Pacific Current Group Limited

Hello, and thank you for standing by. My name is Lacey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pacific Current Group 2026 Full Year Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Michael Clark, Managing Director. Please go ahead.

Welcome to the Pacific Current Group, or PAC, investor presentation call for the 2026 financial year. By way of introduction, my name is Michael Clarke and I'm the Managing Director of Pacific Current Group. I joined the board of PAC in February 2024 as a non-executive director, becoming Acting Chief Executive in July 2024 and was appointed Managing Director in November 2025. I'm joined on the call by Ron Patel, the CFO of Pacific Current Group. Ron joined PAC over 17 years ago. In our full year update to shareholders in August last year, we highlighted The Pact was committed to taking actions that would unlock shareholder value and to report the progress made to achieve this goal. We are gratified to report that the momentum developed in the FY25 financial year has continued into this financial year. Today's call is in two parts. Ron and I will first take you through the full year results for FY26. I will then speak to the separate announcement we lodged this morning regarding the commencement of a strategic review for Pacific Current Group and our FY27 priorities before we open the line for questions. Turning to slide three in the presentation pack, again Pacific Current Group is pleased to update on the company's results for the 12 months ending 30th of June 2026. FY26 was another year of successful transition of Pax Business to a more simplified structure featuring increased transparency of asset values, successful capital management initiatives, eradication of debt, further material reduction in operating expenses and the strengthened balance sheet, all aimed at enhancing shareholder value. Against this strategic backdrop, it is pleasing to report that total shareholder return over both the past financial year and the past five financial years exceeded the broader share market by meaningful amounts. Ron will speak more about that in his part of the presentation. Key elements of the result include declaring an underlying net profit after tax, or NPAT, of AU$14.8 million for the period. This is down from AU$26 million in the previous corresponding period on a reshaped earning space, following the sale of boutique interest and the return of surplus capital to shareholders. The statutory result was a net loss after tax of AU$1.5 million, compared with a profit of AU$58.2 million in FY25. driven by non-cash fair value adjustments and the absence of the prior year's gains on sale. One will take you through that detail also shortly. 2D Current has declared total dividends of $0.48 per share for the financial year, an increase of 12% over the previous corresponding period, and including the first frank dividends the company has paid since 2023. declaring an increased partially-cranked dividend, continues the capital management initiatives of the past two years aimed at efficiently and effectively returning surplus capital to shareholders. Further, the implementation of cost saving initiatives resulted in a 41% reduction in total overhead expenses compared to the previous corresponding period, with scope for further material cost reduction in FY27 and a further reduction in the number of ordinary shares on issue through the ongoing on-market share buyback. Due to capital management initiatives, asset sales during the period and related considerations, PAC's fair value estimate of net asset value increased to $16.18 per share at 30 June. This is up over 4% on the $15.51 per share estimate a year earlier. Over the past five years, fair value NAV per share has compounded at over 14% per annum, from $8.39 per share to $16.18 per share. Again, Ron will take you through those numbers in more detail shortly. Funds under management ended the year at AU$26.4 billion, down from AU$30 billion. The movement principally reflects the exit from Ether in June and a stronger Australian dollar, with three of the five continuing boutiques growing FUM in reporting currency over the year. Turning to activity now, it was another busy period, particularly for transaction activity with the following portfolio transactions completed. Firstly, the partial sale of Victory Park Capital. In September 2025, Pax sold a portion of its interest, specifically 2% equity in Victory Park Capital and 0.8% interest in Victory Park Capital Holco Future Carrier Interest Entitlements to CNO Financial Group. for AU$8.1 million. Following the transaction, PAC's interest reduced to 9.2% equity, 18.6% future carry and 24.9% existing carry. PAC received AU$7.7 million net proceeds in October 2025. Secondly, full repayment of the Senior Secured Debt Facility. In October 2025, PAC-40 were paid with Senior Secure Debt Facility with WH-SOL patents. Total repayment of US$42.1 million included a $0.8 million US dollar early repayment premium and $0.3 million US dollars interest for October. The facility was settled using the US$42.5 million restricted deposit account which WH-SP held security over. The on-market share buyback commenced. In October 2035, PAC announced an on-market share buyback of up to 2 million shares or 6.8% of issued capital funded from existing cash reserves. On 1 June, PAC increased the maximum number of shares bought back from 2 million shares to just over 2.6 million shares, approximately 8.6% of issued capital prior to the buyback, funded again from cash reserves. As at 30th of June, PAC had repurchased over 2.2 million shares at a cost of AU$22.9 million. As a result, shares on issue have declined by 7% during the period from 30.2 million shares to 27.9 million shares. We also exited our holding in Janus Henderson Group in November of 2025. PAC sold its entire holding, generating US$9.4 million in proceeds. We continued deploying growth capital between December and February. FAC agreed three new secured loan facilities, including a $2 million Australian loan as an affiliate of ROC Partners, a US $2.1 million facility with Northern Lights Alternative Advisors, and a $25.1 million US dollar facility with Independent Financial Partners, or IFP, all bearing interest at between 10% and 11% per annum. and maturing between 2028 and 2031. As of 30th of June, 14.6 million Australian dollars was drawn across those facilities. The IFP facility, particularly, is a four-year board, currently drawn to 8.2 million US dollars, and is supporting IFPs recruiting and acquisition momentum. We also included, concluded the investment management agreement with an affiliate of GQG. In May, PAC concluded its two-year management agreement in accordance with its terms and assumed responsibility for investment management of its portfolio of assets. We've also exited or begun the exit of Abacus Global Management. PAC commenced its sale through the financial year in its holding in Abacus shares, realising AU$11.4 million during the period. We also finally exited from Ether. taxed all its entire revenue share in ETH for US $1.8 million, together with its 25% stake in ETH's general partner during the period. Clearly a very busy time. I'd now like to hand over to Ron to cover financials for the year.

Thank you, Michael. Turning to slide four in the presentation pack, FY26 reflects the reshaped earnings base that follows two years of planned routine realizations. and the return of surplus capital to shareholders. Underlying net profit after tax was $14.8 million, down 43% from $26 million. Total underlying income of $25.1 million was down 48%, with boutique income of $7.1 million, reflecting the ethics Michael has covered. Interest income of $16.8 million is now 67% of underlying income and the largest single component of earnings. Total overheads fell 41% to $9.4 million. Corporate overheads of $5.4 million went down 21% following the cost reset. Interest expense fell from $6.7 to $2.6 million after the October debt repayment and the investment management fees were $1.4 million. Interest income now covers corporate overheads more than three times over. Looking to FY27, both interest expense and investment management fees roll off entirely. The debt facility is repaid and released and the GTG investment management agreement concluded in May 2026. Underlying earnings per share of 50.2 cents declined 10%, a much smaller fall than NPAT, supported by the 36.8% reduction in weighted average shares on issue from the buybacks. Cash conversion remained strong, with underlying pre-tax earned cash earnings of 14.4 million dollars representing 91% of underlying profit before tax. The legal schedule is included in the presentation. Total dividends for the year are $0.48 per share. The fully franked $0.20 interim dividend was paid in April and the final dividend of $0.28 franked to 17.5% with a record date of 4 September and payment on 8 October. Turning to slide 5, alternate balance sheet. The alternate balance sheet presents SPAC on a look-through basis, separating our corporate net assets from our investment exposures. Corporate net assets increased $274.9 million from $144.3 million at 30 June 2025. the WHSP debt facility and the restricted deposit tax security have both left the balance sheet and the deferred tax liability has almost halved. Cash and short-term deposits ended the year at $157.7 million up $19.8 million. Realization proceeds and release of the restricted deposit more than funded the $60.5 million of debt repayment, $22.9 million of buyback, and $14.4 million of dividends. The reduction in assets held at fair value through profit and loss reflects the partial sale of victory parts and the lower fair value of the retained interest. Financial assets of 100.3 million dollars comprise the abacus bonds and shares and 15.4 million dollars of loans to pet boutiques. The petersville default consideration was collected in full in May. Pet now carries no financial debt and total liabilities are down 89% to 8.6 million dollars. Turning to slide 6, shareholder value. Statutory NAV at 30 June was $13.96 per share and our fair value estimate of NAV was $16.18, up 4% on last year and a premium of $2.22 or 16% to statutory NAV. The accounting standards require different measurement basis across the portfolio. Several of our larger boutiques positions are carried at cost and can be written down, but not up. This year's fair value uplift came largely from those boutiques held as associates. In total return terms, share price plus dividends, PAC delivered 10.4% in FY26. and 18.4% per annum over the five years to prediction 2026, against 6.1% and 7.8% for the ASX 200. Turning to slide seven, fair value versus book value. As part of preparing the statutory accounts, we value every investment, both to test assets carried at cost for impairment and to set the fair value of assets measured at fair value. These valuations follow the accounting standards. They are estimates, not the precise price at which an investment would change hands, and the methodology is set out in the presentation and financials. The notable movements this year. Rock's fair value rose from 37.2 to 16.1 million dollars on a stronger growth outlook for the business. IFP rose from $9.6 to $35.8 million, reflecting an improved growth trajectory that a debt facility is healthy to fund. Victory has reduced to $44.3 million, reflecting slower fundraising and higher discount rates for private credit strategies, together with the partial sale. FTA increased $14.4 million on successful fundraising and improved carried interest expectations. And financial assets reflect tactics from Janice Henderson and higher values for the Abacus bonds and shares. Bringing it together, fair value net assets of $452 million with corporate net assets largely cashed and stated after implied tax on the fair value uplift. Slide 8 summarizes the portfolio transactions Michael has already covered. So with that, I will hand back to Michael for the strategic review and the FY26 outlook.

Thank you, Ron. I want now to speak to the second announcement we lodged this morning. Pacific Current has commenced a strategic review to explore options to further optimise value for shareholders. In early 2024, PAC took the decision to transition from an active investor in boutique asset management firms to an owner of a portfolio of investment holdings, with management of those investments externalised for an interim period. Two years on, following the realisations and capital returns you have heard about today, The company's asset base is a combination of investments in asset managers, financial assets and cash. Against that backdrop, the board has been considering how best to improve return on capital and optimise value for shareholders going forward. Recently, the company received a non-binding, indicative proposal from River Capital and established Australian investment managers specialising in listed and private market assets with approximately $1 billion of assets under management. The proposal contemplates Pacific Current acquiring River Capital for approximately AU$80 million, with consideration of approximately 6.3 million Pacific Current shares and implied valuation of $13 per share, which would be subject to a two-year escrow period. Under the proposal, Pacific Current would evolve into an active listed equities and private markets investment manager, focused on investing third-party money with the capability to deploy balance sheet capital as a co-investor on a case-by-case basis. Funds managed by River Capital currently hold approximately 10 million receiving current shares. To broaden the shareholder base and increase free float, the proposal contemplates at least 6 million of those shares being sold down through a managed book bill at no less than $13 per share prior to completion of any acquisition. The receipt of that proposal reinforced the Board's view that this is an appropriate time to undertake a comprehensive, formal review of the company's strategic alternatives. The review will consider three potential paths. First, progressing the River Capital proposal. Secondly, the sale of Pacific Current Group. And finally, delisting the company from the ASX and undertaking an orderly realisation of its holdings. The Board has made no decision regarding the River Capital proposal or any other alternative other than to consider them. Any transaction with River Capital will be subject to satisfactory due diligence, an independent expert's report, the approval of Pacific Current shareholders excluding shares held by funds managed by River Capital and any of its associates, the sell-down of the River Capital fund shares at no less than $13 per share and any necessary regulatory approvals. there is no certainty that any transaction will be progressed or will eventuate. To assist with the review, we have appointed Flagstaff Partners as financial advisor and Ashurst Perkins Coy as legal advisor. We anticipate providing an update on the strategic review at or before our annual general meeting and we will keep the market informed of any material developments in accordance with our continuous disclosure obligations. I'm finally turning to slide 10 in the pack. Looking forward to the 2027 financial year, Pacific Current Management expects to maintain the strong momentum that we have built and been discussing in the past two financial years by continuing to focus on executing a clear and disciplined plan. The FY27 priorities describe how we will run the business day to day while the strategic review is underway. They sit alongside the review I've just taken you through. will continue to be on executing the following four key initiatives. Firstly, preserve capital optionality by maintaining balance sheet strength with capital deployment opportunities assessed in light of the strategic review and growth opportunities assessed against the return profile of buybacks and shareholder distributions. Secondly, continuing to return capital to shareholders by funding dividends from underlying cash earnings with the on-market buyback and further returns assessed again alongside the strategic review. Thirdly, continued expense reduction by maintaining disciplined cost management to support margin stability and capital efficiency and to target further material expense reduction in FY27 as interest costs and investment management fees roll off. And finally, to sharpen the operating model, embedding the governance and structural changes now in place to speed decision making and reduce complexity. In conclusion, FY26 delivered what we set out to achieve. A simpler portfolio, the elimination of debt, a materially lower cost base and significant capital return to shareholders. The strategic review is the logical next step on that path. Testing in a disciplined and structured way how the value of this business is best delivered to shareholders. We would like to thank our employees and the PAC Board, both past and present, for their work over this year and in previous years. We'd now like to answer any questions that you may have. Thank you.

At this time, I would like to remind everyone, in order to ask a question, please press star 1 on your telephone keypad. We will pause for a moment to compile the Q&A roster. Your first question comes from the line of Lachlan Rogers with 115 Capital. Please go ahead.

Hi guys, are you able to give any like KPIs or more detail on the drivers behind the valuation uplift for Rock Partners?

Hi Lachlan, this is Ron. So on the Rock Partners, they had a bit of a positive fundraising outlook and we revisited that model in a bit more detail and just based on the outlook for where the next five years of cash flow sit, we believe that there is uplift in the fair value.

Right, okay. And my second question was, is there any market for selling the abacus bonds into, or are you just planning to hold those until maturity?

Yeah, if I can pick up on that and just make a comment about ROC as well. I mean basically in the last couple of years we've moved all the valuations into a very consistent framework and some of the uplift in ROC also reflects that same approach being applied to all of our portfolio investments. So it's a combination of both the potential outlook for ROC but also a consistent way that we value all of the portfolio assets. The bonds, the abacus bonds, I mean it all depends on what price could be achieved, to be frank. We monitor that regularly. They trade a little bit over. To be very clear too, the bonds we hold are not the equivalent bond to the listed bond that many people follow. It's trading roughly at a little bit over $25 and change. So we effectively monitor that. The only way we would look to exit those bonds prior to maturity would be if there was a sufficient premium over that $25 face value in the period leading up to maturity, which is in 2028. All right.

Okay. That's all from me. Thanks, guys.

Your next question comes from the line of Greg Hoffman with Hoffman Superfund. Please go ahead.

Hi, there. Just in relation to the... the non-binding proposal, just trying to wrap my head around that. At the $16.13 fair value, multiplied by the 6.3 million shares that are proposed as consideration, am I wrong in saying that that should be evaluating River at $100 million, and so therefore the Board would have to believe that River's worth substantially more than $100 million before considering that transaction to be within the shareholders' interests, or have I? got a roll in my logics at that.

Greg Shaw, look, right at the moment, it is very early. We received that proposal from River only a little bit earlier in this month, August. So we're still going through that. We're only in the process of appointing advisors at the moment. We declare a fair value NAV for the company, which effectively is the sum of the asset value at this moment in time. So there is no allowance for the cost of running the company or any future potential change. So that's a moment in time valuation based again on that consistent valuation framework that we apply and of course there's a large element of that valuation. It's now effectively cash and short-term securities. It's between $8 and $9 a share. So we haven't made any determinations about you know, the value of the River Capital proposal. That is yet to come. We'll keep the market informed as we move through analysis, again, supported by our advisors through that proposal. But, you know, the actual numbers, you can do the math. I mean, the $16 and just a little bit, $16.18, the fair value now, again, to be very clear, is effectively the value if you sold all of the assets of the company today at their fair value without any sort of spread. So just to be clear on what that means. I mean, if you look back on the history of the company share price, it's consistently traded below that. We are working to close that gap, obviously, and the initiatives that the board is considering, including the River Capital proposal, would all be aimed at maximising that value towards $16 a million share.

Thank you. Yeah, it does. But just on that last point you said, Yes, the stock market has consistently valued below that, but is it fair to say that on balance with corporate transactions that you've undertaken, have your fair values been pretty close to the mark or even slightly below the mark? The board's history of valuing its own assets as evidenced by capital market transactions, not the share price, is pretty good. Is that fair to say?

That's a fair comment. I mean, over the last year, I've been involved for just under three years. really you know through a period of quite a number of transactions and I mean effectively virtually all those transactions were undertaken either close to or above the fair value. So look you know the valuation approach we take is not you know it's designed to be rigorous, to be supportable, you know we're not trying to overstate or understate the value. It is a consistent approach that we follow and we detail the methodology you know in the notes with the results. And again, we've looked at that again in the last year or so. We've reviewed all of that again to, you know, confirm our confidence in that and to confirm the veracity of our approach. So, you know, you're right. You know, I think that as it's turned out in terms of transactions, and there's been, you know, fewer than 10 but more than a couple, you know, we've basically achieved fair value or above in the transactions that have been undertaken.

And just to tie those two threads together, if we can assume that $8 or $9 of cash and short-term investments is money good, is $0.01 on the dollar that could be returned to shareholders in an equal access manner, we're then talking about a $7 gap to your fair value or an $8 gap. And at a $13 price, that $3 discount is basically all attributable to $7 of It's a huge discount to the quality of the key part of the portfolio. Is that reasonable to characterize it that way?

I think characterizing it as a huge discount is a bit of a step. Again, you've got to think about that that's, again, a moment in time valuation. You would have to, as an ongoing concern, you would start at $16 and change and deduct $1 to $2 a share to run the company. year in, year out, you know, there'd be some allowance for that. So you've got to be very careful. The $16 valuation is, you know, we provide that to indicate a moment-in-time valuation, the fair value, as we call it. In terms of, you know, realised transactions, the share price over time has traded, you know, a little bit above $12 after the equal access off-market buyback. and it's currently trading a little bit under $12 at the moment. I mean that's the history of the company. That's the highest price the shares have ever traded at over its long history. So I think you've got to look at all of those factors. You look at the valuation, you look at the market, you look at the market interpretation of it and also liquidity in the share. I mean I'm sure you probably noticed the shares are not that liquid. and saying that the price reflects all of these factors efficiently is a bit of a leap, given that, you know, volume per day can be anything from more shares trade to, you know, the low tens of thousands. So all of these factors are relevant, which lead to the strategic review, you know, the board's movement to consider that. But they're all very good policy raising.

Okay, and so obviously part of the strategic review is saying, well, instead of, you know, It's potentially doing a deal for a large block of stock at $13 and then morphing the vehicle into something quite different. It's quite reasonable to sit down and say, okay, we think we're worth $16. More than half of that's already liquid. The other half we're confident. We've got a history of realising our investments in a corporate betting at fair value. We've got a look at doing this thing ourselves. We'll look at all that.

Yeah, we look at all those factors. We look at all those, you know, and hence the three elements of strategic review. We highlight, you know, the proposal from River Capital because we've just received that and we want to make sure the market is fully informed of what the board's thinking. But you'll note there's the other two elements. You know, the sale of Pacific, you know, that we're saying that, you know, all of this work in the last two years, if you look at the results, you'll see the returns have been quite strong actually over those, we said, the past year and five years. But going forward, the bulk of our portfolio was cash. You know, so clearly maintaining that level of returns is difficult.

But you did a large off-market buyback, which intensified, effectively intensifies the remaining sharehold of interest in those solely performing assets. Like, that isn't often any day of the week that you do something like that, is it?

Oh, no, that was a very, you know, a long-considered action by the board, again, to... return value to shareholders. Again, the shares are only going to be traded at $12. Sorry, there was a judgment made then between what is the right price for a remaining shareholder and exiting shareholder to create a level of fairness. And to be frank, that was a judgment based on advisors and input that the board made. And $12 at the time, the fair value now was well below where we are now. At that time, it was sort of back in FI24. You know, that was a judgment the board made around all of these factors I've been talking about between, again, then what was fair for exiting shareholders and continuing shareholders. That was the board's assessment. And it was a very successful off-market...

Sorry, don't get me wrong. I'm saying that was a good... a good piece of capital management and that that piece of capital management is open to you again. You know, if you're saying it's hard to replicate returns when so much of the portfolio is cash, it's easy to translate that cash into an intensified interest into your quality boutiques by doing large off-market buybacks.

Yeah, sorry, I might have misinterpreted your question too as well. Yeah, the board will consider all of that. We'll always consider on-market and off-market buybacks. You know, whatever we feel is the most efficient way to return capital. So yes, that will be part of the considerations going forward.

Okay. Well, I'll just commend you on your job so far in realising value in the corporate markets for your assets and the past capital management. I think it's been great and I'm sure the board will work through the strategic review and deliver value for all shareholders.

Thanks, Greg. Appreciate the comments.

Again, if you would like to ask a question, please press star 1. There are no further questions at this time. You have another question from Greg Hoffman. Sorry, your line is open.

Sorry, I just wondered. A lot of people have a question, but in relation to this non-voting offer, Would any tax shares acquired by River Principles through the book bill be subject to escrow, or would that only apply to the considerations?

Again, it's very early days, and we'd need to really work through this, obviously, with the River Capital Principles, but my understanding is that they would probably apply, that any increase in stakes or change in stakes would be subject to the escrow. But again, early days, Greg, and we will update the markets. under the, you know, requiring tenders disclosure requirements as we, you know, sort of work through that proposal and understand it in more detail.

And would there be a maximum percentage that River Principals and their associates would be committed to acquire through that book deal?

Well, I mean, there's, you know, I mean, we'd all be bound by, you know, all of the various rules around, you know, majority shareholder issues. You know, clearly, it is a very complicated transaction, what we've seen to date. involving movements of shares through time, but clearly we'd need to be extremely mindful of the takeover provisions and all of the requirements around that. And so would River Capital needs to be very mindful of that.

Yeah, I imagine that all of that is essentially forward if it's not handled in the right way. Okay, thank you. Yes.

There are no further questions at this time. I would like to turn the call back over to Michael Clarke for closing remarks.

Thank you all for joining the call. We appreciate your time today. And also, thank you for the questions. It was great to hear or to engage actively with shareholders. Of course, we are available for briefings for shareholders over the next few weeks. We've got a few being scheduled, so we're very happy to also do that. And thanks again for your time.

This concludes today's call. You may now disconnect.