Partners Group Private Equity Limited

Good morning. Welcome, everybody, to the Q1 Princess Call. My name is Cyril Ripley from Partners Group, and I would like to introduce you today to Andrea and Federica. Andrea is the Responsible Senior Product Manager at Partners Group for Princess and knows the product inside out. She will be going forward to do investor relations together with me, and we will present today the Q1 highlights. Federica is the Responsible Senior Portfolio Manager at Partners Group for Princess and will present today the portfolio. With this, I already hand over to Andrea.

Thank you, Cyril. It is a pleasure being with you and the audience today. Before we start, if you would like to ask any questions during the webcast, please use the Q&A tool which you can find on your screen. We will make sure to answer you at the end of the presentation. In the interest of time, we will group similar questions and answer in one go. If we run out of time or you have additional questions, please don't hesitate to contact us by email at princess.partnersgroup.com or through the contact form available on the website. I am pleased to report that Princesses NAV developed positively during the quarter, achieving a NAV total return of 3.6% for the first three months. Value creation at portfolio level contributed 4.3%, while currency effects also supported enough growth. A number of portfolio companies contributed to the performance, with the largest three contributors to the NAV increase being top 10 companies for Princess. Namely, the recently announced sale of SRS Distribution, the second largest portfolio company, was the largest contributor to the NAV increase, considering the uplift to Princess' prior carrying value. Further, PCI Pharma Services, a global provider of outsourced pharmaceutical services in the U.S., reported double-digit revenue and EBITDA growth across all segments, while Vishal Megamark, a franchisor of hypermarket stores in India, continued to report strong financial performance. The share price total return over the quarter mirrored the NAV growth at 3.6%, closing March at €10.75 per share. The discount to NAV remains stable, keeping Princess in line with its peers. Portfolio activity was tilted to investments, with Princess adding Rosen and VelvetCare to its portfolio. As already informed in a previous update call, Princess has made an additional commitment to Partners Group Direct Equity 5 fund during the quarter, bringing the total commitments to €50 million. in terms of distributions, these were predominantly received from its direct investments. And towards the end of the quarter, the realization activity kicked off with the IPO of Calderma and the non-sale of SRS distribution. As far as the liquidity position is concerned, the cash balance was 1.5 million euro with an undrawn credit facility of 109.5 million euro. Now, as a reminder to shareholders, Princess maintains a credit facility for short-term liquidity management purposes. Finally, post-quarter end, Princess declared the first interim dividend of 35.5 cents per share, which will be paid to shareholders on 17th of June. Over the quarter, Print has completed the previously announced acquisition of Rosen Group and VelvetCare. While Rosen will be covered later in the presentation, I would like to mention a couple of words about VelvetCare. Firstly, Partners Group has developed a rigorous thematic investing approach, which involves years of focused research into long-term mega-themes underpinned by strong secular growth. One such theme relates to the bifurcation between premium and value offerings in consumer markets and the private label's growing role in the space. Now, one might wonder, what is private label? Well, private label refers to products that are produced by one company and subsequently branded and sold by another one. This allows the brand owner and retailer to offer products with their own branding and design without heavy investment in manufacturing. The segment benefits from several secular trends, including growing income inequality, leading to polarization of spend, growth of discount retailers, and increased use of outsourced manufacturing by asset-like direct-to-consumer brands. At the same time, private label offerings are increasingly sophisticated in terms of value quality segmentation and are enjoying an overall positive shift in perception. Such an example is VelvetCare. Headquartered in Poland, VelvetCare is one of the largest independent manufacturers of branded and private label hygiene paper products in Central and Eastern Europe. VelvetCare has a diversified product portfolio and a strong market position in its core markets. Moreover, it differentiates itself through superior production capabilities, best-in-class technology, and deep relationships with retailers across multiple countries. Partners Group will work with management to build on the company's strong position and drive growth. Key value creation initiatives will include expanding international reach, broadening the product portfolio with a focus on high growth categories, and making targeted acquisitions. In terms of distributions, these were predominantly received from the direct investments. In particular, 1.1 million euros stemmed from its preferred equity stake in Polyconcept, on the back of strong fee cash flow generation over recent quarters. By way of reminder, Polyconcept is a global supplier of multi-category promotional products, operating on five continents and selling in more than 100 countries. While 1 million euro was received from its investment in Global Blue, a New York Stock Exchange listed provider of VAT refund and foreign exchange services for international travelers. This was the result of 100 million US dollars strategic equity investment from internet and technology company Tencent and the refinancing of the companies that both occurring in November last year. The remaining balance of 3.1 million euro was predominantly received from the legacy portfolio and that investments. With this, I would like to hand over to Cyril to discuss our investment approach.

Thank you, Andrea. I would like to talk today quickly about Partners Group. As you know, the Board of Princes realized that Princes is the only product listed at the London Stock Exchange that does not have the name of the manager in the name of the vehicle. Does the Board of Princes ask the manager of Partners Group whether we are comfortable to insert our name, Partners Group, in the name of the product? Of course, he said yes, because at the next HM of Princes on the 21st of June, shareholders are asked to vote for or against changing the name from old Princes Private Equity Holding Limited to new Partners Group Private Equity Limited. Thus, I thought it makes sense to quickly talk about Partners Group. So Parts Group was founded in 1996 and today manages 147 billion of assets under management with over 1,900 employees in 20 offices worldwide. By far the largest asset class with 76 billion of AOM is private equity. The remainder is private infrastructure, real estate and debt. Most of our clients are pension plans and behind these pension plans are 200 million beneficiaries. That is why in the room where we make our investment decisions, which we call the decision room, we have a big banner over the large video conference screens stating, we are responsible for dreams. We once interviewed our end clients, meaning the beneficiaries, and we made a media out of it and showed it to all of our employees. We interviewed... 30, 40, 50-year-old teachers, firefighters, factory workers, nurses in hospitals, train drivers, bus drivers, you name it, and we ask them what their dreams are when they will retire. We realize the higher the return we achieve in our products, the more dreams our clients can fulfill when they retire. And we realize we cannot take too high risks because these people absolutely cannot lose their pensions. So that is why we decided at Partners Group to have a very prudent, very diligent, highly selective investment approach. For example, last year, we looked at 900 investment opportunities on the private equity direct side. But in the end, we only invested in nine companies. So that's only 1% of the deal flow. This also means we decided to broadly diversify our portfolio across vintage years, industries, geographies, and diversify also across many number of companies, investing typically only 1% to 2% of NAV in one single company. Frederica will talk about more of this later. This investment philosophy also applies to Princes, which of course also gets offered its fair share of pro-rata allocation to all new private equity direct investments companies the PG platform is doing in any given quarter. Some Princess shareholders are also pension plans, but many are not. But also the many wealth managers who hold Princess will appreciate their attitude of trying to achieve high returns, but at the lowest risk possible. Every asset manager has one slide showing how good they are, and this is our version of it. Partners Group is a public company itself, and with 38 billion of assets with market cap, we're one of the largest private equity managers now in the world, currently number four by market cap. But we're not just big. We also have a good track record. And, of course, every year we win many industry awards. But also, for example, a previous study resulted in Partners Group by our track record post-global financial crisis was the second best in the industry. Ten years ago, Prince's portfolio was 80% fund-to-fund and only 20% private equity direct. So in the past, Prince's could not fully actually profit from our track record. But going forward, Prince's will focus purely on partner school private equity direct investments. Does the famous slogan in the disclaimer, past performance is no indication of future performance? I think it's true here because I truly believe the future performance will be better because of the focus on partners group, private equity, direct investments going forward and because also lower fees because no double fee layer anymore on the fund to fund part like in the past. Now, private equity means you buy a company for $1 billion and sell it five years later for $2 billion in what we call a 2x multiple, resulting in a 15% per annum return. If you're holding periods eight years instead of five years, then you need even a 3x multiple to achieve a 15% per annum return. But how do we do this? Now, first, you need to find the right company. So you need to have a differentiated thematic sourcing approach. This means we deep dive into thematic research and identify high conviction sectors. I will talk about this more on the next slide. But doing your homework and performing the most thorough pre-buy due diligence you can possibly do is not enough. Once you own the company, you need to create value, which we will call entrepreneurial ownership. Before I joined Partners Group 23 years ago and found the love of my life, meaning private equity, I had a short affair with management consulting at McKinsey. But my lesson learned then was if your goal is to double or triple the enterprise value of a company in five years, this is not possible with just reducing the costs. You need to double or triple the revenues, which in turn will double your net profit. If you manage to increase your EBITDA margin and do some of the free cash flow you use to pay down some debt, you can even achieve a 3x multiple of the equity value. That is what we call transformational investing. So not just finding measures to achieve a 10% or 20% more EBITDA. No, this will be fine tuning. But we want to double or triple EBITDA. And this is what we call transformational. Now on thematic sourcing, 20 years ago, A private equity manager could just wait until their favorite investment banker gives them a call presenting the next private company, which is for sale, and you source your next investment. But today, the industry has really changed. Today, sourcing of new investments is much more complicated. At Partners Group, we have 550 investment professionals which leverage their internal and external network expertise to analyze private markets and are trying to identify the best themes to invest. In private equity, we have specialists looking at healthcare, goods and products, technology, and services. We call these our four verticals. within which we deep dive in these verticals. So within each vertical, you deep dive into themes like, for example, companies whose business model is to speed up the time to market in the pharmaceutical industry. But this is a multi-year process, so which means several years of preparation before the actual purchase of a company. Now, let's have a look at an investment partners group as a platform has done in Q1, and thus, of course, also Princess got its fair prorata share offered and invested as well. Our specialists in the services vertical started four years ago in 2020, looking at the theme called increasing quality and standards. And they identified a sub-theme called testing, inspection, and certification, in short, TIC. As typical for every sub-theme analysis which we do, the investment team mapped out the top 20 companies active in this field and identified Rosen as an ideal match with our criteria, which means it has to be operating in resilient, growing markets with intensifying regulatory scrutiny, clear sustainable technology leadership, and strong data. Rosen was a founder-owned business, so it's not owned previously by a private equity company. And whilst initially there was no appetite for the family to sell, our continued focus and persistence paid off, and we signed the investment late last year. But what exactly is Rosen doing? So Rosen Group has 3,800 employees based in Switzerland, clients in over 120 countries all over the world, And they are the clear market leader in mission-critical inspection services for energy and infrastructure assets. So, for example, they are using a so-called smart pig, which you see on the right hand, lower right side of the presentation. So, this device is called a smart pig, which is used to inspect oil and natural gas pipelines and in future hydrogen pipelines. They contain electromagnetic components such as ultrasonic sensors, radio frequency modules, gauge plates, and they can measure parameters such as diameter, curvature, thickness of the metal, pressure, metal loss, and temperature. In other words, they try to find a crack in a pipeline so that it can be repaired before the pipeline bursts. Now, I have no clue about the pipeline inspection business, but in my free time, I'm a passionate private pilot, and in the aviation industry, we call this preventive maintenance, meaning you don't wait until a part breaks, and therefore you repair or replace the broken part, but instead, you try to anticipate issues and detect and repair problematic parts before they fail. Rosen Group's in-house manufacturing, with over 90% of its technologies developed internally and 275 patents, has positioned the company as a dominant player, holding 40% of market share in North America and Europe, which makes it the clean number one in its industry. The company's future growth is supported by long-term structural drivers. Pipelines currently serve as the backbone of energy transport in many countries, and the aging asset base will require more and more maintenance and inspections. Additionally, with 80% of its revenues guaranteed through take-or-pay contracts, Rosen Group demonstrates a resilient business model, providing a high level of predictability for future cash flows. Just look at one key figure on this slide. 15 years average client tenure says it all. Our investment team has identified potential value creation through the mixed shift towards a new technology called EMOT, which stands for electromagnetic acoustic transducer, which is an ultrasonic testing technique. with imminent process readjustment, potential monetization of data, which actually belong to Rosen, so the data they inspect belong to Rosen, not the company which is actually paying Rosen to do the inspection, and the possibility to leverage on artificial intelligence and machine learning going forward. So with this, it's my pleasure to hand over to Federica, Responsible Senior Portfolio Manager for Princes, to talk about the portfolio.