NB Private Equity Partners (NBPE)

06/05/2022

Results analysis from Kepler Trust Intelligence

NB Private Equity Partners (NBPE) has released its financial results for the year ending 31 December 2021. The trust had its best year on record, delivering NAV total returns of 44.8% in USD terms and share price total returns of 65.0% in GBP terms. This also marked the third consecutive year that NBPE has delivered double-digit NAV total returns for shareholders.

Underpinning this record year of performance was continued strong operating performance, with revenue and EBITDA growth of 27% and 28% respectively and a record level of realisations. In total, 14 companies announced full or partial exits, at an 83% increase relative to prior year valuations and a 3.3x multiple of cost.

Those exits and other portfolio realisations resulted in $389m of proceeds. NBPE now has $402m of available liquidity, with $102m in cash and $300m from an undrawn credit line. However, NBPE's investment level currently sits at 107%, meaning the trust can afford to be selective when making new investments.

Kepler View

Realisations have been one of the driving forces behind much of NB Private Equity Partners (NBPE's) success over the past three years and 2021 was no exception. A raft of dealmaking helped drive strong returns, as well as valuation increases as a result of strong operating performance from the existing portfolio.

On a weighted average basis, the companies in the underlying portfolio generated LTM revenue and EBITDA growth of 27% and 28%, respectively in 2021, well ahead of most listed equities. With an average age of private investments of 3.4 years, value creation is well-underway across the portfolio. In addition, value increases across the portfolio were driven from holdings which IPO'd and which NBPE continues to own shares in. At the year end, 17% of NAV was represented by public holdings, some of which are represented in the largest individual holdings in the portfolio. Given the falls in public markets since the financial year end, this has been the driving contributor to the fall in NAV we have seen since then.

The strong performance during the year reflects the rigorous process the team uses to assess potential investments, not to mention the underlying strength of the companies in the portfolio in terms of revenue and earnings growth. The team prefer companies and sectors backed by megatrends, with high-growth or secular tailwinds, and in many cases, high barriers to entry or the delivery of mission-critical products or services. Key sectors include technology, industrials and industrial technology, consumer/e-commerce and business and financial services.

NBPE's goal is to invest in private companies and deliver long-term capital appreciation to shareholders and income through the semi-annual dividend. It attempts to do this by co-investing alongside private equity managers with whom NB has strong relationships. This means that it gets access to lots of deal flow, often on a management fee and performance fee-free basis. Importantly, in this way the investment manager's team can manage cashflows and deploy capital in a nimble and efficient manner, without the need to over-commit to funds or add more balance sheet risk.

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