Good day and welcome to the AURELIUS Equity Opportunities Analyst Conference, H1 2022 report. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Matthias Täubl. Please go ahead, sir.
Hello and welcome to today's call about the first half year, 2022, of AURELIUS Equity Opportunities. My name is Matthias Täubl, CEO of AURELIUS Equity Opportunities. I'm here together with our CFO, Richard Schulze-Muth, and we are happy to take your questions at the end of the presentation.
Let me jump straight to page four, where we can see the highlights of the first six months of this year. In general, it remains a challenging environment. Therefore, we are quite pleased with the outcome of the numbers for the first six months, which are still showing a very robust business model of AURELIUS. Very strong P&L, which means operational performance of our portfolio companies.
We are still sitting on a decent cash level, which did come in with around EUR 310 million after the dividend payments and share buyback of EUR 41.5 million and cash in from different disposals. Quite a decent cash level which gives us firepower for doing more deals.
The net asset value remains above EUR 1 billion, pretty much on the same level as it was by end of the first quarter 2022, and it's also reflecting the operational performance, as I've mentioned before, of our existing portfolio companies. We have seen a very strong transaction activities in the first six months. We have done seven add-on acquisitions, five co-investments together with the fund, and two exits. I will talk about them in a little bit more detail.
Right now already as an outlook, it remains challenging, which means we have to be close to our portfolio companies, to our existing portfolio companies with our task force experts. On the other hand, uncertainty and challenging environment typically means also a huge potential for us on the buy side. I would expect some more deals to be signed and closed in the upcoming months. Let me now hand over to Richard Schulze-Muth, who will talk about the numbers in more detail.
Yeah. Thank you very much, Matthias. Welcome also from my side to our H1 2022 earnings call. Let's start with our key figures on page five. Our total consolidated revenues came in with EUR 1.591 billion. On an annualized basis, the revenues from continued operations were EUR 3.1969 billion compared to EUR 2.652 billion in H1 2021.
This increase is mainly driven by the solid performance of the existing portfolio companies and the new transactions in the last twelve months Matthias mentioned. EBITDA of the combined group was EUR 141 million compared to EUR 124 million in H1 2021. The EUR 141 million group EBITDA are split as follows.
The bargain purchase is zero. As you all might know, the bargain purchase is shown in our P&L when the purchase price that we paid for a company is lower than the net assets we've acquired. In half year one, 2022, no bargain purchase has been booked.
All acquisitions have led to goodwill so far, but the purchase price allocations relating to all of these acquisitions are currently performed. The restructuring expenses are EUR 32.1 million, a decrease from EUR 36.6 million in half year 2021 due to the solid operational performance of our portfolio in the first half of 2022.
From the fair value revaluation of the co-investments, for 30 June 2022, the earnings are EUR 7.6 million, and this is related to co-investments that have been longer than six months here with AURELIUS, and this is APS and NDS. The increase in valuation pursuant to the equity method accounting is book profit, that goes through the P&L.
Yeah, gains on exits were nearly on the same level as in half year 2021. The EUR 38.2 million in half year 2022 are mainly due to the very successful exit of AKAD in February this year. The operating EBITDA is EUR 127.6 million. This is 4% higher than the operating EBITDA in half year 2021, and is showing the solid operational performance.
Cash compared to year-end 2021 has reduced to EUR 310 million as of 30th June 2022, and this was mainly driven by the strong deal activity in the first six months with 5 add-on acquisitions and 3 co-investments. The dividend payment Matthias just mentioned here of EUR 42 million and the share buybacks of EUR 21 million in the first six months.
The free holding cash in AEO and holding companies is still over EUR 150 million and therefore we have sufficient firepower for the upcoming deal opportunities. Finally, you see the equity ratio remains stable over 25% as of 30th June 2022, despite the dividend payment. Let's move to the next slide, page six. On page six, you see a split of our portfolio in terms of total consolidated revenues and operating EBITDA.
As always, by the three categories, segment, portfolio status, and vintage. By segment, you can see that still well-balanced revenues here from the continued operations over the segment service and solutions with EUR 214 million, industrial production EUR 606 million, and retail consumer product with EUR 736 million.
The operating EBITDA margin of the segment industrial production with the EUR 50.3 million you see here and retail consumer product with EUR 78.7 million is above 8% or respectively above 10%. The operating EBITDA margin of the segment service and solution with EUR 16.9 million is close to 8% despite of the sale of AKAD in February, which was a strong contributor of the operating EBITDA in that segment.
The operating EBITDA of the segment other with negative EUR 90 million is driven by the transaction costs relating to the strong deal activity here in half year one and the exits of AKAD and Ideal Shopping and the management compensation relating to those.
By portfolio status, you can see that the portfolio companies in the improvement phase contributing already a good operating EBITDA of EUR 20 million and the portfolio companies in the optimization phase and the growth phase is just the majority as a strong operating EBITDA of over 67 and respectively over 58 million euro. Finally, let's move to vintage.
There you can see here, a very strong operational performance of the 18-36 month vintage frame, i.e., mentioned that earlier, the acquisitions we made during the COVID-19 pandemic or shortly before, like Distrelec, Zentia, and REWE have developed very well and strengthened the respective operational performance here, of the portfolio companies in this vintage frame with over 50% of the total EBITDA contribution.
Over 50% of revenues and operating EBITDA are coming from portfolio companies with a holding period of more than three years. You can see here that, the solid development of our portfolio companies that are longer, with us. Let's move on to page 7, the net asset value calculation of our portfolio.
The total NAV for half year 2022 was EUR 1.04 billion, a small decrease of roughly 1% compared to Q1 2022. The half year 1 2022 NAV for industrial production is EUR 392 million, and this is mainly coming from the good operational performance here of Zentia and Moveero. Despite the challenging market environment with increasing energy costs, supply chain pressure, they're doing pretty well.
Unilux is included for the first time at fair value. Hämmerl was sold in Q2 2022 and hence is excluded from the NAV. We've included here the VAG Brazilian add-on acquisition RTS, which Matthias will talk in a minute, and it is included at acquisition costs.
In the sector retail and consumer products, the NAV as of half year one is EUR 324 million, and this is due to the very strong operational performance of Silvan, EIG, and Distrelec. Furthermore, the new add-on acquisitions, CameraNU.nl and Cyfrowe.pl for the European Imaging Group and BMC's acquisition of De Rijke are included here at acquisition costs.
For service and solution, the NAV is EUR 83 million. This is coming mainly from Rivus Fleet Solutions. BPG Building & Partners Group, latest add-on acquisition CGE is included at acquisition costs. The NAV of the other segment is EUR 163 million. The valuation consists here of the cash of listed AEO and the non-operating holding companies. Furthermore, as always, the brand company Blaupunkt is included there.
The nominal amount of the Nordic bond is deducted in this segment, and the treasury shares are not included in this calculation. Finally, you see our co-investments together with the AURELIUS European Opportunities IV fund. The NAV of the co-investment is EUR 41.4 million, includes APS and NVO at fair value and Minova, McKesson, and CTD Tiles at acquisition costs.
The valuation leads to an NAV net per share of 36.28 EUR. The treasury shares are not included in the calculation, and therefore, the NAV net per share went slightly up due to the increase in treasury shares compared to March 31st as the number of shares were reduced, and therefore, this is increasing the NAV net per share.
Besides this, our NAVs are calculated consistently based on a DCF model, and we use actuals as of 31 March 2022 and including the budget of the portfolio companies until 2024. We assumed a conservative growth rate of 0.5% and have a WACC of 11.21% on average.
The WACC is slightly higher than for Q1 2022. At this point, it was 10.99%. I think we can skip page eight. This was just in narrative here regarding the different sectors of the NAV I've just explained. On page nine, you can see as additional information the NAV of the AURELIUS portfolio by vintage as of 30 June 2022.
You can see that the majority of the NAV comes from the portfolio companies with the holding periods of 18 to 36 months and over 36 months in line with the good operational performance here of the portfolio companies in these vintages.
This follows our business model and show that generally the good support works out with continuing operational support of AURELIUS. The portfolio companies that belong longer to us are contributing the majority of the total NAV. The NAV of the co-investments is EUR 41.4 million. It's contributing actually 4% of the total NAV. Now I hand over back to Matthias.
Thank you, Richard. Yes, on page ten, let's talk about transactions to date. First of all, about the add-ons, let me remind you why this is so important to us and our portfolio companies. We are talking about companies and targets out there with a couple of million in revenue up to, like for example, CameraNU.nl, which is mentioned here on the as a second tombstone we have acquired for our portfolio company.
European Imaging Group, up to EUR 60 million, which is the biggest acquisition as an add-on here on this page. Even the smaller ones, as mentioned before, a couple of million in revenue, they are contributing quite significantly after synergies, supposed synergies to the overall EBITDA performance of our portfolio companies.
Therefore, if you do multiple add-on acquisitions for all of our portfolio companies, it contributes overall quite significantly to the EBITDA. We have all the in-house capabilities within the group. We do have the M&A specialists. We do have the lawyers, the tax guys, everything what is needed to get such transactions done. Of course, challenging environment like now is also creating a lot of opportunities.
A lot of smaller competitors to our existing portfolio companies are struggling based on the supply chain issues, labor shortages, you name it. Therefore, this creates opportunities for us to do more add-on acquisitions, and this is why it is that important to us. What we have seen in the second quarter, the add-on acquisitions we have done in the first three months, we have mentioned last time already.
In the second quarter, we have seen an additional acquisition for our European Imaging Group, our retailer of photo cameras and photo equipment in Poland. We have seen in July two add-on acquisitions for our automotive aftermarket supplier based in Norway, NDS, who has acquired Hovdan and Nordic Wash, two portfolio companies, where it's about strengthening the market in the marine sector, but also in the equipment sector.
Nordic Wash is about supplier for equipment for washing equipment for cars. On page 11, transactions, we have seen two of them. It's AKAD University, I will talk about in a minute in more detail, and Hammerl, we have sold to Bächl.
Both are typical blueprint cases for AURELIUS, where we acquired these companies for bargain purchase price and have developed it over the years. A lot of potential typically sits normally on the cost side, but we have developed it further. I will talk about how we did it at AKAD, and the same applies for Hammerl.
Therefore, we were very pleased to hand it over to Bächl in July 2022. On page 12, AKAD, it was acquired back in 2014 from AURELIUS. We acquired this company for bargain purchase price, as Richard mentioned before already. It was founded more than 60 years ago. It's a distance learning university, has now over 67,000 alumni.
Since we took it over, there were a lot of things done, especially our V concepts we put in place, which means costs down and revenue up. On the cost end, typically we find some neglected unloved child when we take it over, as it was part of a bigger corporate.
We find a lot of potential on the cost side, which we do, which was the same here at AKAD as well. Of course, it was about developing the business further on the revenue side as well, which is then the second leg of the V concept we put in place.
Here at AKAD especially, it was about putting in place and elaborating a modular system where we can now offer, or AKAD can now offer two different bachelor's and master's and MBA degrees and studies to over 12,000 students right now.
That was the main chunk to really develop further studies here and also put in place a modularized concept which allows them to, our students, the distance learning students, to have more flexibility in how they pull together the different studies.
Once there is the perfect moment for us where we think we can develop it further, but somebody else out there who can do this then even better, when it's really about top line developing and top line performance. This is where we come to the conclusion.
This is the case now for AKAD. We got a lot of inbound interest in the past already, and so therefore we were happy to sell it for EUR 48 million, which translates into 15 times money over money multiplier and was significantly above our latest net asset value as well to Galileo Global Education, a strategic buyer. For us, a very nice outcome. On page 13, the co-investments, very thrilled about different sections we have done here.
We've spoken about some of them in the past already. Let me just mention quickly again, McKesson, definitely the elephant here in the room, GBP 5 billion turnover, 4 different segments we're working on. They are dealing with medicine and over-the-counter drugs in the UK. Has in the retail arm, 1,300 owned pharmacies.
There's a digital arm, and wholesale arm, and also in specific care and patient's home care unit, where they supply specific, like, for example, for cancer therapy, specific equipment to the patient's home. Links to the NHS, to the National Health Service. All four of these different units have wide significance.
Altogether, GBP 5 billion in turnover. We bought it from McKesson, based in Texas. For them, it was about pulling out of Europe and which they did in the past already, and the remaining stake was in the UK. McKesson for them was about exiting swiftly and therefore we were the right buyer. I think we can do something really great for this business.
We have started with our team, has put in place a lot of operational experts who are working on this target at the moment. That's a good idea of what we can get our arms around and what exactly is needed. Stay tuned, but I think this could become a really interesting one for us and the fund with whom we have done this acquisition.
In July, we have mentioned that we will acquire Dürr Dental and Dental Bauer from amongst other holdings. This is about equipment, different equipment, which is needed by dentists. These were two different French exits, and also underlines how we were able to deal with more complex transactions where we had to deal with different shareholders and stakeholders behind who were selling these companies to us.
We will pull it together with the family who is running Dental Bauer already very successfully. They will be in charge and are in charge at the moment as well. We are providing them with additional resources. We especially take care of how to merge the different assets we were acquiring, and they are running the operational business in a very successful way.
Therefore we are looking forward. It's currently around about EUR 300 million in revenue combined businesses to take it to the next level. Let's jump straight to page 14. Very excited about our latest investment we have done together with the fund. Footasylum, it's an omni-channel leisure retailer, so the portfolio consists of fashion streetwear and sportswear based on all the famous brands out there, Nike, Adidas, The North Face.
Currently having around EUR 360 million, it was acquisition where we bought it from JD Sports, stock listed, bigger fashion retailer and a leisure retailer based in the UK. We are talking about different channels. How Footasylum is selling their products. It's about stores, own stores, 63 of them based all over the UK.
We have seven different websites for different brands and also offering a wholesale channel. It's a typical AURELIUS transaction, so therefore we see a lot of opportunities on a standalone basis. First of all, it's about making sure that we put in place the right strategy. It is of course, as it was owned by JD for quite a while, and the selling process was going on. As always, there are some.
It does something to the operational business where there's been a lack of decision-making about strategic or how clear the strategic path going forward should look like. This is what we would like to put in place together with the management team who did a great job here in the last couple of years, besides managing also the sales process.
Looking forward to take this company to the next level, around about seven percentage points as EBITDA right now. If we challenge it and the peer group, it's possible to take this company to above 10% points of EBITDA, especially as I mentioned before, to put it on a standalone basis and then strengthen their own brand offering, which they do have in place already, very, very successfully. Strengthen this even further, typically this leads to a high margin growth potential.
We do see also some operational performance measures we can put in place. This is where our existing task force experts in the different areas will support existing management to take this business then to the next level. Very, very excited and very thrilled about this acquisition and what we can do to this business. On page 15, the overall portfolio status.
These are the AURELIUS Equity Opportunities only portfolio companies without the co-investments here. On the right-hand side, the numbers, which we're just talking about. Overall, as we can see, still quite nicely balanced when it comes to the different levels of maturity, when it comes to different regions and also to different industries. It's quite balanced from a risk point of view.
On the right-hand side, you can see the typical numbers where we see the EBITDA margin is stepping up from the improvement to the growth phases, and that we have six, seven companies in the growth phases which are more or less ready for an exit. We mentioned it a couple of times already.
We will see some exits in the future here in the upcoming 12-18, 24 months. Definitely it's a little bit depending on the right environment. We are not rushed, and we are not forced to sell any of these businesses. Therefore, we are constantly in discussions with our M&A advisors who are supporting us on the exit here as well to get the moment right when we will exit such a company.
Stay tuned. Overall, we are talking about companies with around about EUR 100 million of EBITDA, where we'll see exits somewhere in the near future. On page 16, we have the add-on co-investments. Different transactions we have done together with the fund, where you can see on the left-hand side especially as it is quite new, so the holding period is less than one year.
The companies like Minova, McKesson, CTD, NDS, and APS. On the right-hand side, the net asset value for the specific portfolio companies in the different stages. The last column is about the AURELIUS Equity Opportunities portfolio companies. On the right-hand side, the co-investments altogether sum up to EUR 40 million.
As you are aware of, here the same principle applies then for our own portfolio companies for the AURELIUS Equity Opportunities portfolio companies, which means for the first six months we keep it as the equity value. The stake we acquired the company for or a particular stake we are controlling.
After this six months, we then put in place a fair value assumption or scheme for this portfolio of companies, and this leads then to a ramp up of the net asset value, what is shown here as well. Overall, a very decent portfolio, very balanced when it comes to the different industries. As you can see, the performance we are quite pleased with, but we have to stay careful, and we have to stay close to our business.
It's a challenging environment also for our portfolio companies. On page 17, three core topics we are working on at the moment. The first one is expanding our investment focus, which, we mentioned a couple of times already. It's about fostering our efficiency in the mid-market segment where we do see a lot of potential going forward, also undermined by our transaction activities.
We have just spoken about it the first six months of this year and more to come in the upcoming months. Of course, to successfully further growth in these different segments, it's important that we further professionalize our operating model.
We are working on this constantly, growing quite fast in this area in our task force, how to make sure that we get the right experts in place who will then take care of the portfolio companies. It's all about hands-on mentality. It's about entrepreneurial spirit we are bringing to our portfolio companies and making sure that we can then take it to the next level.
The third very important topic, of course, on our table right now is the ESG approach. We have launched this project back in October 2021. Achieved some significant first steps also, which were picked up by the different agencies out there, ESG agencies, which leads to an improved rating we have seen, but still more to come.
It's about our top-down and bottom-up approach, which means top-down is how can we as an AURELIUS, as a holding, make sure that we contribute positively to the different segments of E, S, and G. At the same time working in our portfolio of companies, which is then the bottom-up approach on the different ESG measures we have to put in place to improve the ESG ratings there.
Both together, this will meet somewhere in the middle. The top-down and the bottom-up approach and make sure that we as a group, as AURELIUS Group, will impact E, S, and G positively as it is expected, as we would like to achieve it. Finally, this brings me to the outlook on page 18. Mentions most of the stuff here. Definitely challenging times ahead.
Therefore, we have to take care of our task force specialists. They need to stay close to our businesses, our portfolio companies. Thank you at this point to our experts. We're quite successful, as you have just seen in the numbers for the first six months.
We are well aware that the challenging times are not over, and so therefore, we have to stay close to our operational business and make sure that we can react immediately if there are further waves of different shortages in, on the supply side, labor, inflation, all the topics we are dealing with at the moment. Shareholder value definitely stays in our focus. We have launched our share buyback program. We've spoken about this. It's still ongoing. Of course, also the dividend is in our focus.
Both together, very important topic for us to keep our shareholder in our focus and to shareholder value in our focus. Definitely, I do expect a lot of more activities on the transaction side, especially on the buy side. I think there are a lot of opportunities we're working on right now. Stay tuned. I would expect in the upcoming weeks and months a couple of more deals as we have seen in the past in all the three segments.
In the standalone deals in the lower mid-market, there's always equity opportunities only for the add-ons for sure. Especially together with Stefan, we do see in the mid-market segment a lot of opportunities right now. That's what I would expect. Some more exits we were discussing and tackling already, nicely filled pipeline with portfolio companies.
It's about getting the right moments when it's the right moment to make sure that environment is also then the right one to gain the maximum value for our portfolio companies. I would expect some more exits in the near future. That brings me to the end. On page 19 you can see the financial calendar. A lot of conferences ongoing now in the upcoming months in autumn. Then on November tenth, we will hear each other again when it's about Q3 reporting. Thank you for listening, and let me take your questions now.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. As a reminder, it is star one to ask a question. We have our first question from Gerhard Schwarz from Baader Bank. Please go ahead. Your line is open.
Yes, hello. Thank you for giving me the opportunity to ask a question. It is on the WACC figures that you have been mentioning for the first half. Now it's at 11.21%, up from 10.99%. But when we look at the end of last year, we were still at 10.34%, and therefore my question is there a particular reason why this increase was slower, more shallow than we have seen it in the first quarter as interest rates and credit markets have seen a further rise in the second quarter as well? Thank you.
Yeah, shall we take this one, Matthias? To what number are you referring to? Can you say that again?
The WACC number we have been
Yeah, of course. Just related to the risk buffer we've allocated to that based on the numbers. The current developments just that we've just checked here on our end where that WACC is related and put the risk buffers here into that specific movement if you ask me. Gerhard, can you hear us?
Yes, I can hear you.
Can you maybe repeat the question again? I think, Richard, I'm not sure if the call is.
Oh, okay. It was about the WACC, the cost of capital you are using for the valuation of the companies. It has been rising in the second quarter still from 10.99 to 11.21. The rise was even stronger in the first quarter, and I was wondering if a higher rise would not have been warranted for any reason. Because credit markets were still seeing rising yields. Bond markets were seeing rising yields, and so one would have expected potentially a higher effect on the WACC numbers.
I think coming back to that, we put here the risk buffers already in Q1 because there already was the movement in that and the volatility here when it comes to that interest. We baked that already in the Q1 numbers.
Okay.
I think in also Gerhard in the WACC which we have seen by end of 2021, we have been very on the conservative side. If you compare the WACC to where we have been, let's say for example back in 2019, it was still very on the high end and therefore the step up is not as significant as you would expect on the interest markets right now. As I was
Okay.
Saying already on the conservative side.
Yeah.
Okay, understood.
Thank you, Gerhard. Are there any further questions?
As a reminder, you may press star one to ask a question. Our next question is coming from Gerhard Orgonas from Berenberg. Please go ahead. Your line is open.
Hello, Gerhard Orgonas here. I'm sorry if I'm asking something that you've talked about before. I dropped out twice at the call.
I've got three questions. First of all, what is the cash on the holding level please, currently? Secondly, the other revenues of EUR 90 million in H1, is this mainly Blaupunkt? So what else is in there? Thirdly, just on the exit, you said, you know, six to seven companies in possibly the exit process and then you needed that. Is this the right time?
Do you expect something significant in H2 or is it too early, is this not the right time to do an exit process? And how do the exit process actually work? Do you have a kind of auction or do you talk to potential buyers one by one because they're mainly family-owned businesses? What's the typical process for exiting?
Let's start with the cash holdings. We have over EUR 150 million cash holdings at the moment. If you have our normal buffer here for portfolio companies et cetera, that brings it up to a firepower of over EUR 100 million.
Your second question was what is in the other segment when it comes to revenues? That is mainly the IP revenues, so our Blaupunkt licensing company, which are included in the revenues of the other segments. The rest I think Matthias with regard to exit.
Yeah. Yes, on the exit side, yeah, absolutely fair comment. Of course, constantly we are screening the overall market and environment and especially the potential buying universe for our specific portfolio companies. Don't forget that most of our companies we will sell as a trade sale, which means to strategics, therefore, they are less hesitant.
I think the private equity market looks definitely different at the moment, so this is where I wouldn't expect big transactions in the upcoming months. Portfolio companies where we think is mainly of interest for strategics. I don't see any reason why that the market in general should not work the exit market. Therefore, we are working constantly and are also in discussion with these potential buyers.
To your specific question about how do we do this, we always have typical inbound interest or portfolio companies, mainly again here from strategic. There's always a constant discussion ongoing. Typically once we are deciding for exiting a portfolio company, we will set up a structured process, which means an auction process.
This is what I would expect for some of our portfolio companies in the near future. Will it be the upcoming three, six or 12 months? This is something we are still discussing with our M&A advisors for the specific portfolio companies. I would expect some, as I said, six, seven portfolio companies already for an exit, two, three exits in the near future. Doesn't sound very unrealistic to me.
Near future, then this year?
Could well be the case, of course, as I said before, depending on the overall market circumstances, but could well be that we will see the one exit or the other this year.
Okay, thank you.
As a reminder, you may press star one to ask a question. There is no further question in the queue, sir.
Thank you very much then for listening. As I've mentioned a couple of times, I'm very excited about the outcome of our numbers for the first six months. Nevertheless, we are careful, we stay tuned and are very close to our businesses, but especially looking forward to some really nice transactions in our pipeline is nicely filled in all the three segments. Stay tuned. I would expect some more transactions, and we are looking forward to these ones. Thank you very much for listening and hope you have a great day.
Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.