Partners Group Private Equity Limited

Good morning and welcome everyone to the half-yearly 2024 results call. I'm Andrea Matescu and with me today are my esteemed colleagues, Dr. Cyril Vikli and Federica Cataniga. We are excited to present our half-yearly results and provide insights into our performance. Before we dive in, I want to address some housekeeping items. 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 answer the questions 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 send us an email at tgpe-ltd at partnersgroup.com or through the contact form available on the website. Let's first reflect on our milestones and eventful first half of the year. In February, we announced the appointment of Axel Holtruck. Axel has 20 years of direct private equity experience at managers such as AEA Investors, Silver Lake Partners, and Investcorp. He's also on the board of TBAG, a publicly listed private equity firm focused on mid-market buyouts in Germany. And in March, we announced the appointment of Gerhard Roggemann as a non-executive director. Gerhard has served on the boards of several prominent companies as non-executive director, including Deutsche Börse, Presenius, French Life, FNC Asset Management, and Resolution. Importantly, in terms of his private equity experience, he was chair and non-executive director of DPAG from 2009 to 2020. In terms of changes to the board composition, and as previously reported, Henning von der Forst, who served as a non-executive director since 2012, did not stand for re-election at the AGM in June. The Board wished to thank Mr. von der Forst for his significant contribution, insight and commitment to the company over many years. We are delighted to share that we are steadfast in our efforts to continuously improve our shareholder communications. Our active engagement with shareholders and efforts to improve our reports and website are ongoing, and we appreciate your patience as we work through this journey. We would also like to extend our sincere gratitude to all shareholders who participated in the AGM. The company laid out its clear, robust capital allocation policy in March this year. Fundamentally, the policy respects the liquidity position and waterfall of the company, and the dividend objective is at the heart of the company's new capital allocation policy. As such, the dividend, as well as ongoing fees, expenses, the repayment of outstanding indebtedness, and the reserve to meet existing investment commitments, will be provided for prior to excess free cash flow being used for share buybacks, according to the mechanism described. Finally, the resolution to change the company's name to Partners Group Private Equity Limited passed its shareholder vote at the annual general meeting in June this year. The company's name change reflects the evolution of its portfolio and relationship with Partners Group, the investment manager. To reflect the new name, the corporate website address was changed to www.partnersgroupprivateequitylimited.com. You may have also noticed that the short name in the report is now PGPELTB, which is also reflected in the new mailbox. Now turning to the financial highlights. In the first half of the year, the company has now developed positively and closed the reporting period at €14.38 per share. After paying the interim dividend of €0.355 per share to shareholders, the company achieved a total return of 4.1% for the first six months. The interim dividend payout aligns with the objective to distribute 5% of the previous year-end NAV in semi-annual payments. Meanwhile, the dividends paid to shareholders over the last 12 months correspond to a dividend yield of 6.3% based on the closing share price at the end of June. Furthermore, the share price has witnessed a total return of almost 14% and closed the reporting period at €11.45 per share. In terms of drivers, both value creation and favorable currency movements contributed to the NAV growth. Notably, the sale of SRS distribution, which we will cover in the next slide, provided the largest contribution. Other large contributors during the reporting period were BCI Pharma Services and Diversitec. Both are top 10 companies in PGPE LTD's portfolio and increased in value over the reporting period, reflecting their financial performance. The amount invested during the first half of the year totaled 19 million and a half. And as already announced with the last quarterly update, the company has further committed to Partners Group Direct Equity Five Fund in March. Meanwhile, the company has seen distributions totaling 103 million, largely driven by exit proceeds from SRS distribution and Civica. And further to the distributions received, the new investments made and the first interim dividend paid, the company had cash and cash equivalents of 24 million, 24.6 million euro and the entire revolving credit facility was undrawn as of 30 of june 2024 during the first half of 2024 the company made new investments in rosen group velvet care and pest control partnership although transaction activity recovered more slowly than expected Partners Group, the investment manager, remain focused on operational value creation initiatives at portfolio companies and disciplined underwriting. I will quickly mention some points about ROSEN and VelvetCare, while Federica will cover later on in the presentation best control partnership. Now, ROSEN Group is a global provider of recurring regulatory driven inspection and integrity management services for energy transmission pipelines. It is headquartered in Switzerland, and its core business involves the sending of high-tech precision sensors through pipelines to detect corrosion or minor cracks, helping customers to optimize throughout and extend the useful life of essential infrastructure assets. Value creation initiatives include Salesforce and go-to-market optimization and continued investment in technological innovation, R&D, and capital expenditure. While headquartered in Poland and with a history stretching back to 1897, VelvetCare is one of the largest independent manufacturers of branded and private label hygiene paper in Central and Eastern Europe. With over 800 employees, VelvetCare distributes finished branded and private label products via supermarkets, discounters, wholesalers and other retailers. Its largest markets include Poland, the Czech Republic and Germany. partners group will work with management to build on the company's strong position and drive growth, while key value creation initiatives will include expanding international reach, broadening the product portfolio with a focus on high growth categories, and making targeted acquisitions. Now, moving on to the next slide, despite the challenging and subdued environment for exits, the company achieved substantial distributions totaling €103.7 million, reaffirming the strength and quality of its portfolio. The significant sum was predominantly driven by exits from portfolio companies SRS and Civica, which contributed €92.4 million. The remaining distributions were predominantly received from more mature investments across the portfolio, underscoring the benefits of diversification. The largest distribution in a month of 70.2 million euro came from SRS, which, as you know by now, was sold to the Home Depot. The transaction closed in June this year. Now, based in the US, SRS is one of the largest distributors of roofing, landscaping, and pool supply products. Founded in 2008, SRS has grown via acquisitions and greenfield branch openings, while same-store sales growth benefited from an expanding U.S. property market and rising roof replacement demand. The company also expanded into several new distribution segments, including landscaping and swimming pools. €22.2 million came from Civica, the UK-based provider of cloud software solutions for the public sector. Since Partners Group's initial investment on behalf of its clients in 2017, Civica has grown into a global leader in this space. Civica's software is used by over 6,000 public sector customers for the running of essential government functions across four verticals, including local government, healthcare, education, and central government, enabling improved delivery of services to citizens while reducing costs and boosting revenue and productivity. With this, I would like to hand over to Cyril.

Thank you, Andrea. Good morning also from my side. Let me quickly talk about the private equity market in general. And because Partners Group Holding is a public company and I was the former CFO, I know both worlds pretty well, private equity and public equity. So I would like to compare public markets with private markets But I'm preaching my own gospel here, thus I will be quick, because the fact that you dialed into this call already shows that you're a believer in private markets. I will then explain the parts group investment approach, and in that context, closing with an illustrative example. Now, last year, 2023, has seen extremely low exit activity. And although compliance keeps repeating that past performance is no indicator for future performance, it is often very helpful to look back at the history to understand the future. And if you look back the last 30 years, Parties Group was founded in 1996. And since then, the world experienced several ups and down market cycles. And guess what? After the bull market follows the bear market, then after it follows the bull market again, For example, 1995 to 1998, we all remember the dot-com bubble, great exit activities for the private equity industry. Then 2001, 2002, dot-com bubble bursted, record low exit activities. But in 2004, 2006, great recovery, a lot of exits, and followed by a global financial crisis correction, 2007 and 2008, low exit activity. Then great recovery in 2011 to normal, back until 2018, then COVID-19 hit. but then followed a high 2021. And as always, after high comes low, and those 2023 was a low. So the good news is that a trough, it means that the future will be brighter. So I don't have the crystal ball, but if you look at the first half of 2024 on the next slide, on page nine, then you see that in H1, 2024, we already have seen an improvement in exit activity, because this year is on track to be more of a normal exit activity year, meaning in line with 2018 and 2020 levels. So we have seen there are cycles, but there's also trend. And if you look at the trend on page 10, the private equity industry is clearly showing upwards. So private equity assets and the management had tripled the last 10 years from 3 trillion to 10 trillion U.S. dollars. And it's estimated to double again the next 10 to 15 years from 10 trillion to 20 trillion. And the real economy is happening in private markets, not in public markets. For example, in the US, 87% of companies with more than 100 million revenues are private. So that means that the private equity industry in the US alone has more than 20,000 companies to choose from, whereas the public market investors can only choose from less than 3,000 public companies. And the trend in public markets is negative. Look at the number of IPOs, for example, the 20 years 1980 to 2000, 6,500 IPOs versus the 20 years 2000, 2021, only 3,000 IPOs, so less than half. And even those companies which are public, they sell subsidiaries which they believe are non-strategic. And these are estimated to amount to 10 to 15 billion. And of course, a divestment of a public company means an investment for a private equity company. And on page 11, not only the number of new IPOs are declining, also the number of public companies which are public are declining. So today the world has half the number of public companies than 25 years ago. For example, in the U.S., a fall from 8,600 to 4,300 companies being public. And the industry has changed too. So IT companies in 2010 made up 20% of public market caps, versus today over 40%. So IT is increasing, but normal industries like industrials, energy and financials are declining in weight in public markets. And we all have noticed the dominance of the famous Magnificent Seven in public stocks in the MSCI World Index the last 12 months, to a point where the MSCI World Index is not representing any more normal private equity companies, I believe. So what the future will be? Now on page 12, we distinguish between active and passive approach. And in public markets, I have to say, the asset management industry has changed dramatically. I mean, in the past, highly experienced portfolio managers were paid to outperform a benchmark alpha for being active. That was the key success is being active. But nowadays, more and more investors give their money to passive index funds, and the fewer remaining active funds force their portfolio managers to minimize the tracking error to a benchmark because of risk management reasons, which of course leads to performance of these funds being more and more beat up. We also see a similar development in private markets too, but private markets work totally differently. When a private equity manager buys one company, nobody else can buy the same company. So BlackRock, for example, cannot come and buy 1% of each private equity company and make an iShare ETF index out of it at low cost. In private equity, the closest to an index fund is maybe a funder fund, where the manager tries to replicate beta by committing to as many private equity managers as possible. But we at Partners Group, we believe we need to be active. We need to find alpha, not beta. And in private equity, you need to work hard to create value. You buy a majority stake, so you need to take the lead to the business as an owner. You need to have active stewardship. You need to be an entrepreneur. And on page 13, we used the word transformational investing at Partners Group. And what do we mean by this is that we don't want to buy a company to increase sales only marginally by, for example, 10% or reduce costs by 10%. No, we want to double or triple the EBITDA during our holding period. And if we would aim for only marginal improvements, we would call it marginal investor or something like that. But we want the improvements during the years of our holding period being substantial, hence the term transformational. And how do we try to achieve this? So on the one hand, the process how we find the new attractive investment opportunities is very systematic. We do key, we do deep dives into sub-sectors of each industry to find high conviction targets. And once we have invested in a company, we run the business as entrepreneurs, meaning entrepreneurial governance, meaning value creation through platform building and asset transformation. And on page 14 gives you more color on these two boxes. On the left-hand side, entrepreneurial ownership means that we find the best possible board members and we want them to be active. meaning, for example, minimum one day per week that they need to spend working on this company, and they need to take full responsibility for one important value creation driver, for example, bringing a U.S. company to Europe, or M&A growth, or whatever it is. They need to have a five- to ten-year vision. And knowing Parts Group, you know we are interested in hard data That means not just a marketing blah, blah, but board members are measured by clear KPIs with annual board assessment reviews, and we even have a proprietary software for this, which we call PG Alpha. And on the right-hand side, examples of transformational levers which drive EBITDA growth are digital transformation, new products, new regions, platform building, complemented by pricing excellence and operational efficiency improvements. So my last three slides I would like to spend on a case study about Diversitec, which is a very successful HVAC company in the U.S. And HVCA stands for heating, ventilation, and air conditioning. Thus, Diversitec makes money on installing, maintaining, and repairing air conditioning devices, which can not only cool in summer, but also can heat in winter. Partners Group runs its business as entrepreneurs to drive fundamental value creation and develop the systematic operational value creation playbook to drive growth and profitability improvements. On page 16, you see that Diversitific has increased their revenues by 30% to 0.9 billion US dollars during our holding period, which is basically the last two years. It is a complex business with over 300,000 orders fulfilled per annum because customers can choose from 30,000 different parts from Diversity Tech. Diversity Tech has done 18 acquisitions since 2015. And reading all the private equity managers' reports, every company they buy is always a leader. But here it's actually really true. Diversity Tech is a top five of its seven product categories. A typical example of value creation is bringing a successful U.S. company to Europe. This does not always work because, for example, culture differences, but it works surprisingly often. For example, the French are well known for the cuisine, the art of fine dining, but who would have thought that the largest European McDonald's hub with over 1,500 McDonald's locations is France? So Diversitec managed to increase the number of subsidiaries in Europe selling air conditionings and maintaining them and repairing them from one to six subsidiaries in the last two years. And although I'm not allowed to disclose the revenues or EBITDA of the European business, I managed to get approved to mention that the EBITDA of the European business has grown by six times the last two years. And because of this, the share of the European business as percent in the total business has grown from less than 5% to 20%. With this, I would like to hand over to Federico to talk about the portfolio and performance of PGP Limited.

Thank you, Cyril, and good morning, everyone. I'll take it from here and provide an update on portfolio developments over the first half of 2024, as well as an outlook on portfolio activity. We'll start here with a slide that you should be familiar with, one that recaps PGP Limited's portfolio composition which is really designed to reflect the company's goal, meaning to provide access to a high quality portfolio of direct private equity investments with broad sector and geographic diversification. I will not go into the details of every single chart or name here, but I will take a moment to highlight key changes to portfolio composition versus the last quarter. First of all, the percentage of portfolio NAV in direct private equity investments continues to take up and it currently stands at 97%. The exit of SRS distribution also changed the sector and regional split of the portfolio at the margin. And now we have a more balanced sector split between healthcare and industrial versus last quarter. as well as a more balanced split in regions between Western Europe and North America versus the previous overweight to the US. SRS was also the portfolio's second largest position at the end of Q1, and this exit changed the composition of our top 10 portfolio companies that you see here on the right-hand side of this slide. At the same time, strong performance from International Schools Partnership and Galderma means that these two companies entered the top 10 following positive revaluations during the quarter. But there has been some turnover in the top 10 names. There have been no meaningful changes in the share of the portfolio this company represents. And you'll see that our top five are stable at just around 30% of overall NAD. familiar as many of you might be with our top 10 positions it is worth highlighting that pgp limited portfolio has much more depth to it in terms of single name diversification with over 70 portfolio companies across our 4pg thematic vertical and an average position size of 1.5 percent the portfolio does not rely on just a handful of assets to drive performance The number of positions alone, however, does not fully capture concentration risk. The size of each individual position is also a critical variable that determines overall portfolio risk and return. We tried to depict this graphically here on this slide, where each square in this puzzle represents a portfolio company. And the size of the square approximates the represented share of each asset. As a portfolio manager, my goal in portfolio construction is to proactively manage the size of the position in line with available liquidity as well as investment flow, remaining mindful of concentration risk and at the same time of over-diversification. Finally, before moving on, I'll spend a word on sector diversification. Academic literature, but also maybe common sense, sees strong value in sector diversification in public market portfolios. But this might not always be the case in private markets. Due to the very nature of private market investments, which rely on active engagement with portfolio companies to generate performance through bottom-up value creation, evidence suggests that managers who leverage their specific skills and expertise focusing their efforts on fewer sectors or themes to demonstrate better outcomes and performance. And at Partners Group, we embrace this approach. We do so by investing through a thematic lens across four industry verticals, technology, goods and products, health and life, and services. And here you see these four sectors and verticals represented by four different colors on the chart. On the next page, I will just touch quickly on what we consider to be our return engine. That's how we call it here. And that's the balanced vintage year diversification. You might recall this slide from previous updates, but I really cannot overemphasize the importance of steady deployment to spread risk across macro and market environments, but also to sustain portfolio liquidity over time. we'll return to the vintage years topic later on in the call and i will therefore leave these slides for now for you to take in but the one point i'd highlight um is really the almost perfect 50 50 split between mature assets in the portfolio and younger assets indicated strong support for both upcoming portfolio liquidity but also for continued value creation As we continue again on value creation, I'll take a moment to highlight two recent investment examples that illustrate different ways in which partners groups design and execute value creation plans. In the first case, it is about building an international platform through strategic acquisition. Well, in the second case, it is about continuing to accelerate strong organic growth in what's already a widely recognized leader in its market segment. We'll talk about Pest Control Partnership, an investment that came into the portfolio during the first half of 2024 and represents partners group plans to establish a proprietary buy and build leading international platform in a 22 billion euro global pest control sector. With Pest Control Partnership, we aim to replicate the successful playbook that we've employed in building out other platforms, such as the international school partners, by anchoring value creation around three steps. First, acquire small, profitable, independently owned operators at a creative multiple. Then integrate the acquired targets into a platform to drive operational efficiency, building density and scale. And finally, leverage technology to further enhance service delivery and back office efficiency while improving the quality of customer service. As risks posed by pests in commercial and industrial settings increase as a result of structural trends such as urbanization, globalization, and climate change, pest control partnership targets to offer traditional and technology-enabled services to address these challenges. Services such as integrated pest management, food safety and auditing are crucial for businesses and organizations where pest issues can have a significant impact on productivity, product quality, health and safety, and regulatory compliance. With thousands of potential targets in Europe alone and over 10 already in exclusivity, Pest Control Partnership Management Team is already actively working to deliver on our ambitious value creation plan. More recently, in July 2024, Partners Group agreed to acquire a majority stake in Fair Journey Biologics, a leading antibody discovery contract research organization, trusted partner of leading pharma and biotech company. This is a company that primarily focuses on discovering development of antibody-based therapy. Our investment team track the assets since early 2022, for over two years, and initiated detailed commercial due diligence in 2023. Over time, we built a strong relationship with Ferdinand, CEO and founder, while also engaging with the majority shareholder, GHO Capital, which ultimately positioned us as the preferred owner to steward the company through its next phase of growth. Partners Group will work with CEO and founder, who will remain a significant shareholder, and his management team to drive strong growth while identifying add-ons of complementary capabilities and technologies to unlock faster, more effective drug development for Pagerney's partners. This transaction is expected to close in the coming weeks, formally entering PGP limited portfolio in Q3 2024. I'm very pleased to add these two assets to the portfolio as two foundational businesses that provide proven scalable solutions to address significant challenges facing our environment and our society. On the next slide, we see how our investment teams continue to build a solid pipeline of investment opportunities to support deployment. These are automatically sourced across our verticals and then screened by our Global Investment Committee. Just earlier this week, in the middle of summer really, four brand new opportunities were presented to our ICs for the first time. The ones you see here are already more advanced opportunities, which have been through the first round of due diligence screening. And we might indeed see some of them coming into the portfolio down the line. There's no need to go into the details of every company here, but please do notice how these names are spread to cover various sectors, countries, enterprise size, and also end market. All these assets have one thing in common. If you skim through the short description, you'll note how most of these companies are the leaders in their respective market segments, consistent with our approach to focus on market-leading companies. that we see as best positions to capitalize on their market share and reputation to further grow, to withstand market challenges, and to protect margins and profitability. Investing in market leaders or transforming companies into ones will also help position such companies for successful exits. And as we spend a moment to update you on ongoing monetizations and upcoming exit processes, it is no coincidence that the names in focus are recognized leaders in their market. Starting here from SRS distribution, Andrea has already mentioned the receipts of full proceeds from the sale of this company to Home Depot, SimonQ1. Last quarter, we conservatively indicated the transaction was likely to close towards the end of the year. But in fact, we received 70 million euros in june 2024 and these were used to pay down our outstanding credit facility together with the 13 million euros received from srs distribution during the life of the investment until q1 2024 this translated into realized gross multiple in excess of five times money Another woody update here is on Galderma. The stock price of the company is up 25% approximately since IPO earlier this year, now implying an enterprise value in excess of $20 billion. Most importantly, the six-month lock-up and share period is due to expire at the end of September. And a gradual sell-down of our stock could potentially commence earlier in Q3, following the acquisition of a 10% stake in the company by L'Oreal. Finally, a word on Avis Financiers. Possibly a less well-known and certainly smaller company, Avis is a leading financial company that primarily focuses on unbanked and informal income segments of home buyers in India. We invested in Avest in 2016 in what was at the time the largest financial services buyout in India. Under our ownership, the company grew into a scale business, thanks to a number of strategic initiatives around product and regional expansion, but also business digitalization and management upgrades. We IPO'd the company two years later, in 2018 and gradually sold down our stake between 2020 and 2024, already realizing a DPI of over three times at the end of June. What's new here is that we recently signed an agreement for a final stake sale to CVC Capital. This is subject to customary approval and expected to close in the next six months, leading to an expected growth to DPI for this investment in excess of five times. In line with the overall company size, PGP's limited position in Avas is relatively small in the context of the portfolio and will not be a needle mover from a liquidity perspective. However, I do think that this investment is not worthy as a testament to our ability to realize value across business sites, regions, and also different exit avenues. So here we have the highlight of three companies where we've seen recent meaningful development towards either full or partial realization. But our confidence in portfolio liquidity is more broadly supported by the overall positive momentum we've seen on exits over the past 12 months, as well as by the ongoing processes that involve more than 10 companies in our portfolio at the moment, which we look forward to updating you on in future quarters. Moving on to performance, I'm pleased to report that the company's portfolio is exactly, is doing exactly what it does on the tin. That is providing access to a private equity portfolio whose returns are driven by operational value creation in direct investment, where partners group transformational ownership approach is central to unlock that return. Gross portfolio performance for the first half of the year was 4.8%. which is what you see in the dark brown bars in both charts here on the slide. On the left-hand side, we decompose the return by breaking it down by asset type. And we can see how this is almost exclusively driven by direct investments and primarily a private equity one. Notably, the sales of SRS distribution at over 30% uplift to the company's prior valuation provided the largest contribution. But amongst other meaningful drivers, I'd like to highlight PCI Pharma, the portfolio's largest holding of today. Since our initial investment in 2016, PCI has achieved an EBITDA CAGR of over 20% and continues to outperform expectations, surpassing our initial 2016 underwriting assumption. The company continues to surpass also revised projections from 2020 when we partially realized our investment selling part of the equity while continuing to actively contribute to the value creation through our two board seats. On the right-hand side, we instead decomposed the portfolio return by financial metrics. The results show that EBDI growth, that is the value creation at the operational level within our portfolio company, is the main driver of performance, and clearly so. Increase in EVB day multiple also contributed positively to total value creation, and so did portfolio changes, mainly represented by the SRS exit and the early positive performance of our new asset, VelvetCare. These positive effects were only partially offset by an increase in debt at the portfolio company level, as we took the opportunity to refinance some debt packages at lower spread, to strengthen capital structures, to sustain growth, and platform building plans for our companies during the period. On the following page, we have a snapshot of portfolio NAV broken down by TVPI marks. which can be seen as an indication of value creation initiatives being reflected in portfolio company value. There have been no material changes here versus previous quarter, and over 90% of our NAV remains marked above cost, resulting in an NAV weight in money multiple just under 2.2 times. If we exclude assets whose performance is too early really to be assessed against our plan, Over 60% of portfolio NAV is outperforming our base case underwriting plan, and a further 30% are on plan with our underwriting plan, with less than 10% NAV falling below our expectations. As mentioned last time, underperforming assets represent a limited and contained set of investments whose negative news has been largely reflected in the portfolio already, and we do not see them significantly impacting performance going forward. Indeed, there were no changes in this component of the portfolio, which remains stable, limited, and well-monitored. On the bright side, instead, we notice a clear correlation between the holding period of our assets and their valuation marks, suggesting that we continue to compound growth towards, sorry, throughout our holding period, all the way through realization. And we explore these aspects in a bit more detail on the next slide. where I break down portfolio NAB by marks and by vintage year. It is a very dense slide. And while you'll see a lot of red figures in here, there's nothing to be alarmed about. In Partners Group recent rebranding, red is the color we use to highlight positive aspects and key takeaways. Let me then use the four boxes on the top right here to help me guide you through the main summary points. Four and a half years is the average holding periods for companies in our portfolio today. This figure is approximately half a year higher than it was two years ago, as macro backdrop has resulted in low transaction volume in the market and longer holding periods. This extension of holding period has somewhat weighted on portfolio IRR, a metric that is influenced by the timing of cash flow. And it has done so especially in 2022 and 2023, when many of the assets we invested in pre-2019 would have normally reached their maturity. In this market environment, however, we remain disciplined, held on to our assets, and decided to sell when the time is right, continuing to compound performance as they approached or even surpassed, in certain cases, our target holding period of five to six years, as you see in the second box. The question then becomes, how are our pre-2019 assets performing? Are they going to drive future performance? To answer, I'll move to the bottom boxes. First, 50% of our NAV is in companies we've been holding for over four years. And some of these are our best-performing assets, and recent performance drivers are included in these clusters. Think PCI Pharma again, Avis Financiers, or KinderCare. As you can see from the red area in the two left bars in the chart, these assets are largely held at a multiple that is in excess of two times investment. However, the last figure shows us that the weighted multiple we've realized on last 12-month exit stands higher than two times, at around three times my multiple. This is also very much in line with the multiple we've achieved for pre-2019 assets that we have already sold to date, including, for example, the recent sale of SRS at an uplift of over 30%. In summary, to bring this all together, our more mature companies are performing well, and the majority of them have been preparing for exit. While I must say the past performance is not indicative of future results, we do take comfort in our realized track record and are encouraged by recent transactions like SRS and Golderma, indicating that our mature assets retain upside potential also at exit. I will now hand it over back to Andrea to summarize discussion points before opening up for Q&A.

Thank you, Federica, for this very comprehensive presentation. Now, let's take a moment also on this slide, which shows the consistent performance across cycles of Partners Group Private Equity Limited. So the company's investment objective is focused on delivering long-term capital growth and an attractive dividend yield. Over the last 10 years, we've achieved double-digit annual returns for both share price total return and NAV total return, showcasing our commitment to creating long-term value. This consistent performance across market cycles reinforces our dedication to delivering sustained growth and our year-to-date results further underscored this with a healthy 4.1% year-to-date NAV total return. Moreover, dividends paid out over the last 12 months have yielded 6.3% based on June's closing price, aligning with our objective of providing an attractive dividend yield for our investors. Now, before we move on to the Q&A, I would like to leave you with the following points. PGPE Limited provides shareholders with exposure to Partners Group's direct private equity investment strategy, participating in transactions alongside some of the world's largest institutional investors. Partners Group is a thematic investor, focusing on investments in companies where growth is underpinned by long-term transformative trends. Now, PGPE LTD portfolio demonstrates diversification, providing investors exposure to companies operating in a variety of industries and jurisdictions. The portfolio was built over time, achieving a very good vintage diversification. We have an attractive mix of mature assets, but also assets that are newer in value creation stage, and that keeps a consistent performance across market cycles. From an investment perspective, we continue to focus on the disciplined deployment of capital and the identification of companies where we believe we can support management to create value. We believe that the current discount to NAV offers value and provides exposure to a well-diversified global private equity portfolio that continues to generate positive NAV performance. And finally, As already mentioned, the company's investment objective is to generate long-term capital growth and an attractive dividend, and it has achieved double-digit NAV and share price total return performance over the last decade. With this, we conclude the update, and at this point, we are happy to open for the Q&A. I see we already have a number of questions in the webcast. And as already mentioned earlier, we will group similar questions and answer in one go. I already have a first question here. For you, Cyril, could you please talk more about how you source deals?

Yeah, of course. That is a simple question, but a very long answer, but I tried to make it short. So we are doing thematic sourcing. So that means we have five industries. We have goods and products, health and life, technology and services. We have 200 full-time employees who do nothing else, but Sourcing investments is one of the largest in-house teams across the globe. And we're looking for established business models with meaningful margins, experienced strong management, which are positioned for growth. These are the criterias. And we source about half of the investments which we source is from our integrated platform and the other half from our internal network. um but the key thing is that on average from thematic source research to sourcing it's more than two years of preparation so it's a very long time and the idea is to be proactive to try to identify those companies which we want to own and then approach the owner actually before there there is a sale going on so one or two or three years before there is a sale intended

approach the owner and say hey you have a great business we would like to buy this business from you thank you cyril okay now i uh see also question for for you federica in the report you state that you have 125 million of unfunded commitments uh could you provide some comments around what these are yes absolutely

So of the 125 million unfunded commitments represent everything that we are sort of legally bound to unfound. So we are very conservative in estimating this figure. 35 million out of these 125 are pre-2015 commitments, mostly unfunded commitments to fund holdings. that are largely now in harvesting phase. And so we really consider this extremely unlikely to fund. Of the remaining 90 million, approximately a third is undrawn from direct investment that we have made within the portfolio. And we expect these to draw over the next few years as our companies continue to build and grow. And then we also have approximately 50 million of unfunded commitments to active partners group flagship private equity funds. And again, here we expect approximately 90% of these will be called in line with the typical call level of a primary fund. So out of the overall 125 million figures, I would guide towards approximately 80 million unfunded commitments expected to be called over the next two to four years.

Thank you, Federica. I also see that we have a number of questions around the ethics management in the portfolio. Could you give us more color on that?

Yeah, sure. You might remember that we discontinued our FX hedging policy early in 2023. And since then, we are not actively hedging the FX exposure of the portfolio. Having said that, we do report on a monthly basis in our monthly report the FX, the currency breakdown of the portfolio for investors that wish to hedge their currency risk on their side.

Thank you. Okay, now I have a question for you, Cyril, as well. Do you have any numbers on portfolio company EBITDA or revenue growth across portfolio, anything regarding the margin, given the focus on value creation?

Yeah, I'm actually a little bit disappointed to have several of you asking this question because we spent so much love the last couple of months to develop page 26, 27, 28 of the presentation, which we believe are better positioned to actually explain the performance and how much came from EBITDA, how much more came from EBITDA multiples, how much came from net debt. So the short answer is the following. The average EBITDA growth last 12 months as of June is 9%. The EBITDA multiple is 17 times and the net debt in percent of EV is 35%. Now, the longer answer to this is how you calculate this. And I think you all know that I have written my PhD thesis in private equity elevations. But I think my habilitation for my professor, I will write on this topic because I realize it's actually not so simple. So, for example, what do you do with public companies like Galdermo, which the valuations are not made using EV, EBITDA, but they're actually, you lose the listed share price. Or what about infrastructure companies like Ascentia? which are not valid at EV-EBITDA, but they are using the discounted cash flow model? Or what about exited companies as SRS distribution, where we don't use EV-EBITDA multiples anymore, but we just use the exit price? Or what about new companies which entered in H1 2024, we were not there last year? Or exits of last year, which are not there anymore this year? You never have a real good like-to-like comparison if you calculate an average. And even if you calculate an average, how do you calculate an average? Simple average, NAV weighted average, beginning of year, end of year, average period. So what we have done here in these figures which I announced, we have taken the average NAV as of the end of the year, end of June, divided by two, and we have used 51 companies which represented 91% of NAV as of June and we have excluded the public companies like Alderna, we have excluded the infrastructure companies like Accenture, we have excluded the exited companies like SRS Distribution And if you ask the question about M&A, also there we dig into the numbers more deeply. What we included is actually the closed M&A transactions, but not the pro forma kind of expected to close M&A transactions in these figures. But I believe it's always a snapshot. as of a certain date, as of December, as of June. So it's not the best to actually try to understand the performance of the portfolio.

Thank you, Cyril. Now, we also have a couple of questions around the liquidity and also share buybacks in light of the capital allocation policy. And I mean, as I already presented earlier during the webcast, I mean, the capital allocation policy respects the liquidity position and waterfall of the company. As such, the dividend, as well as ongoing fees, expenses, repayment of outstanding indebtedness, and the reserve to meet existing investment commitments will be provided for prior to excess free cash flow being used for share buybacks according to the mechanism which was described. As we start to see more exits and distributions, It is expected that free cash flow will turn positive and then, depending on the share price or not discount, surplus cash flow would be available for buybacks. Now, I have another question for you, Federica. Now, the report and presentation don't hold any information around portfolio level debt. Would you provide some insights on this?

Yes, assuming that portfolio level, that means the use of credit facility. We closed the first half of the year with no drawn facility within the portfolio. As I mentioned, we used receipts from SRS distribution sales to fully repay our outstanding facility, which previously stand at approximately 40 million euros. As of today, also, we remain fully undrawn on the facility. Going forward, I would indicate we will continue to use the facility as always, so to really bridge short-term mismatches between cash inflows and outflows. And again, staying around the 0% to 5% of NAV in terms of facility utilization, which is what we've been consistently doing for the past years.

Thank you, Federica. Now I see a couple of other questions. One of them back again to maybe to the ethics, right, and to the exposure. Why did your currency exposure change in June?

Yeah, I mean, I touched on the portfolio changes when covering the diversification slide. The exit of SRS, which represented approximately 7% of the portfolio, did change the regional composition of our portfolio and also the currency exposure. So that's really what was the... what was the driver there. The balance between dollar and euro currency exposure within the portfolio shifted around, so we are now currently standing at approximately 47% euro, while beforehand we had 47% dollars. Now really the SRS exit was the main driver there.

Thank you very much. Now one last question before we close with the Q&A. And actually, I think this one is still for you, Federica. So are you underweight on technology as a sector?

Already the term underweight means that we're implying the use of a benchmark, right? So I guess this comes from a perspective of someone looking at us versus, for example, the MSCI world, where as Cyril has mentioned, the technology exposure is closer to 40% of the index. So yes, we are underweight technology versus the MSCI world. But one could also argue that the MSCI world is overweight technology sector as a whole. So what I would say is that we respect really our goal, which is to be aligned with partners group platform and we do our in terms of our exposure to IT. And we're also very much aligned with the small cap public equity investment universe, which has only approximately 11% in their technology exposure. Perhaps what I could also point out is that we had very successful realizations in our IT portfolio, I think in GlobalLogic, FDI Global, or even Civica more recently. This also means that our technology segment in the portfolio is newer, is younger, right? So potentially yet to grow into their valuation in terms of size. Over time, as these newer assets grow in value and size, and we continue to add new ones, by the way, I would potentially expect the technology exposure to increase at the margin, but I would still see this at around 15 to 20% of portfolio, probably not reaching the values for, again, indices such as the MSCI world as they are today.

Thank you, Federica, very much for this. With this, we will conclude the webcast today. We would like to thank you all for joining the webcast, and we wish you a wonderful day ahead. Have a lovely day.