Release Date: March 04, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Apax Global Alpha Ltd (LSE:APAX, Financial) returned EUR69 million to investors via dividends and buybacks, equating to a dividend yield of 7.8%.
- The Apax XI Fund, to which AGA has a $700 million commitment, has shown strong performance with a 1.3 times gross money multiple after only an eight-month holding period.
- The company has actively reduced its exposure to listed Private Equity positions, decreasing from 25% to 2% of NAV.
- Apax Global Alpha Ltd (LSE:APAX) has a robust balance sheet with calls in the next 12 months covered 2.4 times.
- The core sectors of Tech, Services, and Internet/Consumer contributed positively to NAV growth, with promising returns expected from recent investments.
Negative Points
- Total NAV return per share for the year was only 0.8%, which is considered disappointing.
- Challenges in retail and healthcare investments, particularly the write-down of Vyaire, negatively impacted performance.
- The company experienced a slowdown in Consumer-exposed businesses and those exposed to cyclical headwinds.
- The performance since IPO has been below the long-term target, with underexposure to Private Equity assets initially.
- The decision to value AssuredPartners at a potential IPO's value led to a sale at a 10% discount to the last unaffected valuation.
Q & A Highlights
Q: What are your thoughts on the underperformance from the IPO to date?
A: Ralf Gruss, Partner and Chief Operating Officer, explained that the performance since IPO has been below the long-term target, which is disappointing. Initially, AGA was underexposed to Private Equity assets, which are structurally higher returning compared to debt. Over time, exposure to Private Equity increased from 30% at IPO to over 80% now, which should help future returns. Additionally, AGA has returned significant capital to shareholders, with 95p per share paid out in dividends since IPO.
Q: Can you outline where portfolio companies have the most exposure to tariffs and any mitigating strategies?
A: Salim Nathoo, Partner, noted that less than 15% of the portfolio is exposed to tariffs, primarily in medical devices and consumer sectors. Most portfolio companies are in sectors like software and tech services, which are less affected by tariffs. Companies are preparing mitigation strategies, including passing on costs, exploring alternative manufacturing locations, and adjusting shipping logistics.
Q: Can you give more detail on the drivers behind the 1.3 times multiple after only an eight-month holding period for Apax XI portfolio companies?
A: Salim Nathoo highlighted three factors: strong initial performance of investments made in 2023, such as Bazooka and IBS Software; robust revenue and EBITDA growth of 15% and 14% respectively, with some multiple expansion; and synergies from transformative acquisitions like Zellis and OCS/Finwave.
Q: Why did you value AssuredPartners at a potential IPO's value, and how has that impacted your valuation policy?
A: Salim Nathoo explained that AssuredPartners was valued with an IPO exit in mind, as it was considered stable and predictable. However, an opportunistic buyout by AJ Gallagher occurred. The valuation policy remains conservative, with Assured being an exception due to its stability compared to more volatile tech investments.
Q: In the context of Paycor's acquisition by Paychex, what trends have you seen in strategic investor interest versus sponsor-to-sponsor deals?
A: Salim Nathoo noted that both strategic and sponsor interests are present in the exit pipeline. Strategic investors are active due to cheap financing, and the portfolio is attractive to them once fully developed. Sponsor interest remains strong, while IPOs are more limited to stable, large companies.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
