Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Wendel's Q1 2024 Results Conference Call and Webcast. At this time, all participants are in listen only mode. There will be a presentation, followed by question and answer session. If you want, wish to ask a question, please press star one one on your telephone and wait for your name to be announced. You can also ask your questions on the webcast. Olivier Allot, Director of Financial Communications and Data Intelligence, will read them. I must advise you that this conference is recorded today. I would now like to turn the conference over to your speaker, Mr. Jérôme Michiels, Wendel Executive Vice President and Director of Wendel Growth. Please go ahead, sir.
Thank you, and good afternoon, and welcome to this Q1 in 2024 trading update. I'm very happy to be here today with Olivier Allot and Lucile Roch from our investor relations team, to go through the key highlights of this quarter. I'm on page 3 of the presentation, and I will start with the consolidated sales that we are reporting at EUR 1,848 million, which is 11.7% overall in terms of growth, and 6.9% organic growth. Solid quarter for this Q1 2024. The net asset value is also up by roughly 11% since December 31, 2023, at EUR 178.1 per share.
As you will see, the increase is fully attributable to the appreciation of the share price of Bureau Veritas by more than 20%, since the beginning of the year. We have carried out the deployment of our new strategic orientations with the disposal of 9% of Bureau Veritas share capital. That generated around EUR 1.1 billion of proceeds to us, at a price which is in line with March thirty-first, 2024 net asset value, and at a tight discount of 3%. We are moving forward with the closing of IK Partners, that we expect to finalize in the coming weeks.
Lastly, we started out our share buyback program with 475,000 shares bought back as of April 2024, which is about EUR 39 million, within the EUR 100 million program that we've announced for share buyback. Let's now turn to the consolidated sales on page 4. As I said, they are up 11.7% overall, and 6.9% organically. When you look line by line, I'm sure you will have seen the very good performance of Bureau Veritas, announced yesterday.
Q1 posted 8% organic growth, which is a very good start of the year, especially when you look at the different divisions with notably consumer products resuming a good level of organic growth, slightly north of 6%, as well as the other divisions that have performed extremely well over the first quarter. Stahl, yeah, has also had a very positive quarter at 0.5% organic growth, which is a recovery compared to the last quarters, with a volume growth recovery after second half of 2023, where we have seen some destocking effect. This quarter starts in a positive territory with more than 3% volume growth for the quarter.
We are extremely pleased with the integration of ISG, the ICP packaging business, packaging coatings for packaging that we bought from ICP, and this generated a scope effect of 10.9% for Stahl during Q1. Scalian, as you might remember, Scalian has a different reporting period than Wendel, and in this chart, well, in this table, what you see, 137.5, are the sales for the three months ended December 31. If you were to consider the sales for the first quarter, they came in at EUR 140.6 million. That's the small number you see underneath the Scalian line. A total growth of 1.3% and an organic growth of 0.2%.
The market is difficult, and Scalian has done better than most of its peers, but as you might be aware, the engineering and IT services market is less favorable during this first quarter. We are pleased with the performance of Scalian that has also been affected by a seasonal effect. So this 0.2%, as I said, is better than the market, especially when you take into account this seasonality effect. CPI is up 9.7%, strong organic growth continuing on a very good momentum. And lastly, ACAMS at minus 0.35% organically.
This is the result of the continuous growth in the core North American banking sector, as well as market share gains in Europe, that have been offset by delayed agreements with certain large enterprise customers that have shifted to Q2. We are confident that the company will resume growth where we typically see it, but this Q1 has been affected by delayed signatures of agreements. So in total, EUR 1.8 billion, 11.7% total growth, and 6.9 organic.
External growth at 9.8%, mostly as a result of the integration of ICP and some scope effect at Bureau Veritas, and -5% foreign exchange impact, largely as a result of the foreign exchange impact at Bureau Veritas. If we now turn to the net asset value, on page 5, 178.1 EUR per share. This includes EUR 4.6 billion of listed equity investment. This was before the disposal of 9% of Bureau Veritas that we carried out early April.
So if you were to strip that out, you would be looking at 3.5, roughly, listed investments, and obviously the cash balance that you see there of EUR 2.3 billion would have to be increased by EUR 1.1 billion to EUR 3.4 billion, sorry. Then these data assets, EUR 3.3 billion, this takes into account the disposal of Constantia that has been carried out earlier this year. The rest is unchanged versus December, pretty much. So in total, EUR 178.1, the discount has slightly contracted at 48% versus around 50% at the end of last year, so still at the high level.
When you compare to the December 2023 NAV on page 6, we are showing on the components of the growth on this chart. So, it mostly results and substantially results from the increase in Bureau Veritas share price, which has been 23.4% year-to-date. Unlisted assets are pretty much unchanged with a progression of less than or around EUR 1 per share, which is the result of both the change in multiples.
As you know, we calculate NAV at the end of the quarter based on peer multiples, and some very slight changes in the reforecast from our unlisted companies that we have taken into account as well, resulting in a net NAV per share of 178.1 EUR at the end of March. From a from a liquidity and and net debt standpoint, we are in a very strong position at the end of March, with EUR 2.3 billion of cash, supplemented by our RCF undrawn of EUR 875 million, fully undrawn. So the average cost of our debt is pretty low at 2.4%, especially in current markets where interest rates are much higher.
Our average maturity is beyond four years, and we have strong ratings with stable outlooks both at Moody's and S&P. Our loan-to-value ratio is at 0.6% at the end of March. Again, this was computed without taking into account the disposal of our of a 9% stake in Bureau Veritas, nor does it take into account the acquisition of IK that we expect to close in the next weeks. The sponsor money commitments associated with our investments in IK on the acquisition of IK, and the CPI dividend that we received early April for around $100 million.
So if we were to include all of the above, we would be looking at a negative loan-to-value ratio, so minus 5.1%, which means that we are in an excess cash, net cash, position, based on all of the above, again. And our total liquidity would be of EUR 3.6 billion in total, taking into account the closing of IK, including the sponsor money commitment, the disposal of BV, the CPI dividend, and the remainder of our share buyback program of EUR 100 million, which is around EUR 60 million, still to be carried out within this program. So very strong liquidity, long average maturity, and low cost of debt.
So in a nutshell, Q1 has been quite dynamic in terms of the performance of our portfolio companies, as well as for Wendel. We have energetically deployed our new strategic directions that we have detailed at our Investor Day late last year. So, we are now in a very strong position in terms of liquidity with EUR 3.6 billion at the end of March. And we have at the end of March, adjusted for what I've just mentioned, which means that we have the firepower to invest both in permanent capital and to continue building an asset management platform.
We are actively looking at opportunities, obviously, to create more value for our shareholders and, in the end, sustain double-digit total shareholder return. Thank you very much for your attention, and I will now be very happy to take your questions.
Thank you, sir. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Once again, please press star one one on your telephone and wait for your name to be announced. If you wish to ask a question via the webcast, please type them in the question box and click submit. We are now going to proceed with our first question. The questions come from the line of Geoffroy Michalet from ODDO BHF. Please ask a question. Your line is opened.
Hi, gentlemen. Thank you for taking my questions. I have two. The first one is, could you elaborate a bit on the rationale of doing a dividend recap on, on CPI, you know, while you, you have currently pro forma EUR 3.6 billion of cash, or of liquidity? Second question is on the valuation of unlisted asset. I know that you, you don't provide granular information, but would you say that it's fair to assume that you have revised slightly up CPI and Stahl, and slightly down ACAMS and Scalian? Thank you very much.
Thank you for your questions, Geoffroy. So let's start with the first one on CPI. Well, CPI was financed with a unitranche debt previously with funds actually providing debt to CPI. And we saw an opportunity to releverage as the company, you know, had paid down some debt and basically seen a strong, very strong increase in EBITDA. We thought it was a good time to releverage and improve basically the capital structure. We were down to an EBITDA multiple of 3.75x, which is fairly low for such a cash generative business.
As the market reopened for leverage loans, we refinanced in the market at very favorable terms to re-increase leverage close to 5x. This has been done very successfully by our teams. This is, I would say, a logical move for CPI to go to those syndicated loans in the leverage finance market, as the company has grown in size and moves into this territory. So, you're right, we already have a lot of cash at the holding level, but this was really an excellent timing to issue in this market and move to a more standard LBO financing under very favorable conditions.
Regarding the valuation of unlisted asset, you're right. I mean, we are not providing any detailed information to the market on the components of our net asset value. Just, I mean, I will just say that, there has been very, very minimal moves in terms of net asset value at the end of March, compared to the end of December. When you look at the unlisted assets, we are talking of a 1% change, and really it's the result of very, very small pluses and minuses. So there is not one line, you know, which is increasing significantly. You're really looking at very, very small variations, like ±1% on each line, and altogether it's a +1%, so really nothing there to comment specifically on.
Thank you very much. If I may just catch up on the CPI dividend recap, does that mean that you don't-
Yes
...see any M&A opportunities in that field? I mean, historically, it was not really a-
No
... build-up story, rather an organic story, but, it doesn't change, it means?
No, we do see some opportunities. We have a pipeline, we have looked at a few, and there are some opportunities that are live within the pipeline. But you know, CPI is not, is a very cash generative company, fast-growing company with a high level of EBITDA. And most of the targets that we see can be executed under the new financing and the new capital structure. If ever we come across a larger opportunity, I think we would be certainly happy to put equity at work in such a good transaction and in such a good investment. But I don't see that materializing, because as I said, the targets that we are looking at or that CPI is looking at are of such size that they can be acquired by CPI under the capital structure without requiring any significant need for new equity.
A last one, and then I stop. Is the covenant,
Yes
... disclosed for CPI?... And if yes, at which level?
If it's not disclosed, it's going to be disclosed in our financial statements that for the first half or the second half. So, but it's, there's nothing fancy there. I mean, it's a typical transaction, so... And we don't have an issue with that. I mean, we have sufficient headroom with regards to covenant. As you know, CPI is highly cash generative, so, given the leverage that the company now has post-refinancing, even with that level of debt, we have absolutely no issue with regards to covenants.
Okay, that was it for me. Thank you.
Thank you, Geoffroy.
Thank you. We are now going to proceed with our next question. The question's come from the line of Alexandre Gérard from CIC. Please ask the question.
Yes. Good afternoon, Jérôme, Olivier, and Lucile, and thank you for that presentation. Two questions on my side. In the press release, you qualify your portfolio of opportunities as being rich. Can you please comment further on that? And, Wendel was mentioned in the press recently as being potentially interested in the French fintech company, Harvest. Can you confirm that? And also, still on the investment side, would you be ready to consider opportunities sold by IK Partners? For example, Eres was sold by IK this week to Eurazeo. Is this something that you studied? And, theoretically speaking, would you be ready to buy companies which are being disposed by IK? And second question is on the financial communication side.
It seems that many of your competitors are moving and changing their reporting standards, adopting the IFRS 10 accounting standards. Would you be ready to do that? Don't you think that this might help also to read your numbers? And we saw also a few weeks ago, Exor in Italy, which has more or less the same portfolio structure as yours doing that. So would you be ready to do that? Thank you.
Thank you, Alexandre. Very good questions. On the pipeline, yes, we are active, as always. So we have a good list of opportunities that are attractive and that our teams and we are actively working on these. I'm not going to comment specifically the name you mentioned, because this is our policy, basically, not to comment any rumors from the press. But yes, we are active. We, as outlined by the executive board at the Investor Day, we intend to further invest in the permanent capital. And, given the level of liquidity that we have, we are actively looking at new investments, both on the permanent capital side and on the asset management side, to grow our platform there.
Would we be ready to consider opportunities coming out of IK? I think it would be a bit awkward to be, you know, the controlling shareholder of IK whilst buying businesses from them at the same time. We are interested in the general sector of independent financial advisors and globally, financial services, which is the sector of Eres that you mentioned, but specifically, we did not work actively on Eres. It's a very good exit for IK, and we are very happy, obviously, about this.
But, we're not pursuing actively opportunities that should come out of IK Partners. Regarding your question on IFRS 10, it's not an option which is open to us at the moment. But, you're right in saying that it's increasingly popular within the investment holdings. I think that it can give a better visibility on the financial statements when you have a sizable asset management business. Because, I mean, obviously aggregating the financial statements of Bureau Veritas with a significant asset management business will certainly raise question at some point, someday. We are not there yet, so we will be looking into it in due time. I think at this moment, it's not open for us.
I've seen, just like you, that Exor has communicated about this, so, people are moving towards this exemption from consolidation, but, it's not open to us. I'm sure we'll consider it down the road whenever it becomes open.
All right. Thank you.
Thank you. Thank you, Alexandre.
We are now going to proceed with our next question. The question's come from the line of Grégoire Hermann from Berenberg. Please ask your question.
Hello, everyone. Thanks for taking my question. I have three, please. The first one would be on the cash. I think you're now piling quite some substantial cash at the holding level. I was just wondering, where is it sitting at the moment? Are you just keeping it in your bank account or using, like, very short maturity notes? I know it's meant to be deployed, but for the moment, it's sitting on your bank account and for at least the start of the year. So, this could mean substantial interest income here, and if this would be the case, would you consider redistributing it to shareholders? Or actually would consider just it's as deeper pockets for more expenses?
The second question I would have is actually kind of a read across with the CVC IPO today. I think we're seeing them trading at quite some high level in terms of fee-related earnings. Just wondering here, when we look at the acquisition price of IK Partners, how do you feel about that? It looks like you had IK Partners at a very decent price. Obviously, the two companies are not really comparable, but the... Are you confident that you can still target these kind of prices for the next acquisition that you are planning to make? Thank you.
Thank you. So on the cash, yes, we have a lot of cash at the moment, but we are actively managing it. It's not sitting on our bank accounts. It's actively managed, and we are receiving interest on this cash or making a return on this cash through investment in very, very low-risk securities, with liquidity. We might, in some instances, be ready to surrender a bit of return, if we draw short-term. So we have some securities that, you know, bear interest at 4%, or even slightly more than 4% over six months.
But if you repurchase them, then you get a lower return. So provided we keep invested for six months, we might for some investments receive 4% return without any significant risk. So this is what we are talking about. Not all our cash can be invested under such conditions, but until now, we've done pretty well, thanks to our treasury team and our CFO, who has been very active in terms of managing this cash. We don't intend to redistribute cash more than the dividend that we have increased by more than 20% this year already.
So this is a significant increase, which is the result of our ambition to develop an asset management platform, which will result in a higher dividend now that we are determining the dividend pay as a percentage of net asset value, and that we intend to increase that from roughly 2.5%-3.5% in the future. So we are already talking of a good level of distribution, supplemented by share buybacks, and we've always said that we'd be opportunistic in terms of share buyback. We've announced a EUR 100 million program that has been completed for about EUR 40 million to date, so EUR 60 million remaining.
Once we will have completed this program, we might again launch a new program, depending on market conditions and on priorities that we see. But I think our number one priority is to invest in attractive companies for the permanent capital, as well as growing our asset management business towards the objective of EUR 450 million fee-related earnings in 2027, and that's what we are doing every day. And it's about finding attractive opportunities and getting them at the right price. How do we feel about the acquisition of IK Partners? We feel very good about it, especially as the business is developing very well in terms of fundraising as well as in terms of performance.
As Alexandre mentioned it, Eres was, for instance, an excellent exit, but before that, we also had some very good news at IK Partners. We are very impressed and very happy for the CVC IPO, which demonstrates that public shareholders are very keen on the good-performing asset manager. CVC is certainly one of the best in Europe. So, it's all very positive for the sector that this IPO is going well, and especially in the aftermarket. What are the implications for us in terms of our asset management strategy? I think our strategy is unchanged. It's still about building a sizable platform, and we hope to come back to you in the following quarters with news on this strategy, as well as on the permanent capital side.
Very clear. Thank you.
Thank you.
Thank you. We are now going to take our next question. The question's come from the line of Arnaud Palliez from CIC Market Solutions. Please ask your question.
Yes, good afternoon. Thank you for taking my question. I have two questions. The first one is on Stahl. I would like to know what is your current view on this asset following the buildup you made with the acquisition of ICP. Do you expect additional buildup opportunities for Stahl? Or is it an asset that on which you consider today that the maximum in term of scaling up this company has been done? And the second question is, I'm going back to the CVC IPO. Do you, in your strategy to build up a larger asset management platform, can we expect some acquisition of a listed private asset managers? Is it something you're looking at, or you are only looking at companies that are still private?
Thank you, Arnaud. So on your first question, Stahl, yes, we are looking at additional build-up opportunities. As I said, we are extremely pleased with ICP in terms of positioning Stahl towards the coatings business. And in terms of synergies as well, it has gone extremely well since the acquisition about a year ago. It further expands the exposure to an interesting part of the business, and we are actively looking at other opportunities to further expand Stahl's exposure to higher growth types of businesses, provided that they generate the same type of profitability than the rest of the group, and there are some opportunities out there that qualify.
So, we are supporting that, and management is working on that. So, we are not of the opinion that we've reached the max, a max. We think there is more to come in terms of expanding Stahl. And, regarding the potential acquisition of a listed business, well, never say never, but until now, the pipeline is more for private targets. There are some asset managers that are unlisted, you're right, and we might look at them. But until now, we have rather focused on unlisted opportunities. But let's see if we can materialize a few of them in the next years.
Okay. Thank you. Just to be a bit more precise, you don't expect to just purchase minority stakes in listed private asset managers?
No.
No.
No. Our strategy is to have control in asset management. Would make no sense for us to buy a minority stake in a listed asset manager. We are really looking at developing an asset management platform for private markets, and having control is very important for this strategy.
Okay. Thank you. Thank you.
Thank you!
We have no further questions.
I think we have questions coming-
... at this time on the phone.
Okay.
I'll hand back to you for web questions.
Yes, I think we have questions. Yes, we have a question coming from the web, Olivier?
Yes, we have a question from Alexandre Cadas. Does the sale of Eres by IK Partners at quite a good price will change anything to the valuation of the IK Partners acquisition for you?
No. Although it's good for the business of IK, so... But it doesn't change the valuation parameters of the closing.
Okay. A question from three questions from Samarth Agrawal. Some of them were already asked, but Samarth wants more details. In one question about portfolio valuation within unlisted assets, which grew only modestly, while there was a rebound in broader market valuations during the quarter, was the total unlisted valuation overall impacted by any particular asset, or is it a function of sectoral positioning?
So there was no particular impact by one asset. And within the total, it's pretty evenly spread in terms of pluses and minuses. As I said, yes, we've seen some positive multiple effect here and there, although it depends on the companies, and some slight changes in terms of reforecast altogether. And if you add up some foreign exchange impact on our investment in the U.S. and other small items, that's what results in the 1% change that we're seeing. But within that, again, there is no particular impact that I would highlight, because we are really talking minor changes making up this 1% change.
Thank you. Question about related to the liquidity. How does your current principal investment pipeline looks like? What are the near terms plans of capital deployment into third party asset management business? And three, is it also feasible to expect a stronger buyback program, given the very strong cash position and the wide NAV discounts?
Thank you. Well, the pipeline looks healthy and busy, both on the permanent capital side and on the asset management side. We internally refer to Q2 as being the deal season, pretty much in the investment world of the PE. So we have active opportunities right now. Our teams are very busy currently. We'll see if we prevail and manage to buy the targets that we are looking at. We have ample liquidity, as you said, to execute. Will we improve or increase buybacks as well?
Well, we have this EUR 100 million program outstanding that we are making progress on, and as we always say, we will stay opportunistic and decide once it's completed, whether we do another one. But we see effective opportunities, and I think it's about repositioning Wendel towards with new investments on the permanent capital side and growing the asset management business. These are really the two priorities. I think buyback comes as a distant third behind those two very important priorities of our strategy.
Thank you. We have a question from Simona Sarli from AlphaValue. It's about the sale of 9% of Bureau Veritas. So Bureau Veritas remains the main driver of your operating performance and your dividend income. When do you think that IK Partners will make full contribution to your dividend income? And when you say pro forma of IK Partners acquisition in your NAV calculation, are you referring to EUR 383 million or EUR 255 million? If I've understood correctly, IK Partners is just the first step in building your asset management business, what would be your asset under management target?
Lots of questions. Thank you. So, in terms of magnitude, post the disposal of 9%, we are looking at a net asset value at Bureau Veritas of EUR 3.3 billion. The acquisition of IK is going to represent EUR 383 million for the 51% that we are acquiring, to be increased by the sponsor money commitment that we will have in the funds of IK. At this point, we estimate that we should be around EUR 300 million at closing. So IK is going to be 383 plus 300 or about, so shy of EUR 700 million. We, Bureau Veritas is going to continue to grow.
As you know, the company has unveiled the LEAP 28 plan at their capital markets day, which calls for an improved organic growth profile, an improvement of profitability, a more active M&A policy. So we expect Bureau Veritas to continue to grow from this EUR 3.3 billion today. And we expect to deploy capital in IK as well, as a sponsor of their fund. And at some point, we will have the option, the possibility to acquire the remaining 49% of the share capital.
But I think it will take more IK before we reach EUR 3 billion, but that's what our teams are working on to expand our asset management business organically, obviously through IK, through the increase in valuation of the GP, as well as the performance and the funds that we will deploy in the fund, in the funds as a sponsor. And then the acquisitions will help us reach the EUR 150 million FRE that we are targeting for 2027. I think it's not the right time to compare Bureau Veritas with IK or permanent capital with asset management, as it is only at the beginning, but we are very pleased by the beginning. IK is a wonderful company, and we are very happy to be able to become the controlling shareholder of IK, and to support such a good team and such a good track record.
Thank you. We have additional questions from Simona Sarli. As usual, after this quarter, what do you think of the current environment for private equity? Do you think that IK Partners will be able to do as good a deal as they did for Eres? And what are your cash inflow targets for IK Partners for 2024, 2025 and 2026?
Thank you. Very detailed question again. Well, I think private equity is an asset class that is growing more and more capital, that has been growing more and more capital over the past years. It is still a very attractive category when it comes to investing, as demonstrated by the performance of IK and other asset managers. Some of you were talking of CVC, and so we now have public information on the performance of this asset class, which has been very good and remains very good. There is some liquidity, as demonstrated by IK.
They've been able to sell at, under very favorable terms, a long list of businesses over the past 18 months, which is why they are successful in raising new funds. So we expect that to continue, and the market is also helped by the reopening of the leverage market as we have seen in the US with CPI, and we have seen that as well in Europe with already a handful of transactions have been reopened the leverage market. So there is liquidity, there are some funds to be invested, and the performance is very good. So we are confident that this pattern will continue and the trend will continue.
In terms of our expectations for the cash flow of IK, we are not entering into those details. But we will report on IK once the closing will have been done, on a quarterly basis, and you will get some information there, on IK.
Thank you. We have no more question on the web or by phone, so I think you can conclude.
Thank you. Thank you very much. So, thank you for having attended this call. The next event will be the AGM for us on May 16, and then the H1 results on July 31. Thank you very much for your attention, and have a good day.
Ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.