Catella AB (publ)

Good morning everybody and welcome to Catella's Interim Report for the fourth quarter of 2024. My name is Daniel Garrosh and I am the Interim CEO of Catella Group and together with Michel Fichier, CFO and Head of Investor Relations, we will walk you through the highlights of the quarter and the full year of 2024. After the presentation we will open up for a Q&A session and the material and reports are as always available on our website. I'd like to start the presentation with a brief overview of Catella starting on page three. Today's Catella manages 155 billion in assets under management with a revenue base of 2.3 billion SEC and operations in 12 countries and assets in 16 backed by nearly 500 employees. So we can flip to the next page. We operate in three property-focused business areas, investment management, principal investments, and corporate finance. Although real estate has had a couple of challenging years recently, we are supported by a long-term growth trajectory as portfolio allocation to real assets is increasing. Nearly 70% of our income stems from fixed recurring revenue, providing stability to the business as a whole. We see sustainability as part of conducting our business, both through long-term relationships with clients, as well as through fund investments and investment projects. We manage our larger institutional investors' capital through funds and asset management mandates. And this is done through local teams with profound knowledge of their markets, leading us being a true vertically integrated pan-European player. And we have a history of over 35 years. And during that time, we've been established a pan-European platform and a strong brand. So with that brief introduction, I'd like to start this quarter's presentation with a short market summary on page six. So we have had 12 quarters of declining or hesitant market. We have noticed support for a recovering and growing market as Q4 transaction volumes showed an increase of more than 20% year on year. Strongest growth was noticed in the residential segment with a 45% growth year on year. And the trend in valuation of European real assets is that it continues to stabilize. After over two years of negative value adjustments, lowered interest rates, as well as opportunities for financing opening up, the market is now at a point where yields are becoming attractive. A significantly stronger and well-founded interest in real estate investments is also something I and my colleagues are experiencing in our day-to-day operations. The increased activity level is seen foremost in a larger market, such as in the UK and also in Sweden, whereas smaller markets in, for example, Finland still are experiencing limited market activity in terms of transaction volume. So with that brief market backdrop, I'd like to move on to page seven for some key financial and operational highlights of the quarter. The improved market conditions are also reflected in our financials, as you can see. Net revenue has increased by 39% year on year. The EBIT increased almost by a factor of seven, taking restructuring cost of 19 million into account. This increase was even higher. Worth repeating is that the result is both an effect of improved market conditions as well as efficiency initiatives we have carried out over the two last years. If we then take a look into our business areas, there are a couple of things I'd like to highlight, and we can start with investment management. Summarizing the year and the quarter, we have had a larger inflow of capital than outflow, resulting in a positive AUM development. And even though it's not on the historical growth rates that we have become used to, we see this as a sign of strength. The ability to grow through asset management mandates with strong local teams managing underperforming assets and assets which require repositioning proves the resilience of our business model. This in a market where capital inflows to our core property funds have been muted. In UK, our seed investment capital from some two years back of 2 million pounds into strategic equities fund attracted capital from a large pension fund deciding to invest 1.4 billion SEK. This is an excellent example of how we can leverage both Catella capital and competence into larger structures and managed assets. In Germany, we reached our milestone of 500 million euro capital commitments into our logistics fund. And logistics is an asset class which has performed well in this market environment that we have experienced. Also, in Germany, we finalized the merger of our two fund platforms into one, creating Catella Investment Management, GmbH, with 10 billion euros in AUM and 420 assets across 15 European countries. In France, Catella Aquila, which we acquired a majority of in 2023, onboarded the fund assets in France, which we now will be managing in-house. So if we turn to principal investments, the sale of the French logistic development Polaxis was finalized in November, releasing liquidity at the marginal profits. In Denmark, we invested in a new residential development project. And the investment is made together with a large international capital partner, capping our total capital commitment to 83 million SEC over the development phase and securing long-term mandate with recurring revenues and also at attractive returns, 15 to 20% IRR on the invested capital. And since I know that there will be questions on Cactus, I can say that all is progressing according to plan, even though an intersection of this size takes some time, especially in a market as this. We are engaged in dialogues with investors and as market conditions are continuously improving, we stay positive that we will be able to close an intersection to our satisfaction. However, at this stage, I cannot share any additional information on specific timing or price, but I promise that we will get back with an update as soon as we have more specific information to share. For corporate finance, total number of transactions as well as volumes increased year over year. Especially the team in Spain was kept busy in the quarter and had a record quarter and year. Besides having efficiency improvements and cost adjustments, which are also reflected in our P&L and EBIT improvement, despite lower revenue, we have also made some forward-focused recruitments to capture growth in the returning markets. So before moving on to the business areas in detail, I'd like to discuss our route forward and our priorities for 2025 and onwards on the next page. Me, together with management, started to review a strategy during the autumn and had a discussion with the board in December. What we concluded when reviewing our current strategy was that we had many, perhaps too many ongoing future focused initiatives. We have been successful with some, but really to advance our position going forward, we will need a more dedicated focus and fewer strategic priorities to secure the capacity and really focus on the how, i.e. how to implement the strategies and priorities we see as the most important. So following this review, we have landed in three overall strategic initiatives for the group. And the first one being to deconcentrate and to refocus principal investments. Looking ahead, we are firmly committed to decrease the concentration, i.e. to increase the diversification of our investment portfolio. And furthermore, we have refined the criteria for new investments. So the investments need to be smaller in size. They need to be more diversified as it comes to asset class, geography and duration. And primary focus for principal investments going forward will be to support the growth of investment management AUM through new funds or mandates. And also investments hurdles shall be meet with a 15 to 20% IRR, but could also be lower if it secures long and recurring fixed fee revenue. So by narrowing down and focus the use of our own balance sheet going forward, our investments will fuel the growth of AUM and even further increase the stability of growing cash flows. Secondly, Even though we made already significant efficiency improvements and strengthen our corporate finance organization, we believe that we can do more to improve the underlying profitability and make sure to put the structure in place supporting growth. In here, I see a clear scope to create a better joined-up business where we take advantage of our strong local organizations, but at the same time, make sure to offer a seamless offering to our pan-European clients. And thirdly, besides refocusing principal investments to support AUM growth, we need to continue to grow our existing funds as well as launching fewer but larger international scalable products that should be supported by our own investment thesis, the Catella House View. So investment management is the main value driver of our business and it is of course extremely important that we continuously create products that are relevant and that are in demand from our investors. So with this as our priorities, we will continue to build Catella based on our core competences, capital and competence, and by increasing AOM and fixed revenue over time, create sustainable and profitable growth, creating shareholder value. So that was a little bit about the future strategy. If we then move on to page 10 to discuss investment management in detail, Since inception, this business area has delivered a strong average annual growth rate of nearly 20%. Despite the more cautious market and lower interest for core fund investment, we show growth for the quarter and full year in assets under management. In funds, there was a net inflow, primarily driven by a larger residential fund, Catella European Residential III, followed by Catella Vånen Europa and Catella Modernas Vånen, with continuous interest from investors and finalized assets which have entered the funds. In asset management, some mandates reach majority and assets were sold during the year, but a larger part of these were replaced by new long-term mandates, primarily in Finland, where AUM has nearly doubled over the year. And these are new mandates with a new focus, where we aid investors to manage underperforming or even defaulted assets to reposition them and increase returns. And as I mentioned before, asset management provides a good balance to our business model and provides opportunities to grow in an environment where investor interest in core and core plus investments is limited. In this setting, our pan-European reach coupled with strong on the ground local market competence is something investors and partners value highly. And that is a true differentiating factor for us. Moving on to page 11. So the increased transaction activity led to an increase of nearly 40 percent in variable revenues compared to last year. And it is the driver behind the increase of nearly 40 million in net revenues. OPEX ended at nearly 190 million in the quarter. that this was mainly driven by an increase of transaction based variable expenses and one of restructuring costs amounting to 9 million. Taking this into consideration, we demonstrate a significantly lower fixed cost base compared to one year ago. And through the merger of our German fund platforms, we will further harmonize operations and increase efficiencies going forward. Besides the continuous strong focus of our efficiency improvements, we continue our efforts of retaining and growing our asset management looking ahead. We can now turn to the next page for an overview of principal investments. So our principal investment portfolio consists of nine active projects at year end, plus a few smaller seed investments and equity co-investments in client aggregation mandates. During the quarter, the logistic project Polaxis was sold, releasing liquidity at the marginal profits. Furthermore, an additional milestone payments were received for the forward-funded METS project. Both strengthen our liquidity, which has been a key priority for us to manage during this part of the cycle. We also entered into new projects in accordance with a revised focus on principal investments. In Denmark, as I mentioned, the investment in Vega will be made together with a large international capital partner. And the structure caps our total capital commitment to 83 million SEK over the development phase. At the same time, it builds AUM and secures long-term mandates. this investment is also made at attractive returns some 50 to 20 percent irr on the invested capital sorry in berlin we have entered a similar product structure but that is currently at an early stage and we'll come back on that further on so all in all in principle investments we remain committed to our projects and based on our financial position we have the opportunity to be patient and to protect value and generate shareholder returns In parallel, we continue to view smaller investment opportunities as they emerge, likely ones we've entered in Q4, with ambition to grow AVM, gain new revenues through asset management mandates and generate returns on equity. So let's focus on corporate finance now on page 15. Net revenue was on par with last year, but with differences between our different markets. Spain had a very strong quarter with our other four markets being at similar or lower levels. So even though net revenue was unchanged, EBIT came in stronger, highlighting the efficiency improvements being reflected in the P&L. To reiterate what we have previously said is that our corporate finance business area holds strong market positions in the five markets where we have operations. And with a couple of new recruitments and increased cost efficiencies, the business area is now in a better position to be a highly profitable business as the market now returns. So I'll now hand over to Michelle, who will share the brief financial summary beginning on page 17.

thank you thank you daniel and good morning everyone and to start by repeating what has already been mentioned we summarize a strong end of the year in the fourth quarter with revenue top line mainly driven by increased transaction based revenues in investment management setting aside net revenue from the principal investment sales of polaxis When I browsed through the analyst comment this morning, I noticed that our restructuring cost had not been considered in their first takes of the results. And as we've mentioned previously, we continuously, we have continuously throughout the year adapted the organization to a market with lower activity. At a first glance, OPEX increased for the quarter and full year. but that was mainly driven by variable expenses and also one-off restructuring costs. Our main focus, as you know, has been to reduce the fixed expenses, and for the quarter, as you can see on the slide, these decreased by 33 million, and for the full year, 76 million. And this is before taking restructuring costs into account. Those amounted to 19 million in the quarter, and 44 million for the full year. 13 million of that is what is highlighted in the report, and that relates to severance costs. And the additional cost of 5 million is related to the merger of our two German fund platforms, taking us to a total of 19 million. The corresponding figures for the full year, the severance cost amounted to 28 million, And the cost related to the merger amounted to 16 million, summing this up to 44 million of one off restructuring costs for the full year of 2024. So in summary, we conclude a solid year under the current market conditions. And taking the one off restructuring costs, which I just mentioned into account, I would say that we end the year with more than solid results. Also worth highlighting is that since 2022, we have managed to reduce fixed costs by over 200 million, as you also see, as also shown on the slide. Turning to net EBIT, it showed an improvement of 59 million, and this then once again includes the one of restructuring costs of 19 million. If we then have a look below the EBIT line, net financial ended 71 million better than last year, but this was mainly driven by FX tailwinds as the SEC depreciated during the quarter. Altogether, the last quarter of 24 ended significantly better than the last year at 59 million. And the same goes for the full year results of 30 million. If we then flip to page, the next page. And here, after listening to feedback from some of our investors, we have refined our presentation of our net cash positions additionally. Amongst other things, we have also included our fund investments in this presentation. So end of quarter, our equity ratio stood at 37%, and our cash position was 901 million, an increase from 870 last quarter and 800 end of last year. And as I've mentioned on numerous occasions, to prudently maintain a strong balance sheet and cash position has been key for Catella throughout this market downturn. And the slide you see in front of you summarizes also how we look at our net debt, or in our case, net cash position. As you all know by now, the overall majority of our liabilities are related to investments in development projects through principal investments. these projects are in turn always valued at cost so if we then start on the left and move to the right summarizing all our investments these amount to approximately 3.2 billion if we then on top of that add our current cash position of 900 million we reach a total of 4.1 billion If we then deduct our market debt and financing our projects and also adjust the cash position with working capital needs and bonus accruals, this takes us to a cash position of 1.3. So the background for this exercise is of course the hypothetical scenario if we would divest all our current projects valued at cost and our fund investments, this would lead to a negative net debt, i.e. excess liquidity after the debt being repaid. And of course, in this hypothetical scenario, we would still have investment management and corporate finances revenue generating businesses going forward. And to state the obvious, it's not our ambition to divest our projects, and we will continue to invest in our existing pipeline and also invest in new projects that meet the business area's long-term return requirements of 15% to 20% IRRs. And as Daniel mentioned, with a primary focus to fuel the growth of AUM in investment management. I think I'll stop there and hand back over to you, Daniel.

Okay, thank you, Michelle. And before we conclude and open up for Q&A, I'd like to briefly summarize the quarter from our perspective. As we now have mentioned, our house view is that we have the worst behind us and that the market will slowly start to recover from this point. Fueled by significantly improved financing conditions, lower credit margins and an active bond market, transaction volumes have already started to increase And we see an increased number of transactions as well as an increase in the average transaction size as well. As we previously discussed during this hesitant period, we have taken decisive steps to decrease efficiencies and restructured and strengthened operations at the same time as we have preserved liquidity and a strong capital position, both at group and at fund level. So with these efforts, Catella is in a better position today as the market slowly now recovers. So our key takeaways from this quarter is that we continue to do the right things and we make progress. First, we are very proud of, and we see this as a sign of strength, as I mentioned earlier, being able to grow the assets under management with larger inflows of capital than outflows in this tough market context. Further, we have managed to deliver a strong Q4 with increased profitability as a result of implemented cost efficiencies. Further on, during the quarter, we have divested several projects within our principal investments portfolio in line with our strategy. These divestments support continued investments in attractive development projects fed into other product strategies. And as we mentioned, as effective from front offices in the German fund business into Catella Investment Management. In short, this move creates a 10 billion euro investment platform where we will be able to enhance synergies and share resources under one face to the markets. And lastly, we are now operating under a new and refined strategy that is centered around the three strategic focus areas to deconcentrate our investment portfolio within principal investments, to increase our profitability within corporate finance, and also finally to grow our AUM within investment management by growing existing funds as well as launching fewer but larger international scalable products. So all in all, we are satisfied with where we are and we see that we are well positioned to reap the benefits of the continuously improved markets. And we remain committed to even more focus on delivering improved results, thus increasing shareholder value. So with that, we end this presentation and I'd like to thank you all for listening and now open up for questions.