Wendel

Good morning ladies and gentlemen and thank you for standing by. Welcome to Vendor's full year 2024 results conference call and webcast. At this time all participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question you will need to press star 1 1 on your telephone and wait for your name to be announced. You can also ask your questions on the webcast. Olivier Allot, Director of Financial Communication and Data Intelligence, will read them. I must advise you that this conference is being recorded today. I would now like to hand the conference over to Mr. Laurent Minot, Vendors Group CEO. Please go ahead, sir.

Thank you very much for this introduction. Good morning to everybody. Happy to have you on this call for the full year result 2024 of Vandell. I'm here with David Darmon and Benoit Driot. We will make the presentation, all three of us. We will be, as always, available to answer your questions also in the room. We have Olivier Allot, our investor relations officer, and Jérôme Michel in order to answer to your questions if any need. So let's start. I think the last year financial was a real achievement as our dual model is starting to deliver the growth we expected. Our fully diluted net asset value per share has reached €185.7 per share, which represents, if you take into account the dividend that was paid in 2024, 16.9% year-over-year value creation. Our principal investment activity contributed to 21.1 euro per share, and you will see that more in detail later on, thanks to a large part of the strong stock performance of Bureau Veritas. But also our new asset management activity contributed for the first time to 6 euro per share, thanks to the above expectation fee-related earnings generation and the strong growth of the AUM, 24% growth. As a result, we will propose a 4.7 euro per share dividend, up 17.5% compared to last year. And as I announced in our strategic roadmap, this dividend level takes into account the first partial integration of the asset management activity into Vendel in 2024. Keep in mind that this is just the beginning. And it will mechanically be higher in 25, thanks to the consolidation of a full year for IK and Monroe Capital. And Monroe, we expect to close transaction in Q1 this year. So, let's go to the next slide. And I think, as you see, we took some major steps to create a long-term value in 24. both on principal investment and asset management. Regarding principal investment, well, Bureau Veritas delivered strong results on the back of the quality of its LEED28 strategic plan, and this has been reflected in the performance of the share price, which has gone up 28% during the year. Our unlisted assets, and we'll come back in more detail on that, pursue their M&A activities to improve their medium, long-term value creation profile. But David will come back more in detail on that. As an investor, we've been very active in terms of portfolio rotation during the year with $2.3 billion of disposal and value creation or crystallization and the acquisition, as you know, on the other side of global decades to further improve our portfolio growth profile. And we strongly believe that global decades will bring a lot to us in the future. On the asset management side, 2024 has been a transformational year for Waddell and its shareholders. First, obviously, we had the closing of the IK transaction, which was initiated in 23, but really started and contributed to Waddell in this year. And it has been a very good start because the value of IKNR NAV has increased very significantly this year on the back of the fantastic growth it delivered above the estimated allowance in 2023. We continue to build our asset management platform, which we think will be a strong value creator in the future and with strong growth and level of dividend be distributed uh with the announcement of the acquisition of a new vertical in the private credit a monroe capital uh um will be the we expect to close the transaction in as i said q1 it will give our platform a critical mass and increase our exposure to the u.s economy These are really great achievements that improve Bandel's growth profile, increase our cash flow generation, and thus will increase our dividend payout to our shareholders. They are key to deliver, we think, stronger return to shareholders, and as I mentioned, it's just the beginning. Now, if you look to the transformation over the last two years, you see that today Vandel Group managed altogether 41 billion of assets, 41 billion pro forma, obviously of the acquisition of Monroe, which is made of 7.4 billion in the principal investment, excluding cash, and 33.4 billion of assets managed for third party in Europe and in the USA. Keep in mind that two years ago, we had only principal investment. So this is really a big, big change. At the end of the day, it, of course, gives Vandell a much more value-creative and cash-generative model, but it's also very interesting to note that our economic exposure today is made of three-thirds, one-third in Europe, one-third in the U.S., and one-third in the rest of the world. Now, let's go, because I think it's important that we understand well the drivers of the value creation in 2024. So we've created 27.4% euro per share in value during the year, which is, as I mentioned, 16.9% compared to the start of the year. This impressive growth is explained first by the strong growth of the listed assets by 29%, mainly due to better value of share price growth. It's interesting to note that we sold in 2014 1.1 billion euros of better value of shares, but thanks to the growth of its share price, its total value in our NAV is almost the same at the end of 2023. And on the other hand, our unlisted asset value for life basis, so without including global decades, which just came into the year, went down 7%. TPI, but we'll go back in more detail to that, and I will hand over to David for that. CPI had a very positive performance over the year, but Stahl, Acams, and mainly Scallion suffered overall from more difficult market conditions and volatile multiples. Our asset management GP value is strongly up by €6 per share in light of a very good performance of IKEA partners during the year 2024. Another element of the value creation or destruction is cost, financial results, and other elements. The impact is only one euro per share down this year, thanks to good control of cost, very positive carry, financial carry, and the positive impact of the dollar aging we have put in place at the time of the acquisition of Monroe Capital. In 2024, we bought back 92.5 million euros of shares, and that has created some value through accretion by our buyback, and that represents 1.4 euro per share of value accretion. So all of that leads to 27.4 euro per share, which includes 4 euro of dividend and 23.4 euro of the fully diluted NAV increase on the year. Now I pass over to David who will go into the detail of the principal investment performance and I will take back the lead to discuss about the asset management. David.

Thank you very much Laurent and good morning everyone. I am now on slide 8 where we're going to give you more details on the value creation on the principal investment you can see that over the year 2024, there was a plus 12.8% value creation from the principal investments. The value creation comes mainly from Bureau Veritas, as Laurent mentioned. It delivered an outstanding 2024 vintage, both from an operational point of view and on the stock market performance. Regarding the unlisted assets, the overall contribution to value creation was negative in 2024 with mixed performances. CPI performed very well, and contributed very positively. And so positively that CPI actually paid a 93 million euros dividend to Vendel early 2024. Regarding Stahl, Scagnon and Acamps, the contribution was negative over the course of the year as a reflection of those assets' performances and the multiples of their peers. And those offset the good performance from CPI, as Laura mentioned. Regarding Stahl, We value the company from the sale of its wet end division, which has reduced EBITDA in absolute value, without the full impact of the multiple re-rating we expect from this strategic refocus. We strongly believe that the new style that was presented during the investor day has now become a very attractive asset. I am now moving to slide 9, where you can see that the principal investment NAV was up 21.1 euros, led by the listed asset growth. As already mentioned, Bureau Veritas delivered an outstanding performance in 2024. The sales were up 6.4%, including a 10.2% organic growth. The profits were up 7.1%, and the margins are up 11 business points year-over-year. Bureau Veritas expects to deliver for the full year 2025 meet-to-high single-digit organic revenue growth and will show an improvement in adjusted operating margins at constant exchange rates. And also, the company announced a strong cash flow with cash conversion above 90%. We are very confident in the prospect of Bira Veritas, and we have been very involved in supporting the company in the definition of its Leap 28 strategic plans, which we fully support. Regarding Tarket, as of December 31st, 2024, it is valued according to its 20 days average share price end of 2024, which was 10.5 euros. As you saw, Tarket Participation, Tarket Controlling Shareholder, announced its intention to file an offer, followed by a squeeze-out on the target shares with an offer price of €16 per share, which is a fair version of target value, and thus we will use this price in our Q1 2025 NAV. I am now moving to slide 10, where you can see company by company, the private companies, I mean, the performance over the year. Regarding style, keep in mind that these figures are still including the wet-end division sales and EBITDA. On a NAV valuation standpoint, as I already mentioned, we did include the wet end. The positive sales growth despite market challenge that we saw in the automotive and luxury goods proved the resilience of the Stahl business model. The bid-down margin remains pretty strong at 22.2%, demonstrating a very effective cost control. 2024 was a transformation year for Stahl. It did become, over the year, a pure-play specialty coatings formulation and a radical change in its equity story. The sale of the wet and leather chemical division aligns with a strategic shift, and it's very worth emphasizing this transformational move. The performance of financials shows a stronger growth profile and an improved margin, which now stands at 23.7%. Regarding CPI, 2024 was another year of very strong performance, with revenue growth up plus 8.5%, and EBITDA up 7.8%. The company did maintain a high EBITDA margin at 49.3%, despite international expansion investments and some significant IT investments as well. Over Christmas, the company actually closed its first acquisition under Vandell's ownership, a small Norwegian leader in behavior intervention and training. Regarding ACAMS, 2024 had stable sales despite a very strong transformation in the company. The EBITDA margin went up 70 basis points, showing an effective cost management. 2024 was also a pivotal year for the company, a year of transformation under a new leadership and with some key investments in technology-driven growth. Regarding Scallion, you can see that the sales declined by 1.2%, reflecting a broader market slowdown, especially in the automotive in Europe and in the aeronautics. The EBITDA margin dropped by 60 basis points, mainly due to a lower utilization rate, and the market slowdown was partially offset by a strict SG&E control. The company had two acquisitions in 2024. One was Julin in Spain, and the other one was Manolo in Canada. Some very strategic and attractive targets, one in cybersecurity and the other one in high-end drone engineering software IT. So 2024 was a 27th year for Scalion as well, in a very tough market environment. We're working hard with the management to ensure that Scalion will fully benefit from the upcycle, building on the very strong OT business and an improving IT offering. Last, regarding global decades, you can see that the company enjoys a strong revenue growth, both organically and through M&A. The BIDA margin remains solid at 23.9% in line with our expectation. Early 2025, Global Decade will have three acquisitions in line with the management plan, and the M&A pipeline is still very strong. I hand over back the mic to Laurent for the rest of the presentation.

Thank you, David. We're moving to slide 11 on the specifically IKA growth momentum. 2024 was another strong year for IK partner. First of all, which is I think a key element today of success of IK is the amount of impressive liquidity that has been returned to LPs. 1.6 billion of proceeds were generated with an average 2.8 times multiple for 11 exits. a lot of return and a very good performance of the companies that were sold during this period. I think there's not so much funds that have been able to rely on that, which is, I think, at the heart of the success of IKEA. That has resulted in successful fundraising. On a calendar year 2024, it's a $3.4 billion that were raised by IK. It's a raising season that started late 2023 and will finish during the first half of 2025. The target is $6 billion. uh for this vintage and we're well on the way we are already currently at 5.2 billion out of that 6 billion vintage so we are very very confident in the fact that we will reach and and all we have in the pipe shows that we will reach 6 billion even potentially a little bit more um you've seen also an active and selective deployment over 2024 the teams of ikea relies 17 deals for $1.5 billion of investment. And it's also a company that is permanently innovative. IK pursues its growth strategy with new products. We've made the first continuation fund. We've developed Article 8 SRDR, and we have more ideas to come in order to fuel the growth in 2025. If we move to the asset under management on the next page, I think you see the quite impressive development of IK, very well positioned in the PE market for the mid cap and small cap segment, which we think is a very good segment and where IK is very, very well positioned in Europe. It has delivered outstanding results. The AUM are up 24% in 24 from $11.1 billion to $13.8 billion from December 23 to December 24 of the period. As I mentioned, $3.4 billion were raised, and this good momentum in fundraising is successfully issuing all the different strategies, the mid-cap, the small cap, the continuation vehicle, and the partnership fund, which are all for fundraising very close to the end in mid-cap. halfway in the small cap because it started after, and the contribution vehicle is finished, partnership fund is close to be finished. As a result, IKEA delivered very strong FRE in 2024 with close to €70 million FRE above our initial estimates, which we announced at the time of the acquisition, which was €60 million at that time for the 2024 year. Okay, another point is cost, and a little bit of a zoom on that. Cash operating costs, net financial results, and other items impacted negatively by €1, thanks for a very strict cost control and a quite positive financial carry in 2024. plus the political impact of the aging instrument put in place at the time of the equation of Monroe. It has represented, as you see, only one euro per share. Then also we've made, as I mentioned, share buyback, and the share buyback result in a 1.4 million euro creation per share in December 31st, 24. Now we move to the ESG. Well, I know that it is less of the spirit of the moment to speak about ESG now, but we are still very committed to what we've done now for the last six years. And we've been now six years that we've been including the Dow Jones Best-in-Class World and Europe Indices, making it one of the top, VADEL is one of the top 10% of companies in terms of sustainability in the diversity Diversify financial category. We have a score, as you see, of 76 out of 100 in this category, which has improved compared to 2023. In 2024, Vandell defined a new ESG roadmap, and this roadmap includes five priorities, governance and business ethics, reliability of extra financial information. We had the first CSRD report that we're doing this year. health and safety, climate change and adaptation and parity. I will hand over to Benoît Drigo to comment on the result of the year.

Good morning. In 2024, the sales amount to $8.64 billion. The asset management contributing for the first time this year. This amount is 13% above last year and 8.4% organically, thanks to Bureau Veritas and CPI good performances. The net asset from operation is 754 million euros, 6% above last year, despite the disposal of Constantia Flexible. After the capital gain of that was 692, but 420 in group share after the amortization of the goodwill entries, a depreciation booked by Scallion in the context of the industry slowdown. and a depreciation booked by STAL on its weight and division that is being sold. The net income group share is 294 million euros, twice the amount of 2023. In accordance with IFRS, some events are not booked in the P&L. The capital gain on the block of Bureau Veritas shares that was 784 million euros. The change in fair value of our stake in IHS and the dividends we received from Bureau Veritas and CPI that are fully consolidated. If we turn to the following page and the financial structure, The LTV ratio at the end of 2024 was 7.2%, including the commitment we have in IK funds. If we take into account the acquisition of Monroe, this LTV is 23% above the S&P ceiling for our current rating. we will reduce this LTV with the value creation of the portfolio and the asset rotation. Concerning our liquidity, even after our commitment in IEK funds and the acquisition of Monroe and the accompanying commitments, The amount of liquidity is still very large, 1.2 billion euros, including 875 million euros of available credit lines. The amount of debt is 2.4 billion, including 750 million of exchangeable bonds in Bureau Veritas that will be redeemed in Bureau Veritas shares. The average maturity is 3.6 years, but if we don't take into account the exchangeable bonds that will be redeemed in ViroValita shares, it is 4.7 years in line with our long-term investor profile. As Laurent just explained, the cost of our debt is lower than the return of the cash in 2024, so we made a net income on the net debt.

Okay, thank you. Thank you, Benoit, for this presentation. Just a few words to conclude. We're very confident that the development of this dual model will continue to create more value and more recurring returns for our shareholders. We will first build the third-party asset management platform through the successful integration of Monroe Capital, continued development of IKEA Partner, as well as the implementation of commercial synergies between the two entities. and we strongly believe it will deliver strong FRE. We will also continue to look for additional verticals. Principal investment, our investment will continue to deploy transformation plan in our companies to grow them organically, but also through M&A. And I can tell you we are very active with all the companies in order to make sure that we take benefit of those great investments. Our ambition is really to leverage our dual model to deliver superior return to our shareholders with strong financial discipline. We are convinced that this strategy, which was initiated two years ago, will deliver an attractive value proposal for our shareholders and investors. And it's the first year where it starts to pay and it will continue. In fact, the asset management part is just at the frontier of being included in these numbers, and it will really start to be significant next year, as you will see. Thank you very much for your time and for your attention.

uh benoit david and i and all the team is are at your disposal to answer any question that you may have thank you thank you as a reminder to ask a question you will need to press star 1 1 on your telephone and wait for your name to be announced to withdraw your question please press star 1 1 again if you wish to ask a question via the webcast please type it into the box and click Submit.

We have a web question. Olivier was speaking. The first question, XR announced a buyback given large discount to its NEV. Why not make such a smart capital allocation move?

As I've always said, we've made some buyback last year which created 1.2 or 1.3 euro per share value through accretion, and we've always said that we would be opportunistic doing that. I think we've created significant value by investing in the asset management business too, and we will continue because we think we need to create value for the long term, not only for the short term. It's a combination of the different strategy that we are pursuing and share buyback is part of the tool that we are using, but we cannot reduce our strategy to a pure share buyback.

Thank you. We have another question from the web. The Financial Press disclosed that Pernod Ricard could sell Moule Champagne. Would you have a look at it and make a bid? No.

No, I'm saying no, because we're not interested in any sort of, we've never had any, I mean, we have no competencies in the retail and consumer business, so we will not invest into that.

Thank you. Can you make any additional comments on the discussions between AGS and Bureau Veritas, and do you have in mind other options?

Well, I think most of it was very clearly stated in the communiqué that was published by Bureau Veritas on January 27th. This discussion between BV and Bureau Veritas and SJS has ceased and did not result in an agreement despite BV's strong belief in the value of consideration within this sector. I don't think we have more to comment despite that. We, as Vandell, as we mentioned during the presentation, we strongly support Bureau Veritas Lib, but with the LIP28 strategy and supporting its strong ambition of a transformative leap in growth on one side and performance. and also portfolio reshuffling. So we think it's the right approach and we will continue to support the company in doing so.

Thank you. Are you concerned by some potential changes in carry interest tax scheme in the U.S. for private equity industry?

We're not exposed to that. So we don't, we're not, we're not, I mean, we're not concerned so not being concerned it's not a it's not an issue for us will it have some impact on the private equity industry in the us potentially in the us we're exposed to two things by investing on some companies and you know our two good companies cpi and acam cpi is a very well performing company since we bought it after a slow start during kovit but now has a great performance. ACAM is really in a transformation. Year 2024 was a very good year in transformation, change in leadership, and we've seen that the results are starting to pay now, and we expect to see much more in 2025. I think there's a clear demonstration of that during our investor day. And the other exposure we have to the U.S. is in the private asset activity is Monroe Capital through private credit. And we view the fact that Monroe, as you know, that in private credit, the carried interest issues is much smaller than it is in the private equity issue. So we don't view that as being a significant issue. Thank you.

There is still a substantial discount to NME. How do you explain that and what are you going to do about it?

Well, I think I've said that many times. The only antidote, the remedy to discount is performance. So the only thing we will do is keep on improving performance of the global assets this year performance of our net asset value and including the dividend we pay to our shareholders was 16.9%. It's one year, so people may claim, you know, one year doesn't make a story. So let's do it next year and the year after. And if we deliver that on a sustainable basis, I think then the discount will be reduced. The second element is that we have decided that we should offer to our shareholders a significant return. And we've defined a dividend policy that is reflecting the potential of value creation that we're generating on our set, that is reflecting also the higher cash flow profile that we are creating through the asset management business. Asset management business is a business that generates yield and growth, and that's really what we want. We want to generate significant dividends coming forward And by doing the two of it, I think we will generate significant value to our shareholders. You've seen that the dividend has increased this year, but it will mechanically continue to increase significantly in 2025 just by the addition of the full year of IK plus the fact that Monroe will be part of us and will generate significant FRA. We will continue making sure that we've got a disciplined work on making sure that we create value on the assets that we've invested in and that we distribute significant part of the cash flow we generate through our activities. So, yeah, I think long-term, this is what we'll pay. I'm not running for just the next month's reduction. I'm looking for long-term. Obviously, working on your capital structures through buybacks is also a tool in order to do it, as I mentioned, but it cannot be the only one because it's just stopping the story. And we have a story that started 320 years ago, and we just think that we can do it for many more years to come. At least David and I think that we've been having the confidence of the board for the next four years so we will commit ourselves to make sure that we can generate significant value in the next four years for all our shareholders thank you there are no more questions on the web and no questions by phone so long it's time to close the call okay well good thank you very much uh uh for all of you what i can tell you is that we're very you know uh um we're we're very committed to creating value. We're very committed to increasing value for shareholders. You will see that there will be return. We're here to make sure that the discount, as you mentioned, it was mentioned, will decrease and it will only decrease thanks to the quality of what we do, quality of the performance of our sets, quality of our the reduction or the how can I call it, the fact that we manage all that with the lowest cost possible and the quality of our cash flow profile. And we can be stuck with high growth and high dividend. Thank you very much. And next time we will talk together will be for the first quarter of Thank you very much. Have a great day.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.