Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fundraising increased by 63% year-on-year, reaching EUR 2.1 billion.
- Fee-paying assets under management (AUM) from third parties grew by 14%.
- Management fees from third parties increased by 13%.
- Shareholder returns improved with a 10% increase in dividend per share and a doubling of the share buyback program.
- Eurazeo SE ranked 81st among Time Magazine and Statista's 500 World's Most Sustainable Companies and 2nd out of 283 private equity companies for diversity, equity, and inclusion.
Negative Points
- Net results group share for H1 2024 stood at a negative EUR 105 million.
- Change in fair value contributed to a negative EUR 48 million.
- Balance sheet management fees were down 3%.
- Growth portfolio was adjusted down by 7%.
- Performance fees are still low despite the high level of realizations.
Q & A Highlights
Q: What are your expectations for asset rotation in the second half of the year? Will it be close to your historical average of 25%?
A: We don't commit to a specific number, but we are already at 9% and have a diversified and sizable pipeline for H2. The environment is gradually improving, and while 2024 will be a solid transition year, we aim for a 16% rotation annually to deliver on our share buyback promise.
Q: What is your view on IM Global Partners? Is it core or non-core, and do you expect to sell more of your stake?
A: IM Global is considered core. It has strong exposure to US underlying assets and delivers growth. We sold a 20% stake in 2021 to prove its value, but we are happy to remain a controlling shareholder.
Q: Can you explain your valuation approach and what has driven the changes this half-year?
A: We use EV to EBITDA multiples for buyout companies, adjusting them to align with market conditions. Growth portfolio valuations are based on a discount to the last funding round, currently at 36%. The main drivers for adjustments are sector-specific market movements, particularly in SaaS and fintech.
Q: What are your prospects for fundraising, particularly for the next growth equity fund?
A: Fundraising has been delayed due to market conditions and the implementation of the European scale-up mandate. However, we have a strong pipeline of potential investors and expect to resume fundraising in 2024, accelerating in 2025.
Q: What is your current assessment of the private debt market, and what is the targeted size for the seventh vintage of your direct lending strategy?
A: The private debt market is deepening across Europe, and we see no signs of increased default risk. The sixth vintage was around EUR3 billion, and we expect the seventh vintage to be at least as large, given the strong momentum.
Q: Can you provide a breakdown of your assets by region and your exposure to France and the US?
A: Approximately 40% of our assets are in France, 40% in the rest of Europe (including the UK and Switzerland), and 20% in the US. This is based on the headquarters of the companies we invest in.
Q: What makes Japan an interesting market for you, and are you targeting institutional LPs or private wealth channels?
A: Institutional investors in Japan are underweight in European mid-market investments, which is our core expertise. We are primarily targeting institutional LPs and do not see immediate opportunities in the private wealth channel in Japan.
Q: What new products are you planning to launch in the wealth management segment?
A: We are working on products designed for the European market, including Luxembourg legal vehicles. Our flagship product, ESG3, has been successful, and we plan to launch specific funds tailored to the needs of our distribution partners.
Q: What value creation do you expect in H2, and how will it contribute to net profit?
A: We aim for a consistent 12% return on our portfolio over a three to five-year period. While we don't provide specific guidance, we expect value creation to improve with a slightly better economic environment and strong company performance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
