Allegro Fund III is a $290m turnaround fund managed by Sydney based Allegro (www.allegrofunds.com.au) an independently owned Australian fund manager investing primarily in mid-market businesses within Australia and New Zealand. Allegro currently manages more than $1.0 billion of enterprise value in investments.
Allegro are specialists in “Transformational Capital” – applying capital and expertise to unlock and create value. Allegro invest equity funds on behalf of their investors, and work in partnership with management to realise growth potential and deliver enduring value to their investors.
In September 2008, Allegro became the first fund manager to be backed unanimously by institutional investors to replace the incumbent manager of an Australian private equity fund, when it was appointed to manage the $300 million ABN AMRO Capital Australia Fund II (renamed Allegro Private Equity Fund I).
In June 2015, Allegro Fund II completed its final close with total commitments of $180 million. Allegro II subsequently invested in six businesses across Australia and New Zealand.
Today Allegro is recognised as a leading fund manager in the mid-market segment. Allegro’s team, which includes fifteen investment professionals, bring deep and varied experience in investing, turnaround management and operational value creation. Allegro have a proven ability to originate, evaluate and execute quality deals, and to drive value from mid-market businesses.
An active manager of portfolio assets, Allegro prefers hands-on involvement in both strategy and overseeing operational improvement. Allegro believe that staying close to portfolio companies is the surest path to extracting the value, and returns, that investors demand.
As the winner of the TMA Turnaround of the Year Awards in 2008, 2010, 2011 2012 and 2016, Allegro are the most recognised and awarded turnaround team in Australia. The performance of Allegro Funds I and II bears the hallmark of this distinctive approach.
Allegro Fund III has completed six investments to date; Ngahuia Group (Number One Shoes & R Hannah & Co.), Endeavour Learning Group (ELG), Questas Group, Perth Radiology Clinic, Greenlit Brands Pty Ltd, Toll Express and Camp Australia.
Ngahuia Group. During October 2017, Allegro announced the acquisition of New Zealand’s Leading footwear retail group, which includes Number One Shoes “NOS” and R Hannah & Co “Hannahs”. NOS and Hannahs together have a total of 112 stores across New Zealand and greater than 30% share of the growing value and middle segment of the NZ footwear market.
NOS is a value orientated, big-box footwear retailer offering affordable private labelled shoes between the prices of $20 to $60+. This business is New Zealand’s largest specialist discount retailer with 51 stores across New Zealand.
Hannahs, established in 1968, is the oldest footwear retail chain in New Zealand. The company has an enviable store network of 61 stores located in all major malls and high streets in New Zealand.
Combined, these businesses are the market leaders in New Zealand for shoes retailing from $20 to $200 per pair.
During February 2021, Allegro Fund III completed the 100% sale of Ngahuia Group Ltd to Tahua Partners.
Ngahuia is New Zealand’s leading footwear retailer operating 100 stores across two iconic retail brands, Number One Shoes and Hannahs. Hannahs is one of New Zealand’s oldest brands and has operated for over 150 years while Number One Shoes has operated for over 40 years. Both brands are focused on the value to the lower to middle market segment.
In October 2017, Allegro partnered with Roger and John via an Management Buyout (“MBO”) to acquire Ngahuia from ASX listed Bapcor (ASX:BAP), who sold the business as a non-core asset. Allegro applied its unique approach and large operating partner team with skills across branding, operations and strategy to partner with management to accelerate the transformation of Ngahuia.
The business pursued an aggressive customer and digital led strategy while shrinking its physical footprint and lowering its operating cost base. Online sales have grown significantly to 10% of sales and continues to grow rapidly. The business also invested in its data capability to drive CRM and digital marketing across its 1m+ customer database.
A new store model – ‘New Zealand’s ultimate shoe destination’ – was developed by integrating Hannahs into nearby larger Number One Shoes’ stores. This strategy saved significant operating costs and turned previously unviable locations into successful stores. However, the larger opportunity is to cross sell and upsell across the common customer base of the two brands. The six locations with this model are trading well with significant increases in profitability. The business plans to roll out this model across 30 more locations over the next three years.
This exit provided Allegro Fund III and its investors, including VPEG3 with a strong return across a 3.4 year investment period. The realised proceeds from this exit were distributed by Allegro to VPEG3 on 31 March 2021 and will subsequently be distributed to all VPEG3A investors during the June 2021 quarter.
Endeavour Learning Group (ELG). On 5 October 2018, Allegro was pleased to announce that it had entered into a binding agreement to acquire Endeavour Learning Group (“ELG”) as the second investment in Allegro Fund III. The transaction includes Endeavour Colleges (“Endeavour”) and FIA Fitnation in Australia and the College of Natural Health and Homeopathy in New Zealand. ELG services more than 6,500 students and has a national footprint with 6 campuses in Australia and 2 campuses in New Zealand.
Endeavour is the core business being acquired and is the leading Australian higher education institution in the natural health sector. The college was established in 1975 and currently holds a 75% share of natural therapies within the market.
In July 2023, Allegro Fund III announced the sale of Endeavour Learning Group to UP Education, a Pacific Equity Partners (“PEP”) portfolio company. UP Education is a large, diversified market-leading multi-sector education group that delivers Vocational Education and training, Higher Education, University Partnerships and Online Education across Australasia.
Acquired in 2018, Endeavour was the second investment in Allegro Fund III and over this period Allegro has successfully implemented a number of transformational changes, including separating it from its UK-based parent, establishing a local team and capability, launching new courses and significantly increasing the quality of the digital learning experience.
UP Education operates in Australia and New Zealand, educating approximately 23,000 students each year across 50 campuses and 19 cities with approximately 1,200 employees. The UP Group is led by a capable management team and has more than triple earnings since PEP acquired the business in 2016. Since PEP has acquired the business, UP has made 12 bolt-on acquisitions, and Endeavour represents an attractive strategic fit for UP given its market leadership in natural health higher education and national campus network.
The sale involves Endeavour being merged into the larger UP business, with Allegro Fund III rolling the proceeds of sale into UP’s holdo shares alongside PEP and its existing investors.
Questas Group. On 18 June 2019, Allegro announced the acquisition of a majority stake in Australian industrial firm Questas in a partnering deal with the company’s founder.
Established in 1996, Questas comprises a group of companies operating through a national branch network to provide hydraulic, irrigation, pump and engine solutions to the mining, construction, agricultural and general industrial sectors.
For more than 20 years Questas has successfully acquired, operated and transformed niche industrial businesses to become one of Australia’s largest independent hydraulics and water companies with a suite of brands.
Perth Radiology Clinic. On 25 July 2019, Allegro Fund III announced that they had acquired a significant holding of Western Australia’s largest diagnostic imaging provider, Perth Radiological Clinic (PRC), in partnership with PRC’s doctors.
Established in 1948, PRC is Australia’s largest private partner radiology business with more than 80 doctors (partners and employed associates). PRC services hospitals (public and private), specialist centres and suburban clinics across Western Australia. The company offers a complete and integrated range of radiology services including MRI, CT, US, plain films, interventional procedures and nuclear imaging.
Allegro’s longstanding relationship with PRC through their prior ownership of I-MED Network (an Allegro Fund I investment from 2011 to 2014), of which PRC was a subsidiary, was a critical factor in securing this unique investment opportunity for Allegro Fund III. This previous involvement provides Allegro with a further understanding of the operational strengths of this business and the increasing growth potential of this sector.
Value Retail Group. During November 2019, Allegro Fund III was pleased to notify investors that they had come to an agreement to acquire the Value Retail Group, which includes iconic retail brands: Best & Less and Postie (NZ).
On 9 July 2021, Allegro Fund III announced the exit via an IPO and ASX listing of Best & Less Group, Australia’s leading value apparel specialty retailer, that comprises of retail brands Best & Less in Australia and Postie in New Zealand.
Allegro Fund III acquired Best & Less Group (formerly Value Retail Group and formerly the General Merchandise division of Greenlit Brands) in December 2019. Over Allegro’s investment period, management successfully achieved the follow growth objectives in their investment plan;
1. Completed the effective transformation from Greenlit Brands and the establishment of the Best & Less Group as a standalone and sustainable business, in control of its own strategy, operations and funding;
2. achieved a strong acceleration in the disruption transformation program, completed and implemented a store optimisation program, invested into the e-commerce channel and customer loyalty programs, restated stalled sourcing, supply chain and traffic conversion initiatives and added additional resources to support the baby, kids and women’s categories; and
3. implemented a more ambitious growth strategy that leveraged industry tailwinds and combined new store openings, increased like for like sales growth and high growth in e-commerce penetration, to further gain market share and materially increase EBITDA growth.
Today Best & Less Group operates across a profitable 245 physical store and online channel network and is one of the largest value apparel omnichannel retailers across Australia and New Zealand.
On 26 July 2021 Best & Less Group (ASX:BST) successfully listed on the ASX after experiencing significant institutional and retail investor demand, raising $60 million at $2.16 per share, representing a Market Capitalisation of $271 million. The IPO followed the strategic $40 million equity investment from BB Retail Capital (BBRC), a private investment firm founded and chaired by experienced retail entrepreneur Brett Blundy.
Allegro Fund III sold 41% of their shareholding immediately after the completion of the IPO, retaining 42% shareholding post the IPO offering, which is subject to a staged escrow arrangement until the release of the Company’s H1 FY23 results to the ASX. The partial exit of the Best & Less Group delivers Allegro Fund III investors, including VPEG3, another strong investment return across a 1.5-year investment period, with the partially realised proceeds expected to be received by VPEG3 and distributed to all VPEG3 investors during the September 2021 quarter.
Toll Global Express. On 21 April 2021, Allegro Fund III announced the acquisition of Toll Global Express an Australian transportation and logistics company with operations in road, rail, sea, air and warehousing.
Toll Global Express includes Toll’s courier and express parcels arms, as well as its palletised, intermodal and shipping operations, and its New Zealand business. Its assets include 39 planes, dozens of depots and thousands of trucks and containers. The biggest contributor to the Group is express parcels, which include same-day delivery and next-day delivery and makes more than $1 billion a year revenue.
Allegro is reported to be injecting $500 million into the group separating it from Toll, restructuring the group and paying off Toll’s liabilities. Allegro is expected to rename the express business after the deal is completed (expected to by the end of June 2021), however is allowed to keep operating under the Toll brand for up to two years.
Allegro founding partner Adrian Loader will Chair the express operations with newly appointed Chief Executive Officer Christine Holgate, who will lead the transformation strategy for the growing parcels and logistics organisation.
Camp Australia. During February 2023, Allegro Fund III completed the financial restructure and ultimate acquisition through a debt-to-equity swap of Camp Australia, Australia’s largest out of school hours care provider.
Founded in 1987, Camp Australia has had a strong reputation for delivering high-quality care to primary school-aged children. Camp Australia’s before and after-school care programs are designed to provide children with a safe and supportive environment where they can participate in a range of fun and engaging activities.
These activities are designed to promote learning, social interaction, and physical activity, and they are tailored to suit the age and developmental needs of each child. The company also offers vacation care programs during school holidays, which provide working parents with a convenient and affordable childcare option when schools are closed. These programs feature a range of activities, such as excursions, arts and crafts, and sports, and they are designed to keep children entertained and engaged throughout the holiday period.
Camp Australia operates in over 500 schools across Australia, and it employs over 3,000 staff members who are trained and qualified in childcare and education. The company is committed to providing a safe and nurturing environment for children, and it has a range of policies and procedures in place to ensure the safety and wellbeing of all children in its care.
