Eurazeo Paris Ord

Hello and welcome to Eurasia's first 9 months 2023 results call. My name is Alicia 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 question. If you require assistance at any point, please press star 0 and you will be connected to an operator. I will now hand you over to William Kadoussassan, Co-CEO, to begin today's conference. Thank you.

Thank you very much. Good morning. Thanks for joining this call. I am pleased to welcome you to our Q3 2023 trading update and first nine months results. Let me walk you through the performance and development we recorded for the period. I'd say the mantra is that we continue to post solid growth in a context which, as you know, is more uncertain than ever. Steady AUM growth is the first message we want to pass. We enjoy the steady increase in our asset and the management. Fee paying AUM, as you can see on the page that has been provided to you, and the press release are up 19% for the period. Our total AUM are up 11%. Just a technical comment. As a reminder, we have sold our stake in Rome. So now our AUM excludes the contribution for Rome, which has also been restated logically in the 2022 figures. We have, for the period, a resilient fundraising. And this is, again, in spite of a more challenging environment. We raised $1.7 billion from third parties in the first nine months of 2023. This is a tad lower than we had raised, the amount we had raised for the first nine months of 2022. excluding Rome, i.e. for our core asset management. Now, if you would just focus on Q3, we are at above 400 million to be compared with 300 million for the same period of last year. Quarterly fundraising figures are a bit less relevant. And remember that last year we had some concentration on Q4 with 1.1 billion. So overall, 1.7 a tad lower than we had for the same period of last year. The main contributors, as we explained in the past quarters, are logically private debt, which continue to enjoy a very strong momentum, with over 900 million raised in the first nine months, which is up 31% compared to last year. We enjoy a very good start for our impact strategies. This is clearly a promising sector with strong interest from clients. Infrastructure funds that we've talked about in the past quarters continue to collect well. This is a fund dedicated to energy transition. We have new commitments and we are now very close to the initial target of 500 million, so we should cross that target and end up the year at the level above. Smart City2, which is a venture fund focused on mobility and technologies associated with green mobility and cities, has closed and exceeded its initial target. Another contributor which you would find across different strategies, but in terms of clients, Beyond institutional, as you know, we have a very strong contribution from wealth management. That continues to be the case for the first nine months. Fundraising in wealth management was about 600 million for the first nine months, actually 566, which is very consistent with the number we had in 22, which was a record year. That represents 33% of the inflows And now, wealth management represents 17% of our AUM, third-party AUM, should we focus on inventories, which when you compare with competition, is obviously a good number. A very important thing, which we announced yesterday, post-closing, we completed a first closing of our mid-large buyout strategy. at 2.3 billion, of which 600 million of third-party investors' money. This is a very important milestone for this strategy, which is historically supported by the balance sheet. It has already proven that it could raise money through secondaries and dedicated side funds, but now we're talking about primary money in this new Capital Five program. of 600 million. So if you adjust the 1.7 I talked about before for this number of 600, you end up on the pro forma 2.3, which is to be put in conjunction with our guidance for the year. We now expect that we should reach around 3 billion of fundraising for the whole of 2023. And as you hear from me, we have already done the bulk of it as we speak. Logically, and that's the next slide, good momentum in AUM growth translates in increasing recurring revenues. They are again up double digit at 10%. The recurring management fees stand at 305 million euros for the first nine months of 2023. Again, 10% up relative to the same period of last year. And adjusted for last year, catch-up fees base effect. We don't have much catch-up fees in the first nine months of 2023, but we had catch-up fees in 2022. The management fee growth is up 12%. If you focus on me, as we put in the press release, on third parties, adjusted from the base effect I was alluding to, management fees are up 7% for the first nine months. Let me turn now to the performance of portfolio companies. As you know, we are publishing now our numbers under IFRS 10 exemption rule, which means that we no longer consolidate the revenues of the portfolio companies. Yet, as discussed with you in the previous quarters, we continue to think this is a very important indicator for you to gauge the quality of the portfolio we have on balance sheet, as well as the quality of the investments. As you know, what we invest from the balance sheet is usually through the funds. And what the numbers we give you here relates to assets which represent 95% of the total net value of Euro-Zero balance sheets. So we consider it's a very relevant indicator. Overall, as you can see, very decent and even solid growth across the board. Revenues in mid-large buyout, mid-large buyout represent 43%, as you know, of our own balance sheet value. Mid-large buyout companies posted revenue growth of 15% year-on-year for the first nine months, well distributed, broad-based, and that reflects the quality of choices, particularly in terms of sectors, companies, geographies. Small buyout post somewhat slower growth, more heterogeneous for this first nine months with 3%. Business services and healthcare related companies continue to have very strong growth. Companies more exposed to the consumer sector are experiencing some slowdown. The growth strategy shows again that the underlying growth of the companies continues to be strong and consistent with expectations. Overall, the weighted average growth is 17%. There are some companies particularly related to consumer marketplaces or fintech, which experience a slower growth. But overall, the bulk of the portfolio companies post-growth in between 20% and 45%. The brand's strategy, i.e. consumer growth unit, recorded, again, a pretty broad-based robust growth of 11% year-on-year. And real assets, which in this case relates particularly to real estate, in terms of exposure of the balance sheet, posted also very strong growth at the portfolio level of about 10%. That reflects the type of exposure we have. The type of exposure is very concentrated On hospitality, that represents more than 40% of the portfolio. And that's obviously very good in the context. Offices represent less than 30% of the portfolio. But one has to say that even in this area, we benefit from high occupancy rates. Let me turn to the deployments and realizations. In terms of deployment, we continue to be selective with 3 billion of deployment in the first nine months compared to 3.8 billion for the same period of last year. Now, we are selective, but we benefit from the fact that we have diversified sources of funding with institutional money, third party, retail money, third party, and some balance sheet, which allows us to be somewhat active in this context. We are starting to see some interesting opportunities thanks to some repricing, particularly in secondaries and somewhat in buyouts, which debt continue to enjoy a good momentum. Realizations, which I know is a key area of focus for everyone in the industry, were logically more limited in the period, and the overall market is down 50% according to PitchBook in terms of realization. There is a bit of proactivity in this number. Let me explain. We decided in the market context where rates had not stabilized yet, and there were some uncertainties, the so-called BDASC spread had not stabilized to delay some of our exits, which explains the lower number for 2023 year-to-date. Now, having said that, We are confident about the outlook. We launched a number of processes which are ongoing and that would result in a pickup in realizations in the first half of 2024. Let me finish now with the balance sheet and dry powder. Still a very comfortable headroom. We have a 12% gearing for the company, which is a bit higher than what we had in the past quarters. But as you know, we run the company with a conservative credit policy, yet it can vary from one quarter to another, depending upon the pace at which we deploy versus the pace at which we realize. That remains very reasonable. Gearing, it compares to own funds of $1.4 billion. And we have an important liquidity with a credit facility. In terms of dry powder, we stand at $6.2 billion. So the number for third party has been adjusted for Roan. Roan was accounting for $600 million. So the number is $4 billion ex-Roan plus 2.2 commitments from the balance sheet, which gives teams flexibility for future deployments. To wrap up, yes, we continue to operate in a difficult environment on asset rotation and fundraising, although we concur with some comments that have been made by peers that there are some green shoots. In this context, We have been able to grow our asset management activity and the underlying portfolio company's growth remains dynamic. During the full year result of 2022, we guided you towards strong growth in FREs for the year. We are on track to meet this target. On the fundraising side, we anticipate reaching 3 billion of inflows for the year. which would be somewhat above the level of fundraising we achieved in 2022 for the whole year. As you know, we have an important milestone in terms of financial communication with you, as we will be presenting our midterm roadmap during the capital market days on November 30th, 2023. I know. Thank you for your attention. And we are available for questions.

As a reminder, if you would like to ask a question or make a contribution on today's call, please press star 1 on your telephone keypad. To withdraw your question, please press star 2. We'll take now our first question from Alexandre Tissier from Bank of America. Your line is open now. Thank you.