Growth comes from nurturing successful partnerships - Universal Partners
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ANNUAL REPORT 2019 Growth comes from nurturing successful partnerships
Contents 04 Our business at a glance 06 About us 08 Our structure 10 Share analysis 12 Our investment strategy 14 Our executive team 16 Our board and investment committee 20 Leadership review 22 Message from the chairman 25 Chief executive officer’s report 30 Our investments 42 Corporate governance 44 How we are governed 47 Our board 52 Board committees 54 Managing risk 56 Directors’ share interests 57 Directors’ remuneration 58 Sustainability report 59 Other relevant information 60 Annual financial statements 62 Commentary of the directors 63 Statement of compliance 64 Certificate from the secretary 65 Independent auditors’ report 68 Statement of financial position 69 Statement of profit or loss and other comprehensive income 70 Statement of changes in equity 71 Statement of cash flows 72 Notes to the financial statements 94 Shareholder information 96 Corporate diary 97 Corporate information
2 ABOUT THIS REPORT UNIVERSAL PARTNERS 3
ANNUAL REPORT
2019
About this report
This is the third integrated annual report of Universal Partners FRAMEWORK AND ASSURANCE its forward-looking statements, whether as a
Limited (“Universal Partners” or “the Company”).
result of new information, future information
The company has a primary listing on the or otherwise. This forward-looking information
Stock Exchange of Mauritius (SEM) and a has not been reviewed or reported on by the
secondary listing on the alternative board of external auditors.
It provides investors with an overview of our investment strategy, the Johannesburg Stock Exchange (JSE AltX).
performance over the reporting period and our governance The information included in this integrated APPROVAL OF THE INTEGRATED
report has been provided in accordance with REPORT
framework. This report seeks to demonstrate that Universal International Financial Reporting Standards
Partners has the capacity to deliver on its investment strategy (IFRS), the Mauritian Companies Act, 2001, the
Mauritian Securities Act, 2005, SEM Listing
The board of directors of Universal Partners
acknowledges its responsibility for ensuring
and in doing so, create and deliver value over the medium- and Rules, JSE Listings Requirements, Integrated the integrity of this integrated report. The
Reporting Framework and the Code of board believes that this report presents
long-term for our shareholders. Corporate Governance for Mauritius. a balanced and fair account of Universal
Partners’ performance for the year ending
FORWARD-LOOKING STATEMENTS 30 June 2019. On the recommendation of the
Audit and Risk committee, the board approved
This integrated report contains certain the 2019 integrated report for publication on
forward-looking statements with respect to 11 October 2019.
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 Chief executive officer
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 or alter
Our business at a glance 06 About us 08 Our structure 10 Share analysis 12 Our investment strategy 14 Our executive team 16 Our board and investment committee
6 OUR BUSINESS AT A GLANCE UNIVERSAL PARTNERS 7
ANNUAL REPORT
2019
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. Twenty per relationships we build and the trust that
underpins them.
cent of the company’s funds may be allocated to other regions. OUR VISION
Integrity
Our experienced leadership team is recognised for its strong Our vision is to create and manage a portfolio We know that success doesn’t happen over
track record of managing and growing successful businesses. of investments that deliver value for our night. What sets us apart is the integrity
shareholders. 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
We are patient investors with a permanent capital structure and
investment decision.
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.
8 OUR BUSINESS AT A GLANCE UNIVERSAL PARTNERS 9
ANNUAL REPORT
2019
Our structure
Universal Partners was established Universal Partners is listed on the Stock
in Mauritius on 25 April 2016
Exchange of Mauritius (SEM) with a secondary
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
Commission. Managers (Argo) under the leadership of
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
a management fee for its services as well as a
carry fee on exit, should the investment beat
the hurdle rate, calculated from when the
investment is made by the Company. A total
of 80% of this carry fee is payable in cash and
20% is payable in Universal Partners equity.
10 OUR BUSINESS AT A GLANCE UNIVERSAL PARTNERS 11
ANNUAL REPORT
2019
Share analysis
SHAREHOLDER SPREAD
Our shareholder base is maturing and consolidating, with 99% of shares being
held by shareholders who hold more than 100 000 shares each. Over the period RANGE NUMBER OF
SHAREHOLDERS
% OF HOLDERS NUMBER OF SHARES % OF SHARES
our shareholder base has consolidated, down from over 200 in 2018 to 114 in 1 - 999 24 21,1% 8 417 0,0%
2019. The directors and their associates directly and indirectly own 20.8% of the 1000 - 9999 26 22,8% 98 481 0,1%
total issued share capital of the company as at 30 June 2019. This has increased
from 15.4% as at 30 June 2018, given their expectation that the portfolio is
10000 - 99999 24 21,1% 785 842 1,1%
delivering value in accordance with our vision and purpose. 100000 - more 40 35,0% 71 457 391 98,8%
Total 114 100,0% 72 350 131 100,0%
2
90% 10% 15% 85% 77% 23%
12 OUR BUSINESS AT A GLANCE UNIVERSAL PARTNERS 13
ANNUAL REPORT
2019
Our investment
strategy
Our investment strategy is to invest in high- We are focused on acquiring and building We seek to invest in companies that
potential, growth businesses in our primary successful businesses in diverse industries demonstrate the following important
where we are able to add value. The types of attributes:
markets, the United Kingdom and Europe. businesses we seek are typically those that
We also assess opportunities outside of the demonstrate an advantage over competitors,
such as an enhanced customer experience,
−− A robust, easily understood business model
−− Clear competitive advantages
United Kingdom and Europe. The mandate a consolidation platform, a lower cost base −− A clear path to strong and sustainable
and technological and innovation leadership profitability, combined with a high cash
allows the Company to invest up to 20% of its (demonstrated by registered and protected IP). conversion ratio
funds (at the time of the investment) in other −− Experienced management, who
We take an active shareholding in the demonstrate a strong cultural fit with
regions. We have identified numerous viable businesses we invest in, in order to enable Universal Partners and our investment
opportunities outside of the United Kingdom meaningful participation in the formulation
and monitoring of the business strategy.
manager
−− Long-term growth potential
and Europe and are considering obtaining We offer permanent capital and target
shareholder approval to widen the mandate
investments of up to 49%, with a board seat.
We will also invest where we are part of a
so that we are able to capitalise on these consortium on the condition that we have
adequate minority protections and have a
opportunities. board seat. As a broad guideline, we look
for investments that require an initial equity
contribution of between £8 million and
£20 million.
14 OUR BUSINESS AT A GLANCE UNIVERSAL PARTNERS 15
ANNUAL REPORT
2019
Our executive team
We are seasoned investment specialists, PIERRE JOUBERT (54) DAVID VINOKUR (40) ANDREW BIRRELL (50)
CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER EXECUTIVE DIRECTOR
with a track record of successfully
growing businesses and delivering Nationality: South African Nationality: South African Nationality: British/South African
(permanently resides in Mauritius)
shareholder value. As entrepreneurs, David is the CFO of Universal Partners Limited. Andrew has 30 years’ experience in various
senior executives and business owners, Pierre is the CEO of Universal Partners. Prior He is also the CEO of the Global Capital executive and non-executive roles, across
to joining Universal Partners, he was the chief Group. David has more than 15 years of the life insurance, general insurance, health
we are adept at helping the businesses investment officer of the Richmark Group of private equity experience. During his career, insurance, stock broking, asset management,
we partner with deliver sustainable companies, which he joined in November 2015.
Previously he spent 13 years at Rand Merchant
he has been instrumental in originating,
structuring, concluding and exiting private
and retail online banking industries, in South
Africa, the UK, Scandinavia, Canada, Ireland
growth. Our strong global investor Bank (“RMB”) fulfilling various roles including equity transactions in a variety of industries and and Australia. His previous executive role
senior transactor in the Corporate Finance countries. He represents Universal Partners and was as CFO of Guardian Financial Services, a
network enables us to successfully division, head of the Equities and co-head Global Capital on the board of the underlying successful UK life insurance consolidator that
invest in high-growth businesses, and of the Global Markets divisions. Pierre is a companies both locally and offshore, and was sold to Swiss Re in early January 2016. Prior
member of the RMB investment committee, a assists with the strategic management of the roles include Group Chief Actuary and Group
our ethos means that we only seek to position he has held for 17 years. He is also a investments. After completing his articles at CRO of Old Mutual plc, CRO of Old Mutual
partner with organisations where we member of the Ashburton Private Equity Fund
1 investment committee and a non-executive
PricewaterhouseCoopers, David was certified
as a chartered accountant and became a
South Africa Ltd, COO and CFO of Investec
Securities Ltd and CFO of Capital Alliance
believe we can add strategic value. director of Homechoice International PLC. member of South African Institute of Chartered Holdings Ltd and Capital Alliance Life Ltd.
Previously, Pierre held various executive Accountants. Following this David joined Global He serves as an independent non-executive
positions at Connection Group Holdings Ltd Capital in February 2004; his portfolio consists director on the Boards of Sanlam Limited,
including that of CEO of Connection Group for of a diverse range of private companies in a Sanlam Life Limited and Sun Life of Canada
four years, leading the successful turnaround of variety of industries. UK. He has been appointed by the company
the business that culminated in the group being as as a non-executive directors on the Boards
bought by JD Group Ltd. In his early career, David holds a Bachelor of Commerce degree of YASA Limited and JSA Services Limited, and
Pierre worked for various companies in the and Bachelor of Accounting degree from the as an alternate director of SC Lowy Partners.
Reunert Ltd group after completing his articles University of the Witwatersrand (South Africa), Andrew is a Fellow of the Institute and Faculty
with Deloitte. and is a Chartered Accountant (South Africa). of Actuaries, United Kingdom and Actuarial
Society of South Africa and is also a Chartered
Pierre holds a Bachelor of Commerce degree Enterprise Risk Actuary (CERA).
from the University of Cape Town, and is a
Chartered Accountant (South Africa). Andrew holds a Bachelor of Business Science
(Hons) (Actuarial) from the University of Cape
Town, South Africa.
16 OUR BUSINESS AT A GLANCE UNIVERSAL PARTNERS 17
ANNUAL REPORT
2019
Our board
and investment
committee
Our board of directors is responsible for LARRY NESTADT (69) MARC OOMS (68) NEIL PAGE (64)
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
Nationality: South African Chairman of the investment committee Member of the investment committee
and determines our strategic positioning. Nationality: Belgian Nationality: South African
The board and investment committee Larry Nestadt has a long and successful global
corporate career. He is a co-founder and Marc Ooms was general partner of the Neil started his career with Ford Motor
offers a wide range of experience, former executive director of Investec Bank Ltd. Petercam Group, a Benelux investment bank. Company prior to entering the banking
competencies and perspectives. Larry has been instrumental in the creation
and strategic development of a number of
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
listed companies including Capital Alliance Bank Nederland. He retired from Petercam in and international banking. He specialised in
Holdings Ltd (Capital Alliance Life – acquired 2011. Today, Marc is a private equity investor private equity in 1985, when he joined the
by Liberty Life; Capital Alliance Bank – now and independent board member. He is also MBO division of Barclays Merchant Bank (which
Brait), Super Group Ltd, HCI Ltd, SIB Holdings involved in real estate mainly in Germany and subsequently became Firstcorp Capital, the
Ltd, CorpGro Ltd and Global Capital Ltd. He Poland. He serves, between others, as a board forerunner of Ethos Private Equity (Pty) Ltd).
also served as past chairman on the boards member of the following companies: Sea-Invest In 1989 Neil co-founded what is today RMB
of these companies. Previously, Larry sat Corporation, Luxemburg (the largest European Corvest, a leading private equity investor in
on the boards of Softline Ltd, JCI Ltd and stevedoring group in bulk and fruit which is also South Africa. Neil was the managing director
Abacus Technologies Holdings Ltd. Further active in Africa); BMT International NV (gears, until his retirement in 2018 and sat on the
he has been a former chairman on a number transmissions, aeronautics, moulds for the glass boards of various RMB Corvest investee
of non-listed company boards both in South industry); Greenyard Foods NV (world leader in companies, and the boards of the subsidiary
Africa and abroad including Stenham Ltd distribution of fresh, frozen and canned food, companies making up the RMB Corvest Group
(UK) and Prefsure Life Ltd (Aus). Larry is the listed on Euronext); Baltisse and Straco, both of Companies. Neil remains on the board
current executive chairman of Global Capital important Belgian family controlled groups in of RMB Corvest as a non-executive director.
(Pty) Ltd and non-executive chairman of Blue private equity and real estate. Neil was a member of the RMB investment
Label Telecoms Ltd, Dis-Chem Pharmacies committee for a number of years up until his
Ltd, National Airways Corporation (Pty) Ltd, Marc is a graduate of the VLEKHO Business retirement from RMB Corvest.
Morecorp Group (Pty) Ltd, Melrose Motor School, Brussels.
Investments (Pty) Ltd and SellDirect Marketing Neil holds a Bachelor of Commerce and CAIB
(Pty) Ltd. He also serves as deputy chairman of (SA), Dip SAIM from Port Elizabeth Technikon,
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.18 OUR BUSINESS AT A GLANCE UNIVERSAL PARTNERS 19
ANNUAL REPORT
2019
ANDREW DUNN (48) PETER GAIN (44) FRANÇOISE CHAN (51) KESAVEN MOOTHOOSAMY (36)
NON-EXECUTIVE DIRECTOR INDEPENDENT NON-EXECUTIVE NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR
DIRECTOR
Member of the investment committee Nationality: Mauritian Nationality: Mauritian
Nationality: South African Member of the investment committee
Nationality: United Kingdom resident Françoise is an executive director of Kesaven is an executive director of Perigeum
Andrew has over 25 years’ experience in Intercontinental Trust Ltd. Capital. He was, until June 2016, a senior
all areas of business development and Peter is a seasoned entrepreneur who over the manager in the Capital Market Advisory team of
Private Equity, from establishing and scaling past twenty years has built numerous successful With many years of practical experience, a leading management company in Mauritius.
companies to structuring and managing businesses. During his career he has led a Francoise is a seasoned professional and has For the past 14 years, in the Mauritius financial
business investments. Andrew’s career has number of significant corporate transactions a deep understanding of the intricacies of the services industry, he has acquired experience
featured highlights such as founding Miltrans, including fund raisings, listings, asset sales, Global Business industry. She has assisted a ranging from fund formation and administration,
a Logistics and Supply Chain business which mergers and group restructurings in various number of multinationals, fund managers and accounting, Mauritius regulatory matters,
was later sold to Super Group, the successful sectors. These include mining and resources, high net worth individuals in the structuring and investment structuring, transaction advisory to
MBO of Premier Foods which was sold to Brait, agriculture and food processing, warehousing the implementation of their affairs in Mauritius. valuation, capital raising and listing on securities
the Manline Group which was merged into and logistics, telecoms and media, dental and exchanges. He is actively involved on various
Barloworld Logistics and several other Private medical services, financial services and funds Françoise previously held senior positions at the initiatives to enhance the attractiveness of the
Equity interests spanning Property, Aviation management. Peter is the chairman of Draper representative of Arthur Andersen in Mauritius SEM. He is also a board member of SEM listed
(National Airways Corporation), Dealerships Gain Investments Ltd, and a director of various as well as in the International Banking Division companies and a number of funds established
(Melrose Motor Investments) and Security (SSG privately held investment companies around the of Barclays Bank Plc. Françoise is a member of in Mauritius. He graduated from the University
Holdings), and was the CEO of the Richmark world. both the International Fiscal Association (IFA) of Mauritius with a B.Sc. (Hons) in Accounting
Group from 2012-2018. and the Society of Trust and Estate Practitioners with Information Systems and holds a MBA in
Peter holds a Bachelor of Business Science from (STEP) and serves as a director on the board of Leadership and Innovation. He is also a fellow
Andrew cofounded DNI in 2006 where he the University of Cape Town, South Africa. several Global Business companies including member of the Association Of Chartered
currently serves as the CEO. Mainland Real Estate Limited. Certified Accountants UK (FCCA), a member
of the Mauritius Institute of Professional
Andrew holds a Bachelor of Commerce degree Françoise holds a DEA in banking and finance Accountants (MIPA) and Member of the
from the University of Cape Town, South Africa. and she holds a Master Degree in Econometrics Mauritius Institute of Directors (MiOD).
from the University of Paris 1 Sorbonne,
France. She also holds a Magistere d’Economie
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 22 Message from the chairman 25 Chief executive officer’s report 30 Our investments
22 LEADERSHIP REVIEW UNIVERSAL PARTNERS 23
ANNUAL REPORT
2019
MESSAGE FROM THE CHAIRMAN
Delivering “OVER THE MEDIUM- TO LONG-TERM,
value for our THE OUTLOOK FOR THE UK ECONOMY
REMAINS POSITIVE, PARTICULARLY
shareholders
FOR THE SECTORS THAT WE ARE
INVESTED IN.”
Over the medium- to long-term, the outlook for workers in the UK, has proven to be well
the UK economy remains positive, particularly founded. The trend towards flexible working
for the sectors that we are invested in. in the UK continues to drive demand for JSA’s
services and new regulation of this sector has
We play an active strategic role with board made JSA’s offering increasingly attractive,
representation in the businesses we invest in. given JSA’s compliance with the UK’s flexible
We ensure that we have a cultural fit and are working regulatory and tax regime. As a result
aligned with management who either have a of increasing regulation, the sector is ripe for
vested interest in the business or are adequately consolidation and during the year JSA acquired
incentivised. The companies we have invested three smaller companies that offer the same
in acknowledge our partnership approach and services. UPL supported JSA in this endeavour
attest to the value we bring, recognising us as by providing bridging finance and assisted
supportive and constructive shareholders. the company to secure a debt facility to fund
acquisitions.
OUR INVESTMENTS
Electric motor manufacturer, YASA, in which
During the reporting year we continued to we have a significant minority shareholding,
focus on the five investments we have made continues to build its reputation in the market.
since founding UPL in 2016. Our four largest A YASA motor provides the majority of hybrid
investments, Dentex, JSA, YASA and SC Lowy power in the Ferrari SF90 Stradale, launched
are all at, or ahead of, where we expected them in June 2019, which has been an excellent
to be at this point. validation for the product.
Dear Stakeholders, DELIVERING ON OUR INVESTMENT
STRATEGY Our investment in Dentex, which has grown Subsequent to the year end, UPL has invested
As Universal Partners Limited, “UPL” or to be the second largest private UK dental a further £3 million in YASA, as part of an
the “Company”, enters into its third year, I Our strategy remains unchanged. We seek practice group, continues to perform beyond additional £18.5 million capital raise led by a
believe that we are well on track to deliver the to hold investments in high-quality growth expectations. As at the date of this report, the new shareholder, Oxford Scientific Investments
attractive growth in net asset value over the businesses across Europe, with a particular focus number of dental practices owned by Dentex (OSI), a reputable private equity company with
medium- to long-term that we proposed to on the United Kingdom. Our mandate also has grown from 3 practices when we first a high profile shareholder base that backs
prospective shareholders at the time of our allows for up to twenty per cent of total funds at invested to 62 and its acquisition pipeline looks technology investments.
listing in August 2016. the time to be invested outside of this region. strong. This is proof of the attractiveness of its
offering, which is characterised by a unique SC Lowy, the high-yield bond and distressed
To date, we have made five investments in Despite Brexit uncertainty, the United Kingdom co-ownership model. During the year, Dentex debt specialist, where we invested as part of a
businesses that meet our investment criteria remains a very attractive market given its undertook a further capital raise in order to fund consortium that we led together with Investec
and we continue to build a pipeline of new substantial economy, low unemployment rates its continued expansion which UPL participated Bank, is a leading market maker in this space.
investments. No new investments were made and highly skilled workforce. Furthermore, we in, investing a further £4.98 million. SC Lowy owns Choeun Savings Bank in South
during the reporting year, but we did deploy have a permanent capital structure which means Korea and Solution Bank in Italy (previously
additional capital into existing investments we are not bound by exit timeframes, allowing Our decision last year to invest in JSA, a Credito di Romagna). While it has been a
to enable them to deliver on their growth us to exit investments when the time is right, professional employment organisation that difficult period for credit-based funds like SC
objectives. for both the business and our shareholders. provides limited company umbrella and Lowy, given that interest rates are at a cyclical
payroll services to contractors and temporary low, it has performed ahead of its peers.24 LEADERSHIP REVIEW UNIVERSAL PARTNERS 25
ANNUAL REPORT
2019
CHIEF EXECUTIVE OFFICER’S REPORT
Good progress
“THE COMPANIES WE HAVE INVESTED
IN ACKNOWLEDGE OUR PARTNERSHIP
APPROACH AND ATTEST TO THE
VALUE WE BRING, RECOGNISING US
AS SUPPORTIVE AND CONSTRUCTIVE in growing our
investments
SHAREHOLDERS.”
OPERATING ENVIRONMENT
SC Lowy has created a sound platform from We have secured a £15 million debt facility, at
which to grow its share of this substantial favourable rates, that will allow us to support Overall the macro economic environment
market, which we believe is underserved. growth in our current investments and to fund in the UK has held up well considering the
new potential investments that have been uncertainty created by the Brexit process, which
Our smallest investment, in water efficient toilet identified. We are currently actively considering has dragged on for far longer than expected.
manufacturer Propelair, has proved to be the two investments that have been presented by Unemployment in the UK is low and economic
one challenging investment. The decision was our investment managers, Argo, and continue growth is positive, although this is tempering.
taken in the prior year to replace the founder to seek out other opportunities that meet our
with a more experienced CEO in order to scale investment criteria. Given that all of UPL’s investments were made
the business, which resulted in the founder post the announcement of Brexit, its potential
being obstructive and the new CEO not working CONCLUSION implications were factored into our investment
out. However, the founder is no longer working The year ended 30 June 2019 was marked by a decisions. While the Brexit process has been
in the business and we now believe that we have I would like to thank our executive team, board focus on fostering growth in the five companies turbulent to date, the businesses we are
found an excellent CEO, who formerly worked and investment committee for their on-going we have invested in to date, in order to deliver invested in are resilient and are unlikely to be
in the industry for Dyson, and have the right commitment and dedication to pursuing our the full potential of these businesses. unduly affected in the long term by the eventual
management team in place to take the business vision of creating and managing a portfolio outcome. Furthermore, our permanent capital
forward. The sales pipeline is looking promising of investments that delivers value for our Four of these investments, Dentex, YASA, SC structure allows us to be flexible in relation to
and Propelair have implemented a new reseller shareholders. Lowy and JSA are performing well and we are the exit horizon of our investments.
partner model which appears to be working. excited about the opportunities ahead as we
We believe in the unique product, which is I am pleased with the performance of the continue to work with their management teams OUR INVESTMENTS
being well received and for which there is a investments we have made, which, for the most to execute on their business plans. Propelair,
demand, but are taking a conservative approach part, are on track or exceeding our expectations our smallest investment, has had a challenging During the reporting period we made no
as to how we value this business for now. to date and remain confident in the team’s year and changes have been made to the new investments but were actively involved in
ability to secure additional investments that will management team, which we believe will result enhancing value in our existing investments.
LOOKING AHEAD enhance the value of our portfolio. in positive outcomes in the year ahead.
DENTEX
We have now invested £55 of the £72 million During the period we invested further capital
we raised in our initial public offering on the in Dentex (£4.9 million) and Propelair (£400,000). Our thesis of growth and consolidation in the
Stock Exchange of Mauritius (SEM) and the We also assisted JSA in securing a debt facility UK dentistry market continues to play out as
Alternative Exchange of the Johannesburg to fund its acquisition strategy and will invest expected with private UK dental group Dentex.
Stock Exchange (AltX) in August 2016. Larry Nestadt further equity in YASA and Dentex as part of Dentex, which now owns a total of 62 practices
Chairman their next funding rounds (approximately and has a strong acquisition pipeline, is the
With our pipeline of new opportunities and 10 September 2019 £3 million and £6.2 million respectively). second largest private dental group in the UK,
follow on investments required in our existing second only to Portman, which sold a substantial
portfolio we require additional capital and or Although no new investments were made stake in the company last year to Core Equity
facilities. After considering various options we during the period, we have a pipeline of new Holdings for around £300 million.
determined that at this point in time a debt investment opportunities and are actively
facility is the best option to maximise value for pursuing two of these. Dentex’s co-ownership model, where dentists
our shareholders. become equity shareholders in the group, has
Subsequent to the year end, the Company has proven to be very attractive and sets Dentex
an approved £15 million debt facility which apart in a market that is attracting increasing
will be utilised for funding future investments investor interest. Although earnings multiples
and improve the portfolio returns for our on dental practices acquisitions have increased
shareholders. as a result of this growing interest, the returns26 LEADERSHIP REVIEW UNIVERSAL PARTNERS 27
ANNUAL REPORT
2019
“DENTEX, YASA, SC LOWY AND JSA ARE ALL “WE REMAIN POSITIVE ABOUT THE
PERFORMING WELL AND WE ARE EXCITED INVESTMENT OPPORTUNITIES IN
ABOUT THE OPPORTUNITIES AHEAD AS OUR PRIMARY MARKETS AND ARE
WE CONTINUE TO WORK WITH THEIR CONTINUING TO ACTIVELY PURSUE
MANAGEMENT TEAMS TO EXECUTE ON INVESTMENTS IN GOOD COMPANIES
THEIR THE BUSINESS PLANS.” WITH RESILIENT MANAGEMENT. ”
in this market remain very attractive and we customers via its online, tech-enabled, capital position, reinforced by the strength SC LOWY
anticipate a substantial multiple uplift on exit subscription revenue model. of the shareholders, provides the necessary
if we continue on the same path and remain confidence to large industrial clients to rely on SC Lowy is a leading market maker in distressed
disciplined in acquisitions. During the year JSA has an exceptionally competent and the company for critical electrification solutions. and high yield debt, particularly in Asian loans
Dentex raised a further £10 million of equity experienced management team and we are and bonds, and is on track to increase its market
capital in order to fund its continued expansion, confident of their ongoing ability to grow In April 2019 YASA launched its inverter/ share in European loans. SC Lowy secures
with UPL investing a further £4.98 million. and take advantage of further consolidation controller solutions which, similarly to its access to these markets through the banking
opportunities. To enable further acquisitions motors, offer superior performance in a more platforms it owns in two strategic markets, South
Dentex is in the process of restructuring UPL assisted JSA in securing a £15 million compact package. This new business line is Korea and Italy. It’s wholly-owned South Korean
and increasing its debt facilities and is debt facility. receiving encouraging support from industry, bank continues to perform well and Credito di
simultaneously raising another £11.5 million and allows YASA to offer standalone motors and Romagna, the Italian bank acquired by SC Lowy
equity to fund its pipeline of acquisitions. YASA controllers, or to offer unique integrated motor/ in 2018, was re-branded as Solution Bank in May
We expect to invest a further £6.2 million as controller packages. 2019 as part of the strategy to return the bank to
part of this capital raise. YASA, the world’s leading manufacturer of profitability. Solution Bank has now stabilised its
axial-flux electric motors, is building a global YASA also holds great potential for performance and is profitable at the operational
JSA SERVICES LIMITED reputation for its high power, lightweight, electrification in the aerospace industry and has level. As a result of strong capitalisation and
efficient and small footprint solutions. A been selected to power the Rolls Royce ACCEL improved operational performance, Solution
UPL has a significant minority shareholding in YASA motor sits at the heart of the hybrid (“Accelerating the Electrification of Flight”) Bank has received a passport to raise deposits
JSA, a leading provider of professional advisory powertrain in the Ferrari SF90 Stradale, electric flight project, which aims to capture across the EU, which enjoy deposit protection
and outsourcing services to the UK’s growing launched in May 2019, the first ever Ferrari the electric aircraft world speed record in 2020. on the first €100,000 per account. This will
flexible workforce. JSA’s services cover the two hybrid series production sports car, with a Given that a YASA powered car holds the support Solution Bank’s ability to capitalise on
major methods for how contract workers are higher combined power output than any electric land speed record, and a YASA powered spread widening opportunities between low
paid in the UK – via personal services companies previous Ferrari road car. YASA is working on boat holds the electric water speed record, the cost deposits and high yielding assets. SC Lowy
or umbrella payroll services. Imminent legislative a number of further opportunities to deepen company looks forward to the YASA powered continues to build on its strong presence in
changes around who can be categorised as the relationship with Ferrari off the back of Rolls Royce ACCEL holding the electric air India, which is the second largest market for
a flexible worker (referred to as “IR35”) mean this successful collaboration. Development speed record. Non Performing Loans after Italy.
that it is important for both options to be projects with a number of other well-known
offered seamlessly and for service providers and highly regarded automotive manufacturers During the year, YASA was one of 32 companies Although absolute returns over the period have
to be accredited with the FCSA, the industry are in progress, across the high performance which received grants totalling £33 million from been lower than in prior years due to a range
regulatory body. JSA is an accredited member and luxury segments. The pressure on the the UK government’s Advanced Propulsion of challenges in credit markets (primarily driven
of the FCSA, which is an onerous accreditation, automotive sector to introduce more efficient Centre, which is focused on developing the next by the thirst for yield overcoming the need for
out of reach for many of the smaller industry and lightweight hybrid and electric solutions generation of low-carbon vehicles. This grant caution), SC Lowy’s Primary Investment (“PI”)
operators, presenting a significant consolidation continues to increase, and YASA is well will be used to fund the development of an and Special Situations (“SI”) funds benefited
opportunity. placed to assist its clients with meeting these integrated electric drive unit, which consists of from good investment performance relative
challenges using its world leading technology. a YASA Motor and YASA controller integrated to peers, resulting in a strong pipeline of
During the year JSA acquired three smaller with a two-speed gearbox. This new technology potential new investors. Third party funds under
competitors, being Crest Plus Operations; Subsequent to the year end, YASA raised an will offer a compelling lightweight and efficient management in the PI and SI funds have grown
K&B Accounting Group and Cloud9 Umbrella. additional £18 million of equity capital, with UPL off the shelf solution to automotive producers as a consequence of new money being received
This brings to nine the number of acquisitions contributing £3 million in a round that was led looking to fast track Battery Electric Vehicle and positive investment performance. This
that JSA has completed since 2013, resulting by a new investor, Oxford Sciences Innovation, development, as opposed to having to run demonstrates its ability to attract new funds and
in the consolidation of over ten brands into a highly experienced and respected investor costly inhouse development programmes. investors even in adverse market conditions.
its scalable and highly efficient platform, with in high technology companies utilising IP
the group now servicing more than 15,000 developed at Oxford University. YASA’s strong28 LEADERSHIP REVIEW UNIVERSAL PARTNERS 29
ANNUAL REPORT
2019
“THE VALUATIONS OF THE COMPANY’S INVESTMENTS
HAVE BEEN ASSESSED AT 30 JUNE 2019 AND THE
COMPANY HAS RECORDED A NET UNREALISED
GAIN ON REVALUATION OF ITS INVESTMENTS OF
£10,241,580 FOR THE YEAR UNDER REVIEW.”
We expect that credit market conditions, our shareholding to 14.4%), although overall repaid in full during the year except for the loan of the investment management agreement
characterised by a substantial increase in this remains by far our smallest investment. to YASA that was repaid on 19 August 2019, between the Company and Argo. Transaction
“covenant lite” loans and a reduction in Unfortunately, given the legal process which subsequent to the Company’s year-end. costs of £2,000, relating to the acquisition of
spreads, will revert to more normal conditions the company had to go through with the JSA in the prior year, were incurred during the
in the next 18 to 24 months. As in previous founder CEO (which included a UK Employment The valuations of the Company’s investments current year. Further, general and administrative
reversions, the precise time of transition is Tribunal hearing brought by the founder, where have been assessed at 30 June 2019 and the expenses amounting to £334,441 were incurred.
difficult to predict, but it is likely to happen Propelair prevailed), and other complications Company has recorded a net unrealised gain on The accrual for performance fees calculated on
rapidly and lead to a substantial re-appraisal of which stretched the management’s bandwidth revaluation of its investments of £10,241,580 for the revaluation of the Company’s investments
credit markets. SC Lowy is well placed to take over the year, Propelair has to date failed to the year under review. amounted to £1,499,096 for the year. These fees,
advantage of a deterioration in credit markets meet the sales targets set at the time that which are recalculated quarterly, may become
and is building liquidity in all of its operations in Universal Partners invested. As a consequence During the year under review, the Company payable to Argo in the event that the Company
anticipation of such a change. we are taking a prudent approach regarding revalued its investment in Dentex as a result realises the expected profit on disposal of the
the valuation of this investment, which we of a successful capital raise from existing investments, and does not become payable,
PROPELAIR will reconsider should the company return to and new third party investors by Dentex in to Argo prior to the Company exiting the
acceptable sales and financial outcomes. The February 2019 at a price of GBP 1.70 per share. underlying investments on which it is calculated.
We remain confident that the water efficient, investment in Propelair has been written down The revaluation, together with the additional
enhanced hygiene toilets manufactured by to £1.00 in the interim, which means the fund investment made of GBP 4,981,733, has brought The NAV per share as at 30 June 2019 was
Propelair provide an excellent solution to manager earns no fees on the asset until the the total value of the Company’s investment in £1.143 (30 June 2018: £1.032).
the growing water stresses in many regions performance of the investment improves and Dentex to £30,060,988.
of the globe. In addition to the substantial the valuation can be reconsidered. WITH THANKS TO ALL OUR
water savings the product offers, it is proven The investment in YASA was revalued by STAKEHOLDERS
to reduce bacteria in washrooms, resulting in FURTHER INVESTMENT £7,663,471 to reflect a total investment of
lower transmission of pathogens in workplaces, OPPORTUNITIES £18,949,329. The revaluation equates to a price I would like to thank our board and investment
particularly during the winter flu periods. In of £386.95 per share at which YASA concluded committee for their ongoing support and insight
addition, the Propelair toilet’s powerful flush We remain positive about the investment a further capital raise subsequent to the end of as we continue to grow our investments and
minimises blockages, reducing maintenance opportunities in our primary markets and are the reporting period and is the price at which seek out further opportunities that will enable us
costs and thus total cost of ownership, which continuing to actively pursue investments in the Company invested a further £3,000,023. to deliver on our vision.
makes the unit ideally suited to offices, retail good companies with strong management. Firm commitments to support this capital raise
properties and other areas with high volumes Argo Investment Managers has presented two were received from current and new investors
of traffic. investment opportunities to UPL which it is prior to the Company’s year-end and all
currently considering. amounts committed were received by YASA in
With a new management team in place, the August 2019. Pierre Joubert
focus is now on converting the sales pipeline in FINANCIAL PERFORMANCE Chief Executive Officer
its two focus markets, the UK and South Africa, The performance of Propelair and its ability 10 September 2019
following the official accreditation received in For the year under review, we earned revenue in to generate future profits is of concern to
South Africa in July 2019. A number of trials the form of interest from providing short-term the Company. Accordingly, the investment in
are underway at large corporates in these bridging loans to investee companies as well Propelair has been impaired by £1,404,983
two markets, which have all met or exceeded as interest earned from investing excess cash in and is reflected at a nominal value of £1 at the
expectations in respect of water saving, hygiene interest bearing fixed deposits for periods of up reporting date.
improvement and ease of maintenance. to six months. The deposited funds will remain
Propelair’s new CEO has put in place a channel in short-term fixed deposits, money market and The Company’s investment in SC Lowy is
model, outsourcing installation, maintenance NCD instruments until such time as they are reflected at its original cost and is denominated
and marketing to local partner companies, an required for investments in accordance with the in US Dollars (“USD”). During the year, the
approach which we support. Company’s investment policy. translation effect of exchange rate movements
between the USD and the GBP resulted in a
During the period we invested a further The interest earned amounted to £289,110 foreign exchange gain of £403,458.
£399,984 in the business to fund the growth (£123,984 from cash balances and £165,126 Management fees paid during the year
of Propelair in line with its strategy (bringing from short-term bridging loans). All loans were amounted to £1,200,809, incurred in terms30 LEADERSHIP REVIEW UNIVERSAL PARTNERS 31
ANNUAL REPORT
2019
Our investments
Universal Partners has concluded five
investments to date.
Dentex: April 2017
Propelair: July 2017
YASA Limited: August 2017 Dentex Healthcare Group Limited YASA
SC Lowy: December 2017 Cost of investment: £20.7 million Cost of investment: £11.3 million
JSA Services: May 2018
The company’s mandate states that each
investment should be less than 20% of the total
assets at the time of making the investment.
However, due to different growth rates in SC Lowy Partners JSA Services Limited
assets over time, it is quite possible that any Cost of investment: £11.3 million (US$ 15 million) Cost of investment: £9.4 million
one investment can account for more than 20%
of the asset base thereafter. The case studies
that follow provide insight into how Universal
Partners is delivering on its investment strategy
through these investments.
Propelair
Cost of investment: £1.4 million32 LEADERSHIP REVIEW UNIVERSAL PARTNERS 33
ANNUAL REPORT
2019
OUR INVESTMENTS DENTEX HEALTHCARE
GROUP LIMITED
Over sixty practices “DENTEX HAD 3 PRACTICES WHEN
THE INITIAL INVESTMENT WAS
MADE AND HAS SINCE GROWN
THIS TO 62 PRACTICES ACROSS THE
and growing
UNITED KINGDOM, WITH A STRONG
ACQUISITION PIPELINE. DENTEX
ARE THE SECOND LARGEST PRIVATE
DENTAL GROUP IN THE UK.”
The private dental industry in the United Kingdom −− giving them clinical freedom in their surgeries, To facilitate further growth via its pipeline
within agreed best practice procedures and of acquisitions, Dentex is in the process of
continues to grow as consumers increasingly seek engagement with other leaders in clinical restructuring and increasing its debt facilities
higher quality treatment and more aesthetic dental
practice, facilitating continuing professional and simultaneously raising further equity of
Company name development and better outcomes for £11.5 million. The Board and Investment
Dentex Healthcare Group interventions, which are not readily available through patients; and Committee have provided approval for the
Limited −− providing them with assistance to build their company to follow its rights in the capital raise,
the National Health Services (NHS). business and enhance their wealth alongside resulting in a further investment of £6.2 million
Business description Dentex. during the financial year starting on 1 July 2019.
UK dental consolidator
The Dentex model improves alignment versus Due to its defensive nature and the low level of
Sector alternative models, making Dentex a more corporate consolidation, the UK dental sector
Healthcare services
Investment partners
T he NHS typically covers the basic
treatments necessary to maintain
oral health and while private dentistry
economic cycle. The dental sector tends
to remain robust whether the economy is
strong or weak, since in many instances
attractive proposition for entrepreneurial
clinicians who wish to remain invested in the
sector in a manner that allows them to deliver
continues to attract substantial interest from
financial sponsors. An example of this is the
acquisition in 2018 of a controlling stake in
Universal Partners, also offers basic treatments, it plays the requirement for non-discretionary excellent clinical outcomes to patients whilst Portman Dental Care, the largest private dental
Dentex management, an increasingly important role for dental work is unaffected by the state of increasing the value of their investment. group in the UK, by Core Equity Holdings, a
other investors customers seeking more aesthetic dental the economy. Competitor models tend to operate on the European Private Equity firm. The transaction
procedures. By 2020 it is expected that basis that corporates acquire 100 per cent of the valued Portman at around £300m on an
Cost of investment the UK dental care services market Dentex had 3 practices when the initial underlying practices and the dentists become estimated multiple of 18 times forward EBITDA.
£20.7 million will reach £7.5 billion, with most of the investment was made and has since salaried employees within tight corporate This demonstrates the thesis that there is
increase driven by private dentistry grown to 62 practices across the United practice parameters. The alternative model greater value in vehicles that consolidate dental
Fair value per accounts due to NHS cost-savings and related Kingdom, with a strong acquisition is well suited to certain dentists, however practices, versus single dental practices, and
£30.1 million restriction of access to non-essential pipeline. While there are a number of the partners Dentex seeks to work with also confirms the view that the private dental
services. At present, many NHS dentists dental corporates in the UK, corporates tend to value clinical freedom within a more sector has attractive features and further growth
Date of investment are not taking on new patients, meaning only account for approximately 12% of entrepreneurial setting. opportunities.
28 April 2017 that people who have not yet registered the total dental market. Dentex are the
or unable to register with an NHS dentist only dental corporate that truly partners During the current year Dentex raised a further Universal Partners has invested equity alongside
Shareholding are obliged to seek private dental care. with clinicians by: £10 million of equity capital to fund its continued management and strategic partners to fund
42% expansion. UPL participated in this round by Dentex’s investment into further practices. The
Universal Partners made a £15 million −− making them equity partners in the investing a further £4.98 million. The capital raise investment in Dentex is in line with our strategy to
investment in Dentex Healthcare Group Dentex Group in part payment for their was priced using an independent valuation and invest in high potential growth businesses in the
Limited in April 2017 having recognised practices; reflects the value at which shares were issued to United Kingdom.
the sector’s strong growth potential −− allowing them to retain their dental existing and new investors. Post completion of
and defensive characteristics over the practice identity; the capital raise, the fair value of the Company’s
investment in Dentex is £30.06m.34 LEADERSHIP REVIEW UNIVERSAL PARTNERS 35
ANNUAL REPORT
2019
OUR INVESTMENTS YASA LIMITED
The power behind
“YASA HAS ALSO ATTRACTED
SIGNIFICANT INTEREST FROM TIER
1 VEHICLE MANUFACTURERS AND
IS FOCUSING ON SECURING DEALS
IN THIS HIGH-VOLUME MARKET.”
leading brands
Since 2017, European countries have announced confidentiality terms, and where the YASA opportunity to sell motors and inverter/
a ban on the sale of cars and vans with internal motor is expected to be used in many of their controllers separately, or in uniquely packaged
future hybrid and battery electric vehicle. As solutions.
Company name combustion engines over a range of dates, an example of this, Ferrari launched the SF90
YASA from 2025 in Norway, 2030 in Germany and Stradale in June 2019, the first production YASA is one of 32 companies which qualified
Ferrari hybrid road car, which also has the for grants of £33m in aggregate from
Business description 2040 in France and the United Kingdom. highest power output of any Ferrari road car the Advanced Propulsion Centre, the UK
Manufacturer of electrical motors, delivered to date. A YASA motor linked to government’s vehicle for supporting the
generators and controllers the Ferrari V8 engine provides the majority of development and commercialisation of the
hybrid power to the SF90. next generation of low-carbon vehicles. This
Sector grant will be used to fund the development
Automotive manufacturing (motors), YASA has also attracted significant interest of an electric drive unit (“EDU”), which is an
aviation, trains and other industrial
applications M ost of these countries have set
challenging intermediate goals,
for instance the UK has pledged
suited to battery electric and hybrid
applications, particularly where
packaging in limited space is desirable.
from tier 1 vehicle manufacturers and is
focusing on securing deals in this high-volume
market.
integrated package combining an electric
motor, inverter/controller and gearbox,
as an off the shelf solution to automotive
Investment partners that by 2030 half of new car sales will In comparison to other electric motor manufacturers. This will substantially reduce
Universal Partners, Parkwalk be hybrid or electric as part of its technologies, the YASA motors are YASA is engaged in a number of other their risk in developing advanced powertrain
Advisers, Oxford University strategy to reduce vehicle emissions. smaller, lighter, more customisable advanced engineering projects in the solutions to meet the future demand for
Innovations, Oxford Sciences Other regions, such as China, have and have far higher power density and automotive, aviation and industrial sectors. A hybrid and battery electric vehicles. YASA is in
Innovation even more ambitious plans to ban efficiency. All of YASA’s performance YASA motor will power the Rolls Royce ACCEL discussions with a number of leading gearbox
the sale of petrol and diesel vehicles. claims have been independently (“Accelerating the Electrification of Flight”) manufacturers in order to source appropriate
Cost of investment In many instances drivers have been validated by a leading European electric flight project, which aims to capture gearbox technology for the EDUs.
£11.3m as at 30 June 2019 (£9.3m incentivised to move to electric automotive engineering consultancy. the world speed record for electric aircraft in
primary in August 2017 and £2m propulsion, and drivers of internal 2020. Currently a YASA powered boat holds Universal Partners’ investment in YASA is
secondary in February 2018) combustion vehicles are being YASA was spun out from research the electric water speed record and a YASA in line with our investment strategy to hold
penalised via increases in various taxes undertaken at Oxford University by powered car holds the electric land speed investments in innovative, high quality
Fair value per accounts such as toll fees, emissions charges and YASA founder and chief technology record, and hence it is possible that YASA’s growth businesses. Post the balance sheet
£18.9 million license fees. officer, Dr Tim Woolmer, and technology will hold the electric speed records date of 30 June 2019 the Company invested
has commercialised its patented on land, air and water by the end of 2020. a further £3 million in YASA, as part of an
Date of investment YASA has developed and technology across a range of product £18.5 million equity capital raise led by a new
18 August 2017 commercialised a patented axial flux areas over the last decade. In April 2019 YASA launched inverter/ shareholder, Oxford Sciences Innovation
technology enabling it to manufacture controllers which, similarly to its motors, offer (“OSI”) maintaining our overall shareholding
Shareholding a range of electric motors, generators YASA has signed long-term develop more power per kilogram of weight in a more in the business at 24.2% pre dilution from the
24% and controllers with superior and supply agreements with compact package. This new product line has employee share option scheme (22% post
performance characteristics. These customers in the premium automotive unique features which provide substantial dilution).
motors and controllers are well sector, which are subject to strict benefits over competitor products, and has
been developed in house, giving YASA theYou can also read
