AGT Avi Global Trust Plc

AVI GLOBAL TRUST PLC

Monthly Update

AVI Global Trust plc (the "Company") presents its Update, reporting performance figures for the month ended 31 December 2024.

This Monthly Newsletter is available on the Company's website at: AGT-DECEMBER-2024.pdf

This investment management report relates to performance figures to 31 December 2024.

Manager's Comment

AVI Global Trust (AGT)'s NAV increased +1.7% in December.

D'Ieteren, Chrysalis and Harbourvest were the top contributors, adding +113bps, +76bps and +37bps to returns, respectively.

Entain detracted -57bps following the announcement of legal proceedings against the company in Australia, whilst News Corp and Frasers shaved off -43bps and - 30bps. In the case of Frasers, this followed a relatively modest (-4% at the mid-point) cut to full year guidance which has pushed the shares down -17% over the month. We added to the position.

D'Ieteren

D'Ieteren was the most significant contributor to performance over the month, adding +113bps to NAV as the position returned +13%.

As highlighted in September's letter, last Autumn the company announced an extraordinary €74 per share special dividend, equivalent to 39% of the company's market cap at the time. Selling pressure from tax-sensitive investors - who faced Belgian Withholding Tax rates of up to 30% vs. AGT's 10% net rate - pushed the shares down from €226 to a low of €188. During this period, we increased our position by more than 70% at an average price just shy of €200 per share.

This made D'Ieteren our largest position at a 9.3% weight on the 9th December when the shares closed at €200 per share. On the 10th December the company traded ex-dividend of the €74 per share special dividend yet closed the day at €160 i.e. some +27% above the implied ex-dividend price of €126. Net of 10% tax, AGT received proceeds of £35m, equivalent to 3.1% of NAV.

As we look ahead, we expect investors to retune their focus on D'Ieteren's fundamentals. The last year has seen a relatively difficult operating environment for Belron, the crown jewel asset that repairs and replaces vehicle glass, which accounts for 68% of NAV. As higher insurance premiums have seen customer propensity to repair decline, and the insured market (to which Belron are more exposed than peers) cede share to the cash market. During Q3 we saw a number of US auto service peers cut guidance, however D'Ieteren re-affirmed Belron's guidance, which, in our view, speaks to the continued and considerable self-help measures the company can utilise. In 2025 we expect D'Ieteren to hold a Capital Markets Day - the first since Carlos Brito was appointed Belron CEO. We view this and new Belron long-term margin guidance as key catalysts, which should help re-focus investor attention on the attractive long-term outlook for the company and its structural tailwinds.

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D'Ieteren shares currently trade at €162, which represents an 50% discount to our estimated NAV. The October 2024 transaction between Belron minority shareholders at a €32.2bn enterprise value ("EV") pegs D'Ieteren's 50% equity stake at €221 per D'Ieteren share. This valuation was higher than we had modelled - having previously estimated Belron to be worth €24.5bn EV, or 17x our estimate for 2024 EBIT. It does however put a line in the sand for future, more meaningfully sized transactions in Belron's equity, such as an IPO or further private equity sales. As and when these occur, we expect this to be a positive catalyst for D'Ieteren's very wide discount to narrow. As such, despite strong recent performance, D'Ieteren is our second largest position at 7.4% weight.

Bolloré / Vivendi:

In mid-2023 we (re)initiated a position in Bolloré (4.9% weight) - the French holding company controlled by Vincent Bolloré. The investment case was predicated on the attractive NAV growth potential from Universal Music Group ("UMG"); the potential value creation from Vivendi, the French media conglomerate; and with €6bn of net cash at the holding company level, the prospect for simplifications across the notoriously complex and deeply discounted Bolloré group structure. To date returns have been all but zero (+1.0% ROI).

During the month, Vivendi, of which Bolloré owns just shy of 30%, was split into four separate companies - Canal+, Havas, Louis Hachette and Vivendi - with the stated intention to unlock the conglomerate discount at which it traded. Prima facie this has been ineffective: the four sum of the parts now trade collectively at €8.2 per share, versus €8.3 the day prior to the split and €8.0 a little over a year ago when the intention to split up the group was first announced.

However, from a Bolloré perspective we wonder whether this is not such a bad thing after all. Having passively moved through 30% in each operating company, and with more lax shareholder protections, Vincent Bolloré may well exploit one or more of these undervaluations. Eighteen months ago, it was a consensus view that Vincent Bolloré would pay a control premium to take over the entire Vivendi conglomerate. As is often the case, he has dumbfounded fund managers and avoided putting his hand in his pocket. Ultimately Vincent Bolloré is motivated by long-term capital gains, not near-term mark to market movements and we have long been of the view that it makes most sense to be aligned with him at the Bolloré level, and hence we did not hold a direct position in Vivendi.

With that said, when surveying the post-split state of play, the valuation of the remaining Vivendi holding company appears highly attractive, something that has been compounded by non-fundamental selling from passive investors in the days following the split. We took advantage of this and built a direct position such that Vivendi is now an 2.5% weight.

Vivendi's market cap stands at €2.5bn, and its 10% stake in UMG is worth €4.4bn. Adding in another €2.3bn of listed equity stakes and netting off €2.1bn of debt brings us to a NAV of €4.7bn and a discount of 46%. To us it is interesting that this level of discount is wider than the c.40% Vivendi has averaged in recent years despite Vivendi now being a much simpler beast, with an entirely listed NAV. Such a level of discount stands out against liquid European holding companies with listed, hedgeable NAVs, and even more dramatically so when compared with mono-holding companies - which is now in essence what Vivendi is. It seems likely to us that Vincent Bollore will want to monetise and close this discount. In the meantime, this gives us additional exposure to UMG which underpins an attractive NAV growth outlook.

Contributors / Detractors (in GBP)

Link Company Matters Limited

Corporate Secretary

08 January 2025

LEI: 213800QUODCLWWRVI968

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