Last checked at 
25 Aug 2020 07:00
(LSE: APAX)
Apax Global Alpha Limited
Unaudited interim results for the half-year ended 30 June 2020
For further information regarding the announcement of AGA's 2020 first half results, including the details for today's analyst and investor webcast at 9.30am (UK time), please visit www.apaxglobalalpha.com.
Covid-19 update
· The economic outlook remains highly uncertain. While countries have begun to rebound as they have reopened from lockdowns, levels of GDP remain well below pre-Covid levels in most economies. The speed of recovery will depend on the evolution of the pandemic, medical interventions, policy responses, and general consumer and business confidence. The recovery is unlikely to be linear and, for most economies, economic activity may not return to pre-Covid levels until 2022. The impact and recovery is, however, very different between sectors. Tech in general has proved more resilient and is expected to grow over the coming years driven by underlying trends. Offline retail has been severely impacted and is recovering more slowly.
· With the portfolio proving resilient in the first half of 2020, we believe that the Apax Funds' focus on: i) drawing on the Investment Advisor's sub-sector expertise, particularly in those subsectors benefiting from digitisation trends; ii) driving business transformation, the pace of which has only increased in the past five months; and iii) investing with modest average entry leverage levels, will leave the portfolio well-positioned coming out of this current crisis.
· AGA's liquidity position remains healthy. At 30 June 2020, AGA had cash of €33.8m and its revolving credit facility of €140.0m remained undrawn. Derived Investments of €281.5m provide a further source of capital for AGA to meet its commitments to the Apax Funds.
Key highlights
· Interim dividend of 4.87 pence per share declared, equivalent to 2.5% of the euro NAV as at 30 June 2020.
· H1 2020 Total NAV Return1 was broadly flat at (0.5)% (0.6% constant currency). Following a negative return of 11.9% in the first quarter of 2020 reflecting general market weakness, valuations strongly recovered during the second quarter at 13.3%, especially in the Private Equity portfolio.
· Contributions to Total NAV Return1 of (0.5)% were:
o Private Equity 2.0%
o Derived Debt (0.2)%
o Derived Equity (0.9)%
o Costs, FX and other movements (1.4)%
· Adjusted NAV grew back to over €1bn at 30 June 2020, at €1,060.7m, with NAV and Adjusted NAV2 per share of €2.16/ £1.96.
· At 30 June 2020, the Invested Portfolio was split 72% Private Equity and 28% Derived Investments and it is expected that AGA will maintain the majority of its assets invested in Private Equity going forward.
· AGA follows the four Apax core sectors. As at 30 June 2020, the Invested Portfolio was split 44% Tech & Telco and Digital, 28%3 Services, 19% Healthcare and 9%3 Consumer.
Outstanding commitments and funding sources
· AGA was 97% invested with cash of €33.8m.
· Outstanding commitments to the Apax Funds (together with recallable distributions and the new AX commitment) amounted to €499.2m (47.1% of NAV). In addition to future Private Equity distributions, funding sources that can be accessed to fund future Private Equity calls include Derived Investments of €281.5m, an undrawn revolving credit facility of €140.0m, cash of €33.8m, and net current assets of €2.9m.
Adjusted NAV2 movements (€m) | Private Equity | Derived Investments | Cash
| Treasury Shares | Facility drawn | Other4
| H120 Total | |
Adjusted NAV at 31.12.19 | 759.4 | 342.2 | 3.3 | - | - | (12.8) | 1,092.1 | |
+ Investments | 20.7 | 15.7 | (49.8) | - | - | 13.4 | - | |
- Distributions/ divestments | (61.8) | (50.6) | 109.6 | - | - | 2.8 | - | |
+ Interest and dividend income | - | - | 9.5 | - | - | (0.5) | 9.0 | |
+/- Unrealised gains/(losses) | 25.2 | (24.6) | - | - | - | - | 0.6 | |
+/- Realised gains/(losses) | - | 2.2 | - | - | - | - | 2.2 | |
+/- FX gains/(losses)5 | (7.9) | (3.4) | (2.4) | - | - | - | (13.7) | |
+/- Costs and other movements | - | - | (3.8) | - | - | - | (3.8) | |
- Dividends paid | - | - | (25.7) | - | - | - | (25.7) | |
+/- Performance fee reserve6 | 6.9 | - | - | (6.9) | - | - | - | |
+/- Treasury shares | - | - | (6.9) | 6.9 | - | - | - | |
+/- Revolving credit facility drawn/repaid | - | - | - | - | - | - | - | |
Adjusted NAV at 30.06.207 | 742.5 | 281.5 | 33.8 | - | - | 2.9 | 1,060.7 | |
Private Equity portfolio highlights
· The Private Equity portfolio delivered a resilient performance in H1 2020 with a Total Return1 of +2.3% (+3.4% constant currency).
· Tech & Telco remains the most heavily weighted sector, accounting for 41% of the Private Equity portfolio, followed by 30%3 in Services, 16% in Healthcare, and 12%3 in Consumer.
· On a look-through basis, AGA invested c.€58.2m in six new investments (Cadence Education, Coalfire Systems, Verint Systems, KAR Global, Accurate Background, and Prove) and exited three positions (Sophos, Aptos, and Engineering10) during the period.
· Calls of €20.7m were paid to Apax VIII, AMI Opportunities and the Apax Digital Fund.
· Distributions totalled €61.8m; €17.6m from Apax Europe VII in relation to the sale of Sophos and Aptos, plus €43.2m from Apax VIII related to the partial realisations of TietoEVRY, Duck Creek, Exact and Neuraxpharm.
· Aggregate Gross IRR7 and Gross MOIC7 on Private Equity full exits in H1 2020 were 25.7% and 3.6x.
· Unrealised gains were €25.2m and unfavourable FX movements were €7.9m.
Private Equity - operational metrics | 30 June 2020 | 31 December 2019 | ||
Portfolio year-over-year LTM revenue growth8 | 11.0% | 20.9% | ||
Portfolio year-over-year LTM EBITDA growth8 | 16.0% | 15.9% | ||
Enterprise Value / EBITDA valuation multiple8 | 17.0x | 17.2x | ||
Net debt / EBITDA multiple8 | 4.2x | 3.7x | ||
Number of closed investments in the period11 | 6 | 13 | ||
Number of exits for the period12 | 3 | 7 | ||
Derived Investments portfolio highlights
· Derived Investments leverage the insights and expertise of the Investment Advisor. The portfolio is weighted towards Tech & Telco, accounting for 53% of the Derived Investments portfolio.
· The portfolio is split 82% in Derived Debt and 18% in Derived Equity.
· A combination of Derived Debt Total Return1 of (1.5)% ((1.1)% constant currency) and Derived Equity Total Return1 of (18.4)% ((15.1)% constant currency) led to an overall Total Return1 of (5.3)% for Derived Investments ((4.2)% constant currency).
· Derived Debt performance H1 2020 with Total Return of (1.5)% comprised:
o Income 3.6%
o Realised gains 0.1%
o Unrealised losses (4.8)%
o FX (0.4)%
· Derived Equity performance H1 2020 with Total Return of (18.4)% comprised:
o Income 0.1%
o Realised gains 2.7%
o Unrealised losses (17.9)%
o FX (3.3)%
· New investments of €15.7m were all Derived Debt positions. AGA made three new investments in the period (Astra, Cotiviti, and Amerilife), of which two were first lien debt positions.
· AGA exited five debt positions and two equity investments with proceeds of €50.6m12
· Gross IRR14 on Derived Debt exits was 14.2% and Gross MOIC13 was 1.2x. Gross IRR13 on Derived Equity exits was 18.3% and Gross MOIC13 was 1.7x.
· Realised gains were €2.2m and unrealised losses of €24.5m stood against income of €9.0m and negative FX movements of €3.5m.
· FX exposure of c.72% in US dollar denominated investments.
Derived Investments - operational metrics |
| 30 June 2020 | 31 December 2019 |
Debt year-over-year LTM EBITDA growth14 |
| 9.7% | 14.6% |
Debt average income yield to maturity14 |
| 9.2% | 9.3% |
Debt average years to maturity |
| 5.7 | 6.0 |
Debt average income yield15 |
| 7.8% | 8.9% |
Equity year-over-year LTM earnings growth16 |
| 7.0% | 24.8% |
Equity price-to-earnings ratio16 |
| 20.8x | 20.7x |
Number of investments for the period11 |
| 4 | 13 |
Number of full exits for the period12 |
| 7 | 13 |
Other Invested Portfolio highlights
Invested Portfolio analysis17 | €m | €m | % | % |
Private Equity | 742.5 |
| 72% |
|
- AMI |
| 22.4 |
| 2% |
- AEVI |
| 4.8 |
| 1% |
- AEVII |
| 29.7 |
| 3% |
- AVIII |
| 252.5 |
| 25% |
- AIX |
| 414.9 |
| 40% |
- ADF |
| 23.0 |
| 2% |
- AX |
| (4.9) |
| (1)% |
Derived Investments | 281.5 |
| 28% |
|
- Derived Debt |
| 230.8 |
| 22% |
- Derived Equity |
| 50.7 |
| 5% |
Total | 1,024.0 |
| 100% | 100% |
Commenting on the results, Tim Breedon CBE, Chairman of Apax Global Alpha, said:
"As we look into an uncertain economic future, we draw confidence from the resilience our portfolio has shown during the crisis to date and believe that the sector-focused approach provides long-term value generation opportunities and an attractive yield to our shareholders."
Commenting on the results, Ralf Gruss, COO of Apax Partners, said:
"We are pleased that AGA's NAV grew back to over €1bn. The portfolio has benefited from its overweight position in Tech & Telco and Digital and portfolio companies increasing their operating leverage. We believe the portfolio is well-positioned coming out of the crisis to generate attractive returns in this challenging environment."
For more information, the Company's latest results presentation is available to view at: www.apaxglobalalpha.com
Contact details
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Footnotes
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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"
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2. | Please be advised that this announcement may contain inside information as stipulated under the Market Abuse Regulations (EU) NO. 596/2014 ("MAR")
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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
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4. | The information presented herein is not an offer for sale within the United States of any equity shares or other 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
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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 equities and debt 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 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.