A partner through challenging times - Universal Partners
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1 OUR BUSINESS AT A GLANCE
1 OUR BUSINESS AT A GLANCE
ANNUAL REPORT 2020
A partner through
challenging times
Contents
07 Our business at a glance
08 About us
10 Our structure
12 Share analysis
14 Our investment strategy
16 Our executive team
18 Our board and investment committee
23 Leadership review
24 Message from the chairman
29 Chief executive officer’s report
38 Our investments
53 Corporate governance
54 Governance structure
60 Structure of the board and its committees
67 Director appointment procedures
68 Director duties, remuneration and
performance
71 Risk governance and internal control
74 Reporting with integrity
75 Audit
76 Relations with shareholders and other key
stakeholders
79 Annual financial statements
80 Commentary of the directors
81 Statement of compliance
82 Certificate from the secretary
83 Independent auditor’s report
86 Statement of financial position
87 Statement of profit or loss and other
comprehensive income
88 Statement of changes in equity
89 Statement of cash flows
90 Notes to the financial statements
111 Shareholder information
112 Corporate diary
113 Corporate information
4 ABOUT THIS REPORT UNIVERSAL PARTNERS 5
ANNUAL REPORT
2020
About this report
This is the fourth integrated annual report of Universal Partners FRAMEWORK AND ASSURANCE or alter its forward-looking statements,
Limited (“Universal Partners” or “the company”).
whether as a result of new information, future
The company has a primary listing on the information or otherwise. This forward-looking
Stock Exchange of Mauritius (SEM) and a information has not been reviewed or reported
It provides investors with an overview of our investment strategy, secondary listing on the alternative board of on by the external auditors.
performance over the reporting period and our governance
the Johannesburg Stock Exchange (JSE AltX).
The information included in this integrated APPROVAL OF THE INTEGRATED
framework. This report seeks to demonstrate that Universal Partners report has been provided in accordance with REPORT
International Financial Reporting Standards
has the capacity to deliver on its investment strategy and in doing (IFRS), the Mauritian Companies Act, 2001, the The board of directors of Universal Partners
so, create and deliver value over the medium- and long-term for our Mauritian Securities Act, 2005, SEM Listing acknowledges its responsibility for ensuring
Rules, JSE Listings Requirements, Integrated the integrity of this integrated report. The
shareholders. Reporting Framework and the Code of board believes that this report presents
Corporate Governance for Mauritius. a balanced and fair account of Universal
Partners’ performance for the year ending
FORWARD-LOOKING STATEMENTS 30 June 2020. On the recommendation of
the Audit and Risk committee, The board
This integrated report contains certain approved the 2020 integrated report for
forward-looking statements with respect to publication on 9 October 2020.
Universal Partners’ financial performance and
position. These statements and forecasts
involve risk and uncertainty as they relate
to events and circumstances that occur in
the future. There could be various factors,
including but not limited to, global and local
economic conditions, industry as well as Larry Nestadt Pierre Joubert
regulatory factors that could cause actual Chairman CEO
results or developments to differ materially
from those expressed or implied by these
forward-looking statements. Universal
Partners is not under any obligation to update
Our business at a glance 08 About us 10 Our structure 12 Share analysis 14 Our investment strategy 16 Our executive team 18 Our board and investment committee
8 OUR BUSINESS AT A GLANCE UNIVERSAL PARTNERS 9
ANNUAL REPORT
2020
About us
Universal Partners Limited is a permanent capital investment OUR PURPOSE THE VALUES WE LIVE BY:
holding company. Our purpose is to partner with, and add Trust
value to, high potential businesses in order to We don’t simply invest in businesses, we
achieve strong capital appreciation over the partner with people. Every investment
We seek investments in high-potential, growth businesses, medium- to long-term. we make is based on the quality of the
with a focus on the United Kingdom, and Europe. 20% of the OUR VISION
relationships we build and the trust that
underpins them.
company’s funds may be allocated to other regions.
Our vision is to create and manage a portfolio Integrity
Our experienced leadership team is recognised for its strong of investments that deliver value for our We know that success doesn’t happen
track record of managing and growing successful businesses. shareholders. overnight. What sets us apart is the integrity
of our people and the reputations they
We provide growth capital to high quality businesses that have developed through years of building
meet our investment criteria. We add value by drawing on sustainable businesses.
our extensive experience to offer strategic direction to the Honesty
companies we partner with. We will only partner where we see value and
where we believe we can offer insight.
For us, honesty is what underpins every good
investment decision.
We are patient investors with a permanent capital structure and
are committed to achieving the best long-term outcomes for Excellence
We seek excellence in the businesses we
both the businesses we invest in and for our investors. invest in, and we offer excellence in return.
10 OUR BUSINESS AT A GLANCE UNIVERSAL PARTNERS 11
ANNUAL REPORT
2020
Our structure
Universal Partners was established Universal Partners is listed on the Stock
Exchange of Mauritius (SEM) with a secondary
in Mauritius on 25 April 2016 listing on the Johannesburg Stock Exchange
as a public company limited by Limited’s Alternative Exchange (JSE AltX).
Universal Partners raised over £72 million
shares, holding a Category 1 for investment in its initial public offering in
global business license issued by August 2016.
the Mauritian Financial Services Universal Partners appointed Argo Investment
Managers (Argo) under the leadership of
Commission. executive directors Pierre Joubert, David
Vinokur and Andrew Birrell, as its investment
manager. Argo is responsible for sourcing
the investment opportunities, executing the
transactions, and managing the investments
until such time as they are realised. Argo earns
an annual management fee for its services, in
addition to a carry fee payable only once an
investment is realised. A portion of this carry
fee is payable in Universal Partners equity, and
a portion in cash. The equity portion has a
three-year lock in period.
12 OUR BUSINESS AT A GLANCE UNIVERSAL PARTNERS 13
ANNUAL REPORT
2020
Share analysis
Our shareholder base is maturing and consolidating, with 99% of shares being
SHAREHOLDER SPREAD
held by shareholders who hold more than 100 000 shares each. Over the period
RANGE NUMBER OF % OF HOLDERS NUMBER OF SHARES % OF SHARES
our shareholder base has remained consistent with 117 shareholders in 2020. SHAREHOLDERS
The directors and their associates directly and indirectly own 20.8% of the total 1 - 999 29 24,8% 8 417 0,0%
issued share capital of the company as at 30 June 2020. 1000 - 9999 24 20,5% 98 481 0,1%
10000 - 99999 23 19,7% 785 842 1,1%
100000 - more 41 35,0% 71 457 391 98,8%
Total 117 100,0% 72 350 131 100,0%
UPL SHARE PRICE VS GBP/ZAR EXCHANGE RATE
90,6% 9,4% 15,3% 84,7% 76,7% 23,3%
117 72 350 131 72 350 131
14 OUR BUSINESS AT A GLANCE UNIVERSAL PARTNERS 15
ANNUAL REPORT
2020
Our investment
strategy
We are focussed on acquiring and building We seek to invest in companies that
Our investment strategy is to invest in high- successful businesses across a broad range demonstrate the following important
potential, growth businesses in our primary of sectors where we are able to add value. attributes:
The types of businesses we seek are typically
markets, the United Kingdom and Europe. those that demonstrate an advantage over − A robust, easily understood business
We also assess opportunities outside of the competitors, such as an enhanced customer
experience, a consolidation platform, a lower
model
− Clear competitive advantages
United Kingdom and Europe. The mandate cost base and technological and innovation − A clear path to strong and sustainable
leadership (demonstrated by registered and profitability, combined with a high cash
allows the Company to invest up to 20% of protected IP). conversion ratio
its funds (at the time of the investment) in − Experienced management, who
We take an active shareholding in the demonstrate a strong cultural fit with
other regions. businesses we invest in, in order to enable Universal Partners and our investment
meaningful participation in the formulation manager
and monitoring of the business strategy. − Long-term growth potential
We offer permanent capital and target
investments where we are able to take
minority stakes up to 49%, with at least a
board seat. We will also invest where we are
part of a consortium on the condition that we
have adequate minority protections and have
a board seat. As a broad guideline, we look
for investments that require an initial equity
contribution of between £8 million and £20
million.
16 OUR BUSINESS AT A GLANCE UNIVERSAL PARTNERS 17
ANNUAL REPORT
2020
Our executive
team
We are seasoned investment specialists, PIERRE JOUBERT (55) DAVID VINOKUR (41) ANDREW BIRRELL (51)
CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER EXECUTIVE DIRECTOR
with a track record of successfully growing
businesses and delivering shareholder value. Expertise: Corporate finance and Expertise: Private equity, corporate finance Expertise: Investments, M&A, private equity and
investment specialist and investments financial services
As entrepreneurs, senior executives and Nationality: South African Nationality: South African Nationality: British/South African
business owners, we are adept at helping (permanently resides in Mauritius)
the businesses we partner with deliver Pierre is the CEO of Universal Partners. Prior David is the CFO of Universal Partners Limited. Andrew has over 30 years’ experience in various
sustainable growth. Our strong global to joining Universal Partners, he was the chief
investment officer of the Richmark Group of
He is also the CEO of the Global Capital
Group. David has more than 16 years of
executive and non-executive roles, across the life
insurance, general insurance, health insurance,
investor network enables us to successfully companies, which he joined in November 2015. private equity experience. During his career, stock broking, asset management, and retail
Previously he spent 13 years at Rand Merchant he has been instrumental in originating, online banking industries, in South Africa, the
invest in high-growth businesses, and our Bank (RMB) fulfilling various roles including structuring, concluding and exiting private UK, Scandinavia, Canada, Ireland and Australia.
ethos means that we only seek to partner senior transactor in the Corporate Finance equity transactions in a variety of industries and Previous executive roles were as CFO of Guardian
division, head of the Equities and co-head of countries. He represents Universal Partners and Financial Services; Group Chief Actuary and Group
with organisations where we believe we can the Global Markets divisions. Pierre is a member Global Capital on the boards of the underlying CRO of Old Mutual plc; CRO of Old Mutual South
add strategic value. of the RMB investment committee, a position
he has held for 18 years. He is also a member of
companies both locally and offshore and
assists with the strategic management of the
Africa Ltd; COO and CFO of Investec Securities
Ltd; and CFO of Capital Alliance Holdings Ltd and
the Ashburton Private Equity Fund 1 investment investments. After completing his articles at Capital Alliance Life Ltd.
committee and a non-executive director of PricewaterhouseCoopers, David was certified
Homechoice International PLC and Brait as a chartered accountant and became a Andrew serves as an independent non-executive
SE. Previously, Pierre held various executive member of South African Institute of Chartered director on the boards of Sanlam Group, Sanlam
positions at Connection Group Holdings Ltd Accountants. Following this David joined Global Life and Sanlam Developing Markets in South
including that of CEO of Connection Group for Capital in February 2004; his portfolio consists Africa, and esure insurance Group and Sun Life
four years, leading the successful turnaround of of a diverse range of private companies in a Financial of Canada in the United Kingdom. He
the business that culminated in the group being variety of industries. represents Universal Partners on the boards of
bought by JD Group Ltd. In his early career, JSA Services Limited, YASA Limited and SC Lowy
Pierre worked for various companies in the David holds a Bachelor of Commerce degree Limited. Andrew is a Fellow of the Institute and
Reunert Ltd group after completing his articles and Bachelor of Accounting degree from the Faculty of Actuaries, United Kingdom and the
with Deloitte. University of the Witwatersrand (South Africa), Actuarial Society of South Africa. He is also a
and is a Chartered Accountant (South Africa). Chartered Enterprise Risk Actuary (CERA) and a
Pierre holds a Bachelor of Commerce degree member of the Institute of Directors in the United
from the University of Cape Town, and is a Kingdom.
Chartered Accountant (South Africa).
Andrew holds a Bachelor of Business Science
(Hons)(Actuarial) from the University of Cape Town,
South Africa.
18 OUR BUSINESS AT A GLANCE UNIVERSAL PARTNERS 19
ANNUAL REPORT
2020
Our board
and investment
committee
Our board of directors is responsible for LARRY NESTADT (70) MARC OOMS (69) NEIL PAGE (65)
NON-EXECUTIVE DIRECTOR AND INDEPENDENT NON-EXECUTIVE INDEPENDENT NON-EXECUTIVE
ensuring that Universal Partners adheres CHAIRMAN OF THE BOARD DIRECTOR DIRECTOR
to sound corporate governance principles
Member of the investment committee Chairman of the investment committee Member of the investment committee
and determines our strategic positioning. Nationality: South African Nationality: Belgian Nationality: South African
The board and investment committee
Larry Nestadt has a long and successful global Marc Ooms was general partner of the Neil started his career with Ford Motor
offers a wide range of experience, corporate career. He is a co-founder and Petercam Group, a Benelux investment bank. Company prior to entering the banking
competencies and perspectives. former executive director of Investec Bank Ltd.
Larry has been instrumental in the creation
He was also the managing director of Petercam
Belgium N.V. and chairman of Petercam
industry in 1978. He has extensive commercial
banking experience including retail, corporate
and strategic development of a number of Bank Nederland. He retired from Petercam in and international banking. He specialised in
listed companies including Capital Alliance 2011. Today, Marc is a private equity investor private equity in 1985, when he joined the
Holdings Ltd (Capital Alliance Life – acquired and independent board member. He is also MBO division of Barclays Merchant Bank (which
by Liberty Life; Capital Alliance Bank – now involved in real estate mainly in Germany and subsequently became Firstcorp Capital, the
Brait), Super Group Ltd, HCI Ltd, SIB Holdings Poland. He serves, between others, as a board forerunner of Ethos Private Equity (Pty) Ltd).
Ltd, CorpGro Ltd and Global Capital Ltd. He member of the following companies: Sea-Invest In 1989 Neil co-founded what is today RMB
also served as past chairman on the boards Corporation, Luxemburg (the largest European Corvest, a leading private equity investor in
of these companies. Previously, Larry sat on stevedoring group in bulk and fruit which is also South Africa. Neil was the managing director
the boards of Softline Ltd, JCI Ltd and Abacus active in Africa); BMT NV (gears, transmissions, until his retirement in 2018 and sat on the
Technologies Holdings Ltd. Further he has been aeronautics, moulds for the glass industry); boards of various RMB Corvest investee
a former chairman on a number of non-listed Greenyard NV (world leader in distribution companies, and the boards of the subsidiary
company boards both in South Africa and of fresh, frozen and canned food, listed on companies making up the RMB Corvest Group
abroad including Stenham Ltd (UK) and Prefsure Euronext); Baltisse and Straco, two important of companies. Neil remains on the board of
Life Ltd (Aus). Larry is the current executive Belgian family offices. RMB Corvest as a non-executive director.
chairman of Global Capital (Pty) Ltd and non- Neil was a member of the RMB investment
executive chairman of Blue Label Telecoms Ltd, Marc is a graduate of the VLEKHO Business committee for a number of years up until his
Dis-Chem Pharmacies Ltd, National Airways School, Brussels and lives in Belgium. retirement from RMB Corvest.
Corporation (Pty) Ltd, Morecorp Group (Pty)
Ltd, Melrose Motor Investments (Pty) Ltd and Neil holds a Bachelor of Commerce and CAIB
SellDirect Marketing (Pty) Ltd. He also serves as (SA), Dip SAIM from Port Elizabeth Technikon,
deputy chairman of Cell C Ltd. South Africa.
Larry is a life member of the Young Presidents
Organisation, Lloyds of London (since 1983) and
is an honorary colonel in the South African Air
force.20 OUR BUSINESS AT A GLANCE UNIVERSAL PARTNERS 21
ANNUAL REPORT
2020
ANDREW DUNN (49) PETER GAIN (45) FRANÇOISE CHAN (52) KESAVEN MOOTHOOSAMY (37)
NON-EXECUTIVE DIRECTOR INDEPENDENT NON-EXECUTIVE NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR
DIRECTOR
Member of the investment committee Member of the investment committee Nationality: Mauritian Nationality: Mauritian
Nationality: South African Nationality: South African (Permanently resides
in the United Kingdom) Françoise is an executive director of Kesaven is an executive director of Perigeum
Andrew has over 25 years’ experience in Intercontinental Trust Ltd. With many years of Capital. He was, until June 2016, a senior
all areas of business development and Peter is a seasoned entrepreneur who over the practical experience, Francoise is a seasoned manager in the Capital Market Advisory team of
Private Equity, from establishing and scaling past twenty years has built numerous successful professional and has a deep understanding of a leading management company in Mauritius.
companies to structuring and managing businesses. During his career he has led a the intricacies of the Global Business industry. For the past 15 years, in the Mauritius financial
business investments. Andrew’s career has number of significant corporate transactions She has assisted a number of multinationals, services industry, he has acquired experience
featured highlights such as founding Miltrans, including fund raisings, listings, asset sales, fund managers and high net worth individuals ranging from fund formation and administration,
a Logistics and Supply Chain business which mergers and group restructurings in various in the structuring and the implementation of accounting, Mauritius regulatory matters,
was later sold to Super Group, the successful sectors. These include mining and resources, their affairs in Mauritius. Françoise previously investment structuring, complex transaction
MBO of Premier Foods which was sold to Brait, agriculture and food processing, warehousing held senior positions at the representative advisory to valuation, capital raising and listing
the Manline Group which was merged into and logistics, telecoms and media, dental and of Arthur Andersen in Mauritius as well as in on securities exchanges. He is involved on
Barloworld Logistics and several other Private medical services, financial services and funds the International Banking Division of Barclays various initiatives to enhance the attractiveness
Equity interests spanning Property, Aviation management. Peter is the chairman of Draper Bank Plc. Françoise is a member of both the of the SEM. He is also a board member of
(National Airways Corporation), Dealerships Gain Investments Ltd, and a director of various International Fiscal Association (IFA) and the SEM listed companies and a number of funds
(Melrose Motor Investments) and Security (SSG privately held investment companies around the Society of Trust and Estate Practitioners (STEP) established in Mauritius. He graduated from
Holdings), and was the CEO of the Richmark world. and serves as a director on the board of several the University of Mauritius with a B.Sc. (Hons)
Group from 2012-2018. Global Business companies including listed in Accounting with Information Systems and
Peter holds a Bachelor of Business Science from companies. holds a MBA in Leadership and Innovation.
Andrew cofounded DNI in 2006 where he the University of Cape Town, South Africa. He is also a fellow member of the Association
currently serves as the CEO. Françoise holds a DEA in banking and finance of Chartered Certified Accountants UK
and she holds a Master Degree in Econometrics (FCCA), a member of the Mauritius Institute of
Andrew holds a Bachelor of Commerce degree from the University of Paris 1 Sorbonne, Professional Accountants (MIPA) and Member of
from the University of Cape Town, South Africa. France. She also holds a Magistere d’Economie the Mauritius Institute of Directors (MiOD).
from the University of Paris 1 Sorbonne in
conjunction with ULM et L’Ecole des Hautes
Etudes en Sciences Sociales of Paris, France.Leadership review 24 Message from the chairman 29 Chief executive officer’s report 38 Our investments
24 LEADERSHIP REVIEW UNIVERSAL PARTNERS 25
ANNUAL REPORT
2020
MESSAGE FROM THE CHAIRMAN
"WHILE THE UK IS FACING
CHALLENGING TIMES IN THE
Successfully navigating
SHORT TO MEDIUM TERM, WE
REMAIN POSITIVE ABOUT THE
LONG-TERM FUNDAMENTALS,
turbulent times A SUBSTANTIAL ECONOMY,
LOW UNEMPLOYMENT AND A
HIGHLY SKILLED WORKFORCE"
Dear Stakeholders, record drops. The relaxation of restrictions in June
saw positive signs of recovery, with GDP increasing
This has been an unprecedented year. No business 8.7% on the previous month, however, the UK GDP
could have anticipated that a global health figures do not bode well for the rest of the year.
pandemic (Covid-19) would shut down entire Furthermore, Brexit negotiations are becoming
economies for months at a time. Yet, despite some increasingly compressed. It is still unclear whether
very tough months and a global recession that is a deal will be reached in time and the extent of the
likely to affect economies for some time, Universal impact it will have on the UK economy.
Partners remains on track to deliver attractive growth
in net asset value over the medium- to long-term for While the UK is facing challenging times in the short
our shareholders. to medium term, we remain positive about the
long-term fundamentals, a substantial economy, low
During the year we added another investment to unemployment and a highly skilled workforce. We
our portfolio, TechStream Group, a technology have built up good momentum in this market, which
talent solution business, formed through the merger positions us well for future opportunities. As we have
of three existing businesses. This brings the total iterated previously, Brexit has been factored into all
number of investments in our portfolio to six. our investment decisions and this is something we
have been anticipating and preparing for.
DELIVERING ON OUR INVESTMENT
STRATEGY Universal Partners’ approach to investing means
that we invest in businesses that are resilient, even
Our focus remains to hold high quality growth in the worst of times. Our investee companies have
businesses across Europe, with a particular focus robust, easily understood business models and clear
on the UK. Our mandate also allows for up to competitive advantages, allowing them to remain on
20% of total funds at the time to be invested track even during times of severe economic distress.
outside of Europe. We generally seek a significant They also have a clear path to strong and sustainable
minority shareholding of at least 25% with board profitability combined with a high cash conversion
representation in the businesses we invest in. This ratio, which has proven especially important at this
ensures that we are involved in setting the strategic time. All of our businesses have an experienced
direction of the business to enable it to scale, but management team that demonstrate a strong
also ensures that the management has a vested cultural fit with Universal Partners and our investment
interest in ensuring that the business continues to manager, Argo. This enabled quick, strategic and
perform as planned. necessary decisions to be made, which was needed
when Covid-19 hit at a pace no business could have
Our primary market, the UK, was very hard hit by adequately prepared for.
the Covid-19 pandemic. Economic output shrank
by 20.4% in the second quarter of 2020, the worst OUR PERFORMANCE
quarterly slump since records began in 1955. This
pushed the country, which is heavily reliant on When looking at the performance of our investments
services and household spending, into the deepest over the year, it is important to separate the
recession of any major global economy. Industries pre-Covid period (July 2019 – February 2020) and
most exposed to government lockdown measures, the post-Covid period (March 2020 onwards). The
including services, production and construction, saw outbreak of Covid in the UK resulted in a nationwide26 LEADERSHIP REVIEW UNIVERSAL PARTNERS 27
ANNUAL REPORT
2020
"UNIVERSAL PARTNERS’ APPROACH
TO INVESTING MEANS THAT WE
INVEST IN BUSINESSES THAT ARE
RESILIENT, EVEN IN THE WORST OF
TIMES. OUR INVESTEE COMPANIES
HAVE ROBUST, EASILY UNDERSTOOD
BUSINESS MODELS AND CLEAR
COMPETITIVE ADVANTAGES,
ALLOWING THEM TO REMAIN ON
TRACK EVEN DURING TIMES OF
SEVERE ECONOMIC DISTRESS."
lockdown, which was declared on 23rd March YASA, the world’s leading manufacturer of axial- however is positive, given that there is likely to be and robotic process automation. The company
and, with the exception of SC Lowy (which had flux electric motors, is performing ahead of its substantial corporate balance sheet restructuring invested £7.8 million in the merged TechStream
been impacted by Covid in Hong Kong and business plan, as a result of better than expected ahead, particularly once initial government Group in January 2020. The TechStream Group
Italy), affected all of our investee companies’ sales of standard motors and major engineering support programmes come to an end and lenders was formed following the successful merger of
ability to operate. The effects of this pandemic programmes being undertaken in the automotive are required to actively manage distressed three leading specialist technology talent solution
varied significantly depending on the business sector. Covid-19 did not have a significant impact positions. companies - Xcede, TechStream and Etonwood.
type, with some businesses having to shut on this business, as its main focus is on engineering This has resulted in a global business with
down altogether for a period, while others were development projects, which remained on track JSA, a top 3 UK provider of personal service £100 million in revenues, over 650 technology,
able to shift the majority of their business to and are progressing well, despite remote working companies (PSC) and umbrella payroll services, engineering, and digital consultants on client sites
remote working within a relatively short space regulations. YASA was proud to be selected by was on track to deliver good results this year but and 220 internal employees across nine global
of time. Ferrari as the primary source of hybrid power in suffered two significant setbacks; the Covid-19 offices. TechStream’s revenue is split roughly
their SF90 Stradale hybrid, launched in the second pandemic which impacted its umbrella payroll equally between fees earned from permanent
We have endeavoured to articulate in this half of 2019, although the Ferrari factory closure revenue, and a delay in expected legislative placements and net fee income from providing
report our expectations of the possible impacts due to Covid in the second quarter of 2020 resulted changes (IR35) which resulted in lower PSC niche IT contractors to clients.
of the pandemic on our investee companies. in lower than anticipated motors being shipped. revenue. While Covid-19 caused a sharp drop in
For more detail on each individual investment In addition to some substantial development umbrella revenue during April, JSA management While Covid-19 resulted in an immediate
please see the CEO’s report on p30 to p36 of programmes in the automotive sector working responded quickly to reduce costs, enable staff to reduction in permanent placement revenue for
this report and the ‘Our investments’ section on on Battery Electric and Hybrid Vehicles, YASA is work remotely and continue to offer a seamless the business, the effect on the contractor book
p40 to p51. increasingly involved in a number of initiatives for service to its clients. Umbrella revenue has been has been more muted. The highly experienced
electrification of the aerospace industry. These rising steadily since May and management expect management team responded by significantly
OUR INVESTMENTS research and development initiatives are being to reach pre-Covid levels by the fourth quarter of reducing the monthly cost base of the business
undertaken with a number of new and established 2020, proving the resilient nature of the business. and successfully accessing government support
Dentex, the UK’s second largest private dental industry participants, supported by government Increasing revenue combined with a lower cost measures in the countries in which TechStream
practice group, continued its growth and funding, and we are confident the company will be a base has resulted in improved profitability and operates.
acquisition strategy, growing the number of participant in realising the vision of electric flight. JSA is well positioned to resume its strategy
practices to 73 (up from 62 last year). Lockdown of growing the business organically and by Propelair, a manufacturer of water efficient toilets,
severely impacted this business, with the SC Lowy, the high-yield bond and distressed debt acquisition. remains our smallest and most challenging
complete closure of all private practices for specialist, where we invested as part of a consortium investment. While sales in 2019 increased by
a period of ten weeks resulting in a severe that we led together with Investec Bank, continues JSA has benefitted from HMRC’s permission to a factor of three over the previous year, we
reduction in revenue. However, we have seen a to grow its share of this substantial, underserved defer the payment of VAT and National Insurance have taken a cautious approach regarding
strong recovery since private dental practices market. Its Primary Investment Fund performed (NI) contributions until 31st March 2021. This the valuation of this investment. The new
were able to open again on 8th June. Dental ahead of its benchmark during this financial year arrangement has resulted in the company management team have continued to execute
practices continued to earn capitation fees and continues to attract additional investment. SC enjoying high levels of liquidity and avoiding any their strategy, with an increased number of sales
and NHS revenue throughout the lockdown Lowy also launched a new Strategic Situations Fund covenant breaches with its debt funders. partners and improvement in the sales pipeline.
period. We expect this resilient business to during the period. SC Lowy’s banking platform in In the year under review the company required
restore its historic earnings in the coming South Korea continues to deliver attractive returns TechStream Group, our sixth investment to additional funding, which was provided by two of
months. Dentex is in the process of finalising a on equity and the operation in Italy has completed date, is a specialist global technology talent the other significant shareholders in the business,
£20 million capital raise from existing and new the turnaround envisioned when the platform was recruitment firm specialising in providing contract and was supplemented by the introduction of a
shareholders which will enable Dentex to take acquired in 2018. Although Covid-19 resulted in SC and permanent staff in growing sectors such new shareholder and a successful crowd funding
advantage of the softer market conditions and Lowy experiencing record trading volumes, high as cyber security, digital transformation, data round which raised more than the anticipated
we expect it may be able to resume acquiring levels of market volatility in March 2020 had an analytics, artificial intelligence, renewable energy amount. The business was adversely affected by
practices as early as the fourth quarter of 2020, adverse effect on fund performance. The outlook Covid, being unable to complete on a number of
in line with its long-term business plan.28 LEADERSHIP REVIEW UNIVERSAL PARTNERS 29
ANNUAL REPORT
2020
CHIEF EXECUTIVE OFFICER’S REPORT
"I REMAIN CONFIDENT IN
THAT OUR PORTFOLIO, WHICH
Short-term upsets
HAS PROVEN ITS RESILIENCE
IN EVEN THE MOST ADVERSE
CIRCUMSTANCES, REMAINS ON
TRACK TO REALISE STRONG
CAPITAL APPRECIATION FOR OUR
STAKEHOLDERS OVER THE MEDIUM
but long-term gains
TO LONG-TERM."
large contracts which have been in negotiation for CONCLUSION The year ended 30th June 2020 was an incredibly
some time, and UPL elected not to commit further challenging one, given the Covid-19 pandemic and
capital to this investment. We remain cautious Clear leadership, strong governance and effective the resultant lockdowns across many countries, which
regarding the future performance of Propelair and decision making are vitally important during a crisis impacted all the companies we are invested in, along
maintain the valuation at £1.00. and I would like to thank our executive team, board with their customers and employees.
and investment committee for the role they have
LOOKING AHEAD played and the time they have invested in helping us to I am pleased to report that while all the businesses
navigate through this difficult year. were severely tested, all have prevailed and are
We cannot predict the duration of the pandemic on the road to recovery. I believe this is testament
or its longer-term impact on the global economy. Peter Gain, an independent non-executive director, to our investment approach, which is focused on
We do however expect muted growth in major will not put himself up for re-election at the AGM in seeking opportunities in companies that are able to
economies for some time, particularly as state order to focus on his other commitments. We thank him respond to tough environments thanks to excellent
wage support programmes wind down. for sharing his expertise and experience with the UPL management teams, good cash conversion and a
board during his tenure. A replacement board member clear competitive advantage.
In the short term our focus is on ensuring that is being sought and will be announced in due course.
our existing businesses are firmly on the road to During the financial year we made one new
recovery and, if necessary and appropriate, provide I remain confident that our portfolio, which has proven investment of £7.8 million in TechStream Group,
them with additional funding or supporting them its resilience in even the most adverse circumstances, a company with a global reach, focused on
in raising new facilities, to enable them to realise remains on track to realise strong capital appreciation recruiting niche and scarce talent in a number of
their business plans. In the medium term we expect for our stakeholders over the medium to long-term. key technology fields. This investment was funded
that good investment opportunities will arise in our via a drawdown on the £16.5 million debt facility we
target markets. We recognise that many excellent secured in 2019. A further £2.5 million of this facility
businesses will look for well aligned equity partners will be invested as a follow-on investment in Dentex,
in order to get through this tough period, given our dental healthcare group, with the balance
that access to debt financing may be constrained. available for working capital and for follow-on
Larry Nestadt investments in our existing portfolio.
We have now fully deployed the £72 million Chairman
that we raised in our initial public offering on 8 September 2020 COVID-19 IMPACT
the Stock Exchange of Mauritius (SEM) and
the Alternative Exchange of the Johannesburg Our portfolio companies were operating according
Stock Exchange (AltX) in August 2016. In order to their strategic plans before Covid-19 hit, but the
to invest in the TechStream Group, and consider severe lockdown and related regulations imposed
other opportunities as well as make follow on meant that none of our businesses were able to focus
investments in our existing portfolio, we secured on business as usual during the last quarter of this
a £16.5 million debt facility at favourable rates in reporting period.
December 2019.
The nationwide lockdown in our primary market,
We are considering our capital raising approach the UK, which was declared on 23rd March, affected
and structure going forward in order to be able all our investee companies’ ability to operate. The
to continue building on the foundation we have effects of this varied significantly depending on
established over the last four years. the business type, with some businesses having to
shutdown altogether, while others were able to adjust
their business to cope with new regulations within a
relatively short space of time.30 LEADERSHIP REVIEW UNIVERSAL PARTNERS 31
ANNUAL REPORT
2020
"ONCE THE EXTENT OF THE
COVID PANDEMIC WAS CLEAR,
OUR BUSINESSES IMMEDIATELY
IMPLEMENTED APPROPRIATE
COST MANAGEMENT
STRATEGIES."
Government support in the UK, in the form of the We also assisted our portfolio companies who had schemes and supporting their partner dental the completion of the £20m equity round and a
Coronavirus Job Retention Scheme, significantly debt facilities to engage with their funders in a practitioners and staff, who have expressed their return to normal trading, the business can access
helped businesses during this period. Under this constructive way, given that none of the facilities in appreciation of the benefits of being part of a its committed acquisition facility to partly fund
scheme, which ran from March 2020 until August place had envisaged a complete economic lockdown substantial organisation during this difficult period. the acquisition of further dental practices. Dentex
2020, companies could furlough employees when they were entered into. is therefore well placed to expand its network of
whilst keeping them on the payroll via the UK Practices were allowed to reopen on 8th June 2020 high quality, private focused dental practices and
Government subsidy of 80% of furloughed staff Our immediate focus was on the safety and wellbeing once they had implemented additional infection integrate these new acquisitions into the current
wages, up to a maximum of £2,500 per person per of the customers and staff in our portfolio companies. prevention and control procedures. Private practices estate.
month. Once this was secured, we could then commence have rebounded strongly since reopening and by
engagement on restoring the business plans of August 2020 were trading at 80% to 90% of pre- YASA
Once the extent of the Covid pandemic was our portfolio companies. Not only do we want to Covid 19 levels. We expect further improvements in
clear, our businesses immediately implemented ensure that each business is back on a sustainable trading as the dentists adapt to the new operating YASA has developed and commercialised a
appropriate cost management strategies. They growth path and has the resources required to environment, and new ways of working are patented axial flux technology enabling it to
also quickly ascertained whether government deliver on their business plans, we also recognise implemented. For instance, Dentex has installed air manufacture a range of electric motors with superior
support available allowed them to benefit from that the customers, management and staff of these filtration systems and provided practice staff with performance characteristics. It has further developed
any relief offered. In some instances staff were companies are the foundation of their success. suitable PPE, to facilitate the return to full capacity an innovative inverter/controller technology which
placed on the furlough scheme described above, in a safe and secure manner. will allow it to offer integrated motor and inverter
however in other instances the businesses were solutions in addition to stand alone motors and
able to reconfigure their operations (e.g. to remote OUR INVESTMENTS When it became clear in February 2020 that Covid inverters.
working) and continue servicing customers. The 19 presented a risk to the UK, Dentex suspended
impact varied by the nature of the business. Dentex all acquisitions in the pipeline in order to focus In the second half of 2019 Ferrari launched the
Furlough was a critical part of retaining employees on the existing estate of practices. The Dentex new SF90 Stradale hybrid supercar. It is the most
in Dentex, given that all but a few dental practices Dentex concluded the acquisition of a further 14 management team and shareholders believe powerful road car ever built by Ferrari and has a
in the UK were shut down for 10 weeks. Other dental practices between July 2019 and February there is now an opportunity to acquire high quality hybrid powertrain consisting of a Ferrari V8 internal
businesses such as YASA and JSA were able to 2020 and is now the second largest, and one of the practices at attractive valuations and there is an combustion engine mated to a custom designed
continue operating with few, if any, staff placed on fastest growing, private focused dental corporates attractive and large pipeline of potential acquisition YASA motor, which provides a high-power output
furlough. in the UK with 73 practices. During the year, Dentex targets. Dentex is now raising £20 million of new whilst being lightweight. The YASA solution has
raised £25 million equity to partly fund its buy and equity to resume acquisition activity as soon a small profile and is robust, given it is placed
Given the speed at which the Covid-19 pandemic build strategy, with UPL investing a further £9 million. as trading returns to pre-Covid 19 levels. UPL’s off the crankshaft. It passed all tests during the
unfolded it was impossible for any business to be In addition, Dentex secured a £67 million committed investment committee has approved an investment development process, demonstrating it could
adequately prepared. On behalf of UPL, the Argo debt facility in December 2019. At 30th June 2020, of £2.5 million as part of this raise. Heads of Terms reliably withstand all forces it was subjected to,
team held regular meetings with the boards and the business had £35 million undrawn in its debt for the full £20 million commitment have been whilst continuing to provide the desired power.
management teams of all our portfolio companies, facility to fund future acquisitions. signed with new and existing Dentex shareholders. YASA is understandably proud of its association
and in turn presented information regularly back As a result of Covid, the agreed price for this with the SF90 Stradale, the confidence placed in its
to the UPL investment committee and board. Following the UK government enforced lockdown, funding round is lower than the current carrying technology by Ferrari, and its demonstrated ability
The team were able to learn and share relevant the Chief Dental Officer instructed all dental value, hence the value of UPL’s investment in Dentex to pass a thorough and rigorous evaluation process.
insights across the portfolio about topics such as practices to close during the week commencing has been written down by 21%.
the wage support schemes available and issues 23rd March 2020. As a result, the business earned
such as remote working and hygiene protocols. no private dental revenue during April and May Constructive discussions have been held with
This sharing of knowledge was beneficial to 2020, however it continued to earn revenue from its Dentex’s lenders, confirming their belief in the
management teams across the portfolio and contracts with the National Health Service (NHS) and Dentex business model and their willingness to
consequently they were able to adapt their from private capitation schemes. support the company through this period. Following
businesses effectively in a short period of time. Dentex management have done an exceptional
job in cutting costs, accessing government support32 LEADERSHIP REVIEW UNIVERSAL PARTNERS 33
ANNUAL REPORT
2020
The YASA standard motor continues to demonstrate "OUR IMMEDIATE FOCUS during the year under review, anchored by Oxford During the period SC Lowy raised a new Strategic
its ability to deliver reliable electric motive force WAS ON THE SAFETY AND Sciences Innovation (OSI), a new shareholder on Situations (SI) fund of US$105 million, ending the
in a range of applications - from a project to WELLBEING OF THE CUSTOMERS the register. An Oxford based investor, OSI has year with over U$1 billion funds under management
electrify railway rolling stock in the UK, to delivering AND STAFF IN OUR PORTFOLIO a mandate to invest in technology developed by (FUM). As a result of the increase in FUM, SC
impressive power in hybrid Koenigsegg super cars. COMPANIES. ONCE THIS WAS researchers at Oxford University. UPL invested £3 Lowy passed an important milestone whereby
YASA is engaged in a number of confidential SECURED, WE COULD THEN million in the round, participating pari passu with the management fees charged are sufficient to cover
automotive development programmes with COMMENCE ENGAGEMENT other existing investors. the running costs of the non-banking business. The
manufacturers of sporting, premium and luxury ON RESTORING THE BUSINESS SI fund mandate differs from the PI fund in that it is
motorcars. These programmes cover not only Hybrid, PLANS OF OUR PORTFOLIO YASA demonstrated great resilience during the able to hold fewer and more concentrated positions.
but also pure Electric vehicle applications, where the COMPANIES." Covid lockdown. All office based settled into remote These positions are held at cost until they are
combination of YASA’s high power output relative to working within a short period, and the factory realised, resulting in a deferral of performance fees.
weight combined with its excellent energy efficiency, was initially closed for three weeks to allow for To date the SI fund has achieved an IRR on closed
provide substantial range benefits compared to re-configuring to implement the UK government’s positions in excess of 20%
other automotive and aerospace technologies. social distancing and revised risk management
YASA’s proven flexibility in packaging its high-power, requirements. Thereafter factory staff returned SC Lowy acquired Credito di Romagna, an Italian
lightweight solutions further differentiates it from to work, provided they were not in a vulnerable Bank based in the region of Emilia-Romagna, in
alternatives. group, or sharing a household with vulnerable 2018. The bank had been under scrutiny from the
members. The YASA board met remotely on a Bank of Italy prior to acquisition, and a turnaround
During the period YASA launched its first series weekly basis with management to review and was required. As part of the turnaround, the bank
of inverters to market, having spent a number of approve contingency plans, and all delivery and was re-branded as Solution Bank during the period
years in the development phase. Like its electric development commitments made to customers under review, and has now shown increased net
motors, YASA inverters offer high performance in a were met. Certain customers closed their factories, interest margin and operating profits in each of the
lightweight package, and YASA is now able to offer reducing demand for YASA motors during the last six quarters.
integrated motor / inverter solutions in addition to height of the Covid wave in Europe. Once these
stand alone motors and inverters. YASA is confident customers re-opened their factories, YASA agreed During the period under review Solution Bank
that its inverter capabilities present an attractive motor delivery schedules, which have been met applied for, and received, a passport from the Bank
stand-alone solution to the market and will result in full. Development programmes with customers of Italy to raise deposits and acquire assets across
in increased opportunities for its electric motor continued unaffected. the Eurozone. This is in line with the business plan at
solutions, not only in the automotive sector, but also the time of the acquisition, and allows Solution Bank
in the aerospace sector. SC Lowy further flexibility in funding and investing.
In terms of the business plan agreed with the Bank of
YASA continues to work with a number of participants SC Lowy is a leading market maker in distressed Italy, SC Lowy injected a further €10m of equity into
in the aerospace sector on achieving the vision of and high yield debt, particularly in Asian and Middle Solution Bank in March 2020. As a result of the relief
electric powered flight. A number of development Eastern loans and bonds. put in place by the Bank of Italy due to Covid 19, SC
programmes are ongoing and the UK government is Lowy does not expect to have to inject any further
supporting the electrification of flight via a number The SC Lowy Primary Investment (PI) Fund’s equity into Solution Bank during 2020. SC Lowy and
of grant programmes. YASA is engaging with the performance for the period to date was ahead Solution bank believe that they are well placed to
relevant parties in this regard. of its benchmark. Having started strongly in assist Italian businesses to restructure post Covid-19,
January and February, market dislocation in March given the core expertise of managing distressed
At the time that UPL invested, the investment case resulted material increases in credit spreads and debt.
was underpinned by a benchmarking of YASA’s thus substantial mark-to-market losses. Fund
technology against alternatives, which confirmed performance normalised in April and May, with a The injection of €10 million made by SC Lowy into
that YASA has world leading solutions. Post UPL’s strong performance in June resulting in most of the Solution Bank was supported by an equity raise of
initial investment in 2017, YASA has continued to adverse performance being clawed back.
successfully deliver its business plan and successfully
completed a further equity raise of £18.5 million34 LEADERSHIP REVIEW UNIVERSAL PARTNERS 35
ANNUAL REPORT
2020
US$25 million undertaken by SC Lowy, which was approximately 2 800 umbrella clients and 300 PSC growth in profitability in the next financial year. between employers and highly skilled staff. The
led by TempleWater LLP, a new investor on the share clients. JSA’s performance was recognised in the 16th company has over 650 technology, engineering, and
register, and included a number of existing investors. Sunday Times PwC Top Track 250 survey, which digital consultants on client sites and 220 internal
The equity round was priced on the same terms as Covid-19 lockdown regulations had a significant was published in September 2020. Top Track 250 employees across 9 global offices. TechStream’s
UPL entered SC Lowy in December 2017. impact on the umbrella payroll services side of the ranks Britain’s mid-market private companies by revenue is roughly split equally between fees earned
business given the severe impact on contractors, sales, with minimum required growth of 5% in from permanent placements and net fee income from
Choeun Savings Bank, SC Lowy’s South Korean agency and temporary workers. This resulted profit or sales in the last year. JSA was ranked providing niche IT contractors to clients.
banking operation, continues to trade profitably and in a substantial drop in revenue, particularly in 97th.
deliver an attractive return on equity. This is despite April 2020. However, the PSC side of the business The management team have deep experience in the
management’s caution in extending new credit to was largely unaffected, providing a strong base JSA has completed six value enhancing specialist recruitment industry and have managed
customers in certain segments, due to available load of revenue. Management’s quick response acquisitions since UPL invested in the company through a number of cycles. Open vacancies in many
market pricing not fully reflecting their view of the to the disruption in operations was impressive; in May 2018, almost doubling its annualised of the fields they recruit for reduced substantially as a
risks inherent in these sectors. remote working was enabled immediately while EBITDA as a result. These acquisitions have been result of Covid-related lockdowns and management
maintaining the security and integrity of client financed from internally generated cashflows and responded swiftly by significantly reducing the
SC Lowy’s offices in Hong Kong, Seoul, Milan, data. JSA also made a meaningful reduction available debt facilities, requiring no additional monthly cost base of the business, while successfully
Bologna, London and New York were all impacted in monthly expenses by taking advantage of equity from shareholders. Substantial equity accessing the available government support
to varying degrees by the Covid pandemic, however Government support. HMRC further permitted value has been created in the process and this measures. While profitability was adversely impacted
all staff were able to continue fully working remotely. the deferral of a substantial amount of VAT and NI investment has been revalued by £6.37million by Covid-19, there has been a steady increase in
SC Lowy traded a record volume of distressed contributions until 31 March 2021, which put JSA as part of the revaluation exercise performed at revenue post the easing of lockdown restrictions due
debt and high yield loans during March and April in a strong liquidity position and ensured that no year end. to resilient demand for skills in the niches in which
2020. Despite this, management expects that the debt covenants were breached. it specialises. Although UPL remains confident that
Covid-19 related market volatility will adversely TechStream Group the company will achieve the investment business
impact performance and performance fees during Legislative changes relating to eligibility of flexible case, it has written down the value of its investment
2020, particularly in countries where central bank workers via Personal Service Companies (PSC) in UPL invested £7.8 million in TechStream Group in TechStream Group by GBP 957,518 due to the
support to banks shielded them from having to the UK (IR35), expected to be fully implemented in January 2020 via a drawdown of the Rand deferral of profits as a consequence of the Covid-19
manage their loan portfolios aggressively. It remains in April 2020, were delayed by a year as a result Merchant Bank International (RMB) debt facility. impact. Investec Bank Plc, the bank who have
SC Lowy management’s view that banks will have to of Covid. The impending new rules caused Our investment, together with a financing provided the initial debt facility to TechStream Group,
restructure their balance sheets once government substantial uncertainty amongst flexible workers package provided to TechStream Group remain supportive of the company.
support schemes are eased, and they remain and their clients in the first quarter of 2020, by Investec Bank Plc, funded the merger of
confident that they will be able to assist banks at this resulting in a structural change in the market and TechStream, Xcede and Etonwood, creating a Propelair
time. This normalisation should benefit the company a permanent reduction in JSA’s PSC clients. The global business with revenue of £100 million.
during 2021. company expects that in terms of the planned UPL acquired a significant minority stake in The Propelair positive pressure flushing toilet offers
changes a significant number of flexible working the TechStream Group alongside existing multiple benefits to property owners, occupiers and
JSA contractors will in future need to provide their shareholders and the management of the three end-users, and is even more relevant at the present
services via an umbrella payroll provider, which businesses. time as a result of its proven ability to reduce the
JSA is a provider of personal service companies will benefit JSA’s business as it is well placed to aerosols produced by conventional flushing toilets.
(PSC) and umbrella payroll services to contractors provide compliant solutions to both its existing TechStream focuses on recruiting permanent These aerosols spread bacteria and viruses and
and temporary workers in the UK. Its strategy of customers and new clients. and contract staff for clients’ specific new Propelair has demonstrated that its technology
consolidating smaller, complementary businesses high technology niches such as artificial substantially reduces these. In addition, the Propelair
in the sector continues to be highly successful and Although the IR35 and Covid setbacks have intelligence, cyber security, data analytics/ technology enhances hygiene and uses a fraction of
during the period JSA completed the acquisition affected JSA’s profits for the year to September science, digital transformation, high-tech the water used in conventional units. Despite these
and integration of two more companies: Mango Pay 2020, the company is already experiencing a solid engineering, renewable energy and robotic two key features that make the product compelling,
and Liberty Bishop. Through these acquisitions, JSA, recovery in revenue, and this, together with the process automation. Global demand for these the company continues to experience a longer than
with its scalable, highly efficient platform, has added lower cost base, is expected to result in robust skills significantly exceeds supply and hence expected sales cycle. Although sales over the period
there is room for a specialist intermediaryYou can also read
