Gresham House Strategic Plc Investor Presentation 28 February 2018
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Gresham House Strategic plc - The Opportunity ▪ Compelling opportunity to buy at a 29.9% discount to NAV 1 ▪ Concentrated portfolio with considerable potential upside, attractively valued and tracking in line with investment manager’s thesis ▪ Portfolio valued at a discount to market together with share price discount to NAV creates a ‘double discount’ ▪ Proven team - long term 20-year track record 2 ▪ Right timing – Focused on undervalued areas (Small- Source: Bloomberg, as at 6 March 2018 Cap, Value) in a market that is increasingly favouring GHS Portfolio Metrics vs. Indices stock-pickers 3 FTSE FTSE All FTSE GHS GHS Small Share AIM ▪ Current 4 Forecast 4 Intention to continue dividend payments following Cap Current Current Current maiden 15p dividend and share buyback in April EV:Sales 0.8x 0.7x 1.1x 1.4x 1.7x 2017 EV:EBITDA 6.2x 5.0x 7.9x 8.0x 13.2x Sales Growth 16% N/A 5% 4% 9% -0.3x -0.4x Net. (cash (cash 2.0x 1.3x 0.5x Debt:EBITDA positive) positive) 1 Discount to NAV as of 28 February 2018 and using GHS mid-price of 822.50p Source: Bloomberg Data for FTSE All-Share, Small Cap and AIM market, Company Accounts and House Broker Forecasts for GHS Portfolio Holdings as of 28 February 2018. 2 See slide 8 3 “Stock Pickers are poised to reap gains from falling correlations” Cormac Mullen, Bloomberg, 4 August 2017 4.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). Metrics take into account the discount to NAV and are calculated at a portfolio level. | PAGE 3
Public Equity – The Market Opportunity Smaller companies attractively priced FTSE All Share median EV/EBITDA multiple (x) 15.0 ▪ The valuation differential between large stocks above 11.8 9.5 £250m and smaller, less liquid stocks is significant 10.0 ▪ The valuation dislocation has been increasing 5.0 ▪ Significant opportunity to generate superior long-term 0.0 returns investing in good quality, intrinsically Mkt Cap below £250m Mkt Cap above £250m undervalued smaller companies Source: Bloomberg 29 December 2017 Value Versus Growth Value stocks set to outperform 2.0 +2 Std Dev ▪ Recent relative under-performance of value versus 1.8 +1 Std Dev 1.6 growth provides potentially strongest argument for value Trend 1.4 -1 Std Dev in 40 years 1.2 -2 Std Dev ▪ Stocks with value characteristics have been overlooked 1.0 for much of the last five years 0.8 0.6 Source: Bloomberg data to 29 December 2017 | PAGE 4
Public Equity – Investment Opportunity Influential minority stakes Gresham House Value Enhancement (5%-25%) and active management of investments (including Board introductions, advisory) Strategic and Provision of Corporate Capital Advice Highly engaged strategy Adding value as an active investor supporting strong Access to Operational Sector management teams Improvement Experts and Directors Investor Targeting inefficient areas of public markets Relations and Market Engagement Smaller companies (illiquid, under researched, barriers to growth capital) Focus on profitable, cash generative companies GHS offers investors a Which are intrinsically undervalued and can benefit from portfolio of investments that are strategic, operational or management initiatives currently… Thorough diligence to identify value creation catalysts 3) Forecast to grow 1) Less expensive than Improved return on capital, profit growth, multiple faster the market expansion, debt reduction and cash returns Flexible mandate up to 30% can be invested in unquoted 2) Supported by Pre-IPO, direct private equity, P2P, preferred positions stronger balance sheets | PAGE 5
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