Good afternoon, everybody. Welcome to our Annual Results Analyst Investor Call. We have with us Harold Boël, our CEO, who will take you through the key highlights of our investor presentation, and then we'll open it up for a Q&A for our analysts. We have people in the room here and also a few online. Until the Q&A, you'll be on mute, and we'll explain how to raise a question when we get there. For now, let me hand over to Harold to take us through the highlights of the past fiscal year. Thank you. Harold?
Okay. Thank you. Hello, everybody, and thank you for being here this morning. The idea is to have a run through the highlights of the numbers. I think some of you are familiar with the model, so I won't go too deeply into that, but share, you know, really what happened in 2025. Just for reminder on this first slide, the highlights of what we do and what happened in 2025, but also who we are. You know, let me start with those basics. We are an investment holding company. We're focusing on growth opportunities across the world and along the whole cycle of the lifetime of a company, from inception all the way to becoming a mature company.
The first part of the cycle is covered by our private funds activity and the latter part through our direct activity. This we do on the basis of a focused approach across five sectors, which you have on the top left corner of the presentation: digital transformation, healthcare, sustainable supply chain, education, and consumer retail. We do this on four locations, Brussels, London, Luxembourg in Europe and Singapore in Asia. 83 employees, 19 nationalities. A very broad, diversified portfolio of 80 direct investments and roughly the same number of general partners with whom we work. If I now focus more on the happenings in 2025, NAV came out at EUR 10.8 billion on 31st December 2025. Roughly split between direct and private funds.
There's always been in recent years a balance between these two activities. I will have some details about what it means in terms of performance. The highlight of the year from a market perspective was the capital increase in October of last year. Closely followed by the issuance of a long-dated bond in November, which means that we stand on a total gross liquidity position of EUR 1.7 billion, and that translates into a net liquidity of EUR 400 million.
We will propose to the general assembly a dividend, a rising dividend, as has been the case almost every year since 1956, and dividend increase will be at 4.6%. If I go to the next slide, a little more details on who we are, and the, you know, the fundamental things that drives our operation, adaptability, an entrepreneurial spirit. We have a long history, so we know about cycles and the key is to distinguish the signal from the noise and to be able to create value across the cycles. This and the two are linked, of course, is by building strong relationships, with everybody with whom we have interactions.
Among these, talent, the quality of our team being the competitive advantage. If I look at the summary of FY 2025, the market has picked up and our level of investment and divestment has picked up last year versus 2023 and 2024. Also in conditions where the ability to provide long-term permanent capital solution was very appreciated. We had a busy deal flow. We were in stage to add a number of companies to the portfolios, and you have them there. They're both on the long-term minority investment, Proeduca first and foremost among them. The more, I would say on the growth side, so companies which also with an established presence and needing growth capital and them thinking about stream and scalable.
Things that are earlier bets, Qargo here in Belgium. PostHog also being a more, I would say, cutting-edge, earlier stage investment. We were also active on the exit side with the realization of 50% of our position in bioMérieux, and the full exit of First Eagle and OrganOx. OrganOx which you will also have seen on the investment side. This was a, you know, a very good investment. The thesis was that a strategic was going to be probably interested in the company and at some point would buy us out instead of the usual period of a number of years. It happened after a couple of weeks.
A good result validating anyway our investment thesis. Portfolio performance was broad across the portfolio, both on the private side, private fund side, and on the long-term minority investment. However, depreciation of currencies, the most massive depreciation of the currencies of the USD against euro that we have seen in a very long time has affected us, as you can see. As you will have seen, a broad part of our portfolio is in dollar, in dollar-denominated geographies, and we suffered from that.
If I look then at where it brings us, it brings us at this EUR 10.8 billion, which translates into EUR 306 per share, and that is comparable to the EUR 312 at the end of last year. Actually, if you pro forma the EUR 306 per share at the end of 2025 against the dilutive effect of the capital raise, you get back to EUR 312 . Basically NAV is broadly flat from year to year. A quick focus, bottom right corner on our liquidity position.
Gross cash of EUR 1.7 billion, net cash of EUR 430 million, which means that, reminding you the financial guidance that we give is to operate with an LTV of between 5% and 10%. With a negative LTV for the moment, we have room to go before this position stabilizes. It means that in the coming years, and it will take the time that it takes, we will be net investors. Also, drawing your attention on financial flexibility, we have EUR 1.4 billion of undrawn confirmed credit lines, and we also have EUR 1.3 billion of uncalled commitments in the private funds.
In other words, that if there were to be, and it can happen, it hasn't happened in the past, but if there were to happen a gross imbalance between capital calls, distribution, and realization in the portfolio, we have the financial flexibility to address our immediate commitments, and sort the situation further. If I have the next slide. This is the split. Won't go into the details. Broadly diversified across sectors, across geography, and across investment style as well as vintage. We think that this level of diversification also allows us is the best measure of risk, that we have within the portfolio. On the next slide, you have the key financial indicators.
They are just the numbers behind the narration that I just gave you. We move on and the KPIs as well. If I look at where the performance comes from, you see that it is in terms of investment style broadly balanced between the different pillars. These are NAV variation, but underneath the graph you have the actual value creation across the portfolio, and you see that we have had a balanced year. We have net inflows for around EUR 200 million. We had a positive market impact.
What we mean is when we look at the fair market value of all of our assets at the end of the year against beginning of the year in local currencies, we have this EUR 1.1 billion of value creation. This is the number you see there. However, with a strong currency headwind of EUR 925 million, essentially on the USD, but also on the Indian rupee. Of course, you know, currency is part of the model. We are every day's buyers and sellers of dollars, essentially. You know, introducing a layer of balance sheet hedging doesn't make much sense because we have the cash hedging inherent to the model.
We fully own that risk. Given the size of the risk, it means that in spite of a flat performance across the year, the underlying performance of the companies, all other things remaining equal, would have been a value creation of the order of magnitude of 10-ish%. Which is close and actually a little bit above historical performance. These currency impacts, we know they come and they come and go. Now, if I look at direct versus private funds, again, balanced pictures between acquisitions and disposals.
Then if I focus on the market impact of the fair value, we see we try to for the non-quoted to distinguish the part of the value creation that comes from the inherent performance of the company. That is most often an EBITDA increase or revenue increase or free cash flow increase, depending on the valuation model that we take. Against that one is positive to almost EUR 100 million. Against that, we look at the evolutions of the multiples themselves. We had a somewhat small headwind from all other things remaining equal. Valuation multiples tended to trend down last year, but EUR 84 million out of EUR 5 billion, it's about 1.1%.
The currency impact of 347. If I do the same calculation on the private funds, of course, we don't have a view on the line by line underlying portfolio company, there are a couple of thousands of them, so that would be a very difficult exercise. But we see that broadly speaking, in local currency, the market impact was positive, very positive actually, in mid-single digits. It's mid-double digits. However, against a currency impact, which was more negative. Logic again, this portfolio, the private funds portfolio has a center of gravity in the US and therefore is dollar denominated.
If I move forward, the top ten investments, this is for your information to give you a little bit of the, you know, we talk a lot about the forest, but it's good that you guys also have a view on the biggest trees. The top ten, not much change into either the who's in the top ten and variations versus the 30th June. It's the same list. The top ten represent 29% of the portfolio. A sizable chunk, but at the same time, sufficient diversification on other lines, reminding you that there are 80 direct lines in the portfolio. Sofina Private Funds, the 10 largest position represent 22%.
Stable also across the years and with the Sequoia relationships, I would say plural, between Sequoia Capital, HongShan, formerly Sequoia China, and Peak XV, formerly Sequoia India, being important relationships there in terms of NAV and also the long-standing relationship with Lightspeed at number two. The rest is also, I think, unchanged versus last year or maybe one or two. If we move on, busy year in investment across sectors, across geographies, across investment style, and also two investments I'd like to highlight are Qargo and Stream, both in digital transformation. These were funding rounds that we were able to lead.
Actually, we're the lead investor of those investors which meant from a market access point of view, that when you're able to lead investments, you have access to more opportunities. In terms of commercial development, this is a good thing. We have strong convictions, of course, on these two assets. Nevertheless, these remain investments, and only the future will tell whether these were the best investments we could make. OrganOx, both entry and exit. Following on the investment, that is very specifically more often for Sofina Growth, because these are businesses whose growth still needs to be fueled.
That is, the advantage of our permanent capital model is that we have the ability, when the conviction is strong on the asset, to make follow-on investments, usually led by external parties or by the whole group of the internals, to in order to help and fuel further growth of those companies. The divestments are more focused. A full divestment of the remaining position in GL events. A top slicing, well, serious top slicing, 50% of our position in bioMérieux. bioMérieux is a, you know, fantastic company.
We're very happy with that investment, but we've been there for 15 years, and it felt the time to have some form of capital rotation, knowing that the stake that was left was still significant in terms of value at work, and made our involvement with the company still logical and worthwhile. Also note, Lenskart and Pine Labs. I think one hears a lot about the fact that the IPO windows are closed and the liquidity is hard to get. These two investments were IPO'd in India. Of course, we still had some partial liquidity. We're still exposed through the lock-up periods.
This is to show that our portfolio is of sufficient quality that it is able to be going on the market. ByteDance it's a regular fixture actually of ByteDance. They have regular buybacks and somewhat of a larger volume this year that allows to create some liquidity. The gross of the largest exposure there is still in the company. Let's move on. Post-closing events. A new investment in long-term minority investment, Cerealis. It's a Portuguese company. It's our first investment in Portugal. Even though this is a geography we've been involved with and have known the ecosystem of family businesses and family companies quite well for already a number of years.
We were able to make that concrete into an investment. Cerealis is the owner of two pasta brands, very popular and leading market share position in Portugal and Czech Republic. An investment alongside the Moreira da Silva and Dominguez families. Some follow-on investments in the Alltruth and a new investment in XBOW. This is an investment in actually using artificial intelligence to completely disrupt, and it's more than disruption. It's creating a market for automatic digitized penetration testing of software systems.
This is an AI that does the red team work against IT systems. On the sustainability side, in 2024, our targets and our decarbonization plans were approved by SBTi, meaning that we have a reduction in Scope 1 and 2, which is what we do by electrifying our car fleet, turning off the lights when we leave the room, keeping a healthily low temperature in the building, as you can discover today. Check on that one. You know, it's a lot of small little things, and we are on schedule for those reductions, buying green energy and so on and so forth. Then on the Scope 3 is to travel intelligently also. Taking the train wherever we can, staying longer in faraway destination, traveling economy rather than business whenever it makes sense, and so on.
Also turning our portfolio to SBTi. We are, we have a line from today all the way to 2040 to be at 100% with by 2029 aiming to be around 40% of the portfolio and with a few companies that have converted. That is moving well on that. This is our way to contribute that our portfolio and ourselves are contributors to the Paris Agreement. Move on. Responsible investment. This is part of our responsible investment policy. We can move on. This has been already shared. With that, we have the annex. I'm just looking at the time. I think it's a good time to stop here and to start the Q&A. We'll have maybe the opportunity to dive into deeper one of the other slides.
Thank you, Harold. Obviously, all the slides are available online and including the annex, of course, with some more deeper dives. We'll open up for the people online. I see Rudy and Amal and Leon there. But maybe first here in the room, David or Livio, if you have a question, please go ahead.
Yes, sure. Just speak into the mic?
Yes, please.
Okay. No, thanks. David Vagman from ING. Maybe on the private funds and more the VC side, what is your look now on their valuation? Would you challenge them more on the valuation methodologies and the market that they use on the types given the circumstances?
Well, it's a question we get regularly. The valuations we use at year end are mostly audited valuations. There has been a third party looking at them. You have to realize that the underlying portfolio of our private funds is, as I say, a couple of thousands of companies. We are, you know, it's almost physically not able to pinpoint all of them. It's a very, very diversified portfolio. It's not in the 7,000. It's not like the top 10 had 50% of the value. It's super spread out. A specific line by line challenge, no, is not possible. What we do do, however, is to make sure that we have all the information, that this information has been audited, that the frameworks under which the valuations are made are clear, and that we understand the valuation policies.
Also that we can do two things. They're point checks. One of them is that when we have companies in the portfolio, that we check how they value common. We are both invested our valuation against theirs. Because we trust our valuation, we can form our view on theirs. The second one is that when there is a sizable exit, that we compare the valuation of that exit against the last mark of that same company in the portfolio. What we have seen is that across time, you know, give or take specific events that happen between the last closing and the moment of exit, these tests are largely positive in the sense that the actual exit value is close, if not close, then superior to the value in the books. Yes, we look at it critically.
We're not able to challenge it line by line and redo the calculation and understand, but we have a number of sense checks to do. Historically, we have not had, you know, surprises on that end. What you have to understand is that with the good funds, their view is, you know, to be able to raise the next one. In order to do that, they know that their LPs are going to be looking at distributions, essentially. LPs, you know, are happy to see the paper value of the holdings increase, but LPs also know that at the end of the day, it's for how much you sell it. That we have, as humans, an asymmetric reaction to good surprises and bad surprises. The good fund managers know that the surprises have to come on the good side.
They have a natural incentive to underpromise and overdeliver on the valuation side. That is especially true, I think, actually it is especially true in VC, where getting your hands on the valuation is not an easy thing to do.
Thank you. Second question on the market, the current geopolitical, let's say, macro environment. Because you've said that you would be a net investor for the foreseeable future. You're also saying that you're looking at things through the cycle. Do you intend to slow down a bit your position of being an investor right now, rather being patient, prudent, given the uncertainties, the multiple level of uncertainties? What is your... What can you do? Because okay, you have your direct investment, but then you have also the funds. Would you advise them to slow down? Can you even say that? Yeah.
Okay. Let's unpack that. On the direct side, yes, indeed, geopolitical tension, resurgence of inflation risk, resurgence of interest rate hikes, all that has an impact on the economy. We are not directly exposed. We don't have first-order exposure to much of that, because we don't have a portfolio in the Middle East. We don't have assets whose profitability are directly linked to energy prices. Energy has a way of working its way through the economy. You know that more than I do. Indeed, a time to be cautious, a time to be prudent, but sometimes also a time to identify a good opportunity.
That in moments where markets are really slowing down, sometimes you have very interesting assets coming to market at that moment. Really keeping a lookout for that. For the moment, on the private market side, I would say we see a lot of opportunities of good quality companies. So a very strong slowdown hasn't happened yet, and we are working with that, taking into account the uncertainties and the likely impact of interest rates and so on. We remain active, actively seeking. Now we will see at the end of the day how much we have invested, because investment discipline remains an essential. What I said about we expect to be net investors, it's an expectation, it's not an objective.
If we don't find those interesting assets, then we, you know, we won't invest. It's as simple as that. On the fund side, they have the discretion. We have discussions with them, and we compare notes on a number of markets where we are also investors. You have to realize the quality of our book in terms of assets is such that we are. You know, history has shown, and these are funds that have been there for a long time, that they have also a very good institutional feeling for when is the time to accelerate, when is the time to slow down. I will not say we don't advise each other.
We exchange notes, and we compare notes and see what they do. Their track record has been excellent. I would say even the other way around, in 2021, of being very strong net divestors, when a whole series of digital market companies went to market, and they in 2020, and especially in 2021.
Mm-hmm
They reaped the gains from that. They didn't stay exposed.
Last question from me for now.
Yeah.
Before, let's say, the Ukraine war, et cetera, we saw before that a strong. It's a bit confusing.
Right.
We saw a strong, let's say, dislocation of share price for software companies or companies exposed to AI. The market turned extremely skeptical or, let's say, negative on, you know, SaaS companies or information services companies, on the stock market.
Mm-hmm.
What is your look, or your view on this? Do you think, like, even Sofina directly could be an investor if you in some of these companies? Or you would rather be patient and wait to see the real impact of AI on these companies?
It's a very good question, and we get it a lot, and it has occupied us in the past months. Just, you know, a few observations. One of them is that this is a scene which is moving extremely fast. Whatever you think today, you have to keep revisiting it because you may change your mind because just things are happening, and the understanding we have of the technology and the impact of the technology changes every day.
However, because it changes so fast, it means that having an attitude where you say, "Well, we will wait for the dust to settle and then we'll start doing stuff, and we'll start getting interested in the stuff," is probably not a good idea, because by that time it would be too late. Because these are such big, massive companies, they would have, you know, run away or the transformation would be too late for us to seize the opportunities and to act upon the threat. We try to develop a view on the likely impact of AI on software companies. What we see is that there's been a very broad sell down in the market.
With an impact on the multiple, almost regardless of how the underlying companies were doing. The markets react like that. We think that the reality is more nuanced. Actually if I take as a parallel what happened in retail, you know, Amazon is one of the most massive and valuable companies in the world, but Walmart is still around. You can't say that, okay, everything that adopts new technology will kill everything that is not adopting the new technology. The truth is, on the disruptor side, you have to find the right business model, and Amazon did. Next to Amazon, there's a whole series of e-commerce companies which are no longer there, and we don't talk about them anymore.
On the disrupted side, there's all other companies that did not adapt to the digital age and who also went. You have winners and losers both on the legacy side and on the new kids side. You know, history tends to repeat itself. I think it will be the same in on the impact of AI. What we see in terms of understanding the technology, you know, the first point, the code and the quality of your code, that's not a protection. That's not a moat. Nowadays, the AI can code faster than all of us together. That's not a protection. You have to look at what other aspects are the protection. First one is to look at what the business does.
Is this a layer or is this a vertical? By what I mean by a layer is visualization. If the stuff that your software company is doing is helping people visualize their data, AI can do that very well. If you are that company, and you're operating on the SaaS model, you have to think, you have to ask yourself really hard question and say, "What am I bringing to my customer, to my client that my client can't do himself?" Then you have to, you know, pivot. A number of companies are doing that because these SaaS companies, they have their, I would say, their legacy light. They have established businesses, but they have engineering teams which from one day to the next, they can have working if they're agile enough to do so.
The second one is, if you are not at the horizontal sort of layer level, do you add value, and do you crystallize workflows that are adapted to the sector in which you operate? You have to understand this, you know, in the SaaS world, there are a number of SaaS companies which are very dedicated to a vertical. Because the view is that that vertical has specific requirements in terms of workflow, in terms of managing the data, in terms of how you connect, and so on and so forth, that are very specific to that sector and which are very hard to map onto a general-purpose sort of other software.
Now, we think that these models probably have a chance, and they will have to use for some of their offering and some of their function. They will have to use and embed AI into their offering, but they have a good chance of surviving. Third one is data. Is the software, the SaaS in question, a generator of data, or is it using data provided by the client? No need to tell you that in one case you have a stronger moat than in the other. Then regulation.
Sometimes you impose to do certain things in certain ways because of the regulation, and therefore, your software has to map the whole regulation bit, which is not something people can do, you know, from their own little IT department. What we've done is that we've identified a number of these structural characteristics, both in the portfolio and in the deal flow, sort of to guide ourselves, to give an idea of an AI vulnerability index, as it were, in both the companies in the portfolio and the ones we see in the deal flow, and to act upon that. Now, we remain humble because as I said, this is a very fast moving sector.
What we've identified is also a number of things that we need to watch out for. One of the assumptions that we make is that the big LLMs will not be able to develop deep sector knowledge. They can do general purpose coding and Claude does it super well, and we use it. Very sector specific, they won't be able to do it. That's an assumption. We're gonna keep a keen eye on that and iterate rapidly. Another assumption is that indeed generating data and being what they call a system of records is a way of being protected.
Again, if AI is able to produce a valuable layer above that, where the system of records then becomes just a commodity, that assumption could be challenged. We keep an eye on what is going on in the market. That's the advantage of the Sofina model, is that we have access to this deal flow, we have access to our portfolio companies, we have a number of software companies in the portfolio. We can keep an eye really on a day-to-day basis, almost exaggerated, but live on what's happening.
We have access to the funds because the conversation you and I are having on this topic, you can imagine that we're having it with all of our GPs who are investing in software, be it on the defensive side of what kind of SaaS is still worth investing in, but also on the offense, the new AI models. That's where XBOW, for instance, is an interesting case, where what they do is penetration testing, and penetration testing is usually done by hand.
You hire a consultant, and they spend a week, and you do it super expensive, and you do it every two years because you have to, and you get a report. Whereas, when you automate this through AI agents, you can do it at the flick of a switch. You could potentially do it on a permanent basis on the basis of all the known, of not only of all the known vulnerabilities of the different systems, but also on imagining, let's say, you know, by searching zero-day exploits as they are called. These are vulnerabilities which have not been identified before and which you identify on the occasion of a red team.
The performance of XBOW on both these counts is, well, it's superior to doing it by hand, and because it's done that way, you can do it more often at better conditions. That's an example where AI is not so much, you know, eating the lunch of software, but it's actually replacing human interventions and creating a market which did not exist before. Sorry, that was a bit long.
No, no.
It's a super important subject.
Would this make you also change the way you invest in this? Because you've said better not to wait for the dust to settle, and also we've seen some really information services companies, you know, with share prices dislocated, et cetera. Would you want to do it yourself and think, "Okay, like this is a listed company which is really truly trading well below its what we think it is fair value," and take your chance and be maybe a bit more opportunistic?
It wouldn't be our style to do that, in the sense that there's an old saying in investment is that you should not try to catch a falling knife. Investing in companies which are distressed because you have a view that they're distressed for the wrong reasons, and you can do something about that is a valuable investment style. In investment, it's more than style, it's really practice. We are growth investors, so our job is to identify companies that have wind in the sails, both from a fundamental and a market point of view, and to accompany the growth and to help them deal with their growth rather than being transformation actors, into.
Because it's much more work, labor intensive, so you have to have a more concentrated portfolio, therefore you're taking more risk. You probably need to do that from a majority position point of view. We are only a minority investment. It's not a bad idea, but at first instance, it's not for us.
My question.
Sorry.
Yeah, my question was more about companies that are still performing well operationally.
Yeah
Where the market has taken a very negative view on the medium long term. We cannot see yet, so if you take some information services company, they still post, let's say high single-digit percent growth-
Yeah
The market has taken a very negative view on their future and so we've seen a massive decline.
Yeah. Info services is one of the places I'd be careful because you know, one of the things you realize is that the addressable market of AI is, of course, it's the software market. That's the one, that's the visible part of the end of the iceberg. The part of the iceberg on the water is the labor market, the white-collar labor market. So the extent to which AI would be able to produce agents that can operate in such condition that they take that over is a big unknown, and that is not something I'd be prepared to take a long-term bet. You may say, "Okay, this is an exaggeration. It will revert to mean, and by that time I will have made my money." Our approach is more fundamental, more long term.
Okay. Thank you. Thank you.
I was wondering, so in the first half, the funds, the fair value decreased obviously because of FX and so forth, but the long-term minority investments did quite well. In the second half, that seemed to have turned around, and they're down on the year. I was wondering if that's operational or is there something else that I'm missing?
Who's down on the directors?
No, the fair value, the long-term minority investments.
Yeah. Okay. They're down on the year from-
They were in the first half, so that's why I.
The value creation, the total value creation is positive. It's slightly level. It's to 1.7%.
I'm looking at the balance sheet, investment portfolio.
Careful that in the balance sheet you have, the volume effect.
Oh, okay.
If you sell more than you buy in a given
Oh, okay. Yeah, yeah.
You have to look at the performance.
All right. Yeah. Yeah, indeed. Secondly, ByteDance, I think in my book it's around 8% of the portfolio, my estimate, which is already on the high side. I was wondering, you know, the valuation keeps increasing because of buybacks. Obviously, I don't think you necessarily value it in that regard. I was just wondering, you're a minority investor, but how might an exit look like in the future? Is that something? Because I assume Sofina normally wants to be. I mean, it's getting a big position.
It is getting a big position. The reason why it's getting a big position is because of success of the company. This is one of the most successful companies from a revenue and profitability growth point of view. That's, in other words, it's a super high quality problem to have, and I remind you, we invested there in 2016. It's also part of the model. I'm just making a digression here that because of our network, because of being in touch with these world-class investors the world over, we have, I would say every once in a while, the opportunity to invest into legendary companies, and that is the case with ByteDance.
The upshot of that, the consequence of that is that our holding in ByteDance is through an SPV. Actually, the way you have to understand it in terms of governance is that it's actually managed as a private equity fund with a single asset. Okay. That's the way the investment was structured. In other words, we don't have control over the exit of our position. That's the downside of it, you know. However, we keep close tabs on the company, of course, you know. We try to have access to as much information.
We don't have strong information rights, but we have other ways of understanding what's going on there and having a view with the numbers and these are in the meantime they are in the market. The view that we have is that this is an extremely profitable and very well run and fast-growing company. We don't have a view on when a potential exit will happen, but we know that in the meantime, the company keeps on growing and actually keeps on investing, and ByteDance is one of the leading AI players in China. There is also a part of our exposure to the disruptors is through ByteDance.
All right. Thanks.
If that answers your other question.
Also, as a reminder, for those analysts on the call, I see Rudy and Amal, on the phone you can do five, and then you will be able to ask a question or, John, if you raise your hand, we can unmute you. Let us know if there is a question from the group online, and then we can do either dial five on the phone or raise your hand. I see Rudy, go ahead, ask your question. If you do five, you will be able to-
Yes.
Can you hear us? Yeah.
Yes. Thank you very much. Can you hear me?
Yes. Hello, Rudy.
Okay. Thank you very much for the presentation. Very interesting. I was pleased by the internal value creation not depending, of course, on the capital increase and also on the depreciation of the US dollar. Thank you also very much for the very good details about distinction between horizontal and vertical discounts. I had a question with regards to your current view on Mistral and on the prospects of an IPO, given the fact that some US players are tending to that route. Thank you very much.
Our view on Mistral is that it remains, you know, very talented management team, and the product that they brought to market is with very strong performance. From the onset, and as time went on, they confirmed that view. They chose not to go onto a head-on competition with OpenAI and Gemini and so on of this world. Rather to have a very focused route to market. Their route to market is their ability to produce small models that are less hungry, less power hungry, less data hungry, but still that provide good performance for a specific job, so more focused than generalist models. With the ability for these models to be hosted on premises rather than on the cloud.
To work with the large companies which they have and also actually governments to provide really artificial intelligence as a service. What they would do is that they would you know bring their models to the premises of the client. With that model also bring what they call the white glove service, i.e., engineers and consultants who are able to implement the model for the specific business uses of their clients. There's a number of clients in trials and actually operational on that model.
It remains, you know, especially on the LLM side, the business models, the pricing, and how everything works is still uncertain and still being discovered by the market. I think the public markets, but you guys know more about that than I do, will need to have more certainty on how the business model works, precisely what the value creation drivers are and so on and so forth, before they're really ready and ripe for an IPO. I don't have a view on-
Okay.
the IQ of Mistral.
Okay. Thank you very much. Another question is, of course, your Sofina Private Funds is in VC and growth capital, of course. Is it correct to say that you don't have 0% exposure to private credit directly or indirectly through these funds?
No, it is correct. We don't have in the private funds funds that do private credit. It's just we venture in growth and some LBO, so we have no exposure there. Our own treasury is invested in debt capital markets instruments. These would be, you know, rated bonds and so on and so forth. That could be either direct or through funds, but from, you know, debt capital markets perspective. Some of our companies rely on private credit for their further growth, but with refinancing horizons, which are, I think, two, three years into the future, and that's on the earliest side. Our sensitivity to direct credit really is zero, or close to zero as you know.
Okay. Thank you, [audio distortion].
Thank you. I also see-
Thank you very much.
Oh, go ahead, please. Okay. Jon Pérez at Kepler Cheuvreux, I see you have a question as well. We'll unmute you, and then you can go ahead and ask your question.
Hi. Hello. Can you hear me?
Yeah.
Yes. Hi. Thank you for the presentation and apologies for not being able to attend in person. I had one question looking, you know, at the exit market. After 2022 and the global rise in long-term yields, there was sort of a bottleneck, right, in the amount of exits. There was a view in the market that even though valuation multiples had compressed over the past few years, the earnings growth had sort of caught up with that in 2025, 2026, we should see, you know, an easing of the bottleneck. Do you agree with that view? Especially if we take a forward-looking view, with the current macro environment, do you think that we could see, should I call that a second bottleneck in exit? How do you see the exit market going forward, basically?
Yeah. That's, you know, a few weeks ago, I would have tend to concur with the view that you have. The geopolitical element and the impact that it can have on interest rates and therefore on market liquidity is there. At this moment it's less clear which way things will happen. What you do see is that it's, you know, it's not a binary situation. There have been exits. If you look at our own portfolio, if you go back to the balance of capital calls and distributions that we have in the private fund side as a proxy for the exit and investment activity in the venture and growth space, you can see that indeed 20...
The back end of 2022 all the way to mid-2024 was very slow, but not zero. From a, you know, a bottom-up point of view, I think good assets, quality assets will find their way to market, even in these circumstances in spite of the uncertainty. What we see in the deal flow, indeed, the phenomenon of against, you know, the peak valuations achieved in 2021, you're not talking about the same multiples anymore. But indeed, earnings and revenue growth have allowed companies to grow into their valuation, and still mean, you know, pretty decent returns for their investors. Does that answer your question?
Yes. Very clear. Thank you.
You are welcome.
Thank you. I also see Amal Aboulkhouatem from Degroof Petercam. You have a line, so press five, and then you should be able to come through here.
Yeah. Good afternoon, and thank you for the presentation. Perhaps just on my side, an open question and follow-up on the previous one on how the current environment and let's say the geopolitical volatility has an impact on the way you are looking at your investment portfolio when it comes to diversification on currencies, but also on the liquidity side. Is it too early for you today to say we are taking perhaps a bit more cautious approach or you keep the same topics and thematics and you continue?
Okay. No, as I said to David earlier, the current environment from a geopolitical point of view and the macro consequences of that is more unstable than it has been, and that's a fact. We always approach our investments with you know, discipline and probably in these times even more than in the past. The way we operate is to take a long view through the cycles.
The way our diligence is conducted really rests on looking at the fundamental quality of the business models that we invest in, the fundamental quality of the setup of the companies in which we invest, the fundamental quality of its management team, the fundamental strength, that's very important, and the growth of the other investors around the table. We look very carefully at what we know the long-term determinants of a company's success are. The fact that the macro is shaky actually makes you need to be very careful if you have a view of taking a very focused bet. This is happening today, and in six months' time things will be like that, and therefore I shall sell at that moment.
Without taking that fundamental views. That is not the style in which Sofina invests. Sofina invests looking at the long-term prospects of the company. In other words, all things remaining equal. If the macro gives a lot of tailwinds, well, that's good. If the macro gives a lot of headwinds, that's less good. If we've invested in the best companies from a relative perspective onwards, we should still be doing okay. That is the view and that is the approach. In a nutshell, yes, we're taking into account the turmoil that we're seeing and the direct first order exposures of that. We're not completely, we don't have strong exposure to those, but everybody will have second-degree exposure to them.
It means, however, it does mean that for people like us who do the fundamental work of analyzing the company and having a view on their prospects from a long-term perspective, actually shaky periods like now can be periods of gain, of having an easier access to company. We're not the only ones in that position. A lot of the funds with whom we work are also keeping prudent but steady in their looking for opportunities in the market.
Okay. That's clear. That's very clear. Perhaps if I just may just insist on the impact of the currency volatility. I heard you saying earlier that you see that as a temporary element. I hope so too. In case it would prolong until 2026, would you consider having perhaps a bit more active or proactive hedging policy?
Well, it's, you know, a question, especially when it shakes like that we ask ourselves. You have to realize that we've put $200 million to work last year, which we bought at 1.17, 1.18. That's the way the cash hedge works. We are now putting money to work. From an NAV point of view, of course it has an impact. From a cash perspective, you're putting $2 to work, which have cost you less than the historical cost in euros.
In that way, you gain back from an investment perspective what you may lose on NAV when the dollar goes down. When the dollar goes up, it makes for an expensive investment, but you're very happy from an NAV and distribution point of view. These things balance out. We've looked at the impact on NAV on a long-term basis, so I think on a four and 10-year basis, and we've seen that on a four-year basis it's neutral actually.
Okay. Thank you very much for your.
This is the way we operate. We have a natural hedge. Now, where you are right in terms of of hedging is that if we, you know, enter into an investment agreement wherein by time of closing in two months' time, we have to, you know, come with currency, so we have to invest $200 million, we will hedge that to protect our returns. And similarly, if we are in a process of selling a company in a currency and we have a big income in a given currency, so order of magnitude of more than 100 or 200 million, we will hedge that also again to protect our return. We will not speculate on these big amounts. On the day-to-day investments, those are the ones that protect our NAV actually.
Okay. Thank you. Thank you very much.
Thank you, Amal. We're actually at the hour. If there are more questions here in the room or online, if you want to raise your hand or a closing question, please go ahead. Otherwise, we'll close the call and let me look for a second. Really, John, I think we're good here in the room. All good. Thank you all for joining the call. Hope it was useful. I'm sure it was. If there is any questions, you know where to find me. With that, we conclude our call, and I look forward to staying in touch. Thank you very much.
Thank you.