Petershill Partners PLC

Good day, everyone, and welcome to Peters Hill Partners interim results first half 2025 results call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question and answer session. I would like to advise all parties that today's call is being recorded. Before we begin, I'd like to remind you that during this call, we may make a number of forward-looking statements which could differ from our results materially. and Peters Hill Partners assumes no obligation to update these statements. I'd like to also encourage you to take a moment to read and digest the disclaimer on slides two and three of the presentation. By attending this presentation, you will be deemed to have read and understood the terms of the disclaimer and agree to be bound by them. A replay of today's call will be available on the investor relations section of our website, along with a copy of our interim results and presentation. Now I'd like to hand the conference over to Ali Racy-Decordi, co-head of the Petershill Group within Goldman Sachs Asset Management. Please go ahead.

Good morning, everyone, and thank you for joining us to discuss the Petershill Partners interim results covering the first half of 2025. Today I'm joined by Naguib Kharaj, Chairman of the Independent Board for Petershill Partners PLC, Robert Hamilton Kelly, co-head of the Petershill Group, and Gergit Kambo, CFO of the Petershill Partners PLC. Before we discuss our financial and operational results, as you may have seen, this morning we have made an additional announcement. This sets out the Board's proposal and intended recommendation for Petersell Partners to implement a return of capital to all Free Float shareholders, which will involve the cancellation of the Free Float shareholders' shares and to delist from the London Stock Exchange's main market before re-registering as a privately limited company. To discuss this proposal, I'll pass you on to Naguib.

Thanks, Ali, and good morning. We've announced an important set of proposals today which we believe will provide a compelling opportunity for shareholders in Petershill Partners. The proposals would deliver with speed and certainty a return of capital to the free float shareholders at a substantial premium to the undisturbed share price and a price which is fair to all shareholders. The consequence of the proposals would be that the free float shares would be cancelled and the company would cease to be listed on the stock exchange. Let me take you through the key aspects and the way the Board has thought about the issues in coming up with the proposals. On slide six, we set out the value proposition, which is a total payment to free float shareholders of 420.2 cents per share. This is made up of 415 cents per share for the return of capital and an interim dividend of 5.2 cents per share. The total payment is a 35% premium to yesterday's closing share price. and a 41% premium to the volume-weighted average price for the past six months. The total value equates to a 10.6% discount to book value as compared with the average discount to book value of 37% that the stock has traded at since January 2024, and it represents a P.E. multiple of 18.5 times. For a shareholder who participated at the time of the IPOs, this would translate into a total return over the period of 16%. This compares to the total shareholder return for the FTSE 250 over the same period of approximately 4%. Moving on to slide seven, I'd like to explain the background and rationale for the board's proposal. Peters Hill Partners was listed on the London Stock Exchange in September 2021 with a goal of providing shareholders diversified exposure to the growth and profitability in the alternative asset management industry. We've delivered on that manifesto in terms of growth of assets under management and fee-related earnings. despite the macroeconomic headwinds and the challenging environment for alternative asset management investing. We've also increased the focus on private market strategies, and so now 95% of our AUM is in private markets with long-term lockdown capital. Slide 8 outlines some of the actions which the board and the operator have undertaken to drive value creation in addition to the company's underlying performance. At the time of the IPO, we spoke about our intention to generate value through M&A activity. Over the past four years, we've invested $1.3 billion in 14 transactions, acquiring stakes in new partner firms or adding to our existing holdings in some firms. We've also sold five partner firm stakes at premium valuations, realizing an aggregate nominal value of approximately $1.9 billion. As a board, we're very conscious of our responsibilities as stewards of shareholder capital. In addition to the regular dividends paid out of operating earnings, we've deployed capital on share buyback and last year made a tender offer of $103 million at a premium. Following the tender offer, we switched to returning capital to shareholders through special dividends, so we didn't shrink the free float any further and have paid $438 million in special dividends. Despite the underlying operating performance and these actions to create value and optimize capital efficiency, the Board does not believe the company's share price and valuation has appropriately reflected the quality and value of the company's assets and its attractive growth prospects. Since the 1st of January 2024, the company has traded at an average discount of 43% to the P multiples of listed US and European alternative asset management firms, and an average discount of 37% to reported book value. The Board's view is that this valuation discount reflects the fact that investment companies are generally trading at a discount to book value, especially where their assets are illiquid. In addition, macroeconomic market, geopolitical and industry factors have dampened interest in our kind of business, and the low level of liquidity in the stock due to its limited free float has also been a factor. We believe that absent any significant catalyst, these factors and the valuation discount would endure. And at these valuation levels, the private funds managed by Goldman Sachs would not be sellers, and so the free float would remain small and the liquidity in the stock would continue to be limited. Having made a number of disposals, the company has cash available on the balance sheet and a substantial amount of near-term receivables which are contractually binding deferred payment obligations. As a board, we've been considering how we would use that capital optimally for the benefit of shareholders. One option would be to redeploy it into new investments. However, if the market were to continue to value the company at a large discount to book value, then every dollar of new investment may end up being valued in the stock at significantly less than a dollar. If instead we were to return the capital to shareholders, then the distributions would enable shareholders to receive cash back at full book value. But by shrinking the company, we would reduce our future growth prospects and potentially, with a smaller company, present a less attractive investment opportunity, which in turn could result in a lower valuation and a higher discount to book value. So as an alternative, we determined that we could mobilize resources in such a way as to create a near-term opportunity to provide the free float shareholders with the ability to realize their investment at a substantial premium to the current market and at a level close to book value. Slide 9 sets out the sources of funding as well as the key factors the Board considered in assessing the value at which the transaction would make sense. We have a good starting base because we regularly attribute a fair value to every partner stake as part of our financial reporting. This takes into account our assessment of future growth, and we provide extensive disclosure in our financial statements of the discount rates and other parameters which are used to come up with a fair value. We also use external valuation experts. But the financial statement values do not take into account illiquidity. By definition, all our investments are minority stakes, and are inherently illiquid. We cannot control or easily drive exits or sales and have to work with the majority owners. Some of our partner stakes are very large and so would have a limited universe of potential buyers. And if we were to declare ourselves to be a seller of assets in a runoff, this could also have an impact on achievable values. So our situation is not the same as an investment company which holds a portfolio of liquid traded stocks which can easily be sold in a short space of time. If we think about the discounted cash flow value at the level of a PLC shareholder, this is slightly different to the aggregated book value of the positions held on the balance sheet. The book value captures the gross value of the individual investments and takes a provision for taxes and divestment fees, assuming those assets are sold at those marks. What the balance sheet book value doesn't capture is the present value of future operating costs of the PLC vehicle, such as the operator's fees and governance costs, nor does it capture future taxes on earnings if one were to realize the underlying cash flows from holding the investments. We've taken these factors into account. Of course, all the valuations have inherent in them considerable uncertainty on timing and achievability. What we have on offer in our proposal is certainty of cash proceeds within a short period of time. We're effectively providing an acceleration of value realization. So when we look at the value being put forward in these proposals, we think that the price represents a fair price for all shareholders, and our external advisors have also come to that conclusion. Slide 10 explains the structure and the timetable. The proposal is to be implemented by a court-approved scheme of arrangement in which the company will return capital to free float shareholders and cancel their shares. There is no third party offer and this is not an offer by the private funds managed by Goldman Sachs. The practical result is analogous to the free float shareholders selling their shares. And the end outcome, when the free float shares are cancelled, would be that the private funds managed by Goldman Sachs, which currently owns 79.5% of the company, will end up owning 100% of the company. All of the resolutions involved are inter-conditional, and the deal will not happen unless they are all passed. For the capital return, the outcome of the shareholder vote will be determined solely by the free float shareholders. It requires 75% of the free float who vote in order to pass the resolution and the private funds managed by Goldman Sachs will not be able to vote their shares and they will not participate in the capital return. We expect to post the documents relating to the transaction on the 7th of October and the shareholder meetings to approve the transactions would take place on the 3rd of November. If approved by shareholders, the cancellation of the shares and delisting would happen in early December and the cash settlement would take place shortly after that. I hope you found this explanation helpful. As a board, we've worked very hard to ensure we optimize the outcome for all shareholders. We believe that the proposals we put forward are a good solution, which enables free float shareholders to realize a substantial premium for their shares in cash and with a high degree of near term certainty. And the private funds managed by Goldman Sachs have confirmed that they also support the proposals. I will be available, as will other directors and the operator team, over the coming weeks to meet with shareholders and answer questions so that investors are able to make a well-informed decision ahead of the shareholder meetings. With that, I'll pass you back to Ali and Gurjit to talk through the interim results.