Half Year 2023 Petershill Partners PLC Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Hubert Lam - Bank of America - Analyst : Hi, good morning. Thanks for taking my questions. I've got three of them. Firstly, can you give us your expectations on fund activation in the second half? It seems like it's slowed since your previous update, or you've been more cautious. So how much of that $20 billion fee-eligible AuM you've raised -- you expect that to be the second half? I know you mentioned Francisco Partners, but how about the rest? Second question is on FRE margin. It's continued to be below 60%, I guess, on the back of higher costs as well as lower fees. What's your guidance for the rest of the year and also in 2024? Do you think you can get back to your previous guidance of about mid 60s? Last question is on M&A. You said it's slower for you despite other GPs out there doing deals recently. Why do you not see the same opportunities? And what valuations are seeing, and if you do continue to wait, what is your plan for the higher cash accumulation you'll have? Thanks.

Question: Hubert Lam - Bank of America - Analyst : Great, thank you.

Question: Angeliki Bairaktari - JPMorgan - Analyst : Good morning and thank you for taking my questions. First of all, with regards to the consolidation that we have seen in the private markets industry, in particular, in the infrastructure space recently, do you see any opportunities to actually realize any of your investments in GPs on the back of that trend? Ideally, at a higher exit point than the entry point, which could also send a signal with regards to sort of the underlying value of all of those GP stakes. Then with regards to the fee-paying AuM inflows, we saw only $3 billion of inflows in the first half, some of these activations have been delayed. Can you give us some guidance with regards to your expectation for the second half in terms of the fee-paying AuM inflows, please? And then is it fair to expect some improvement of the blended Partner-firm management fee rate next year considering a large share of the not yet activated AuM is in private equity, which should earn a higher margin? Thank you.

Question: David McCann - Numis - Analyst : Yeah, good morning. Thanks for taking my questions. Three from me, please. So firstly, on the portfolio valuation, you mentioned it's broadly stable, and we can also see. And I think you mentioned as well that you basically use stable cost of equity and stable [multiple broadly] speaking within the mix. I mean, that also implies that you've got broadly the same cash flow projections and earnings projections for the relevant categories. I mean, question there is does that not seem a bit odd with some of the outlook given the subdued environment, at least in the short and the some of these companies and, I guess, how can you justify keeping your cash flow projections? Question one. Question two on the tax. I mean, clearly high level, this came in an awful lot higher than the sort of 12% to 14% guidance. You did give a couple of brief comments around that, Adam, on the call, but just wanted to dig into that a bit more detail. So it seemed part of it was due to the mix of PRE being lower, part of it was due to the tax receivable agreement. I think you also mentioned something around this and the forward-looking impact of that. Can you just confirm, is the 12% to 14% range still the right range for thinking about mix going forward? And if PRE has a lower mix, what does that look like? And also, can you just reiterate that guidance you gave about the tax receivables? Part of that, that would be helpful. That's question two. And finally, a technical one on slide 32. Given partner management fee revenues there, their labels on this, can you confirm this last 12 months? It doesn't look like six-month period revenue. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 08, 2023 / 6:00AM, PHLL.L - Half Year 2023 Petershill Partners PLC Earnings Call

Question: David McCann - Numis - Analyst : Great, thank you. This is a quick follow-up on that tax, particularly TRA point. So you've given the number for this issue, what would you expect to see for future years? That would be useful. Thank you.

Question: Luke Mason - BNP Paribas - Analyst : Yeah. Good morning, guys. First question on fundraising or following up into 2024. So I mean, $20 billion to $25 billion guidance for this year, how are you thinking about 2024? Should we see some bigger fundraisings coming back in terms of the cycle of fundraising for some of your larger Partner-firms? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 08, 2023 / 6:00AM, PHLL.L - Half Year 2023 Petershill Partners PLC Earnings Call And then second question is on the FRE margins. You talked about stability in H1 for the 59%. I think if we look at Q2, it dropped to 57%. So is that kind of the run-rate level? And how should we think about FRE margins moving as you get the activation of these larger funds like Francisco Partners come through in September? Should that bump them up again? So just some more detail there, please. And then just thirdly, on the exit outlook, could you give more detail around that outlook more broadly? And then I think in the statement, you say some recent realizations have been done at premium to holding values for the underlying funds so if you could just give any more detail on what you're seeing there, that would be interesting. Thank you.

Question: Luke Mason - BNP Paribas - Analyst : Okay, thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 08, 2023 / 6:00AM, PHLL.L - Half Year 2023 Petershill Partners PLC Earnings Call

Question: Alexander Bowers - Berenberg - Analyst : Morning. Three questions from me. The first one is would you able to provide some feedback from any conversations you potentially had with your partner on the new rules -- rule amendments announced by the SEC in August on the regulation of private fund advisors? Second was if you will be able to elaborate a little bit as to which of your firms you're expecting to raise in H2 this year? And then lastly, I think you mentioned the drop in management fee margin was broadly sort of half transaction fees, half business, and asset mix. Does the massive category include low and negotiated or discounted management fees? Thanks.

Question: Alexander Bowers - Berenberg - Analyst : Thank you.

Question: Andrew Shepherd-Barron - Peel Hunt - Analyst : Thank you. And thank you for taking my questions. Two, if I may. The first is just thinking about sort of split between fee and performance-related earnings. Can you give us some idea, given the use of DCF substantial evaluation, what are the -- how the NAV splits between the two, percentage wise? If I had to guess, I would have thought that CRE is about 20%, 25% of NAV perhaps, but probably not more given this to use. That would be my first question. And secondly, and also related to that I'm sorry, is that -- if you -- when you're buying, when you're looking at businesses today, my understanding in the past is that you thought the same strict with both FRE and PRE. Buying today, think of rethinking it. Would you change that? Would you focus more on purchasing FRE? Comment on that would be great. And my other question is just a follow-up on the FRE margin question, which is, do you think that when things have normalized -- to be discussed -- do you think the margin can go back to where it is -- do you think it should be 65, 66% or has something structurally changed in the industry cost, structurally higher competition, et cetera? Thank you.

Question: Andrew Shepherd-Barron - Peel Hunt - Analyst : Okay. Thank you very much. I'm going to start at page 31. Thank you.