Pacific Current Group Limited (PAC) Earnings Call Transcript

Good afternoon. I'm Justin Arter, the Chair of Pacific Current Group and the Chair of this meeting. I'm delighted to welcome you all to the Annual General Meeting of Shareholders of Pacific Current Group Limited. Thank you for your attendance today. I'd appreciate it if all mobile phones can be turned off or put on silent. As the time is now 2:00 p.m., and we have a quorum of members present, I declare the Annual General Meeting open. Joining me today are Michael Clarke, our Managing Director, who's joining the meeting from London via the webcast; and our Non-Executive Director, Joanne Dawson, Chair of the Audit and Risk Committee and Chair of the Remuneration, Nomination and Governance Committee. I'd also like to thank each director for their support and contribution during the year. Others here today that make a tremendous contribution to our business, David Griswold, our General Counsel, who is joining via webcast; our CFO, Ashley Killick; and our Company Secretary, Clare Craven, who unfortunately are able to be with us here today. Finally, I note that Rita Da Silva of E&Y, our external auditor, is also here. Rita will be provided a reasonable opportunity to answer questions you may have about the conduct of the audit. The agenda for today's meeting is set out on your screen. Before commencing with the formal matters before the meeting today, I'll outline the formalities of the meeting and make some general comments and then hand over to Michael, who will present an overview of activity in fiscal year 2025, comment on strategy and provide an outlook for the business. A question-and-answer session about the financial statement, the audit and general persons of management will be held before the resolutions are put to the vote of shareholders. Shareholders and proxyholders participating in person will be able to ask questions. Any shareholder or visitor who is listening to the audio webcast won't be able to ask questions or vote online. The notice of today's meeting was made available to all shareholders on our website where you'll also find our constitution and the 2025 annual report. The minutes of the 2024 AGM are available to view at the registration table. I'll take the notice as read and deal with the business of the meeting in the order it appears in the notice. But before we do that, I will explain how voting and questions will work for the meeting. Can you register your attendance this afternoon, you would have been issued with an attendance card. Most of the blue card can ask a question and vote at the meeting. Most of the yellow card can ask a question but not vote. Visitors with a black card and on title to vote or ask a question. Your Board has determined that voting at the meeting will occur by way of a pulp for all resolutions, which require a vote. So you have enough time to vote, I will shortly open voting and I will stay open until the meeting close with you. I will put each resolution to the meeting for questions or comments and then put the resolution to a poll. Only shareholders attending in person or by proxy may vote on the resolutions. As we formally put a resolution to the meeting, Proxies received in relation to that resolution will be shown on your screen. That number will include votes on undirected proxies cast by me as Chair. As set out in the notice of meeting as Chair of epoxies in on with the directions provided by shareholders and all undirected proxies. I will vote in favor all resolutions. Today, we've appointed in [ Tim Huen ] of Computershare, the company's share registry, as the Returning Officer. After the vote, have been counted and reviewed by the returning officer, the results meeting will be released to the ASX and available on our website. I declare voting open on all items of business, and you can now submit your votes to the returning officer at any time. In relation to questions and comments, general business questions will be taken for item 1 and questions relevant to each other on a business will be taken following the introduction of that item. If you wish to ask a question, please hold up your registration card and when invited to speak, please identify yourself and then ask your question. I will either answer the question pass to the most appropriate person to respond. As Chair, I reserve the right to rule out questions that don't relate to the business of the meeting. We also will not answer questions that are the same or substantially similar to questions that have already been answered. As mentioned in my letter in the annual report, financial year 2025 has been a pivotal one for Pacific Current marked by significant developments and change in the governance and structure of our organization. In terms of Board renewal, 2 long-standing directors, Tony Robinson and Gil Goran, both for time. Michael Clarke became an Executive Director and acting CEO; and Jo Dawson and I joined the Board as nonexecutive directors, respectively. The Board acknowledges and thanks both Tony and [ Jill ] for their invaluable contributions during their tenure. During this period, Pacific Current has transitioned to an externalized investment management arrangement. Our portfolio has reduced following the completion of a number of strategic transactions we now have a more concentrated register of shareholders following the op market buyback. I'd like to thank the Board and management for their efforts and support through this period of transition. In particular, I would like to acknowledge and thank 2 key people in our organization for their outstanding service and leadership. As you know, our Chief Financial Officer, Ashley Killick, will retire at the end of November. Ashley joined Pacific Current in 2019 and during his 6 years with Pacific Current has been instrumental in strengthening the company's financial position, driving operational efficiencies and improvements in financial reporting and supporting strategic growth initiatives. David Griswold, our General Counsel and Chief Compliance Officer, retired in December 2024 after more than 20 years with Pacific Current and Northern lines. David has continued to support Pacific Current as outsourced General Counsel through 2025 on numerous strategic matters. During his long career with us, David's extensive industry experience, and legal and regulatory expertise has been a major factor in our continued success. On behalf of the Board and shareholders, we thank Ashley and David for their many years of expert guidance and counsel and wish him both a long and happy retirement. Looking to the future, pacific Current has today announced 2 important changes to its leadership team. First, Michael Clarke, who was originally a nonexecutive independent Director and acting CEO has now been appointed as Managing Director of Pacific Current. The Board would like to thank Michael for his expert leadership during this period of change and opportunity. Second, Ron Patel, formerly our Head of Finance, Investment Analysis and Valuations, has been appointed as acting Chief Financial Officer. Ron has extensive technical expertise and an in-depth knowledge of Pacific Current and the investment industry, having been a senior member of the team since 2008. The Board is confident of his seamless transition to the acting CFO role. The Board congratulates both Michael and Ron on their appointments. I will now hand over to Michael to present the business overview.

Thanks, Justin. I'm not gratified to report that through the execution of significant initiatives including, as Justin mentioned, an equal access off-market share buyback, several large portfolio transactions and the implementation of further cost-saving initiatives, the positive momentum developed in the previous financial year continued throughout FY '25 and has also continued into FY '26. Turning to financial results. Solid progress in both underlying and statutory profitability was recorded with PAC declaring a statutory net profit of $58.2 million and an underlying net profit of $26 million for the period. The statutory profit was driven by uplifts in the fair value of assets in the portfolio and the gain on disposal of selected assets. Underlying profitability was impacted by the higher level of cash holdings in the portfolio resulting from the disposal of assets during the current and prior periods. Consequently, underlying earnings per share declined to $0.5576 from $0.6204 per share in the previous period. The successful completion of an equal access off-market share buyback in March 2025, enabled PAC to buy back just over 22 million ordinary shares at $12 per share with a total value of $264.5 million. This represented over 42% of issued capital. Following completion of the buyback, PAC has just over 13 million ordinary shares on issue. The share buyback achieved several important objectives, including improving capital efficiency, providing liquidity to selling shareholders and reducing share count for the benefit of remaining shareholders. In a further capital initiative, PAC announced on 15th of October than an on-market share buyback of up to 2 million shares, representing 6.8% and of outstanding capital would be conducted. The Board believes that an on-market buyback represents an efficient use of capital and is in the best interest of shareholders, particularly in light of the company's strong balance sheet and current share price level. cost-saving initiatives implemented in the financial year positively supported the result with close to 60% reduction in corporate costs during the period. It is also worth highlighting that although underlying net profit and earnings per share declined year-on-year, the number of ordinary shares on issue was significantly reduced following the off-market buyback, further enhancing shareholder value. The recently announced on-market share buyback will further reduce the number of shares on issue. PAC declared a final dividend of $0.28 per share unfranked for the second half of the financial year. The final dividend brings the total dividend per share for the financial year to $0.43, an increase of over 13% on the full year dividend declared in the previous financial year. Because of fair value uplifts recognized on completion of asset sales during the period and related considerations, PAC's fair value estimate of net asset value increased to $15.51 per share on 30th of June 2025. This estimate exceeds statutory NAV by $0.76 per share and compares with the fair value estimate of NAV $13.47 per share on 30th of June 2024, an increase of over 15%. Turning now to recent portfolio initiatives. On 25th September, PAC announced that it had entered into an agreement to sell a portion of its interest in Victory Park Capital Advisors to CNO Financial Group in exchange for selling 18% of PAC's remaining 11.2% equity stake in Victory Park and 5% of PAC's 19.4% of future carried interest entitlements in Victory Park's funds yet to be launched, PAC received upfront consideration of USD 5.5 million, and that's before transaction costs. After completion of the transaction, PAC now has a 9.2% stake in Victory Park's management company and 18.6% of carrier interest entitlements are new farms. PAC will maintain its current 24.9% of carried interest entitlements for the firm's existing funds and funds currently being raised. As a part is an important part of the transaction, CNO group will inject over USD 600 million of funds across the Victory Park platform. PAC also announced on for November that it had made an early repayment of its senior secured debt facility provided by Washington H. Soul Pattinson. The facility was initially established at USD 50 million with an outstanding principal balance of USD 41 million at the time of repayment. It had a 5-year term that began in October 2022. Interest rate was set at the 1-month secured overnight financing rate, plus 4.8%. An early repayment penalty of USD 820,000 was incurred. Following this repayment, PAC no longer has any interest-bearing borrowings. Looking ahead, management of PAC expects to maintain the strong momentum that has been built in the previous 2 financial years by continuing to focus on executing a clear and disciplined plan to deliver growth in shareholder value. To this end, focus in this financial year will be to execute the following key initiatives: accelerate growth by leveraging high potential opportunities with the existing boutique partners and assessing new investment opportunities to drive scalable growth. Secondly, unlocking shareholder value by evaluating targeted capital initiatives to enhance returns and optimize capital structures, of course, similar to the on market currently being executed on market share buyback. -- continuing to control operating costs by maintaining disciplined cost management to support margin stability and capital efficiency. And finally, enhance organizational efficiency by embedding and refining the structural and governance changes introduced in FY '24 and FY '25 to improve agility and decision-making. Finally, these strong progress was made in FY '25. There is still much to do, and we remain relentlessly focused on achieving the best outcome for shareholders. Thanks, Justin.

Thank you, Michael. We have come to the formal business of the meeting. The first half of the business is receipt and consideration of the 2025 Annual Report of Pacific Current Group Limited This over solution to be contained by shareholders. The 2025 annual report contains the financial report, directors' report and the independent auditor's report. A copy of the 2025 annual report is made available on the company's website, the ASX platform and was sent to those shareholders who requested a pop. The financial statements have been approved by the directors and audited by EY. I will take the 2025 annual report as read. Questions may also be asked to the auditors in relation to the conduct of the audit, the preparation and content of the orbit report, the accounting policies adopted by the company and the independence of the auditor. At this time, I would like to take any general questions or comments about the 2025 Annual Report for the auditor. No questions for management or the auditor received prior to the meeting. Are there any other comments or questions on this item or on management for the business in general? There being no questions. I will now move to the next item of business that is resolutions. Resolutions 1 and 2 are each to be considered as ordinary resolutions must be approved by a simple majority of the votes cast our shareholders present and entitled to vote on the resolutions. If the first resolution concerns my election as a director. I will hand the chair to Jo Dawson for this resolution.

Thanks, Justin. I'll now move to resolution 1 being the election of Justin Arter. Justin retires in important company's constitution and being eligible, offers himself for election as a Non-Executive Director of Pacific Current Group. Justin Arter joined the Board on the 17th of June 2025 as the Executive Director and was appointed as Chair of the Board on the first of July 2025. Justin has over 35 years experience in the funds management, superannuation and investment banking industries. He's held various senior executive roles, including the CEO of up with BlackRock, this country and for Australia and Head of the Institutional Client business for the U.K., Middle East and Africa and as CEO of Victoria Funds Management Corporation. Further information in relation to Justin's background and experience is available in the notice of meeting. The resolution is set out on your screen. The directors with Justin abstaining, recommends shareholders vote in favor of the election of Justin Arter as the Director of Pacific Current Group. Are there any questions? As there is no questions, I'll now put Resolution 1 to the meeting. The proxies received in relation to this resolution are shown on the screen. I'll now ask you to vote for, against or abstain in relation to Resolution 1. I'll now hand the chair back to Justin. Thank you, Justin.

Thank you very much, Jo. The second resolution to the meeting is the adoption of the remuneration report. Resolution 2 is an advisory resolution that doesn't bind the directors or the company. The remuneration report was contained within the 2025 annual report is available on the company's website and was posted to shareholders on request. I will take the remuneration report as read. The resolution is set out on your screen. Further details about the resolution are also contained in the explained the notice of making. Before putting resolution 2 to the meeting, I would like to advise shareholders that the company will disregard any state in the voting exclusion statement related to Resolution 2 as set out in the Notice of Meeting. Noting on each director has a personal interest in their remuneration from the company, as set out in the remuneration report, the directors unanimously reference shareholders Resolution 2. Are there any questions or comments on this resolution? If there's no further discussion, I will now put Resolution 2 to the meeting. Proxies received in relation to this resolution are shown on the screen. Please now complete your voting card for resolution 2. Ladies and gentlemen, that concludes the discussion and voting on the resolutions of the meeting. The voting system will close at the end of the meeting. Once voting has been closed, all voting will be final and can't be challenged. Would you please check that you've casted your vote on all resolutions, and returning offers a collector voting performance as you leave the meeting. That concludes the business as set out in the notice of meeting. On behalf of the Board, I would like to thank you for your support, attendance and participation today. Votes take some time to count and obtain the final results. As advised earlier, after the votes have been counted, the results of the polls will be released to the ASX as soon as possible. I now declare the meeting closed.