Quarterly results for 31 March 2020

RNS Number : 9828M

Apax Global Alpha Limited

15 May 2020

 

(LSE: APAX)

Apax Global Alpha Limited

Quarterly results for the period ended 31 March 2020

For further information regarding the announcement of AGA's 2020 first quarter results, including the details for today's analyst and investor webcast at 9.30am (UK time), please visit www.apaxglobalalpha.com .

Impact of COVID-19

COVID-19 has a material impact on the global economy. As the crisis continues to unfold, it is becoming clear that it will create substantial humanitarian, social, and economic consequences across the globe. Population lockdowns are pausing many types of economic activity, with the speed of economic recovery remaining very uncertain. AGA's performance in the first quarter of 2020 was adversely affected by the general economic weakness and resulting decline in market values, that followed the measures taken by governments to contain the Covid-19 pandemic. The focus of the portfolio is on sectors less likely to be affected by these difficult conditions than the broader market, however valuation multiples have fallen generally and this has had a negative impact on the Company's Net Asset Value. AGA's liquidity position is robust as we enter this extended period of uncertainty. At 31 March 2020, AGA had cash of €29.2m and its revolving credit facility of €140.0m remained undrawn. Derived Investments of €265.8m provide further source of capital for AGA to meet its commitments to the Apax Funds.

Key highlights

•	1Q20 Total NAV Return1 was -11.9%. LTM2 Total NAV Return1 was 0.0% reflecting the impact of COVID-19 on the portfolio's performance with valuations negatively affected
•	1Q20 Total NAV Return1 of -11.9% contributed by: o  Private Equity -7.9% o  Derived Debt -2.0% o  Derived Equity -1.7% o  Costs and other movements -0.3%
•	1Q20 Total Return1 of Private Equity was -11.6%. Derived Debt delivered Total Return1 of -7.7%. Derived Equity had a Total Return1 of -25.1%
•	AGA was 97% invested with net cash after liabilities of €27.2m3

Adjusted NAV4 movements (€m)	Private Equity	Derived Investments		Cash	Treasury Shares	Facility drawn	Other4	1Q20 Total	LTM Total
Adjusted NAV at 31.12.19	759.4	342.2	3.3		-	-	(12.8)	1,092.1	988.2
+ Investments	1.2	14.9	(27.0)		-	-	10.9	-	-
- Distributions/ divestments	(37.4)	(47.8)	85.3		-	-	(0.1)	-	-
+ Interest and dividend income	-	-	5.2		-	-	(0.5)	4.7	22.3
+/- Unrealised gains/(losses)	(87.0)	(46.3)	-		-	-	-	(133.3)	10.6
+/- Realised gains/(losses)	-	1.8	-		-	-	-	1.8	(17.7)
+/- FX gains/(losses)5	-	1.0	(2.0)		-	-	-	(1.0)	1.2
+/- Costs and other movements	-	-	(2.3)		-	-	0.5	(1.8)	(9.4)
- Dividends paid	-	-	(26.4)		-	-	-	(26.4)	(52.2)
+/- Performance fee reserve6	6.9	-	-		(6.9)	-	-	-	(6.9)
+/- Treasury shares	-	-	(6.9)		6.9	-	-	-	-
+/- Revolving credit facility   drawn/repaid	-	-	-		-	-	-	-	-
Adjusted NAV at 31.03.20 7	643.1	265.8	29.2		-	-	(2.0)	936.1	936.1

Private Equity portfolio highlights

•	Private Equity portfolio performance driven by fair value mark-downs with 1Q20 Total Return1 of -11.6%
•	Calls of €1.2m were paid to AMI and ADF
•	Distributions totalled €37.4m; €17.6m from AEVII in relation to the sale of Sophos, €19.8m from AVIII in relation to partial realisations and escrow (TietoEVRY, Duck Creek, Exact and Neuraxpharm)
•	On a look-through basis, AGA invested c.€23.9m in two new investments (Cadence Education and Accurate) and exited three positions (Sophos, Aptos and Engineering) during the quarter
•	Gross IRR and Gross MOIC on Private Equity8 full exits in 1Q20 were 26.2% and 3.6x

Private Equity - operational metrics		31 March 2020	31 December 2019
Portfolio year-over-year LTM revenue growth9	18.7%			20.9%
Portfolio year-over-year LTM EBITDA growth9	12.4%			15.9%
Enterprise Value / EBITDA valuation multiple9	16.0x			17.2x
Net debt / EBITDA multiple 9	4.2x			3.7x
Number of closed investments for the quarter10	2			6
Number of exits for the quarter11	3			3

Derived Investments portfolio highlights

•	Derived Debt performance 1Q20 with Total Return of -7.7%: o  Income +1.9% o  Unrealised losses -10.5% o  FX +0.9%
•	Derived Equity performance 1Q20 with Total Return of -25.1%: o  Realised gains +2.4% o  Unrealised losses -25.9% o  FX -1.6%
•	New investments of €14.9m were all debt positions: three new investments being Ad Astra, Amerilife and Cotiviti
•	AGA fully exited four debt positions and two equity investments with proceeds of €47.8m13
•	Gross IRR and Gross MOIC on Derived Debt14 full exits were 13.6% and 1.2x whilst Derived Equity full exits achieved a Gross IRR of 18.3% and Gross MOIC of 1.7x

Derived Investments - operational metrics		31 March 2020	31 December 2019
Debt year-over-year LTM EBITDA growth15		10.6%	14.6%
Debt average income yield to maturity15		11.8%	9.3%
Debt average years to maturity		5.9	6.0
Debt average income yield16		9.6%	8.8%
Equity year-over-year LTM earnings growth17		18.0%	24.8%
Equity price-to-earnings ratio17		18.2x	20.7x
Number of investments for the quarter12		3	2
Number of full exits year for the quarter 13		6	6

Other Invested Portfolio highlights

Invested Portfolio analysis18	€m	€m	%	%
Private Equity	643.1		71%
-  AMI		26.0		2%
-  AEVI		5.4		1%
-  AEVII		29.2		3%
-  AVIII		224.4		25%
-  AIX		353.6		39%
-  ADF		11.2		1%
-  AX		(6.7)		0%
Derived Investments	265.8		29%
-  Derived Debt		221.5		24%
-  Derived Equity		44.3		5%
Total	908.9	908.9	100%	100%

Commenting on the results, Ralf Gruss, COO of Apax Partners, said:

"The COVID-19 crisis has impacted AGA's first quarter returns.  Much of AGA's portfolio is in sub-sectors that are currently less severely impacted, and we remain confident that AGA and its portfolio are well-placed to navigate through these difficult times and capitalise on new opportunities during the recovery phase."

For more information, the Company's latest results presentation is available to view at: www.apaxglobalalpha.com  

Contact details

Sarah Page IR Manager - AGA Telephone: [phone] Email: [e-mail]

Footnotes

1. Total NAV Return means the movement in the Adjusted NAV per share over the quarter plus any dividends paid. Total Return reflects the sub-portfolio performance on a stand-alone basis. It excludes items at overall AGA level such as cash, management fees and costs 2. LTM = Last Twelve Months to 31 March 2020 3. Net cash after liabilities of €27.2m calculated by taking cash of €29.2m less net current liabilities of €2.0m at 31 March 2020 4. Movement of €10.9m was mainly due to the settlement of an investment traded in the prior quarter that settled in the current period 5. FX on cash includes the revaluation of cash balances and net losses arising from the differences in exchange rates between transaction dates and settlement dates, and unrealised net losses arising from the translation into euro of assets and liabilities (other than investments) which are not denominated in euro 6. Movement in the Private Equity performance fee reserve of €6.9m reflects settlement of the performance fee reserve by the Company's purchase of shares in the market and subsequent issuance of those shares to the Investment Manager. This does not represent the underlying Private Equity portfolio's carried interest. There was no performance fee accrued in 1Q20 7. Adjusted NAV and NAV were €936.1m as there was no performance fee reserve at 31 March 2020 8. Private Equity Aggregate Gross IRR and Gross MOIC calculated based on the expected aggregate cash flows in euro across all funds for the deals transacted in the period Sophos, Aptos and Engineering. Gross IRR represents concurrent Gross IRR. 9. Gross Asset Value weighted average of the respective metric across the portfolio. At December 2019 and March 2020, 20 and 22 investments were respectively excluded as these are financial services companies often valued on book value or for which earnings financials are not available e.g. complex carve-outs or growth investments. For EV/EBITDA and Net Debt / EBITDA figures exclude MatchesFashion and Vyaire Medical due to low EBITDA from opex investments and short-term fluctuations in EBITDA respectively 10. Private Equity investments closed in the first three months of 2020. Both Cadence Education and Accurate closed in March 2020 11. Represents Private Equity exits which were closed or signed but not yet closed in the first three months of 2020. Both Sophos and Aptos closed in March 2019 and Engineering was signed but had yet to close at 31 March 2020 12. Represents new Derived Investments in 1Q20. Three new debt investments: Ad Astra, Amerilife and Cotiviti. There were no new equity positions 13. Derived Investments divestments in the first three months of 2020. €47.8m consists of €21.9m from four debt positions exited, €23.1m from two equity positions fully exited and €2.7m from two other partial equity sales 14. Derived Investments Gross IRR and Gross MOIC calculated based on aggregate euro cash flows since inception for deals fully exited during 1Q20; Amerilife 1L and 2L (Debt), Boats Group (Debt), Safetykleen (Debt), Strides (Equity) and Sophos (Equity) 15. Gross Asset Value weighted average of the respective metric across the Derived Debt portfolio. (FullBeauty was excluded from LTM EBITDA growth) 16. Gross Asset Value weighted average of the current full year income (annual coupon/clean price as at the respective date) for each debt position in the Derived Debt portfolio as at the respective date 17. Gross Asset Value weighted average of the respective metric across the Derived Equity portfolio. (Answers, Airtel Africa and Cengage were excluded from both LTM earnings growth and P/E ratio) 18. Invested Portfolio excludes cash and cash equivalents, revolving credit facility drawn and net current assets, including these the NAV is €936.1m and Adjusted NAV is €936.1m. The performance fee reserve was nil at 31 March 2020

Notes

1.	Note that references in this announcement to Apax Global Alpha Limited have been abbreviated to "AGA" or "the Company". References to Apax Partners LLP have been abbreviated to "Apax Partners" or "the Investment Adviser"
2.	Please be advised that this announcement may contain inside information as stipulated under the Market Abuse Regulations (EU) NO. 596/2014 ("MAR")
3.	This announcement is not for release, publication or distribution, directly or indirectly, in whole or in part, into or within the United States or to "US persons" (as defined in Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act")) or into or within Australia, Canada, South Africa or Japan. Recipients of this announcement in jurisdictions outside the UK should inform themselves about and observe any applicable legal requirements in their jurisdictions. In particular, the distribution of the announcement may be restricted by law in certain jurisdictions
4.	securities of Apax Global Alpha Limited ("AGA"). AGA has not been and will not be registered under the US Investment Company Act of 1940, as amended (the "Investment Company Act"). In addition, AGA's shares (the "Shares") have not been and will not be registered under the Securities Act or any other applicable law of the United States. Consequently, the Shares may not be offered or sold or otherwise transferred within the United States, or to, or for the account or benefit of, US Persons, except pursuant to an exemption from the registration requirements of the Securities Act and under circumstances which will not require AGA to register under the Investment Company Act. No public offering of the Shares is being made in the United States
5.	This announcement may include forward-looking statements. The words "expect", "anticipate", "intends", "plan", "estimate", "aim", "forecast", "project" and similar expressions (or their negative) identify certain of these forward-looking statements. These forward-looking statements are statements regarding AGA's intentions, beliefs or current expectations concerning, among other things, AGA's results of operations, financial condition, liquidity, prospects, growth and strategies. The forward-looking statements in this presentation are based on numerous assumptions regarding AGA's present and future business strategies and the environment in which AGA will operate in the future. Forward-looking statements involve inherent known and unknown risks, uncertainties and contingencies because they relate to events and depend on circumstances that may or may not occur in the future and may cause the actual results, performance or achievements of AGA to be materially different from those expressed or implied by such forward looking statements. Many of these risks and uncertainties relate to factors that are beyond AGA's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of regulators and other factors such as AGA's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which AGA operates or in economic or technological trends or conditions. Past performance should not be taken as an indication or guarantee of future results, and no representation or warranty, express or implied, is made regarding future performance. AGA expressly disclaims any obligation or undertaking to release any updates or revisions to these forward-looking statements to reflect any change in AGA's expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based after the date of this announcement, or to update or to keep current any other information contained in this announcement. Accordingly, undue reliance should not be placed on the forward-looking statements, which speak only as of the date of this announcement

About Apax Global Alpha Limited

AGA is a Guernsey registered closed-ended collective investment scheme incorporated as a non-cellular company that listed on the London Stock Exchange on 15 June 2015. It is regulated by the Guernsey Financial Services Commission.

AGA's objective is to provide shareholders with capital appreciation from its investment portfolio and regular dividends. The Company is targeting an annualised Total Return, across economic cycles, of 12-15% (net of fees and expenses) including a dividend yield of 5% of Net Asset Value.

The investment policy of the Company is to make Private Equity investments in Apax Funds, and Derived Investments which are investments in debt and equities derived from the insights gained via Apax Partners' Private Equity activities. Further information regarding the Company and its publications are available on the Company's website at www.apaxglobalalpha.com.

About Apax Partners LLP

Apax Partners is a leading global private equity advisory firm and over its more than 40-year history, Apax Partners has raised and advised funds with aggregate commitments of over €40 billion. Funds advised by Apax Partners invest in companies across four global sectors of Tech & Telco, Services, Healthcare and Consumer. These funds provide long ‐ term equity financing to build and strengthen world ‐ class companies. For further information about Apax Partners, please visit www.apax.com. Apax Partners is authorised and regulated by the Financial Conduct Authority in the UK.

 

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