Partners Group Private Equity Limited

and thank you for standing by. Welcome to the PGPE Limited H1 2025 results call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you may submit your questions via the webcast. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Andrea Martiescu. Please go ahead.

Good morning, and thank you for joining today's investor call for PGPE Limited. I'm Andrea Matejescu, and I'm delighted to be here with my colleagues, Dr. Cyril Vitli, Federica Cataniga, and Fiona Gillespie. Today, we'll be sharing an update on the NAF development and portfolio highlights as of 30th of June. But before we get started, just a quick note on the housekeeping. If you have any questions during the webcast, please use the Q&A tool available on your screen. and we'll address questions at the end of the presentation. Now, to ensure we cover as much as possible, we will group similar questions and respond to them in one go. And if you run out of time or you have additional questions afterwards, feel free to reach out to us via email or through the contact form available on our website. Let's get started. The first half of 2025 was characterized by volatility, escalating geopolitical tensions, trade disruptions, and rising concerns over the balance between inflationary pressures and the Fed fund trade path were key factors. These factors also weighed on the US dollar, which weakened against major currencies, including the Swiss franc, euro, and British pound, driven by growing fiscal deficits and policy uncertainty. Turning to performance, the net asset value, or NAV, of PGB Limited closed the first half of the year at €13.79 per share, reflecting a total return decline of 5.7%, which is inclusive of the first entering dividend. This was primarily driven by adverse currency movements, notably by the US dollar 12% depreciation against the euro, leading to a 5.4% negative ethics impact which outweighs the positive contribution from underlying portfolio value creation. Now, on the positive side, performance showed gradual stabilization with signs of momentum building in the second quarter. Now, total return improved to negative 1.2% compared to negative 4.6 in Q1. Strong portfolio value creation at 3% in the second quarter and almost 1% for the half year highlighted the resilience of our underlying investments. However, currency headwinds reduced performance by 3.6% in the second quarter and 5.4% during the first half of the year. In June, we distributed 26 million with the first interim dividend to shareholders, and this corresponds to 37.5 euro cents per share. This distribution aligns with the objective of paying 5% of the previous year and up in semi-annual payments. Over the past 12 months, dividends equated to a 7.5% yield based on the closing share price of €9.72. From a liquidity perspective, following nearly €40 million in distributions received, €80 million invested, and the interim dividend paid, the company had cash-in-cash equivalents of €8.3 million and €120 million undrawn credit security as of 30 June. Looking ahead, economic policy developments are accelerating global economic fragmentation, supporting partners' groups' brave new world essence of increased volatility and uncertainty. These shifts will reshape private market investments for the years to come. We anticipate increased transaction activity over the remainder of 2025 as trade policy clarity emerges, thereby reducing uncertainty. Balanced sector and regional diversification strategies will be important with potentially stronger performance from service-oriented businesses and those with domestic supply chain. So outcomes will vary significantly across sectors and individual companies. As partners group and consistent with our transformational investing approach, we continue to actively partner with portfolio companies to refine and adapt strategies. Our discipline risk management framework tested across multiple economic cycles remains central to this approach. Now, on the next slide. During the first half of 2025, we have received total distributions of 39.6 million. This includes 31.4 million from the gradual sell-down of several of the listed portfolio companies, such as Bischel and Galderma. Another notable contributor was the full sale of Tooth, a leading affordable luxury product retailer, which contributed 7.5 million euros. On the investment side, PGP deployed €18.3 million, with €13.6 million allocated to five new smaller investments. We also made several add-on investments in existing portfolio companies to support ongoing operations and strategic acquisition pipelines. One example of a new investment is Avid Biotechnology. This is a US biologics contract development and manufacturing organization, or CDMO. specializing in small batch production of complex mammalian proteins. It was founded in 1981, and Avid transitioned to a CDMO model in 2018 and now operates four facilities in California with over 370 employees. The company has a strong reputation in the niche sector and benefits from robust organic growth and revenue visibility. Partners Group has strong conviction in CDMOs, and interacts with such companies for several years now as part of the firm's thematic research under the health and life vertical. Maybe just a few words on this slide. Transaction volumes during the first quarter continue the positive trend established in 2024. The second quarter, however, saw another slowdown on the back of renewed macro and geopolitical uncertainty. Realization activity across the company portfolio while remaining below historical averages, showed improvement compared to the 2023 low. We're seeing encouraging momentum with mid-July exit announcement for two of our top 10 investments, PTA Pharma Services and Tekem. Those transactions, expected to close during the second half of the year, demonstrate PGP's ability to create liquidity and selectively reinvest in high-conviction assets, even in the current market. As we gain more clarity on the macroeconomic front, We anticipate cage-up in distributions and investment activity in the second half of the year, with contracted realizations providing comfort on reversion to more normalized levels over the next 6 to 12 months. With that, I would like to hand over to Fiona and Cyril for our special topic.

Thank you, Andrea, and also hello to everyone from my end. So as Andrea alluded to, the first half of 2025 was challenging at the macro level with the complex interplay between trade tensions that span globally, fiscal policy shifts, especially relating to strict immigration policy in the US, and also continued geopolitical tension. However, trade deal announcements with some of the US's key trading partners are bringing more clarity to the outlook, both for the remainder of 2025 and for 2026. This said, domestically to the US economy, We continue to see tariffs as a stagflation-like force, as inflation is expected to creep up from here, albeit without reverting back to the highs related to pandemic disruption, and also in a more tolerable fashion. Now, for growth, tariffs act as a headwind, which is in large part driven by eroded purchasing power among consumers, fears over job losses, that we're driving up precautionary savings, and capex growth, which is still on the lower side, with firms reporting still weak expectations over the next six months. But despite this stagflation-like near-term economic backdrop, we continue to expect the Fed to cut two times 25 basis points over the remainder of the year, with the first cut in September. This comes as upward inflation from tariffs is expected to be temporary, given it is a price-level adjustment upwards that should phase out of year-on-year inflation calculations over a 12 to 18-month period. Also, leaving rates in restrictive territory would likely be unhelpful to a large extent in moderating inflation from tariffs, but would rather risk being a more prominent drag on economic activity. This is especially important given the significant downward revisions to the payroll figures for much of 2025 year to date. Recall here, the Fed has a dual mandate of employment and price stability. So while in the near term we continue to expect growth headwinds from tariffs at a global level and from strict immigration policy in the US more specifically, we see some factors that should support growth in 2026. In the US, this stems from the signing by President Trump of the so-called One Big Beautiful Bill Act. This new budget encompasses front-loaded tax cuts, especially for higher income earners and corporates. This, alongside the expected moderation in interest rates, should prove supportive to consumption and investments. In Europe, the significant fiscal shift out of Germany, away from fiscal conservatism and efforts across the region, both in response to tariffs and also the Draghi report, to boost investments and innovation should also be a tailwind to growth next year. This should come with spillovers to other European economies. Europe also stands to benefit from past ECB rate cuts that continue to feed through to lower rates on consumer and corporate loans. We therefore see Europe's outlook as being stronger than before, given a push for structural reforms and lower rates. To conclude on the investment backdrop, we have gained more clarity on the way forward for the remainder of 2025 and have also grown more constructive for 2026. This said, given the inherently long-term nature of private equity investment, we maintain our thesis of the brave new world in which we expect to see continued, albeit more moderate, macroeconomic volatility, geopolitical fragmentation, and a strong drive for tech accelerations. This stresses the importance of a hands-on active ownership approach with transformational investing. I will now hand over to Cyril to walk us through what exactly this means.