Eurazeo Paris Ord

Hello and welcome to the Eurozeo Financial Information H1 2023 results. My name is Caroline and I'll 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 mode. However, you'll 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'll be connected to an operator. I will now hand over the call to your host, Mr. William Kiddas Cheshing and Mr. Christoph Berweger to begin today's conference. Thank you.

Thank you very much. Thank you very much. Good morning and thank you for joining our H1 Results presentation. Thank you for the interest you take in our company. This presentation will have three parts. First, key highlights for the first half. Second, we talk about operational performance. Third, we talk about financial performance. We will then be available for a Q&A session. Let me start with the key highlights. As regards financial highlights, let me remind you that we changed the qualification of the company at the start of the year, and this is the first time we are reporting under the IFRS 10 exemption. Eurozeo net results for the first half stands at nearly 1.8 billion euros, with three factors behind it. First, we continue to grow our asset management business at a steady pace. Fee-paying AUM are up 16%, one-sixth year-on-year, and fee-related earnings are up 37%, at 69 million euros. The contribution of the asset management activity amounts to 64 million for the first half, up 45% year on year. Second, the value of our portfolio is stable at around 8 billion, with a slightly negative mark to market of 27 million. We maintain a cautious approach to valuation in spite of good underlying operational performance of our portfolio companies and supportive valuation benchmark. As you can see, the per share value of our portfolio increases by 3%, nevertheless, partly thanks to our share buyback program. Third and last, we have two exceptional items in H1, one positive at 1.9 billion stemming from the impact of the change in IFRS qualification, as I said, which was already announced in Q1, and one negative, one slightly negative, with 74 million lost, resulting from the unwinding of the Rhone partnership. On non-financial, we continue to thrive, as you know, for leadership in ESG. And as a case in point, we made further progress. The share for AUM that we qualify as impact is up 8% to reach 4.4%. 7 billion at the end of the first half. As you know, we are a great believer that impact will become increasingly a driving force in our fundraising. Let me update you on key decisions taken in the past five months since Christophe and I took over as co-CEOs of Eurazeo. These decisions are milestones to achieve our objectives which is to create the European-based leader in private markets on mid-market growth and impact. First, we took decisions on organization and people. We adjusted our organization to reflect our strategy to operate as a full-fledged and scalable asset manager. We renewed leadership in some key investment teams and functions. And as you know, Together with our stakeholders, we adapted the remuneration structure of the Executive Board that is now more aligned with shareholders' interests. Second, on strategy. We announced that we would review our minority stakes. We announced today that we have just disposed of our 30% stake in Rhône. The decision on MCH will be taken by the end of the year. On top, we are also assessing the mid-term potential of all key investment strategies and will communicate at the end of the year. Third, on efficiency, we have launched key initiatives such as merging management companies that will simplify greatly our organization, investing more strongly in our digital roadmap, and harmonizing operations across the company. Finally, We took the decision to change materially and improve our financial reporting. We also published today, on top of the new qualification of the company, we also published today new KPIs with the performance of a selection of our funds, which you will find in the appendix. I now hand over to Christophe, who will comment on the operational performance for H1. Thank you, William.

So let's start with asset management KPI. Total AUM are up 3.5% over 12 months, but third-party AUM are up 7% with balance sheet AUM growing at a lower pace. A double-digit growth in fee-paying asset management, which are up 16%, thanks to our recent fundraising and deployments in some asset classes. Turning now to fundraising, as you are all aware, the current environment for fundraising has become more challenging in the short term. LPs are taking more time to allocate their funds, given a slower pace in asset rotation and distributions. The impact of the denominator effect, and caution on rate hikes. The latest data available points to a market decline in fundraising for the European market of 17 to 20% in the first half of this year. In this context, we raised 1.3 billion over this period, down 15% for the same period last year. Private debt again recorded good inflows, both in direct lending and in corporate loans through a program called Obligation Relance. In private equity, we collected funds mainly in venture and in secondaries and ongoing funds. We just announced the final close of the Smart City 2 program above target at 400 million euros. wealth management inflows remain a strength for our group. We raised around 350 million euros in H1, around 27% of the group's fundraising for the period. We expect this segment to remain dynamic thanks to the new partnerships we recently signed like CNP and La Banque Postale, Boursorama, Allianz Belgium, and Apicil. I just mentioned that private debt is currently doing well. Allow me to give you a few highlights on this strategy, which represents nearly 20% of our assets under management. We are one of the leaders in Europe on the mid-market segment. Our particular strength here is clearly direct lending with promising development in asset base and corporate financing. Our direct lending franchise benefits from a strong positioning with our mid-cap focus. As you know, the ongoing disintermediation of banks and financing tools fully based on floating rates offers a very favorable risk-reward profile for investors. Take our last vintage, which is called Eurazeo Private Debt 6. We are on track to reach our 2 billion euro target, let's say, during this autumn. Our target net IRR is between 9% and 10%. The default rate of the portfolio is very low, at 0.3%, and the loss ratio is basically 0%. This is due to the fact that we are financing strong cash-generative companies backed by blue-chip sponsors. we are also able to continue to deploy capital at a good pace. This enables us to be very selective, and this bodes well for our future fundraising.