Pacific Current Group Ltd

ASX:PAC

Earnings Call Analysis

Robust Growth Amidst Strategic Changes

The company experienced an 8% growth in Funds Under Management (FUM), reaching $15.2 billion, and a notable 20% increase in boutique contributions primarily due to management fee revenue growth. Earnings before interest, tax, depreciation, and amortization (EBITDA) rose by 26%, while net profit after tax (NPAT) grew by 15%, resulting in a $0.15 per share dividend. Despite fluctuations in currency impacting net asset value (NAV) by $0.23 per share, NAV would have remained stable without this factor. A strategic review concluded without a sale, yet the firm remains open to asset transactions that respect partnership agreements. Strong fund commitments are expected to continue, with optimism for fiscal years '24 through '26, despite some short-term revenue pull-forward and aggressive reinvestment by fast-growing managers which could impact near-term earnings. Asset sales could potentially occur, adding to the narrative of growth and value realization.

FUM Growth and New Investments

The company demonstrated robust growth in Funds Under Management (FUM), with ownership FUM rising 8% from USD 14.1 billion to USD 15.2 billion. This growth was supplemented by a strategic investment in an auspicious new partner, Avante Capital Partners.

Revenue and Profitability

Thanks to an increase in management fee revenues, notably from Banner Oak and Pennybacker Capital, the company's EBITDA saw a significant rise of 26%, and the net profit after tax (NPAT) grew by a commendable 15%. In line with this growth, a dividend of $0.15 per share was declared.

Net Asset Value Fluctuations

During the period, currency fluctuations led to a $0.23 per share decrease in fair value adjusted Net Asset Value (NAV). However, without these currency impacts, the NAV would have remained stable. Noteworthy changes in fair value included increases in GQG, Roc, and Pennybacker, offset by impairments at Aether and Banner Oak.

Strategic Review and Acquisition Attempts

The company underwent a strategic review due to acquisition interest, which was ultimately discontinued when it became evident that shareholder approval for the acquirer's highest bid was unlikely.

Portfolio Company Autonomy

The company highlighted that its minority investor status typically prevents it from initiating asset sales without the investment manager's consent, emphasizing the autonomous decision-making of portfolio companies.

Yield Prospects on Fees

There is an anticipated upward trend in the yield on both management and performance fees, attributed to higher operating leverage from rapidly growing companies and more mature funds in the company's portfolio expected to generate increased performance fees.

Fundraising Success and Future Contributions

Pennybacker Capital excelled in fundraising, gathering over $1.5 billion for its latest flagship fund, which will significantly enhance future contributions due to the firm's operating leverage. These contributions are predicted to be multiples higher in the coming years compared to previous years.

Guidance on Fund Growth and Contributions

While there's an anticipation of modest fund size increases and a deceleration in fundraising, the initial seed fund's performance is expected to stimulate growth in contributions over the next few years, albeit at a slower pace.

Value Unlocked and Future Fund Commitments

Recent events have underscored the inherent value in the company's portfolio. Management and the Board remain focused on exploring additional avenues to unlock further value, with strong fund commitments projected through the current fiscal year and into fiscal 2025.

Investment in Manager Growth

Acknowledging that some of the company's fastest-growing managers have invested heavily in their businesses, leading to lower-than-expected earnings contributions, the company remains supportive of this strategy due to the significant long-term payoffs.

Asset Sales and Revenue Growth

A meaningful probability exists for partial or full asset sales, and although reported revenues at Victory Park grew modestly, gross revenue growth was substantial, albeit offset in financial reporting by placement agent fees.

Projections and Dividends

Revenue from performance fees and management fees in the second half of the fiscal year are forecasted to be broadly similar, or perhaps slightly less, than the first half. These projections assume no significant performance fees beyond Victory Park, which may not be a fair assumption given the visibility on such fees. Dividend policy remains consistent with the targeting of similar payout ratios, with variation to be reflected in the final dividend.

Visibility Through Fiscal Year 2028

Strategic investments are on good footing with clear visibility expected up to fiscal 2028. There appears to be no imminent risk for significant revenue retraction from major clients within this horizon.

Earnings Call Transcript 2024-Q2

[Operator]

Good day, and welcome to the Pacific Current Group 2024 Half Year Results Conference Call. [Operator Instructions]. I would like to advise all participants that this call is being recorded. Thank you.

I'd now like to welcome Paul Greenwood, MD, CEO and CIO, to begin the conference. Paul, over to you.

[Paul Greenwood, executive]

Thank you, and welcome to the Pacific Current Group Midyear Results presentation. We appreciate your time and interest in our company. We will be reviewing our financial and operational results for the first half of fiscal '24 as well as discussing our outlook for the business and the rest of this year and beyond.

I'd like to start by thanking our CFO, Ashley Killick and the finance team he manages for their great work in finalizing our financial results. I should also say thank you to the finance teams at each of our portfolio companies. The PAC results are largely driven by the information we receive from our boutique managers and we work hard to invest in strong relationships with boutiques and also rely on them to help us meet our own reporting deadlines.

So let's begin with Page 3 of the results presentation, which offers highlights for the period, including continued strong FUM growth with ownership FUM increasing 8% during the period from USD 14.1 billion to USD 15.2 billion. We made a new investment in a very exciting company, Avante Capital Partners during the period. We also saw notable increases in fair value at GQG, Pennybacker and Roc, though these were offset by an impairment at Aether and at Banner Oak.

Financial highlights for the period included a 20% increase in boutique contributions, driven by 30% growth in management fee revenues. The growth in management fee revenues was primarily a result of increases in Banner Oak and Pennybacker Capital. Our underlying EBITDA grew 26% during the period, and underlying NPAT grew 15%. And PAC declared a 15% -- or $0.15 a share dividend for the period. I'll save comments about our business outlook for the end of the presentation.

Let's go on to Page 4 of the results presentation, which highlights the underlying results in greater detail. The only thing I would really note here is that our underlying operating expenses were very controlled with just 3% growth. And then the obvious difference between the EBITDA growth and the NPAT growth was the interest expense related to our debt facility.

Page 5 illustrates the strong progress we have made over the last several years in terms of growth in management fee revenues. In this period, our performance fees were very much a function of contributions from Roc, whereas last year, they were driven more by SCI. Page 7 of the presentation builds upon the disclosures we made at our FY '23 year-end results presentation, where we provided our internal estimates of NAV adjusted for fair value of all our assets. This graph shows that our fair value adjusted NAV fell by $0.23 a share during the period.

The reason for this was primarily currency fluctuations, which detracted $0.23 a share. In other words, fair value NAV would have been flat if currencies had been stable. In terms of simple changes in the fair value, the period saw increases in GQG, Roc and Pennybacker, offset by the impairments at Aether and Banner Oak. It is worth noting that at the 31st of December, GQG sold at $1.71 a share and that the increase since that time would add nearly $1 a share to PAC's fair value on a gross basis.

Moving to Page 10. I'm sure almost everyone is well aware that in the first half of the fiscal year, PAC went through a strategic review process, driven by interest from a couple of parties to acquire PAC. PAC created an Independent Board Committee that we call the IBC to lead this process. Ultimately, it became clear that PAC would be unlikely to obtain shareholder approval for the highest bid, so we ceased proactively trying to find an acquirer for the business.

Since completion of this strategic review, PAC has been actively soliciting input from shareholders, exploring other avenues to unlock value. During and after the IBC led process, we received numerous questions about whether we can sell to parties our individual assets. And the reality is that there are complexities around selling individual assets that are often overlooked yet are of paramount importance, and these are worth reviewing.

Specifically, asset sales are almost always driven by the portfolio company. And when they decide that they would like to sell some or all of their company. As a minority investor, PAC essentially never has the right to sell its stakes in companies without the consent of the investment manager. In other words, we seldom, if ever, have the ability to compel a transaction.

Lastly, our business is all about relationships. When companies decide to partner with us, they do so because of this trust relationship we have developed with them, in a sense, the partnership is more personal than corporate.

The relationship is important because they are trusting us to ultimately do things like approve their budgets, assist them with distribution and provide advice and counsel to them as they grow their businesses. As a result of these points, there is no reason for portfolio companies to consent to being sold to a party they are unfamiliar with or uncomfortable with. And so that's what -- those are the primary reasons why we can't sell off individual assets, unless there's a willing party at the boutique level.

Page 12 summarizes fund growth over the last several years, which you can see remains quite positive and with almost everyone above the line in terms of positive growth.

Page 13 provides an update on the ownership adjusted funds under management that we began -- we have begun providing to the market. The biggest contributor to these figures during the period were GQG, Banner Oak, Pennybacker and Roc.

Page 14 of the presentation provides an update on the ownership adjusted yield, which, as a reminder, is calculated by taking the earnings we receive from each company and dividing it by the ownership adjusted funds under management. If we take a several year view of this figure, our expectation is that the ownership adjusted yield on both management fees and performance fees will trend upward though not in a straight line. This is because, one, our more rapidly growing company should benefit from their high operating leverage; and two, our portfolio companies will increasingly have more mature funds that should generate greater performance fees.

Moving to Page 15. It just summarizes development at Tier 1 boutiques. There are a few of these I'd like to elaborate on. On the positive side of things, everyone is aware of the robust growth in performance and stock appreciation at GQG. Pennybacker has also had great fundraising success recently. Specifically, in the face of a very challenging commercial real estate market, the firm has been able to raise more than $1.5 billion for its recent flagship fund. The value of PAC -- the value of this to PAC is large because we fully benefit from the firm's operating leverage and thus, the contributions we received this year and next will be a multiple of what we have received in prior years.

On the negative side, we had 2 impairments during the period. The first is for Aether. The firm has been raising its first seed fund, but the raise has gone slower than expected. We expect them to modestly increase the size of the fund from where it sits today, but the slower pace of fundraising means we expect the contributions we receive from them to decline over the next couple of years and this had been reflected in our valuation.

We do believe there's a good chance that the performance of this initial seed fund ultimately drives growth. But if this occurs, it could be down the road, a couple of years. Banner Oak is the other one where we have taken an impairment, and this one may look funny, as its FUM has grown nicely and its contributions to PAC have been very strong. In fact, I believe they were the second largest contributor during the first half of this fiscal year.

As a reminder, when we invested in Banner Oak, we were keenly aware that the largest business risk related to it only having 1 very large client. In the course of our diligence, we've met with that client, and we're comfortable they would remain supportive of the business. Nevertheless, we structured our investment to help mitigate the client concentration risk, and we did this by receiving a disproportionate share of the profits of the business until certain return thresholds have been met.

Even though Banner Oak continues to deploy capital from this client, the client has expressed its desire to gain control over some assets earlier than initially contemplated. The net result is that we don't expect new allocations from the client anymore, and we now have less visibility on what will happen to the business and the assets it currently manages beyond 2028. Until or through 2028, our visibility remains quite strong. Banner Oak may very well raise its own fund, but the uncertainty around the timing and size of such a fund is such that we need to discount the prospects in our valuation models.

Moving to Page 18. Where we talk about the operational outlook, we are gratified that the events of the last year highlighted the value in our portfolio. And while some of this value may be better reflected in our share price now, we believe there may be additional ways to unlock value in the future, and this will remain an important focus of the Board and management. We continue to expect strong fund commitments through this fiscal year and through fiscal '25. This is primarily due to more of our managers returning to the market to raise the next funds and there's a fund series.

Moving to Page 19. We believe FY '24 will be a strong year for PAC than the first half was. And in fact, FY '25 and FY '26 looked good as well. We note that some of our fastest-growing managers have invested more in their businesses than we expected. And that's their earnings contributions during this half were less than expected. We're actually quite supportive of such aggressive reinvesting though, because in our experience, the payoffs for this are well worth it.

Lastly, we believe there's a meaningful probability of having one or more partial or full asset sales during this period. So that concludes our prepared remarks.

But before we jump into questions, I thought I would preemptively answer 1 question we've already received. This relates to the financial statements where it made it seem -- the way the financial statements read, it makes it seem like the revenues at Victory Park grew very modestly, only 5%. In reality, the growth -- the gross revenue growth was notably higher than that. But the reporting standards result in us or in the revenues, their revenues being shown net of placement agent fees. And so that results in a sort of a muted growth profile. With that, we are happy to take any questions that people may have.

[Operator]

[Operator Instructions] Your next question comes from line of Nick McGarrigle from Barrenjoey. Your next question comes from line of Nick Burgess from Ord Minnett.

[Nicolas Burgess, analyst]

Just a couple of questions on your outlook statement that I'm a little bit confused in with. So the first half has seen very strong management fee growth but you're talking about a reduction in the second half. Now the GQG dividend is annualizing about 30% growth, and that is a big part of your management fees as well.

So if we put that to one side, based on those comments, it sort of implies, I think, a pretty big step down in management fees. And obviously, over the same time period, flows have been growing very strongly. So just a little bit more color on that would be helpful.

[Paul Greenwood, executive]

Sure. Happy to respond and it's a great question. So there are a couple of things going on. One is Banner Oak had a very good period. But part of that, a couple of million bucks was, I'd say, call it, management fees being pulled forward. And that ultimately sort of comes at the expense of some future management fees. They sort of wound up an investment sort of sooner than expected and -- but brought those revenues forward.

So the other component is Pennybacker has -- as I mentioned, has had great success in raising their most recent fund. And in the context of raising that fund, or when you raise a fund like that there -- the later -- the latter commitments to the fund have to pay management fees going back until the time of the inception of the fund. And as a result, that results in what they call catch-up fees. So some revenues that hadn't been -- they had received earlier get paid. And so there's a little bit of onetime revenues in Pennybacker's results as well.

I think -- so there's -- now we do get placement fees or catch-up fees. We will -- we tend to get them every single period, but I'd say it was a little higher than normal this period with regard to Pennybacker. And then next period, we -- as I mentioned, we expect higher performance fees. I think if you'll take a look at the 2 halves, I would say they're going to be -- our forecast would be -- they would be roughly similar, though the second half might be slightly lower than the first half in aggregate revenues is -- that's -- but that's assuming no performance fees beyond Victory Park in the second half, which is probably not a fair assumption.

[Nicolas Burgess, analyst]

So sorry, can you just say that again? So aggregate revenue performance fees and management fees, second half, broadly similar to what the aggregate fees were in the first half?

[Paul Greenwood, executive]

I would say broadly similar or maybe $1 million lighter, but that assumes no performance fees really other than Victory Park, which we have some -- we feel like we have good visibility on. And so that's a bit of a wildcard on the performance fees.

[Nicolas Burgess, analyst]

Okay. And my second question, just around your comments that some fast-growing boutiques have been reinvesting.

[Paul Greenwood, executive]

Yes.

[Nicolas Burgess, analyst]

That doesn't sound like it's GQG from what we know.

[Paul Greenwood, executive]

That's right.

[Nicolas Burgess, analyst]

And most or a lot of your other exposure is through revenue or management fee exposure. And I thought your exposure to bottom line results is reasonably modest. So where is that exposure to growth investment coming from?

[Paul Greenwood, executive]

Yes. Great question. Primarily Roc and Victory Park, which are both bottom line deals and both growing very rapidly. And in fact, it's worth noting, too, that the same experience we were having -- if you look at our experience with Pennybacker before this year, they invested -- same thing. They invested probably more than we expected into their business.

And this year, we're -- and going forward, we're now reaping the benefit of that because these businesses do have high operating leverage. And so if they can get that incremental fund raised, you really start to feel it. And so I think that's why what we get in for this fiscal year from Pennybacker will more than triple, I think, from last -- from FY '23. And -- so that's -- we hope to be beneficiaries of that, but that's -- it comes at the expense of this period's earnings.

[Nicolas Burgess, analyst]

And lastly, since I've got the floor, just the dividend was flat despite the strong profit growth and I think the payout ratio is sort of below 50% versus a 70% plus average. And then you're talking about realizations. So how should we interpret that? It seems like you might have some additional capital coming into the business from the realizations and yet you've kept the dividend sort of lower than previously?

[Paul Greenwood, executive]

Yes. And what we've tried to do on the dividend is we used the final dividend to do the sort of differentiation. We still are targeting the same sort of payout ratio. So we would expect the -- if we have a very strong year, that, that would be reflected in the final dividend. So it's just we've always had this sort of second half bias. And so I wouldn't read much into the $0.15 staying flat.

[Operator]

Your next question comes from the line of Nick McGarrigle from Barrenjoey.

[Nicholas McGarrigle, analyst]

I just wanted to dig into the Pennybacker result, because in the notes of the accounts, it looked like it made $27 million of profit for the year, which was a material amount. I mean, does that number go down next year because there was some pull forward or some kind of catch-up on the fundraising? Just trying to think about the profile of those things, like, the huge spike up?

[Paul Greenwood, executive]

Yes, it is. I mean, look, in reality, it is a huge spike up. There will be some -- I wouldn't expect that -- necessarily that level next year because of the -- there will be some catch-up fees in that number. But I would certainly -- it's -- I would expect that number certainly north of -- we're still talking numbers north of 20 of expected profit.

[Nicholas McGarrigle, analyst]

Yes. Okay. And then Banner Oak, is there a risk that the large client start to take money back off Banner Oak with a view that they wind down that relationship? Or where is that kind of committed relationship positioned…

[Paul Greenwood, executive]

It's a good question. I think we are -- I feel like we are in reasonably good shape on the visibility of what to expect through '28. And so I don't think -- I don't think -- as far as I know, there's no risk of -- they can't grab all the revenues back, so I think we're in good shape. And until -- through that period, we expect really healthy yields. Ultimately, in our -- we always make bull and bear in base case models. In our bear case, we still don't lose -- we still don't lose money on the investment. We just don't make a good return.

[Nicholas McGarrigle, analyst]

Right. So in terms of the protections that you've got there, is it kind of a preferential dividend…

[Paul Greenwood, executive]

That's right.

[Nicholas McGarrigle, analyst]

Preferential revenue share? Yes.

[Paul Greenwood, executive]

That's right.

[Nicholas McGarrigle, analyst]

And so you expect to kind of recover your capital, but you probably -- you don't make kind of the returns that you might have thought on in the base case?

[Paul Greenwood, executive]

In the bear case, that's right.

[Nicholas McGarrigle, analyst]

Yes. And then you mentioned in the outlook statement that you're considering one or more full or partial asset sales?

[Paul Greenwood, executive]

Yes.

[Nicholas McGarrigle, analyst]

I just wanted to get a bit more context around that. Are these processes that are in-train and high certainty of happening? And then, I guess, as an extension, what's the capital gains consequence on those sales? And then particularly, if you partially divest some GQG shares, what's the capital gains consequence of that?

[Paul Greenwood, executive]

I will let -- actually speak to the tax consequences. What I'd say is we can't talk about anything even if wanted to, we couldn't talk about things that are -- could be in the works. So what I'd say is there are multiple situations with probabilities ranging from reasonably more likely than not to possible.

And -- but I'd say what's different from this period is it feels like there are more assets where those sort of -- that are potentially in mode to see some sort of transaction. And actually, once you speak to the capital gains or the tax treatment of any of our assets are probably notably GQG.

[Ashley Killick, executive]

No, I think it was Benjamin Franklin who said there are only 2 certainties in your life, Nick, death and taxes, so typically, because most of our assets are offshore. And U.K. and U.S., right, pretty much around that 25% mark, so the tax -- the capital gains that's taxable would pretty much be difference between what we sell it for and our cost base, tax cost both is reasonably consistent with the cost base.

[Nicholas McGarrigle, analyst]

And has -- I mean, for GQG instance -- for instance, has that been provisioned on the balance sheet? And is there any consideration of tax in the kind of management NAV?

[Ashley Killick, executive]

Sorry if I cut in on you. I missed the second part.

[Nicholas McGarrigle, analyst]

Sorry, just maybe go do the tax provisioning first?

[Ashley Killick, executive]

Yes. It's about $14 million in the deferred tax account that relates to the implied capital [ account ] from GQG.

[Nicholas McGarrigle, analyst]

And is that amount netted off in the management's kind of underlying NAV analysis that you did?

[Ashley Killick, executive]

Yes.

[Paul Greenwood, executive]

Yes.

[Nicholas McGarrigle, analyst]

So that NAV is a GQG post-tax, not a pretax NAV?

[Ashley Killick, executive]

Yes, correct.

[Paul Greenwood, executive]

Correct.

[Nicholas McGarrigle, analyst]

And in GQG is the only boutique for which you recognize that tax liability on sale?

[Ashley Killick, executive]

No, no, no. It was everything [ it ] has, so when we calculate the deferred tax computation, we just test the current market value or fair value for GQG compared to its cost base and provide for that the appropriate tax rate. And then on Slide 7, because we have implicit going since Victory Park [ tended back ], and Roc, that's what increased the deferred tax liability to show the additional tax that we believe applicable if we realized both successes.

[Nicholas McGarrigle, analyst]

Okay. That's very clear. Maybe just a final question from me on Victory Park. I mean, they lost money in the first half based on the notes to the accounts. I understand there was some mark-to-market movements there. But can you just give us the ins and outs on, I guess, new fundraisings and old fund closing and the management and performance fee impact of that?

[Paul Greenwood, executive]

Sure. So the business continues to actually perform well. The sort of lackluster bottom line that you've seen is a reflection of those significant placement fees, which are our onetime fees going through the system and as well as a new investment they made in a new business line. It's called Triumph, it's -- I think there's public announcements about it, but it's a capital markets initiative that they have invested in and it's already getting some traction, already producing some revenue.

So I think you're -- that's what you're seeing there. They are, as we have reported beforehand, their last fund, they call the ABOC Fund, asset-backed opportunistic credit fund, was a big, big fund. They are now raising the successor fund of that at the very end of the calendar year, they secured the first commitments for that fund. We expect -- I mean those are in multiple 9-figure commitments. We expect that to that fund to ultimately grow significantly throughout this year. And it has a target, certainly north of $2 billion. Just proportionate share of the profits of the business until a certain return threshold is met. Even though Banner Oak continues to deploy…

[Nicholas McGarrigle, analyst]

Recognized this year and then you get the run rate marked benefit of this couple of billion dollars into more FY '26?

[Paul Greenwood, executive]

You -- look, you would see, there would certainly be some placement fees, but it -- it's not like necessarily placement fees on all the revenues. It sort of depends on who the underlying investors are, and sometimes there are some investors that were -- no placement fees are paid.

So it all depends, but you would see, I think, and Ashley might correct me if I'm wrong, I think the way that it's recognized, I think those placement fees is recognized as that capital is not committed, but as it is put to work. So it sort of, in a sense, results in a net revenue number that -- as opposed to a higher gross number where the placement fees are netted out. Is that accurate, Ashley?

[Ashley Killick, executive]

Yes. Sorry, I think I was on mute. Yes.

[Paul Greenwood, executive]

Yes.

[Nicholas McGarrigle, analyst]

I mean, I've still got the floor, so might as well just keep going. You mentioned, I think, in the outlook statement that you've kind of got a few different priorities for unlocking shareholder value, one of which is reducing overhead. Can you talk through potential capacity for that in the quantum? And then potentially the other point in that comment was around the potential for a pooled fund and just how progress has gone there since you've resumed after this potential sale process paused things.

[Paul Greenwood, executive]

Yes. I'll start with the fund first, which is we -- it continues to be something on the, I'd say, on the drawing board. What we're finding is there's still the -- sort of the uncertainty that arose as a result of all the strategic discussions last year still is impacting, I'd say, market receptivity to that fund.

People are concerned that if we allocate to this fund, do they have visibility on management being there, and that's hard as long as there's sort of ongoing uncertainty around the corporate situation. So I think if we were going to do that, we need to sort of probably let the dust settle a little bit more on the corporate front.

It is still something we are active in, and in fact, I have a fundraising meeting tomorrow morning on this with a large prospect, so it remains something real, but as our sales team feels like the -- it's being a little bit impacted by the -- by some of that -- by some of the uncertainty around the sort of corporate ownership front. And forgive me, what was the first part of that question?

[Nicholas McGarrigle, analyst]

The overhead.

[Paul Greenwood, executive]

The overheads. Yes, look, we don't think we've had flat head count before a while, and so we're -- all I'd say is there is -- we're limited what we can do without reducing functionality, but we can -- but if the cost-benefit of reducing some functionality is worth the cost savings, then that's something we'll pursue. So it's just one of the levers we're exploring here. And I think -- I don't think we have an imminent announcement on that front.

But I'd say it's -- we're looking at everything, trying to unlock more value. I feel like we're making some good progress, but there's -- I think we still believe there are some things we can do to add additional value from here.

[Nicholas McGarrigle, analyst]

Okay. I might ask one last question, and I promise it's the last one. If you've got multiple potential asset sales coming through and you've got a reasonable balance sheet, what's the intention? Or what does the pipeline look like for new investments at reasonable prices? And then you've mentioned buybacks in that bullet point as well.

[Paul Greenwood, executive]

Yes.

[Nicholas McGarrigle, analyst]

How do you think about kind of use of capital in the instance that you do crystallize some positions?

[Paul Greenwood, executive]

Yes. That's a good question. And look, I think we are -- we're maintaining a robust pipeline, and we'd love to put more capital to work. But I think we're probably also looking at buybacks to a greater extent than we have in the past. And depending on what assets are sold, there's -- we could end up -- some of our assets are chunky, and so you can certainly imagine a hybrid solution where some investment -- some capital is redeployed and some is returned to shareholders.

We don't have a definitive answer on that yet, but we have the investments. But like I said, we're looking at buybacks to a greater degree than we have in the past. And I guess that's one way to unlock -- it's a great way to unlock value given that I think we've established that there are some value to be unlocked.

[Nicholas McGarrigle, analyst]

I mean given the debt cost you $3 million of interest in the half, is there capacity to retire the debt? From some of those pricing? Or do you think you'd maintain that [ pursuant ]…

[Paul Greenwood, executive]

We could -- if we retire the debt now, we'd have to pay some prepayment penalties, I think. I'd -- that sort run their course in, I believe, 18 months. So -- and that's something that at the right -- it's just a cost of capital question. But if that's the right use of proceeds, we'd do that otherwise. Otherwise, we're probably a little more reticent to do that now and we'd wait until the debt cost came down.

[Operator]

[Operator Instructions] And there are no further questions at this time. So I'd like to hand back to our presenters.

[Nicholas McGarrigle, analyst]

Well, thank you very much. We appreciate your time and attention and interest in our company. We will be doing a roadshow the week of March 11, and happy to -- if we don't have meetings set up, happy to meet with any and all takers, and in the interim stand available to answer any calls that anyone may have. So thanks again, and have a great day.

[Operator]

That does conclude our conference for today. Thank you for participating. You may now all disconnect.