Release Date: September 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The private equity portfolio continues to show good earnings growth, with mid-teens growth over the last 12 months.
- Increased investment and exit activity, with four new investments and five full exits since the start of the year.
- The introduction of a new capital allocation framework, including share buybacks, aims to drive further NAV accretion.
- The debt portfolio achieved a total NAV return of 2.1% in the first half of 2024, with a long-term track record of strong performance.
- The Apax XI fund, which is over 30% invested, has shown promising momentum and is expected to be a key driver of value going forward.
Negative Points
- Total NAV return for the first six months of 2024 was down 1.4%, primarily due to the write-down of Vyaire and the drag from listed private equity holdings.
- Vyaire's impact on performance was significant, with the company filing for Chapter 11 and being completely written off.
- The listed private equity holdings have introduced volatility and have been a major drag on performance over the last 2.5 years.
- The movement in net debt was negative due to an increase in absolute net debt levels, driven mainly by portfolio company M&A.
- Foreign exchange movements, particularly the strengthening of the euro against the dollar, negatively impacted NAV.
Q & A Highlights
Q: Can you provide more details on the impact of Vyaire on the portfolio?
A: Ralf Gruss, Chief Operating Officer, explained that Vyaire's write-down significantly impacted both the private equity and debt portfolios, reducing returns by 2.9%. Vyaire has filed for Chapter 11 and has been completely written off in the private equity portfolio, with its remaining holding valued at only EUR4.6 million or 0.4% of the company's NAV.
Q: How has the new capital allocation framework affected the company's strategy?
A: Ralf Gruss highlighted that the new capital allocation framework includes share buybacks, which have been added to drive further NAV accretion when the discount is wide. This framework also includes regular semiannual dividends fixed at 11p per share per annum, equivalent to 5.2% of AGA's June NAV.
Q: What are the key drivers of NAV performance in the first half of 2024?
A: Ralf Gruss noted that the key drivers were the write-down of Vyaire and the continued drag from listed private equity holdings. Excluding these impacts, AGA's total NAV return would have been 4.2%. The private equity portfolio showed good earnings growth, and there was a pickup in both investment and exit activity.
Q: Can you elaborate on the recent investments and exits in the private equity portfolio?
A: Salim Nathoo, Partner at Apax, mentioned that there were four new investments and three follow-on investments in private equity since the start of the year. Additionally, five full exits were signed at the beginning of the year. Recent investments include WGSN, Zellis Group, and IES, among others.
Q: How has the debt portfolio performed in the first half of 2024?
A: Ralf Gruss reported that the debt portfolio achieved a total NAV return of 2.1% in the first half of 2024. Excluding the impact of Vyaire, the return would have been 6.5%. The debt portfolio primarily comprises investments in companies and sectors where Apax can leverage insights from its private equity activities.
Q: What is the outlook for the private equity portfolio going forward?
A: Salim Nathoo expressed confidence in the private equity portfolio, noting that it remains well-positioned with good earnings growth. The portfolio is diversified across three global buyout funds, and recent investments are off to a good start, which should drive future value creation.
Q: How has the exposure to listed private equity holdings changed?
A: Ralf Gruss stated that the exposure to listed private equity investments has reduced to 7% of NAV at the end of June, down from a peak of 25% at the end of 2021. This reduction is expected to lessen the headwind from these holdings going forward.
Q: What are the key takeaways from the recent NAV movements?
A: Ralf Gruss summarized that despite recent challenges, the underlying portfolio is positioned for further value creation. The new capital allocation framework and reduced exposure to listed holdings are expected to support future performance. The balance sheet remains robust, supporting unfunded commitments to private equity funds.
Q: Can you provide more details on the recent exits in the private equity portfolio?
A: Salim Nathoo highlighted that Apax IX exited its remaining positions in Genius Sports and Baltic Classifieds Group, delivering total gross returns of 2.6 times and 4.2 times, respectively. Additionally, Apax IX agreed to sell Healthium at a 23% uplift, delivering a total gross MOIC of 3.2 times.
Q: How is the balance sheet positioned to support future commitments?
A: Ralf Gruss explained that AGA has significant available resources amounting to approximately EUR586 million, made up of investments in debt, cash, and an undrawn EUR250 million revolver. These resources represent 65% of unfunded commitments, providing strong coverage for expected capital calls in the next 12 months.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
