Oakley Capital Investments Limited (OCI.L) Q2 FY2025 Earnings Call Transcript & Summary

Good morning. My name is Steven Tredget. I'm a Partner at Oakley Capital, and it is my pleasure to welcome you to the Oakley Capital Investments 2025 Interim Results Webcast. Thank you for joining us today. As usual, you can submit questions in writing during the webcast by following the questions tab at the top of your screen. We will tackle as many of these as possible at the end of the session. And as ever, you can download the presentation to view at your leisure by clicking on the Downloads button. In today's presentation as well as examining OCI's current asset breakdown and the drivers of performance despite some challenging conditions, we'll also cover an investment activity review, highlighting a busy period for Oakley, despite and on the whole subdued private equity market. With the help of the investment team colleague, Alessandro Costamagna, we'll spotlight Business Services, highlighting our Oakley Lights sector, its playbook in this space and provide an overview of some of the latest deals. We'll look to cash and commitments comparing OCI's outstanding commitments to its available liquidity. And finally, we'll plot the progress of the recently revised capital allocation policy. Let's reflect now on OCI's performance in the first half of the year and the factors responsible for that performance. On the 30th of June 2025, OCI's NAV per share was 742p, representing a total NAV of GBP 1.275 billion. That equates to a 7% total NAV return in the first half, building on the strong compounding delivery over recent years and taking our 5-year CAGR to 17%. This is a healthy outcome given the continued macro uncertainty in markets. It reflects both robust trading momentum across much of the portfolio and the benefit of having a broadening set of assets. Total shareholder return of 2.7% at the end of June now stands at circa 15% as the shares responded to the agreed vLex sale, the trading update and the move to the main listing. Putting this performance in context of NAV growth over the last 10 years, and we see a return to growth after a flat year in 2024. Over the past decade, NAV per share has risen more than threefold from around 200p in 2015 to today's 742p. And most importantly, shareholder return has followed suit with a 10-year total return standing at 320% as of today. Looking to deployment of capital as a percentage of NAV, the numbers at the bottom of the slide, we see the first half deployment at 4% of NAV is some way behind the annual average of 20% of NAV. We expect this to catch up given the deals we've already signed and announced but not yet completed, the deals close to signing, which there are 3 and a very strong pipeline of opportunities currently in varying stages of due diligence. We've noted as well the weighted average age of the portfolio holdings to highlight any trends, particularly in the light of PE funds reportedly being forced to hold investments for longer given a muted exit activity. The global medium hold period for PE deals is around 6 years, with North America surpassing 7 years, numbers that have increased around 1.5 years since 2020. For OCI, we haven't seen any big deviations in the weighted average age of the OCI portfolio. 3 years today has moved up from 2.3 years in 2023. The last time we saw a rise like that was in '21 to '22 as we benefited from the performance of a number of maturing portfolio companies. For context, the average hold of all realized deals, Oakley realized deals is 4.2 years. So another 12 months of ownership could reasonably be expected to lead to a number of realizations. Now to break down the NAV. This first slide shows the shift in composition of the assets at June compared to December. At the full year results, we highlighted that circa 50% of NAV in that year was an asset whose value was unlikely to change in the period as alongside cash and the North Sails preference shares, a significant portion of the portfolio investments have been held for less than 2 years, meaning they were still in the early phase of the Oakley value creation cycle. Six months on, and we have a more normalized composition with more investments moving into the 2-year plus category where, historically, we start to see stronger valuation uplifts as companies deliver earnings growth, professionalize and expand. Turning to equity investments by sector. OCI remains well diversified across Oakley's 4 focus areas. Business Service is now the largest sector of GBP 416 million, reflecting both new deals and strong growth in platforms such as testing inspection business, Phenna. Technology remains a close second at GBP 364 million, where we continue to back highly scalable recurring revenue businesses. Consumer and Education stands at GBP 266 million and GBP 257 million, respectively, each representing a substantial portion of the portfolio. By geography, the U.K. and DACH, DACH being the German-speaking countries, remain core markets alongside Spain, France and Italy, giving us both scale and established regions and access to attractive growth opportunities. In the bottom right-hand corner, we clarify the FX exposure of the NAV. This in part reflects the geography of the assets and the currency they are held in. The higher exposure to dollars that is maybe implied by the pie chart above is the impact of including the dollar-denominated North Sails direct holding and the Oakley Touring investments. Over the slide, we now break down the equity investments by portfolio company, with each bar showing OCI's look-through value to each of the 35 portfolio companies held at the half year. The 4 largest look-through holdings, which are spread across each of the sectors are Cegid, North Sails, IU Group and Phenna. We'll speak to North shortly, but providing a brief update on the other 3. We have Cegid, which has further cemented its position as one of a handful of Europe's leading business service software providers, reaching revenues close to EUR 1 billion, of which 90% are recurring and an EBITDA growth of circa 15% to reach over EUR 350 million. Cegid also completed 2 strategic acquisitions during the first half, further consolidating its position in Iberia and DACH. Phenna maintained its position as one of the fastest-growing tech groups globally reporting double-digit organic revenue growth versus prior year, whilst continuing to be one of the top 5 contributors to OCI's total NAV return. The company built upon its accretive M&A strategy with 11 acquisitions completed during the first half of the year at an average of circa 7x EV/EBITDA. And finally, IU Group continued to perform despite the market headwind of new student degree enrollments falling in Germany. First half revenues were slightly above prior year, whilst adjusted EBITDA was up 18%. IU continues to invest in maintaining its superior quality and student outcomes across all formats, supported by its proprietary AI technology. At the same time, it is significantly expanding its letter base to support an increased student demand for in-person teaching in its on-campus business. We, of course, have a longer tail of smaller, younger, but faster-growing companies, names like ADP, vitroconnect and Hosting.com, which are all expected to become bigger contributors in the years ahead. Within venture, Oakley PROfounders and the Oakley Touring Fund made a further 3 investments, taking them to a combined 21 investee companies. Whilst collectively, they are comparatively small, circa 4% of NAV, and we don't have ambition to grow that beyond the single digit of NAV. They are nonetheless represent an exciting possible driver of growth for OCI in the future and give us exposure to highly attractive subset of generative AI-powered software companies. The Oakley Touring Fund even delivered its first realization after only 12 months, the partial sale of SafeBase delivered a gross 50% IRR. Over the slide, we highlight the key portfolio drivers of NAV in the first half. The 3 biggest positive contributors were vLex, Bright Stars and Techinsights. As we have reported, legal tech platform, vLex was the standout contributor, delivering a 30p uplift to NAV per share. This was driven by the agreed sale of the business in June in a transaction that values the business at 3x our prior period book value and creates one of the few Spanish technology start-ups to reach unicorn status. The company continues to scale rapidly, benefiting from the launch of its new AI-enabled products and strong customer adoption. Bright Stars, which contributed 6p grew its EBITDA 44% in the period, driven by price increases, margin improvement, thanks to lower use of agency staff and growth in government funding. M&A continues to remain strong with 8 new sites acquired in the first half, bringing the total settings to 120, well ahead of the original target. Techinsights enjoyed continued subscription revenue growth, supported by strong renewal rates from existing customers as well as more buoyant semiconductor market. This is thanks to a surge in demand for logic and memory chips in AI, data centers and advanced computing applications. On the negative side, Time Out share price fall led to a 25% share drag on the NAV. The company remains a tale of 2 halves with the Markets division continuing to grow. It's contributing circa GBP 1 million of EBITDA a month currently, a number which is expected to double over the next few years with a strong pipeline of potential new openings. In fact, in the next 2 weeks alone, 2 more sites go live as the door opens on the markets of Budapest and Union Square Manhattan. The Media division, however, remains in decline in the face of challenging local commercial conditions in the U.S., the impact of AI-led search on website traffic and the creepy and costly tech infrastructure at Time Out. A strategic review of this division is underway with OCI and other shareholders expected to learn more about the next steps in October or November. Steer Automotive, which was down 4p per share, is operating in a car repair market, which saw volumes drop 10% to 15%, the result of a mild winter and more drivers not claiming for accident repair on their vehicles, thanks to higher accesses and the fear of pushing up future premiums. In spite of this, Steer revenues were flat, but EBITDA lower as the group continued to invest in its now 200 sites, a number, which has doubled over the last year. Although the earnings drop is reflecting the valuation, we expect numbers to recover quickly as insurers push a bigger share of volumes to Steer as the only strategic national scale repair partner. The positive lead indicator of insurer notifications is already up 10% in Q2, but there is a P&L lag as it takes 30 days to receive, repair and invoice. And finally, Contabo, which saw an ongoing slowing of growth due to misjudge price increases and outages causing a rise in downtimes. Subsequently, platform reliability issues have been resolved, customer satisfaction is recovering and an appropriate pricing strategy has been established. The fourth largest positive contributor to NAV adding 5p was North Sails, which would have been larger if it wasn't for the impact of dollar weakness in the second quarter. And talking of North, it remains OCI's largest investment via both its Fund II exposure and a directly held investment. As of June, OCI held $79 million in preferred equity, carrying a 5% coupon, $140 million in directly held ordinary equity, and a EUR 66 million indirect stake via Fund II. OCI, Oakley and the company are working together to structure the holding appropriately, optimize value and progress towards some liquidity solutions. In the coming weeks, it is hoped but not yet confirmed that Oakley Fund II will close. And with it, it's North Sails investment transferring to a dedicated continuation vehicle. I should note that OCI's direct investment in North Sails will not be transferred into the CV at this point as the Board wishes to retain as much optionality as it can for the time being. In terms of trading, performance at North remains very encouraging. EBITDA this year is expected to grow to $43 million from $37 million last year. This has been thanks to positive momentum so far with year-to-date revenue trading ahead of budget. Sailmaking division is trading well, benefiting from strong order flow at the premium end, Grand Prix and super yachts. [ Merz ] continues to perform strongly, driven by Southern Spars, high activity and premium product mix. And Action Sports is broadly in line with expectations with a slightly lower EBITDA margin versus budget due to higher SG&A costs and one-off investment in staff. Apparel has underperformed versus expectations with sales across key channels, wholesale, new stores, e-commerce falling short of expectations. Higher discounting on all DTC channels impacted gross margins. Early post-acquisition synergies are expected to contribute over $3 million, driven roughly equally by product positioning initiatives and cost savings. We believe the business has the potential to deliver $70 million plus of EBITDA in 4 to 5 years, driven by the following core value drivers. That Doyle and Quantum acquisition that we announced last year has strengthened the defensibility of the Sailmaking model and offers significant further synergy potential. This is expected to be the primary catalyst for visible earnings growth. And then there's Action Sports and Apparel, which are set to be the long-term growth drivers as they align with the broader North brand strategy. In Action Sports, we will leverage innovation from Sails to become the #1 brand, tap into large markets such as France and Germany and accelerate digital. In Apparel, we are refocusing towards higher-value customers with reducing -- reduced discounting while driving efficiencies through the cost base rationalization. And finally, for this section of the presentation, we take a look at the average weighted KPIs across the portfolio. Despite the macro headwinds, the average organic EBITDA growth over the last 12 months stands at 13%. To compare to peers, the average, including M&A, is circa 23%. The average EBITDA growth is, of course, a relatively blunt figure as whilst it may reflect trading headwinds, particularly amongst the consumer operations like a Alerce and Vice. It also reflects, one, a growing number of portfolio companies with more modest organic earnings growth, but with a platform focused on creating value through buy and build like a Phenna, a Steer or a Liberty Dental. Or secondly, companies that are early within the whole period, businesses like Assured Data Protection, a disaster recovery as a service business that was acquired in October last year. It is growing revenue by almost 60%, but there is significant and ongoing material investment in the cost base, particularly in sales, research and development and finance functions, resulting in a doubling of full-time employees, which is expected to suppress EBITDA in the near term. Average leverage in the portfolio stands unchanged at 4.2x net debt to EBITDA, well below the broader PE market, where still averages are typically around 5 to 6x. Average valuation multiples, as you might expect, also remain flat at 16.3x EV/EBITDA. This remains attractive compared to the underlying listed comparables, and we continue to demonstrate a conservative approach to valuations with realizations in the last 12 months at or above book value. Now let's turn to Oakley activity year-to-date and how this compares to what is broadly a subdued global private equity market. As a whole, global PE investment activity has been muted, exit values are down and fundraising has been subdued. By contrast, Oakley has remained highly active. EUR 472 million have been invested year-to-date compared to EUR 642 million in the prior period. EUR 150 million of proceeds has been realized or will be realized as a result of the agreed sale of vLex. This generated a 6.3x money multiple, demonstrating Oakley's ability to create value even in more challenging markets. And significantly, Oakley successfully raised Fund VI in March at EUR 4.5 billion, the largest fund raise in Oakley's history and a strong endorsement of its performance and differentiated strategy. It also reflects the increasing attraction of Europe as a stable, less PE penetrated region, and it's offering diversity to the U.S. and the dollar, which some institutions have felt overexposed to in the recent months. If we take a snapshot of those Oakley deals completed in the last 12 months, it will come as no surprise to those that know us that all 10 of these transactions are in companies led by the founders who created the businesses and who remain significant equity owners post our investment. We've backed over 30 founders now, and they create a multiplier effect of deal generation as they themselves often present us with more than one investment opportunity over time. There is one founder duo, for example, that we have backed 5x in different vehicles. And these founders also go on to endorse us within their own founder network. We remain most proud of the fact that post partnering with us, many go on to invest with us with the network committing to date over EUR 350 million to the Oakley funds. The other feature that remains consistent is the near 70% of the deals in our history that have been uncontested with founders choosing to have a bilateral engagement, prioritizing working with a partner they trust and value over maximizing the price. Clearly, the most significant piece of activity from an OCI perspective in the half was the agreed sale of Phoenix, a timely illustration of how Oakley generates outsized returns by backing founder-led businesses and then supporting them to professionalize, scale and innovate. Other slide is a chart we've used before with other portfolio companies to illustrate the phases of an Oakley investment and how the value typically builds over this time, emphasizing the importance of value creation in the first year's investment and why meaning value growth is not anticipated until the third or fourth years. In vLex's case, we paid what many would consider a full price at 19x compared to the value of the multiple of the existing portfolio. And we maintained that valuation for the first year of ownership. Oakley then combined the company with Fastcase to create the world's largest law firm subscriber base. This unique and reliable data set allowed the company to launch its Vincent AI product, transforming the business into a powerful software platform and helping deliver a 300% uplift to book value in the fourth year of ownership. vLex also reflects Oakley's increasing activity in the business services space, which as we reflect on earlier, is now the largest sector by investment value. To tell us about Oakley's business services strategy and to reveal more about some of the recent investments in the sector, I have the pleasure of introducing Investment Team Director, Alessandro Costamagna, who joins us live from Milan. Ale, over to you.

Thank you, Steven, and good morning, everyone. Yes, so the Business Services sector has been a major area of focus for us in recent years. In fact, over the past 12 months alone, we've made 4 new platform investments as Steven has shown in the previous slide. But before diving into the details of those deals, let me take a moment to explain why we like this sector so much. Business services, first of all, is a huge market. I think it represents around 12% of European GDP. And within that, we see a number of subsectors that tick all of the boxes that we look for in an Oakley investment. Those are large and growing markets. The demand is often underpinned by trends like increased regulation, increased outsourcing, technological shift. The markets are very resilient. There's a lot of downside protection. The business are often noncyclical. They're driven by repeat revenues, mission-critical services, all the things that we like. And in many cases, services are even mandated by regulation. In terms of barriers to entry, you have strong brands, entrenched customer relationships and deep pools of expertise that make it very hard for new entrants to compete. And finally, many of those markets remain fragmented today, creating obviously, a lot of consolidation opportunities, build scale, strengthen competitive moats and attract top talent. And finally, a key attraction is that many of these businesses are still founder-led. As you know, that's where Oakley's reputation as a trusted partner to entrepreneurs really gives us an edge. It allows to access opportunities that are off market or disrupt competitive processes. And we'll talk about some examples like Join, like G3 and Infravadis that show this quite clearly. Of course, business services is a very broad sector with a very wide range of business models. So to succeed, we believe it's essential to go narrow and to go deep. And that's why we have invested heavily in building this subsector expertise, developing strong networks with industry specialists, with entrepreneurs. And this approach helps us position both as a value-added partner to founders and as a source of obviously, proprietary deal flow. On this slide, you can see how our platform investments now span many of our top priority verticals from the testing, inspection and certification that you're accustomed to with Phenna by now. Insurance services is a very active area now. Cybersecurity managed services and specialist consulting, just to name a few. And these all share the common characteristics that I mentioned before, mission-critical services, resilience through cycle, strong structural growth and consolidation potential. On the right-hand side, you will see additional subsectors where we are currently building knowledge and relationships. So we're ready when the right opportunity comes along. And before moving on to the case studies, let me highlight what are the 2 main themes that run through our business services investments. The first one is business model transformation. We often focus on shifting companies from project-based revenues to recurring subscription-led models. A good example is Techinsights, which we've taken from 15% subscription revenues at entry to over 80% today. And the other investment theme is consolidation, buy-build strategies. Consolidation is a powerful driver of value in this sector. Investments in Phenna, in Liberty Dental, in ProductLife Group, in Steer Automotive, those are all very strong examples of consolidation. Each of this platform has been very active. And in fact, on average, completing roughly one bolt-on acquisition per month since the investment date. And collectively, those bolt-ons of our business services deals account for as much as 55% of the, call it, original EBITDA at the signing of the platform deals. So in summary, Business Services is really a natural fit with Oakley's DNA. It's a sector full of large, resilient markets with attractive fundamentals and where our track record and founder relationships gives us a real edge. These themes will come through strongly as we move into the case studies. And I'd like to start with one of our latest investments, which is Join Business Management Consulting. I'd like to refer to it as Join, it's just easier. So let's bring those teams to life. Join. Join operates in IT and management consulting for the financial services sector in Italy. It's a clear fit with our business services strategy. It's mission-critical services, growing market, and they work with banks, with insurers and with payment service providers. This is a founder-led business. Obviously, the founders are still very much invested, remain very invested alongside us. And our ability to build trust over an extended period was very important. We, in fact, developed a relationship with the founders over 18 months. And allowed us to structure a proprietary deal despite strong market interest because we were not the only ones knocking on the door, and it allowed us to build together a strategic plan for the coming years. The market opportunity is very interesting. The consulting spend for financial services sectors in Italy is around EUR 1 billion. It continues to grow. It's driven by this ongoing digitalization of banks and of insurance companies. And so it creates this substantial long-term growth for Join that we love so much here. Join has already been delivering exceptional growth with 20% revenue CAGR over the last 5 years, which outpaces the broader consulting market and its major competitors. And possibly the thing that I like the most about the investment is this business uniqueness. And most impressive is the culture. And you can see that with the number, with the employee churn under 5%, which is almost unheard of in consulting. And that's really thanks to a unique culture that is focused on retaining talent and growing talent in a very competitive labor market. The firm has also a real depth in niche areas of financial services like core banking system migrations, which are highly complex and mission-critical for its clients. So in short, Join really embodies the characteristics that we look for in an Oakley deal, founder-led business in a large and growing market, strong competitive differentiation, cultural resilience and a clear path to consolidation. So it's a great example of how Oakley's approach to building trust with entrepreneurs and focusing on specialist mission-critical niches can deliver really interesting opportunities. And now I'll give it back to Steven to talk you through G3 and Infravadis.

Thanks, Alessandro. Alessandro will join us again for the Q&A at the end, if anyone has any questions or follow-up to his section, particularly on business services. Thank you, Ale. And the second new business services during the period and Fund VI is debut investment is a global strategic advisory consultancy. G3 provides market intelligence and advisory services to major corporates and investment firms. Here, we are backing 2 entrepreneurs, Nick Alcock and Michael Bevan, who led an MBO of the business in 2018. They are reinvesting to maintain a significant stake in G3 and will continue to run the business as co-executive chairs. G3 is an exciting, fast-growing, high-margin business with revenues having grown at 27% CAGR over the last 5 years, driven by increasing client demand for support on critical business decisions and by expansion into new geographies and high-growth areas such as cyber advisory. It operates in a circa GBP 3 billion serviceable market, which is expected to grow significantly as geopolitical tensions, regulation and business complexities continues to rise. G3's client base includes 9 of the 10 largest investment funds and around 50% of the FTSE 100 are already clients. Again, this is a founder-led with Oakley having built a trusted relationship over several months is a great example of Oakley's ability to identify niche high-growth markets and partner with entrepreneurs who lead them. And 1/3 of the new deals in what is a broad sector operates in underground infrastructure maintenance, UIM and operates in this particular sector in Germany. Infravadis' ambition is to become Europe's first tech-enabled UIM leader by combining operational excellence with a scalable digital-first approach. As its first acquisition, it has acquired a major stake in Abfluss Schäfer Group, a market leader in sewage cleaning, pipe inspection and repair services. The business has delivered 20% revenue CAGR over the last 8 years, while consistently maintaining very high margins over 45% for the last 6 years. This EBITDA margin compares with circa 10% margin for its peers, highlighting the strength of the business model and its tech-enabled product. This is also an attractive, fragmented and sizable market with low-tech solutions serving a German UIM market worth over EUR 5 billion that is growing 5% per annum, driven by the need to upgrade aging infrastructure. If we look at that on a European scale, the market grows to EUR 25 billion. And this is another founder-led platform where Oakley sees a clear opportunity to build the category leader in an essential and fragmented sector. Moving on to OCI-specific analysis and our last couple of topics. First, turning to a review of OCI's liquidity position and its outstanding commitments. At the 30th of June, OCI has total outstanding commitments of around GBP 1.07 billion across the Oakley funds. A large majority of this highlighted in the bright purple sections of the bars is the GBP 470 million recently committed to the newly launched Fund VI, GBP 312 million of outstanding Fund V commitments, a fund entering the last years of its deployment phase and GBP 153 million in Origin II, which started its deployment in the last year. To give us a better indication of when we can expect the GBP 1 billion to be called, these bars break down if and when the commitments will be called. Starting at the left, there is over circa GBP 300 million that is not expected to be called. We've discussed this before. This is often because a fund doesn't deploy all 100%. It can't. It's not like a public equity fund where you can kind of deploy into small increments of pounds or single million pounds. And also, there's contingency that's out in the fund in order to be able to invest further and unexpectedly in existing deals. Circa GBP 575 million that is set to be called over 12 months -- after 12 months, sorry, in over a 5-year period and circa GBP 200 million are expected to be called in the next 12 months. This compares to GBP 257 million of liquidity at the end of the half with cash and available credit facilities. This implies OCI has current liquidity for approximately 1.25 years of deployment if there is no further realizations, of course, which is thinner than the typical target level of cover. However, in combination, we've got deals already announced by vLex, refi is expected in the next 6 months and realizations targeted in the next 12 months that are expected in combination to generate inflows to OCI of circa GBP 200 million. Although this is not guaranteed, this is typical for OCI that outflows at least match or are expected to exceed inflows as a result of deal proceeds. Let's turn to capital allocation. We've highlighted 4 elements of OCI's capital allocation, which was updated in a recent announcement in April of this year. And some of these categories clearly overlap. We've got fund commitments. Over the longer term, the Board remains committed to exposing shareholders to returns generated by Oakley funds. And to that end, EUR 500 million was committed to the latest flagship Fund VI. We've got the direct investments. So resolution plan is in place to manage those direct investments, especially North Sails, providing both liquidity, maximizing upside and moving the investment off the company's balance sheet. Then there's capital return. Dividends have been discontinued in favor of distributing capital via share buybacks. The dividend had remained at an unchanged and nominal level since its introduction in 2016, and the Board determined that shareholder returns will be better served by buybacks at material discounts to NAV rather than paying dividends. The annual buyback program was initially launched for a minimum of GBP 20 million. And then the share buybacks achieved so far, OCI has already bought back and canceled 5.2 million shares year-to-date, returning circa GBP 25 million to shareholders, half of this year's intended buyback amount, which was also increased in the half. To add more color to the 5.2 million shares having been bought back at an average price of 481p, a 32% discount to NAV, delivering a 7p uplift to NAV per share year-to-date. By the year-end, around 6% of shares in issued if this buyback program is fully deployed, would have been bought back and canceled, demonstrating the meaningful impact of this program. Let's conclude on what we believe remains a strong outlook for shareholder returns. We're not kidding ourselves. We're still stuck with persistent macroeconomic uncertainty and a more selective deal-making environment, which is an impediment to OCI's performance. There's no doubt in that. However, Europe is showing evidence of more relative resilience and this, combined with OCI-specific factors means we remain well positioned for continued outperformance. Those 3 core factors are: one, increased NAV growth. And that's driven by an attractive portfolio where forecast earnings momentum reflects the impact of Oakley's value creation techniques with more companies now maturing into their value creation phase. We expect this to translate into sustained NAV growth. Secondly, there's that differentiated pipeline. Oakley continues to access founder-led opportunities across its core sectors, benefiting from its deep sourcing network and long-standing founder relationships. This pipeline remains a real competitive advantage and ensures a continued flow of compelling investments. And finally, shareholder value. But this is being supported through OCI's active buyback program and, importantly, the recent move to the London Stock Exchange Main Market and now its inclusion in the FTSE 250 Index, which will take effect from the 22nd of September. Together, these measures are enhancing liquidity, broadening our shareholder base and are helping to narrow the discount. Taken together, these factors give us confidence that OCI can continue to deliver attractive returns for shareholders. And that brings us to the end of the presentation element of the webinar. Thank you for remaining with us. And at this point, I'll hand over to Rosanna to take us into the Q&A section.

Thank you, Steven, for that presentation, and thank you to everyone who has submitted questions so far. For those of you who would still like to, it's not too late. [Operator Instructions] And we'll get through as many as we possibly can. Steven, we're going to kick off on a question about strategy, particularly in light of that increased flagship fund size that you referenced in your slides. So following the increase in the size of the flagship fund, does this mean a change in the style of typical Oakley deals, more processes and less founder-owned?

Yes, it is one of the most frequently asked questions of Oakley, and it's been the most frequently asked question of Oakley for the last 10 years, I'd say, and that's because kind of the value of the funds and the AUM has grown kind of significantly over that time. And it was certainly one of the key questions that investors asked when we raised Fund VI. And I think if you have taken us back to Fund III, we probably would have anticipated that kind of founder-led opportunities might start to kind of top out at a certain level and you really only be deploying what was Fund III, GBP 1 billion or so into that market kind of reliably. And that's simply not been the case. And the reason we had to scale it is from a number of reasons. We're still finding founder-led businesses at scale. Not only just founder-led, but founder-owned, some kind of billion-odd sized companies that have had no institutional capital touch that business. How surprising is that? And I often quote the kind of stat that of businesses in Europe generating over GBP 100 million of revenue. So substantial businesses, fast-growing businesses, 96% of them are private and the majority of those have had no institutional backing whatsoever. You're also combining the fact that as Oakley has grown, as the founder network has grown, as our sourcing has kind of developed, we're able to access more opportunities. And our reputation, which was something that didn't precede us. We've been a relatively small kind of PE house. We had to kind of go out there, network ourselves and through serendipity, find some wonderful deals. Now that's starting to switch. We've become -- advisers know us, we've become clearly better known for doing the kind of deals and being that partner of choice. And therefore, we're kind of finding more of these opportunities come to us, scale opportunities. It's probably worth given that we've got Ale on the line too and to ask him as well to kind of comment on that, and on our ability to still find founder deals outside of processes.

Yes. I think it's interesting for me because that was maybe the main question that I had myself when I joined Oakley. So -- and now I can answer it with facts. The larger fund does not mean a shift away from our typical Oakley deals. The strategy really remains the same. We keep on partnering with founders and management teams in our core sector. What the larger fund really gives us is simply more firepower, the ability to do slightly bigger deals, to do more add-ons to deploy additional follow-on capital, but the hallmarks of the classic Oakley deal don't change, the founder ownership, the complexity, the bilateral sourcing, they keep on being the same. And we can touch on if we want to discuss the pipeline. The pipeline is extremely healthy. In fact, we've had -- we keep on having staffing discussion as we need to allocate time and resources very, very wisely. And I think it's healthy not just in the volume of deals, but also in the quality of deals. Pretty much all of the deals that we have in the pipeline are founder-owned or founder-led, where we either have one-to-one discussions or we're very early on, potentially disrupting a process. So I hope that answers your question.

That's great. We've had a few questions come in on realizations and upcoming exits. Steven, you alluded to it at one point in the presentation, but can you give us a bit more detail on what is the outlook for further realizations in 2025?

Sure. I'll talk to kind of Oakley specifically. I wonder if Alessandro might just talk a bit on the kind of the exit market more generally and kind of the health of that and the kind of any trends there. I mean, if I recall at the full year, I said that I thought we probably had 5 companies, which could be -- which are targeted for realization in a kind of 12- to 18-month period. And that's now obviously, one of those has signed, but not yet completed, leaving 4. And that's still the right number, about 4 that's now scheduled in the next kind of 12 months. And in all those cases, we've -- there has been kind of engagement with early engagement possible buyers. There are advisers appointed, and they are kind of steadily progressing to realizations. I wouldn't increase any very near-term expectations of realizations. The likely kind of earlier source of additional proceeds is more likely to be through at least one reasonably sizable refinance in the kind of months ahead.

Yes, happy to speak about the general European private equity exit environment. I think it showed mixed performance in the first half of the year. Let's also keep in mind that '24 was a very good exit year in Europe for PE funds. The exits rebounded from the lows of '22 and '23 when back then the market suffered from geopolitical uncertainty, higher interest rates. So '24 was a good year. So we start from that basis, which is quite a high bar. The slowdown in the first half of the year was particularly pronounced for mega deals, less so for mid-market. The main factors around that, the slowdown are macro, tariff uncertainty, financing, uncertainty around interest rates, corporates that are still trying to understand where the world is going. And so those have slowed a little bit strategic exits and decreased IPO activity. And those are very valid for mega deals. But at the same time, sponsor-to-sponsor sales have been quite good. They've become now the dominant route. And -- but the quality of mid-market assets in resilient sectors is still attracting very strong buyer interest. So overall, while exits are slower, those well-positioned mid-market firms can still achieve very good outcomes. Looking forward, if inflation continues to ease and financing markets reopen, who knows, maybe exit volumes can pick up gradually into the latter part of the year and into 2026.

Great. And maybe another question for you, Alessandro, and Steven, you can chime in, is regarding the pipeline. You alluded to it in your first answer, but perhaps more specifically, whilst you've mentioned that the pipeline is healthy, where are you specifically seeing opportunities?

It's healthy across funds, across flagship and across origin. I think we have over 10 deals in good stage in both, and it's healthy across sectors. If I were to point to a couple of subsectors where we see a lot of activities, there's probably insurance services where we've been doing lots of work. Specialist consulting services is also an area where we see lots of traction. We have several interesting deals in some niches in tech. So it's really valid across sectors and across funds. And as I mentioned, I think the most important thing is not just the volume, but the quality of those leads. Pretty much all of those are founder-led or often founder-owned and most of these are bilateral discussions. So the pipeline is very good. What we need to be good at is also prioritizing things.

Great. And going back to Steven for the next question. Could you update us on the Board's announced intention to appoint new directors and the type of director they are looking to appoint?

Yes. So this question relates to the fact that Caroline Foulger announced her retirement and didn't stand for reelection at the recent AGM on the 2nd of September, and that follows her 9-year tenure as a Board Director. And the company or the Board has subsequently announced that there is a process ongoing to appoint a replacement Board Directors. Where that process is quite advanced and what type of director are looking to appoint? I mean, I think they're specifically looking for individuals with investment trust experience. They're looking for those with investment experience in various guises. They're looking for kind of, if I may say, kind of gray hair kind of long-term and meaningful experience, people who have run businesses of those kinds. And I think someone with -- particularly with U.K. experience. So I wouldn't be surprised if the Board choose kind of a senior independent who is kind of known to the U.K. market and is based here in the U.K.

Thank you very much. We just had one question in on share buybacks. With regards to share buyback, roughly what sort of discount would you be happy with from this current level after the GBP 50 million that has been utilized? Will this be extended?

That's one the Board kind of continue to evaluate. I mean, I think that currently, they are very comfortable kind of buying up to and beyond the kind of 20% discount. Why 20%, which is about GBP 6 is because that's the kind of similar net return that you get from the fund. So at the very least, you should be buying up and potentially beyond the 20% level. The Board meets kind of regularly to reevaluate that. And so they have that on the subject list for the October Board meeting, if -- to kind of reevaluate the kind of pricing levels that they'll move the buyback to. But in the meantime, we're safely within that price range.

Thank you. And we've got time for probably just one more question, and that is going to be on North Sails, Steven. So what is the plan for OCI's direct investment that you mentioned in the North Sails section if it isn't going to be transferred into the new CV?

I mean I think -- I mean, it's essentially a decision that the Board has made. It's not to say that it wouldn't necessarily enter into the CV, but I think they are -- they want to understand the likely timing of measures they'd like to see, particularly around the kind of full or partial realization of the pref share and also the attraction of a new secondary buyer into the North equity. And I think they want to understandably kind of maximize their leverage and influence over that process. At the moment, it's a decision to withhold, but it's not indefinitely because ultimately, they would like to move the investment off of the balance sheet. It's not for them to continue to directly manage it. They don't want to. And ultimately, to sit in a CV alongside most of the other investments in North would be an ideal outcome for them. So I think it will end up there. And I guess while we're on the subject, the timing of the -- of that kind of those other events that I mentioned, I mean, I guess kind of H1 is the kind of muted suggestion around when a refi is possible and the liquidity for the pref shares and H2 of next year is the kind of targeted time for introducing new equity investors to the North Equity.

Thank you. I've got my eye on the clock. I think that's all we've got time for today, unfortunately. There are a couple of other questions that have come in, and we will try and reach out to you directly with responses. But that's everything. Steven, back to you.

Thank you, Rosanna, and thank you again for all that have joined us this morning. I mean I think without being highly repetitive, we -- myself, we'll underline the kind of headwinds that anyone in investment is currently experiencing. But I think there's enough that sets OCI, its portfolio and our approach aside that we believe is going to help to build on that 15% shareholder return that we've achieved to date. And we remain pretty optimistic about what we can achieve, not this year, not just this year, but in the years ahead for OCI and its shareholders. Thank you so much for joining this morning's webcast.