TSRUF (TSRUF) Q4 2026 Earnings Report, Transcript and Summary

Welcome to the Pacific Current Group or PAC investor presentation call for the 2026 financial year. By the way, an introduction, my name is Michael Clarke, and I'm the Managing Director of Pacific Current Group. I joined the Board of PAC in February 2024 as a Non-Executive Director, becoming acting Chief Executive in July 2024 and was appointed Managing Director in November 2025. I'm joined on the call by Ron Patel, the CFO of Pacific Current Group. Ron joined PAC over 17 years ago. In our full year update to shareholders in August last year, we highlighted that PAC was committed to taking actions that would unlock shareholder value and to report the progress made to achieve this goal. We are gratified to report that the momentum developed in the FY '25 financial year has continued into this financial year. Today's call is in 2 parts. Ron and I will first take you through the full year results for FY '26. I will then speak to the separate announcement we launched this morning regarding the commencement of a strategic review for Pacific Current Group and our FY '27 priorities before we open the line for questions. Turning to Slide 3 in the presentation pack. Again, Pacific Current Group is pleased to update on the company's results for the 12 months ending 30th of June 2026. FY '26 was another year of successful transition of PAC's business to a more simplified structure featuring increased transparency of asset values, successful capital management initiatives, eradication of debt, further material reduction in operating expenses and the strengthened balance sheet, all aimed at enhancing shareholder value. Against this strategic backdrop, it is pleasing to report that our total shareholder return over both the past financial year and the past 5 financial years exceeded the broader share market by meaningful amounts. Ron will speak more about that in his part of the presentation. Key elements of the result include declaring an underlying net profit after tax or NPAT of AUD 14.8 million for the period. This is down from $26 million in the previous corresponding period on a reshaped earnings base following the sale of boutique interests and the return of surplus capital to shareholders. The statutory result was a net loss after tax of $1.5 million compared with a profit of $58.2 million in FY '25, driven by noncash fair value adjustments and the absence of the prior year's gains on sale. Ron will take you through that detail also shortly. Pacific Current has declared total dividends of $0.48 per share for the financial year, an increase of 12% over the previous corresponding period and including the first franked dividend the company has paid since 2023, declaring an increased partially franked dividend continues the capital management initiatives over the past 2 years and it efficiently and effectively returning surplus capital to shareholders. Further, the implementation of cost-saving initiatives resulted in a 41% reduction in total overhead expenses compared to the previous corresponding period, with scope for further material cost reduction in FY '27, and a further reduction in the number of ordinary shares on issue through the ongoing on market share buyback. Due to capital management initiatives, asset sales during the period and related considerations, PACS's fair value estimate of net asset value increased to $16.18 per share at 30 June. This is up over 4% on the $15.51 per share estimate a year earlier. Over the past 5 years, fair value NAV per share has compounded at over 14% per annum from $8.39 per share to $16.18 per share. Again, Ron will take you through those numbers in more detail shortly. Funds under management ended the year at AUD 26.4 billion, down from AUD 30 billion. The movement principally reflects the exit from Aether in June and a stronger Australian dollar with 3 of the 5 continuing boutiques rolling from in reporting currency over the year. Turning to activity now. It was another busy period, particularly for transaction activity or the following portfolio transactions completed. Firstly, the partial sale of Victory Park Capital. In September 2025, PAC sold a portion of its interest, specifically 2% equity in Victory Park Capital and 0.8% interest in Victory Park Capital Holdco, future carried interest entitlements to CNO Financial Group for AUD 8.1 million. Following the transaction, PAC's interest reduced to 9.2% equity, 18.6% future carry and 24.9% existing carry. PAC received AUD 7.7 million net proceeds in October 2025. Secondly, full repayment of the senior secured debt facility. In October 2025, PAC fully repaid the senior secured debt facility with W.H. Soul Patinson. Total repayment of USD 42.1 million included a USD 0.8 million early repayment premium and USD 0.3 million interest for October. The facility was settled using the USD 43.5 million restricted deposit account, which WHSP has security over. The on-market share buyback commenced. In October 2025, PAC announced an on-market share buyback of up to 2 million shares or 6.8% of issued capital funded from existing cash reserves. On 1 June, PAC increased the maximum number of shares bought back from 2 million shares to just over 2.6 million shares, approximately 8.6% of issued capital prior to the buyback funded again from cash reserves. As at 30th of June, PAC had repurchased over 2.2 million shares at a cost of AUD 22.9 million. As a result, shares on issue have declined by 7% during the period from 30.2 million shares to 27.9 million shares. We also exited our holding in Janus Henderson Group in November of 2025. PAC sold its entire holding generating USD 9.4 million in proceeds. We continue deploying growth capital between December and February. PAC agreed 3 new secured loan facilities including a $2 million Australian loan as an affiliate of ROC Partners, a USD 2.1 million facility with Northern Lights Alternative Advisers and the $25.1 million U.S. facility with Independent Financial Partners, or IFP, all bearing interest at between 10% and 11% per annum and maturing between 2028 and 2031. As at 30th of June, AUD 14.6 million was drawn across these facilities. The IFP facility, particularly is a 4-year board covered to drawn to USD 8.2 million and is supporting IFP's recruiting and acquisition momentum. We also included -- concluded the investment management agreement with an affiliate of GQG. In May, PAC concluded its 2-year management agreement in accordance with its terms and assume responsibility for investment management of its portfolio of assets. We've also exited -- or begun the exit of Abacus Global Management, PAC commenced the sale through the financial year and is holding -- in its holding in Abacus share, realizing AUD 11.4 million during the period. We also finally exited from Aether. PAC sold its entire revenue share in Aether for USD 1.8 million, together with its 25% stake in Aether's general partner during the period. Clearly, a very busy time. I'd now like to hand over to Ron to cover financials for the year.

Thank you, Michael. Turning to Slide 4 in the presentation pack. FY '26 reflects the reshaped earnings base that follows 2 years of planned boutique realizations and the return of surplus capital to shareholders. Underlying net profit after tax was $14.8 million, down 43% from $26 million. Total underlying income of $25.1 million was down 48% with boutique income of $7.1 million, reflecting the exit Michael has covered. Interest income of $16.8 million is now 67% of underlying income and the largest single component of earnings. Total overheads fell 41% to $9.4 million. Corporate overheads of $5.4 million were down 21% following the cost reset. Interest expense fell from $6.7 million to $2.6 million after the October debt repayment and the investment management fees were $1.4 million. Interest income now covers corporate overheads more than 3x over. Looking to FY '27, both interest expense and investment management face roll off entirely. The debt facility is repaid and released and the GQG investment management agreement concluded in May 2026. Underlying earnings per share of $0.502 declined 10%, a much smaller fall than NPAT, supported by the 36.8% reduction in weighted average shares on issue from the buyback. Cash conversion remained strong with underlying pretax and cash earnings of $14.4 million, representing 91% of underlying profit before tax. A detailed schedule is included in the presentation. Total dividends for the year are $0.48 per share, the fully franked $0.20 interim dividend was paid in April and the final dividend of $0.28 franked to 17.5% with a record date of towards September and payment on 8th October. Turning to Slide 5, alternate balance sheet. The alternate balance sheet presents PAC on a look-through basis, separating our corporate net assets from our investment exposures. Corporate net assets increased $274.9 million from $144.3 million at 30 June 2025. The WHSP debt facility and the restricted deposit that secured it have both left the balance sheet and the deferred tax liabilities has almost halved. Cash and short-term deposits ended the year at $157.7 million, up $19.8 million. Realization proceeds and the release of the relationship trade deposits more than funded the $60.5 million of debt repayment, $22.9 million of buybacks and $14.4 million of dividends. The reduction in assets held at fair value through profit and loss reflects the partial sale of Victory Park and the lower fair value of the retained interest. Financial assets of $100.3 million on price, the Abacus bonds and shares and $15.4 million of loans to PAC boutiques. The Petershill deferred consideration was collected in full in May. PAC now carries more financial debt and total liabilities are down 89% to $8.6 million. Turning to Slide 6, shareholder value. Statutory NAV at 30 June was $13.96 per share, and our fair value estimate of NAV was $16.18, up 4% on last year and a premium of $2.22 or 16% to statutory NAV. The accounting standards require different measurement basis across the portfolio. Several of our larger boutiques positions are carried at cost and can be written down but not up. This year's fair value uplift came largely from those boutiques held as associates. In total return terms, share price plus dividends, PAC delivered 10.4% in FY '26 and 18.4% per annum over the 5 years to 30 June 2026, against 6.1% and 7.8% for the ASX 200. Turning to Slide 7, fair value versus book value. As part of preparing the statutory accounts, we value every investment, both to test assets carried at cost for impairment and to set the fair value of assets measured at fair value. These valuations follow the accounting standards. They are estimates, not the precise price at which an investment would change hands, and the methodology is set out in the presentation and financials. The notable movements, ROC's fair value rose from $37.2 million to $60.1 million on a stronger growth outlook for the business. IFP rose from $9.6 million to $35.8 million, reflecting an improved growth trajectory that our debt facility is helping to fund. Victory Park reduced to $44.3 million, reflecting slower comprising and higher discount rates for private credit strategies, together with the partial sale. Astarte increased $14.4 million on successful fundraising and improved carried interest expectations. And financial assets reflect exit from Janus Henderson and higher values for the Abacus bonds and shares. Bringing it together, fair value net assets of $452 million with corporate net asset largely cash and stated after implied tax on the sale value uplift. Slide 8 summarizes the portfolio transactions Michael has already covered. So with that, I will hand back to Michael for the strategic review and the FY '26 outlook.

Thank you, Ron. I want now to speak to the second announcement we launched this morning. Pacific Current has commenced a strategic review to explore options to further optimize value for shareholders. In early 2024, PAC took the decision to transition from an active investor in boutique asset management firms to an owner of a portfolio of investment holdings with management of those investments externalized for an interim period. Two years on, following the realizations and capital returns you have heard about today, the company's asset base is a combination of investments in asset managers, financial assets and cash. Against that backdrop, the board has been considering how best to improve return on capital and optimize value for shareholders going forward. Recently, PAC has received a nonbinding indicative proposal from River Capital, an established Australian investment manager specializing in listed and private market assets with approximately $1 billion of assets under management. The proposal contemplates Pacific Current acquiring River Capital for approximately AUD 80 million with consideration of approximately 6.3 million Pacific Current shares, an implied valuation of $13 per share, which will be subject to a 2-year escrow period. Under the proposal, Pacific Current would evolve into an active listed equities and private markets investment manager focused on investing third-party money with the capability to deploy balance sheet capital as a co-investor on a case-by-case basis. Funds managed by River Capital currently hold approximately 10 million Pacific Current shares to broaden the shareholder base and increase free float. The proposal contemplates at least 6 million of those shares being sold down through a managed book bill at no less than $13 per share prior to completion of any acquisition. The receipt of that proposal reinforced the Board's view that this is an appropriate time to undertake a comprehensive formal review of the company's strategic alternatives. The review will consider 3 potential parts: first, progressing the River Capital proposal; secondly, the sale of Pacific Current Group; and finally, delisting the company from the ASX and undertaking an orderly realization of its holdings. The Board has made no decision regarding the River Capital proposal or any other alternative other than to consider them. Any transaction with River Capital will be subject to satisfactory due diligence, and independent experts report. The approval of Pacific Current shareholders, excluding shares held by funds managed by River Capital and any of its associates, the sell-down of the River Capital Fund shares at no less than $13 per share and any necessary regulatory approvals. There is no certainty that any transaction will be progressed or will eventuate. To assess us with the review, we have appointed Flagstaff Partners as a financial adviser and Ashurst Perkins Coie as legal adviser. We anticipate providing an update on the strategic review at or before our Annual General Meeting, and we will keep the market informed of any material developments in accordance with our continuous disclosure obligations. And finally, turning to Slide 10 in the pack. I'm looking forward to the 2027 financial year, Pacific Current management expects to maintain the strong momentum that we have built and been discussing in the past 2 financial years by continuing to focus on executing a clear and disciplined plan. The FY '27 priorities described how we will run the business day-to-day while the strategic review is underway. They sit alongside the review I've just taken you through. The focus on FY '27, we'll continue to be on executing the following 4 key initiatives. Firstly, preserve capital optionality by maintaining balance sheet strength with capital deployment, opportunities assessed in light of the strategic review and growth opportunities, assist against the return profile of buybacks and shareholder distributions. Secondly, continuing to return capital to shareholders by funding dividends and underlying cash earnings that the on-market buyback and further returns assessed again alongside the strategic review. Thirdly, continued expense reduction while maintaining disciplined cost management to support margin stability and capital efficiency and to target further material expense reduction in FY '27, as interest costs and investment management fees roll off. And finally, to sharpen the operating model, embedding the governance and structural changes now in place to speed decision-making and reduce complexity. In conclusion, FY '26 delivered what we set out to achieve. A simpler portfolio, the elimination of debt, a materially lower cost base and significant capital return to shareholders. The strategic review is the logical next step on that path, testing in a disciplined and structured way how the value of this business is best delivered to shareholders. We would like to thank our employees and the PAC board, both past and present for their work over this year and in previous years. I would now like to answer any questions that you may have. Thank you.

[Operator Instructions] Your first question comes from the line of Lachlan Rogers with 115 Capital.

Are you able to give any like KPIs or more detail on the drivers behind the valuation uplift for ROC Partners?

Lachlan, this is Ron. So on the ROC Partners, they had a bit of a positive fundraising outlook, and we really put it that model in a bit more detail and just based on the outlook for where the next 5 years of cash flows said we believe that there is an uplift in the fair value.

Right. Okay. And my second question was, is there any market selling the Abacus bonds into? Or are you just planning to hold those until maturity?

Yes, look, I can pick up on that and just make a comment about ROC as well. I mean, basically, in the last couple of years, we've moved all the valuations into a very consistent framework, and some of the uplift in ROC also reflects -- that same approach being applied to all of our portfolio investments. So it's a combination of both the potential outlook for ROC, but also a consistent way that we value all of the portfolio assets. The bonds, the Abacus bonds, I mean, it all depends on what price could be achieved, to be frank. We monitor that regularly. They trade a little bit over. To be very clear, too, the bonds we hold are not the equivalent bond to the listed bond that many people follow. It's trading roughly at sort of a little bit over $25 and change. So we effectively monitor that. The only way we would look to exit those bonds prior to maturity would be if there was a sufficient premium over that $25 face value in the period leading up to maturity, which is in 2028.

Your next question comes from the line of Greg Hoffmann with Hoffmann Super Fund.

Just in relation to the nonbinding proposal, just trying to wrap my head around that. At the $16.13 fair value multiplied by the 6.3 million shares that are proposed as consideration, am I wrong in saying that that's really valuing River at about $100 million? And so therefore, the Board would have to believe that River were substantially more than $100 million before considering that transaction to be more on shareholders' interests? Or have I gotten wrong in my logic separate?

Greg, so look, right at the moment, it is very early. We received that proposal from River only a little bit earlier in this month or this -- so we're still going through that. We're only in the process of appointing advisers at the moment. We declare a fair value NAV for the company, which effectively is the sum of the asset value at this moment in time. So there is no allowance for the cost of running the company or any future potential change. So that's a moment in time valuation based again on that consistent valuation framework that we apply. And of course, there's a large element of that valuation is now effectively cash and short-term securities. It's between $8 and $9 a share. So we haven't made any determinations about the value of the River Capital proposal. That is yet to come. We will keep the market informed as we move through analysis, again, supported by our advisers through that proposal. But the actual numbers, you can do the math. And I mean the $16 and just -- at $16.18, the fair value NAV. Again, to be very clear, is effectively the value if you sold all of the assets of the company today at their fair value without any sort of spread. So just to be clear on what that means. I mean if you look back in the history of the company's share price, it's consistently traded below that. We are working to close that gap, obviously, and the initiatives that the Board is considering, including the River Capital proposal, would all be aimed at maximizing that value towards $16.18 a share.

Yes, it does. But just on that last point, you said, yes, the stock market has consistently valued below that. But is it fair to say that on balance, the corporate transactions that you've undertaken have your fair value has been pretty close to the mark or even slightly below the mark. The Board's history of valuing its own assets as evidenced by capital markets transactions, not the share price is pretty good. Is that fair to say?

Look, that's a fair comment. I mean over the last year, I've been involved for just under 3 years, really through a period of quite a number of transactions. And I mean, effectively, virtually all those transactions were undertaken at either close to or above the fair value. So look, the valuation approach we take is not -- it's designed to be rigorous, to be supportable. We're not trying to overstate or understate the value. It is a consistent approach that we follow and we detail the methodology in the notes with the results. And again, we've looked at that again in the last year or so. We've reviewed all of that, again, to confirm our confidence in that and to confirm the veracity of our approach. So you're right. I think that as it's turned out in terms of transactions, and there's been fewer than 10 but more than a couple. We've basically achieved fair value or above in the transactions we've undertaken.

And just to tie those 2 threads together, if we can assume that $8 or $9 of cash and total investments is money good, is 100 cents on the dollar. It could be returned to shareholders in an equal access manner. We're then talking about a $7 gap to your fair value or an $8 gap. And at a $13 price, that's $3 discount is basically all attributable to the $7 of assets. It's a huge discount to the quality boutique part of the portfolio. Is that reasonable to just characterize it that way?

I think characterizing as a huge discount is a bit of a step. Again, you've got to think about that that's, again, a moment in time valuation. You would have to -- as an ongoing concern, you would start at $16 and change and deduct $1 to $2 a share to run the company year in, year up. There'd be some allowance for that. So you've got to be very careful. The $16 valuation is -- we provide that to indicate a moment in time valuation at the fair value NAV as we call it. In terms of realized transactions, the share price over time has traded a little bit above $12 after the equal access off-market buyback that is currently trading a little bit under $12 at the moment. I mean that's the history of the company. That's the highest price the shares have ever traded at over its long history. So I think you can look at all of those factors, you look at the valuation, you look at the market, you look at the market interpretation of it. And also liquidity in the share. I mean I'm sure you probably noticed the shares are not that liquid. So saying that the price reflects all of these factors efficiently is a bit of a leap given that volume per day can be anything from not shares trade to the low tens of thousands. So all of these factors are relevant, which lead to the strategic review, the Board's movement to consider that. But they're all very good points you're raising.

Okay. And so obviously, the part of the strategic review is saying, well, instead of potentially doing a deal for a large block of stock at $13 and then morphing the vehicle into something quite different, it's quite reasonable to sit down and say, okay, we think we're worth $16. More than half of that's already liquid. The other half, we're confident. We've got a history of realizing our investments in the corporate setting at fair value. We've got a look at doing this thing ourselves at this...

We'll look at all -- yes, we'll look at all those factors. We'll look at all of those and hence, the 3 elements of strategic review. We highlight the proposal from River Capital because we've just received that, and we want to make sure the market is fully informed of where -- of what the Board's thinking. But you'll note there's the other 2 elements. The sale of -- we're saying that all of this work in the last 2 years. If you look at the results, you'll see the returns have been quite strong actually over those we said the past year in 5 years. But going forward, the bulk of our portfolio is cash. So clearly, maintaining that level of returns is difficult.

But we -- given a large of off-market buyback, which intensified -- effectively intensifies the remaining shareholders' interest into those strongly performing assets, like that is an option any day of the week, if you do something like that.

No, that was very a long considered action by the Board again to return value to shareholders. Again, the shares, I don't think it ever traded at $12.

What you're saying it will be -- sorry.

Sorry, there was a judgment made then between what is the right price for a remaining shareholder and exiting shareholder to create a level of fairness. And to be frank, it was a judgment based on advisers and input that the Board made and $12 at the time, the fair value NAV was well below where we are now at that time was sort of back in FY '24. There was a judgment the board made around all of these factors I've been talking about between, again, then what was fair for exiting shareholders and continuing shareholders, that was the Board's assessment. And it was a very successful off-market.

Sorry, don't get me wrong. I'm saying that was a good piece of capital management and that, that piece of capital management is open to you again. If you're saying it's hard to replicate returns when so much of the portfolio's cash. It's easy to translate that cash into an intensified interest into your quality boutiques by doing the large off-market.

Yes. Sorry, I might have misinterpreted the question too as well. The other Board will consider all of that. I mean we always consider on-market and off-market buybacks, whatever we feel is the most efficient way to return capital. So yes, that will be part of the considerations going forward.

Okay. Well, I'll just commend you on your job so far in realizing value in the corporate markets for your assets and the past capital management, I think it's been great, and I hope the board -- I'm sure the Board will work through the strategic review and deliver value for all shareholders.

Thanks, Greg. Appreciate the comments.

[Operator Instructions] There are no further questions at this time. You have another question from Greg Hoffmann.

So I just want to let other people have a question. But in relation to this nonbinding offer, would any tax shares acquired by River principles through the book build be subject to escrow? Or would that only apply to the consideration [ instance ]?

It's -- again, it's very early days, and we'd need to really work through this, obviously, with the River Capital principles, but my understanding is that they would probably apply that any increase in stakes or change in stakes would be subject to the escrow. But again, early days, Greg, and we will update the market under the requiring tenuous disclosure requirements as we sort of work through that proposal and understand it in more data.

And would there be a maximum percentage that we have principles and their associates would be committed to acquire through the [ book billed ]?

Well, I mean there's -- I mean, we'd all be bound by all of the various rules around majority shareholder issues. Clearly, it is a very complicated transaction, what we've seen today, involving movements of shares through time. But clearly, we'd need to be extremely mindful of the takeover provisions and all of the requirements around that. And so would River Capital need to be very mindful.

Yes. I imagine that all of that is potentially forward if it's not [ paid ] in the right way.

There are no further questions at this time. I would like to turn the call back over to Michael Clarke for closing remarks.

Look, thank you all for joining the call. We appreciate your time today. And also, thank you for the questions. It was great to hear or to engage actively with shareholders. Of course, we are available for briefings for shareholders over the next few weeks. We've got a few meeting schedules. So we're very happy to also do that. And thanks again for your time.