Partners Group Private Equity Limited

Ladies and gentlemen, welcome to the Prince's Private Equity Holding Q2 2023 Investor Conference Call and Live Webcast. I'm Alice, the Colosco operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. Webcast viewers may submit their questions inviting by the relative field. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Sarah Page, Head of Industrial Relations for Princess Private Equity. Please go ahead, Madam.

Good morning and welcome, everyone. Thank you for joining Princess' 2023 Interim Results Call. We have a few topics to cover today, and I'm joined by Fionnuala Carville, Interim Chair of Princess, Cyril Whipsley, who's Senior Partner at Partners Group, and Oliver O'Brien from the Partners Group ESG team. I'll quickly cover the headline numbers and then hand over to Cyril. So global buyout activity in private markets has remained muted in 2023 so far, and appetite for private equity investments continue to diminish against the challenging backdrop of monetary tightening, recessionary risks, and have paid in two installments. With the share price increasing by 23% up to June, share price total return was 27.8% and the discount narrowed by 12% from 42% to 30%. So we're pleased to say that this brings Princess's discount back in line with peers. Now, despite the challenging environment that I mentioned continuing into Q2, we have at the portfolio company level seen a good level of tuck-in activity, as I mentioned. Secondly, the operational performance continues to be enhanced with strategic initiatives tailored to each company. So you'll see that revenue and EBITDA growth has remained healthy, but the impact of inflation has slowed growth somewhat. However, inflation is coming down on goods and products as well as energy costs, but remains sticky for services through wage inflation. But despite this, EBITDA margin continues to be above 20%, and our valuation multiples are in line with growth sectors in public markets, as we had previously shown in the annual results presentation. And that is why we are feeling comfortable with the valuations. But then Partners Group active ownership and entrepreneurial governance approach is driving EBITDA and revenue growth. and that's why you see the direct private equity platform outperforming the sector-adjusted public markets. Partners Group Average Private Equity Direct EV EBITDA multiple is on par with public comparable companies in those specific sectors, and the EV EBITDA multiples haven't changed in the last two quarters, and debt levels came down one turn in Q2. I'll now pass on to Cyril to introduce himself.

Thank you, Sarah. Good morning, everyone. I had the pleasure of meeting some of you already in Switzerland and Germany, but I hope to meet the rest of you soon, and especially in the UK in early September to meet more shareholders. I'm a new face to Princess, but I'm an old face to Partners Group. This is actually my 22nd year. Partners Group started in the private equity direct team. was the chief financial officer of the firm, was responsible for the IPO of Partners Group, was 10 years investor relations of Partners Group Holding. And then since, over six years, changed to portfolio management, being the head of, co-head together with Roberto Gagnatti of portfolio management, being responsible for all the products at Partners Group and Band-Aid, including Princess. And now I'm happy to be the new senior face for Princess from a Partners Group point of view. If we look at the Partners Group investment platform, it's important to say that we dedicate substantial senior resource to Princess because Princess is very important to us. Princess is actually the only vehicle in the Partners Group's suite of products that gives anyone access to the Partners Group private equity platform. We believe it is the best structure for the democratization of private equity And we want to ensure that Princess continues to provide this access and the shareholder value as it has done since 2006, when it became listed in Frankfurt Stock Exchange first, and then later in 2007 in London. In addition, Princess leverages a world-class investment platform with over 250 private equity professionals alone, and Partners Group provides the portfolio companies with over 150 industry experts who act as directors in these companies, driving entrepreneurial governance and value creation through what we call asset transformation and platform building. Now, looking at the top 10 largest portfolio companies, of course, the key reason for performance is always underlying growth. As a reminder, we focus on sectors that are supported by transformative trends and that are growing at an above average rate of growth rates over the next five to 10 years. Think about themes like energy efficiency, supply chain management, digitalization. We look for companies that stick to resilient demands and a good amount of pricing power. And as majority shareholders, we then become owners and grow these businesses through value creation strategies, such as platform build-out and asset transformation. In 2022, we grew the EBITDA of our direct private equity portfolio companies by like 16%, which is in line with the historic average of 15%, and clearly is above what broader public markets have been delivering. We also managed to protect our margins of the portfolio companies at about 20% on average. So we have an incredible growth profile and stable margins, which is remarkable in a time of high inflation, rising raw material and wage costs. So for the top 10 companies you see on that slide, I can confirm that they continue to perform either in line with expectations or even above expectations. Partners Group Valuation Method Polity is based on a fair market values updated monthly, and you will see the monthly NEV reports in between these results call and should counter investor concerns around valuation lags in private equity. Let me quickly say one to two sentences on each of the portfolio companies. BCI Pharma is an outsourced pharmaceutical service provider, has reached record growth, and its recent acquisition has integrated and performed very well. Organic growth also remains strong as a result of tailwinds in commercial injectables and the realization of key operational value creation initiatives at these manufacturing facilities. SRS is a US-based distributor of roofing products, so the roof on the house, such as singles, clay, and cement tile or metal roofing of the houses. As of March 2023, the company has seen increasing year-to-date sales and remains well-positioned to take share. Further, the company has implemented measures to improve operational efficiency heading into their busy season. Omega, the conveyor belting solutions company, increased in value because of double-digit growth in revenues all over the world, actually. and benefited from its ongoing cost initiatives to maintain a healthy EBITDA margin. KinderCare is the US-based early childhood education company, has generated value as its growth in numbers of centers, as numbers of kindergartens opened, as well as account and retention of full-time employees, has allowed for higher occupancy, efficiency, and growth in enrolled children, students. Further modernization of digital capabilities and strengthening of higher teacher engagement are being initiated to continue Kinders Care's recent success. Emeria, most of you know still at the old name Foncia, is the global leader in property management and services. It's in the process of rolling out Millennium, that's its proprietary enterprise resource soft solution, integrating several internal resources, driving operational excellence, significant cost reductions, as well as an even better understanding of customer needs. It's also accelerating its platform strategy in the UK. Techem, the energy metering company in Germany, increased in value because of higher revenues from its digital transformation journey towards a holistic energy efficiency service provider, while maintaining the attractive EBITDA margin, but also profited from a higher EBITDA multiple, reflecting higher valuations of the public peers, due to the sector's resilience exhibited during the COVID-19 and Ukraine crisis. Essentia is the new name for Macau, a leading provider of gas transportation infrastructure in Mexico, further increased in value due to the completion of its main natural gas pipeline construction, as well as some recent acquisitions. Additionally, following implementation of new management and rebranding, further progress has been made with local regulators and successful refinancing has been completed. These advancements are both reflected in revenue and EBITDA figures. Vishal is one of India's largest value retailers that offers apparel, general merchandise and fast-moving consumer goods products has seen strong growth in the first half of the year across all categories, and in particular, Apparel, as a result of investments in fabric quality and introduction of new fashion fits. The company's omni-channel rollout has also seen strong uptake. Diversity Tech is a heating, ventilation, and air conditioning parts and supplies manufacturer, has recently driven growth through the acquisition of Castle Engineering and efficiency initiatives at its plant in Beaufort, Georgia. The company is also benefiting from deflationary input costs, as well as a hot summer season leading to increased demands of air conditioning. Divica is a leading provider of specialist cloud software for the public sector, has performed very strongly due to the favorable industry tailwinds, as well as the successful cloud transformation plan executed on the Peach's ownership. With hundreds of customers migrated to cloud, A new logo wins.