 7 B R I D G I N G T H E D I V I D E B E T W E E N P U B L I C A N D P R I V A T E M A R K E T S

GHS existing portfolio – Attractively valued with significant potential upside NAV £41.3m (1,131.3)1 Undervalued with strong Growth capital supporting £17.4m £1.5m growth prospects strategic refocus Buy & build, organic growth Strategic change and £3.5m £1.4m plus strong cash generation expansion Recovery and growth, investing alongside Organic & acquisition growth £3.3m £1.4m management at attractive valuations Pre-IPO opportunity, Convertible loan notes and Site rollout, earnings growth, £2.1m £1.1m equity investment high return on capital Significant operational Recovery, margins and gearing and scope to improve growth alongside strategic £1.9m £1.1m ROCE refocus Other Investments – £2.1m Cash and cash equivalents – £3.0m Tax losses – c. £150m 1 NAV, Cash and holdings value data as of 31 January 2018 using bid price per share data 8 B R I D G I N G T H E D I V I D E B E T W E E N P U B L I C A N D P R I V A T E M A R K E T S