REG - Petershill Prtnrs - Preliminary Results
26/03/2024 07:15
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RNS Number : 2431I Petershill Partners PLC 26 March 2024
Petershill Partners
Operated by Goldman Sachs Assets Management
2023 PRELIMINARY results
For the year ended 31 December 2023
CONTINUED ROBUST FUNDRAISING AND HIGHER CAPITAL RETURN ANNOUNCED
Key Highlights
§ Adjusted Profit After Tax(1) of $200m for the year ended 31 December 2023
(2022: $273m).
§ Total income(1) of $319m (2022: $379m) and Adjusted EBIT(1) of $284m (2022:
$336m) with Adjusted EBIT margin of 89% (2022: 89%).
§ Adjusted EPS(1) of 17.6 cents (2022: 23.7 cents).
§ IFRS Profit After Tax of $321m (2022: $453m loss) and IFRS EPS of 28.4
cents (2022: (39.4) cents), includes the change in the carrying value of
investments.
§ The Board has proposed a final dividend of 10.1 cents per share taking the
full year dividend for 2023 to 15.0 cents per share (2022: 14.5 cents).
§ The Board is considering launching a tender offer to purchase up to $100m
of the Company's shares. Decision to be made by the end of April so that
approval could be sought at the forthcoming AGM.
§ As a result of applicable US securities law requirements, the Company has
today served notice to terminate its current share buyback programme until
either the Board decides not to proceed with the tender offer or the tender
offer completes.
§ Partner Distributable Earnings (DE)(2) of $292m (2022: $370m), reflecting
slower market activity.
§ Partner Fee Related Earnings (FRE)(2) of $203m (2022: $213m).
- Net management fees(2) were 2% higher year-over-year and 6% higher
year-over-year gross of transactions fees and offsets(2)
- Partner FRE Margin(2) of 58% (2022: 62%)
§ Lower DE primarily driven by lower Partner Realised Performance Revenues
(PRE)(2) at $55m, compared to a strong prior year (2022: $132m).
§ PRE as a percentage of Partner Revenues(2) was 13% (2022: 26%).
§ Partner Private Markets Accrued Carried Interest at $615m was in line with
the prior year end (2022: $611m).
§ Robust Partner-firm asset raising and AuM growth with $23bn gross fee
eligible assets raised in 2023.
§ Aggregate Partner-firm AuM(2) of $304bn and Aggregate Fee-paying AUM(2) of
$221bn, up 7% and 14%, respectively year-over-year.
§ $8bn of fee eligible assets at 31 December 2023 are expected to turn on and
generate revenues in future periods.
§ Balance Sheet and capital return remain strong.
§ Free cash flow (FCF)(1) conversion increased to 99% (2022: 76%) supporting
growth and the progressive dividend policy.
§ Investments at fair value were $5.3bn, an increase of 6% vs. the prior year
end (2022: $5.0bn).
§ Cash and investments in money market funds totalling $305m as at 31
December 2023 (31 December 2022: $581m).
§ Book value per share(1) of 431 cents (2022: 416 cents).
§ Purchased 13.2m Ordinary Shares for $26m through 31 December 2023 as part
of the $50m buyback programme announced in March 2023 and 15.8m Ordinary
Shares for $32m through 24 March 2024.
2024 Guidance
§ $20 - $25bn organic fee-eligible AuM raise and realisations of $5 - $10bn
in fee-paying AuM.
§ $200 - $230m full year Partner FRE.
§ PRE of 15% - 30% of total Partner Revenues.
§ Acquisitions in 2024 expected to be in-line with medium-term range of
$100-$300m per annum.
§ 85% - 90% Company Adjusted EBIT margin.
* The 2024 FRE range incorporates a revision to the fee model of one of our
Absolute Return Partner-firms which at year end 2023 successfully moved their
main fund to a "full cost pass through model", in line with larger scaled
players. The new fee model is not expected to impact near term Partner
Distributable Earnings but does result in a shift of a portion of this firm's
FRE towards cashflows that the Company categorises as PRE.
Subsequent to the year end, the Company completed two transactions accretive
to the net asset value, which align with our FRE centric nature:
§ 30 January 2024, the Company acquired additional interests in three
existing Partner-firms in a secondary transaction from a financial investor
for $55m at a discount of approximately 16% to the carrying value at 31
December 2023.
§ 12 March 2024, the Company sold a partial interest of PRE and Investment
Income in AKKR back to management for $35m at a slight premium to the carrying
value at 31 December 2023.
1. Financial measure defined as Alternative Performance Measure, or ("APM").
Further information on APMs on page 52.
2. Partner-firm key operating metric. Refer to the glossary on page 49 for
additional information.
Final Dividend
The Board has proposed a final dividend payment of 10.1 cents (USD) per share,
payable on 14 June 2024 to shareholders on the register as at close of
business on 10 May 2024, with ex-dividend date of 9 May 2024. The total
dividend per Ordinary Share for 2023 is 15.0 cents up 3% from 2022, in line
with the progressive dividend policy. Shareholders should note that the
default payment currency is USD, however, shareholders can elect to have their
dividends paid in either GBP or EUR. The last day for currency elections to be
registered is 24 May 2024. Currency elections should be submitted via CREST(3)
in the usual manner.
Ali Raissi-Dehkordy and Robert Hamilton Kelly commented:
"Despite a challenging external backdrop in 2023, we were pleased with our
Partner-firms raising $23 billion of fee eligible assets, on track relative to
both size and timing. Unsurprisingly, distributable earnings were lower in the
year predominately reflecting lower transaction activity, and the slower
realisation environment impacting Partner-firm Realised Performance Revenues.
FRE were also down 5% compared to 2022 but we remain confident on the
medium-term outlook for FRE growth supported by attractive organic fee-paying
AuM growth with potential for future M&A and note an increase in accrued
performance fees which underpins the medium-term outlook for PRE. Our
portfolio of Partner-firms remains strong with the carrying value of our
Partner-firms up around 6% while our high profitability margin and cash
conversion supports our strategy for growth and continued capital return to
shareholders.
The company maintains its progressive dividend policy and the Board is
considering launching a tender offer to purchase up to $100m of the Company's
shares, reflecting the strong operating cash flow and balance sheet. Our
robust capital raising and dynamic approach to capital allocation underpins
our ongoing confidence about our medium-term prospects for shareholders."
3. CREST: Certificates Registry for Electronic Share Transfer - electronic
system for holding securities.
Management results
Year ended 31 December
2023 2022
$m
$m
Income
Partner Fee Related Earnings(1) 203.0 213.2
Partner Realised Performance Revenues(1) 54.7 131.6
Partner Realised Investment Income(1) 34.4 25.4
Total Partner Distributable Earnings 292.1 370.2
Interest income 27.3 8.6
Total Income(2) 319.4 378.8
Operating costs
Board of Directors' fees and expenses (1.7) (1.5)
Other operating expenses(3) (11.3) (13.2)
Operator charge (21.9) (27.8)
Profit share charge (0.1) -
Total operating costs (35.0) (42.5)
Adjusted Earnings before interest and tax (EBIT)(2) 284.4 336.3
Finance cost(4) (37.1) (28.3)
Adjusted Earnings before tax (EBT)(2) 247.3 308.0
Tax and tax related expenses(2) (47.7) (35.4)
Adjusted profit after tax(2) 199.6 272.6
Reconciliation of Adjusted profit after tax to IFRS profit / (loss) for the
period after tax
Adjusted profit after tax(2) 199.6 272.6
§ Movement in financial assets and liabilities held at fair value(2) 220.6 (776.5)
§ Unrealised divestment fee (expense) credit (50.5) 0.9
§ Non recurring expenses5 1.2 (18.5)
§ Change in liability for Tax Receivables Agreement (21.5) (19.0)
§ Adjustment for Tax and tax related expenses(6) (28.3) 87.6
IFRS profit / (loss) for the period after tax 321.1 (452.9)
1. Partner-firm key operating metrics. Refer to the glossary on page 49 for
additional information.
2. Financial measure defined as Alternative Performance Measure, or ("APM").
Further information on page 52.
3. 2023 amount excludes $1.2m VAT reclaim. 2022 amount excludes $1.2m in
connection with the IPO.
4. 2022 amount excludes non-recurring finance cost of $17.3m related to the
retirement of Notes payable and issuance of Unsecured Notes and the change in
Liability for the Tax Receivables Agreement.
5. 2023 amount includes $1.2m VAT reclaim. 2022 amount includes the
non-recurring expense of $1.2m and finance cost of $17.3m noted above.
6. Includes deferred tax (expense) / credit related to movement in financial
assets and liabilities held at fair value.
Key Partner-firm metrics
Petershill Partners Operating Metrics
31 December
2023 2022 Δ
Aggregate Partner-firm AuM ($bn) 304 283 7%
Aggregate Fee-paying Partner-firm AuM ($bn) 221 194 14%
Partner Blended Net Management Fee Rate (%) 1.31% 1.41% -10 bps
Implied Blended Partner-firm FRE Ownership (%) 13.3% 13.5% -20 bps
Partner Net Management and Advisory Fees ($m) 350 342 2%
Management Fees ($m) 356 337 6%
Fee Offsets ($m) (18) (16) 13%
Transaction and Advisory Fees ($m) 12 21 (43%)
Partner Fee Related Expenses ($m) (147) (129) 14%
Partner FRE ($m) 203 213 (5%)
Partner Realised Performance Revenues (PRE) ($m) 55 132 (58%)
Partner Realised Investment Income ($m) 34 25 36%
Partner Distributable Earnings ($m) 292 370 (21%)
Partner FRE Margin (%) 58% 62% -4 pts
Partner Distributable Earnings Margin (%) 67% 74% -7 pts
Partner Realised PRE as a percentage of Partner Revenue (%) 13% 26% -13 pts
Partner Realised PRE over Average Aggregate Performance Fee Eligible (bps) 2.0 bps 5.6 bps -3.6 bps
Partner-firm AuM*
* Realised Performance Fee Revenues for the period divided by the Average
Aggregate Performance Fee Eligible Partner-firm AuM. The Average Aggregate
Performance Fee Eligible Partner-firm AuM represents the average of the
beginning and ending period stated.
Petershill Partners Operating Metrics***
31 Dec 2023 30 Sep 2023 30 Jun 2023 31 Mar 2023 31 Dec 2022 YTD**
Δ
Aggregate Partner-firm AuM ($bn) 304 303 300 290 283 7%
Aggregate Fee-paying Partner-firm AuM ($bn) 221 197 196 195 194 14%
Average Aggregate Fee-paying Partner-firm AuM* ($bn) 201 193 190 188 178 13%
Aggregate Performance Fee Eligible Partner-firm AuM ($bn) 275 276 274 266 259 6%
Average Aggregate Performance Fee Eligible Partner-firm AuM* ($bn) 270 265 258 251 236 14%
Additional metrics:
Partner Private Markets Accrued Carried Interest ($m) 615 613 608 600 611 1%
Investment Capital ($m) 423 398 398 383 383 10%
* Average Aggregate AuM figures represent the twelve month mean and use the
start and each quarter end of the reporting period adjusted for acquisitions
and dispositions where applicable.
** Percentage change relative to 31 December 2022.
*** Represents key Operating Metrics that reflect data
reported to the Operator on a three-month lag.
Details of results presentation
There will be a call for investors and analysts at 9.00am GMT today, 26 March
2024, hosted by Ali Raissi-Dehkordy, Robert Hamilton Kelly, Adam Van de Berghe
and Gurjit Kambo to discuss these results, followed by a Q&A session.
All interested parties are invited to participate via telephone or the audio
webcast. Please click here
(https://event.webcasts.com/viewer/portal.jsp?ei=1509448&tp_key=4ccdad6376)
to access the webcast.
Conference Call Information:
Domestic: +44(0) 330-165-3657
Domestic Freephone: 0800 279 6843
International: +1-929-477-0492
International Tollfree: 888-596-2629
Conference ID: 1772166
All participants are asked to dial in approximately 10-15 minutes prior to the
call, referencing "Petershill Partners" when prompted.
Replay Information:
An archived replay of the call will be available on the webcast link.
Please direct any questions regarding obtaining access to the conference call
to Petershill Partners Investor Relations, via e-mail,
at PHP-Investor-Relations@gs.com Analyst / Investor enquiries:
Gurjit Kambo +44 (0) 207 051 2564
Media enquiries:
Brunswick Group phll@brunswickgroup.com
Simone Selzer +44 (0) 207 404 5959
About Petershill Partners
Petershill Partners plc (the "Company" or "Petershill Partners") and its
Subsidiaries (the "Group") is a diversified, global alternatives investment
group focused on private equity and other private capital strategies. Through
our economic interests in alternative asset management firms
("Partner-firms"), we provide investors with exposure to the growth and
profitability of the alternative asset management industry. The Company
completed its initial acquisition of the portfolio of Partner-firms on 28
September 2021 and was admitted to listing and trading on the London Stock
Exchange on 1 October 2021 (ticker: PHLL). The Company is operated by Goldman
Sachs Asset Management ("Goldman Sachs" or the "Operator") and is governed by
a diverse and fully independent Board of Directors (the "Board").
Through our Partner-firms, we have exposure to $304 billion of Aggregate
Partner-firm AuM, comprising a diverse set of more than 200 long-term private
equity and other private capital funds where capital is typically locked in
over a multi-year horizon. These underlying funds generate recurring
management fees and the opportunity for meaningful profit participation over
the typical 8+ year lifecycles of such funds. We believe our approach is
aligned with the founders and managers of our Partner-firms and, as a result,
allows the Company to participate in these income streams in a way that aims
to provide high-margin, diversified and stable cash flows for our
shareholders.
For more information, visit https://www.petershillpartners.com/homepage.html.
Information on the website is not incorporated by reference into this press
release and is provided merely for convenience.
Chairman's Statement
Dear Shareholders
Global markets experienced volatility throughout 2023. Major equity indices
rebounded from considerable declines in 2022, but did so with large swings
and, in the US, concentrated in a small number of technology stocks. The year
began with a regional banking crisis that started in the United States and
carried into Europe. Significant movements in US treasury yields, paired with
economic uncertainty and geopolitical instability, contributed to the
movements which markets experienced. Against that backdrop, our Partner-firms
raised $23 billion of new fee eligible AuM, making this another year of
Petershill Partners achieving its fundraising targets against a challenging
environment. This year our fundraising came from 18 different firms
underpinning a core tenet of Petershill Partners which is to provide
diversification through our ownership in many different high quality
alternative asset managers.
Fee related earnings were down 5% as cost growth amongst our Partner-firms
more than offset the 2% growth in Partner Net Management and Advisory Fees.
Funds were raised in advance of their being needed for deployment, resulting
in a delay in the activation of fees for new funds raised. We experienced
lower Partner Realised Performance Revenues (PRE) in 2023, resulting from both
lower investment performance in the absolute return strategies and the subdued
realisation environment throughout the year that impacted our private markets
strategies. As a result, our Partner Distributable Earnings were lower, as
expected in the context of limited realisations.
The carrying value of our investments in Partner-firms ended the year higher
primarily resulting from higher multiples on comparable listed businesses as
markets re-rated in the second half of the year.
Our Partner-firms exhibited continued strength in asset raising despite the
difficult market background. The consequent increase in fee-paying AuM will
continue to support management fees going forward. One of the factors that
distinguishes the Company from its peers is the range of high-quality General
Partner (GP) services that the Operator offers to Partner-firms, designed to
unlock value and increase future returns. In 2023, the number of GP services
engagements grew by 50%, and this engagement increases confidence about
prospects for our Partner-firms - and for the Company.
The capital structure of the Company, with its relatively low fixed rate
long-term debt, looks even better now than it did a year ago as rates have
risen significantly since we raised this debt. We closed on a $100 million
unsecured revolving credit facility to provide more liquidity if need arises.
The Company did not draw down on this facility at all during the year. While
much of the cash during the year was invested in money market funds, the
Operator did start to shift some cash into slightly longer duration fixed
deposits as short-term rates moderated. We cancelled approximately $3 billion
of share premium in 2023, which has provided us with greater flexibility in
structuring capital returns to our shareholders.
The Operator chose not to make any acquisitions during the year as the
opportunities considered did not present attractive value creating
opportunities. We announced a $50 million buyback programme earlier in the
year to purchase shares at an attractive price relative to the Company's net
asset value as we consider this to be significantly value accretive. To date,
the programme has completed $32 million of purchases.
Our Partner-firms continued to generate solid free cash flow during the year,
which funds our progressive dividend programme. The Board approved an interim
dividend of 4.9 cents per share and is recommending a final dividend of 10.1
cents per share, bringing the full year dividend to 15.0 cents per share. This
compares with a full year dividend of 14.5 cents per share in 2022. In
addition, taking into account our balance sheet capacity, strong anticipated
cash flows and the value at which the Company's shares are trading, the Board
is considering launching a tender offer to purchase up to $100 million of the
Company's shares. Our decision will be made by the end of April so that
approval could be sought at the forthcoming AGM.
We held 10 Board meetings during the year, supplemented by 13 meetings of
Board Committees, covering Audit and Risk, Remuneration, Nomination and
Management Engagement. Additionally, the Board met with two Partner-firms in
New York, and we continue to seek feedback from shareholders both through
direct engagement and through the investor relations activities of the
Operator and our brokers.
Subsequent to the year end, we closed on 2 transactions. One where we
purchased additional interests in three existing Partner-firm investments in a
secondary transaction at a reasonable discount to our carrying value and
another where we sold part of our PRE and balance sheet exposure back to
management. We believe both of these transactions will be accretive to
shareholder value. We expect inflation to moderate and interest rates to start
to come down as we move through 2024; this should provide a better environment
for transaction activity in markets and lead to a pickup in realisations for
Partner-firms.
The Company's shares have continued to trade at a significant discount to net
asset value throughout the year and the Board actively considers strategies
which could have an impact in narrowing that discount. We continue to exercise
careful discipline in the allocation and management of capital through
buybacks, dividends and the hurdles applied to new investments. We believe
that our careful stewardship of capital, combined with the attractive
underlying growth prospects and cash flow generation of our Partner-firms,
will be recognised by the market in due course and will result in good medium
to long term returns to shareholders.
The Operator's Report
The Company's purpose is to give investors the opportunity to participate in
the growth of the alternative asset management industry. Despite the
industry's reputation for complexity, the Company's model is simple. Investors
share in the fees generated by first-class Partner-firms that manage
alternative investments predominantly in private markets and other unquoted
assets. In a higher inflation environment, which tends to lower real returns,
alternative investments can be particularly attractive.
To assist readers, we refer throughout this section to adjusted measures which
the Company considers to be Alternative Performance Measures or APMs and
Operating Metrics. APMs are non-IFRS measures that analyse our performance,
using a variety of measures that are not specifically defined under IFRS;
while Operating Metrics are non-IFRS measures that are based on the
performance of the Partner-firms which are not related to the Group's
financial statements.
APMs and Operating Metrics are used by the Directors and the Operator to
analyse the business and financial performance, track the Company's progress,
and help develop long-term strategic plans and they also reflect more closely
the cash flow of the Company. The Directors believe that these APMs and
Operating Metrics are useful to investors, analysts and other interested
parties as supplemental measures of performance and liquidity.
Definitions of APMs and Operating Metrics, along with reconciliations to the
relevant IFRS measures for APMs, where appropriate, can be found in the
Glossary of Key Operating Metrics on pages 49 to 51 and Alternative
Performance Measures on pages 52 to 58.
Technical Note
As part of the initial acquisition of the portfolio of Partner-firms on 28
September 2021, the Company acquired interests in several trusts, which
previously issued $350 million of long-term debt with a 5% coupon and a
maturity date of 2039. The debt was secured by the rights to the cash flows of
certain Partner-firm interests held by the Company and other interests held by
the Petershill Funds managed by the Operator. The debt was retired and the
interests owned by the Petershill Funds securing that debt was released when
the Company raised $500 million of new, unsecured long-term debt. However,
under IFRS the Company was required to consolidate these interests through 19
December 2022. This consolidation resulted in all of the income, investment
gain and finance costs appearing in the Consolidated Statement of
Comprehensive Income. However, Shareholder returns were only affected by the
interests that the Company owned.
Since these interests were de-consolidated at 19 December 2022, they are not
included in the Consolidated Statement of Financial Position at 31 December
2022 or 31 December 2023. The Consolidated Statement of Comprehensive Income
reflected the effects of consolidation for the period from 1 January 2022 to
19 December 2022. This did not have an impact on the financial statements and
results for 2023.
The APM basis presents the financial information on a non-IFRS basis,
excluding the impact of the assets, liabilities, income, investment gain and
finance cost which do not affect Shareholder returns. It can therefore aid
Shareholders in assessing their investment in the Company.
The IFRS and APM basis numbers discussed and presented below include
significant "unrealised" and non-cash items that include unrealised change in
fair value of investments, and it should be noted that, while permitted, it is
not the Company's core strategy to exit or realise these investments.
Therefore, management results are also presented, excluding the unrealised
change in fair value of investments at fair value through profit and loss and
related unrealised divestment fee.
Company Performance
The Company's income reduced in 2023 as subdued exits reduced PRE
significantly and increased Partner-firm expenses reduced FRE margins. FRE
decreased 5%, PRE decreased 58% over the prior year and Partner Realised
Investment Income increased 35% in 2023, resulting in an overall decline in
Partner Distributable Earnings of 21% over the prior year. Fund-raising by
Partner-firms was robust despite the challenging environment. The $23 billion
fee-eligible AuM raise in 2023 is attributable to the high quality of our
Partner-firms and the diversification of our portfolio. Aggregate Partner-firm
AuM grew 7% and Aggregate Fee-paying AuM grew 14% for the year. Ownership
weighted AuM increased 3% year-over-year to $37 billion and Fee-paying
ownership-weighted AuM increased 8% year-over-year to $28 billion.
The Company's results for 2023 represent the period from 1 January 2023
through 31 December 2023 and are presented with comparative data for 2022, the
Company's first full year of operations.
The Company's revenue model combines three types of income from Partner-firms:
management fee income, performance fee income and investment income. Of these
three, management fee income in particular provides stable, recurring profits.
FRE Margin fell from 62% to 58%, the management fee income APM basis for the
year was $203 million (2022: $213 million), performance fee income APM basis
$55 million (2022: $132 million), and investment income APM basis $34 million
(2022: $25 million).
The IFRS profit and total comprehensive profit for the period after tax was
$321 million (2022: loss of $453 million) equating to an Earnings Per Share
(EPS) of 28.4 cents (2022: (39.4) cents). This includes an increase in
financial assets and liabilities held at fair value of $221 million (2022:
$777 million decrease APM basis), an Unrealised Divestment Fee of $51 million
(2022: $1 million credit), non-recurring credit in expenses of $1 million
(2022: $19 million expense), change in liability towards Tax Receivables
Agreement of $22 million (2022: $19 million), an increase in deferred tax of
$53 million (2022: $56 million decrease) and excludes an expected payment
towards the Tax Receivables Agreement of $24 million (2022: $31 million).
The Company's Adjusted Profit after tax was $200 million (2022: $273 million).
The Company's Adjusted EBIT for the year was $284 million (2022: $336
million), resulting in an Adjusted EBIT margin of 89% (2022: 89%). This
highlights the key characteristics of Petershill Partners as a business with
significant growth of durable capital, delivering stable and recurring
revenues with a highly efficient Adjusted EBIT margin and significant cash
flow.
Dividends
Petershill Partners has set a progressive dividend policy which will reflect
earnings growth over time. The Board reviews the distributable reserves
periodically, including consideration of any material changes since the most
recent audited financial statements, ahead of proposing any dividend. The
interim dividend is set to one-third of the prior year's annual dividend
amount, and the final dividend proposed is set to reach the target for the
year. Shareholders will be given the opportunity to approve the final dividend
for the year at the Company's Annual General Meeting.
Based on the financial results for the year, the Board has proposed a dividend
of 10.1 cents per Ordinary Share to be approved by Shareholders at the AGM on
23 May 2024. This dividend, when combined with the interim dividend declared
of 4.9 cents per Ordinary Share, totals 15.0 cents per Ordinary Share for
2023.
Given our financials are primarily driven by USD denominated economics
(management fees and USD denominated funds, and performance fees and balance
sheet income on USD denominated funds), our dividends are proposed and paid in
USD. However, Shareholders have the option to elect for payment in either GBP
or EUR.
Investments at Fair Value through Profit or Loss
2023 2022
$m $m
At beginning of year 4,959 5,524
Investments (includes new, follow on, and prior commitments, net of disposals) 69 212
Change in fair value of investments through profit and loss APM basis 227 (777)
At end of year 5,255 4,959
The fair value of the Company's investments in Partner-firms at 31 December
2023 was $5,255 million (31 December 2022: $4,959 million). The fair value of
the Company's investments in Partner-firms is determined using both earnings
multiples and discounted cash flow techniques, which are common industry
approaches. In valuing the investments, key assumptions include estimates of
future AuM growth, expected management and performance fee margins, expected
current and future underlying fund returns and timing of realisations. Whilst
an exit of an investment is possible, we do not typically seek to exit an
investment as part of our strategy. The weighted average discount rate used to
value private markets fee related earnings decreased modestly to 13.0% in 2023
from 13.3% in 2022. The weighted average discount rate used to value private
markets performance fees related earnings was unchanged year over year at
25.2% for 2023. Refer to footnote 4, Investments at fair value through profit
or loss, beginning on page 30 for additional details.
The increase in the fair value of investments through profit and loss was $227
million for the year ended 31 December 2023 (2022: $(777) million decrease APM
basis). The increase in fair value was primarily due to the impact of the
increase in valuation multiples of comparable businesses. See Note 4 in the
Notes to the Consolidated Financial Statements on page 30 for additional
information.
Cash and Investments in Money Market Funds
The Company's balance sheet is strong and well-capitalised with sufficient
cash and money market investments to support its operational needs. On 14
December 2023, the Company entered into a fixed term deposit of $150 million,
which matures on 15 March 2024. At 31 December 2023 the Company had $243
million in cash and cash equivalents (2022: $98 million) and $62 million
invested in money market funds (31 December 2022: $483 million) with a AAA
credit rating.
Borrowing
The Company has $500 million of long-term, unsecured debt with an effective
interest rate of 6.2% and a range of maturities between 7 and 20 years. This
debt was issued in 2022 and the proceeds were used to retire $350 million of
notes outstanding at the time.
On 6 January 2023 the Company entered into a $100 million revolving credit
facility with a term of three years. The Company is subject to a fee on the
drawn and undrawn amounts. The rate for any drawn amount is based on reference
rate plus a spread. The interest rate on the revolving credit facility is
subject to changes in market interest rates. In 2023, the Company did not draw
down on the revolving credit facility. Any interest expense incurred is
included in finance cost.
Deferred Payment Obligations
Certain investments in Partner-firms are purchased with deferred payment
terms. These deferred payment obligations represent amounts payable by the
Company at various dates in the future. When the Company enters into deferred
payment obligations, a portion of the purchase price is recognised as finance
cost through the settlement of the payables under the effective interest
method. The interest rate used is based on the reasonable borrowing rate for
the Company at the time of the transaction. In 2023, $6 million was included
in finance costs (2022: $6 million), which was associated with deferred
payment obligations.
Tax Receivables Agreement
The Company entered into a Tax Receivables Agreement as part of the Initial
Acquisition on 28 September 2021. The agreement provides for the payment of
75% of cash tax savings, if any, in U.S. federal, state and local income tax
that the Company actually realises. The cash tax savings are defined as the
difference between the taxes actually due, and the taxes due had there been no
step-up in tax basis from the Initial Acquisition. The Company expects these
payments to arise over a period of 15 years. The value of these estimated
payments at 31 December 2023 is $175 million (31 December 2022: $186 million)
assuming an 18% discount rate and using the Company's most recent projections
relating to the estimated timing of the payments. The change in liability for
the Tax Receivables Agreement related to the accretion of the discount was $22
million (2022: $19 million). The expected payment for 2023 related to the Tax
Receivables Agreement is approximately $24 million (2022: $31 million). Refer
to Note 3 in the Notes to the Consolidated Financial Statements on page 29 for
additional information.
Operating Expenses
Operating expenses were $84 million (2022: $43 million). Included in the
operating expenses for 2023 was a $51 million expense related to the fee
payable on the divestment of investments. The accrual is calculated and
charged to the income statement based on the fair value of the Company's
investment in Partner-firms at the balance sheet date. Divestment fees only
become payable once gains are realised.
The Operator is entitled to such divestment fee calculated at 20% of the
realised profit on the exit of an investment. Although the Company does not
intend to exit its investments, an accrual is reflected representing an amount
that would be payable if the Company were to exit all of its investments. At
31 December 2023, the fee payable on divestment of investments was $95 million
(31 December 2022: $44 million). No payment was made in 2022 or 2023.
The Operator is entitled to a fee (Operator charge) of 7.5% of Income from
investments in Partner-firms APM basis. The Operator charge for the year was
$22 million (2022: $28 million).
The Operator is entitled to a Profit Sharing Charge on a quarterly basis. The
Profit Sharing Charge is equal to 20% of total income from investments in
Partner-firms, as defined under IFRS, from new investments made post
admission, in the relevant quarter and only after a two-year ownership period
from the date on which the investment is closed, and subject to the relevant
investment achieving an investment return of at least 6.0 per cent. The Profit
Sharing Charge for the year was $0.1 million (2022: $nil).
The Directors' fees for the year were $1.7 million (2022: $1.5 million). Fees
paid to Directors for the year are unchanged in local currency.
The Adjusted EBIT margin for 2023 was 89% (2022: 89%) reflecting the
relatively low cost to operate the Company.
Finance Cost
The finance cost for the year ended 31 December 2023 was $37 million (2022:
$46 million). Included in the finance cost for 2023 is an amount of $6 million
(2022: $6 million) of imputed interest relating to deferred payment
obligations and a fee of $0.6 million relating to the $100m revolving credit
facility (2022: $nil). Included in the finance cost for 2022 was $17 million
in non-recurring costs resulting from the retirement of $350 million of debt.
Refer to Note 10 on page 38 in the Notes to the Consolidated Financial
Statements.
Tax Expense
The Company's tax charges are comprised primarily of certain taxes in the
United States (where the 2023 federal corporate tax rate was 21% and state and
local taxes may vary) as well as certain taxes in the United Kingdom (where
the 2023 corporate tax rate was 23.5%). Accordingly, the effective tax rate
payable by the Company may vary from year to year based on the geographic mix
and nature of the income earned by the Company. Notably, a substantial amount
of income derived from Management fee income will be subject to United States
federal corporate tax as well as applicable state and local taxes. Income
derived from Performance fee income and Investment income may be subject to
taxes in the jurisdiction in which the investment in the Partner-firm is held,
including the United Kingdom.
As a result of the above considerations, as well as the items discussed above
under "Tax Receivables Agreement", the Company calculates tax and related
expenses and its Adjusted tax and related expense rate by combining the
estimated payment under the Tax Receivables Agreement and the current tax.
Current tax expenses comprise obligations to tax authorities related to
current period reporting. Deferred tax expenses arise with respect to
temporary differences between carrying amounts of assets and liabilities and
their tax bases.
Analysis of Tax
2023 2022
$m $m
Analysis of tax on profit
Current tax 23.5 4.2
Deferred taxation 52.5 (56.4)
Tax expense/(credit) 76.0 (52.2)
The tax expense does not include the related expected payments under the Tax
Receivables Agreement for the current year. The expected payment under the Tax
Receivable Agreement for the year ended 31 December 2023 was $24 million
(2022: $31 million).
The tax and related expenses for the year, which considers both the current
tax and the expected payment under the Tax Receivable Agreement ("TRA") were
$48 million (2022: $35 million) and the adjusted tax and tax related expense
rate was 19.3% (2022: 11.5%). These amounts represent current taxes payable in
addition to any expected payments under the Tax Receivables Agreement for the
year and exclude deferred taxes.
The current tax of $24 million for 2023 includes approximately $13 million
related to estimates from the prior year. Excluding the $13 million related to
estimates from the prior year, tax and related expenses for 2023 were $35
million and the Adjusted tax and tax related expense rate was 14.0%.
Capital
As at 31 December 2023, the Company's issued share capital comprised of
1,122,202,824 Ordinary Shares (31 December 2022: 1,135,399,597). During the
period the Company commenced a share buyback and purchased 13,196,773 shares
at an average price of 157.8p per share.
Total Shareholders' funds was $4,834 million at 31 December 2023 (31 December
2022: $4,719 million). As at 31 December 2023, there were retained earnings of
$3,133 million (31 December 2022: $329 million loss). These retained earnings
include the change in fair value of investments for the year of $227 million
(2022: ($777) million APM basis) which does not have an impact on the realised
profits.
In 2023, the Company paid dividends totalling $180 million and bought back
Ordinary Shares totalling $26 million resulting in a reduction to capital of
$206 million in the form of a capital return to Shareholders.
Approximately 77% of Petershill Partners shares are held by long-dated private
funds managed by Goldman Sachs Asset Management. Goldman Sachs Asset
Management is the manager of these shares and exercises discretion over how
and when they could be sold in the future, on behalf of the investors in those
funds.
Partner-firm performance
for the year ended 31 december 2023
(continuing operator's report)
Key Operating Metrics
We provide significant detail on our Partner-firms in our key Operating
Metrics as this gives investors insight into the revenues and revenue model of
the Company.
In 2023, fundraising continued across the Company's Partner-firms with
Aggregate Fee-paying Partner-firm AuM growing 14% year-on-year to $221
billion. Ownership weighted AuM grew 3% to $37 billion (2022: $36 billion).
Strong aggregate Partner-firm AuM and Aggregate Fee-paying AuM growth are the
basis for future earnings development and highlight the positive operating
dynamics and pricing power of our high-quality Partner-firms. This growth has
translated into robust, recurring, and high-quality earnings from our
Partner-firms - with full year Partner Distributable Earnings of $292 million,
despite the challenging environment.
Petershill Partners is not reliant on any one firm, one fund-raising, one
track record, or one brand. Our approach is to invest in a range of
high-quality, high-performing alternative asset management firms, who manage a
diverse range of funds, giving the Company stable, high-quality, recurring
earnings.
Our total AuM at year-end comprised over 200 funds, spanning private equity,
absolute return and other private capital funds, with an average life cycle of
9 years. That means their capital is locked in for an average duration of 9.0
years, generating recurring management fees and the opportunity for meaningful
profit participation throughout this time. We believe our long-term approach
differentiates us and provides for enhanced alignment with the key principals
at each Partner-firm and, as a result, allows the Company to participate in
their income streams in a way that provides high-margin, diversified and
stable cash flows for our Shareholders.
Partner Fee Related Earnings (FRE)
Partner FRE, drawn from management fees, declined 5% year-over- year to $203
million (2022: $213 million), primarily reflecting higher expenses and lower
transaction and advisory fees over the comparable period. Partner Fee Related
Expenses were $147 million in 2023, up from $129 million in 2022. Higher costs
due to Partner- firm fundraising and team expansions contributed to the
reduction in the Partner FRE margin year-over-year to 58% (2022: 62%).
Transaction and advisory fees were $12 million in 2023 down from $21 million
in the prior year. The lower transaction and advisory fees reflected the
subdued transaction environment that impacted global markets in 2023. In 2023,
the Partner Blended Net Management Fee Rate was 1.31% (2022: 1.41%).
Partner Realised Performance Revenues (PRE)
PRE, which represents direct participation in the upside performance of
Partner-firms' funds and products, declined year-over-year to $55 million for
2023 (2022: $132 million) in difficult market conditions with a relatively
unattractive realisation environment. Performance of the absolute return
strategies was lower compared to the prior year, which also contributed to the
year-on-year decline in PRE. $10 million was attributable to the absolute
return strategy in 2023 (2022: $57 million). 13% of total partner revenue in
2023 was derived from PRE (2022: 26%).
Partner-firms manage a variety of performance fee-eligible funds at different
stages of their life cycle. Due to this diversification, the Company
anticipates that Realised Performance Revenues will be earned regularly from a
wide range of funds going forward, with a range of 20-30% of total
Partner-firm revenues over the medium term, assuming market conditions and
environment are broadly supportive.
Partner Private Markets Accrued Carried Interest was $615 million at 31
December 2023, broadly stable with the $611 million at 31 December 2022.
Partner Realised Investment Income
As an owner in the Partner-firms, the Company shares in a percentage of the
investment and balance sheet income of the Partner-firms and realises this
through a number of direct positions in the funds of underlying Partner-firms,
known as Realised Investment Income. This totalled $34 million in 2023, up
from $25 million APM basis in 2022.
Consolidated Statement of Comprehensive Income (unaudited)
For the year ended 31 December 2023
For the year ended For the year ended
31 December 2023
31 December 2022
Note $m $m
Income
Income from investments in Partner-firms derived from: 2(x)
Management fee income 203.0 213.0
Performance fee income 54.7 139.4
Investment income 34.4 32.6
Total income from investments in Partner-firms 292.1 385.0
Interest income from investments in money market funds 2(x) 24.7 8.6
Interest income from other assets 2(x) 2.6 -
Total income 319.4 393.6
Movement in financial assets and liabilities held at fair value
Change in investments at fair value through profit or loss 2(vi),4 227.0 (806.7)
Change in contingent consideration at fair value through profit or loss 4 (6.4) -
Total movement in financial assets and liabilities held at fair value 220.6 (806.7)
Expenses 2(xi)
Board of Directors' fees and expenses (1.7) (1.5)
Other operating expenses (10.1) (14.4)
Operator charge 6 (21.9) (27.8)
Profit sharing charge 6 (0.1) -
Unrealised divestment fee (expense) / credit 6 (50.5) 0.9
Total expenses (84.3) (42.8)
Operating profit / (loss) for the year 455.7 (455.9)
Finance expense
Finance cost 10 (37.1) (45.6)
Movement in liability to Petershill Funds 15 - 15.4
Change in liability for tax receivables agreement 2(v),3 (21.5) (19.0)
Total finance expense (58.6) (49.2)
Profit / (loss) for the year before tax 397.1 (505.1)
Tax (expense) / credit 8 (76.0) 52.2
Profit / (loss) for the year after tax 321.1 (452.9)
Profit / (loss) and total comprehensive income / (expense) for the year 321.1 (452.9)
Profit / (loss) and total comprehensive income / (expense) attributable to:
Equity holders of the Company 321.1 (452.9)
Earnings per share
Basic and diluted earnings / (loss) per Share (cents) 11 28.38 (39.36)
The accompanying notes on pages 17 to 48 form an integral part of these
financial statements.
Consolidated Statement
of Financial Position (unaudited)
As at 31 December 2023
31 December 2023 31 December 2022
Note(s) $m $m
Non-current assets
Investments at fair value through profit or loss 4 5,254.7 4,958.9
Deferred tax asset 9 - 44.0
5,254.7 5,002.9
Current assets
Investments in money market funds at fair value through profit or loss 4 62.3 483.4
Cash and cash equivalents 5 242.9 97.6
Trade and other receivables 12 127.4 138.2
432.6 719.2
Total assets 5,687.3 5,722.1
Non-current liabilities
Unsecured Notes payable 14, 16 493.8 493.2
Deferred payment obligations 2(vi) 7.3 50.0
Liability for Tax Receivables Agreement 2(v) 150.5 150.6
Contingent consideration at fair value through profit or loss 4 3.9 -
Deferred tax liability 9 8.2 -
Fee payable on divestment of investments 6 94.8 44.3
758.5 738.1
Current liabilities
Trade and other payables 6.9 8.7
Deferred payment obligations 2(vi) 44.6 189.9
Interest payable 16 10.0 10.0
Profit sharing charge payable 6 0.1 -
Operator charge payable 6 6.6 21.0
Contingent consideration at fair value through profit or loss 4 2.5 -
Liability for Tax Receivables Agreement 2(v) 24.2 35.1
94.9 264.7
Total liabilities 853.4 1,002.8
Net assets 4,833.9 4,719.3
Equity
Share capital 2(ix), 17 11.2 11.4
Share premium 2(ix), 17 - 3,346.7
Other reserve 2(ix), 17 1,689.6 1,689.6
Capital redemption reserve 2(ix), 17 0.5 0.3
Retained earnings / (accumulated losses) 18 3,132.6 (328.7)
Total shareholders' funds 4,833.9 4,719.3
Number of Ordinary Shares in issue at year end 17 1,122,202,824 1,135,399,597
Net assets per share (cents) 19 430.75 415.65
The accompanying notes on pages 17 to 48 form an integral part of these
financial statements.
Consolidated Statement of Changes in Equity (unaudited)
For the year ended 31 December 2023
Share Share Other Capital redemption reserve Retained earnings / (accumulated losses) Total
capital
premium
reserve
Note $m $m $m $m $m $m
Opening net assets attributable to Shareholders 11.4 3,346.7 1,689.6 0.3 (328.7) 4,719.3
at 1 January 2023
Repurchase and cancellation of Ordinary Shares 17 (0.2) - - 0.2 (26.3) (26.3)
Share premium cancellation 17 - (3,346.7) - - 3,346.7 -
Dividends paid in the year 20 - - - - (180.2) (180.2)
Profit and total comprehensive income for the year - - - - 321.1 321.1
Closing net assets attributable to Shareholders 11.2 - 1,689.6 0.5 3,132.6 4,833.9
at 31 December 2023
For the year ended 31 December 2022
Share Share Other Capital redemption reserve Retained earnings / (accumulated losses) Total
capital
premium
reserve
Note $m $m $m $m $m $m
Opening net assets attributable to Shareholders 11.6 3,346.7 1,689.6 - 247.9 5,295.8
at 1 January 2022
Repurchase and cancellation of Ordinary Shares 17 (0.2) - - 0.2 (53.3) (53.3)
Redemption and cancellation of Redeemable Shares 17 - - - 0.1 (0.1) -
Dividends paid in the year 20 - - - - (70.3) (70.3)
Loss and total comprehensive expense for the year - - - - (452.9) (452.9)
Closing net assets attributable to Shareholders 11.4 3,346.7 1,689.6 0.3 (328.7) 4,719.3
at 31 December 2022
The accompanying notes on pages 17 to 48 form an integral part of these
financial statements.
Consolidated Statement of Cash Flows (unaudited)
For the year ended 31 December 2023
For the year ended For the year ended
31 December 2023 31 December 2022
Note $m $m
Cash flows from operating activities
Profit / (Loss) for the year before tax 397.1 (505.1)
Adjustments to reconcile operating profit / (loss) for the financial period to
net cash flows from operating activities:
Reinvestment of income from investments in Partner-firms (57.0) (42.6)
Movement in financial assets and liabilities held at fair value through profit 4 (228.8) 806.7
and loss
Movement in trade and other receivables 14.6 (59.1)
Movement in trade and other payables (2.8) (8.0)
Movement in fee payable on divestment of investments 6 50.5 (0.9)
Movement in profit sharing charge payable 6 0.1 -
Movement in operator charge payable 6 (14.4) 11.8
Movement in contingent consideration held at fair value through profit or loss 4 6.4 -
Finance expense 58.6 49.2
Purchase of investments in money market funds 4 (781.4) (1,043.4)
Sale of investments in money market funds 4 1,227.1 1,021.1
Reinvested interest income from investments in money market funds 4 (24.6) (8.0)
Taxes paid (28.2) (4.4)
Net cash flows from operating activities 617.2 217.3
Cash flows from investing activities
Purchase of investments at fair value through profit or loss (204.2) (149.7)
Capital proceeds received - 6.7
Net cash flows from investing activities (204.2) (143.0)
Cash flows from financing activities
Dividends paid 20 (180.2) (70.3)
Interest expense payments (28.3) (27.8)
Payment of share issue costs - (5.7)
Repayment and cancellation of share capital 17 (25.4) (50.0)
Proceeds from Unsecured Notes 16 - 500.0
Repayment of Notes payable 16 - (350.0)
Payment of transaction costs related to debt issuance and repayment - (8.1)
Extinguishment of liability to Petershill funds 15 - (89.6)
Payment under Tax Receivables Agreement 3 (33.8) -
Net cash flows from financing activities (267.7) (101.5)
Net increase / (decrease) in cash and cash equivalents during the year 145.3 (27.2)
Cash and cash equivalents at the beginning of the year 97.6 124.8
Cash and cash equivalents at the end of the year 242.9 97.6
Non-cash investing and financing activities
In kind distribution of investments in Partner-firms and Trade and other - 492.2
receivables held at Issuer SPVs to Petershill Funds
In kind distribution of investments at fair value through profit or loss 0.2 -
The accompanying notes on pages 17 to 48 form an integral part of these
financial statements.
Notes to the Consolidated Financial Statements (unaudited)
For the year ended 31 December 2023
1. General information
Petershill Partners plc (the "Company") is a company limited by shares,
incorporated and registered in England and Wales whose shares are publicly
traded on the Main Market of the London Stock Exchange. The consolidated
financial statements of Petershill Partners plc for the year ended 31 December
2023 comprise the Company, its subsidiaries and its indirect subsidiaries
together referred to as the "Group".
The Company was incorporated and registered in England and Wales under the UK
Companies Act 2006 (as amended) as a private company limited by shares under
the name Delta Epsilon Limited on 24 March 2021 with the registered number
13289144. On 12 August 2021, the Company was re-registered as a public limited
company as Delta Epsilon plc, and on 2 September 2021, the Company was renamed
Petershill Partners plc.
2. Basis of preparation and significant accounting policies
i. Basis of preparation
The consolidated financial statements of the Group have been prepared and
approved by the Board of Directors in accordance with UK-adopted International
Accounting Standards ("IFRS") and with the requirements of the Companies Act
2006 as applicable to companies reporting under those standards. The financial
statements are presented to the nearest million United States Dollar ($'m),
the functional and presentational currency of the Company.
These preliminary results for the year ended 31 December 2023 are unaudited
and do not constitute statutory accounts within the meaning of Section 435 of
the Companies Act 2006. Statutory accounts for the year ended 31 December 2023
have not yet been delivered to the Registrar of Companies.
The consolidated financial statements have been prepared on a going concern
basis under the historical cost convention, as modified by the revaluation of
financial assets and liabilities at fair value through profit or loss. The
preparation of the financial statements requires estimates and assumptions to
be made that may affect the amounts reported in the financial statements and
accompanying notes. Actual amounts could differ from the estimates included in
the financial statements herein. The preparation of the consolidated financial
statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires judgement to be exercised in the
process of applying the accounting policies. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates
are significant to the consolidated financial statements, are disclosed in
note 3.
Refer to note 2(xiv) for discussion on new and amended standards and
interpretations that are applicable to the Company and the Group.
The principal accounting policies are set out below.
Certain figures for the year ended 31 December 2022 in the Consolidated
Statement of Financial Position and Consolidated Statement of Cash Flows have
been re-categorised to conform to current year presentation. The Operator
charge payable has been disaggregated from Trade and other payables. This
re-categorisation does not have any impact on the consolidated financial
result for the years ended 31 December 2023 and 31 December 2022.
ii. Segmental reporting
The Operator serves as the Group's alternative investment fund manager for
purposes of the UK AIFMR and EU AIFMD, which pursuant to the Operator
Agreement has delegated its portfolio management functions to the Investment
Manager, which has further delegated the provision of portfolio management
services to the Investment Advisor. The Investment Advisor, acting as the
chief operating decision-maker, is responsible for allocating resources and
assessing performance of the operating segments. The key measure of
performance used by the Investment Advisor to assess the Group's performance
and to allocate resources is the Group's income from investments in
Partner-firms.
The Group is engaged in holding interests in and investing into Partner-firms
for the purpose of generating revenues derived from the share of management
fees, performance fees and investment income. The management of the Group,
including assessment of performance, budgets and liquidity is managed for the
portfolio as a whole and not by discrete segments. Hence, the Board, as
recommended by the Investment Advisor, has concluded that the Group is
organised into one main operating segment.
The Group derives 85% (2022: 89%) of its income from North America and the
remaining 15% (2022: 11%) from Europe. 91% (31 December 2022: 92%) of the
Group's fair value of investments are located in North America and the
remaining 9% (31 December 2022: 8%) are located in Europe.
iii. Functional currency and foreign currency transactions
The Board of Directors has determined that the functional currency of the
Company and its subsidiaries is United States Dollar (US$), as this is the
currency of the primary economic environment in which the Company and its
subsidiaries operates and is the currency of the majority of the Group's
Investments in Partner-firms. If indicators of the primary economic
environment are mixed, then management uses its judgement to determine the
functional currency that most closely represents the economic effect of the
underlying transactions, events and conditions. Although the Company is listed
in the UK, the Group's investments are mostly held in the USA and transactions
are mostly denominated in US$. Expenses (including the Operator charge,
Divestment fee and Profit sharing charge) are denominated and paid mostly in
US$.
Transactions in currencies other than US$ during the period, including income
and expenses, are translated into US$ at the rate of exchange prevailing on
the date of the transaction. Monetary assets and liabilities denominated in
currencies other than US$ are retranslated at the functional currency rate of
exchange ruling at the reporting date. Non-monetary items that are measured in
terms of historical cost in a currency other than US$ are translated using the
exchange rates as at the dates of the initial transaction. Non-monetary items
measured at fair value in a currency other than US$ are translated using the
exchange rates at the date when the fair value was determined.
Foreign currency translation gains and losses on financial instruments
classified at fair value through profit or loss are included in the
Consolidated Statement of Comprehensive Income as part of the change in fair
value of investments at fair value through profit or loss.
Exchange differences on other financial instruments are included in the
Statement of Comprehensive Income as Foreign exchange gain / (loss). Gains and
losses on foreign exchange during the year were immaterial and have been
included under Other operating expenses in the Consolidated Statement of
Comprehensive Income.
iv. Financial instruments
i. Classification
Financial assets are classified based on the business model for managing those
financial assets and the contractual cash flow characteristics of the
financial assets.
All investments have been classified as financial assets at fair value through
profit or loss as they are managed, and performance is evaluated, on a fair
value basis. The primary focus is on fair value information and the use of
that information to assess the assets' performance and to make decisions.
Financial assets classified as receivables are carried at amortised cost less
expected credit losses ("ECL").
ii. Impairment
The Group has adopted the general approach to measuring the loss allowance as
required by IFRS 9 - Financials Instruments. A 12-month ECL is recognised for
all financial assets within stage 1 of the Group's impairment model and
lifetime ECL for all other financial assets and is deducted from the gross
carrying value of the receivables. ECL is determined as a product of Loss
Given Default ("LGD"), Probability of Default ("PD"), and Exposure at Default
("EAD"), discounted at an effective interest rate.
The methodology is structured around three core steps: i) Risk
differentiation, ii) Risk quantification, and iii) whether there has been a
significant increase in credit risk since origination and or exposures are
considered to be credit impaired. In implementing this methodology,
Partner-firms are distinguished for riskiness by leveraging key risk
indicators through a comprehensive credit risk review framework.
Risk differentiation
1. The Partner-firms' liquidity position, indebtedness and ability to
generate future cash flows are considered the key risk indicators, with
weights assigned to each indicator that is informed by experience. A higher
weight is attributed to the Liquidity Indicator on the basis that it is
considered to be a strong reflection of a firm's ability to meet immediate
cash obligations. The latter driver of 'Cashflow adequacy Indicator' relies on
the Partner-firm's ability to generate cash and incorporates forward looking
information.
2. The overall score for each Partner-firm is estimated by combining
the risk indicator weights with the values for each selected risk indicator.
Risk quantification
1. The median risk score serves as the benchmark for quantifying risk
across all Partner-firms.
2. This benchmark is a 'BBB' rating, which is classified as an
investment grade by S&P and indicates an adequate capacity to meet
financial commitments but is also susceptible to adverse economic conditions.
3. The median risk score obtained is compared to the scores of all
other Partner-firms, resulting in Partner-firms with lower comparative risk
being rated as 'A', and those with higher comparative risk as 'BB'.
Once the ratings are assigned using the above two steps, the scores are
calibrated to a corresponding PD rate. The PDs are informed by using average
cumulative default rates for US corporates from S&P publicly available
data. To recognise the increased risk on absolute return Partner-firms which
are considered to be volatile, a nominal increase is applied to the PD rates.
A LGD value is applied for exposures in all stages, albeit where considered
appropriate the LGD for stage 3 exposures will be adjusted to reflect the
specific circumstances of the exposure. The LGD rate is consistent with the
Basel II framework for corporates, sovereigns, and banks on senior subordinate
claims.
Significant increase in credit risk
The Group assesses whether a significant increase in credit risk has occurred
for an exposure through a comprehensive credit risk assessment framework. This
framework employs both qualitative and quantitative indicators which includes
days past due, review and reconciliation of aged receivables and periodic
review of financials and cashflow data with Partner-firms. In addition, the
Group considers that there has been a significant increase in credit risk when
contractual payments are more than 30 days past due.
Credit impaired exposure
The Group considers a financial asset in default when contractual payments are
90 days past due unless there is sufficient evidence from comprehensive credit
risk assessment which suggests otherwise.
The Group also considers a financial asset to be in default when the
comprehensive credit risk assessment indicates that the Group is unlikely to
receive the outstanding contractual amounts in full ('Stage 3').
iii. Write-off policy
The Group writes off financial assets, in whole or in part, when it has
concluded that there is no reasonable expectation of recovery. When a
financial asset is deemed to be uncollectable, the Group concludes this to be
an indicator that there is no reasonable expectation of recovery. The Group
may seek to recover amounts it is legally owed in full, but which have been
wholly or partially written off due to no reasonable expectation of full
recovery.
The calculated ECL is detailed in note 21.
iv. Recognition and derecognition
Financial assets and financial liabilities are initially recorded at their
transaction price, (which is representative of fair value), plus transaction
costs that are directly attributable to their acquisition or issue other than
those classified as at fair value through profit or loss in which case
transaction costs are recognised directly in profit or loss, and then measured
at fair value subsequent to initial recognition. Gains and losses arising from
changes in the fair value of financial assets and financial liabilities at
fair value through profit or loss are presented in the Consolidated Statement
of Comprehensive Income in the period in which they arise. Assets and
liabilities, other than those at fair value through profit or loss, are
measured at amortised cost.
Realised gains and losses are recognised upon sale or disposal of investments.
Unrealised gains and losses from financial assets and liabilities at fair
value through profit or loss are included in the change in fair value of
investments through profit or loss in the Consolidated Statement of
Comprehensive Income.
Financial assets are derecognised when the rights to receive cash flows have
expired or substantially all risks and rewards of ownership have transferred.
Financial liabilities are derecognised when the obligation specific in the
contract is cancelled or expires.
The carrying amounts of assets comprised of cash and cash equivalents and
Trade and other receivables are held at amortised cost. The carrying amounts
of liabilities comprised of Unsecured Notes payable, Deferred payment
obligations, Fee payable on divestment of investments, Liability for Tax
Receivables Agreement, Interest payable, Profit sharing charge payable,
Operator charge payable and Trade and other payables are held at amortised
cost. The carrying value of assets and liabilities except Unsecured Notes
payable held at amortised cost listed here approximates fair value as these do
not contain any significant financing components. The fair value of the
Unsecured Notes payable is estimated at $467.0 million based on interest rates
at 31 December 2023 (31 December 2022: $463.0 million).
v. Significant accounting policies
i. Notes payable and interest expense
Unsecured Notes payable are initially recognised at fair value. After initial
recognition, these are subsequently measured at amortised cost using the
effective interest method; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the Consolidated
Statement of Comprehensive Income over the period of the loans or borrowings
using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as
transaction costs of the loan to the extent that it is probable that some or
all of the facility will be drawn down. In this case, the fee is deferred
until the draw down occurs. To the extent that there is no evidence that it is
probable that some or all of the facility will be drawdown, the fee is
capitalised as a prepayment for liquidity services and amortised over the
period of the facility to which it relates.
Borrowing costs including interest expense are recognised in the period in
which they are incurred using the effective interest method.
ii. Liability for Tax Receivables Agreement
The Group's acquisition of the Partner-firms from the Petershill Funds
increased the tax basis, for US tax purposes, of the acquired assets, as
compared with their pre-acquisition tax basis. This increase in tax basis is
expected to increase the amortisation of such assets in the hands of
Petershill Partners, Inc. (formerly Delta Epsilon Delaware, Inc.) (the
"Delaware Subsidiary"), a wholly owned subsidiary of the Company, and
therefore reduce the amount of US tax that the Group would otherwise be
required to pay in the future. This increase in tax basis may also decrease a
taxable gain (or increase taxable loss) on future dispositions of certain
assets to the extent this tax basis is allocated to those assets.
As part consideration for the Initial Transaction, the Delaware Subsidiary
entered into a Tax Receivables Agreement (the "Tax Receivables Agreement" or
"TRA") with certain Petershill Funds and their subsidiaries, which will
require the Delaware Subsidiary to pay 75% of the amount of cash tax savings,
if any, in US federal, state and local income tax that the Delaware Subsidiary
realises. The computation of the tax savings is based on the actual US federal
tax savings realised on the tax returns of the Delaware Subsidiary over the
amount that would have been paid if the increase in tax basis had not
occurred. State and local income tax savings are based on the assumption that
the state and local tax rate is 6% of the reduction in federal taxable income
due to the increased tax basis. In addition, any such savings that the
Delaware Subsidiary realises as a result of the tax benefits associated with
the increases in tax basis that arise due to payments under the Tax
Receivables Agreement, are assumed to result in additional increases in tax
basis that will result in future tax benefits. The Group expects that, as a
result of the size of the increases in the tax basis of the investments
described above, the payments that it will be required to make under the Tax
Receivables Agreement may be substantial. The majority of these incremental
payments are expected to arise over the next 15 years.
The Group has estimated the future tax savings payable under the TRA based on
information that has been provided by the underlying
Partner-firms as to the amount of the step up in tax basis and future expected
amortisation. To the extent that a step up did not result in a
future amortisation deduction it has been assumed that no tax benefit will be
payable under the TRA agreement. In addition, the Group has assumed that any
amortisation will result in an immediate tax benefit in the year of the
amortisation. The Group has recorded a liability of $174.7 million
(31 December 2022: $185.7 million), representing the Operator's best estimate
of the amounts currently expected to be owed to certain of the Petershill
Funds and certain of their subsidiaries under the Tax Receivables Agreement.
The liability that is recorded is associated with the expected future tax
benefits related to the aggregate step-up in tax basis.
The Liability for the TRA was initially recognised at fair value of the
expected liability. Any changes to the carrying value of the expected
liability are recognised in the Consolidated Statement of Comprehensive Income
at each reporting date. Refer to note 3 for detailed discussion of the TRA.
The payable is subsequently carried at amortised cost based on assumptions
discussed below and may be adjusted. These assumptions are based on the
Operator's judgement and information provided by the Partner-firms. The
Operator has estimated the step-up tax basis of the acquired assets based on
tax information provided by the Partner-firms, and to the extent amortisable
projected the amortisation of the step-up tax basis to occur over 15 years,
applied an effective interest rate of 18% (31 December 2022: 18%) and utilised
the current effective tax rate of Delaware Subsidiary in calculating the
future tax benefits and resulting payments under the TRA.
In addition, the TRA provides for the payment on the TRA to become due on the
original due date of the US federal income tax return and an interest that is
payable on the final payment from the due date of the return until actual
payment is made. The interest is recognised as a Finance cost in the
Consolidated Statement of Comprehensive Income at each reporting date.
vi. Investments held at fair value through profit or loss
Investments are designated upon initial recognition as held at fair value
through profit or loss. Gains or losses resulting from the movement in fair
value are recognised in the Consolidated Statement of Comprehensive Income at
each valuation point.
Financial assets are recognised / derecognised at the date of the purchase /
disposal. Investments are initially recognised at cost, being the fair value
of consideration given. Transaction costs are recognised in the Consolidated
Statement of Comprehensive Income as incurred.
The Group measures its investments at fair value. Fair value is defined as the
price that would be received to sell an asset or paid to transfer a liability
(i.e. the exit price) in an orderly transaction between market participants at
the measurement date. In the absence of quoted market prices, fair value is
determined by the Operator. Due to the inherent uncertainties of valuation,
these estimated fair values may differ significantly from the values that
would have been realised had a readily available market for these investments
existed, and these differences could be material.
The Operator is responsible for the implementation and maintenance of internal
controls and procedures related to the valuation of the Group's investments.
Valuations are prepared in accordance with the Operator's valuation policy and
subject to verification procedures. A third-party valuation advisor is engaged
to assist in the preparation of the valuation proposals including certain
market data driven assumptions. The valuation proposals are reviewed by the
Operator's functionally independent Valuation Oversight Group ("VOG").
Periodically, VOG presents the valuation proposals and their independent price
verification review results to the Operator's valuation committee ("Valuation
Committee") which convenes to approve and oversee the application of valuation
policies and review fair value estimates for the investments. Subsequently,
the Operator reports the valuation results to the Board of Directors.
Per the valuation policy, the Operator initially values the Group's
investments based on their purchase price and thereafter values them using
valuation methods that it determines, in its sole discretion. The Operator
uses a number of different valuation techniques, including the market
approach, which applies a multiple to current operating income of
Partner-firms and the income approach, which applies discounted cash flow
techniques based upon estimated future cash flows and discount rates. Since
observable prices are generally not available for such investments, the
Operator considers all available market evidence in determining fair value.
Certain investments are valued at the most recent Net Asset Value per unit or
capital account information available and the Operator considers such value to
be an appropriate measure of fair value. Further information about investments
held at fair value through profit and loss is included in note 4.
Deferred payment obligations
Certain financial assets are purchased under various contracts containing
deferred payment terms. These deferred payment obligations are initially
recorded on the contractual purchase date with a discount being imputed for an
effective interest rate that will be the equivalent rate of interest due on
borrowings and subsequently carried at amortised cost. As at 31 December 2023,
the amortised cost of Deferred payment obligations of $51.9 million (31
December 2022: $239.9 million) reported on the Consolidated Statement of
Financial Position is imputed at an effective interest rate of 2.4% (31
December 2022: 2.5%).
Any difference between the initially recorded deferred payment obligations and
the final contractual liability payable is recognised in the Consolidated
Statement of Comprehensive Income as a finance cost over the period of the
deferred payment obligation using the effective interest method. For the year
ended 31 December 2023, an amount of $6.0 million (2022: $5.5 million)
relating to deferred payment obligations is included in Finance cost on the
Consolidated Statement of Comprehensive Income and as such any sensitivity in
respect of the discount rate applied is immaterial.
Contingent consideration
Certain financial assets are purchased under various contracts containing
contingent payment terms. These contingent payment obligations are initially
recorded at fair value on the contractual purchase date, subject to
probability of payment, with a discount being imputed for an effective
interest rate that will be the equivalent date of interest due on borrowings
and subsequently carried at fair value. Any change in fair value is recorded
as a change in fair value of financial liability in the Consolidated Statement
of Comprehensive Income.
The fair value of contingent consideration obligations represents the present
value of the future expected payments based on an assessment of the likelihood
of those payments against their contractual thresholds. The Operator uses a
number of different valuation techniques, at its discretion, but primarily
relies on the income approach which applies discounted cash flow techniques
based on the estimated future payments and discount rates. Further information
about contingent consideration is included in note 4.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in
the Consolidated Statement of Financial Position when there is a legally
enforceable right to offset the recognised amounts and there is an intention
to settle on a net basis or realise the asset and settle the liability
simultaneously. The legally enforceable right must not be contingent on future
events, and it must be enforceable in the normal course of business and in the
event of default, insolvency or bankruptcy of the Group or the counterparty.
vii. Dividends
Dividends payable are recognised as distributions in the financial statements
when the dividend is approved by shareholders or when paid.
viii. Related parties
Parties are considered to be related if one party has the ability to control
the other party or exercise significant influence over the other party
in making financial or operational decisions. Enterprises and individuals
that directly, or indirectly through one or more intermediary, control, or are
controlled by, or under common control with, the Group, including subsidiaries
and fellow subsidiaries, are related parties of the Group. This includes its
key management personnel, including directors and officers of the Operator,
other affiliated entities of the Operator and the Private Funds. In
considering related party relationships, attention is directed to the
substance of the relationship and not merely the legal form.
ix. Share capital
Financial instruments issued by the Company are treated as equity if the
holder has only a residual interest in the assets of the Company after the
deduction of all liabilities. The Company's Ordinary Shares are classified as
equity instruments. The Company's Redeemable Deferred Shares, redeemable upon
request, were classified as financial liabilities.
For the issue of each Ordinary Share for cash, $0.01 has been recognised in
Share capital and the remaining cash amount received has been recognised in
Share premium and Other reserve. For the issue of each Ordinary Share issued
to Petershill Funds in exchange for financial assets and liabilities,
$0.01 has been recognised in Share capital and the remaining amount
recognised in Share premium, and Other reserve such that the aggregate of the
amount recognised in Share capital, Share premium and Other reserve is equal
to the fair value of the financial assets and liabilities transferred to the
Group.
Under Section 612 of the Companies Act, where an issuing company has secured
at least 90% equity holding of another company in return for shares of the
issuing company, then merger relief shall be applied requiring the premium,
with respect to the shares issued, to be recorded to Other reserve as merger
relief. The acquisition of Petershill Partners Ltd (formerly Delta Epsilon
Cayman Ltd) (the "Cayman Subsidiary") by the Company fell under the ambit of
Section 612 of the Companies Act and hence merger relief was applied to the
excess over the nominal value of shares. Refer to note 17 for more
information.
The Company's shareholders approved the cancellation of the amount standing to
the credit of the Company's share premium account in full (the "Reduction of
Capital") at its annual general meeting held on 24 May 2023. A formal approval
of the same was obtained on 20 June 2023 by His Majesty's High Court in
England (the "Court"). Accordingly, the Reduction of Capital has become
effective and has created additional distributable reserves of approximately
$3,346.7 million. Accordingly, the amounts standing to the credit of the share
premium account have been transferred to Retained earnings. Refer to note 17
for more information.
Incremental costs directly attributable to the issue of new shares ("Share
issue costs") are shown as a deduction against proceeds from Share premium.
Incremental costs include those incurred in connection with the placing and
admission which include fees payable under a placing agreement, legal costs
and any other applicable expenses.
The cost of repurchasing Ordinary Shares including the related stamp duty and
transactions costs is charged to Retained earnings and dealt with in the
Consolidated Statement of Changes in Equity. Share repurchase transactions are
accounted for on a trade date basis. The nominal value of ordinary share
capital and Redeemable Deferred Shares repurchased and cancelled is
transferred out of Share capital and into the Capital redemption reserve.
x. Income from Investments in Partner-firms and interest income
Cumulative income and returns from Financial assets at fair value through
profit or loss is made up of the Income from Investments in Partner-firms
which comprises the current year income (including accruals where applicable)
and the changes in fair value on financial assets at fair value through profit
or loss which comprises the fair value changes of the future returns of the
Investments in Partner-firms.
Income from Investments in money market funds and other assets is accounted
for on an accrual basis. Income from Investments in Partner-firms is generally
recognised when the rights to receive payment from the Financial assets at
fair value through profit or loss have been established, and comprises three
underlying components, as follows:
I. Income from Investments in Partner-firms derived from Management fee
income ("FRE") is based on the net management fees earned by the underlying
Partner-firms and is reported in the Consolidated Statement of Comprehensive
Income. This comprises the portion of the income in respect of the
Partner-firms' management fees that is due to the Group for each relevant
current period. This arises from the investments held to earn a share of the
underlying investee's management fee revenue.
Typically, the investments entitle the Group to a set percentage share of the
net management fee revenue earned by the underlying Partner-firm. Depending on
the nature of the operations of the underlying Partner-firm, income arising
will be accounted for on an accrual basis only when the right to receive
payment has been established under the terms of the agreement with the
Partner-firms.
II. Income from Investments in Partner-firms derived from Performance fee
income ("PRE") is based on the realised performance fees earned by the
underlying Partner-firms and is reported in the Consolidated Statement of
Comprehensive Income. This comprises the portion of the income in respect of
the Partner-firms' performance fees. Typically, these investments entitle the
Group to a set percentage share of the performance fee revenue earned by the
underlying investee. Depending on the nature of the operations of the
underlying Partner-firm, income arising will be accounted for on an accrual
basis only when the right to receive payment has been established under the
terms of the agreement with the Partner-firms.
III. Income from Investments in Partner-firms derived from Investment Income
is based on the investment income earned by the underlying Partner-firms and
is reported in the Consolidated Statement of Comprehensive Income. This
comprises the portion of the income in respect of the Partner-firms' realised
gains and losses or any distributed income from the investments held on
Partner-firms balance sheets. Investment income arising will be accounted for
on an accrual basis only when the right to receive payment has been
established under the terms of the agreement with the Partner-firms.
Gains or losses resulting from the movement in fair value of the Group's
investments held at fair value through profit or loss are recognised in the
Consolidated Statement of Comprehensive Income at each valuation point.
xi. Expenses
Expenses are accounted for on an accruals basis. Share issue costs of the
Company directly attributable to the issue and listing of shares are charged
to the share premium account.
Operator charges, profit sharing charges, professional fees, divestment fees
and other expenses incurred are recognised on an accrual basis and expensed to
the Consolidated Statement of Comprehensive Income. Certain professional fees
are transaction costs incurred to structure a deal to acquire or dispose of
investments designated as financial assets at fair value through profit or
loss. These transaction costs, when incurred, are immediately recognised in
the Consolidated Statement of Comprehensive Income as an expense.
xii. Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with
banks and other short-term investments in an active market with original
maturities of three months or less and bank overdrafts.
xiii. Taxation
Income tax comprises current tax and deferred tax and is recognised in the
Consolidated Statement of Comprehensive Income except to the extent that it
relates to items recognised directly in equity, in which case it is recognised
in Equity.
The current income tax payable on profits is recognised as an expense based on
the applicable tax laws in each jurisdiction in the period in which profits
arise, calculated using tax rates enacted or substantively enacted by the
balance sheet date. Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities for accounting and tax
purposes. A deferred income tax asset or liability is recognised for each
temporary difference, except for temporary differences subject to initial
recognition exemption and earnings related to subsidiaries where the temporary
differences will not reverse in the foreseeable future and the Group has the
ability to control the timing of their reversal. Deferred tax assets and
liabilities are determined based on the tax rates that are expected to be in
effect in the period that the asset is expected to be realised or the
liability is settled, based on tax rates and tax laws that have been enacted
or substantively enacted by the balance sheet date.
Current tax assets and liabilities are offset when they are levied by the same
taxation authority on either the same taxable entity or within the same tax
reporting group (which intends to settle on a net basis), and when there is a
legal right to offset. Deferred tax assets and liabilities are offset when the
same conditions are satisfied.
Deferred income tax assets are recognised to the extent it is probable that
the benefits associated with these assets will be realised. The determination
as to if it is probable that a deferred income tax asset will be recognisable
is dependent on a number of factors including the expectations of future
taxable income in the period the deferred income tax asset is realised.
Further, in certain jurisdictions the character of the loss or deduction as
either ordinary or capital may impact the ability to offset future income. As
such, significant judgements may be required in determining the Group's
ability to realise the future tax assets.
The Group is subject to income tax laws in various jurisdictions where it
operates, and the complex tax laws are potentially subject to different
interpretations by the Company and the relevant taxation authorities.
Judgements may be required in the interpretation of the relevant tax laws and
in assessing the probability of acceptance of tax positions. A tax reserve
related to uncertainty over income taxes is recognised when a payment to tax
authorities is considered probable.
xiv. New and amended standards and interpretations
Accounting standards and interpretations have been published and will be
mandatory for the Group's and Company's accounting periods beginning on or
after 1 January 2023 or later periods. The following are the new or amended
accounting standards or interpretations applicable to the Group.
• Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of
Accounting policies (effective for annual periods beginning
on or after 1 January 2023);
• Amendments to IAS 8 - Definition of Accounting Estimates (issued on 12
February 2021 and effective for annual periods beginning
on or after 1 January 2023);
• Amendments to IAS 12 - Deferred tax related to assets and liabilities
arising from a single transaction (issued on 7 May 2021 and effective for
annual periods beginning on or after 1 January 2023); and
• Changes to IAS 1 - Classification of liabilities as current or
non-current (effective for annual periods beginning on or after
1 January 2024).
These amendments have been adopted and the impact of these amendments to the
Company and the Group is not material.
Certain amendments to accounting standards have been published that are not
mandatory for 31 December 2023 reporting periods and have not been early
adopted by the Group. These amendments are not expected to have a material
impact on the entity in the current or future reporting periods and on
foreseeable future transactions.
• IFRS S1 - General Requirements for Disclosure of
Sustainability-related Financial Information (effective for annual periods
beginning on or after 1 January 2024); and
• IFRS S2 - Climate-related Disclosures (effective for annual periods
beginning on or after 1 January 2024).
xv. Assessment of investment entity
The Board of Directors has determined that the Company and its subsidiaries
are not an investment entity and therefore the Company's financial statements
have been prepared on a consolidated basis, as required by IFRS 10
'Consolidated Financial Statements'.
The Board of Directors has assessed if the Company and its subsidiaries
satisfy the three essential criteria to be regarded as an investment entity as
defined in IFRS 10, IFRS 12 'Disclosure of Interests in Other Entities' and
IAS 27 'Consolidated and Separate Financial Statements'. The three essential
criteria are such that the entity must:
1. Obtain funds from one or more investors for the purpose of
providing these investors with professional investment management services;
2. Commit to its investors that its business purpose is to invest its
funds solely for returns from capital appreciation, investment income or both;
and
3. Measure and evaluate the performance of substantially all of its
investments on a fair value basis.
Also as set out in IFRS 10, further consideration should be given to the
typical characteristics of an Investment Entity, which are that:
• it should have more than one investment, to diversify the risk
portfolio and maximise returns;
• it should have multiple investors, who pool their funds to maximise
investment opportunities;
• it should have investors that are not related parties of the entity;
and
• it should have ownership interests in the form of equity or similar
interests.
B85F of IFRS 10 that deals with exit strategies, stipulates that an entity's
investment plans also provide evidence of its business purpose. One feature
that differentiates an investment entity from other entities is that an
investment entity does not plan to hold its investments indefinitely; it holds
them for a limited period. Given equity investments and non-financial asset
investments have the potential to be held indefinitely, an investment entity
shall have an exit strategy documenting how the entity plans to realise
capital appreciation from substantially all of its equity investments and
non-financial asset investments.
The Company and its subsidiaries hold their investments primarily for income
generation purposes and do not have plans to realise capital appreciation from
substantially all of the investments in Partner-firms and non-financial assets
in the normal course of operations. The Company and its subsidiaries do not
have an exit strategy as defined by IFRS 10 and therefore do not meet one of
the essential criteria to be treated as an investment entity.
Accordingly, the Company has not applied the provisions of Para 31 of IFRS 10
that requires an investment company to measure its investment in subsidiaries
at fair value through profit or loss. Instead, the Company consolidates the
subsidiaries that it controls as discussed in the next section.
xvi. Basis of consolidation of subsidiaries
IFRS 10 requires a parent to consolidate its subsidiaries that it controls.
Consolidation of the subsidiaries shall begin from the date the parent obtains
control of the subsidiaries and ceases when the parent loses control of the
subsidiaries. A parent controls the subsidiaries when the parent is exposed,
or has rights, to variable returns from its involvement with the subsidiaries
and has the ability to affect those returns through its power over the
subsidiaries.
The Company consolidates its subsidiaries to the extent it is exposed or has
rights, to variable returns from its involvement with the subsidiaries and has
the ability to affect those returns through its power over the subsidiaries.
The consolidated financial statements of the Group include the results of the
Company and its wholly owned subsidiaries listed below.
Name of Subsidiary Registered office Purpose Interest as at Interest as at
31 December
31 December
2023
2022
Held directly
Petershill Partners Ltd (1) One Nexus Way Camana Bay, KY1-9005, Investment holding company 100% 100%
Cayman Islands
Petershill Partners II Ltd (1,6) One Nexus Way Camana Bay, KY1-9005, Investment holding company 100% 100%
Cayman Islands
Petershill Partners, Inc. (1) 251 Little Falls Drive Investment holding company 100% 100%
Wilmington, DE 19808, United States
of America
Held indirectly
Petershill Partners GP Sub I 251 Little Falls Drive Investment holding company 100% 100%
Series LLC (2,3)
Wilmington, DE 19808, United States
of America
Petershill Partners GP Sub II 251 Little Falls Drive Investment holding company 100% 100%
Series LLC (2,3)
Wilmington, DE 19808, United States
of America
Petershill Partners GP Sub III Series LLC (2,3) 251 Little Falls Drive Investment holding company 100% 100%
Wilmington, DE 19808, United States
of America
Petershill Partners GP Sub IV Series LLC (2,3) 251 Little Falls Drive Investment holding company 100% 100%
Wilmington, DE 19808, United States
of America
PHP Aggregator GP Ltd (2) One Nexus Way Camana Bay, KY1-9005, Cayman Islands General Partner of Cayman domiciled Petershill holding companies 100% 100%
Cook Holdings Series LLC(4, 5) 251 Little Falls Drive Investment holding company 100% 100%
Wilmington, DE 19808, United States
of America
Knight Holdings Series LLC(4, 5) 251 Little Falls Drive Investment holding company 100% 100%
Wilmington, DE 19808, United States
of America
Lyndhurst Holdings LP(4, 5) One Nexus Way, Camana Bay, KY1-9005 Cayman Islands Investment holding company 100% 100%
Plum Holdings LP(4, 5) One Nexus Way, Camana Bay, KY1-9005 Cayman Islands Investment holding company 100% 100%
Peasy Holdings LP(4, 5) One Nexus Way, Camana Bay, KY1-9005 Cayman Islands Investment holding company 100% 100%
1. Referred to as Petershill Subsidiaries.
2. Held through Petershill Partners Ltd.
3. Referred to as Petershill Blockers.
4. Held through the Petershill Blockers and Petershill Partners, Inc.
5. Referred to as Petershill holding companies.
6. Incorporated and acquired by the Group on 28 April 2022.
The Petershill Subsidiaries, Petershill Blockers and Petershill holding
companies are collectively referred to as the Subsidiaries.
I. Consolidation of Petershill Subsidiaries and Petershill
Blockers
The Company wholly owns the issued interests of the Petershill Subsidiaries
and is able to exercise control and power over the Petershill Subsidiaries.
Petershill Partners Ltd wholly owns the shares of the Petershill Blockers
listed above. The financial statements of the Petershill Subsidiaries and
Petershill Blockers are consolidated in preparing the financial statements of
the Group.
II. Consolidation of Petershill holding companies
The Company has consolidated its investment in series and classes of assets
that it wholly owns and controls in the Petershill holding companies. Such
assets and liabilities are ring-fenced from the overall legal entity and
treated as a silo in line with IFRS 10. Specified assets of the series or
class are the only source of payment for specified liabilities in that series
or class. Holders of other series or class do not have rights or obligations
related to the specified assets or to residual cash flows from those assets.
Silos that are not directly or indirectly controlled by the Company are not
considered to be Subsidiaries and are accordingly not consolidated.
III. Consolidation of Issuer SPVs and Intermediary Entities
As discussed in note 2(xiv) and note 14 of the 2022 Annual Report, the Company
and the Petershill Funds had an exposure to the Issuer SPVs (comprised of PH
Offshore GP Issuer, PH Offshore IM Issuer, PH Onshore GP Issuer and PH Onshore
IM Issuer) through the Intermediary Entities (comprised of PH Offshore GP
Aggregator, PH Offshore IM Aggregator, PH Onshore GP Aggregator, PH Onshore IM
Aggregator). The Issuer SPVs were formed to offer the 5% Series A Senior
Guaranteed Notes due 2039 ("Notes"). The Notes were collateralised by the
rights to future cash flows (referred to as "Transferred Interest") generated
from FRE and PRE of certain existing investments in Partner-firms that were
owned by the Petershill Funds. In return for the Transferred Interest, the
Petershill Funds received the proceeds from the issue of the Notes and
remainder in the form of Participation Interest in the Issuer SPVs.
On 28 September 2021, a majority of the Investments in Partner-firms
(including the Participation Interest) referred to above, were sold by the
Petershill Funds to the Company and its Subsidiaries as part of the Offer in
return for Ordinary Shares of the Company. This resulted in the Company
holding majority interest in the Issuer SPVs through the Intermediary Entities
and Subsidiaries. The Petershill Funds continued to have an interest in the
Issuer SPVs and Intermediary Entities and hence a payable was recorded as a
liability to the Petershill Funds. The Petershill Funds did not have any
economic exposure to the Issuer SPVs except in the event of default of the
Notes, when the cash flows relating to the Participation Interest owned by the
Petershill Funds may be used to service the Notes and its obligations.
On 20 September 2022, the Notes were repaid out of proceeds raised from the
issue of Unsecured Notes and the Transferred Interest held as collateral was
released back to the Petershill Funds and the Subsidiaries of the Company.
Other assets comprised of income receivable from Partner-firms held at the
Issuer SPVs were also distributed to the Petershill Funds and the Subsidiaries
of the Company. Cash left at the Issuer SPVs was distributed in December post
which the Issuer SPVs and the Intermediary Entities were dissolved on 19
December 2022. As a result, the Petershill Funds ceased to have any exposure
to the Issuer SPVs effective this date. Pursuant to above, the Company
consolidated the accounts of the Issuer SPVs and the Intermediary Entities in
preparing the consolidated financial statements for the period from 1 January
2022 to 19 December 2022 under the definition of control, the date these
Issuer SPVs and the Intermediary Entities were dissolved. Refer to note 15 for
more information.
The table below summarises the components of Consolidated Statement of
Comprehensive Income attributable to the Petershill Funds that have been
consolidated in preparing these financial statements due the requirements
detailed above for the year ended 31 December 2022. There were no assets or
liabilities attributable to the Petershill Funds that have been consolidated
in preparing these financial statements due to the requirements detailed above
as at 31 December 2023 or 31 December 2022.
For the year ended For the year ended
31 December 2023
31 December 2022
$m $m
Income
Income from investments in Partner-firms - 14.8
Movement in financial assets and liabilities held at fair value
Change in fair value of investments at fair value through profit or loss - (30.2)
Finance income / (expense)
Movement in liability to Petershill Funds - 15.4
IV. Accounting for investment in Partner-firms
The Group's investments in Partner-firms are in the nature of non-controlling
stakes that do not give rise to control or significant influence over the
investees. The Group has assessed and concluded that the provisions contained
in IAS 28 and IFRS 9 relating to joint control or accounting for associates
are not applicable.
V. Elimination of intra-group balances and transactions
Intra-group balances and any unrealised gains arising from intra-group
transactions are eliminated in preparing the consolidated financial
statements. Unrealised losses are eliminated unless the costs cannot be
recovered. The financial results of Subsidiaries that are included in the
consolidated financial statements are included from the date that control
commences until the date that control ceases.
VI. Going Concern
In accordance with the Companies Act 2006, the Board of Directors has a
responsibility to evaluate whether the Group has adequate resources to
continue its operational existence for the foreseeable future and at least for
the 12 months following the issuance of the financial statements.
The Board of Directors has made an assessment of going concern, which takes
into account the current performance and the Group's outlook, including future
projections of profitability and cash flows as well as a downside scenario
using information that is available as of the date of these financial
statements, and the Group's access to the revolving credit facility and its
debt arrangements.
The Group's business model involves earning income from investments in
Partner-firms. The Group's investments in Partner-firms are long-term and the
Group has no exit strategy for its investments. As a result, the Group expects
long-term recurring revenues from its investments in Partner-firms. Income
from investments in Partner-firms is derived from management fee income,
performance fee income and investment income. Management fee income is
typically based on private capital commitment funds managed by the
Partner-firms that are locked up for a period of 8 or more years. The income
from management fees is therefore stable and recurring. Income derived from
performance fee income and investment income from Partner-firms is dependent
on underlying fund and underlying investment performance of the Partner-firms.
The Group has good visibility into the income from investments in
Partner-firms. The Group has a low, and relatively predictable, cost
structure. When taken together with the visibility into the income from
investments in Partner-firms, the Group has reasonably stable earnings.
As at 31 December 2023, the Group has $242.9 million (31 December 2022: $97.6
million) of cash and cash equivalents along with $62.3 million (31 December
2022: $483.4 million) of investments in money market instruments, reflecting a
strong liquidity position to meet operating costs.
The Board of Directors acknowledges its responsibilities related to the
financial statements. Based on the analysis outlined above, the Board of
Directors is comfortable that the Group has sufficient cash to support its
ongoing operations and meet its liquidity requirements in the downside
scenario.
The Board of Directors has assessed the viability of the Group for a chosen
period of three years to 31 December 2026 and this includes the next 12 months
following the issuance of these financial statements, The Board of Directors
has assessed a downside model that places stress on the Group's earnings. The
model includes estimated impacts, primarily based on the below scenarios:
• A 90% reduction in income from Partner-firms derived from performance
fee income. This translates to a substantial reduction in overall income from
Partner-firms over the three years and includes the period under
consideration. Such a reduction might be a result of Partner-firm revenue and
macroeconomic risks;
• A 20% decline in the fee-paying AuM held by absolute return funds,
while private market funds AuM remains relatively stable. This would have a
slight impact on the management fee income;
• The Operator charge is based on the amount of income from
Partner-firms and therefore changes commensurate with the change in income
from Partner-firms;
• The Group's long-term debt has fixed interest rates; and
• Any reduction in the valuation of investments at fair value through
profit and loss would not impact free cash flow, debt covenants or leverage
limitations.
The Group's ability to pay its expenses, including the Operator charge, and
meet its financial covenants of the associated credit facility and debt
arrangements, can continue under the severe but plausible downside scenario.
The Board of Directors' assessment has been made with reference to the Group's
current position, the Group's outlook, its strategy and the Group's principal
risks.
Given the above, the Board of Directors consider it appropriate to prepare the
financial statements of the Company and Group on a going concern basis for a
period of at least 12 months from the date of issue of these financial
statements as set out in note 2(i).
VII. Climate change
Climate change and other ESG-related issues may affect the Partner-firms in a
variety of ways. The impacts can include items such as fundraising demand,
which may have either headwinds or tailwinds depending on the strategy of the
fund. The diversity of investments in Partner-firms, and related underlying
funds, mitigates the risk to the Group if any, that climate change may have on
any one underlying investment made by a Partner-firm.
In preparing the financial statements, the Operator considers the impact of
climate change in the valuation of investments, insofar as they are reasonably
able. For the year ended 31 December 2023, in determining the fair value of
the investments in Partner-firms, based on inputs provided by the third-party
valuation advisor and discussions with Partner-firms, the Operator concluded
that the impact of climate change to valuations is not material at this time
and hence did not use climate change as an input for valuations.
3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires the Board to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expenses.
Estimates and judgements are continually evaluated and are based on Board
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Judgements
Information about judgements made in applying accounting policies that have
the most significant effect on the amounts recognised in the financial
statements is included in the following note:
Assessment as an investment entity
The Board of Directors has determined that the Company and its Subsidiaries
are not an investment entity and therefore the Company's financial statements
have been prepared on a consolidated basis, as required by IFRS 10
'Consolidated Financial Statements'.
The Board of Directors has determined that the Company and its Subsidiaries do
not have an exit strategy as required by IFRS 10 and fail to meet one of the
essential criteria to be treated as an Investment Entity. The Company and its
Subsidiaries hold their investments primarily for income generation purposes
and do not have plans to realise capital appreciation from substantially all
of its investments in Partner-firms and non-financial assets in the normal
course of operations. Refer to note 2(xv) for detailed discussion.
Estimates and assumptions
The Group makes estimates and assumptions, which are reviewed by the Board of
Directors, that affect the reported amounts of assets and liabilities in the
future. Estimates and assumptions are regularly evaluated and are based on
historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
Fair value of investments not quoted in an active market
The Group was formed with the objective of investing in Partner-firms. The
targeted Partner-firms are typically well-established multi-billion-dollar
alternative investment firms with a track record of strong performance and
meaningful cash flow generation and are well-positioned to develop their
platform across future fund and product offerings.
The Group participates in the management fee income, performance fee income
and investment income earned by the Partner-firms. The investments in
Partner-firms held by the Group are not quoted or traded in an active market
and as such their fair values are determined using valuation techniques,
primarily earnings multiples, discounted cash flows and recent comparable
transactions. The fair values of certain Partner-firms are fair valued with
the assistance of a third-party valuation advisor engaged by the Operator.
The models used to determine fair values, which are individually bespoke and
have individual assumptions applied to them, are the responsibility of the
Operator and are validated and periodically reviewed by appropriately skilled
and functionally independent teams within the Operator. In valuing the
investments, key assumptions include estimates around future fundraise timing
and sizes, expected management and performance fee rates and margins of the
Partner-firms, expected current and future fund returns and timing of
realisations. These assumptions are driven by factors including data provided
by the Partner-firms, guidance provided by management of each Partner-firm,
benchmarking analysis of related market data points, and other qualitative and
quantitative factors assessed by the Operator for each period.
The inputs in the earnings multiple models include observable data, such as
earnings multiples of companies comparable to the relevant Partner-firms, and
unobservable data, such as forecast earnings for the Partner-firms and
unobservable adjustments, such as those made to multiples. In discounted cash
flow models, unobservable inputs are the projected cash flows of the relevant
Partner-firms and the risk premium for liquidity and credit risk that are
incorporated into the discount rate. The discount rates used for valuing
investments are determined based on historical returns for other entities
operating in the same industry for which market returns are observable.
Liability for Tax Receivables Agreement
This estimate assumes that the Delaware Subsidiary would have current taxable
income sufficient to fully utilise the deductions arising from the increase
in tax basis and any interest imputed with respect to its payment obligations
under the Tax Receivables Agreement, and that there would be no future changes
to the 21% US statutory federal tax rate. To the extent that the stepped-up
tax basis is amortisable the Group has projected the amortisation of the
step-up tax basis to occur over 15 years. To the extent that the step-up tax
basis is not amortisable, the realisation of a benefit is outside of the
Group's control and would only occur if the Partner-firm disposes of or
otherwise realises a taxable gain or loss on the sale of the asset, and
therefore the Group has estimated there would be no tax benefit in computing
the payment obligation under the Tax Receivables Agreement with respect to
that stepped-up tax basis. The Group applied a discount rate of 18%.
It should be noted that in certain circumstances if the Delaware Subsidiary
disposes of an underlying investment, it is possible that the Delaware
Subsidiary will not be obligated to make payments under the Tax Receivables
Agreement. The likelihood of such an event has been considered in estimating
the amount of the liability under the Tax Receivables Agreement.
The Group is not aware of any issue that would cause the taxing authorities to
challenge a tax basis increase. However, the applicable Petershill Funds and
their Subsidiaries will not reimburse Petershill Partners, Inc. for any
payments previously made under the Tax Receivables Agreement if the related
tax benefits that it claims arising from such increase, are successfully
challenged by the applicable taxing authorities. As a result, in certain
circumstances, payments under the Tax Receivables Agreement could be in excess
of the relevant cash tax savings derived from the Tax Receivables Agreement.
In arriving at the Liability for Tax Receivable Agreement, the Operator has
assumed the applicable US federal and state combined tax rate to be 25.7% (31
December 2022: 25.7%) and considers the same as a significant estimate used in
accruing the liability. For every increase in tax rate by 5%, the liability
under the Tax Receivable Agreement would increase by $36.8 million (31
December 2022: $36.6 million).
As indicated above, the Operator assumed that sufficient current taxable
income would be available to fully utilise the deductions arising from the
increase in tax basis and any interest imputed with respect to the payment
obligations under the Tax Receivable Agreement. However, the final tax returns
filed for the year 31 December 2022 did not result in sufficient current
taxable income to fully utilise the deductions resulting in a reduction in the
amount actually paid under the Tax Receivables Agreement. The reductions in
payment obligations as a result of insufficient current taxable income will
ultimately be paid in future years if taxable income exceeds the amount that
is offset by the amortisation of the stepped-up tax basis in that year. The
Operator expects the Group to have sufficient taxable income available in
future years based on best estimate of income projections available at 31
December 2023 to fully utilise the deductions arising from the increased in
tax basis and any interest imputed with respect to the payments with respect
to the payment obligations under the Tax Receivable Agreement.
As of 31 December 2023, the carrying value of the Tax Receivable Agreement was
reported at amortised cost at a value of $174.7 million (31 December 2022:
$185.7 million). The fair value of the Tax Receivable Agreement is estimated
at $166.6 million (31 December 2022: $185.7 million). The fair value of the
Tax Receivable Agreement would be classified as Level 3 in the fair value
hierarchy due to the use of unobservable inputs. A 3% increase / decrease in
the underlying discount rate would result in a decrease / increase in net
assets of approximately $21.0 million and $25.1 million respectively (31
December 2022: $22.4 million and $28.5 million respectively). The discount
rate was determined based on the cost of capital adjusted for risks related to
the potential elimination of the payments due to possible future disposal of
the underlying investments.
4. Investments at fair value through profit or loss
Non-current investments
The Group's non-current investments comprise of investments in Partner-firms,
which hold a diversified portfolio of investments in private equity, absolute
return, private credit and private real assets.
For the year-ended For the year-ended
31 December 2023
31 December 2022
$m $m
Opening balance 4,958.9 6,023.1
Additions(1) 66.8 230.7
Proceeds from redemptions and return of capital - (18.9)
In kind distribution of Investments in Partner-firms(2, 3) 0.2 (469.3)
Other movements 1.8 -
Change in fair value of investments at fair value through profit or loss(4) 227.0 (806.7)
Closing balance 5,254.7 4,958.9
1. Of the above, an amount of $57.0 million (31 December 2022: $81.0 million)
includes consideration payable on a deferred basis and dividend reinvestments.
2. In 2022, this represents the fair value of Transferred Interest held as
collateral that were released back to the Petershill Funds. Refer to note 15
for a detailed discussion.
3. In 2023, this represents in kind distribution of investments at fair value
through profit or loss.
4. Of the above, an amount of $227.0 million (31 December 2022: $788.8
million) relates to unrealised gain / (loss) on fair value of investments held
at year end.
As discussed in note 2(xvi), the Company has consolidated the accounts of the
Issuer SPVs and the Intermediary Entities till the date of their dissolution
on 19 December 2022.
Current Investments
The Group invests its overnight cash balance in money market funds
representing a collective investment scheme promoted by an affiliate of the
Operator. The money market funds are AAA rated and the Group holds these
investments for cash management purposes with the intent to manage excess cash
and ensure these can be readily liquidated to meet the Group's investment
commitments. These investments are redeemable at short notice and have been
classified as debt investments. As at 31 December 2023, the Group held
investments in money market funds of $62.3 million (31 December 2022: $483.4
million) and during the year ended 31 December 2023 earned interest of $24.7
million (year ended 31 December 2022: $8.6 million).
Non-current and current liabilities
The Group entered into various contingent consideration agreements in
connection with its investments in certain Partner-firms and may have to pay
additional consideration based on the underlying Management Companies' ability
to raise capital or meet certain revenue thresholds as defined in the
investment agreements. As at 31 December 2023, the Company believes that
payment for a portion of the total consideration is probable and has recorded
a liability of $6.4 million (31 December 2022: $Nil) in the Consolidated
Statement of Financial Position.
Fair value measurements
IFRS 13 requires disclosure of fair value measurement by level. The level of
fair value hierarchy within the financial assets or financial liabilities is
determined on the basis of the lowest level input that is significant to the
fair value measurement. Financial assets and financial liabilities are
classified in their entirety into only one of the following three levels:
• Level 1 - quoted prices (unadjusted) in active markets for identical
assets or liabilities;
• Level 2 - inputs other than quoted prices included within Level 1 that
are observable for the assets or liabilities, either directly (i.e. as prices)
or indirectly (i.e. derived from prices); and
• Level 3 - inputs for assets or liabilities that are not based on
observable market data (unobservable inputs).
The determination of what constitutes 'observable' requires significant
judgement by the Group. The Board of Directors considers observable data to be
market data that is readily available, regularly distributed or updated,
reliable and verifiable, not proprietary, and provided by independent sources
that are actively involved in the relevant market.
The following tables analyse within the fair value hierarchy the assets and
liabilities (by class) measured at fair value:
31 December 2023 Level 1 Level 2 Level 3 Total
$m $m $m $m
Assets
Investments in money market funds at fair value through profit or loss - 62.3 - 62.3
Investments at fair value through profit or loss 0.2 - 5,254.5 5,254.7
Liabilities
Contingent consideration at fair value through profit or loss (current and - - (6.4) (6.4)
non-current)
31 December 2022 Level 1 Level 2 Level 3 Total
$m $m $m $m
Assets
Investment in money market funds at fair value through profit or loss - 483.4 - 483.4
Investments at fair value through profit or loss - - 4,958.9 4,958.9
Liabilities
Contingent consideration at fair value through profit or loss (current and - - - -
non-current)
Due to the nature of the investments in Partner-firms, they are always
expected to be classified as Level 3. The fair value of investments in money
market funds is based on the daily published net asset value of each fund and
is therefore considered Level 2. Investments in listed stocks are classified
as Level 1.
There have been no transfers between levels during the period. Any transfers
between the levels would be accounted for on the last day of each financial
period.
Sensitivity analysis to significant changes in unobservable inputs within
Level 3 hierarchy
Key assumptions including the future fund raises by Partner-firms, future
performance of funds managed by the Partner-firms, the timing of exits of
investments managed by Partner-firms and margins of the Partner-firms are
estimates made by the Operator and are not certain. The choice of discount
rate or market multiple is somewhat correlated to the assumptions made above.
The discount rates and multiples are therefore considered to be the
significant unobservable inputs used in the fair value measurement categorised
within Level 3 of the fair value hierarchy. These, together with a
quantitative sensitivity analysis as at 31 December 2023 and 31 December 2022
are as shown below:
Market value as of Significant Range of Weighted average Reasonable Valuation sensitivity
31 December 2023
unobservable inputs
significant
shift(4)
by valuation technique(1)
unobservable
inputs as of
Level 3 investments
31 December 2023
Investments in Management Companies: Market Approach: -/+ - +
Private Markets
$1,201.9 Profit Multiple - FRE(2) 10.0x - 23.5x 14.5x 1.0x $(87.3) $87.4
405.6 Asset Based Multiple 1.0x 1.0x 10.0% (40.6) 40.6
Income Approach:
1,670.3 Terminal Multiple - FRE(2) 4.7x - 17.5x 13.2x 0.7x (42.0) 43.4
Discount Rate - FRE 8.0% - 21.4% 13.0% 1.0% (110.1) 122.3
1,460.9 Terminal Multiple - PRE(3) 2.7x - 10.0x 5.5x 0.8x (32.9) 34.1
Discount Rate - PRE 13.0% - 37.0% 25.2% 2.0% (107.0) 123.6
Investments in Management Companies: Market Approach: -/+ - +
Absolute Return
135.2 Profit Multiple - FRE(2) 8.2x 8.2x 1.6x $(10.1) $10.1
82.8 Profit Multiple - PRE(3) 4.5x - 5.0x 4.7x 2.0x (14.2) 14.2
17.5 Asset Based Multiple 1.0x 1.0x 10.0% (1.7) 1.7
Income Approach:
178.1 Terminal Multiple - FRE(2) 6.1x - 7.5x 7.4x 1.1x (13.2) 17.4
Discount Rate - FRE 13.3% - 16.4% 13.6% 2.0% (13.2) 17.4
102.0 Terminal Multiple - PRE(3) 3.3x - 5.3x 4.5x 0.7x (7.6) 10.1
Discount Rate - PRE 19.0% - 30.3% 22.9% 3.4% (7.5) 10.1
Level 3 investments Market value as of Significant Range of Weighted average Reasonable Valuation sensitivity
31 December 2022
unobservable inputs
significant unobservable
shift(4)
by valuation technique(1)
inputs as of
31 December 2022
Investments in Management Companies: Private Markets Market Approach: -/+ - +
$1,119.7 Profit Multiple - FRE(2) 8.6x - 22.0x 13.3x 0.9x $(103.1) $58.4
353.7 Asset Based Multiple 1.0x 1.0x 10.0% (35.4) 35.4
Income Approach:
1,592.7 Terminal Multiple - FRE(2) 4.7x - 16.5x 12.8x 0.7x (58.3) 25.5
Discount Rate - FRE 10.5% - 21.3% 13.3% 1.0% (139.6) 68.8
1,297.7 Terminal Multiple - PRE(3) 2.8x - 10.0x 5.5x 0.8x (44.1) 20.3
Discount Rate - PRE 13.0% - 42.0% 25.2% 2.0% (146.1) 74.1
Investments in Management Companies: Absolute Return Market Approach: -/+ - +
188.1 Profit Multiple - FRE(2) 7.4x - 8.3x 7.8x 1.7x $(16.9) $16.9
75.1 Profit Multiple - PRE(3) 4.7x - 5.7x 5.2x 1.1x (7.2) 7.2
30.1 Asset Based Multiple 1.0x 1.0x 10.0% (3.0) 3.0
Income Approach:
226.8 Terminal Multiple - FRE(2) 6.3x - 7.5x 7.4x 1.1x (16.1) 21.3
Discount Rate - FRE 13.4% - 16.0% 13.5% 2.0% (16.3) 21.6
75.0 Terminal Multiple - PRE(3) 3.4x - 5.8x 4.9x 0.7x (5.6) 7.4
Discount Rate - PRE 17.4% - 29.5% 21.1% 3.1% (5.3) 7.0
1. The fair value of any one instrument may be determined using multiple
valuation techniques. For example, market comparable and discounted cash flows
may be used together to determine fair value. Therefore, the Level 3 balance
encompasses both of these techniques.
2. The range consists of multiples on management fee related earnings ("FRE")
and may represent historical or forward looking multiples.
3. The range consists of multiples on performance related earnings ("PRE") and
may represent historical or forward looking multiples.
4. The increase or decrease in the unobservable inputs may not be shifted
negatively and positively by an equal amount. For the asset categories that
have different reasonable possible shifts, the above table discloses the
weighted average of the respective negative and positive shift.
As the Group's investments are generally not publicly quoted, valuations
require meaningful judgement to establish a range of values and the ultimate
value at which an investment is realised may differ from its most recent
valuation and the difference may be significant.
An increase / decrease in the underlying discount rate of 1% would result in a
decrease / increase in the fair value of the contingent consideration of
-$0.04 million / +$0.02 million respectively.
The below is a reconciliation of Level 3 assets and liabilities held at fair
value through profit or loss:
Level 3 Instrument For the year-ended For the year-ended
31 December 2023
31 December 2022
$m $m
Assets
Opening balance 4,958.9 6,023.1
Additions(1) 66.8 230.7
Proceeds from redemptions and return of capital - (18.9)
In kind distribution of Investments in Partner-firms(2) - (469.3)
Other movements 1.8 -
Change in fair value of investments at fair value through profit or loss(3) 227.0 (806.7)
5,254.5 4,958.9
1. Of the above, an amount of $57.0 million (31 December 2022: $81.0 million)
relates to consideration payable on a deferred basis and dividend
reinvestments.
2. Represents the fair value of Transferred Interest held as collateral that
were released back to the Petershill Funds. Refer to note 15 for a detailed
discussion.
3. Of the above, an amount of $227.0 million (31 December 2022: -$788.8
million) relates unrealised gain / (loss) on fair value of investments held
at year end.
In addition to above, the Group has $6.4 million of level 3 liabilities as at
31 December 2023 (31 December 2022 : $Nil). The liability recognised during
2023 represents a portion of the total consideration which is probable under
the contingent consideration agreements in connection with its investments in
certain Partner-firms wherein the Group may have to pay additional
consideration based on the underlying Management Companies' ability to raise
capital or meet certain revenue thresholds as defined in the investment
agreements.
5. Cash and cash equivalents
31 December 2023 31 December 2022
$m
$m
Cash at bank 92.9 97.6
Fixed term deposit 150.0 -
242.9 97.6
On 14 December 2023, the Company entered into a fixed term deposit of $150.0
million, which matured on 15 March 2024. Interest is earned on the fixed term
deposit at a rate of 5.40% per annum. During the year, the Company earned $0.4
million of interest which is recorded as Interest income from other assets in
the Consolidated Statement of Comprehensive Income. The amount remained due at
year end and is recorded within Trade and other receivables in the
Consolidated Statement of Financial Position.
6. Operator charges
Recurring Operating Charges
Under the Operator Agreement, the Operator is entitled to recurring operating
charges on a quarterly basis, such Recurring Operating Charges consisting of,
in aggregate, 7.5% of the Group's relevant income from investments, as defined
under IFRS, for the relevant quarter.
The Operator is entitled to Recurring Operating Charges only on income earned
by the Group from assets owned by it. For the year ended 31 December 2022, the
income reported in the Consolidated Statement of Comprehensive Income also
included income earned from interests in the Intermediary Entities and the
Issuer SPVs that the Company did not wholly own. However, the Company was
required to consolidate them under the definition of control up to 19 December
2022, the day on which the Issuer SPVs and Intermediary Entities were
dissolved. See note 15 for further information. For the year ended
31 December 2023, the income attributable to assets owned by the Group on
which Recurring Operator Charges were earned amounted to $292.1 million (31
December 2022: $370.1 million).
Amounts recorded as Operating Charges during the year ended 31 December 2023
were $21.9 million (2022: $27.8 million), of which $6.6 million (31 December
2022: $21.0 million) was outstanding as at 31 December 2023. These amounts
will be paid in accordance with the terms of the Operator Agreement.
Profit Sharing Charge
The Operator is entitled to a profit sharing charge (the "Profit Sharing
Charge") on a quarterly basis in arrears, which in aggregate shall be an
amount equal to 20% of the total dividend income from each new investment
("New Investment") made by the Group after the Admission in the relevant
fiscal quarter (net of any Recurring Operating Charges in respect of such New
Investment), beginning in the ninth fiscal quarter from the date on which the
New Investment closed and subject to such New Investment having achieved a
return of 6% per annum calculated using the total invested capital funded to
the pertinent date. These amounts will be paid in accordance with the terms of
the Operator Agreement.
The aggregate of the Recurring Operating Charges and the Profit-Sharing Charge
is capped at 15% of the Group's income from investments in Partner-firms for
the relevant quarter excluding any Divestment Fee payable for such quarter.
Amounts recorded as Profit Sharing Charges during the year ended 31 December
2023 were $0.1 million (2022: $Nil), of which $0.1 million (31 December 2022:
$Nil) was outstanding as at 31 December 2023. These amounts will be paid in
accordance with the terms of the Operator Agreement.
Divestment Fee
The Operator is entitled to a divestment fee ("Divestment Fee") calculated at
20% of the total Divestment Profit in the relevant quarter in relation to the
Group's investments. Divestment Profit refers to the cash flows realised from
the sale or divestments of assets calculated as the sale price minus the
contribution value of such asset, excluding any dividend income received over
the holding period and on which the Group has already paid Recurring Operating
Charges and, in the case of New Investments, Profit Sharing Charge.
Although the Group does not have an exit strategy for its investments, it may
be subject to exits or realisations at underlying Partner-firms, as such an
accrual is reflected in the 2023 accounts representing an amount that would be
payable if the Group were to exit all of its investments at the fair value
reflected on these financial statements. As at 31 December 2023, an amount of
$94.8 million
(31 December 2022: $44.3 million) has been accrued towards divestment fee
payable to the Operator and none of the amounts have vested.
7. Audit fees
Other operating expenses include fees payable to the Group's Auditor and its
affiliates, which can be analysed as follows:
For the year ended For the year ended
31 December 2023
31 December 2022
$m $m
Fees to the Company's Auditor
for audit of the statutory financial statements of £0.9 million (2022: £1.3 1.2 1.6
million)(1)
for audit-related assurance services of £0.1 million (2022: £0.1million) 0.1 0.1
1.3 1.7
1. The audit fee of £1.3 million for the year ended 31 December 2022 includes
an amount of £161 thousand (excluding VAT) or £0.2 million (including VAT)
relating to additional billing for audit of the 2021 period end financial
statements and £0.9 million (excluding VAT) or £1.1 million (including VAT)
for the 2022 audit.
For the year ended 31 December 2023, the Company's Auditor was paid £0.1
million (2022: £0.1 million) in relation to its review of the Group's
condensed consolidated interim financial statements and the same is included
under audit related assurance services.
8. Tax
The Group's income tax expense can be analysed as follows:
Amounts recognised in profit and loss For the year ended For the year ended
31 December 2023
31 December 2022
$m
$m
Current tax expense:
Adjustments for current tax of prior periods 12.7 1.2
Tax charge at standard US corporation tax rate 1.3 -
Tax charge at standard UK corporation tax rate 9.5 3.0
Total current tax expense 23.5 4.2
Deferred tax expense:
Origination and reversal of temporary differences 65.3 (50.2)
Adjustments for deferred tax of prior periods 5.9 (2.0)
Movements in unrecognised tax benefits (16.7) (3.5)
Effect of changes in tax rates (2.0) (0.7)
Total deferred tax expense / (credit) 52.5 (56.4)
Total income tax expense / (credit) 76.0 (52.2)
The differences in the effective tax rate for the period and the standard rate
of corporation tax in the UK at 23.54% are as follows:
Reconciliation of effective tax rate US UK Other For the year ended %
$m
$m
31 December 2023
$m
$m
Profit / (loss) before tax 207.7 328.5 (139.1) 397.1 -
Tax charge at standard UK corporation tax rate 48.8 77.3 (32.7) 93.4 23.5%
Foreign rate differential (5.2) - 32.7 27.5 6.9%
Intra-group dividends income not taxable - (23.5) - (23.5) (5.9%)
US tax expense related to PLC income 1.3 - - 1.3 0.3%
State and Local taxes 9.3 - - 9.3 2.3%
Items not deductible for tax purposes 10.5 - - 10.5 2.6%
Adjustments for prior periods (US Tax) 6.3 - - 6.3 1.6%
Adjustments for prior periods (UK Tax) - 12.2 - 12.2 3.1%
Cook Holdings Series LLC Tax - 4.1 - 4.1 1.0%
Movements in unrecognised deferred tax (16.7) (48.4) - (65.1) (16.4%)
Total income tax expense 54.3 21.7 - 76.0 19.0%
Reconciliation of effective tax rate US jurisdiction For the year ended %
31 December 2023
$m
Profit / (loss) before tax 207.7 -
Total tax at the standard local country corporation tax rate 43.6 21.0%
US tax expense related to PLC income 1.3 0.6%
State and Local taxes 9.3 4.5%
Items not deductible for tax purposes 10.5 5.1%
Adjustments for prior periods (US Tax) 6.3 3.0%
Movements in unrecognised deferred tax (16.7) (8.0%)
Total income tax expense / (credit) 54.3 26.2
Reconciliation of effective tax rate US UK Other For the year ended %
$m
$m
$m
31 December 2022
$m
(Loss) / Profit before tax (327.1) (354.0) 176.0 (505.1) -
Tax charge at standard UK corporation tax rate (62.1) (67.3) 33.4 (96.0) 19.0%
Foreign rate differential (6.5) - (36.2) (42.7) 8.5%
Liability to Petershill Funds - - 2.8 2.8 (0.6%)
Intra-group dividend income not taxable - (50.7) - (50.7) 10.0%
State and Local taxes (7.0) - - (7.0) 1.4%
Items not deductible for tax purposes 27.3 118.8 - 146.1 (28.9%)
Other (0.9) (0.4) 0.2 (1.1) 0.2%
Movements in unrecognised deferred tax (3.6) - - (3.6) 0.7%
Total income tax (credit) / expense (52.8) 0.4 0.2 (52.2) 10.3%
Reconciliation of effective tax rate US jurisdiction For the year ended %
31 December 2022
$m
Loss before tax (327.1) -
Total tax at the standard local country corporation tax rate (68.6) 21.0%
State and Local taxes (7.0) 2.1%
Items not deductible for tax purposes 27.3 (8.2%)
Other (0.9) 0.3%
Movements in unrecognised deferred tax (3.6) 1.1%
Total income tax credit (52.8) 16.2%
The Investments in Partner-firms were a purchase of assets for income tax
purposes. Due to differences in the computation of the purchase price of the
Partner-firms as well as the impact of the Tax Receivables Agreement,
temporary differences arose on the acquisition. Due to initial recognition
exception under paragraphs 15 and 24 of IAS 12 - Income Taxes no deferred tax
is recognised in respect of these original temporary differences.
An increase in the UK corporation tax rate from 19% to 25% (effective from 1
April 2023) was announced in the March 2020 Budget and substantively enacted
on 24 May 2021. The deferred tax assets and liabilities in the UK as at 31
December 2022 had been calculated based on the 25% rate, with a blended rate
applied where it is was expected that the associated temporary difference
would reverse prior to 1 April 2023. Deferred tax assets and liabilities in
the UK as of 31 December 2023 have been calculated based on the 25% rate.
Deferred tax assets and liabilities in the US as of 31 December 2023 have been
calculated based on the US federal statutory rate of 21% (31 December 2022:
21%) and estimated effective state tax rate of 5.48% (31 December 2022:
4.29%).
The items not deductible for tax purposes of $10.5 million (2022: $27.3
million) in US relate to intergroup dividend expense from payments to the
Company recorded against the Delaware Subsidiary income that is not deductible
for US tax purposes. The UK income not taxable of $23.5 million (2022: $50.7
million) relates to non-taxable dividend income from the Company's
subsidiaries. In addition, -$48.4 million of movement in unrecognised deferred
tax is related to unrealised gain from investments which is not taxable (2022:
$118.8 million, shown as items not deductible in the 2022 table above, is
related to unrealised loss from investment).
9. Deferred tax asset / (liability)
Movement in deferred tax balances
Net balance Recognised in Recognised in Foreign Net balance Deferred tax assets Deferred tax liabilities
1 January 2023
profit or loss
OCI/equity
exchange
31 December 2023
$m
$m
$m
$m
$m
$m
$m
Investment in Partner-firms 18.4 (88.8) - - (70.4) - (70.4)
Tax Receivable Agreement 17.3 6.3 - - 23.6 23.6 -
Deferred payment obligations (0.6) 0.5 - - (0.1) - (0.1)
Other 7.9 15.6 - - 23.5 23.5 -
Losses 1.0 14.2 - - 15.2 15.2 -
44.0 (52.2) - - (8.2) 62.3 (70.5)
Net balance Recognised in Recognised in Foreign exchange Net balance Deferred tax assets Deferred tax liabilities
1 January 2022
profit or loss
OCI/equity
$m
31 December 2022
$m
$m
$m
$m
$m
$m
Investment in Partner-firms (36.4) 54.8 - - 18.4 18.4 -
Tax Receivable Agreement 12.3 5.0 - - 17.3 17.3 -
Deferred payment obligations (0.6) - - - (0.6) - (0.6)
Other 6.2 1.7 - - 7.9 7.9 -
Losses 5.9 (4.9) - - 1.0 1.0 -
(12.6) 56.6 - - 44.0 44.6 (0.6)
After considering jurisdictional netting, the deferred tax balances shown
above are presented on a net basis on the Consolidated Statement of Financial
Position.
As at 31 December 2023 and 31 December 2022, no deferred tax asset is
recognised in relation to the Company's investments and interests in
Subsidiaries because it is not probable that the temporary difference will
reverse in the foreseeable future, or that taxable profits will be available
against which the temporary difference could be utilised.
The gross deferred tax asset as at 31 December 2023 was $62.3 million (2022:
$44.6 million). It is expected that $7.6 million of the deferred tax asset
will be recovered within the next 12 months and the remaining $54.7 million of
the deferred tax asset will be recovered after 12 months.
Losses carried forward as at 31 December 2023 will expire as follows:
US UK Total
$m
$m
$m
2024 - - -
2025 and onwards - - -
Unlimited 58.0 - 58.0
58.0 - 58.0
Losses carried forward as at 31 December 2022 will expire as follows:
US UK Total
$m
$m
$m
2023 - - -
2024 and onwards - - -
Unlimited - 2.5 2.5
- 2.5 2.5
Unrecognised deductible temporary differences and unused tax losses
Deferred tax assets have not been recognised in respect of the following
items:
31 December 31 December
2023
2022
$m
$m
Deductible temporary differences (UK) - no expiration 66.4 117.8
Deductible temporary differences (US) subject to initial recognition exception 35.4 50.6
Tax losses - 0.4
101.8 168.8
Unrecognised taxable temporary differences associated with investments and
interests in Subsidiaries
As at 31 December 2023, no deferred tax liability is recognised in relation to
the Company's investments and interests in Subsidiaries because the Company
controls the reversal of the liability and it is expected that it will not
reverse in the foreseeable future.
Unrecognised taxable temporary differences associated with investments and
interests in Partner-firms
The Investments in Partner-firms were a purchase of assets for income tax
purposes. Due to differences in the computation of the purchase price of the
Investments in Partner-firms as well as the impact of the Tax Receivables
Agreement, temporary differences arose on the acquisition. Under the Initial
Recognition Exemption under paragraphs 15 and 23 of IAS 12, these temporary
differences were not recognised at the time of the original purchase. As such
the recognition of tax benefits or expenses related to the unrecognised
amounts were also not recognised in the financial statements.
Further, to the extent that the Group has recognised unrealised losses with
respect to the investments and interests in Partner-firms, such losses may
result in a deferred tax asset to the extent that the unrealised losses are
not currently deductible for income tax purposes. To the extent the recovery
of these deferred tax assets will only result in future losses that may offset
a future capital gain, the Group has not recognised the associated deferred
tax assets as it is not probable that there will be sufficient income of the
appropriate character in the future to utilise the associated tax benefits.
Uncertainty over income tax treatments
The Group has not identified any reserves related to uncertainty over income
tax treatments as of 31 December 2023 or 31 December 2022.
10. Finance cost
31 December 31 December
2023
2022
$m
$m
Interest on Deferred payment obligations 6.0 5.5
Interest on Unsecured Notes 28.3 29.6
Finance costs on Notes - 10.3
Commitment fees 0.4 -
Borrowing cost amortisation 0.6 0.2
Other finance charges 1.8 -
37.1 45.6
11. Earnings per share
Earnings per share
For the year ended For the year ended
31 December 2023
31 December 2022
Profit / (Loss) attributable to equity holders of the Company - $m 321.1 (452.9)
Weighted average number of Ordinary Shares in issue 1,131,506,310 1,150,241,568
Basic and diluted earnings / (loss) per share from continuing operations in 28.38 (39.36)
the year (cents)
The weighted average number of shares for the year ended 31 December 2023 and
year ended 31 December 2022 is calculated on a time weighted basis based on
the timing of issue and redemption of Ordinary Shares. There are no dilutive
shares in issue.
12. Trade and other receivables
31 December 31 December
2023
2022
$m
$m
Amounts receivable from Investments 105.9 135.9
Tax recoverable 10.4 0.2
Prepayments 1.9 1.8
Other receivables 9.2 0.3
127.4 138.2
13. Notes payable
As discussed on page 105 of the 2022 Annual Report, the Issuer SPVs had issued
the Notes with an aggregate principal amount of $350.0 million. On 20
September 2022, the Notes were repaid by the Company out of proceeds raised
from the issue of the Unsecured Notes. The Issuer SPVs were also subject to a
Make-Whole Amount (as defined in the Indenture) of $7.0 million upon
redemption of the Notes in accordance with the provisions of the Indenture.
For the year ended 31 December 2022, an amount of $28.7 million has been
recorded as Finance cost relating to the Notes payable on the Consolidated
Statement of Comprehensive Income.
14. Unsecured Notes payable
On 24 August 2022, the Delaware Subsidiary issued US private placement senior
unsecured notes (the "Unsecured Notes") to a group of institutional investors.
The Unsecured Notes issued by the Delaware Subsidiary are guaranteed by the
Company.
The Unsecured Notes are comprised of five tranches:
Unsecured Notes Notional (US$) Tenor (years) Maturity Fixed Coupon
Series A 125,000,000 7 2029 5.51%
Series B 175,000,000 10 2032 5.54%
Series C 80,000,000 12 2034 5.69%
Series D 80,000,000 15 2037 5.84%
Series E 40,000,000 20 2042 6.14%
The Delaware Subsidiary may be subject to pay a Make-Whole Amount (as
contained in the Note Purchase Agreement) contingent upon certain principal
repayment, prepayment or redemption of the Unsecured Notes in accordance with
the provisions of the Note Purchase Agreement. Absent an intent by the Group
to prepay the Unsecured Notes, no accrual for such Make-Whole Amount has been
made as at 31 December 2023.
In accordance with the Note Purchase Agreement, the Delaware Subsidiary is
subject to various financial and non-financial covenants. The two financial
covenants that the Delaware Subsidiary must adhere to are 1) the leverage
ratio shall not exceed 4:1 and 2) the AUM shall not be less than the required
minimum AUM amount (as defined in the Note Purchase Agreement). The Operator
monitors the covenant requirements on at least a six-monthly basis. There have
been no breaches of these covenants during the year.
As of 31 December 2023, the outstanding amount of the Unsecured Notes was $500
million (31 December 2022: $500 million). The carrying value of the Unsecured
Notes was reported at amortised cost and was net of unamortised debt issuance
costs of $6.2 million (31 December 2022: $6.8 million) in an amount of $493.8
million (31 December 2022: $493.2 million). For the year ended 31 December
2023, the effective interest rate on the Unsecured Notes was 6.2% per annum
(2022: 6.2% per annum).
For the year ended 31 December 2023, an amount of $37.1 million (2022: $45.6
million) has been recorded as Finance cost on the Consolidated Statement of
Comprehensive Income which includes $28.3 million in relation to interest on
the Unsecured Notes (2022: $29.6 million), $Nil in relation to expenses
incurred on repayment and issue of Notes and Unsecured Notes (2022: $1.2
million) and $6.0 million in relation to interest on the deferred payment
obligations (2022: $5.5 million).
As of 31 December 2023, the fair value of the Unsecured Notes payable is
estimated at $467.0 million (31 December 2022: $463.0 million) calculated
based on discounted cash flows using the discount rate of 6.6% at 31 December
2023 and 6.6% at 31 December 2022 respectively. The Unsecured Notes payable
would be classified as Level 3 in the fair value hierarchy due to the use of
unobservable inputs, including the Group's own credit risk. A 3% increase /
decrease in the underlying discount rate would result in a movement in net
assets of approximately -$87.0 million / +$113.6 million respectively (31
December 2022: -$88.2 million / +$117.6) or -18.6% / +24.3% (31 December 2022:
-19.0% / +25.4%).
15. Liability to Petershill Funds
As discussed in note 2(xvi) and note 13 of the consolidated financial
statements in the 2022 Annual Report, the Petershill Funds had beneficial
ownership in the Issuer SPVs and Intermediary entities. On 20 September 2022,
the Transferred Interest valued at $469.3 million held as collateral was
released back to the Petershill Funds. Other assets amounting to $22.9 million
and cash of $89.6 million held at the Issuer SPVs were also distributed to the
Petershill Funds. As of 31 December 2023, the Group does not have any
liability to Petershill Funds. Further, the Issuer SPVs and Intermediary
Entities were dissolved on 19 December 2022. As a result, the Petershill Funds
ceased to have any exposure to the Issuer SPVs effective this date and the
Liability to Petershill Funds was extinguished.
The interest held by the Petershill Funds was classified as a financial
liability and the corresponding income / expense was included in Movement in
liability to Petershill Funds under Finance expense in the Condensed Interim
Consolidated Statement of Comprehensive Income. For the year ended 31 December
2022, an amount of $15.4 million was included in finance income representing a
reduction of Petershill Funds interest in the Issuer SPVs.
16. Net Debt Reconciliation
31 December 31 December
2023
2022
$m
$m
Unsecured Notes payable 493.8 493.2
Interest payable 10.0 10.0
503.8 503.2
Liabilities from financing activities for the year ended 31 December 2023
Unsecured Notes Payable Interest Liability to Petershill Funds Notes
$m
Payable
$m
Payable
$m
$m
Net debt at 1 January 2023 493.2 10.0 - -
(Repayment) / Issue of debt / interest - (28.3) - -
Interest expense - 28.3 - -
Borrowing costs amortised 0.6 - - -
Net debt as at 31 December 2023 493.8 10.0 - -
Liabilities from financing activities for the year ended 31 December 2022
Unsecured Notes Payable Interest Liability to Notes
$m
Payable
Petershill Funds
Payable
$m
$m
$m
Net debt at 1 January 2022 - 8.1 597.2 340.9
Issue / (repayment) of debt / interest 500.0 (39.7) (89.6) (350.0)
Interest expense - 41.6 (15.4) -
In kind distribution of investments in Partner-firms and Trade and - - (492.2) -
other receivables held at Issuer SPVs to Petershill Funds
Borrowing costs (capitalised) / amortised (6.8) - - 9.1
Net debt as at 31 December 2022 493.2 10.0 - -
17. Share capital and other reserve
For the year ended 31 December 2023
Date Issued and fully paid Number of Share Share Other Capital redemption Total
Shares Issued
capital
premium
reserve
reserve
$m
$m
$m
$m
$m
Shares at 1,135,399,597 11.4 3,346.7 1,689.6 0.3 5,048.0
1 January 2023
Share premium cancellation - - (3,346.7) - - (3,346.7)
Repurchase and cancellation (13,196,773) (0.2) - - 0.2 -
of Ordinary Shares - $0.01
Closing balance as at 31 December 2023 1,122,202,824 11.2 - 1,689.6 0.5 1,701.3
For the year ended 31 December 2022
Date Issued and fully paid Number of Share Share Other Capital redemption Total
Shares Issued
capital
premium
reserve
reserve
$m
$m
$m
$m
$m
Shares at 1,156,696,029 11.6 3,346.7 1,689.6 - 5,047.9
1 January 2022
Redemption and cancellation - - - - 0.1 0.1
of Redeemable Shares
Repurchase and cancellation (21,296,432) (0.2) - - 0.2 -
of Ordinary Shares - $0.01
Closing balance as at 31 December 2022 1,135,399,597 11.4 3,346.70 1,689.60 0.3 5,048.0
On 17 May 2023, the Company commenced a share buyback programme of up to $50
million. During the year, the Group repurchased and cancelled 13,196,773
Ordinary Shares (2022: 21,296,432) as part of its buy-back program for a total
consideration of $26.3 million (2022: $53.3 million) including transaction
costs. On 30 June 2022, the Group purchased and cancelled 50,000 Redeemable
Deferred Shares issued by it for a consideration of $68k.
As at 31 December 2023, the Company's issued share capital comprised
1,122,202,824 of Ordinary Shares (31 December 2022: 1,135,399,597) of $0.01
each. Ordinary Shareholders are entitled to all dividends paid by the Company.
The Company does not have a limited amount of authorised capital.
The Company's shareholders approved the cancellation of the amount standing to
the credit of the Company's share premium account in full (the "Reduction of
Capital") at its annual general meeting held on 24 May 2023. A formal approval
of the same was obtained on 20 June 2023 by His Majesty's High Court in
England (the "Court"), Accordingly, the Reduction of Capital has become
effective which has created additional distributable reserves of approximately
$3,346.7 million. Accordingly, the amounts standing to the credit of the share
premium account has been transferred to Retained earnings.
18. Retained earnings
For the year-ended For the year-ended
31 December 2023
31 December 2022
$m $m
Opening balance (328.7) 247.9
Profit / (loss) and total comprehensive income / (expense) in the year 321.1 (452.9)
Dividends paid (180.2) (70.3)
Repurchase and cancellation of ordinary shares (26.3) (53.3)
Share premium cancellation 3,346.7 -
Transfer of cancelled Redeemable Shares to Capital redemption reserve - (0.1)
3,132.6 (328.7)
19. Net assets per share
31 December 2023 31 December 2022
Net Assets ($m) 4,833.9 4,719.3
Number of Ordinary Shares issued 1,122,202,824 1,135,399,597
Net assets per share (cents) 430.75 415.65
20. Dividends declared and paid
For the year ended 31 December 2023
Dividends declared and paid Paid on Dividend Total dividend
per share
$m
cents
Final dividend with respect to the year ended 31 December 2022 13 June 2023 11.0 124.9
Interim dividend with respect to the year ended 31 December 2023 27 October 2023 4.9 55.3
Total 15.9 180.2
For the year ended 31 December 2022
Dividends declared and paid Paid on Dividend Total dividend
per share
$m
cents
Final dividend with respect to the period ended 31 December 2021 14 June 2022 2.6 30.1
Interim dividend with respect to the year ended 31 December 2022 24 October 2022 3.5 40.2
Total 6.1 70.3
21. Financial risk management
Financial risk management objectives
The Group's investing activities expose it to various types of risks that are
associated with the Partner-firms. The Group makes the investments in order to
generate returns in accordance with its Acquisition Strategy and Investment
Policy.
The most important types of financial risks to which the Group is exposed are
market risk (including price, interest rate and foreign currency risk),
liquidity risk and credit risk. The Board of Directors has delegated portfolio
management and risk management responsibilities to the Operator. Accordingly,
the Operator has overall responsibility for the determination of the Group's
risk management and sets policy to manage that risk at an acceptable level to
achieve those objectives. The policy and process for measuring and mitigating
each of the main risks are described below.
31 December 31 December
2023
2022
$m $m
Financial assets
Non-current assets:
Investments at fair value through profit or loss 5,254.7 4,958.9
Other financial assets:
Investments in money market funds at fair value through profit or loss 62.3 483.4
Cash and cash equivalents 242.9 97.6
Trade and other receivables excluding prepayments 125.5 136.1
Financial liabilities
Non-current liabilities:
Unsecured Notes payable (493.8) (493.2)
Deferred Payment Obligations (7.3) (50.0)
Liability for Tax Receivables Agreement (150.5) (150.6)
Contingent consideration at fair value through profit or loss (3.9) -
Fee payable on divestment of Investments (94.8) (44.3)
Current liabilities:
Trade and other payables (6.9) (8.7)
Deferred Payment Obligations (44.6) (189.9)
Interest payable (10.0) (10.0)
Profit sharing charge payable (0.1) -
Operator charge payable (6.6) (21.0)
Contingent consideration at fair value through profit or loss (2.5) -
Liability for Tax Receivables Agreement (24.2) (35.1)
Categories of financial instruments
Capital risk management
The Group manages its capital to ensure that it will be able to continue as a
going concern while maximising the returns to Shareholders.
The Board of Directors approves the level of dividend distributions to
Shareholders. The Group may purchase its own shares within the limits defined
by the Board of Directors subject to restrictions imposed by applicable laws.
The capital structure of the Group consists of issued share capital, retained
earnings and other reserves as stated in the Consolidated Statement of
Financial Position.
Market risk
Market risk includes price risk, foreign currency risk and interest rate risk.
a) Price risk
The majority of the Group's investments are held in Partner-firms which
presents a potential risk of loss of capital to the Group. Price risk arises
from changes in fair value of the investments in Partner-firms held by the
Group. As discussed in note 3, the fair value of these investments is
determined using valuation techniques including earnings multiples, discounted
cash flows and recent comparable transactions. In valuing the investments, key
assumptions include estimates around future fundraise timing and sizes,
expected management and performance fee rates and margins of the
Partner-firms, expected current and future fund returns and timing of
realisations. Periodically, the Valuation Oversight Group of the Operator
presents the valuation proposals and their independent price verification
review results to the Operator's Valuation Committee which convenes to approve
and oversee the application of valuation policies, and review fair value
estimates for the investments. Subsequently, the Operator reports the
valuation results to the Board of Directors. As new information surfaces on
these key assumptions, the valuation techniques may be adjusted causing the
fair value of these investments to change.
As at 31 December 2023, the fair value of investments was $5,254.7 million (31
December 2022: $4,958.9 million). As presented in the Sensitivity analysis to
significant changes in unobservable inputs table, the valuation of these
investments could vary from -$487.4 million to +$532.4 million (31 December
2022: -$597.0 million to +$366.9 million) depending on the valuation
techniques used while keeping the key assumptions constant.
The Group is exposed to a variety of risks which may have an impact on the
carrying value of the Group's investments. The Group's risk factors are set
out below:
i. Not actively traded
The majority of the Group's investments are held in Partner-firms. These
investments are not generally traded in an active market but are indirectly
exposed to market price risk arising from uncertainties about future values of
the investments held. The Group investments vary as to industry sub-sector,
geographic distribution of operations and size, all of which may impact the
susceptibility of their valuation to uncertainty.
Although the investments are in the same industry, this risk is managed
through careful selection of investments within the specified limits of the
investment policy. The investments are monitored on a regular basis by the
Operator.
ii. Concentration
The Group invests in the alternative asset sector, with a focus on investments
in asset managers with asset classes such as private equity, private credit,
private real assets and absolute return strategies. Concentration risk may
relate to a subsector, relative size of an investment and geography. The Group
is exposed to concentration risk from its investments in the asset management
sector as detailed in note 2 (ii) of these financial statements and page 17 of
the preliminary results.
The Board of Directors and the Operator monitor the concentration of the
investments on a quarterly basis to ensure compliance with the investment
policy.
b) Foreign currency risk
The Group transacts in currencies other than US$. Consequently, the Group is
exposed to risks that the exchange rate of its currency relative to other
foreign currencies may change in a manner that has an adverse effect on the
value of that portion of the Group's assets or liabilities denominated in
currencies other than the US$. Any exposure to foreign currency risk at the
underlying investment level is captured within price risk.
The following table sets out, in US$, the Group's total exposure to foreign
currency risk and the net exposure to foreign currencies of the monetary
assets and liabilities:
As at 31 December 2023 US$ CAD$ GBP£ Total
$m $m $m $m
Non-current assets
Investments at fair value through profit or loss 5,149.2 102.9 2.6 5,254.7
Total non-current assets 5,149.2 102.9 2.6 5,254.7
Current assets
Investments in money market funds at fair value through profit or loss 62.3 - - 62.3
Cash and cash equivalents 241.1 - 1.8 242.9
Trade and other receivables excluding prepayments 123.1 - 2.4 125.5
Total current assets 426.5 - 4.2 430.7
Non-current liabilities
Deferred payment obligations (7.3) - - (7.3)
Unsecured notes payable (493.8) - - (493.8)
Contingent consideration at fair value through profit or loss (3.9) - - (3.9)
Fee payable on divestment of investments (94.8) - - (94.8)
Liability for Tax Receivables Agreement (150.5) - - (150.5)
Total non-current liabilities (750.3) - - (750.3)
Current liabilities
Trade and other payables (4.7) - (2.2) (6.9)
Profit sharing charge payable (0.1) - - (0.1)
Operator charge payable (6.6) - - (6.6)
Deferred Payment Obligations (44.6) - - (44.6)
Interest payable (10.0) - - (10.0)
Contingent consideration at fair value through profit or loss (2.5) - - (2.5)
Liability for Tax Receivables Agreement (24.2) - - (24.2)
Total current liabilities (92.7) - (2.2) (94.9)
As at 31 December 2022 US$ CAD$ GBP£ Total
$m $m $m $m
Non-current assets
Investments at fair value through profit or loss 4,849.2 109.7 - 4,958.9
Total non-current assets 4,849.2 109.7 - 4,958.9
Current assets
Investments in money market funds at fair value through profit or loss 483.4 - - 483.4
Cash and cash equivalents 95.2 - 2.4 97.6
Trade and other receivables excluding prepayments 136.1 - - 136.1
Total current assets 714.7 - 2.4 717.1
Non-current liabilities
Unsecured Notes payable (493.2) - - (493.2)
Deferred payment obligations (50.0) - - (50.0)
Fee payable on divestment of investments (44.3) - - (44.3)
Liability for Tax Receivables Agreement (150.6) - - (150.6)
Total non-current liabilities (738.1) - - (738.1)
Current liabilities
Trade and other payables (6.7) - (2.0) (8.7)
Deferred payment obligations (189.9) - - (189.9)
Interest payable (10.0) - - (10.0)
Operator charge payable (21.0) - - (21.0)
Liability for Tax Receivables Agreement (35.1) - - (35.1)
Total current liabilities (262.7) - (2.0) (264.7)
The Board of Directors does not consider that the foreign currency exchange
risk at the balance sheet date is material and therefore sensitivity analysis
for the foreign currency risk has not been provided.
c) Interest rate risk
The Group's exposure to interest rate risk relates to the Group's cash and
cash equivalents and money market investments. The Group is subject to risk
due to fluctuations in the prevailing levels of market interest rates. Any
excess cash and cash equivalents are invested at short-term market interest
rates. As at the date of the Consolidated Statement of Financial Position, the
majority of the Group's cash and cash equivalents were held at interest
bearing fixed deposit accounts.
The Group's investment in money market funds is variable and is subject to
fluctuations. Any exposure to interest rate risk at the underlying investment
level is captured within price risk. An increase of 100 basis points, based on
the closing balance sheet position over a 12-month period, would lead to an
approximate increase in total profit before tax of $0.6 million (31 December
2022: $4.8 million) for the Group.
In addition, the Group has indirect exposure to interest rates through changes
to the financial performance and the valuation of investments in Partner-firms
caused by rate fluctuations.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting
its obligations associated with its financial liabilities that are settled by
delivering cash or another financial asset.
The Group's policy and the Operator's approach to managing liquidity is to
ensure, as far as possible, that it will always have sufficient liquidity to
meet its liabilities when due, under both normal and stress conditions,
including estimated redemption of shares, without incurring unacceptable
losses or risking damage to the Company's reputation.
The Group's financial assets include investments in Partner-firms which are
generally illiquid. As a result, the Group may not be able to liquidate its
investments in time to meet its liquidity requirements.
The Operator has a liquidity management policy which is designed to enable it
to monitor the liquidity risk of the Group. The systems and procedures
employed by the Operator in this regard allow it to apply various tools and
arrangements necessary to respond appropriately to liquidity concerns. As part
of the policy, the Operator prepares estimates of projected cash flows of the
Group from its investment in Partner-firms, evaluates it against the projected
expenses, investment opportunities and potential distributions to the
Company's shareholders. The Operator updates the Board of Directors on its
findings on a regular basis and highlights any risks from a liquidity
management perspective.
The following tables detail the Group's expected maturity for its financial
assets (excluding equity) and liabilities together with the contractual
undiscounted cash flow amounts:
As at 31 December 2023 Less than 1 year 1-5 years 5+ years Total
$m $m $m $m
Assets
Investments at fair value through profit and loss - - 5,254.7 5,254.7
Investments in money market funds at fair value through profit and loss 62.3 - - 62.3
Cash and cash equivalents 242.9 - - 242.9
Trade and other receivables excluding prepayments 125.5 - - 125.5
Liabilities
Trade and other payables (6.9) - - (6.9)
Unsecured notes payable (28.3) (113.1) (640.2) (781.6)
Profit-sharing charge payable (0.1) - - (0.1)
Operator charge payable (6.6) - - (6.6)
Contingent consideration at fair value through profit or loss (2.5) (3.9) - (6.4)
Deferred payment obligations (44.6) (7.3) - (51.9)
Liability for Tax Receivables Agreement (24.2) (137.0) (393.3) (554.5)
Fee payable on divestment of investments - - (94.8) (94.8)
As at 31 December 2022 Less than 1 year 1-5 years 5+ years Total
$m $m $m $m
Assets
Investments at fair value through profit and loss - - 4,958.9 4,958.9
Investments in money market funds at fair value through profit and loss 483.4 - - 483.4
Cash and cash equivalents 97.6 - - 97.6
Trade and other receivables excluding prepayments 136.1 - - 136.1
Liabilities
Trade and other payables (8.7) - - (8.7)
Operator charge payable (21.0) - - (21.0)
Deferred payment obligations (193.1) (55.5) - (248.6)
Unsecured Notes payable (28.3) (113.1) (677.9) (819.3)
Liability for Tax Receivables Agreement (39.7) (129.3) (412.0) (581.0)
Fee payable on divestment of investments - - (44.3) (44.3)
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will
fail to discharge an obligation or commitment that it has entered into with
the Group, resulting in financial loss to the Group. It arises principally
from investments in money market funds, and also from derivative financial
assets, cash and cash equivalents and other receivables balances.
The Group's policy over credit risk is to minimise its exposure to
counterparties with perceived higher risk of default by dealing only with
counterparties that meet the credit standards set out in the Company's
prospectus.
The Group's policy with respect to Financial instruments, which is inclusive
of income receivables, is detailed in note 2(iv). As at 31 December 2023, the
Group has income receivables of $101.9 million, which is included within
Amounts receivable from Investments in note 12. Of the total outstanding
income receivables, 2.2% is classified as stage 2 and all remaining income
receivables are classified as stage 1. The Partner-firm ratings where
available ranged from A to BBB. The calculated ECL as at 31 December 2023 is
$123 thousand.
Credit risk is monitored on an ongoing basis by the Operator in accordance
with the procedures and policies in place. The table below details the Group's
maximum exposure to credit risk:
31 December 2023 31 December 2022
$m $m
Interest bearing
Investments in money market funds 62.3 483.4
Cash and cash equivalents 242.9 97.6
Non-interest bearing
Trade and other receivables excluding prepayments 125.5 136.1
The table below shows the cash and money market deposit balances and the
credit rating for each counterparty:
Location Rating 31 December 31 December
2023
2022
$m $m
Counterparty
State Street Bank and Trust Company USA A-1+ 92.9 97.6
US$ Treasury Liquid Reserves Fund - Institutional Shares USA AAA 0.2 21.6
Financial SquareSM Government Fund - Institutional Shares USA AAA 10.5 103.3
Financial SquareSM Treasury Instruments Fund - Institutional Shares USA AAA 51.6 358.5
Goldman Sachs Bank USA USA A-1 150.0 -
The Group's maximum exposure to loss of capital at the period end is shown
below:
31 December 31 December
2023
2022
$m $m
Investments at fair value through profit or loss 5,254.7 4,958.9
Other financial assets excluding prepayments 430.7 717.1
22. Related party transactions
Board of Directors
The Company has five Non-Executive Directors. Directors' fees for the year
ended 31 December 2023 amounted to $1.7 million (2022: $1.5 million), of which
$Nil (31 December 2022: $Nil) was outstanding at year end. Amounts paid to the
Board of Directors as reimbursement of travel and other incidental expenses
during the year amounted to $32 thousand (2022: $38 thousand), of which, $Nil
(31 December 2022: $Nil) was outstanding at year end.
The Board of Directors held beneficial interests in 1,094,999 (31 December
2022: 749,999) Ordinary Shares in the Company.
Money Market Funds
On 31 December 2023, the Group held an investment of $62.3 million (31
December 2022: $483.4 million) in money market funds that are managed by
affiliates of the Operator. The Group earned interest income of $24.7 million
(2022: $8.6 million) from investments held in such money market funds managed
by affiliates of the Operator.
Transactions with Petershill Funds
As at 31 December 2023, the Petershill Funds, managed by wholly owned
subsidiaries of the Goldman Sachs Group acting as the investment manager,
owned approximately 76.6% (31 December 2022: 76.1%) of the Company. As at 31
December 2023, the Group had amounts payable to the Petershill Funds of $0.2
million (31 December 2022: $Nil) and amounts receivable from the Petershill
Funds of $6.1 million (31 December 2022: $Nil). These amounts will be settled
in the ordinary course of business.
Liability to Petershill Funds
As discussed in note 2(xvi) and note 15, on 20 September 2022, the Transferred
Interest valued at $469.3 million held as collateral was released back to the
Petershill Funds. Other assets amounting to $22.9 million and cash of $89.6
million held at the Issuer SPVs were also distributed to the Petershill Funds.
During the year, the Group recorded an interest income of $Nil in relation to
its Liability to Petershill Funds (2022: $15.4 million). As of 31 December
2023 and 31 December 2022, the Group does not have any liability in relation
to the issuer SPVs.
Tax Receivables Agreement
As discussed in note 2(v), the Group has entered into a Tax Receivables
Agreement with Petershill Funds, an affiliate of the Operator and the Goldman
Sachs Group, which will require the Group to pay 75% of the amount of cash tax
savings, if any, in US federal, state and local income tax that the Group
realises as a result of the tax benefits associated with this increase in tax
basis. As of 31 December 2023, the carrying value of liability for the Tax
Receivables Agreement was $174.7 million (31 December 2022: $185.7 million).
During the year, payments totalling $32.5 million were made in relation to the
Tax Receivables Agreement liability.
Operator
The Operator is an affiliate and wholly-owned subsidiary of the Goldman Sachs
Group and provides advice to the Group on the origination and completion of
new investments, the management of the portfolio and on realisations, as well
as on funding requirements, subject to approval by the Board of Directors.
For the provision of services under the Operator Agreement, the Operator earns
a Profit-Sharing Charge, Recurring Operating Charges and Divestment Fee, as
detailed in note 6.
The Operator may, in its discretion, pay certain of the Group's fees or
expenses and the Group will reimburse the Operator for the payment of
any such fee or expense. As at 31 December 2023, the Group owed $0.1 million
to the Operator under this arrangement (31 December 2022: $Nil).
Transactions with Goldman Sachs & Co. LLC
Goldman Sachs & Co. LLC ("GSCO") is an affiliate and wholly owned
subsidiary of the Goldman Sachs Group. GSCO acted as the joint placement agent
in the issue of the Unsecured Notes in 2022. For the year ended 31 December
2023, GSCO was paid a compensation of $Nil (2022: $2.5 million) for its
services.
Transactions with Goldman Sachs Bank USA
Goldman Sachs Bank USA ("GSBUSA") is an affiliate and wholly owned subsidiary
of the Goldman Sachs Group. On 14 December 2023, the Company placed a fixed
term deposit with GSBUSA for $150.0 million. The fixed term deposit matured on
15 March 2024 and accrued interest at a rate of 5.40% per annum. During the
year ended 31 December 2023, interest of $0.4 million was earned and was due
at maturity.
23. Ultimate controlling party
The Board of Directors has reviewed the Shareholders of the Company and has
concluded that there is no ultimate controlling party. The Company has a very
diversified investor base that does not cede control to any single investor or
a group of investors. Although the Petershill Funds own 76.6% (31 December
2022: 76.1%) of the Company, Goldman Sachs Asset Management and its affiliates
are the beneficial owner of less than 1% of the Ordinary Shares of the Company
as of 31 December 2023.
The Petershill Funds are managed by Goldman Sachs Asset Management and its
affiliates acting as the investment manager of the Petershill Funds under the
supervision of the independent Board of Directors. Goldman Sachs Asset
Management and its affiliates act in in their capacity as an agent for the
Equity Shareholders of the Company and such a relationship does not give rise
to controlling ownership.
24. Subsequent events
The Group has evaluated activity through25 March 2024, the date that the
consolidated financial statements were available to be issued.
On 1 January 2024, new subsidiaries were introduced into the Group structure
to enable employees of the Operator to be direct beneficiaries of a portion of
the Profit-sharing charge (if any) payable by the Group to the Operator. This
was done to further improve the alignment of interest in the incentives of the
Group, the Operator and the employees of the Operator. There is no change to
the amount or timing of any Profit-sharing charge payable by the Group under
the original Operator Agreement. Furthermore, this arrangement is not expected
to give rise to any material tax consequences for the Group and all initial
and ongoing costs of implementing this arrangement are borne by the Operator.
The Group concluded that no other events took place that would require
material adjustments to the amounts recognised in these consolidated financial
statements.
glossary of key operating metrics
This document contains certain key operating metrics that are not defined or
recognised under IFRS.
The Operator and the Directors use these key operating metrics to help
evaluate trends, assess the performance of the Partner‑firms and the
Company, analyse and test dividends received from the Partner-firms and inform
operating, budgeting and re-investment decisions. The Directors believe that
these metrics, which present certain operating and other information in
respect of the Partner-firms, provide an enhanced understanding of the
underlying portfolios and performance of the Partner-firms and are therefore
essential to assessing the investments and performance of the Company.
The key operating metrics described in this section are derived from financial
and other information reported to the Operator by the Partner-firms. The
Operator, with the assistance of an independent accounting firm, performs due
diligence procedures on the information provided by the Partner-firms. It
should be noted, however, that these due diligence procedures do not
constitute an audit.
In addition, each Partner-firm may account for and define certain financial
and other information differently from one another. For example, each
Partner-firm may calculate its fee-paying AuM differently, the result of which
being that the inputs of the Company's Aggregate Fee-paying AuM are not
consistently calculated.
Whilst the operating metrics described in this section are similar to those
used by other alternative asset managers, there are no generally accepted
principles governing their calculation, and the criteria upon which these
metrics are based can vary from firm to firm. These metrics, by themselves, do
not provide a sufficient basis to compare the Partner-firms' or the Company's
performance with that of other companies.
None of Partner Distributable Earnings, Partner FRE, Partner Realised
Performance Revenues or Partner Realised Investment Income are measures of or
provide any indication of profits available for the purpose of a distribution
by the Company within the meaning of section 830 of the Companies Act 2006, or
of any Partner-firm in accordance with the equivalent applicable rules.
Aggregate Partner-firm AuM
Aggregate Partner-firm AuM is defined as the sum of (a) the net asset value of
the Partner-firms' underlying funds and investment vehicles, and in most cases
includes co-investment vehicles, GP commitments and other non fee-paying
investment vehicles and (b) uncalled commitments from these entities, as
reported by the Partner-firms to the Operator from time to time and aggregated
by the Operator without material adjustment. This is an aggregated figure
across all Partner-firms and includes Partner-firm AuM outside of the
Company's ownership interest in the Partner-firms.
The Operator and the Directors consider Aggregate Partner-firm AuM to be a
meaningful measure of the size, scope and composition of the Partner-firms, as
well as of their capital raising activities. The Operator uses Aggregate
Partner-firm AuM to inform operating, budgeting and reinvestment decisions.
Aggregate Fee-paying AuM
Aggregate Fee-paying AuM is defined as the portion of Aggregate Partner-firm
AuM for which Partner-firms are entitled to receive management fees, as
reported by the Partner-firms to the Operator. The principal difference
between Aggregate Fee-paying AuM and Aggregate Partner-firm AuM is that
Aggregate Fee-paying AuM typically excludes co-investment on which
Partner-firms generally do not charge fees and, to a lesser extent, fund
commitments in Partner-firm funds (i) on which fees are only earned on
investment, rather than from the point of commitment and (ii) where capital
has been raised but fees have not yet been activated. This may also include
legacy assets where fees are no longer being charged.
The Operator and the Directors consider Aggregate Fee-paying AuM to be a
meaningful measure of the Partner-firms' capital base upon which they earn
management fees and use the measure in assessing the management fee-related
performance of the Partner-firms and to inform operating, budgeting and
re-investment decisions.
Aggregate Performance Fee Eligible Partner-firm AuM
The amount of Aggregate Partner-firm AuM that is eligible for performance
fees.
AuM and Associated Data
The data presented in this document for the following key operating metrics
reflects AuM data reported to the Operator on a three-month lag. This
three-month data lag is due to the timing of the financial information
received by the Operator from the Partner-firms, which generally require at
least 90 days following each period end to present final financial information
to the Operator. The key operating metrics reflected on a three-month lag are:
§ Aggregate Partner-firm AuM
§ Aggregate Fee-paying Partner-firm AuM
§ Average Aggregate Fee-paying Partner-firm AuM
§ Aggregate Performance Fee Eligible Partner-firm AuM
§ Average Aggregate Performance Fee Eligible Partner-firm AuM
§ Partner Blended Net Management Fee Rate
§ Implied Blended Partner-firm FRE Ownership
§ Investment Capital
Issuer SPVs
Issuer SPVs comprise the following entities - PH Offshore GP Issuer, PH
Offshore IM Issuer, PH Onshore GP Issuer, PH Onshore IM Issuer.
Intermediary Entities
Intermediary Entities comprise the following entities - PH Offshore GP
Aggregator, PH Offshore IM Aggregator, PH Onshore GP Aggregator, PH Onshore IM
Aggregator.
Investment Capital
Investment Capital is defined as the sum of the reported value of the balance
sheet investments from the Partner-firms. The Operator and the Directors
consider Investment Capital to be a meaningful measure of the performance of
the Partner-firms' balance sheet investments and potential future Partner
Realised Investment Income. The Operator therefore uses Investment Capital to
assess future expected Partner Realised Investment Income and inform
operating, budgeting and reinvestment decisions.
In respect of Investment Capital, the data may be adjusted for any known
valuation impacts following the reporting date of the information received
from the Partner-firms.
Ownership weighted AuM
Ownership weighted AuM represents the Company's ownership stake of each
Partner-firms' Aggregate Partner-firm AuM.
Ownership weighted Fee-paying AuM
Ownership weighted Fee-paying AuM represents the Company's ownership stake of
each Partner-firms' Aggregate Fee-paying AuM. Please refer to Aggregate
Fee-paying AuM on page 49.
Partner Blended Net Management Fee Rate
Partner Blended Net Management Fee Rate is defined as Partner Net Management
and Advisory Fees for the period, divided by the average Aggregate Fee-paying
AuM weighted for the Company's ownership interests in each Partner-firm. The
average Aggregate Fee-paying AuM is calculated as the mean of the Aggregate
Fee-paying AuM at the start and the end of the reporting period and excludes
new acquisitions where the Company has not yet started to receive or have only
received partial period amounts of Partner Net Management and Advisory Fees.
The Operator and the Directors consider Partner Blended Net Management Fee
Rate to be a key metric in assessing the Company's overall management
fee-related performance.
Implied Blended Partner-firm FRE Ownership
Implied Blended Partner-firm FRE Ownership is defined as the weighted average
of the Company's ownership stake in the Partner-firms' management fee-related
earnings and is calculated based on the contribution of average Aggregate
Fee-paying AuM from Partner-firms in each period. It will therefore be
expected to change to some degree from period to period based on the
contribution to average Aggregate Fee-paying AuM of each Partner-firm, even if
the actual ownership of each underlying Partner-firm does not change. Excludes
new acquisitions where Petershill has not yet started to receive or have only
received partial period amounts of Partner Net Management and Advisory Fees.
The Operator and the Directors consider Implied Blended Partner-firm FRE
Ownership to be a meaningful measure of the composition of the Company's
investments.
Partner Net Management and Advisory Fees
Partner Net Management and Advisory Fees is defined as the Company's aggregate
proportionate share of the Partner-firms' net management fees (as reported by
the Partner-firms to the Operator), including monitoring and advisory fees and
less any management fee offsets, payable by the Partner-firms' funds to their
respective Partner-firms for the provision of investment management and
advisory services.
Certain Partner-firms provide transaction and advisory services, as well as
services to monitor ongoing operations of portfolio companies. Management fees
paid to the Partner-firms may be subject to fee offsets, which are reductions
to management fees and are based on a percentage of monitoring fees and
transaction and advisory fees paid by portfolio companies to the
Partner-firms.
The Operator and the Directors consider Partner Net Management and Advisory
Fees to be a meaningful measure of the management fee-related performance of
the Partner-firms, and the Operator uses this metric to analyse and test
income received from the Partner-firms and to inform operating, budgeting and
re-investment decisions.
Partner Fee Related Earnings (FRE) and Partner FRE Margin
Partner FRE is defined as Partner Net Management and Advisory Fees, less the
Partner-firms' operating expenses, fixed and bonus compensation, net interest
income/(expense) and taxes (but not performance fee-related expenses)
allocable to the Company's share of Partner Net Management and Advisory Fees,
as reported by the Partner-firms to the Operator, and subject to applicable
contractual margin protections in respect of certain Partner-firms. Partner
FRE Margin is defined as Partner FRE divided by Partner Net Management and
Advisory Fees.
The Operator and the Directors consider Partner FRE and Partner FRE Margin to
be meaningful measures of the management fee-related earnings of the
Partner-firms and key performance indicators of the Company's income from
investments in management companies derived from management fee income. The
Operator uses this metric to analyse and test dividends received from the
Partner-firms, as well as to inform operating, budgeting and reinvestment
decisions.
Partner Realised Performance Revenues
Partner Realised Performance Revenues is defined as the Company's aggregate
proportionate share of the Partner-firms' realised carried interest
allocations and incentive fees payable by the Partner-firms' funds to their
respective Partner-firms, less any realised performance fee-related expenses
of the Partner-firms allocable to the Company's share of performance
fee-related revenues, as reported by the Partner-firms to the Operator.
The Company's share of the Partner-firms' performance fee-related earnings
will be lower than its share of the Partner-firms' management fee-related
earnings because the Company's ownership stake in the Partner-firms'
performance fee-related earnings is lower than its ownership stake in the
Partner-firms' management fee-related earnings.
The Operator and the Directors consider Partner Realised Performance Revenues
to be a meaningful measure of the performance fee-related earnings of the
Partner-firms and key performance indicator of the Company's income from
investments in management companies derived from performance fee income. The
Operator uses this metric to analyse and test dividends received from the
Partner-firms, as well as to inform operating, budgeting and reinvestment
decisions.
Partner Realised Investment Income
Partner Realised Investment Income is defined as the Company's aggregate
proportionate share of Partner-firm earnings resulting from the realised gains
and losses, or any distributed income, from the investments held on
Partner-firms' balance sheets, as reported by the Partner-firms to the
Operator. Partner Realised Investment Income is also realised by the Company
through a limited number of direct stakes in certain Partner-firms' funds.
Realised Investment Income includes income that has been realised but not yet
paid, as well as amounts that are realised and either fully or partially
reinvested.
The Company's share of the Partner-firms' investment and balance sheet income
will be lower than its share of the Partner-firms' management fee-related
earnings because the Company's ownership stake in the Partner-firms'
investment and balance sheet income is lower than its ownership stake in the
Partner-firms' management fee-related earnings.
The Operator and the Directors consider Partner Realised Investment Income to
be a meaningful measure of the investment performance of certain assets held
by the Partner-firms and key performance indicator of the Company's income
from investments in management companies derived from investment income. The
Operator uses this metric to analyse and test dividends received from the
Partner-firms, as well as to inform operating, budgeting and reinvestment
decisions.
Partner Distributable Earnings and Partner Distributable Earnings Margin
Partner Distributable Earnings is defined as the sum of Partner FRE, Partner
Realised Performance Revenues and Partner Realised Investment Income. Partner
Distributable Earnings Margin is defined as Partner Distributable Earnings
divided by the sum of Partner Net Management and Advisory Fees, Partner
Realised Performance Revenues and Partner Realised Investment Income.
The Operator and the Directors consider Partner Distributable Earnings and
Partner Distributable Earnings Margin to be meaningful measures of the overall
performance of the Partner-firms and key performance indicators of the
Company's total income from investments in management companies. The Operator
uses this metric to analyse and test dividends received from the
Partner-firms, as well as to inform operating, budgeting and re-investment
decisions. These measures reflect any contractual margin protections or
revenue share interests that the Company may have with the Partner-firms,
which means that the Partner Distributable Earnings Margin may differ from the
margins achieved by other shareholders or partners of the Partner-firms.
Partner Revenues
Partner Revenues is defined as the sum of Partner Net Management and Advisory
Fees, Partner Realised Performance Revenues and Partner Realised Investment
Income.
The Operator and the Directors consider Partner Revenues to be a meaningful
measure of the overall performance of the Partner-firms. The Operator uses
this metric to inform operating, budgeting and re-investment decisions.
Partner Private Markets Accrued Carried Interest
Partner Private Markets Accrued Carried Interest is defined as the Company's
proportionate share of the Partner-firms' balance sheet accrued carry (as
reported by the Partner-firms to the Operator) and represents the Company's
proportionate share of the accumulated balance of unrealised profits from the
Partner-firms' funds.
The Operator and the Company consider Partner Accrued Carried Interest to be a
meaningful measure of the performance of the private markets Partner-firms and
potential future private markets Partner Realised Performance Revenues.
Absolute return performance fees are not accrued and are instead realised
annually. The Operator uses Partner Accrued Carried Interest to assess future
expected carried interest payments and inform operating, budgeting and
re-investment decisions. This key operating metric reflects data reported to
the Operator on a three-month lag.
Petershill Funds
The Petershill Funds refers to the following entities: Petershill II L.P. and
Petershill II Offshore L.P., Petershill Private Equity L.P., Petershill
Private Equity Offshore L.P., Vintage VII L.P. and related entities and
certain co-investment vehicles.
Weighted Average Capital Duration
Weighted Average Capital Duration is a key measure of the long term, locked-up
capital of Aggregate Fee-paying Partner-firm AuM. It is defined as the average
life of the underlying Partner-firm funds weighted based on Fee-paying AuM.
Alternative Performance Measures ("APMs")
As part of the initial acquisition of the portfolio of Partner-firms on 28
September 2021, the Company acquired interests in several trusts ("Issuers"),
which previously issued $350m of long-term debt ("Notes") with a 5% coupon and
a maturity date of 2039. The Notes were secured by the rights to the cash
flows of certain Partner-firm investments held by the Company and other
investments held by the Petershill Funds.
For the period ended 31 December 2021 and during 2022, under IFRS, the Company
was required to consolidate them, although the Company did not have rights to
the cash flows of the collateral that were held by the Petershill Funds, This
consolidation resulted in reflecting all of the assets and liabilities of
these entities in the Condensed Interim Consolidated Statement of Financial
Position and all of the income, investment gain and finance cost in the
Condensed Interim Consolidated Statement of Comprehensive Income. However,
shareholder returns were only affected by the interests that the Company owns.
As at 31 December 2022, the Notes were repaid, and the collateral was released
to the Petershill Funds and the Subsidiaries of the Company. Other assets
comprised of income receivable and cash in the Issuer SPVs were distributed as
well. The Issuer SPVs and the Intermediary Entities were dissolved on 19
December 2022. As a result, the Petershill Funds ceased to have any exposure
to the Issuer SPVs effective this date.
Pursuant to the above, the Company has consolidated the accounts of the Issuer
SPVs and the Intermediary Entities in preparing the comparative Condensed
Interim Consolidated Financial Statements for the period of 1 January 2022
through 19 December 2022, the date these Issuer SPVs and the Intermediary
Entities were dissolved. As at 31 December 2022 and 2023, the Company no
longer had any exposure to Petershill Funds on account of the Issuer SPVs and
Intermediary Entities.
The APM basis, which presents the financial information on a non IFRS basis,
excluding the impact of the assets, liabilities, income, investment gain and
finance cost which do not affect shareholder returns, aids shareholders in
assessing their investment in the Company.
The IFRS and APM basis numbers discussed and presented below include
significant 'unrealised' and non-cash items that include unrealised change in
fair value of investments, and it should be noted that while permitted, it is
not the Company's core strategy to exit or realise these investments.
Therefore, management results are also presented excluding the unrealised
change in fair value of investments at fair value through profit and loss and
related unrealised divestment fee.
APMs are used by the Directors and the Operator to analyse the business and
financial performance, track the Company's progress, and help develop
long-term strategic plans and they also reflect more closely the cash flow of
the Company. The Directors believe that these APMs are used by investors,
analysts and other interested parties as supplemental measures of performance
and liquidity.
Year ended 31 December 2023 Year ended 31 December 2022
Alternative performance measurement basis (APM) Adjustments IFRS basis Alternative performance measurement Adjustments IFRS basis
basis (APM)
$m $m $m $m $m $m
Income
Income from investments in Partner-firms derived from:
Management fee income 203.0 - 203.0 213.2 (0.2) 213.0
Performance fee income 54.7 - 54.7 131.6 7.8 139.4
Investment income 34.4 - 34.4 25.4 7.2 32.6
Total income from investments in Partner-firms 292.1 - 292.1 370.2 14.8 385.0
Interest income from investments in money market funds 24.7 - 24.7 8.6 - 8.6
Interest income from other assets 2.6 - 2.6 - - -
Total income 319.4 - 319.4 378.8 14.8 393.6
Movement in financial assets / liabilities held at fair value
Change in investments at fair value through 227.0 - 227.0 (776.5) (30.2) (806.7)
profit or loss
Change in contingent consideration at fair value through profit or loss (6.4) - (6.4) - - -
Total movement in financial assets / liabilities held at fair value 220.6 - 220.6 (776.5) (30.2) (806.7)
Expenses
Board of Directors' fees and expenses (1.7) - (1.7) (1.5) - (1.5)
Operator charge (21.9) - (21.9) (27.8) - (27.8)
Other operating expenses (10.1) - (10.1) (14.4) - (14.4)
Profit sharing charge (0.1) - (0.1) - - -
Unrealised Divestment Fee (expense) / credit (50.5) - (50.5) 0.9 - 0.9
Total expenses (84.3) - (84.3) (42.8) - (42.8)
Operating profit / (loss) for the year 455.7 - 455.7 (440.5) (15.4) (455.9)
Finance income / (expense)
Finance cost (37.1) - (37.1) (45.6) - (45.6)
Movement in liability to Petershill Funds - - - - 15.4 15.4
Change in liability for Tax Receivables Agreement (21.5) - (21.5) (19.0) - (19.0)
Total finance expense (58.6) - (58.6) (64.6) 15.4 (49.2)
Profit / (loss) for the year before tax 397.1 - 397.1 (505.1) - (505.1)
Tax (expense) / credit (76.1) - (76.1) 52.2 - 52.2
Profit / (loss) for the year after tax 321.1 - 321.1 (452.9) - (452.9)
Profit / (loss) and total comprehensive income / (expense) for the year 321.1 - 321.1 (452.9) - (452.9)
Profit / (loss) and total comprehensive income / (expense) attributable to:
Equity holders of the Company 321.1 - 321.1 (452.9) - (452.9)
Earnings per share 28.38 - 28.38 (39.36) - (39.36)
Basic and diluted earnings
per share (cents)
Year ended 31 December 2023 Year ended 31 December 2022
Alternative performance measurement basis (APM) Adjustments IFRS basis Alternative performance measurement Adjustments IFRS basis
basis (APM)
$m $m $m $m $m $m
Non-current assets
Investments at fair value through profit or loss 5,254.7 - 5,254.7 4,958.9 - 4,958.9
Deferred tax asset - - - 44.0 - 44.0
5,254.7 - 5,254.7 5,002.9 - 5,002.9
Current assets
Investments in money market funds at fair value through profit or loss 62.3 - 62.3 483.4 - 483.4
Cash and cash equivalents 242.9 - 242.9 97.6 - 97.6
Trade and other receivables 127.4 - 127.4 138.2 - 138.2
432.6 - 432.6 719.2 - 719.2
Total Assets 5,687.3 - 5,687.3 5,722.1 - 5,722.1
Non-current liabilities
Unsecured notes payable 493.8 - 493.8 493.2 - 493.2
Deferred payment obligations 7.3 - 7.3 50.0 - 50.0
Liability for Tax Receivables Agreement 150.5 - 150.5 150.6 - 150.6
Contingent consideration at fair value through profit or loss 3.9 - 3.9
Deferred tax liability 8.2 - 8.2
Fee payable on divestment of investments 94.8 - 94.8 44.3 - 44.3
758.5 - 758.5 738.1 - 738.1
Current liabilities
Trade and other payables 6.9 - 6.9 8.7 - 8.7
Deferred payment obligations 44.6 - 44.6 189.9 - 189.9
Interest payable 10.0 - 10.0 10.0 - 10.0
Profit sharing charge payable 0.1 - 0.1 - - -
Operator charge payable 6.6 - 6.6 21.0 - 21.0
Contingent consideration at fair value through profit or loss 2.5 - 2.5 - - -
Liability for Tax Receivables Agreement 24.2 - 24.2 35.1 - 35.1
94.9 - 94.9 264.7 - 264.7
Total liabilities 853.4 - 853.4 1,002.8 - 1,002.8
Net assets 4,833.9 - 4,833.9 4,719.3 - 4,719.3
Equity
Share capital 11.2 - 11.2 11.4 - 11.4
Share premium - - - 3,346.7 - 3,346.7
Other reserve 1,689.6 - 1,689.6 1,689.6 - 1,689.6
Capital redemption reserve 0.5 - 0.5 0.3 - 0.3
Retained earnings / (accumulated losses) 3,132.6 - 3,132.6 (328.7) - (328.7)
Total Shareholders' funds 4,833.9 - 4,833.9 4,719.3 - 4,719.3
Number of Ordinary Shares in issue at year end 1,122,202,824 - 1,122,202,824 1,135,399,597 - 1,135,399,597
Net assets per share (cents) 430.75 - 430.75 415.65 - 415.65
Year ended 31 December 2023 Year ended 31 December 2022
Alternative performance measurement basis (APM) Adjustments IFRS basis Alternative performance measurement basis (APM) Adjustments IFRS basis
$m $m $m $m $m $m
Cash flows from operating activities
Profit / (Loss) for the year before tax 397.1 - 397.1 (505.1) - (505.1)
Adjustments to reconcile operating profit / (loss) for the year to net cash
flows from operating activities:
Reinvestment of income from investments in Partner-firms (57.0) - (57.0) (42.4) (0.2) (42.6)
Movement in financial assets and liabilities held at fair value through profit (228.8) - (228.8) 776.5 30.2 806.7
and loss
Movement in trade and other receivables 14.6 - 14.6 (82.0) 22.9 (59.1)
Movement in trade and other payables (2.8) - (2.8) 3.8 - 3.8
Movement in fee payable on divestment of investments 50.5 - 50.5 (0.9) - (0.9)
Movement in profit sharing charge payable 0.1 - 0.1 - - -
Movement in operator charge payable (14.4) - (14.4) - - -
Movement in contingent consideration held at fair value through profit or loss 6.4 - 6.4
Finance expense 58.6 - 58.6 64.6 (15.4) 49.2
Purchase of investments in money market funds (781.4) - (781.4) (1,051.4) - (1,051.4)
Sale of investments in money market funds 1,227.1 - 1,227.1 1,021.1 - 1,021.1
Reinvested interest income from investments in money market funds (24.6) - (24.6) - - -
Taxes paid (28.2) - (28.2) (4.4) - (4.4)
Net cash flows from operating activities 617.2 - 617.2 179.8 37.5 217.3
Cash flows from investing activities
Purchase of investments at fair value through profit or loss (204.2) - (204.2) (149.7) - (149.7)
Capital proceeds received - - - (6.7) - (6.7)
Net cash flows from investing activities (204.2) - (204.2) (143.0) - (143.0)
Cash flows from financing activities
Dividends paid (180.2) - (180.2) (70.3) - (70.3)
Interest expense payments (28.3) - (28.3) (23.8) (4.0) (27.8)
Payment of share issue costs - - - (5.7) - (5.7)
Repayment and cancellation of share capital (25.4) - (25.4) (50.0) - (50.0)
Proceeds from Unsecured Notes - - - 500.0 - 500.0
Repayment of Notes payable - - - (350.0) - (350.0)
Payment of transaction costs related to debt - - - (8.1) - (8.1)
issuance and repayment
Extinguishment of liability to Petershill funds - - - - (89.6) (89.6)
Payment under Tax Receivables Agreement (33.8) - (33.8) - - -
Net cash flows from financing activities (267.7) - (267.7) (7.9) (93.6) (101.5)
Net increase / (decrease) in cash and cash equivalents 145.3 - 145.3 28.9 (56.1) (27.2)
during the year
Cash and cash equivalents at the beginning of the year 97.6 - 97.6 68.7 56.1 124.8
Cash and cash equivalents at the end of the year 242.9 - 242.9 97.6 - 97.6
Net cash position at end of year
Cash and cash equivalents (APM basis) plus investments in money market funds
less deferred payment obligations, contingent consideration and long term
debt.
31 December 31 December
2023
2022
$m $m
Cash and cash equivalents APM basis 242.9 97.6
Investments in money market funds at fair value through profit or loss 62.3 483.4
Unsecured notes payable (gross) (500.0) (500.0)
Deferred payment obligations (51.9) (239.9)
Contingent consideration (6.4) -
Net cash position at end of year (253.1) (158.9)
Free cash flow
The Net cash flows from operating activities APM basis less Purchase of
investments in money market funds, Sale of investments in money market funds,
Reinvestment of income from investments in Partner-firms APM basis and Taxes
paid as a percent of the Adjusted EBIT. This amount can differ year over year
as the timing of settlement of certain income from investments in
Partner-firms may vary.
31 December 31 December
2023
2022
$m $m
Net cash inflows from operating activities APM basis 617.2 179.8
Purchase of investments in money market funds 781.4 1,043.4
Sale of investments in money market funds (1,227.1) (1,021.1)
Reinvestment of income from investments in Partner-firms APM basis 57.0 42.4
Reinvestment of interest income from investments in money market funds 24.6 8.0
Taxes paid 28.2 4.4
Adjusted net cash inflows from operating activities 281.3 256.9
Adjusted EBIT 284.4 336.3
Free cash flow 99% 76%
Book value
Total shareholders' funds.
31 December 31 December
2023
2022
$m $m
Total shareholders' equity 4,833.9 4,719.3
Book value per share
Total shareholders' funds divided by the number of Ordinary Shares in issue at
year end.
31 December 31 December
2023
2022
$m $m
Total shareholders' equity ($m) 4,833.9 4,719.3
Number of Ordinary Shares in issue at year end 1,122,202,824 1,135,399,597
Book value per share (cents) 430.75 415.65
Adjusted Earnings Before Interest and Tax ("EBIT")
Sum of total income (APM basis) and expenses excluding non-recurring charges
before net finance result and before income taxes, change in fair value of
investments at fair value through profit or loss (APM basis), change in
contingent consideration at fair value through profit or loss, profit sharing
charge and unrealised divestment fee.
For the year ended For the year ended
31 December 2023
31 December 2022
$m $m
Total income APM basis 319.4 378.8
Board of Directors' fees and expenses (1.7) (1.5)
Operator charge (21.9) (27.8)
Profit sharing charge (0.1) -
Other operating expenses (10.1) (14.4)
Non-recurring operating (credit) / expense (1.2) 1.2
Adjusted Earnings before interest and tax (EBIT) 284.4 336.3
Adjusted EBIT margin
Adjusted EBIT divided by (APM basis) total income.
For the year ended For the year ended
31 December 2023
31 December 2022
$m $m
Total income APM basis 319.4 378.8
Adjusted EBIT 284.4 336.3
Adjusted EBIT margin 89.0% 88.8%
Adjusted Earnings Before Tax ("EBT")
Sum of total income (APM basis) and expenses excluding Profit sharing charge,
unrealised divestment fee, income taxes, change in liability for tax
receivables agreement, movement in liability to Petershill Funds, change in
fair value of investments at fair value through profit or loss (APM basis) ,
change in contingent consideration at fair value through profit or loss, and
non-recurring charges.
For the year ended For the year ended
31 December 2023
31 December 2022
$m $m
Total income APM basis 319.4 378.8
Board of Directors' fees and expenses (1.7) (1.5)
Operator charge (21.9) (27.8)
Profit sharing charge (0.1) -
Other operating expenses (10.1) (14.4)
Finance cost (37.1) (45.6)
Non-recurring operating (credit) / expense (1.2) 1.2
Non-recurring charges related to financing - 17.3
Adjusted Earnings before tax (EBT) 247.3 308.0
Tax and tax related expenses
The current tax plus the actual/expected payment under the tax receivables
agreement for the current year.
For the year ended For the year ended
31 December 2023
31 December 2022
$m $m
Current tax (23.5) (4.2)
Expected payment under the tax receivables agreement (24.2) (31.2)
Tax and tax related expenses (47.7) (35.4)
Adjusted tax and tax related expense rate
The Tax and tax related expenses divided by the Adjusted EBT.
For the year ended For the year ended
31 December 2023
31 December 2022
$m $m
Tax and related expenses 47.7 35.4
Adjusted Earnings before tax (EBT) 247.3 308.0
Adjusted tax and tax related expense rate 19.3% 11.5%
Adjusted Profit After Tax
Sum of total income (APM basis) and expense excluding Profit sharing charge,
unrealised divestment fee, income taxes, change in liability for tax
receivables agreement, movement in liability to Petershill Funds, change in
fair value of investments at fair value through profit or loss (APM basis) ,
change in contingent consideration at fair value through profit or loss, and
non-recurring charges and including tax and related expenses under the tax
receivables agreement.
For the year ended For the year ended
31 December 2023
31 December 2022
$m $m
Total income APM basis 319.4 378.8
Board of Directors' fees and expenses (1.7) (1.5)
Operator charge (21.9) (27.8)
Other operating expenses (10.1) (14.4)
Profit sharing charge (0.1) -
Finance Cost (37.1) (45.6)
Non-recurring operating expenses (1.2) 1.2
Tax and tax related expenses (47.7) (35.4)
Non-recurring charges related to financing - 17.3
Adjusted profit after tax 199.6 272.6
Adjusted Earnings Per Share ("EPS")
Adjusted profit after tax divided by weighted average number of Ordinary
Shares in issue.
For the year ended For the year ended
31 December 2023
31 December 2022
$m $m
Adjusted profit after tax 199.6 272.6
Weighted average number of Ordinary Shares in issue 1,131,506,310 1,150,241,568
Adjusted Earnings per share (EPS) (cents) 17.64 23.70
This results announcement has been prepared solely to provide additional
information to shareholders and meets the relevant requirements of the
Disclosure Guidance and Transparency Rules of the Financial Conduct Authority.
The results announcement should not be relied on by any other party or for any
other purpose. Whilst the Company aims to provide a diversified investment
approach, diversification does not protect an investor from market risk and
does not ensure a profit.
These written materials are not an offer of securities for sale in the United
States. Securities may not be offered or sold in the United States absent
registration under the US Securities Act of 1933, as amended, or an exemption
therefrom. The issuer has not and does not intend to register any securities
under the US Securities Act of 1933, as amended, and does not intend to offer
any securities to the public in the United States. Any securities of
Petershill Partners plc referred to herein have not been and will not be
registered under the US Investment Company Act of 1940, as amended, and may
not be offered or sold in the United States or to "U.S. persons" (as defined
in Regulation S under the US Securities Act of 1933, as amended) other than to
"qualified purchasers" as defined in the US Investment Company Act of 1940, as
amended. No money, securities or other consideration from any person inside
the United States is being solicited and, if sent in response to the
information contained in these written materials, will not be accepted.
Any tender offer made by the Company would be made in the US pursuant to an
exemption from certain US tender offer rules and otherwise in accordance with
the requirements of UK legislation. In accordance with normal UK market
practice and Rule 14e-5(b) of the US Exchange Act, the Company, its nominees,
its brokers (acting as agents), any financial advisers or any of their
respective affiliates could from time to time make certain purchases of, or
arrangements to purchase, Company securities outside the United States, other
than pursuant to any such tender offer, before or during the period in which
such tender offer remains open for acceptance, including sales and purchases
of securities effected by any financial advisers acting as market makers in
the Company securities. These purchases could occur either in the open market
at prevailing prices or in private transactions at negotiated prices. Any
information about such purchases would be disclosed as required in the United
Kingdom, would be reported to a Regulatory Information Service and would be
available on the London Stock Exchange website,
http://www.londonstockexchange.com.
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements that involve
substantial risks and uncertainties. You can identify these statements by the
use of forward-looking terminology such as "may," "will," "should," "expect,"
"anticipate," "project," "target," "estimate," "intend," "continue," or
"believe" or the negatives thereof or other variations thereon or comparable
terminology. You should read statements that contain these words carefully
because they discuss our plans, strategies, prospects and expectations
concerning the business, operating results, financial condition and other
similar matters. These statements represent the Company's belief regarding
future events that, by their nature, are uncertain and outside of the
Company's control. There are likely to be events in the future, however, that
we are not able to predict accurately or control. Any forward-looking
statement made by us in this press release is based upon information known to
the Company on the date of this press release and speaks only as of such date.
Accordingly, no assurance can be given that any particular expectation will be
met and readers are cautioned not to place undue reliance on forward looking
statements. Additionally, forward looking statements regarding past trends or
activities should not be taken as a representation that such trends or
activities will continue in the future. Other than in accordance with its
legal or regulatory obligations (including under the UK Listing Rules and the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority), the Company undertakes no obligation to publicly update or revise
any forward-looking statement, whether as a result of new information, future
events or otherwise.
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. END FR DXGDXCDDDGSURecent news on Petershill Partners
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