ICG Enterprise Trust PLC (ICGTL.XC) Q3 FY2026 Earnings Call Transcript & Summary

Good morning. Welcome to ICG Enterprise Trust's Q3 Trading Update for the 3 months to 31st of October 2025. I'm joined today by Oliver Gardey and Colm Walsh, who will discuss our investment performance and activity in more detail over the course of this presentation. The slides for the presentation along with the accompanying results announcement are available on our website. We will have time for Q&A at the end of the presentation, so if you'd like to submit a question, please do so through the online portal at any point in the Q&A box on your screens. We'll then aim to answer those questions at the end of the session. With that, Oliver, over to you.

Thanks, Martin, and thanks, everyone, for joining the call. I thought, firstly, a couple of few thoughts on how we're seeing the environment today. Despite heightened macro political risk and market volatility, we believe that the underlying -- and we see that the underlying private company fundamentals remain very robust and credit conditions continue to be supportive of quite a dynamic transaction activity. That combination has translated into a strong period for realizations for ICGT. This has been positive for both NAV and liquidity and we will go through some realizations later on in this presentation. We also believe that, especially in this environment, manager selection and balance sheet discipline are particularly important. And these remain core strengths of the portfolio and of our investment strategy and we look at that data later. Finally, as we announced last year, we are increasing our medium-term exposure to secondaries. We continue to see an attractive opportunity set here given its compelling risk return profile and we made a $90 million -- in addition to a large co-investment in the previous quarter, we made a $90 million commitment to ICG LP Secondaries II post period-end. Before we turn to the numbers, a brief reminder of our focused investment strategy. Our investment strategy and our mandate is really designed to achieve private equity returns, but with less risk and more liquidity than the conventional private equity fund of fund. Our secret sauce is to achieve superior risk-adjusted returns and the way how we do it is the following: We invest exclusively in mature buyouts, profitable cash-generative companies, primarily in developed markets, North America and Europe, where the depth and the quality of managers is the strongest. We invest in mid-market deals. The typical company size we look for has an enterprise value of about $250 million to $2 billion, small by public market standards, but we think a sweet spot of good companies, which can be transformed into great market-leading companies. And we partner with top-tier private equity managers with strong track records through the cycles. And together, this results in a portfolio of resilient companies with a more consistent return profile and where performance is not cyclical or seasonal. And with that, Colm will now talk you through the Q3 numbers.

Thanks, Oliver. So turning to the quarter review, at the 31st of October 2025, NAV per share stood at GBP 20.80. Over the quarter, NAV per share total return was 2.4%, with the portfolio delivering a 2.3% return on a sterling basis. So over the last 12 months to the 23rd of January, the share price total return was 17.3%. GBP 51 million was returned through capital allocation, over half of which came from share buybacks. During the quarter, we invested GBP 25 million, generated proceeds of GBP 82 million, giving us a net positive cash flow of GBP 57 million. For the 45 full exits we've had in the last 12 months, that generated a strong return, so that's 3.1x multiple of costs, and they continue to be sold above their book value as represented by an 11% uplift, which you can see on the slide. And finally, reflective of market transaction activity continuing to improve, we also announced a further GBP 75 million worth of proceeds after the period end. That's essentially from the first of November right through until yesterday. So just to focus on realizations, which have been a particular highlight in the year-to-date. After a muted a couple of years across the industry in 2024 and 2025 -- sorry, in our financial years '24-'25, you can see from the chart that we were roughly averaging GBP 40 million in proceeds per quarter. This year, this is the year through January '26 has seen our quarterly average proceeds double to around GBP 80 million. What's been especially pleasing is the breadth of businesses that have driven this activity, ranging from Minimax, which operates in the fire protection sector, Froneri, which makes ice cream, David Lloyd, Health Clubs, Datasite, virtual data rooms. It demonstrates that our portfolio is able to tap into many different themes, many different secular trends. But the common theme across all these exits is a focus of high-quality businesses and our managers' ability to execute deals even in a slightly more difficult and more selective environment. And it also points very importantly, to the exit optionality that, that mid-market focus that Oliver was discussing affords us. These are companies that aren't solely reliant on an open IPO market for exit. We have multiple different exit routes. So for example, we can sell to financial buyers, strategic buyers, increasingly as well continuation vehicles. Year-to-date, total proceeds represent around 20% of the opening portfolio and that's well ahead of peer averages. Just like to spend some time on the next slide, focusing on one of our largest realizations, which was Froneri. As I mentioned earlier, Froneri is a manufacturer of ice cream. It was our largest single company exposure at the end of July, accounting for around 2.7% of portfolio value. The business has been backed by PAI Partners, high-quality private equity manager, with whom we've invested for many, many years. Indeed, it's one of the longest-standing third-party managers in our portfolio dating all the way back to 2005. Froneri benefits from a defensive market. It's a high-margin business model. It has resilient earnings, and that's driven very strong net sales growth. Our own investment in this company dates back to 2013, and we actually chose to reinvest in the company in 2019, really demonstrating the long-term time horizon that we work to and the long-term nature of our manager relationships. And this third quarter realization generated EUR 41 million worth of proceeds. Now I'm going to spend just a little bit of time on our balance sheet. We remain in a strong financial position. At the 31st of October 2025, we had GBP 230 million of total available liquidity, a low gearing ratio of 3% and over commitment ratio of 27%. This robust balance sheet provides us with flexibility to take advantage of new investment opportunities but also to continue to be able to enhance shareholder returns through both buybacks and dividends. Okay, so the final point I wanted to mention before handing back to Oliver was something we talk about quite a lot, which is the importance of manager selection. We said in our start of the year newsletter that the wider dispersion of private equity manager returns will become increasingly evident in the coming years. This means it is ever more important to continue to invest with top-tier private equity managers, that's managers with strong track records and experience through cycles. We currently have over 30 active manager relationships across the U.S. and Europe. Names like New Mountain Capital, Cinven, Leeds Equity, Bowmark, PAI, the manager of Froneri, I just referenced. Managers who share a similar investment strategy focused on resilient companies, they deliver strong primary performance and typically offer us attractive co-investment opportunities, which amplify our returns and allow us to invest in our managers' best ideas. We continue to enhance our manager selection discipline, and this is where our active portfolio management comes in. We're highly active in our search for new high-quality managers with regular market mapping exercises, scanning the entire addressable market in Europe and the U.S. The most recent example of this was our recent commitment to Stone Point, a new manager in December 2024. We also trimmed the managers and funds, which even if they offered strong historical returns, we believe they may sometimes be identified the fact they will offer lower go-forward returns relative to other uses of capital. And we've shown this proactively with four secondary sales over the last 5 years. Anyway, with all that, I'm going to pass back to Oliver to conclude.

Thanks, Colm. Talking about secondaries, we communicated last year that secondaries were presenting some really compelling investment opportunities. And therefore, we also increased our medium-term target weighting to secondaries to 25% to 30% of the portfolio, we're currently at around 15%. So I'm pleased to announce post period end, we committed $90 million to the ICG LP Secondaries fund, in addition to the GBP 20 million co-investment alongside with ICG LP Secondaries called Project Domino. And as you know, and as we are -- continue to be excited about secondaries, it is an increasingly important component of our portfolio. And in the alternatives market in order to deliver private equity returns at lower risk, more liquidity -- and more liquidity than the conventional private equity fund to fund. And the market has grown consistently at roughly a 15% CAGR over the last decade but has actually doubled from about GBP 100 billion of transaction value in 2023 to over GBP 200 billion in 2025, so just within 3 years. And investors are attracted to the space given it offers private equity type of returns with more credit like risk characteristics and returns capital much faster than a buyout fund. Let's turn to shareholder distributions. Since October 2022, we have executed GBP 70 million of buybacks, equivalent to about 8.4% of opening shares. Alongside this, we continue to run a progressive dividend policy with dividends growing at a compound annual rate of 10% since fiscal year '21. And the Board now announces a Q3 dividend per share of 9p for the full year of fiscal year '26, the intended total dividend per share is 39p per share. On that, I thought I would spend a bit a moment specifically on buybacks. As many of you know, the Enterprise Trust was an early mover in our sector in launching our long-term buyback program in October 2022. And so that has been already over 3 years ago. This long-term buyback program is at any discount and then in May 2024, we launched in addition, an opportunistic buyback. And I'm pleased to say that our buyback programs have delivered clear and tangible benefits. Since launch in October 2022, buybacks have added approximately 71p to NAV per share, and they have also reduced volatility in the share price and improved trading liquidity. So we believe we achieved three very important benefits with our buyback policy. Number one, it enhances the immediate NAV per share, which feeds through the share price over time. Furthermore, our buyback program increases liquidity and reduces volatility of our shares and allows for greater market stability. And lastly, it increases our investor confidence in the trading of our shares. In summary, we optimize long-term shareholder returns through our buybacks, our progressive dividend policy, and most importantly, via our proven investment strategy. Looking ahead and now looking at the longer-term track record over both 5- and 10-year periods, NAV per share and share price total returns remain strong on an annualized basis, just under 13% per annum NAV per share total return over the last 5 years, and just over 16% per annum share price total return over the last 5 years as the discount narrowed over the period. We believe this is a very robust performance and reflects the consistency of our strategy and benefits of an active portfolio management. In order to conclude, I would like to look ahead and give you our excitement of what we see in terms of the strong momentum we've seen and carried through into Q4. Since October 31, we have received GBP 75 million of proceeds. We completed three new co-investments, which makes fiscal year 2026 actually one of our busiest years in investing in co-investments. And as mentioned earlier, we committed $90 million to LP Secondaries in order to participate in the buoyant secondary market and increase our exposure to secondaries. The broader market backdrop is supportive, interest rates have stabilized, and we see more M&A activity and the tougher fundraising market actually benefits enterprise trust and gives us attractive co-investment deal flow. As I mentioned before, we had the busiest year in regards to co-investments on record. Therefore, our robust balance sheet and our strong relationships with top tier managers, positions Enterprise Trust, well for the medium to long term. And with that, I'll hand over to Martin for some Q&A.

Great. Thanks, Oliver. We now have about 10 minutes or so for Q&A, so as a reminder, please feel free to submit questions via the Q&A box on the webinar platform. A few have come in already, so taking them in turn, a lot of questions on realizations. If I group a couple, what has been the reason for the increase in realizations? Is it partly a one-off catch-up because prior years was slower periods? Do you think you can achieve essentially 20% of the opening value -- portfolio value again over the next 12 months?

Yes, I think there's a couple of components going on. First of all, with the stabilization of interest rates, a strong market economy continuing, particularly in the U.S., it just gave more confidence for the managers to bid and be active in the market versus 2 or 3 years ago with not knowing where inflation will end up, tariffs. There's a lot of variables where there was less clarity, and therefore, managers were less confident and less aggressive in buying companies. So that has changed. So that's where we see more M&A activity. And of course, because if you haven't had done much or you haven't created a lot of realizations for [ALP] over the last 3 years, that increases the pressure on the managers to sell. So we see that as well. Going forward, what we're seeing for '26, calendar year '26, we are continuing to see a robust M&A activity. And therefore, we're not seeing any signs that, that will be that -- this was just a short catch-up period. And lastly, what I would like to add is that we've had probably a better realization rate than many of our peers, and that was driven by having -- following our strategy and being -- and have accumulated and invested in a nice portfolio with very strong strategic assets, which even in more difficult times you can find a buyer and mostly strategic buyers continue to be interested in buying market-leading companies.

Great. A follow-up question has come in on realizations actually on the breadth of realization. So Colm, you mentioned various different realizations across different sectors. Looking forward, are there any specific sectors or geographies or managers where you expect more [activity] next year or will it still be broadly spread?

So I would expect -- we have a very diversified strategy. And I think that's one of our strengths, and we don't focus on one particular -- we focus on the attributes that Oliver outlined, those resilient companies, where we think you can find them in the range of different sectors. And I don't expect to see that pass-through realizations being particularly indexed to one sector or another. To Oliver's point, we continue to believe that investing in high-quality companies that have resilient growth characteristics will lead to their ability to be sold. So I don't think that pass-through is going to change, and we expect that breadth to continue.

Great. A few questions on uplifts. So what is your outlook for uplift over the next months? We're reporting the last 12 months' worth of exits, uplift about 11%. So it is lower than in prior years. Do you expect this to continue? Do you think it will revert back to 20-30% uplifts?

I think it's difficult to say. I think uplifts to a large degree, are sometimes a function of the mix of realizations that we have. And sometimes if you have, for example, a company sold to a strategic buyer, you get a bigger uplift than you might do for say, a continuation fund exit. So I think it's very difficult to anticipate what that precise step-up would be. But what I would say is we still think an 11% uplift represents -- people often ask us about valuations. It's a very strong sort of data point to support the valuation of our portfolio. I'd also point as well as that long consistent track record of delivering uplifts being very important as people look at quality of our companies, the quality of our portfolio.

And another indicator for the quality of our portfolio is that the 45 exits were done over a 3x multiple on cost. So I think that's a very strong indicator that these are assets which are market leaders and people are paying good money for those assets.

Great. A few questions on secondaries. Great to see increasing allocation to ICG LP Secondaries. Do you want to just explain, Oliver, what are we seeing in that market? Why now essentially, and maybe start your answer with just a split of our secondaries exposure, what's ICG versus third party? And what's maybe GP-led versus LP-led?

Yes. So just to -- the way how ICG approaches the secondary market, is that we have two separate teams and two separate funds for the GP-led strategy and for the LP-led strategy versus our peers and competitors. Most of them co-mingle them in one fund. We believe these are fundamentally different businesses and need fundamentally different types of sourcing and underwriting and team skills. So the GP-led strategy, which focuses on single asset continuation vehicles is called strategic equity, and we have benefited. They have now raised that Fund 5. We have been participating in all the funds, and we have benefited from a lot of co-investments coming from that fund. And then on the LP Secondaries, where we just recently made the commitment of $90 million into the LP Secondaries Fund II, focuses on portfolios of top-tier buyouts and buying LP interest in top-tier buyouts. And that has performed very well and is one of the top performers in the LP Secondaries market, particularly of the '21, '22 vintage. So roughly, the exposure is slightly more on LP Secondaries than GP Secondaries currently as we grow with the funds and the co-investments. However, we do expect that we'll continue to invest in the GP Secondaries space next year and the split between third-party secondaries versus ICG related secondaries, it's predominantly really ICG -- in the ICG Secondary funds and doing -- because we also can do free our fee and carry co-investments alongside those funds. So that is a particularly attractive way of playing the secondaries market.

A question on U.S. versus Europe. What are our managers telling us in the U.S., what are our managers telling us in Europe and do those views differ?

In terms of the market environment?

Yes.

What I would say is, I think, obviously, when you turn on the news now, there's a lot of coverage about U.S. politics in particular. I think our portfolio looks fairly well insulated. And when we speak to our U.S. managers, they remain optimistic. It is still the world's largest private equity market by some distance. We think it's a market that has especially attractive characteristics. It's a very deep market. It is a pool of some of the world's best private equity managers. We think it's an incredibly attractive market. And the portfolio was not particularly exposed to any of the political volatility. I would say in terms of what our European managers are telling us, I think, again, we're investing in market-leading companies. So -- and very often, these are companies that have diversified business models and I think they remain cautiously optimistic. I would say there's not been a significant change in the tone of what we're hearing from our managers over the last year. Oliver, anything?

I just would add that we're very much a bottom-up oriented investor. So we're very much driven by the performance, the strategy of the underlying fund managers. And when we do co-investments, we look at underlying companies and how they are operating in the market, of course, tariffs would be -- as part of our analysis, how these companies could be potentially affected by tariffs or by other things such as AI or benefit even from AI. So we're very much bottom-up and the geopolitical shifts and capital shifts -- capital flow shifts don't really apply as much to the kind of the companies we're buying, which are mid-market 250 -- market-leading companies in niche businesses, $250 million to $2 billion in enterprise value. So we're less exposed to those type of shifts as you would find and see in the public markets.

Great. Thanks, Oliver. Thanks, Colm. A question on capital allocation. How does the Board think about dividends versus buybacks? We're announcing today the Board increased their dividend guidance for FY '26 to 39p per share. And as Oliver, you said in the presentation, the Board is reconfirming that the long-term buyback is intended to operate at any discount to NAV. Just a word on how the Board thinks about capital allocation and the split between dividends and buybacks?

There's no change in policy. We believe very strongly that obviously, the dividend helps a lot of shareholders to see that we have -- we stand behind it and that the portfolio is generating cash, but also what we are quite keen is particular where discounts are that this is also an opportune time to do some buybacks and generate some value by doing buybacks as well as creating liquidity for the underlying shares, so that as investors are looking for to sell or buy that we have -- that there's a very -- that there is a market as fluid as possible and as liquid as possible.

Great. Thanks, Oliver. A question on our robust balance sheet. So we're announcing a gearing ratio of 3% at 31st of October 2025. This question is, what do you see as the optimal gearing level given the current opportunity set? We probably can't give a precise number, but how do we think about gearing and the robustness of our balance sheet in this current environment?

Well, you're right, Martin. We're not going to give a precise number, but I would say, listen, we don't want to have permanent leverage. We use our borrowing facility to bridge some of the inevitable gaps you get between cash flows effectively, but also to allow us to invest when we see an attractive environment. So I would say you'll have seen that the ratio has fluctuated. It's been a little bit higher than 3% recently. I think shareholders should expect that ratio to sort of stay in the -- within historical ranges. But we're going to keep using it in the same way, but it's good to be in this starting position. We think there's potentially some attractive opportunities that will arise in the year ahead. And all else equal, having a lower gearing ratio allows you to take greater advantage of those opportunities.

Great. There's a question here on NAV returns. So obviously, we've announced very strong realizations and market optimism has improved. This question is, Blackstone stated yesterday, for example, they have the largest IPO pipeline in a long time. Are we anticipating a return to 2021, 2022 NAV returns?

I don't think we're going to see the return back to -- those were extraordinary big years. And frankly, some of that, you see the -- have come down over the last 2 to 3 years because of the high valuations and exuberance in '21, '22, which created a huge NAV growth, but at the same time, that obviously took some of that value creation upfront. And so we have been still -- over the last 3 years, we were kind of digesting that. And now we do think that we will see -- and we will anticipate a return back to normality, but '21, '22 was particularly high with over 20% and 30% NAV growth. So that -- those were -- we're expecting, and that's what we're underwriting in our investments and everything we do from secondaries, primaries, as well as co-investments of around mid-teens net and that's kind of what we're seeing as a long-term average.

Great. Thanks, Oliver. There's only one final question. I can see, which is a factual question. So I'm happy to take this one. This is just on uplifts. We've announced the last 12 months exits, the -- as Colm said, the multiple to cost was 3.1x and the uplift was 11%. This question is just for that specifically for the Q3 exits, what's been the uplift? We don't typically disclose because it's a smaller sample set each quarter's exits. So that's why we give the long -- the last 12 months longer look through, but you can broadly take that those numbers are similar for Q3 that we published for the last 12 months. I don't see any further questions online. So Oliver, Colm, thank you very much. If there are any follow-up questions after this webinar, please feel free to contact the email address that you see on screens. With that, Oliver, Colm, thank you very much, and thank you all for joining today.

Thanks, everyone.

Thanks, everybody.