Last checked at 
1 Nov 2017 07:00
1 November 2017
(LSE: APAX)
Apax Global Alpha Limited
Quarterly results for the period ended 30 September 2017
Apax Funds valuations as at 30 September 2017
For further information regarding the announcement of AGA's 2017 third quarter results, including the details for today's analyst and investor webcast at 9.30am (UK time), please visit www.apaxglobalalpha.com
Key highlights
· Total NAV Return was -0.3% and +2.0% on a constant currency basis, mainly reflecting the continued strengthening of the euro against the US dollar. The nine months Total NAV return was -1.1% or +6.0% on a constant currency basis
· Adjusted NAV decreased by €26.2m to €881.9m mainly due to semi-annual dividend paid in the quarter of €23.0m and negative FX effects of €20.5m. Adjusted NAV is down €56.8m for the nine months
· Adjusted NAV per share of €1.80 (£1.58), compared to €1.85 (£1.62), at 30 June 2017
· AGA was 99% invested and had a net cash balance of €11.2m
Performance highlights
· Portfolio delivered a Total NAV Return of +2.0% on a constant currency basis, Private Equity contributed +1.3% and Derived Investments contributed +1.0% before FX impact of -2.3% and other costs of -0.3%
· Derived Debt Investments delivered a Total Return of -0.7% (+1.6% on a constant currency basis), whilst Derived Equity Investments delivered +0.2% (+1.1% on a constant currency basis)
Adjusted NAV movements | Private Equity €m | Derived Investments €m | Cash
€m | Facility drawn €m | Other
€m | 3Q17 Total €m | 9M17 Total €m |
Adjusted NAV at 30 June 2017 | 453.0 | 307.1 | 149.1 | - | (1.1) | 908.1 | 938.7 |
+ Investments | 70.0 | 119.2 | (190.2) | - | 1.0 | - | - |
- Divestments | (8.9) | (68.0) | 75.3 | - | 1.6 | - | - |
+ Interest and dividend income | - | - | 5.6 | - | 0.1 | 5.7 | 20.8 |
+/- Realised FV movement | - | (0.4) | - | - | - | (0.4) | 19.3 |
+/- Unrealised FV movement | 11.1 | 4.2 | - | - | - | 15.3 | 33.7 |
+/- Costs and others | - | - | (1.9) | - | (0.1) | (2.0) | (8.5) |
- Dividends paid | - | - | (23.0) | - | - | (23.0) | (46.8) |
+/- Performance fee reserve | 0.3 | (1.6) | - | - | - | (1.3) | (9.0) |
+/- FX movements | (7.0) | (9.8) | (3.7) | - | - | (20.5) | (66.3) |
+/- Revolving credit facility | - | - | 4.2 | (4.2) | - | - | |
Adjusted NAV at 30 September 2017 | 518.5 | 350.7 | 15.4 | (4.2) | 1.5 | 881.9 | 881.9 |
Investment activity highlights
· Exposures remained stable during the third quarter with Private Equity at 59% and Derived Investments of 41%
· Private Equity had six new closed investments with no exits, while Derived Investments had nine new positions, two add-ons, and five divestments
· FX exposure c.48% in US dollar denominated investments
Invested portfolio analysis | €m | €m | % | % |
Private Equity | 522.8 |
| 59% |
|
- AMI |
| 7.0 |
| 1% |
- AEVI |
| 2.1 |
| 0% |
- AEVII |
| 58.4 |
| 7% |
- AVIII |
| 376.1 |
| 42% |
- AIX |
| 79.2 |
| 9% |
Derived Investments | 360.0 |
| 41% |
|
- Debt |
| 189.2 |
| 22% |
- Equities |
| 170.8 |
| 19% |
Total(1) | 882.8 | 882.8 | 100% | 100% |
Private Equity portfolio highlights
· Apax Funds returned €8.9m to AGA and €70.0m was called from AGA by Apax IX
· Unrealised gains were €11.1m and adverse FX movements were €7.0m
· Apax IX closed four investments (Syneron Candela, Safetykleen, Manappuram and ECi Software Solutions) and AMI closed two (Max Stock and Go Global Travel)
· Apax IX also announced two new deals, Thought Works and Matches Fashion
· Sector exposure spread across all Apax Partners' focus industries. Services and Tech & Telco were the most heavily weighted sectors, accounting for 32% each of the invested portfolio
· Largest geographic bias in the portfolio was North America, representing 42% of the invested portfolio
· Private Equity portfolio remained relatively young with 81% of Private Equity investments from 2014-2017 vintage
Private Equity - operational metrics | 30 September 2017 | 30 June 2017 | |
Portfolio year-over-year Last Twelve Months (LTM) revenue growth(2) | 11.8% | 8.9% | |
Portfolio year-over-year LTM EBITDA growth(2) | 17.1% | 12.2% | |
Average EV/EBITDA multiple(2) | 13.3x | 13.1x | |
Average net debt / EBITDA(2) | 4.3x | 4.5x | |
Number of new investments in the quarter (3) | 6 | 3 | |
Number of exits in the quarter (3) | 0 | 3 |
Derived Investments portfolio highlights
· AGA fully exited three debt investments and two equity investments generating proceeds of €68.0m in the quarter
· The quarter ended 30 September 2017 saw unrealised gains of €4.2m, realised losses of €0.4m, income generated of €5.7m, offset by FX movements of €9.8m
· AGA completed four new investments in debt (Safetykleen, PDC Brands, Riemser and Syncsort), five new equity investments (Sinopharm, KRKA, Vipshop, Evry, and Talend) and two add-on investments in equity(Tech Mahindra and Strides Shasun), amounting to €119.2m
· Aggregate Gross IRR generated on fully exited investments was 14.2%(4)
· FX exposure of c.56% in US dollar denominated investments
· Sector exposure spread across all Apax Partners' focus industries. Tech & Telco was the most heavily weighted sector, accounting for 43% of the invested portfolio
· Geographic bias towards North America decreased by 10% to 47%
· Portfolio split between Derived Debt and Derived Equity was 53% and 47% respectively
Derived Investments - operational metrics | 30 September 2017 | 30 June 2017 | |
Yield to maturity(5) of debt investments | 13.1% | 13.6% | |
Average years to maturity for debt investments | 5.8 | 5.5 | |
Average income yield(6) of debt investments | 12.1% | 11.8% | |
Year-over-year LTM EBITDA growth debt investments(5) | 1.5% | 5.5% | |
Year-over-year LTM earnings growth equity investments(7) | 8.7% | 5.0% | |
Average P/E multiple(7) of equity investments | 33.6x | 34.4x | |
Number of investments in the quarter (8) | 11 | 5 | |
Number of full exits in the quarter (9) | 5 | 9 |
Commenting on AGA's investment focus, Ralf Gruss, COO of Apax Partners, said:
"Performance in the third quarter was positive on a constant currency basis however given the Company's exposure to US dollar denominated investments, performance was overshadowed by the continuing strengthening of the euro against the US dollar. AGA's Private Equity portfolio is still young, and we are confident about its ability to generate value. AGA has continued to invest in Derived Equity investments due to their relative attractiveness to debt in the current high valuation market environment. We are also pleased to see that a wider investor base is now invested in AGA following its inclusion in the FTSE Indices series"
Sector mix |
€m | Invested portfolio % | Private Equity % | Derived Investments % |
Tech & Telco | 319.0 | 36% | 32% | 43% |
Services | 225.2 | 26% | 32% | 16% |
Healthcare | 205.0 | 23% | 22% | 24% |
Consumer | 127.5 | 14% | 13% | 16% |
Other | 6.1 | 1% | 1% | 1% |
Total | 882.8 | 100% | 100% | 100% |
Geographic analysis |
€m | Invested portfolio % | Private Equity % | Derived Investments % |
North America | 385.8 | 44% | 42% | 47% |
UK | 58.3 | 7% | 3% | 11% |
Rest of Europe | 284.8 | 32% | 44% | 15% |
India | 76.0 | 8% | 4% | 15% |
China | 44.9 | 5% | 2% | 9% |
Rest of World | 33.0 | 4% | 5% | 3% |
Total | 882.8 | 100% | 100% | 100% |
Summary of top 30 investments in Private Equity and Derived Investments | Valuation €m | NAV % |
Top 30 Private Equity portfolio (look-through basis) - AGA's indirect exposure |
|
|
Assured Partners | 49.8 | 6% |
Azelis | 49.2 | 5% |
EVRY | 39.1 | 4% |
Exact Software | 37.8 | 4% |
Engineering | 26.8 | 3% |
Idealista | 25.3 | 3% |
Unilabs | 24.5 | 3% |
GlobalLogic | 24.5 | 3% |
Wehkamp | 20.3 | 2% |
NuPharm365 | 20.0 | 2% |
Duck Creek Technologies | 15.7 | 2% |
One Call | 15.3 | 2% |
Acelity | 14.8 | 2% |
Vyaire Medical | 14.8 | 2% |
Shriram City Union | 14.7 | 2% |
Cole Haan | 14.2 | 2% |
Syneron Candela | 13.4 | 1% |
Safetykleen | 12.8 | 1% |
Quality Distribution | 12.3 | 1% |
Ideal Protein | 10.8 | 1% |
ECi Software Solutions | 9.5 | 1% |
Psagot | 8.8 | 1% |
Guotai Junan Securities | 8.4 | 1% |
Tivit | 7.2 | 1% |
Boats Group | 6.4 | 1% |
Kepro | 6.3 | 1% |
Full Beauty | 6.0 | 1% |
Zensar Technologies | 5.7 | 1% |
Genex | 5.6 | 1% |
Sophos | 5.4 | 1% |
Other | (2.6) | -1% |
Total Private Equity | 522.8 | 58% |
|
|
|
Top 30 Derived Investments portfolio |
|
|
Sophos | 29.3 | 3% |
Syncsort | 21.0 | 2% |
KRKA | 19.4 | 2% |
Genex | 18.9 | 2% |
Riemser | 18.9 | 2% |
Rentpath | 18.2 | 2% |
Quality Distribution | 16.1 | 2% |
Full Beauty | 15.4 | 2% |
Advantage Sales & Marketing | 15.2 | 2% |
Strides Shasun | 15.1 | 2% |
Tech Mahindra | 14.5 | 2% |
Sinopharm | 13.2 | 1% |
Exact Software | 12.6 | 1% |
Palo Alto Networks | 12.2 | 1% |
Safetykleen | 11.1 | 1% |
Development Credit Bank | 11.0 | 1% |
China Cinda Asset Management | 9.7 | 1% |
Vipshop | 9.5 | 1% |
Paradigm(10) | 9.4 | 1% |
Vertafore | 8.7 | 1% |
PDC Brands | 8.3 | 1% |
TAKE Solutions | 8.0 | 1% |
Talend | 7.2 | 1% |
Epicor | 6.4 | 1% |
Answers | 6.2 | 1% |
Shriram Transport Finance | 5.8 | 1% |
rue21 | 4.7 | 1% |
Caliber Collision | 4.3 | 1% |
EVRY | 4.1 | 0% |
Cengage Learning | 2.8 | 0% |
Other | 2.8 | 0% |
Total Derived Investments | 360.0 | 41% |
| ||
Total Investments | 882.8 | 99% |
Cash | 15.4 | 2% |
Revolving credit facility | (4.2) | -1% |
Net current assets | 1.5 | 0% |
Total NAV | 895.5 | 100% |
Performance fee reserve | (13.6) | |
Total Adjusted NAV | 881.9 |
For more information, the Company's quarterly results presentation is available to view at: www.apaxglobalalpha.com
Apax Funds valuations as at 30 September 2017
AGA is pleased to announce it has received the Apax Funds' valuations as at 30 September 2017. These valuations are set out below at an individual fund level (net of relevant fees and carried interest estimates). AGA holds exposures to the Apax Funds via various individual holdings which also have different fee structures.
Details on the composition and valuation of the AGA portfolio as at 30 September 2017 are set out above and in AGA's Q3 2017 Quarterly Results. These differ to those shown in the table below due to the various holding structures through which AGA invests.
Valuations for the Apax Funds to which AGA has an exposure to, have reported the following movements for the period from 30 June 2017 to 30 September 2017:
| Valuation at 30 June 2017(11) | Capital Calls | (Distributions) | Unrealised Gain / (Loss) | Valuation at 30 September 2017(11) | Like-for-like % change(12) |
Apax Europe VI €m | 800 | - | - | 40 | 840 | 5% |
Apax Europe VII €m | 3,407 | - | - | (36) | 3,371 | -1% |
Apax VIII €m | 3,032 | - | (65) | 33 | 3,000 | 1% |
Apax VIII $m | 4,155 | - | (91) | 172 | 4,236 | 4% |
AMI $m | 149 | - | (6) | (3) | 140 | -2% |
Apax IX EUR €m | 37 | 303 | - | 3 | 343 | 1% |
Apax IX USD $m | 166 | 952 | - | 61 | 1,179 | 5% |
Footnotes:
1. Invested portfolio excludes cash and cash equivalents and net current assets, including these the NAV is €895.5m. Adjusted NAV excludes the estimated performance fee and is €881.9m at 30 September 2017
2. At June 17 and September 17 four and eight investments were respectively excluded as these are large positive outliers, financial services companies often valued on book value or for which clean earnings financials are not available e.g. complex carve-outs or recent acquisitions. The increase was due to new portfolio additions and one financial services company newly excluded. September 17 averages are unmoved when re-included: LTM Revenue growth of 11.9%, LTM EBITDA growth of 17.1%, Valuation multiple of 13.1x and Leverage of 4.2x
3. Syneron Candela, Safetykleen and Max Stock closed in July 2017. Go Global Travel and Manappuram Finance closed in August 2017. ECi Software Solutions was announced in August 2017 and closed in September 2017. ThoughtWorks and Matches Fashion were announced August 2017. (Attenti, which was announced in June 2017, closed in October 2017)
4. Gross IRR on exited Derived Investments (Assured Partners, Azelis. Answers second lien debt, Zhaopin and Epam) in Q3 was 14.2%. AGA's investment in Rue21 second lien debt restructured in September 2017 and it received equity in lieu of the debt held. Inclusive of the restructured debt - Aggregate gross IRR would have been negative 9.4%
5. GAV weighted average of the respective metric across the Derived Investments Debt portfolio
6. GAV 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
7. GAV weighted average of the respective metric across the Derived Investments Equity portfolio. (Cengage, Talend, Answers and Rue21 have been excluded from the analysis above)
8. There were four new investments in Derived Debt (Safetykleen, PDC Brands, Riemser and Syncsort), whereas there were five new Derived Equity investments (Sinopharm, KRKA, VIPshop, EVRY and Talend) and two Derived Equity add-on positions (Tech Mahindra and Strides in 3Q17)
9. There were three full exits in Derived Debt (Assured Partners, Azelis and Answers second lien debt) and two exits in Derived Equity (Zhaopin and Epam)
10. At 30 September 2017, AGA marked Paradigm debt based on best available pricing information available at the time. Post quarter end, the Apax Funds announced the sale of Paradigm and the debt is expected to be repaid at par in 4Q17. This represents a mark-up of €7.3m compared to the fair value at 30 September 2017. The transaction remains subject to certain closing conditions
11. Where relevant, the valuations are expressed net of any estimated carried interest payable should the funds hypothetically be liquidated as at 30 June 2017 or 30 September 2017
12. The like for like change represents the change in valuation from the prior to the current reporting date, adjusting for changes due to calls and distributions. Any calls made during the period are added to the prior valuation and distributions are added back to the current valuation
Contact details
Investor enquiries | Media enquiries |
Sarah Wojcik | Andrew Kenny |
Telephone: +44 (0)20 7666 6573 | Telephone: +44 (0) 20 7872 6371 |
Email: sarah.wojcik@apax.com | Email: andrew.kenny@apax.com |
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. 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
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 NAV Return, across economic cycles, of 12-15% (net of fees and expenses) including a dividend yield of 5% of Net Asset Value (NAV).
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. The Company's portfolio is expected to be allocated in approximately equal proportions between Private Equity and Derived Investments, although the investment mix will fluctuate over time due to market conditions, investment opportunities, cash flow requirements, the dividend policy and other factors.
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. It operates globally and has more than 30 years of investing experience. Apax Partners has advised funds that total over €42 billion in aggregate as at 30 September 2017*. 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.
* Funds raised since 1981, commitments converted from fund currency to EUR at FX rates as at September 2017