Earnings Transcript for MF.PA - Q2 Fiscal Year 2024

Operator: Good afternoon, ladies and gentlemen and thank you for standing by. Welcome to Wendel's Half Year 2024 Results Conference Call. [Operator Instructions] 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 recorded today. I would now like to hand you over to the conference over to Mr. Laurent Mignon CEO – Group CEO. Please go ahead sir.

Laurent Mignon: Thank you very much. Good afternoon to everybody. Thank you to be there on 1st of August for our first half results analyst conference. So I'm very pleased – I will be making this presentation together with David Darmon, who is there. So we will be – both of us doing the presentation. And Jérôme Michiels and Benoît Drillaud will also be there in case needed to answer the question you may have. So let's start on the key highlights of this first half 2024. I think the – if we go – Wendel Group is a parent capital structure that now have a dual strategy with principal investment on the one side and developing the asset management on the other one, while both activity generates some links between each other. In first half, the contribution from portfolio companies has been up 9.4% contribution to net earning at €365 million. This is the 9.4% growth is restated from Constantia Flexibles that has been sold, as you know at the very beginning of this year. So restating from that is up 9.4%, which shows good resilience in an environment which is difficult. On the asset management, this is first-time consolidation of IK Partners but still the fee-relating earnings of IK during the first half is €29.5 million, very much in line with what we were expecting with the growth of the fee-paying AuM of 16% since the beginning of the year, showing a very good development of the activity supported by close to €2 billion, €1.7 billion of fund raises and very good perspective for the rest of the year. So we are very happy to be able – thanks to the quality of the performance of IK being able to raise significant amount of capital and be in line with the growth we're expecting from that activity. Altogether, if we take principal investment and asset management, today Wendel Group is managing €20.4 billion of assets but we will come back on the way it is split. Our fully-diluted NAV, which is a new metric we're giving, which takes into account the share buyback we've been doing is established at €175.2 per share at the end of June, which is up 7.9% year-to-date compared to the same aggregate a fully-diluted NAV at 31 of December 2023 which was €162.3 per share. Our loan-to-value pro forma of all the acquisitions and operations that we've announced, even if they are not realized at 30 of June is 5.9%. If we take the loan-to-value as it stand as of 30 of June, it is minus 6.2%. But we have announced Globeducate and so on since then. So net of that it's – pro forma of that it's 5.9%, which leaves the company investment capacity of €1.4 billion to be able to work on our strategy and implement our strategy. Today we announced – we finished the first share buyback that we've announced a few months ago and we're announcing a new share buyback program of €100 million that will go on starting today. If we go next slide, this is really to show you the links between the different assets and how it develops. And you see how our – I mean the very important thing for us is how does our business model create value. On the principal investment, obviously this is the value of the underlying asset that will be the number one element. And the listed asset during the first half has increased in value by 19%. The unlisted assets has been slightly down to 1% despite -- which is a pretty good performance when we look to the environment in which the assets are evolving, but we will come back with more detail on that. We've been very active on the principal investment part during this half year. We've had €2.3 billion of disposal and value crystallization thanks to both the sale of Constantia Flexibles on one side at the beginning of the year and the divestment of 9% of Bureau Veritas during the first half too. We've been investing or committing close to €700 million during this period also so a very active management of the portfolio. And as you've seen the contribution to the net earnings is up at €388 million and no the net income group share is at €388 million with consolidated sales which are up 13% during the period. Part of the profit is linked to the disposal of Constantia, which was realized at the beginning of January. On the other side the asset management is developing itself. GP -- the first time -- the GP value growth today is not significant because it's first-time consolidation of IK. Sponsor money invested is not yet invested not yet called. So we cannot give you how it has evolved, but it will. We've committed as you see up to €400 million on IK X and potentially the partnership Fund III. We've bought 51% of IK for €383 million. Out of it €128 million will be paid in 2027 pending some conditions. We had strong growth in fee-related earnings in the first half compared to last year which is very much in line with what we were expecting and I mentioned a good momentum in terms of fundraising that is continuing and we are very optimistic for the end of the year. So all that is giving an improved growth profile for the company with increased recurring cash flow generation thanks to the asset management development that is starting and again it's just the start. We've got a very strong cash position to fuel execution. And we have set a dividend yield profile. €4 has been paid during the first half. And we are developing an opportunistic share buyback program as you see with this renewed €100 million commitment to buy back shares. If we look to what -- all what we've done was perfectly aligned with our strategy. Most of what you see on the slide here has been commented like the sale of Constantia. We’ve sell 9% of Bureau Veritas for €1.1 billion. The internal rate of return for the investment in Bureau Veritas is 24.8% per year since investment which is a pretty impressive one. We've made the investment on Globeducate and we'll come back on this one €625 million in equity to co-control the company and this company has a very good growth profile and will enhance the quality of our portfolio going forward. We've supported Scalian in its M&A strategy bolt-on strategy by injecting an additional €44 million of equity into Scalian to support the -- specifically the Mannarino investment. CPI made a refinancing project during the year and within this refinancing made a small dividend recap of €93 million that was distributed to Wendel. And Wendel Growth made the sale of Preligens which has been signed is -- will be realized not yet. And we've invested €15 million on a very promising company called YesWeHack. Asset Management I don't come back on what have been said. We have made the acquisition. We've access to 20% of the issued future carried interest also from starting from IK X fund €1.7 billion of fund raises which is very favorably comparing to any other and sponsor money will be -- not called yet but has been committed. Globeducate we mentioned increased recurring cash flow generation and supporting dividend yield growth and dividend yield growth will continue to grow in the coming years thanks to the development of the asset management business. We have strong investment capability with €1.4 billion of sort of I would call it some sort of dry powder of the principal -- I mean of not only the principal investment of Wendel per se and we announced the new €100 million share buyback program. So all of that is geared to value creation and increase our TSR and dividend profile and hopefully long-term to reduce our discount to NAV. If I move to the next slide, I think it's the first time we present that because we have the consolidation of IK Partners today. Wendel managed €20.4 billion of assets. €7.3 billion is in principal investment with 9% -- not 9% of the €7.3 billion; 9% of the total €20 billion, a significant portion of that being in the education with ACAMS, CPI and Globeducate, now a significant portion in the business services, which is the highest portion with Bureau Veritas and Scalian a little bit in industrial with Tarkett and Stahl and a very small portion in Wendel Growth and in telcos through IHS. On the other side, you have the €13.1 billion of AuM of IK. That includes close to €2 billion of dry powder, 15% of the total €15 billion. So it's even more. It's €3 billion, sorry, of dry powder for IK, which is a significant amount to be invested and show the capacity of IK to both invest and divest, but we'll see that when we talk about IK platform during the first half. Maybe a little bit of a highlight on Globeducate and I will share that with David. We've made the investment on this very great platform of K-12 education through a network of 65 premium bilingual and international schools. This is present in 11 countries, mostly in Europe and it is a very attractive market we think. We have 40,000 students in the schools with a world-class education predominantly taught in English. Sales are €440 million in year 2025 expected with €120 million of EBITDA. And we think it's a great business, because it's very stable, predictable and strong double-digit growth expected together with potentially both organic and M&A. Strong cash flow generation mostly invested in organic and external growth. David, do you want to say more on Globeducate?

David Darmon: Yes. Thank you, Laurent. Good afternoon, everyone. So we announced on June 1st this acquisition of a 50% stake alongside Providence. Providence is a global PE firm with a long track record in education. They've been successful in Galileo and obviously in Globeducate, and they have other educational companies in their portfolio. So we thought it was a great partner. We do intend to invest €625 million of equity upon closing. We expect this closing by the end of the year. And as Laurent was saying, we were very excited about this investment opportunity because one there is a great mix of growth avenues both organic with increased numbers of students; what we call semi-organic, which is basically opening new campuses; and M&A. It's a highly fragmented industry and this is a great platform to buy moms and pops. We're also very excited because there is strong predictability of cash flows. At the beginning of the year, you have a good view on volumes and fees, which in an LBO is very helpful. So we look forward for the closing by the end of the year of this very interesting investment opportunity.

Laurent Mignon: Great. Next slide shows you something we will present to you now, which is really to show you how value creation has been done at Wendel. So you've got two; first bar is the principal investment. The second one will be asset management. Then you've got what potentially is a cost to that, which is cash operation cost and the net financing result. Then you have potentially any action we take on the buyback of the shares. That gives you the total value creation. During the first half, principal investment has created €16 per share of value, 19% growth of the listed assets, mostly driven by Bureau Veritas growth. As I mentioned, the non-listed assets have been slightly down but we will make a zoom on each of those, but -- and we'll make a zoom on that. Asset management for the time being it's first time so the negative -- minus €0.1 the transaction fee linked to the acquisition of IK Partners. But globally the fee-paying AuM is growing fast. So this will be a significant value-creation driver in the future. The negative part of the cash operation costs and net financing results is minus €0.7 per share. We have a good cost control situation. We'll come back. We'll make a zoom on that. And we've got a positive carry, because we're lending the money to a higher yield and we're borrowing it. So we'll make a little bit more of a zoom on that. And we've made share buyback which have been relative of €1.3 per share during the period which obviously makes sense. So, total value creations on the fully-diluted NAV per share have been €16.9 per share, 10.4% of the fully-diluted net asset value as a return for the first half. Now, we go into the detail. David, do you want to go into the details of it?

David Darmon: Yeah. So moving to Page 10, more specifically on principal investment as Laurent was mentioning, the growth is €708 million, plus 8.6% compared to last year. You can see on this slide that the lion's share is coming from Bureau Veritas with an increase in €791 million of value creation from Bureau Veritas. This is obviously driven by the strong share price growth since the beginning of the year. I will come back in a minute on the reason for this growth. You can see that the rest of the portfolio in principal investment had a marginal impact a marginal negative impact, because IHS and Tarkett combined share price evolution led to a decrease of €56 million. And our four remaining unlisted assets plus Wendel Growth had a small decline of €28 million, so pretty marginal impact from those six companies compared to the major evolution of the Bureau Veritas, share price. Moving to Slide 11, where you can see the operational performance of those assets. You can see that, Bureau Veritas had a strong growth both organic and in terms of EBITDA plus 4% in terms of sales and plus 4.1% for the EBIT. The share price grew more than that on the back of a very good reception of the new strategic plan the LEAP 28 plan which was announced and the company is starting to implement. And we can see here the early results of this plan. And we threw in the markets some upgrades in terms of forecast which drove nicely the share price. Tarkett had a mixed result over the H1, with a flattish to declining sales. You can see minus 3.1%. But at the same time a very strong margin increase, as it was able to maintain some of these prices, while the cost base in terms of raw material remained pretty low. So with this increase in margin you can see that this decline in sales did not reflect in EBITDA. EBITDA actually grew by 17.5%. IHS is going to publish over the months its results. So we are not going to comment on those today. But we can come back on the recent announcements in terms of change of governance. You probably saw that the resolution and changes we proposed to the shareholders' meeting were voted by over 98% of the shareholders, so very well welcomed by the shareholders. And we do believe that those governance improvements is going to lead to a better share price performance and better relationship in terms of stakeholders which will be very beneficial to the company. I'm moving to Slide 12, and reviewing now the performance of the other private assets we have in our portfolio starting with Stahl. You can see that Stahl had a good beginning of the year both in terms of sales growth with an increase of 4.9% and in terms of EBITDA with an increase in margin. Like I mentioned on Tarkett, Stahl was able to increase its margin because of a good price discipline and enjoying some raw materails price decline. You can see the impact when you control your fixed cost and you benefit from a raw material decline a very strong margin increase at Stahl. Regarding CPI, CPI enjoyed a very strong H1 growth especially in North America. The international was still growing, but at a lower pace. In terms of margin you can see a small contraction, because the EBITDA only grew by 9.2%. The company is making some significant investments in some IT and some processes and hiring some talent, which is marginally impacting the margin here, but it's still enjoying a very healthy margin. The net debt you see here is slightly impacted by the dividend that Laurent mentioned earlier. CPI was able to go to the bank market and a global syndicate and distribute dividend to its shareholders, which obviously, increased the net debt as a consequence. ACAMS had a mixed result during H1. You can see that sales were pretty flat during the first six months with good growth from North America and the European banking clients, but some disappointments in terms of sales in Asia as some customers did delay some orders. So, we call it a sort of transition year for ACAMS with a lot of work being done behind the scene obviously starting with the change of CEO and the arrival of a new CFO and some important investment in learning management system as well. So, you can see some impact on the margin as well. We are still confident on the long-term prospect of the company, but the first six months were really a bit disappointing. Scalian is navigating a tough market. The global market for consulting in digital transition is seeing a slowdown. And you can see the minus 1% pro forma the acquisitions of Mannarino and Dulin, which is very different from the traction that we saw in the semester before where we had a very strong growth. So, Scalian is seeing similar headwind than the rest of its peers. In terms of margin, we mentioned that last time we talked, which is what we call the [indiscernible] the unbilled hours. Scalian had some consultants on its payroll, which were not staffed and that it impacts its margins. And so, you can see that the EBITDA actually declined by more than the 1% sales decline I mentioned earlier. Moving to Page 13, Laurent, if you want to follow on?

Laurent Mignon : Yes. Maybe a word now on IK, because it's the first consolidation. So, IK has a great first half with very strong very good growth momentum and significant ability to make to generate value to its LPs liquidity for LP. Another -- this is a very important element, because they have generated €one billion of proceeds by its more than five exits and I will make a little bit of a highlight on that on the next slide. Those sales were done in very good condition with an average 2.8 times multiple of money. So, a very good return for the LPs on those sales and it's a very important element. The development they've been very consistent in investing. They've invested €870 million; nine transactions across all IK strategy. €145 million of co-investment were offered by the way to LPs on four of these investments. Fundraising is going very well. Strong momentum for the flagship IK X over -- we're close to 80% of the €3.25 billion IK X hard cap and we will reach the objective. So, we're very confident on that. The first reinvestment on IK X has been done with Kooi Eurofeu and BOMA so starting to invest the money of our clients. And in terms of innovation and new strategy they've been a first continuation vehicle that have been done on Yellow Hive continuation vehicle, which was very largely oversubscribed at an equity value of -- enterprise value of €505 million. And then the IK X has been classified as Article 8+ and we are launching the IK partnership fund III now. Next slide shows you what is very important in the asset management is the ability to give back money to the LPs, which is one of the issues for some of the fund where LPs don't have any return. So, DPI is one of the key ratios that is very well and looked at by LPs in order to reinvest and it's very high at IK. IK always have been returning more money than it has drawn from its LPs. You see that there have been five exits that have been done during the first half Mabtech Eres Yellow Hive Mademoiselle Desserts and Carspect. Globally, 2.8 times money; 21% realized IRR on those exits. 41 million -- 41 add-on has been executed across the portfolio to date and there has been an average EBITDA increase of 140% since, entry on those companies. So all those metrics rely on the five but just explain, how this 2.8x money has been realized the 21% IRR. So very successful sales and that result in a very ongoing and good fundraising activity. You see that the fee-paying AUMs were €7.5 billion at the end of December. They're up €1.7 billion thanks to fundraising. There have been five exits for €500 million. So they are now at €8.7 billion, up 16%. Global asset under management including NAV and co-investment that is given by the LPs has moved up from €11.1 billion to €13.1 billion, which is up 18% so very good momentum. The H1 fees globally were €79 million. The fee-related earnings were €30 million, all of that very much in line even, with our forecast when we presented the transaction in October 2023. The dry powder today is significant is close to €3 billion. Cash operating -- the other element of value creation was C&D was the cash operation and net financing result, which was a negative impact of €0.7 per share, with a very good control of the cost to less than 1% of the total GAV on an annual basis to €0.9 per share. There will be -- we've made some work in order to reduce our cost, but there's some timeline between the fact -- the actions we're taking and the realization to that but we'll see more to come in that. And the net financing result has been positive thanks to, the positive carry situation as you know. Share buyback that have been done €100 million have been done €100 million program which had € 1.3 per share impact on a fully-diluted basis as of 30the of June 2024. It was not fully done by the way. I'm saying €100 million. That's the situation of the 30th of June. Since then, the program has been finalized and a new one will start today.

David Darmon: Thank you, Laurent. Moving now to Slide 18, you have here an overview of the IFRS P&L which does not really reflect all the capital gain and inflows generated by our investment activity. Our mission is to deliver performance, but you can't always see this performance directly in our P&L. For instance, the close to €800 million capital gain made on Bureau Veritas shares in April, does not appear here as well as the change in fair value of the IHS share. And the dividend for instance as well, received are eliminated during the consolidation process. But let's move to the most important KPI, which is the NAV on Slide 19. We already commented extensively the performance triggers earlier. So I'm going just to highlight, what is new here. We have added a section for asset management activity. You will there see the valuation of our GP. Today, it's only the 50% stake we own in IK. Tomorrow, it will be all the other GPs and sponsor money we invest as an LP. We will value the GPs with market multiples, and the sponsor money according to the valuation provided by our asset managers. It is worth to be noted, that below the bond deadline, you have a new section as well to reflect the deferred payment in IK, the 51% capital share. So it's €128 million, plus the ticking fees, plus the interest that you will find there. In addition, you have at the bottom of the table, the fully-diluted NAV to take into account the share buybacks fully in the NAV. Moving now to Slide 20, Laurent, you want to describe the debt profile?

Laurent Mignon: No, you can go ahead. Yeah. Okay. We have -- as you know we have no -- we are fully funded and we've got a low LTV ratio today, which allows us to have some significant headroom in terms of investment. Our average maturity of debt is 4.1 years. The average cost of our debt is 2.4%. The return that we have on our cash is 4%, hence our positive carry. We have made during the year some -- so the next debt -- coming maturity is March 27 2026 which is the convertible bond on Bureau Veritas at €32 per share. Then we've got some debt in '26. We have really reinstalled the undrawn credit facility to €875 million which is due to July '29 now. And so -- yes so we have no -- we've got a very good liquidity situation as you can see on that slide. Next slide maybe -- with a 2.4% average cost as I mentioned. Return to shareholders €4 per share. That's up 25% compared to last year. It's a yield average yield of 4.8% on the share price and 2.5% on NAV. We've bought back 1.2 million Wendel shares during the -- since the program launched in October 2023. We'll do another program of €100 million today -- starting today. And maybe I'll go to the key takeaways. We're acting on all the levers in order to increase value creation. That will that's taking time but it's ongoing with investment in B to B services education and energy transition in principal investment. Our equity check sweet spot as you know is between €500 million to €800 million per investment exactly what we've done for Globeducate. We aim to geographically diversify our portfolio. Today, France by the way represents 15% of the group exposure. We have a very small exposure to the French. It's a very wide exposure globally. And we aim at further growing our exposure to the dollar assets. We're -- on the asset management, we believe that the benefit of a private asset management platformization is important. And I think many people now are viewing that as a very positive thing to create platform in this field. IK is the first step and we're looking to other steps going forward. Our priority is to grow new verticals. We've done the buyout. We are looking potentially to private debt private infra or secondary. Permanent capital is a very strong enabler to develop Wendel asset management platform because it helps you seeding the capital and allowing to a much more -- and potentially making acquisitions to add and to help growing those different verticals. Our target as you know is to grow the FRE with an interim target in 2027 to €150 million and create potentially thanks also to the development potential performance-related earnings thanks to the part of the carried interest we're getting in these different asset management companies. So our medium-term upside to net asset value and share price is really -- well we've got a new share buyback. And we've got asset management relies both on organic growth and IK is really starting as you see with very good numbers; M&A potentially; and the development of synergy between different platforms specifically in the well there will be some in the back office part but there will be significant one also on the distribution which is the main benefit of the platformization. On the principal investment performance growth both organic and bolt-on M&A. We are working on all our company to improve the operational situation and having an active management of our portfolio is also a key element of value creation. So, I'm finishing here. And David, Jérôme, Benoît and I are here to answer any questions you may have.

Operator: Thank you. At this time, we’ll conduct a question-and-answer session. [Operator Instructions] Okay. We're going to take our first question from the phone conference. And the first question is coming from Joren Van Aken from Degroof Petercam. Joren, please go ahead.

Joren Van Aken: Yes. Good afternoon. First, I have a question on the asset management business. And I heard you talk about growing new verticals but the line was very bad on my end. So I apologize I couldn't hear that part. So I'm just wondering, could you remind us a bit about the long-term vision for the asset management business? Is the idea to acquire new verticals or specialists in verticals like for example, IK is a specialist in infrastructure and that you build this business with specialists in each segment? Or would you also be open to for example buy another private equity asset manager for example? Just your idea there. And then a second question would be because you have, of course, plenty of liquidity available to do something, should we expect then that the next investment would be an investment in the asset management business? Or are you looking at, for example, another private company? Because I think most people really liked the Globeducate acquisition. So any insights or your thought process there would be helpful. Thank you.

Laurent Mignon: Well, on the asset management, we want to create a true platform that will allow us to provide to LPs different strategies so that you can have a real complementarity of the different teams that we're building up. So, the idea is certainly not to buy another buyout companies. We've made an acquisition of IK. We think IK is a great team and we're going to use IK and to help IK growing itself on the buyout. And I don't want to have -- and we don't want to have competing teams within the same thing. Maybe we can help some -- if IK finds a good opportunity to grow faster in some region or area with making a small bolt-on acquisition, we can help IK to do so. But the priority for IK will be to be developing organically grow its business and we think we can grow it and help it and the numbers we've shown is showing how much successful it is and not to have any sort of a competing team. So the objective is to have complementary teams. So you mentioned infrastructure is one. We could add some debt funds on the other side. So that's really to have different verticals in terms of expertise that have a very strong complementarity in terms of distribution after that. So the value added to that is that you are providing a complete offer to LPs and you can have a much long -- a much deeper relationship with the LPs because you are talking about different strategies with them rather than having a monoline activity, which is only one strategy. So we want to support the teams to develop themselves. We want to avoid to have any competing teams so that we end up in a situation where you have two teams running for or chasing the same type of assets. And yes, so that's the strategy. I think it's really what we've tried to explain since the beginning but to be more clear, so we will not buy another PE, private equity buyout firm coming. IK is really the one. We can think about one day having one in the US but it's not a top priority today on the list. Number two is where do we want to invest our money next time? Well, it's -- again, we have to be opportunistic. If we get a great private investment we'll do it. If we find the right asset management company we will do it. Our strategy is still to grow the asset management platform. So, it's obviously strategic objective. And should we find the right team, then it may be -- that will be what we want to do. But we need really to make sure that we have the right team because to create a platform you need to have a team that can work together. So, we're paying a lot of attention to the quality of the teams we're buying. So, there's no clear answer to your question. But clearly developing the asset management is a clear priority to us in order to develop that platform IK being the first pillar to that strategy.

Joren Van Aken: That's very clear and makes a lot of sense. Thank you.

Operator: Thank you. We're now going to take the next call -- question from the call. And the next question is coming from Grégoire Hermann from Berenberg. Sir, you're live, please go ahead.

Grégoire Hermann: Hello everyone. Thanks for taking my questions. The first one would be on IK Partners. When we look at the figures you've released -- you've shown today, it looks like the asset management fee that you're actually charging is in the very high top range of what we're seeing in the industry. So, I was just wondering here if you could give us a bit of information on the dynamic that you're seeing there and especially on the new funds raised recently whether it's pretty much at kind of the average rate that we can currently calculate or if there is anything changing here? And maybe the second one would be on the share buyback program. It's maybe obvious, but just trying to clarify if I remember correctly at Q1, you -- we briefly touched upon that and you somehow said that you were ruling out any additional shareholder distributions. You were really happy with the increase in dividend target. You were already having a share buyback program. And so I'm just wondering whether here anything has changed or you just basically want to take advantage of the share price weakness that we've seen right after the situation in France? Thank you.

Laurent Mignon: Well, I'll start with the second one is really there is no change in our view and we don't want to make it -- but we think that the discount is very high. So, it's a good -- I think to allocate a part of our capital to do some buyback for that makes sense and creates some value as long as this leaves us enough room in order to make acquisition and deliver the strategy. So, it's part of the value-creation strategy that has significant pillar not only one. Long-term perspective is to create a great principal investment portfolio to create a great asset management platform that will generate recurring revenue, but also you have some financial tricks to do it, which is to buy back some shares whenever you see that the discount is too high. So, it's part of it as long as it's not becoming all of it. So, that's really it. We've defined a clear dividend strategy and that is not going to change. And that dividend will grow within the development of the asset management platform as a significant portion of the fee-related earnings will be distributed in addition to the 2.5% return on NAV that we've defined for our dividend policy. So, that's giving I think a clear view of where we want to go. So, no change of strategy or -- and we've said by the way opportunistic share buyback program because the conditions give us I think this opportunity. It's part of a value-creation plan, not all of it. Number two is on the asset management. Now, I think we're -- by the way we are a pure private equity fund. So, we're charging private equity fees. And when you relate that to -- often it's -- you have to really -- part of the -- on the other side if you look to some of the big LPs, they pay the fees, but they don't pay fees on co-investment. So you have to look to the mix between fee paying AUM and global AUM in order to get a good view of the average fee. But we're in the market. We're talking about one -- yes, I mean we don't give the -- but if you make the math you will see we are in the market of the private equity. We're not higher, but we don't have to make discount. This is a good quality fund and we've got good money coming and we have big LPs that are willing to come, put significant amount of money and being offered also the capacity to make some co-investment hence the co-investment part of our assets under management.

Grégoire Hermann: That’s clear. Thank you.

Laurent Mignon: Obviously fees on AuM is not everything. Fee in private equity is higher than fees on debt or fees on infra. It depends. Each AuM has its own dynamic.

Grégoire Hermann: Okay. Thank you.

Operator: Thank you very much for your question. We have another question from the phone conference. And this next question is coming from Alexandre Gérard from CIC Market Solutions. You are live. Please go ahead.

Alexandre Gérard: Well, good afternoon and thank you for the presentation. Three questions on my side if I may. The first one is related to the change in value of your unlisted assets which is more or less flattish, slightly negative. Can we have a feel of what were the changes in value for each of the five assets? I'm not asking for a number, but more direction and the magnitude for each of these five assets. Second question regarding Scalian. So the operating margin was down. So I understand the cyclical impact. But I mean that company was -- is at the very high end of this industry in terms of profitability. Don't you feel that this might be more than a cyclical impact? And the third question, sorry to be playing on that subject, the asset management business. When you mentioned that €150 million target for 2027 in terms of fee-related earnings, is it your share of that metric? Or is it on a consolidated basis? And I have a question on the AuM basis on private debt. Private debt is if I am not wrong a segment that is of interest to you. And apparently one of the large European players is about to be acquired by Arctos. I'm talking about Hayfin. Is it a company that you have looked at? Thank you.

Laurent Mignon: So just a quick answer to the €150 million is our shares because -- so it's not the consolidated. So it's our share. Now, going to -- just a quick word. I'm not commenting on any transaction. Hayfin is a great company. We know them well. I think their willingness was for the management to keep the majority of their operation. So obviously, that was not in line with the objective to reach -- to join a platform. So we have high respect for the team, but they had different views and that's why they've made this transaction with Arctos. So a very great team very good business, but we fully understand that the willingness of the founders to have a fully independent platform supported by some financial help, but not to join a platform like ours. Now on the -- where does the value of the assets -- private assets? Obviously -- well, it has -- the movement is following the movement of the EBITDA. That's a clear indicator where the value is moving up or down and even if the multiple may change, but we're using to value our assets, the comparable on listed companies apply to the aggregate of our companies. And whenever you see some companies that have negative movement on EBITDA margin well, that has an impact on their value. So that's a good way for you to have a sort of -- but you know that. So implicitly that has an impact on that. And that was the main driver of values during the period. David, do you want to comment on that?

David Darmon: Yes. So Alexandre, on Scalian you saw that the margin in the last quarter is slightly under 10% EBITDA margin which is actually not on the high end of the industry. So we don't think this is like a permanent contraction and well almost the contrary because this contraction as I mentioned is mainly due to a lot of unbilled hours and because we actually hired with the anticipation of a very high growth, so we were caught a bit by surprise by this contraction of the markets. So we need to fix this unbilled hours issue, which will increase the margin from the level where it is today. But in addition we also have plans to increase the offshore of the company, which today is really minimal. We are talking about a few hundred employees in offshore countries and there is a mid-term plan to increase that significantly and that should have an impact on margin. And last, we also mentioned that we want to rebalance the geographic exposure of Scalian, which is today mainly exposed to France. International has higher margin in terms of business mix. And by shifting by -- to a company with higher share of international revenues, we do believe it's going to have an impact on margin as well. So long and square to basically say that we believe that the current level is not the long-term sustainable level and we see midterm recovery of margins.

Alexandre Gérard: All right. Thank you very much. That’s clear.

Laurent Mignon: Top line is resisting well in this environment. So we're pretty -- we think it's a difficult environment today, but the company is resisting well and taking action in order to increase margin as David mentioned. So yeah we see a good future for that.

Alexandre Gérard: On the fee related earnings, you said that was your share? Sorry to make you repeat. The line is bad.

Laurent Mignon: Oh, sorry, our share. Did you get it?

Alexandre Gérard: What did you say, sorry?

Laurent Mignon: I say, yes, it is our shares.

Alexandre Gérard: Yeah. All right your share. Understood. Thank you.

Operator: Okay. Thank you very much. At this stage there's no more questions on the phone conference. So I'm now going to hand you over to Olivier Allot for any questions on the web.

Olivier Allot: Thank you. So we have two questions from Arnaud Palliez. Bureau Veritas was the main contributor to your value creation in H1. If you want to reduce your shareholding, what would be according to you the optimal Wendel's participation rate and exposure to the company?

Laurent Mignon: Well, I think that today we have a good share. We have 7% share. We already have made a convertible bond that will potentially dilute us when it will be exercised. So we're happy with the situation. We think that we were needing to reduce slightly our exposure in order to have a better capital allocation, not because we don't believe in Bureau Veritas but because we thought it was a better capital allocation altogether. Today it represents a portion, which is more reasonable of our global NAV. And we have the convertible bond on top of that as we are very optimistic on the ability of Bureau Veritas to deliver value. We're pretty happy about the situation how we are.

Olivier Allot: Thank you. Is there any restructuring program to implement in Scalian? Or its EBITDA recovery only relies on a better market environment?

David Darmon: I think, I covered that previously. So it's mainly making sure that people are not on the bench, so it's basically winning new businesses and working towards more -- higher exposure to offshore and international. So no we are not talking about restructuring. We're talking about increasing sales operational leverage and going abroad.

Olivier Allot: Thank you. We have a question from Samarth Agrawal, a question on sponsor commitment. Can you share expected timelines when the sponsor money would be called? And just to reconfirm, what would be the term of management and performance fees on Wendel sponsor money to IK Partners?

Laurent Mignon: The sponsor money will be called -- difficult to say [indiscernible] will start to be called probably in the half of this year partly and fully [indiscernible] for what we have. It's difficult to give [indiscernible] we have the same term as being an LP. So exactly the one that [Technical Difficulty]. And there is [indiscernible] the LP has the performance fees is for the team [Technical Difficulty].

David Darmon: So maybe I'm going just to summarize what you just said. So we have the same condition as other LPs. We are very significant LP in those funds, but we don't benefit from different terms. And regarding the deployment of the funds, it's difficult to give a timeline. It's going to start now because as you saw IK X has already three investments made and it's going to be deployed over the life of the fund so account back depending on the speed of making new investment 2, 3, 4 years. But the regular time line you expect for a PE fund to deploy capital.

Laurent Mignon: Yes. And in terms of condition, it's really going to be same as a [Technical Difficulty]. So there's no [indiscernible] performance fees. We have 20% of the performance fees as a firm.

Olivier Allot: Thank you, Laurent. The sound is not very good. So next question is again regarding IK Partners. Following the acquisition of IK Partners which are the key segments within private markets that you are looking to diversify or enhance your third-party asset management portfolio? How should we envision Wendel's asset management to look within the next three to five years?

Laurent Mignon: I think it's too -- I've already expressed on that but the segments are debt infra and secondary. And I think a clear sign is really to look to the fact that we are aiming to have €150 million of fee-related earnings in 2027. That's really the goal.

Olivier Allot: Thank you. Last question from Samarth. I wanted to understand the drivers of valuation within unlisted assets in the second quarter of 2024. My calculation indicates high-single digit to double-digit organic growth across Stahl CPI and ACAMS. So what has driven lower valuations? Is there any specific asset where profitability has presented the valuation drag during the quarter? Or is it just pure multiples?

Laurent Mignon: David, do you want to take this one? Because my line is not...

David Darmon: Yes. Well, if you go on slide 12 you can see the EBITDA growth of the private assets. And basically it's good indicators of which one saw its valuation going up and which one saw its valuation going down. And as we mentioned on slide -- I think it was slide 10, yes, slide 10 you can see that overall the decline is only €28 million. So you're probably not off. Overall, those five companies had a marginal or no negative impact on the NAV. And it's a combination of a few assets going up a few assets going down.

Laurent Mignon: But it's a combination of EBITDA as you see. So as I say it's a good driver and also some peers' PE going down.

Olivier Allot: Thank you. I have no more questions on the web. I think we have an additional question by phone.

Operator: Thank you. Yes, we have one more question from the phone conference. And this question is coming from Alexandre Gérard from CIC Market Solutions. Please go ahead.

Alexandre Gérard: Thank you. Three quick ones on my side. We didn't ask you the traditional question regarding the deal flow and whether you see any significant sign in pickup of the global M&A activity or the market is still frozen. What's your point of view at the moment? Second question regarding Stahl, its financial leverage is not that high at 1.4 time. Would you be ready to consider as you did in the past a leverage recap for a dividend coming from Stahl? And if you could remind us finally the date at which ends your lockup on your Bureau Veritas stake following the recent placement? Thank you.

Jérôme Michiels: So on the last one Alexandre -- This is Jérôme speaking. I don't know if you can hear me. On the lockup of BV we have an undertaking of six months following the block which was carried out early April. So the lockup expires early October this year.

Alexandre Gérard: Thank you.

David Darmon: On the market Alexandre, I would say that deals are getting down. You probably saw in the press a few recent announcements. TA Associates invested in Harvest [indiscernible] traders; Ardian invested in Magimix. Obviously, we invested in Globeducate. So it is definitely a better market right now. There are still some situations which are not going through up to the end. So buyers and sellers are not talking the same language. But it is a market where transactions are actually happening. So it's not frozen anymore. It's a difficult market but it's not what we had like six or nine months ago.

Laurent Mignon: I think there was another question. How can we do a dividend recap? Obviously, we have the ability to do a dividend recap. We'll assess -- it's the right thing to do. But yes, we have the ability.

Operator: So there's no more questions on the phone conference at this point.

Olivier Allot: So thank you very much. So I think we can close this conference call. Many thanks to everybody for attending to this H1 results call and talk to you soon. Bye-bye.

Operator: Thank you. And this concludes today's conference call. Thank you for participating. You may now disconnect.