Eurazeo Paris Ord

Hello and welcome to the Eurasia Financial Information Q3 2022 results call. My name is Laura and I will be your coordinator for today's event. Please note this call is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your questions. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, William Cadouche-Chasson, the member of the Executive Board, General Manager, Finance and Strategy, to begin today's conference. Thank you.

Many thanks, Laura. Good morning to all. Thanks for joining this call. I'm pleased to welcome you all to our Q3 2022 conference. and nine months trading update. I will take a few minutes to walk you through the performance and development we recorded in the quarter. In a nutshell, we continue to make progress in our developments and post good growth in spite of an obviously more complex and uncertain economic and geopolitical background. Let me start first with the asset management activity. We continue to grow our asset management revenues at a strong pace. In fact, we post double digit growth. Management fees are up 22% in the period and management fees from third party grew 25%. We also recorded 73 million in performance fees in Q3 thanks to the exits which we have realized and there will be a more to come later in total revenues from asset management for the first nine months of 2022 amount to 383 million up 16 from the same period of last year turning to aum obviously the revenue growth is linked to the growth in our AUM. AUM are up 20% year-on-year in the past 12 months. As a reminder, we do not revaluate portfolio assets in the NAV, so this is only due to the fundraising, the past increase in the AUM. Fee-paying AUM are up 23% thanks to total fundraising and the fast deployment in private debt particularly. Focusing on fundraising for the quarter, we raised $2.1 billion from third parties in the first nine months of the year. Let me stress that all the strategies that are in the process of fundraising benefit from a good reception, good traction from investors, in spite of an obviously more challenging environment. This is something you will have heard from others in the street. In private equity, we achieved successfully the fundraising for a small buyout strategy, more than $1 billion. Smaller funds, which we have in the market, Ventures and Biotech, Digital and Smart City, enjoy a satisfactory reception. They are still in the process of fundraising. And the flagship fund, Private Debt 6, continues to enjoy strong momentum. This is, as you know, a fund which is focusing on direct lending in Euro denominated, and we are confident it shall reach 2 billion in total towards the beginning of 2023. An important element in the fundraising, as we mentioned in the previous quarters, is the strong flows we enjoy from retail. In flows from retail for the first nine months of the year, are up 61%. They stand at $600 million. The total of the money we've collected from retail investors stands at $3.2 billion at the end of September, which is 14% of our total AUM. We stroke additional partnerships over the quarter, some of which may have seen with the leading online bank for example overall given the current pipeline and this is a very important point because fundraising is not a linear thing fundraising is a combination of market appetite and the pipeline we have on the road but based on the current pipeline we have on the road we expect our total fundraising for 2022 to reach around 3 billion euros. Importantly, we will launch towards the end of the year the marketing of several of our large flagship funds, mid-large buyouts, growth, secondaries, on top of the marketing of a sustainable infrastructure fund, Article 9, which is now starting its marketing. All this marketing effort should yield in full in 2023. Let me turn to the second key point in these results, which is a good execution of the exit program. And obviously, I will start with the exits, as this is an area under legitimate scrutiny by the markets. We continue to realize exits at the pace that we had anticipated. Overall, we realized 2.4 billion of exits in the first nine months, which is an amount equivalent to what we did in the first nine months 2021. And clearly, This is very satisfactory when combined with the multiples we are achieving through these sales, given the more challenging context I was referring to at the beginning of this call. As a case in point, you may have seen that we announced yesterday an additional sale, the exit of our consumer growth brand strategy asset Nest New York, which was valued $200 million and is consistent with a cash-on-cash of 2.7, cash-on-cash multiple of 2.7. Focusing only on balance sheet investments, we have now quasi-completed our planned exit program. Together with Nest and VitaProtect, we announced also in the previous quarter, which we'll are expected to close both towards the end of the year, and adding to it the already closed transaction, we should have completed by the end of the year around 1.3 billion of sales from the balance sheet, which is roughly 18% of the NAV of the portfolio based on end of year 2021, and very consistent with what we had said to you in terms of the amount we wanted to sell. Let me stress again the good terms at which we made those balance sheet exits. These were done at an average of 3.5 times cash on cash, consistent with roughly 33% IRR. And this balance sheet exit will translate, I expect it to translate, into capital gains for an amount of about 800 million net which will be booked in H2 2023. We obviously continue, because this is the core of our business, to do selective investments. As you can see, we completed 3.8 billion of investments in the first nine months of 2022. This is a tad lower than the 4.1. We had... in 2021 we are having a slightly different mix as you can see we have more investment in private debt a little less in private equity and for for the period which is very consistent with dynamics that we see in the market very very good traction for private debt overall in the market i mentioned it in fundraising this is obviously true uh in deployment and returns. On private equity and real assets, as we said, we are very focused investors. We pick leaders in very specific sectors. We mentioned it a few times, healthcare, tech-enabled services, energy transition, and this is what you see on the page and in the press release with investments such as Icarus Solar, Photovoltaic Farms, IMAPO, which is in the healthcare, or in the wealth management, some build-up with a good premium for our small and mid-strategy. A point on... the portfolio, which is obviously a very important element. This is a key factor behind the performance of our funds and hence our capacity to fundraise going forward. This is also a very important element in the computation of our NAV and value creation going forward. Focusing on consolidated portfolio companies, as you can see on the chart, at constant scope and exchange rate, The economic revenue for the companies we consolidate is up 38%, so roughly 40% year-on-year. This growth is visible across all strategies, so you can see that in the press release. We provided you with the details, so that is quite satisfactory because this is very broad-based. Focusing on the growth companies, you know that these companies are not consolidated, but we like to give you figures because this is a very important element for you to gauge the quality of the portfolio. The performance is strong. Revenues for growth companies are up 42%. Last, let me stress, particularly in this context, this more challenging context, the importance of having a robust financial structure. and flexibility to gauge opportunities in the future. The Eurazeo net cash position is positive at 164 million at the end of September. You know that we have credit lines undrawn for about 1.5 billion maturing 2026. And we have also a significant level of dry powder, close to 5 billion, which we stem from the money we collect with LPs. And this, in total, gives us ample flexibility to weather potential challenges in the market, but more importantly, grasp opportunities in the next quarters. And there will be opportunities, as I'm sure you've already heard, I'd like to stop there and leave the floor to you for questions. Thank you very much.

Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. We'll now take our first question from Patrick of Societe Generale. Your line is open. Please go ahead.