Wendel

Good afternoon ladies and gentlemen, and thank you for standing by. Welcome to Vendel's H1 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 Communications and Data Intelligence, will read them. I must advise you that this conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Laurent Nino, Vendor Group Chief Executive Officer. Please go ahead, sir.

Thank you very much. Good morning to all of you. Thank you for being on that call on July 31st. I know there's a lot of other publications today, so we're very honored to have you there. I'm here with David Darmon, with Jérôme Michel, and Benoît Driot, as well as with Olivier Hallot, too. present you the half-year result of VADER and to answer any question you may have afterwards. So let me start with the first key highlights of the half-year. We have, as you know, two pillars of our strategy. One is the principal investment. The other one is the development of the asset management platform. If I start with the largest part of it, which is the principal investment, as you've seen, the listed portfolio has a pretty good momentum across the board, On the second quarter, compared to the first quarter, we've been active by selling some of our – through a forward sell, sorry, part of our shares, 6.7% of Bureau Veritas during this half year, which has generated 750 million of euros of proceeds. On the not listed portfolio, to be fair, it is a disappointing – quarter. We have value has been impacted by current trading and by peers multiple as well as FX. We'll come back on it. We think that we have taken action in order to make sure that we can have better situation in the quarters to come. I think on the two more disappointing companies have been Stahl and Scallion, but I think on both sides we've got good vision on how this will improve. David will come back on that in more detail later on. In term of management of this company, we have two new CEOs that have joined or will join. One for CPI where our existing CEO Tony Jase is retiring and he's been He will be in the transition with a new CEO, Andy Harris, will take place mid-August, so it's really ongoing and it's starting well. And this profile is, I think, a very good profile for putting CPI on a growth perspective, and she's got a very good background, which we think also is a very important element of the future of CPI. For Scallion, we have a new CEO that will join within the course of September. He's an experienced and highly recognized professional of the industry. He will succeed to Yvan. Yvan, as you know, has been the CEO of Scallion since we made the acquisition, and we had agreed at the time that he will – retired within a period of up to four to five years. And as we have a new chapter to open, we all agree that it was the right moment to do it. And we think it will – but David will come back also very much on that later on. On the asset management, there is no – significant news in terms of addition to the platform, but the platform is being put in place. Monroe Capital now is included in our account for the first time. It represents now 22% of the gross asset value of Vandell. The AUM globally, if we compare it to last year, is up 184%. Obviously, there's element of organic growth, but also inorganic growth. We'll come back to that. We have had a good fundraising quarter with a $4.3 billion raise during H1, both at Monroe and IKEA. and our total asset management on third-party now reached 39.1 billion euros. Overall, if we add all of it, it's 45 billion plus of assets that are managed now by Vendel, 6.2 on the principal investment, 39 for third-party clients. Our NAV, fully diluted NAV, is 167.7%. Euro per share. It has down compared to last quarter. It is down for two main reasons. One is the coupon, which was paid in May, 4.7 euros. And we also have a significant impact of the dollar depreciation. Dollars stand at 117 plus at the end of June compared to a dollar which was... around 111, I think, at the quarter, at the beginning of the quarter, 108, yeah, 108 at the beginning of the quarter. So it has been a significant shift in the dollar value, which had impact. on our asset which are denominated in dollars. Otherwise, the rest is pretty flat. Altogether, the gross value of the listed asset and asset management being compensated by the non-listed assets. New. And I think it's important that we have decided to move to a sort of semestral dividend policy. It means that we will serve an interim dividend now on a half-year basis. We've decided to set this half-year dividend, which will be paid in November at 1.5 euro per share, which is roughly a third of last year's dividend. And then we will put the rest of the dividend will be paid, as obvious, in May 26, based on the 25 numbers. I think it's important that we move to that because, as you know, we want to have a policy that is of significant return to our shareholders through increasing dividend and to have a regular payment of dividend, I think, is becoming a sort of benchmark of the way you should do when you pay significant dividends. If we move to the next page, 45 billion of assets. I'm going to be very quick on this one. 6.2 billion on direct assets, direct principal investment. You know the asset, no change in the asset base compared to where it was. Business services with Bureau Veritas and Scalion. 45% of the total, education, professional training and tech, CPI, global educates, ACAMs are here. And then we've got in industrial, STAL and Target. I don't go back on the performance of these assets. David will come back. On the third-party asset management, 60% now is coming from Monroe, 40% from IK, 480 professional in 11 countries, in the platform. Now, if we look to what has impact on the value creation on the NAV, as I mentioned, principal investment has been a decent bringing quarter, 1.5 euro negative, a positive impact of the value of listed asset plus 3.5 euro per share. On the other side, minus 5 from non-listed asset. As I mentioned, the main two disappointing things are Stahl and Scalion, but David mentioned We'll go back on it, but we are hopeful that we have now a much brighter future for all of those non-listed assets when we come back. Asset management has created 3.8 euros per share, good growth of the platform, metrics of each of the IK and manual has been better than expected over the previous years, plus a little bit of a multiple effect, but most of it is coming from the FRA grows, and this increase is despite, yeah. And then we have a Forex. Forex is 4.7. It has a significant impact, as I mentioned, at $1 at 1.17, what was it, 1.1711 or something like that, or 20, 1.1720 as of 30th of June. It is our dollar-denominated asset represents 33% of our GAV today. Altogether, we have down now, which is down 4.3 euro per share, including that 4.7 point on dollar. It could have been slightly up without it, but it doesn't mean that we're not disappointed by the principal investment performance. as all of us. Now, maybe I pass over to David on that so that we can give a clear view of where we are on the portfolio and what perspective we feel on each of the lines, and then I will take over on the asset management part.

Thank you, Laurent, and good afternoon, everyone. So I'm now on slide eight, and we're going to discuss the performance of the listed assets. During H1, the operational performances of the three investments in listed assets were actually good. Starting with BV, BV had a plus 5.7% sales increase during H1. That does include an organic growth of plus 6.7%, driven by two reporting lines growing double digits. The industry lines and marine and offshore were particularly strong. FX had a negative impact of minus 2.3% on BV during H1, which slightly reduced this organic growth. BV also announced the completion of six small bolt-on acquisitions, so there were a very slight and small change in scope. And the company did confirm its 2025 outlook, so a good start of the year for Bureau Veritas. StarCats had mixed performance during H1, with some very positive results in EMEA, but to be opposed to low performance in North America, where the company had an operational issue in its warehouse, which did disrupt the deliveries. IHS will publish its number in August, but we understand that the operational performance are going well on that front. I'm moving now to slide nine to show and discuss the performance of the unlisted assets. Starting with Stahl, Stahl had a soft H1 sales with weak performance in leather, both in the wet end and the finish sales. The underlying market, which are the footwear and the automotive industries, were impacted by the noise of the tariff discussion. And hopefully with better clarity that we have now on that front, we shall see a recovery of those markets by year end. Margins have been partially impacted as well by this slowdown in the letter and also with the integration of Weiburger Graphics, which pre-synergies had margins below 20%, so slightly dilutive pre-synergies. The company is still making progress on the carve-out, which we hope to conclude by year-end. By this prevention institute, H1 sales were growing only by 4%, which is lower than the pace that we were used to for this company. The new U.S. administration policy did create a bit of noise on the budget of some school districts, and we saw some customers pushing back some orders. We expect some sales acceleration in H2 and see better numbers by year-end, but the beginning of the year was slow, as you can see, with this plus 4% in terms of sales. The EBITDA growth is slightly higher. There was a small margin expansion due to some delays in hiring and some cost savings initiatives. As Laurel mentioned, a new CEO is about to join in August, Andy Harris. She's the former CEO of High Ground Software. She has a very strong digital and IT background, and she will help the digital transformation of CPI. So we are pretty excited with this new hiring. I'm moving now to ACAMS. As you can see, ACAMS had a very strong H1 performance with strong results in the Americas, in their conference businesses, and in APAC. Europe was slower compared to those business units. You can see that the new leadership is driving a lot of Salesforce effectiveness, and we can see some good results showing up. The margins have been particularly strong during this semester. We expect those margins levels to normalize during H2, first because the Vegas conference has a lower margin and it's happening in Q3. We also have some hiring that we need to make in H2, which will drive the margin back to close to 25%. So don't get too excited with this 54% growth. It is good, but it will stabilize at the recurring level by your end. On Scania, as Laurent was mentioning, the company and its peers is facing tough market conditions. The company is especially impacted for the service it provides to small French IT customers. and in the automotive sectors in particular. There is a strong resilience in the engineering services and in the international part of the activity, so it balances those headwinds in the franchise business. The company, Vendel invested 41 million euros in the company since the beginning of the year, both to finance an acquisition called skills and affinity and also to strengthen the balance sheet. And last, as Laurent was mentioning, we can see some early signs, anecdotal signs of a stabilization of the performance with some new contracts of wings, which are very encouraging, and a growth in the number of bill consultants, which are also a good sign. So as we say in France, les hirondelles ne font pas le printemps, But we can see some positive signs, and hopefully we are reaching and close to the bottom now. Last, as Laurent was mentioning, a new CEO will join the firm starting in September. It's a very strong professional coming with a background very similar to Scania, so someone very experienced who is going to bring his experience in international background and international in a very dynamic firm. So we are very excited as well with this hiring. And we will introduce him to you during our investor day by year-end. Last, Globe Educate, some good growth coming both from growth in terms of enrollment in number of students and also good growth in tuition fees. And this is combined as well with some strong M&A. We believe that since our acquisition last October, we have close to 5 million EBITDA from acquisition, which is a good pace. The company is actually accelerating on that front, and we believe that next year we will outgrow this M&A number quite significantly. There is a lot of opportunities for consolidation in this industry.