Eurazeo Paris Ord

Good morning to all. Thanks for joining this call. Christophe and I are pleased to welcome you to Eurazeo's 2023 Annual Results Presentation. Our presentation will be in three parts. First, I will share with you the financial and non-financial highlights for the year. Second, Christophe will focus on fundraising, commercial dynamic and asset rotation. Third and last, I will detail our financial results. We will then be available to take questions. Let me start with the highlights of the year. It has been a year since Christophe and I were appointed as co-CEOs of Euraseo by the supervisory board. Together with Sophie and Olivier, members of the executive board, and the whole team at Eurazeo, we have been focused on especially three things. Defining our mid-term strategy, laying the foundation for future growth, and delivering on our 2023 growth targets. In a nutshell, 2023 was a year of transformation and growth. On strategy, we have a clear ambition. It is to become the leading alternative asset manager across the European mean market, growth and impact segments. Our plan is based on four levers. Focus our value proposition. Accelerate the shift towards an asset-light business model. Expand and scale up our client franchises. improve operational efficiency. We've been busy building robust foundations. We have reshaped the organization, merged our investment companies, and launched important projects to strengthen our operations, as well as our digital infrastructure. Last, we delivered on the targets we had set for 2023. Fundraising lands above guidance. FREs posted strong growth. Shareholder return is up. On realisation, our performance is in line with a more muted market environment, yet with a clear pick-up in Q4. Let me turn to the key facts that summarise the financial performance for the year. First, asset management continues to grow at a healthy pace. Fundraising is up 21% relative to last year and around 20% above guidance in spite of a more difficult market. Fee-paying AUM are up plus 12%. Second, we delivered strong growths in operating margin. FRAs are up 22% year-on-year. We increased our FRA margin by about 400 basis points. Third, we further proved the quality of our own balance sheet portfolio. the premium to last net asset value of the five exits we conducted in 2023 pertaining to the balance sheet stands at plus 23%. And whilst value creation is flat at plus 1% this year, value creation for the past three years, including 2023, remains above target at 17%. Fourth and last, we continue to improve shareholder returns. We will propose to the General Meeting at the AGM an ordinary dividend of 2.42 euros per share, corresponding to a 10% increase versus last year. We have started to execute our new share buyback program of 200 million euros, which is twice the amount of the previous program. In 2023, we also delivered on non-financial goals. As you know, we consider our ESG approach and our impact franchise as core to our business model and believe them to be competitive advantages to our future growth. A few key facts. 96% of our active funds are now classified as Article 8 or Article 9, according to the Sustainable Finance Disclosure Regulation. This compares with 90% a year ago. Our share of Article 9 funds, which is the most demanding category, remains one of the highest in the industry at circa 10% of our AUM. We improve our carbon disclosure project climate change rating to A, which puts Eurazeo in the top 2% among all reporting companies, and we maintain our overall excellent ratings across the board. Finally, we are accelerating on impact, with two impact funds having successfully raised above their initial targets in 2023. As announced during our Capital Markets Day, we are in the process of launching a new impact fund. I now leave the floor to Christophe to comment on fundraising and asset rotation.

Thank you, William. Good morning, everyone. Thank you for being with us. Let me start with a focus on our fundraising figures for the year. Eurazeo raised 3.5 billion euros from clients this year, and this is above the guidance of 3 billion euros that we committed to in November. As William introduced, this represents a 21% increase year on year, excluding around, to be compared with around minus 10% for the European market as a whole. This performance is very encouraging given a challenging environment for fundraising in 2023. No doubt this highlights the quality of our franchises as well as the relevance of Eurasia's positioning as a European mid-market growth and impact-focused investment house. It is also broad-based. We managed to increase fundraising across all asset classes. Let me give you a few details. First, in buyout, we announced the successful first closing of Eurasio Capital 5, our new vintage, in mid-large buyout. And we also continue to see good traction for our Eurasio China Acceleration Fund, ICAF. We also face a good momentum in secondary transactions. Second, in venture, we posted a good performance in digital and in smart city, which closed above its initial target. Third, private debt or private debt funds continue to record good inflows thanks to the attractive risk-reward profile for our clients. We are up 31% year-on-year in this asset class thanks to our flagship in direct lending, Eurasio Private Debt No. 6, successfully closing above target. Finally, in real assets, Our Sustainable Infrastructure Fund showed a strong fundraising. It is already above its initial target of 500 million euros, which is remarkable for a first-time fund. And it continues to raise, showing how impact can be a strong business driver. You will recall from our Capital Markets Day that we outlined our ambition to further expand our client franchise through the internationalization of our LP base, of our institutional LP base, and the development of our wealth channel. We've made progress in both directions in 2023. As you can see, we raised 2.6 billion euros of institutional money this year, out of which 69% came from international MPs. This is a significant jump compared to previous years. A few cases in point. A very large Asian bank for the first time took a large ticket in our private debt fund, and this was done for all the subsidiaries of this bank in the world. An Asian life insurance company invested in our buyout program for the first time, and we've had our first successes in the US with consultant firms for our sustainable infrastructure fund. We continued also to grow our wealth franchise in 2023 with 863 million euros collected over the year. Wealth represented 25% of our total fundraising. And at the end of this year, at the end of 2023, AUM, from the wealth segment, amounted to 4.3 billion euros, and this represents now 18% of our total third-party AUM. As we announced during our Capital Markets Day, We also invested in our capabilities to increase fundraising during 2023. We've made senior appointments in our sales team in key geographies such as the Nordic and the Middle East. In parallel, we continue to add regularly new distribution partners for our wealth franchise, and we are beginning to see traction on Moonfair and iCapital platforms. Let me turn to the pipeline of fundraising for 2024. As you can see, we have... a solid and diversified slate of funds on the road, both on the institutional side as well as on the wealth segment. Eurazo is on the road with four flagship funds. With the expected final closing of EC5, Euroasio Capital 5, or mid-large buyout fund, or fifth fund in secondaries, secondary transactions, or seventh vintage in private debt, and or fourth vintage in gross equity. In addition... We also have smaller thematic funds in our range, in biotech, in asset-based debt, and we will final close our sustainable infrastructure fund, which will be the first one this year. We will also be launching an Article 9 LBO fund. You will be hearing more details later. about that one in the course of the year. More specifically, on the wealth segment. I mentioned earlier that Eurazeo has a successful range of dedicated funds. As an example, Eurazeo's evergreen fund, EPVE3, is a mix of private debt and secondary transactions. It should surpass 2 billion euros in 2024, and my guess is that it will be in the first half of 2024. We are also fundraising through, as you can see, several feeder funds across private debt, venture, growth, and secondaries. So let me now turn to deployments and realizations. As you know, 2023 was a low tide for M&A across the board. In an uncertain macro environment, the M&A market for private equity contracted by 40% in 2023, according to PitchBook, and this was particularly spectacular in the first half of the year. We have begun to see green shoots in the market since the summer, and particularly as inflation has receded and interest rates levels have stabilized. There are now more people willing to trade. Funding is back. Funding is available. And multiples tend to stabilize. And we are proud to say this is particularly true for the mid-market segment. Nevertheless, there is obviously a higher selectivity by investors in this context. Against this backdrop, Eurazeos continued to deploy capital selectively in our preferred sectors across all asset categories. We deployed close to 4 billion euros, which is 20% less than previous years. On the realization side, we decided to postpone some of our planned exits to the second part of 2023, and this was obviously done to benefit from better market conditions. With a pickup of activity in Q4, we were able to outperform the market in terms of exits. Overall, On the realization amount, including announced deal, we executed 2.2 billion euros of exits in 2023, i.e. a 24% decrease relative to 2022. When it came to our deployment, we continued to be highly selective in 2023 in private equity and real assets. As you know, Eurasio invests in category leaders, and we have continued to favor sectors with structural tailwinds, like specialty financial services, and BMS is a good example of that, Take-on-able business services, NEOXAM for example, healthcare and energy transition in particular with the rollout of our sustainable infrastructure fund. Demand for direct lending has remained high in the segment covered by Eurasio as we are gaining market share over banks particularly. So we deployed 1.5 billion euros in 2023. And we've been able to pass additional spreads on top of higher floating rates. And this has been done while containing the cost of risk or default rates in this activity remains close to zero. So we end the year with a significant firepower. We have 7 billion euros of dry power, out of which 4.6 billion from LPs. On the realization side, as said, we decided to postpone some of our planned exits to H2 when we clearly saw a pickup in activity in Q4 and we were able to announce by the end of the year significant deals like DORC and FSO, to name a few. Overall, we were able to execute 2.2 billion euros of exits, taking into account all the deals announced at the end of the year. Eurazeo exits were executed in good terms, in very good terms, which reflects the quality of our portfolio as well as the benefits of being a focused mid-market player. So let me stress the five main deals we executed in buyout in 2023. As you can see, average cash-on-cash multiple was 2.8 times, and average IRR amounted to 33%. I will now hand over to William, who will present our financial results. Thank you, Christophe.

I will now take you through the financial results for the year. Let me start with the asset management activity. As a reminder, we sold our stake in Rhone Capital in 2023, and the figures are all presented pro forma of Rhone. Overall, AUM growth, and particularly fee-paying AUM growth, illustrates the dynamism of our asset management business. Total assets under management were up 9% in 2023, reaching 35 billion euros, with third-party AUM up 12%. Fee-paying AUM were up 12% at 26 billion euros, with third-party fee-paying AUM particularly strong at plus 16%. Recurring revenues from asset management posted another year of solid growth. Management fees stood at €398 million in 2023, up 9% from previous year on a comparable basis. Third-party management fees, excluding IMG, were up 8%. IMG fees were only slightly up in 2023. The slow growth pace for 2023 is primarily attributable to a lag effect of lower AUM levels at the end of 2022. Trend has materially improved ever since with IMG AUM up 12% in 2023 and positive inflows year-to-date. Balance sheet management fees were up 18%, which, as we had said during our H1 call, and this has then been already disclosed, is largely due to the commitment made in our mid-large buyout funds. Fee-related earnings for the year 2023 are strongly up. 2023 FREs amounted to 138 million euros, up 22% from last year on a like-for-like basis. Our FRE margin improved by 380 basis points and reached 34.8%, which is close to the bottom end of our mid-term target of 35 to 40%. This further progress in Euraseo's operating leverage reflects our commitment to cost efficiency, whilst we continue to invest in our future growth, as Christophe mentioned earlier. Overall, the contribution of the asset management activity amounted to 128 million euros in 2023. As said previously, Recurring operating income is up strongly, with FRIs up 22% at 138 million euros. Performance fees are down due to a lower level of realizations relative to last year, both for balance sheet and third party. are due to increase significantly in the next few years to represent up to 10% of our third-party revenues over the cycle, as we said during our Capital Market Day. Let's now turn to the investment activity, starting with the value of our portfolio. As you know, since we report our accounts under the IFRS 10 norm, the main driver of the P&L of the investment activity is a portfolio change in fair value during the year, i.e. the value creation. As you can see, the net value of our portfolio was 8.3 billion euros at the end of 2023, up 6% from last year, with scope contributing 312 million euros, or plus 4%, and change in fair value contributing 62 million euros, or 1%. The per share value of the portfolio amounted to 109.6 euros at the end of 2023, up 9% from 2022. Hence, the impact of our share buyback program was plus 3%. As you can see, buyout, real assets and private debt showed increase in fair value of respectively plus 2, plus 4 and plus 12%, whilst the gross portfolio was adjusted down by 6%. Value creation was positively impacted by the operating performance of the underlying portfolio, as well as realizations completed above the last recorded net asset value. On the other hand, we adjusted multiples or discounts applied to some specific lines in the portfolio. Let me stress that value creation of any portfolio is not linear. Some years are stronger than others. Value creation in the portfolio has been 17% per annum over the last three years, including 2023, which is to be compared with our historical average of 12% that we reiterated as a target during our Capital Markets Day. As said, a key component of the value creation pertains to the growth of operating metrics of our underlying portfolio. As you know, we have a transformational value creation playbook, which we think is well adapted to hire for longer interest rates environment. Overall, 2023 was another illustration of the quality of the underlying assets in spite of a more challenging macro environment. In buyout, which represents 60% of the total value of the portfolio, revenues and EBITDA of the underlying companies were up respectively by 10% and 13%. Companies in our growth portfolios, which represent 23% of the total portfolio value, posted an aggregated revenue growth of 17%. In fact, the majority of portfolio companies posted a higher rate of revenue growth than this 17%, i.e. between 25% and 40%, with only a few portfolio companies lagging. And last, in our real assets portfolio, which accounts for 12% of Eurozeo portfolio value, we had a stronger on-year operational performance, as you can see. This performance reflects the specificities of our exposure in real assets. We are talking about operational real estates, and hospitality represents more than 50% of the total with a diversified geographic exposure. Another important element of value creation, as Christophe explained, is our ability to realize exits above NAVs. It has been the case consistently over a long period. 2023 exits were all done on very good terms. This has been mentioned with an average 2.8 times cash-on-cash multiple, 33% IR, and an average NAV uplift of 23%. This compares to an average historical cash-on-cash multiple of 2.1 times on realized transactions pertaining to the portfolio, as well as a 25% historical uplift to latest NAV. Overall, closed and announced deals relating to the balance sheet amounted to around 1 billion euros in 2023, which is about 13% of the previous year portfolio value. Looking forward... we expect a stronger stream of exits relative to 2023, which is consistent with our commitment to accelerate the shift towards a more asset-light business model. And we have a good and diversified pipeline of exits for 2024. Turning to the P&L of the investment activity, Overall, contribution of the investment company was a negative 91 million in 2023 with the following main drivers. Value creation contributes positively 406 million euros, of which 62 million euros linked to the portfolio change in fair value, as I mentioned earlier, and 47 million euros related to other financial assets. Management fees paid to the asset management company amounted to 122 million euros. They are deducted in the P&L of the investment company. In a nutshell, at Group Lavant, net results group share for 2023 stood at 1,824,000,000 euros for the year with the following elements. First, the positive contribution of asset management at plus 128 million euros. Second, the negative contribution of the investment activity at 91 million euros. And third, we registered, as you know, a 1.9 billion euros positive one-off impact. stemming from the revaluation of the accounting value of the unbalanced sheet portfolio in relation to the IFRS 10 norm application, less than 70 million lost on the sale of our stake in Rome. We are committed to increase return to our shareholders through dividends and share buybacks. As announced during our Capital Markets Day, we will propose at the next AGM an ordinary dividend of 2.42 euros per share, which is a 10% decrease year on year. Investors who have been on the register for more than two years are eligible on top to a 10% loyalty bonus. In the coming years, our intention is to continue to increase our ordinary dividend. As regards share buybacks, we bought 129 million euros of our own shares in 2023. And during the capital markets days, we announced a 200 million euros amount of share buyback in 2024 for cancellation that we started to execute at the beginning of the year. This is part of the execution of the 1.5 billion euro share buyback program that we plan to execute over four years. To finish, one word on the financial structure. We have a robust balance sheet. We have a strong capital base with total equity of 8.4 billion euros at the end of 2023. And we have a low gearing below 4%. taking account the closing of the disposal of EFESO, which happened earlier this year, and of DORC, which would happen shortly. We also have ample financial flexibility, thanks to a revolving credit facility of 1.5 billion euros, maturing in 2026. Thank you for your attention. We can now open the Q&A session.