Earnings call transcript: ICG Enterprise Q1 2025 reveals strategic focus

ICG Enterprise Trust PLC (market capitalization: $1.2 billion) reported its financial results for the first quarter of 2025, highlighting strategic investments and a challenging market environment. According to InvestingPro analysis, the company currently trades below its Fair Value, suggesting potential upside opportunity. The company’s portfolio grew modestly in local currency but faced a decline in sterling-based returns. Despite these challenges, ICG Enterprise maintained a solid dividend strategy, with an attractive 2.63% yield, and continued to focus on mature buyout companies in North America and Europe.

Key Takeaways

• Local currency portfolio growth of 0.6%, but a 2.4% decline in sterling-based returns.
• A 12-month share price total return of 12.4%.
• New fund commitments totaling £76 million, including a $15 million investment in Integrum.
• Challenging fundraising environment, with a focus on North American and European markets.
• Dividend strategy remains strong, with a Q1 dividend of 9p per share.

Company Performance

ICG Enterprise Trust’s performance in Q1 2025 reflected a mixed picture. While the portfolio grew by 0.6% in local currency terms, sterling-based returns saw a decline of 2.4%. The company’s focus on mature buyout companies in North America and Europe, which represent a significant portion of the global buyout market, underscores its strategic positioning amidst a buyer’s market. InvestingPro data reveals the company maintains a conservative financial profile with a price-to-book ratio of 0.66, suggesting the stock trades below its book value. Additionally, InvestingPro Tips highlight the company’s strong return over the last five years (subscribers can access 6 more exclusive ProTips). The 12-month share price total return of 12.4% indicates resilience despite market challenges.

Financial Highlights

• Local currency portfolio growth: 0.6%
• Sterling-based portfolio return: -2.4%
• NAV per share total return: -2.6%
• 12-month share price total return: 12.4%
• Closing share price: £13.72
• Q1 dividend: 9p per share
• Intended total dividends for FY26: At least 38p per share (6% increase)

Outlook & Guidance

Looking forward, ICG Enterprise Trust remains optimistic about its strategic direction. The company expects continued exit activity and sees opportunities in the secondaries market. Over the next five years, the company projects a NAV per share total return of 15% and an annualized share price total return of 13%. This outlook is supported by the company’s GOOD Financial Health Score of 2.62 from InvestingPro, indicating solid operational fundamentals. Liquidity and credit availability are expected to support ongoing operations and strategic initiatives. For deeper insights into ICG Enterprise Trust’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

Colm Walsh, CEO of ICG Enterprise, emphasized the company’s commitment to investing in mature buyout companies, stating, "We only invest in buyouts. That’s the same mature companies, the companies with a more consistent return profile." He also noted, "Put simply, it remains very much a buyer’s market," highlighting the current market dynamics. Walsh stressed the importance of a diversified portfolio, saying, "The best protection for investors is to have this diversified portfolio balanced across The US and Europe and strong companies."

Risks and Challenges

• Challenging fundraising environment, particularly for new managers.
• Market volatility impacting sterling-based returns.
• Potential geopolitical risks affecting North American and European markets.
• The complexity of foreign exchange hedging, which the company currently avoids.
• Dependence on mature buyout companies, which may face sector-specific challenges.

ICG Enterprise Trust’s strategic focus on resilient companies and top-tier managers positions it well for navigating current market conditions. The company has maintained dividend payments for 34 consecutive years and raised dividends for 8 consecutive years, demonstrating its commitment to shareholder returns. Despite the challenges, the company remains committed to delivering strong returns and maintaining a robust dividend strategy. Visit InvestingPro to explore detailed financial metrics, expert analysis, and comprehensive valuation models that can help inform your investment decisions.

Full transcript - ICG Enterprise Trust PLC (ICGT) Q1 2026:

Martin, Moderator/Host, ICG Enterprise Trust: Good morning. Welcome to ICG Enterprise Trust’s Q1 Trading Update for the three months to the 04/30/2025. I’m joined today by Colm Walsh, who will discuss our investment performance and activity in more detail over the course of this presentation. The slides for the presentation, along with the accompanying results announcement, are available on our website. We will have time for Q and A at the end of this presentation.

So if you’d like to submit a question, please do so through the online portal at any point in the Q and A box on your screens. We will then aim to answer those at the end of the session. With that, Colm, over to you.

Colm Walsh, CEO/Portfolio Manager, ICG Enterprise Trust: Thank you very much, Martin, and good morning to everybody. Thank you for joining us. So, to begin and just some commentary before we dive into the numbers. I think there’s a there’s a whole heap of factors at the moment that make this particular investment landscape especially interesting, especially as we look ahead to the next twelve months. Firstly, fundraising remains tough, particularly for new managers launching first time funds.

We partner with highly experienced top tier managers who benefit not just from our primary commitments, but also they benefit from our strategic partnership in terms of providing capital for co investments. And the relevance I think here is that, put simply, it remains very much a a buyer’s market. So market is favorable to investors like ourselves with permanent evergreen capital. Secondly, whilst there’s still a wide range of potential outcomes with regard to transaction activity, the fundamentals remain strong. Credit remains available.

Liquidity is a key focus for our managers. And as a result, exit activity is progressing relatively well. That combined with our nimble investment program and our shareholder focused capital allocation policy, we think that positions us well for the current environment. And finally, the geopolitical landscape, never boring at the moment. It means that many investors I speak to are looking for that balanced exposure to the two large global buyout markets in North America and Europe.

And our portfolio, it’s around fifty fifty across both geographies, means we’re tapping into the two largest long and best established markets for private equity. Just moving on to the next slide, and this will be a slide that is familiar to any of those of you who follow us regularly. So I won’t labor on it for too long, but I think it’s just worth summarizing our key areas of focus. First of all, we only invest in buyouts. That’s the same mature companies, the companies with a more consistent return profile.

We don’t invest in venture capital or growth equity. Venture capital, I think the average loss rate is around 50%. The top tier buyouts is much, much lower. So for many of our managers, less than 10%. So we think that indicates a very different risk profile.

We only invest, as I mentioned earlier, in the core developed markets of North America and Europe. So it’s roughly, depending on how you measure it, 85 to 90% of the global buyout market is centered on these two geographies. They have a much more mature PE market, deep knowledge, expertise, and it’s where you get the real concentration of the best quality managers, and we believe deals as well. We invest in mid market and larger deals. So funds over a billion dollars, billion euros typically have that typically indicates that they’re experienced investors.

They have the team and the resources to deliver the private equity model. We look for funds that have those, you know, operational capacity to originate good investments and then transform those investments into global market leaders. And we have plenty of good examples of those in the portfolio. We focus on top tier managers. It might seem very obvious, but the the dispersion between top quartile and bottom quartile fund managers in private equity, the difference is much greater than in other asset classes.

So picking the right managers is especially important in this asset class. And finally, but very importantly, we look for resilient companies. So companies and sectors which show resilience in bad times, grow strongly in good times, and typically that’s because these the growth trajectory of these companies is propelled by underlying secular growth factors. That means they can grow even when GDP is much more volatile. So moving on to the next one slide just to review our q one performance.

So the three months to the 04/30/2025, our portfolio grew on a local currency basis by 0.6%. Unfortunately, that was offset by FX headwinds in the quarter. So the portfolio return on a sterling basis was a fall of 2.4%, and that gave rise to a NAV per share total return over the period of negative 2.6%. Over the last twelve months, our share price total return, that’s the close of business last Friday, was 12.4%, and that’s based on a closing share price of £13.72. We continue to focus on shareholder distributions.

We do this, as many of you will be aware, through both dividends and buybacks. The board announced yesterday a q one f y twenty six dividend of 9p per share with the intention to pay total dividends of at least 38 p. We also returned around £38,000,000 in buybacks in the last twelve months. Our buyback policy has been one of the most shareholder friendly of our peer group as a percentage of the opening share count. Change of activity.

We continue to demonstrate a disciplined approach to investment activity over the quarter with £76,000,000 worth of new funds commitments across five of our long standing manager partnerships. One of these was Integrum, which I will expand on in a moment. New investments totaled £48,000,000 in the quarter. And in terms of exit activity, we received total proceeds of a £149,000,000 during the quarter. That included £62,000,000 worth of net cash proceeds from a secondary sale executed in April and £48,000,000 of cash proceeds from the realization of Minimax, our largest portfolio company holding at the 01/31/2025.

Now we continue to realize exits as an uplift to carrying value. And in the last twelve months, we’ve executed 45 full exits at a weighted average uplift to carrying value of 15%, and that represent and the return the average return on those investments was three times cost. So moving on to the next slide, I did mention that we would spend some time just looking at one of those fund commitments, and I wanted to highlight our recent $15,000,000 commitment to Integrum too. Now like all good rules, we often say we don’t invest in first first time funds. Well, we made an exception, and it was a good exception for Integrum because despite being a first time fund, it had an especially senior management team.

So the firm is led by a gentleman called Taker Olson, who spent twenty five years of his career at KKR, ending there as as a senior partner and leaving just to form to do private equity the way he wanted to do it. We’ve had success with the first funds, 2022 vintage, already a top quartile performer. And what’s the secret sauce here? Well, Integrum focuses on high quality resilient businesses in less cyclical sectors, so very much that focus that we outlined within financial services. These are areas like insurance brokerage, wealth management, payments, professional services.

Now we love these businesses because they’ve got very strong consistent business models, very high net revenue retention, and organic growth, which is fueled, as I mentioned earlier, like it supported a very strong secular growth tailwinds. And that’s a really good alignment with our strategy. As I said, fund one’s performing well. Integrum is also a manager that offers co investment opportunities. So a very good example of kind of of the kind of manager we’re seeking to partner with.

And also, critically, I think, you know, we’re trying to ensure that we’re also identifying new managers as they come through to sort of add to the overall caliber of our portfolio. Moving now on to just I wanted to spend a little bit of time just discussing our balance sheet. Just to highlight that at the 04/30/2025, the end of this quarter, we had total available liquidity of just on just over £200,000,000. Net debt was £45,000,000, and that gives rise to a gearing ratio of 3%. Our over commitment ratio is 26%.

So I think that in those core metrics indicate that we manage our balance sheet prudently, and that’s important because it positions us well to navigate the current environment, gives us more flexibility, and allows us to take advantage compelling opportunities we see, particularly, in the secondaries market and also for directs or co investments. Mentioned earlier some of the liquidity events in the quarter. We announced two large liquidity events in April, a secondary sale of some of our existing portfolio and realization of Minimax, which was the largest portfolio company at the 01/31/2025. Supposing on the secondary sale, so we have an approach of active portfolio management. And as a result, we tapped into the secondaries market taking advantage of our secondaries platform, which gives us really strong market intelligence and awareness of pricing.

And also the ability to execute these often quite complex transactions. So we executed a sale of eight mature primary funds investments. It was a very it was a highly competitive process, So from leading secondary investors, and that ensured, obviously, best execution. So as we announced in April, these funds delivered very strong historical performance, but we believed when we analyzed the future prospects that they had limited future potential relative to other uses of capital. And then we could therefore redeploy the cash into other opportunities that we believe will generate additional long term value for our shareholders.

So we think these sales are accretive. We executed the transaction at a 5.5% discount blended across the funds. That’s significantly lower, as you will all be aware, than the share price discount of ICG Enterprise Trust. And that, you know, we also think that this is a another source of validation for our NAV. As I mentioned earlier, this transaction generated £62,000,000 worth of net cash proceeds.

And secondly, last but not least, we also received £48,000,000 of cash proceeds from the realization of Minimax. We first invested Minimax. It’s a company that supplies fire protection systems, components, and related services in 2018. It’s our largest portfolio company at the January 31, so it’s about 3.1% of the portfolio. And, you know, I think when we look at these two different transactions, one generated by our own active portfolio management and one organically from the portfolio, if you like.

But we believe that these transactions underscore the benefits of our approach, and they validate the quality of the businesses we invest in and the broader value. Turning now to shareholder distributions. We’ve executed £60,000,000 worth of share buybacks since we launched our program in October 2022. And as a percent of percentage of the opening share counts, that makes us one of the most active and therefore shareholder friendly amongst the peer peer our peers in list of private equity. It’s added 3% NAV per share total return, and it’s done across two programs, a long term program and what we label an opportunistic program.

And secondly, we have a progressive dividend policy, which has been in place since 2017. For q one FY ’26, as I mentioned earlier, the board is proposing a dividend of 9 p per share, and it’s indicated its intention to pay total dividends of at least 38 p per share for FY twenty six. And that’s gonna be six that would be a 6% increase on previous financial years at FY twenty five’s total dividends of 36p per share. So moving on now to our long term track record. What does all of this, the portfolio management, shareholder distributions, what does it mean in terms of of performance?

So over the last five years, we have delivered 15% NAV per share total return, and that translates to 13% share price total return on an annualized basis. We have a long track record of delivering for shareholders, and all of this combines clear investment strategy, progressive dividend policy, that long term share buyback program, and our opportunistic share buyback program. It’s all designed to deliver long term strong performance for our shareholders. So with that, I’m going to pass back to Martin for the q and a.

Martin, Moderator/Host, ICG Enterprise Trust: Great. Thanks, Colin. We now have about ten minutes or so for q and a. So as a reminder, please feel free to submit questions via the q and a box on the webinar platform. A few have come in already, so taking them in turn.

If I combine two, there’s one question on what are we hearing from The US, and then there’s a question on what are we hearing from Europe. So if I if I broaden that and combine it, Colm, broadly, what are we hearing from our from our managers generally? What’s the sentiment like with the current environment? We heard from Gridiron Capital last week at our Investor Day. Maybe if you could summarize a little bit their key takeaways.

You spent a couple of weeks in The US. You also went to super return. Yeah. What is the general sentiment across the manager landscape at the minute?

Colm Walsh, CEO/Portfolio Manager, ICG Enterprise Trust: Well, you know, they say 20 different managers, 40 different opinions. But I I would say there are some common themes and perhaps more consistency that you might appreciate between the two geographies. And I don’t know. I think it was well represented actually by and I’ve encouraged shareholders to listen to our we’ll we’ll shortly be publishing our shareholder seminar recording if you weren’t able to attend. We had a partner from one of our US firms who spoke live at the event.

And I think that they remain even in The US quietly confident because if you back high quality companies, what we found is the kinds of companies that we like, just as they were resilient through COVID, something we didn’t envisage happening. Similarly, we I’d be lying if I said we had a master plan in place for tariffs, but the kinds of businesses that are asset light, recurring revenues, focused on, you know, in areas like tech enabled business services, technology, actually were proved to be very resilient to tariffs because they have relatively inelastic demands, because their growth is fueled by these secular tailwinds, we call them. They remain well insulated. And we’ve also seen these managers are always are telling us as well that many transaction processes, they’re still assuming will be going ahead because these companies continue to trade well. And, you know, we very much seen that high quality companies can still transact in this market.

I think European perspective is is similar, perhaps a bit more nervous of of what’s sort of what was playing out domestically in The US. I think to some degree, there’s little difference in how, you know, Americans are more used to their own political system. I think in Europe, perhaps, people find their volatility somewhat more you know, potentially more concerning. But again, in Europe, it’s the same thing. You know, we have businesses that aren’t hugely impacted by it and managers that know that they have quality businesses.

There’s still very much a market for for those kind of assets. We’ve actually seen quite a bit recently. Quite a lot of our recent realizations have been to strategics who I think, you know, very many of our managers are very good at building up companies that have strategic value. The recent realization has been in the in the public domain from one of our US managers where a company was sold at a significant multiple uplift to its original value for a period of six years and was sold to a a big US strategic. So that’s that’s really emblematic of a lot of what we’re seeing at the moment.

But, yeah, with lots of different perspectives.

Martin, Moderator/Host, ICG Enterprise Trust: Super. Thanks, Colin. There’s just a factual question that’s come in, which is what are the valuation dates used for this April portfolio. So to direct to the line in in the r and s, 86% of the portfolio is valued using thirty one March twenty twenty five valuations or later. So 86%.

Colm Walsh, CEO/Portfolio Manager, ICG Enterprise Trust: And and those of you, you may be wondering sometimes why we have our balance sheet days being January, April, July, and so on. That’s to allow us to have that high coverage. It means that we we can capture the most current valuations at each of our quarter ends.

Martin, Moderator/Host, ICG Enterprise Trust: Yeah. But another factual question as well, which is what is the outstanding commitments or unfunded commitments at April and how they compare with January? So in the r and s, we released in in April yesterday, the untotal undrawn commitments is 538. It’s come down slightly versus January, which is 553, which, as Colm says, means the overcommitment ratio in January was 31%, and now in April is is 26. So that’s come down in in the three months as well.

A question maybe on the robust balance sheet column. So gearing in January was 10%, and now it’s dropped to 3% at April. Yeah. You mentioned it it positions us well for the current environment, and it allows us to take advantage of current opportunities. Is it more one or the other?

Is it both? And what are those current opportunities? You mentioned secondaries, direct co investments that that we’re seeing.

Colm Walsh, CEO/Portfolio Manager, ICG Enterprise Trust: I think, put simply, not having high levels of leverage just gives you more room for maneuver. I think, you know, we we’ve tried to be I think compared to our peers, we we have significantly lower gearing than many of our peers. And, obviously, they have their own approaches. But from my perspective, as a portfolio manager, I like going into this cycle to be able to have the the flexibility. We think that balance sheet management is an important part of our, you know, of managing, you know, the the portfolio well on a risk adjusted basis.

But, yes, I think for me, Martin, that the key thing is just having that additional capacity to be able to potentially take advantage of and we mentioned in the RNS, which came out yesterday, you know, we’re seeing particularly interesting opportunities in the secondary market. Just to give a context behind that, we’ve had a long period of slow realizations over the last two or three years, and that’s been that many large investors are tapping that market for liquidity. And, this is creating a dynamic where we think there’s potentially we took advantage of what we thought was a very good seller’s market earlier in the year with our with our secondary sale, which we discussed. We think that that pensioner might be swinging swinging back to being more of a buyer’s market. So so it’s good to have capacity to be able to participate in that.

Martin, Moderator/Host, ICG Enterprise Trust: Super. Thanks, Colin. Question on FX and FX hedging. Obviously, this quarter, dollar has impacted our our returns. What’s what’s the view on FX hedging?

Obviously, it’s just one single short term quarter, but how does the manager and and the boards think about FX hedging?

Colm Walsh, CEO/Portfolio Manager, ICG Enterprise Trust: And I I I was certain I would get this question, and I’ve not been disappointed. So so listen. This is one of those things we get asked quite a bit. It it obviously when people see the potential for currency to to convert a positive number on local currency basis into a negative number in sterling, it can be concerning. I would say to your point, Martin, it is, of course, over a short time period.

And we’ve had an especially pronounced movement in the dollar against sterling, which is just generated that movement. You know, the thing about FX hedging is it’s for private equity, for diversified private equity portfolio. It sounds great in theory, but it’s very difficult to do in practice. And you will see that none of our peers, as far as I’m aware, hedge FX either. Now I don’t fall by the evil.

No one else is doing it, so we must all be correct. The reason for that is that we don’t really we don’t know the precise timing of our cash flows. So we don’t know how so that makes it very difficult to hedge outstanding currency exposure. And also it’s very difficult to construct an effective hedge. You know, if you take some of our larger companies, you know, like say, Frenieri.

Frenieri is a British company headquartered in Yorkshire. But the reality is that its operations are global and therefore its own current currency exposure is especially complex. And if you think about companies like Fonieri being, know, across our portfolio, that precise currency delta that that you need to be able to construct an effective hedge is in practice obviously possible to calculate. So we think that any attempt to hedge foreign currency would end up being costly because we probably have to buy options which are expensive during, you know, periods of high volatility. And, of course, they would introduce some volatility into our earnings as well because, again, the value of the derivatives may not necessarily move in sync with what we’re trying to hedge.

So I would say, in summary, we’ve examined it extensively. It’s something we discussed with our board. We’ve concluded consistently that it would not be a good idea to hedge, and actually that the best protection for investors is to have this diversified portfolio balanced across The US and Europe and strong companies. You know, we think over time, that value creation will dominate any short term currency impact.

Martin, Moderator/Host, ICG Enterprise Trust: Super. Thanks, Vaughn. The final question I see is on Minimax. As most people are noticing, it’s been in our portfolio since 2018. Do you wanna just explain how it’s done for us over over the seven years?

And and, you know, people have noticed it’s now, you know, no longer our top portfolio company holding, but just any more color on on how well that investment has has done for us.

Colm Walsh, CEO/Portfolio Manager, ICG Enterprise Trust: Yeah. So Minimax, you know, whenever I’m I’m sorry to see it. Well, it’s still going to we we will still have some exposure. Yeah. But I’m sorry in a way that it’s it’s going out of our top five because it’s a really good example of defensive growth or or focus on resilient companies.

It because what it does is it’s fundamentally a service that is mandated by regulation. So and it’s not tied to the levels of activity So in really simple terms, if Minimax supplies a an airport with a fire protection system during COVID when flight commercial aviation was down 95% or whatever it was, well, from a the Minimax’s perspective, the airport still had to have a fire protection system. It still had to have it certified and serviced, and therefore, it’s an incredibly inelastic demand profile. It’s also a market leader.

It the business itself is diversified. It’s got it across US, Europe, and actually globally. And it has elements. It gets growth from new builds, but also recurring revenue from that sort of embedded plant needing to be serviced and certified. So over our investment, it really did perform to plan.

You think about over that that cycle, we had COVID as small you know, there was a decline in construction for a period. It was able to weather through all of those storms, and, ultimately, it made a return of around 2.8 times cost on a gross basis. So, you know, really good investment, a sort of seven year hold period, but, ultimately, still a very, very good IRR over that time period. So, you know, very, very happy. And, incidentally, a deal that we have we have access to because of being on the ICG platform and, obviously, especially good intelligence in that company.

It was it was a one where we had very strong alignment with our manager for whom was also investment. So, yeah, so always always bittersweet to see these great companies, you know, get realized to some degree. But, again, we think it’s a it’s a really good demonstrates the strength of our portfolio and approach.

Martin, Moderator/Host, ICG Enterprise Trust: Great. Thanks, Colm. I see no further questions online. If there are any follow-up questions after this webinar, please feel free to contact the email address you see on screens. As a reminder, recording of this event will be available on our website in the coming days.

With that, Colm, thank you very much, and thank you all for joining today. Thank you, everyone. Have a great

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