Oakley Capital Investments Limited

Good morning. My name is Stephen Tredgett. I'm a partner at Oakley Capital, and it's my pleasure to welcome you to the Oakley Capital Investments 2022 four-year results webcast. Before we start the presentation, can I remind you that questions can be submitted in writing during the webcast by following the questions tab at the top of this broadcast window, and we will tackle as many of these as possible at the end of the session. Turning our attention to OCI's performance in the 12 months December 2022, and as we will recount, a forecast portfolio of European tech-enabled businesses has delivered another year of performance. You'll be familiar with the 2022 headline numbers. The strong portfolio value growth delivered a 128 pence increase in the NAT per share, taking us to 662 pence, and NAT assets are now over the £1 billion mark. This is based on the portfolio being independently fully revalued to the end of December. And when including the dividends paid, it amounts to a total NAV return of 24%. As this NAB per share bar chart shows, last year's performance is consistent with OCI's long-term returns, with a five-year compounding average annual return standing at 23%. Arguably, most importantly, OCI has the highest five-year total shareholder return of any investment company, standing at 216%. As we look at this chart, it's worth reminding ourselves that the current Oakley strategy and investment team were fully formed around 2015-16 onwards. And from this point, OCI cash was deployed at a much higher level and earlier Oakley investments began to mature and produce significant returns. setting the momentum for the performance that followed. The NAV growth we have already highlighted was the result of a £214 million increase in the portfolio value. Of this value uplift, 65% was created by the increase in EBITDA generation of the portfolio companies, and 35% was as a result of an increased multiple being applied to that EBITDA. Let's look at this in more detail, starting with the earnings. The key stat is the portfolio company's average organic weighted EBITDA growth in the year of 22%. This was achieved against economic headwinds, high inflation and supply chain disruption, the most notable comparable period with average EBITDA in 2021 growing by COVID-boosted 30%. There are four characteristics which are most responsible for this enduring performance despite the macro environment. And these are the characteristics which are most commonly shared by a locally portfolio company. They are firstly, digitally disruptive companies, which means they take market share and do not rely on market growth. Secondly, they are founder-owned. We are backing proven business leaders with the same long-term alignment as ourselves. Thirdly, they typically have a recurring or subscription nature to their revenues. So their earnings and cash flows are highly predictable. And fourthly, each will be benefiting from a clear, enduring megatrend, such as the shift of businesses and consumers to online solutions or the global demand for quality and accessible education. Two portfolio companies, examples of that high EBITDA growth and in turn significant NAV contribution. IU group, which added 64 pence to the NAV for sharing the period. This is a university with a mission to democratize education by offering high quality, flexible and affordable online degree tuition to adults around the world. It's a scalable platform that is now delivering over 550 different learning offerings and saw enrollments increase 20% in the last 12 months, such that today the university has over 100,000 paying students and EBITDA growth of 40%. And secondly, in Germany, Wishcard Technologies Group added eight pence to NAV. The company is a leading consumer technology company in the gift voucher and employee incentive solution sector. And it continued to do that strong performance in 2022, achieving 20% growth in both voucher sales and earnings. Those that have had a chance to read the results released this morning will note we have moved our KPIs, like the average EBITDA growth, to a weighted average from a simple straight average. Some will naturally assume that our averages were already weighted. For others, this will be a long overdue change. And for those suspicious of any change, we provide a link in results, which gives a simple averages and the recent history of both. The reason for switching now is, as we'll see in a few slides time, there is a growing range of exposure to each of the investing companies. For example, we have two with a look through exposure of over 100 million. We have 10 that have between 30 and 70 million pounds of exposure and seven under 10 million. with 35% of the portfolio value growth was due to multiple expansion. The vast majority of this, over 90%, was as a result of uplifts based on agreed exits. So the weighted average multiple increase from 15.3 times to 15.9 times in the year was down to five exits in the period, which were completed at an average 70% above the prevailing book value. The two companies that contributed the most to NAV as a result of multiple expansions where one Contabo, a web hosting service provider, added 26 pence to NAV per share as a result of Fund 4 selling its stake at a 105% premium to the previous carrying value. The leading cloud hosting platform used by SMEs and developers continues to perform well, with 24 data centers across four continents serving over 300,000 customers. On5 has acquired a minority stake in Contabo to benefit from the anticipated future performance, which is currently tracking EBITDA growth of 40%. And secondly, Oakley agreed the strategic combination of portfolio company Grupo Primavera with software provider Sajid. Group Hope Rivera is Iberia's leading independent business service software provider, while Sajid is a global leading provider of cloud-based management solutions. The combination establishes Sajid's leadership in Iberia and offers exciting expansion opportunities for Group Hope Rivera by delivering Sajid's presence in Latin America. As we consider the ability of the portfolio companies to continue increasing in value despite the backdrop, it is worth reminding ourselves that the Oakley funds hold a majority investment in 17 of the portfolio companies. Controlled investments combined with 20 years of experience allows Oakley to influence outcomes and create value. We've outlined four of the strategies we are most prolific at. all enable us to drive value regardless of the economic cycle or operating environment. To touch on two of these, firstly is the improvement in the quality of earnings. This is best illustrated through the work done with Tech Insights, which is a technical content platform for silicon microchips. The quality of the company's earnings has been transformed. With circa 20% of revenue subscription based at acquisition in 2017, growing to circa 70% today. One of the key drivers of the equity valuation increase since we've owned it. And secondly, buy and build. Of the 40 platform investments the Oakley funds have made to date, they have acquired between them over 125 company bolt-ons, deals which have been responsible for a quarter of realized returns to date. I'm often asked, about our NAV and its robustness. And there is not much written about PE valuations and whether they've been kept artificially high and still lag the public markets even after its recent recovery. I can't speak for all of PE, but I can point out the following with regards to the Oakley portfolio. 11 of the portfolio companies, so 42% of the companies have been priced by a third party investment or a corporate action that took place within the year. And to clarify, when I talk about investment on action, this is something that would have taken months of due diligence on behalf of us or another PE sponsor, and would involve a level of detail that is not available in the public markets when considering the value of business. Those 11, And the remainder of the portfolio have all been independently valued and audited as of December. Thirdly, we have a long-standing track record of selling assets above the book value. That premium on exit stands at 54% since inception, and it's been high in recent years. And fourthly, Oakley has arranged recent secondary sales of Oakley fund positions for some of its investors in the year. These have been sold at between a 10% to 0% discount to the fund NAV. When comparing PE valuations to the public market, I would also highlight the following. There's the disparity between the new economy, typically digital portfolios of ourselves and our direct list of PE peers compared with, say, the FTSE All-Share constituents, which in many cases won't include comparable companies. Two, the public market typically demands a 20% to 30% control premium to take a company private. So in theory, peer holding should rate above public peers, although they don't. A point I've made in previous presentations is that an investment advisor like Oakley is not incentivized by unrealized gains. So it's not motivated to overstate the value of a holding. And finally, with quasi-permanent capital, he is unlikely to face the untimely selling pressure that can befall a mid-cap listed company. We've always maintained that we are relatively modest in our use of debt and that with asset-like companies enjoying high cash conversion, we have companies which can comfortably support debt and quickly deliver. At the year end, the average portfolio company net debt to EBITDA stood up 4.3 times, changing little in the course of the year, which compares to a PE industry average of circa seven times. Adam Rule locally tends to use a majority of equity at the point of making an investment and then refinances latterly following performance. To illustrate the relatively low reliance on debt, the pie chart here shows the four contributing factors to realise returns to date. With the largest by far at 48% being organic growth, as we discussed earlier, M&A has been 24% of the value created. A multiple expansion of 15% is a contributing factor, but not relied upon for returns. But most notable, the use of debt at 2% of realized returns is nominal. Here we break down the 1.2 billion of asset value into the exposure to the underlying portfolio companies, which now stand at 26. You can see the asset value is fairly evenly split between the three focus sectors of technology, consumer and education, with education being the largest. As touched on earlier, as we run our winners, there's increasing disparity between the look through exposure to the larger flagship fund holdings, and say recent investments in lower mid-market companies. IU Group, which we spoke to earlier, is by far the largest equity look through holding with a 243 million exposure to the online university. This is encouraging, given it remains one of the top three fastest growing companies within the portfolio. OCI retains two direct holdings, one in the debt and equity of Time Out, and the other in the debt of North Sales, both the Sales Manufacturing Division and the Empower Division. It is pleasing to report improving and profitable growth in both companies after both suffered significantly at the hands of the pandemic and required additional support from OCI as a result. To put that into context with North Sales, it went from a nominal level of EBITDA in 2021 to producing something in the region of 28 million of EBITDA are exceeding our expectations in 2022. Timeout is listed, so there's little we can give you that's additional to what's in the public markets, except to say that the business is emerging strongly. There's been a significant announced pipeline of new markets that are opening. Profitability has returned to the group. And on the 30th of March, the company will be announcing its interim results. Here we have taken the 26 companies and analysed them for potential impact from the most notable macro risks, acknowledging that no portfolio is unscathed in these circumstances. For example, the small number of consumer companies with manufactured goods bear the threat of continued supply chain constraints. One of those companies most notably affected by this has been Windstar in Germany. And then we've got the two companies serving the web hosting industry. It's unavoidable for them to avoid the exposure to high energy costs, for example. The most notable and unavoidable impact, though, is that of inflation. Cost and wage inflation and the possible reduced demand as a result of the rising cost of living will stand to impact some 60% of the portfolio companies. But in our favor, it's factors like, one, many of those companies provide lower cost business or consumer solutions, like for example, Fitness App Germondo. And that's simply because 70% of them deploy those products or services digitally. Two, in a rising cost environment, consumer marketplaces like price comparison websites can prosper. And three, with pricing power, many of these companies have been or can pass on price rises. given the relatively low cost of a mission-critical service, like, for example, that provided by web hosting software provider, Webprose. The analysis also demonstrates that the portfolio offers a fair degree of resilience to external factors like these, as it did in 2022. With OCI's commitment to a third Oakley Fund strategy in 2022, it's worth highlighting the overriding strategy of Oakley and its medium-term plans. It started with the mid-market flagship buyout funds, now up to fund five, then came the lower mid-market origin funds, and then the VC pro-founders. Rather than moving up the scale to raise much larger funds to invest in much larger companies, Oakley has looked to invest across the company lifecycle, partnering as it always has done with ambitious and improving founders. Possible next step include a growth tech strategy and a continuation fund to allow clients to have larger exposure to outperforming companies that have become too large for the funds. Although the OCI exposure to profound is very limited at this stage, reflecting the size of the VC fund, it's worth providing some background. The strategy was launched in 2009, and now on the third and larger funds, the team has built a track record and scale that warranted an OCI commitment. 9.5 times realized return is thanks to 12 successful exits from 50 investments that have been made to date. Such successes have included get your guide and pack help. In short, they seed fund high growth startups that leverage technology to transform those broken customer experiences. Fund 3 has made three investments to date, which include a platform that provides CFO and reporting solutions to SMEs and a B2B mental health solutions for employees. Following the addition of ProFounders 3, let's look where this leaves us with regards to total commitments. OCI has outstanding equity fund commitments of 929 million as of the 31st of December. The majority of this is its commitment to the recently launched Fund 5. The second bar in the chart in grey breaks this down into the expected timing of the drawdowns, i.e., when will the Oakley funds need the cash committed to them? There is 210 million expected to be drawn in the next 12 months, 519 million set to be called after 12 months, and over a five-year period, and finally, over 200 million that is not expected to be called. Set against these commitments are 210 million of liquid resources, which is 110 million of cash and 100 million of unused credit facility. Whilst this gives us ample near-term cover, we expect exits, refinancings and the repayment of direct debt over the next 12 to 18 months to generate further proceeds. And whilst it's hard to specifically forecast activity and over the prior page, you know, that assumes that, you know, normal business, it kind of continues in the market. In reality, distributions from the funds as a result of realizations that the purple bars in this chart have consistently broadly matched or exceeded the capital calls required to fund investments, the black bars. 2022 proved no different with, 200, broadly 200 million of capital calls and 200 million of distributions. The high activity level came in a year when P activity in general were lower. So we're demonstrating here the quality and the visibility of the investments realized. And two, when it comes to origination, we continue to unlock opportunities by being the partner of choice for business founders. On the subject of future exits, the average hold period of a realised investment in the Oakley funds is 3.6 years, and the weighted average of the portfolio is 3.3 years. So whilst the exact timing of exits is unknown, there are plenty of maturing assets within the portfolio. To add to this, we continue to attract more attention from the larger PE sponsors who currently sit on record levels of dry powder within their funds. over 3 trillion, according to the recent Bain report. Turning to new investments and the foundation for the future OCI NAV growth, Oakley unearthed four attractive new platform investments in the year and made following investments in three companies we wish to continue to back, deploying a total of 271 million. The new founder-led arrivals included Velex, Spain's fastest growing legal data company led by its founding brothers, and it offers a cloud-based online subscription platform, giving easy access to legal and regulatory information to over 2 million users. Affinitas, a roll-up vehicle in the fragmented premium private school space in a sector that we obviously know well, and Fenner, one of the fastest growing ticker business testing and inspection groups globally, with revenue growth of circa 100% CAGR over the last three years. It provides specialist testing and inspection services across infrastructure, built environment, niche industrial, pharmaceutical, and certification and compliance divisions. The business operates across 12 companies countries in four continents. Since signing that deal halfway through the last year, the group has completed 13 acquisitions, reducing its entry multiple by three turns and increasing its EBITDA run rate by circa 50%. To close the presentation, rather than summarising in bullets what we've already told you or repeating what we have said consistently about Outlook for the last few years. We thought we'd leave you with a photo depicting portfolio company Vice Golf. Why? Well, let's take a consumer business that could be on the sharp end of recession. On the surface, it's hard to be optimistic about golf ball sales in 2023. Cost of balls are up. It's a product that can be easily replaced. There is large dominant players. There's low barriers to entry. E-commerce is suffering softness post its COVID spike. And yes, a consumer recession could dent further discretionary spend. So it's not too dissimilar to the challenges facing any consumer company. And yet, Vice has a D2C big box solution that is disrupting the golf ball market. selling a premium product at 40% discount to alternative balls. It maintains that high margins avoids the cost of the pro golf shops, with a brand that shuns the traditional golf image and appeals to a young emerging player. The company drives awareness with an expertise in influencer marketing, much like a number of our consumer brands. And when it comes to value creation, products expansion is enabling them to leverage the brand across equipment and apparel. And then to add a bit of luck, Netflix has given golf the drive to survive F1 treatment with its PGA Tour series, Golf Swing, which is proving incredibly popular and attracting new players to the game. All this means that Vice Golf is currently growing its revenues by over 30%. So yes, we will encounter further headwinds, but like VICE, we have a portfolio of resilient, well-positioned companies with robust valuations, and we're confident that they will continue to deliver outperformance for OCI shareholders in 2023 and beyond. And we've only just released the full year results, but it won't be long until we give you another NAV update in April, when the portfolio will be revalued to the end of March. And the spirit of transparency and communication We have an online capital markets day, which is scheduled in May. So that brings us to the formal part of the presentation. And we'd like to open up the webcast to Q&A. My colleague, James Isola, has been monitoring your questions as they come in. And James, over to you.

Thanks, Steve. And as a reminder to all attendees, you can submit your questions by typing them into the question box at the top of the screen on the webinar page. So many thanks for those of you who've already sent some questions in. We've had quite a few on the current landscape for private equity. So let's start there. Steve, could you speak about the current PE or private equity environment for investment opportunities, pricing and likely exits?

Certainly, I mean, there's always a danger just giving, you know, kind of Oakley's perspective of the broader kind of PE market, because obviously we don't see every deal and we don't compete, you know, typically in auctions. But I think one, let's talk about fundraising activity. Yes, it has declined year on year, but it's still at kind of relatively record levels. And I think it's like, you know, one of the second or third highest in history. So there's capital still being drawn to PE. Secondly, on activity levels and pricing, I mean, I think we'd observe activity levels have fallen, but pricing hasn't. And I think that those two points are related. So why no multiple contraction? I think there's premium assets we are seeing. And when I say premium, these are high quality revenues, hugely differentiated market leaders. The kind of characteristics we might associate with an Oakley portfolio company those deals are still happening. Debt is totally available for them. There may be, you know, 25 pips more of cost, but there's scarcity in those assets. The market is still, you know, got high demand for those. There's no multiple contraction. And I guess also, you know, it talks to the kind of still record dry powder for those kinds of assets. So we're seeing no multiple contraction. So there's premium assets of which there's relative scarcity. And then we speak to second tier assets. And here I'm talking about most of the companies. We're talking here about decent assets, but the trading is still performing for these companies. But in those second tier assets, you get uncertainty in debt. Buyers want a discount. Sellers don't want to sell and won't sell, won't accept discounts. So we're sitting back. And so we're either seeing those companies not come to auction or failing at auction. And so that's why you're seeing uncertainty Ratings held relatively high, but activity levels falling. And if you speak to advisors, and I suspect the same as advisors in the public markets, there is a brewing kind of pipeline of opportunities being prepared for H2 2023. And if you talk to the big four accountants, they are very busy, you know, kind of doing preparatory work. So when it comes to that slightly more competitive, intermediated part of the market, we've not sourced a lot through that avenue. It obviously serves us in terms of where we exit companies. But as far as that competitive part of the market, we're still being patient and waiting for further value to come when it comes to origination. But origination for us still remains the same. It's about founder-owned bilateral agreements being the first institutional capital into businesses that are profitable, fast-growing, but with founders not looking to price maximize, looking to bring on a kind of partner to help them kind of professionalize. Interestingly, when it comes to kind of bolt-on activity, there we've You know, as you've seen, we've been quite active. And that, again, is because it's the founder and lower end of the market. Interestingly, where the market is throwing opportunities for us is that where debt has been cheap and widely available to all, now it's not. And so private equity becomes an alternative solution. Plus, of course, many of these companies will have the wrong balance sheet structure now and are looking to restructure.

Thanks, Steve. Next question is about EBITDA growth. Although still high, average EBITDA growth slowed year on year. Is this a cause for concern and reflective of a longer term trend?

I think the first thing, as I kind of mentioned earlier, is that, well, I guess there's a couple of things to make. One is, what's a typical average EBITDA? It's a relatively blunt instrument. And we've always kind of said that we should hope that Oakley portfolio companies should be generating, depending on where they are in their life cycle, somewhere between 15% to 30% EBITDA growth. And the average has kind of moved between that range. So this is very much still at the upper end of that range. Secondly, when we talk about 30% EBITDA growth, we are referring there to... So that was achieved in 2021, which for digital companies, for the consumer digital companies, they really had the kind of boost of adoption caused by the pandemic and the lockdown. So we've got a very strong, comparable period. So the fact that we've grown consistently on top of that, I see as a positive. Now, that's not to say, and we've been open about this, and particularly in the previous slide, we talked about headwinds. There are companies which we've seen some revenue or margin compression because of the wider macro challenges, but those companies have and will continue to prove more resilient than most of the businesses that you could acquire in the public market.

Thank you. We've had quite a few questions about the discounts. We'll move on to that. and I'll amalgamate some of these questions. What do you feel is a fair discount, if at all? And how confident are you that you can close a discount? And how will you do that? Is part of the answer more buybacks?

So I'll start the question by saying, just when it comes to discounts, The consistent driver of shareholder returns for any investment company, but particularly listed PE, is asset growth. So if you look at, you know, we're one of the highest NAV growth, had one of the highest NAV growth. If you look at our performance over the last 12 months, shareholder share performance, it is one of the highest. Us along with 3i, you know, the other. significant growth in the period. And if you look at prior years, those that have outperformed from a shareholder return, it's the NAV growth and not the discounts which is driven. And I want that to be the focus. I mean, it's easy for me to say the discount's going to close and that's a wonderful addition. Also, I spoke to our five-year shareholder returns. They've been achieved and they are the highest of any investment company on the on the uk stock market and that's been achieved despite the fact that discounted the value so i think we need to put the discount in context and i think um that there is a an overdue focus on it being the what's going to drive return it's not what's driving returns now do i think there should be one absolutely not i mean it's it's It's hard to justify in any way, any kind of discount. I mean, if the NAV was flat and consistently flat over time, then it should at least be trading a par, maybe. But these NAVs have grown consistently over time. And so therefore... you know, the share price should reflect that. In any normal company, you would look to the future expected performance of those companies and value them accordingly and reflect that in the valuation. Here, none of that's happening. There's a kind of, there's a looking in the rear view mirror. Also look at the kind of freemium, you know, the system performance of those assets, the increasing transparency we provide around those assets, that average EBITDA growth, which is going nowhere, which continues to kind of drive the performance of these businesses. And so I firmly believe that companies like ourselves should be trading on a premium. And so whilst I say it's not the driver, we do focus on it. And particularly the OCI board looks at ways to engage on how to tackle it. That's kind of really four ways that could be done. I mean, there is just generally what the listed PE can do for itself, which is continue to create confidence in valuations. And that's in kind of making sure that we use fair market methodology. We provide, we prove the integrity of our valuations by the information that we provide. And hopefully over time, we continue to show that these are robust valuations that, regardless of what's happening in the wider public market, still stand up. And if we think more about OCI-specific measures, there's kind of three areas. There's kind of reporting and frequency. Now, look, we pride ourselves now on being voted one of the best in class for our reporting, and we continue to think ways of improving our transparency. The move to KPIs and that are now weighted is a good example of that. And providing as much detail on different KPIs and as much history around those as possible, and also giving access to the portfolio companies, particularly at the capital market stage when we can. We've moved to quarterly now, we've only been doing that now for two or three quarters, I think that helps. And as much as we can constantly provide the market to provide that insight into the underlying portfolio companies, the better. Then the key one is around performance and scale. If we continue, even in the face of a possible deep European recession, if we can continue to deliver NAV returns we've done in the last five to 10 years, then I think reputation cements itself and so do ratings. Bear in mind that the discount that prevails, discounts across the entire economy, like 14 of the 16 investment company sectors are all on discounts. The sell-off has been wide and hasn't been selective. So it's not, you know, most of these discounts don't exist because of a specific view on a company. They exist because there's been, you know, a kind of a sell-down in investment companies in general. And also, OCI has in the past been a relative minnow within the listed PE space. It doesn't help in terms of liquidity, the kind of investors that can invest in it. Now with net asset value over a billion, a market cap that hopefully is moving itself over a billion, that scale should help in terms of the kind of investors and the liquidity it can then attract. And then finally, there are a couple of specific things OCI points in addressing, we do have these direct investments, they are part of the long term future of Oakley, and the sooner they can be realised, the better. And particularly around North-South debt, you know, there is the, there is the ambition to kind of realise that, so it's possible we've got the performance now, the business is going through restructuring as we speak, hopefully, and potentially attract new equity investment. In doing so, there'll be the opportunity to refinance the debt that OCI has paid to them. And then finally, and in the question, share buybacks. Yes, they are clearly a method to close discount. No one should do a buyback to close discount. You do a buyback because it's shareholder enhancing. It increases the NAV per share. And The reason that we fully commit to doing that, it also has the benefit of giving that confidence in the NAV, because if you're willing to buy the shares, it's kind of sending a very strong message. And the price it stands now is a particularly attractive point to be buying the shares. The thing that determines when we can buy the shares is entirely driven around cash. And so that is down to, you know, kind of what realizations are expected and when and what upcoming commitments to the funds or draw capital calls in the funds we're anticipating. So when we're not doing buyback, it's not because we've suddenly, the program has kind of gone into a lull, we've changed our minds. It's purely around our use of cash.

Thanks, Steve. You partly answered the next question, which is about... intentions with regards to direct direct debt holdings and time out and nought sales but we have had a follow-on couple of questions about and providing an update on prospects for both businesses if you could talk a little bit about that yes certainly um so let's start with i mean i did i did touch on it let's start with time out as i said it's a listed business

So I can't provide new information that's not already in the public market, but the interim results are on the 30th of March. The key kind of story there is a business that has now fully emerging. In 2019, it was really well positioned. It opened these physical timeout food markets, the first one of which was in Lisbon, was doing incredibly well. The media business was kind of turning almost exclusively digital and everything looked fair, set fair for time out. And then, of course, a company dedicated to you going out during a lockdown was not ideal. And all the markets closed. They opened, they closed, they opened, they closed. And, you know, kind of the marketing environment, you know, kind of was obviously very difficult during that time as well. You now find a business which is really starting to motor. There's seven markets opened. there's eight new markets signed of which four or five of those have been in the last six months in major cities around the world, Cape Town, Vancouver, Osaka, Barcelona. And so that is really positive. And to remind you, those markets have kind of minimum EBITDA deliverables from the real estate companies that we've signed them. So the market started to move again, the portfolio is open again, and they're starting to... it's starting to be profitable. And in the media business, we're seeing that actually really start to kind of deliver again. It's been entirely refocused on being digital. So there's no print and that emphasis within the business has been removed. And now the media business is really focused on providing high value ads, creative solutions to kind of bigger brands. So you're talking rather than just relying on programmatic kind of digital advertising, talking about cross-channel, so websites in physical solutions and obviously stuff within the markets that is delivering half a million, million pound type products. marketing solutions to kind of big brands like Maybelline or Mastercard and the like. So I think we can be particularly optimistic about the position that Time Out finds itself in. And of course, it's now had a refinancing. So it's kind of set there from that perspective. There is a modest amount of debt. Unfortunately, we weren't able to pay it down because the terms of the new refinancing, but it's short term and it's 5 million that is to be repaid by the end of this kind of year. And then when it comes to north sales, I mean, the group has had a kind of post-COVID transformation. It was making modest EBITDA in 2024. It's made $30 million of EBITDA in 2022. I mean, exceeding our expectations. And the Mars business are kind of back, you know, kind of doing somewhere in the region of $26 plus million of EBITDA. And then you've got Action Sports. That's the kites and windsurfing area of the business, which kind of really emerged kind of within COVID. And that's kind of producing in the region of kind of $5 to $7 million. And then you've got apparel, which for the first time is profitable and contributing meaningfully and doing around about three million people. So I think we'd be really kind of happy with the way that North has emerged. We always knew it was a high-quality asset that dominated this kind of premium sailing world. The bits that we wanted to do was kind of find the other ways to grow verticals around that brand. And in Kite's windsurfing apparel, we are finally achieving that.

Thank you. The next question is about commitments and cash and liquidity. Can you comment on the outstanding commitments versus the available cash and credit facility? And perhaps some comment around the maturity profile of businesses. And linked to that, the 200 million commitments figure not expected to be called separately. Can you provide a bit more commentary on how you arrive at that number?

Well, I think hopefully, and I assume subsequent to that question being submitted, we took you through two slides in detail on the level of commitments and the level of cash and liquidity. So hopefully we've provided the clarity around that. I mean, in short, to repeat some of those messages earlier, I mean, one, a big chunk of those moves have only just been committed. So we're not expecting a large amount of that to be drawn, you know, kind of immediately. And of course, in the current market with uncertainty, and particularly around, you know, we haven't seen a lot of, you know, multiple compression, or we haven't seen much dislocation yet from a difficult kind of economic environment, you know, we're not in a rush to deploy, you know, kind of capital. In contrast, as I talked about, premium assets are still attracting a lot of attention and high multiples. So, you know, we've... The dynamics should be more around exits rather than investments. But... But in terms of if normal course of business, you'd expect the funds to deploy around or to draw on commitments from us of around 200 million the next year, commitments that we comfortably cover. And then we expect typical activity levels. If you're getting typical investment activity levels, you tend to get typical divestment activity levels that are slide we provided. And on that basis, you would expect and we anticipate significant proceeds from possible exits or realizations. And it's more likely to be one or two assets, rather than the kind of large number of deals that took place within 2022. Was there anything I didn't answer, James?

The 200 million commitment is not expected to be called just a bit more colour around.

Yeah, what does that mean? I mean, that's a pretty conservative number. I mean, it potentially could be higher than that. And why might you not get deals called? First off, you have fund facilities. which help smooth over the drawdown so you don't get your capital called every single time that investment is made or a bolt-on is made within a company. So they offset some of that and you could see realizations long before you yourself had to pay back those fund facilities. Also, typically funds are deployed up to about 80%. They're very rarely deployed up all the way up to 100%. It's not like a public market fund where you can invest in in small increments and invest the exact amount. You know, we're talking about 10 portfolio companies where you're deploying relatively big checks. So the science isn't that you go all the way up to 100, plus you leave yourself the capacity and flexibility to have additional funding in, you know, kind of just in case. And so that's why you can kind of confidently predict. That's based on historic drawdowns that you won't need to draw down the full amount.

Thank you. The next question is about IU group and enrollments. Can you tell us what the split in enrollment growth is between domestic and international or any other relevant splits you think would be useful for us? And secondly, what is the outlook for growth? Is IU group still on course for targeting 175,000 students by the end of 2024?

um so starting with so new enrollment if you look at new enrollments 25 percent circa 25 percent of those are international so to give us some context this was originally a german focused business the the investment thesis for us that this was an opportunity um to have a disruptive player in the german market why why german why germany because two things really one was that This kind of solution was provided by a number of small kind of state backed companies. There wasn't really a holistic high quality solution within the German market. So there was an opportunity to kind of invest in a disruptor. Secondly, this isn't about taking school leavers and giving them an alternative to go into a campus university. The reason why Germany was particularly strong in this area was because this is about taking Adults, average age, as the current average age is about 27, but let's say average age between 20 and 35, who don't come from a necessary academic background. They're working, they may have families and they're looking to do higher education for the first time or re-educate themselves. In Germany, particularly, there is a high, there's been a high historic kind of bias towards apprenticeships and kind of learning in, learning in job. And so there is this cohort of individuals that are looking to maybe get degrees for the first time, but need the flexibility of doing those around their now existing kind of commitments. So that was the kind of thesis. what's been exceptional about how well that's worked, but also how it's applied and how it's been adopted as a solution globally, why it's now one of the leading European universities. And circa 25% of new cohorts are now international, and it's the fastest growing element of student signups. The German growth still continues. And where that's coming from, I think we thought that would be very much focused on the developing countries, countries like Africa and parts of Asia, which is true, it is. But we're also thinking it's just as popular in other developing nations. So in answer to the question, yes, you know, those student number targets still remain. The growth is still continuing as we speak, you know, kind of. enrolments this year so far have exceeded expectations. And finally, there's other ways in which we can encourage growth, and those are the ability to issue degrees in other jurisdictions. We'll soon be able to do that from the UK issue, UK degrees, and we're also looking at other countries, Western countries, where we hope to be able to have degree awarding hours soon.

Thank you. We've got a question about AI or artificial intelligence. Please, could you tell us your view on the impact of AI across the mid-market tech opportunity set? And is there any impact expected in the portfolio?

It's wonderful that you think we are the foremost experts on AI. Interestingly enough, one of the great strategies we're looking at is around AI. generative AI. So it's a subject that we have thought a lot about as an investment house. I think there's absolutely no denying the level of disruption that this could cause. And we're seeing two things, an evolution in enterprise software. There is, you know, millennials are taking control of businesses now when you think about the size of them in the workforce. they are expecting software to look and operate like those they've been used to on their phone. And so there has to be a complete change in software, which is, you know, kind of now quite dated. And so you're seeing an evolution in software. One of the things that's driving that is generative AI and the way that software can be designed and also, you know, kind of generative solutions. In terms of impact within the portfolio, I mean, there's no... I don't know, immediate impacts to the people, except for the fact that they're alive to possible, you know, kind of AI solutions. Interestingly, we talk about IU, they are deploying AI in the delivery of their, of their courses. And what's interesting about that is, is how you can so quickly surpass what a relatively blunt, you know, lecture hall approach to universities to degree tuition. If you're thinking about now, which is monitoring how a student is responding to what kind of topics and what kind of learning materials and being able to adapt those learning materials live and its testing and information delivery really transforms the way that people can learn in a much more sophisticated way than education has been delivered historically.

We've got five minutes left. We're going to try and squeeze in two last questions. First one is, there has been a market fall in public markets in the last couple of months, particularly in tech. How has that, to what extent has that impacted valuations?

Look, I think, well, one, tech is a very large sector, firstly. Secondly, there are all types of tech, particularly when it comes to sell-offs. And, you know, we touched on this in our report on accounts and the kind of bad tech, good tech. I think the tech whose valuations have been maintained are the Over, you know, kind of over 20 percent margin profitable businesses on which you can establish a cash flow generation multiple. You know, those that have suffered are the most kind of speculative, you know, kind of revenue based valued businesses where understandably, particularly with the fall away in cash. in the level of venture capital kind of driven, ever upward driven, you know, kind of rounds, a kind of process which really kind of stopped in 2022. Understandably, you know, some of those companies, you know, the valuations of those have faltered. I think within the kind of, really where I'm going with this is that those companies with high margins, high levels of growing cash generation, that those multiples have remained relatively robust. And I guess to repeat a previous point, that we're also not guessing at what we think those valuations are based on. You know, there is not only a lot of peer group precedent, but there are actions within the group, nearly 50% of the portfolio had an event in which, you know, kind of priced those companies as a result of an investment or an action that took place in the last six to 12 months.

And last question to squeeze in. Who are your typical buyers when you exit a business?

For the last quite a number of years, they have been the large PE sponsors. So the likes of EQT have invested in two of our consumer digital platforms. Silver Lake invested into our companies. KKR invested into Contabo. CBC into a number of our tech businesses. So large global PE sponsors who not only have, they're particularly attracted to the style of our assets and particularly that kind of digitally disruptive type business, They don't want to do the messy early stages of putting these businesses together, professionalising them, growing them. But when they reach that scale, they're incredibly interested. And those increasing relationships with those large sponsors is proving to be successful for us. The majority of the portfolio today will have some level of engagement by each of those companies with a number of sponsors. The kind of companies that we... own you know they're very well known within the PE space now or increasingly so and so there's a lot of engagement and a lot of the transactions we've done we've not started a process we're often kind of preemptively approached by one of the large PE players Thank you Steve I'm afraid we're going to have to bring our Q&A to a close as we've run out of time Steve any closing words you'd like to make before we go Not only, thank you very much for joining us. As I'm sure James will respond, please email us if you have any outstanding questions to the OCI Investor Relations website. This email is on the website, the Investor Relations email, which is on the OCI website. Our next update, as I said, will be Q1 NAV report on the 26th of April. And there ends today's webcast.