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Edited Transcript of RF.PA earnings conference call or presentation 25-Jul-19 4:30pm GMT

Half Year 2019 Eurazeo SE Earnings Call

Paris Jul 30, 2019 (Thomson StreetEvents) -- Edited Transcript of Eurazeo SE earnings conference call or presentation Thursday, July 25, 2019 at 4:30:00pm GMT

TEXT version of Transcript


Corporate Participants


* Olivier Millet

Eurazeo PME - Chairman of Executive Board, Chairman, CEO and Chairman of Management Board

* Philippe Audouin

Eurazeo SE - CFO & Member of Executive Board

* Virginie Sarah Sandrine Morgon

Eurazeo SE - Chair of Executive Board & CEO


Conference Call Participants


* Alexandre Gérard

CM-CIC Market Solutions, Research Division - Research Analyst

* Pierre Bosset

HSBC, Research Division - Head of French Equity Research




Unidentified Company Representative, [1]


Ladies and gentlemen, good evening, and welcome to the Eurazeo Presentation on the First Financial Half 2019.

I would like to give the floor to Virginie Morgon, who is the Chairwoman of the Management Board.


Virginie Sarah Sandrine Morgon, Eurazeo SE - Chair of Executive Board & CEO [2]


Good evening, everyone. On this Thursday evening, I would like to thank everyone who has logged in. We know that there are a lot of financial results published at the end of July. Philippe and myself are with you today. We're here to present not only the results for the first half but also answer your questions. We would like to thank you for joining Eurazeo for this financial half result presentation.

We were very active over the first half. And to illustrate that activity, there are 3 main things that I would like you to remember. The first is investment. We have, at our heart, correct investment, proper asset rotation. As you saw, our investment activity was up at EUR 1.3 billion, EUR 1.2 billion of divestment. And I'll be coming back to this later, but I would like to remind you of a couple of the investing highlights. We have seen significant business and significant success already in Eurazeo for investment.

The second business avenue for the first financial half was the strategic shift towards asset management for partner companies. We can already see tangible returns on that in the results for the first half. In a couple of figures, EUR 1.2 billion raised in the first half, a significant amount. We're talking about management fee growth taken in by the group at 13% and an increase in profitability for management fees, so fee-related earnings, FRE, up 30% over the period. We also have PRE, performance-related earnings, which have been multiplied by 2.5 -- 2.7%, in fact, over the first half. We also have 7% growth in other business, including dividend. On net assets, Eurazeo Development, which drives a large part of our asset management business, saw a significant revaluation of up 17%. This is in large part due to our first revaluation of Idinvest.

The third avenue for our business is the significant improvements that have been carried out internationally through 2 major transactions, very major for the group, which were carried out over the last 3 months. First of all, the acquisition of Eurazeo -- BNP and CIC, the China Investment Corporation investment to ramp up the development of our business in China; and also the acquisition which was closed last month of 25% of the Spanish company, MCH Private Equity.

Philippe, in a few moments, will be presenting the figures and the dynamics for the last 6 months, but a quick rundown from me, growth of our business revenue, 8%; assets under management, up 9%; and our reevaluated net assets, up 7%, as I said. I'll be coming back to these 3 pillars.

Starting with investment. We exercised discipline and judgment in our investment choices. As you know, we have a dedicated team working to find the best opportunities in Europe and in the U.S. targeting growth sectors. As you can see in some of our recent acquisitions, health care with DORC for Eurazeo Capital, education with the investment in Ducasse Education for a majority share in brands as well as Bandier and Q Mixer, luxury with Pat McGrath, and also acquisitions that will be upcoming in financial services and software in which we are very active at the moment. We are always looking for specific company profiles, growth companies that have what we deem to be strong transformation potential and also high-quality management.

On top of the judgment and discipline that we exercise, we also work in a responsible way, as you know, but it's important to remind everyone of things. The way we go about investing over the last 10 years has been driven by these core principles. Eurazeo has taken on governance, talent and applied a strategy that is CSR-oriented and sustainability-oriented. We work on developing our companies, and we work on improving these companies in the public perception and profitability. In 2015, we selected 4 avenues for improvement defined for our 2020 plan. Next year, as we announce our annual results, we will be communicating our position with regards to these CSR targets. So not only we won't be giving the figures, but also we have already started on working on our CSR strategy for the coming 10 years. And we will also be revealing the main ins and outs of that strategy in 2020.

Of course, the final major asset that we have in the way we go about transformation of our companies is the added value that we provide, operational transformation through digital technologies, international expansion thanks to presence in 9 countries today and also our ability to source, acquire and integrate buildups.

These growth pillars serve to improve performance, first and foremost. As we started to do last year, we are now sharing with you the average ROI and also the cash generated by the entirety of the divestments done by Eurazeo in line with our investment strategy. We can even give you more details today, for example, the private funds, the primary, secondary and investment funds and for private debt. We can give you specific details on the areas of investments, direct lending, senior lending, et cetera. We will let you judge the performance for yourselves. They are the drivers of performance.

Our balance sheet is growing today and provides us with more investment opportunities and lets us seize us more added value, but also performance is what makes us attractive to partner investors as well. These partner investors select us and work alongside us to deploy their own wealth and assets. Business-wise, for the first half, EUR 2.5 billion, as I explained, between divestment and investment. Two main takeaways: We were extremely cautious in the way we rotated our assets. EUR 1.2 billion were divested. We applied judgment based on what we deemed to be favorable market conditions, such as the divestment of Moncler, and we were able to seize opportunities. We were opportunistic, you could even say, for things such as Neovia and Smile, as we announced yesterday. We were approached by buyers for these 2 divestments in -- and they offered conditions that we felt were very attractive. And over the coming months, we will continue to be careful and also opportunistic to make sure we can continue to properly rotate our assets.

On the investment side of things, all of the poles of the group were fully involved in the investment dynamic of the financial half. As I was saying just a minute ago, EUR 1.3 billion were invested or reinvested. 40 new companies were added to the company. There are 2 things to take away from this: All of the teams were on deck for this one because we are in an expansion phase and they are growth drivers for Eurazeo. One of the highlights for the half is the significant business in Eurazeo Growth.

As for buildups, you know about these but it deserves attention nonetheless. We've got 30 buildups that we carried out. There are 3 main that stand out although they all would deserve to be highlighted, the acquisition of Ducasse by Sommet Education, which is a significant strategic addition involved in hospitality training. So this is an extra brick that is added to our gastronomy range. We also have Albingia with a first acquisition outside of France. Circles Group is a Luxembourgers insurer, and also a new acquisition for iM Global Partners, Scharf Investments in the U.S. And we can come back to iM Global Partners later probably in the coming months or maybe even today. Some of you were able to join in with the workshop with iM Global Partners.

Now to be very mobile in terms of our assets rotation, I'd, of course, like to give you more information on the operation launch yesterday. This is a disposal signed by Eurazeo PME but also reinvestment of EUR 30 million with Keensight, which is -- which filed Smile. That -- it's Eurazeo's management teams in partnership with the CEOs of these companies that lead to the development of the company, which generates profit.

Let's look at Smile's revenue over the period since 2016, 20% growth per year on average. Of course, there's an exit multiple that reflects not just the top line but also the great potential for Smile over the coming years, 2.3x -- the -- a multiple of 2.3x over 3 years ROI. That will be 40% to 45% depending on the actual date of disposal. And for those of you who know us well, we obviously have a very conservative approach, sometimes too conservative, you might think. 51%, the NAV versus the value attributed to Smile in the publication of our NAV in March 2019 for annual results, 50% appreciation for NAV over 3 months for an operation that will be carried out in the coming months.

Now let me speak about Eurazeo Growth for a minute. We speak -- we don't often speak of that because none of the companies are consolidated. Even global equivalents or the -- by the equivalents [matter when they] speak about the Eurazeo Group. The activities, the revenue and the performance of the growth companies are not reflected in the economic earnings figures of the group. So for a team that has deployed capital very successfully but also for which we have major ambitions, as I said, there's a new team from bringing it -- from bringing together Idinvest and Eurazeo's teams. We will, in early September, be announcing 2 new people who -- one based in Berlin and the other one in London will be joining us as specific and very major financial resources. That EUR 740 million invested between Eurazeo's investment and those of Idinvest for the transformation of those French and European companies in the growth capital.

Our ambition is to raise funds. As early as this year, we're already discussing this with several investors. The objective is EUR 1 billion. We're on the right road. Eurazeo was built through its reputation, its track record. Eurazeo has become a reference brand in digital technology, which has already made 24 investments, the growth capital activity as well as several hundred in venture capital. It's our know-how, the know-how of Idinvest that joined us last April, the know-how built up over 20 years. So only a year after this new investment division there's a very strong dynamic. You can see on this slide that together, the team has made 4 investments, which are very promising. And some of the companies which were amongst the most exciting one in growth capital, ManoMano, Payfit, Adjust and Meero, and we already have invested EUR 218 million to develop those 4 companies.

On the next slide, you will see -- well, we wanted to give you some benchmarks so that you can make your own judgment not just on the potential and the demand for growth capital in Europe but also the timing. We think that our timing has been ideal. Today, we are living through a really key moment for the growth market. First of all, you'll see that there are more and more companies that are achieving the necessary degree of maturities. The number of unicorns that we identified, well, they went up nearly eightfold in 5 years in Europe, this -- toward the table that you can see on the next slide, Page 12, that are more and more significant in terms of amount and we have less and less to envy the American market with a major rebalance in terms of the number of opportunities in Europe and the number of unicorns created in Europe. Also, of needs, financing needs indicated on Page 11, those are our estimates. Don't take them as reflecting the entire market, but in all the companies that we set forth here on Page 11, we know that they've had a need to -- in years 2017, 2018 for EUR 1 billion from the market. We anticipate that they will have financing needs to further development over the coming 1.5 years of EUR 2.5 billion for the coming years.

Now there's the market share of Eurazeo, as you can see on Slide 12. And the 10 most important through the table in France, Eurazeo took part in 7 of them, so 7 entrepreneurs out of the 10 that addressed the market since January chose Eurazeo as their partner. And I must inform you about the number of unicorns that is supported by Eurazeo Group. It's 5, Talend, Doctolib and several others amongst the 9 French unicorns that have so far been identified. So it seems we are very busy in this half year in terms of investment, the group as a whole.

A change in dimension over the last 3 years, we invested 4.5x more in capital than over the previous 5 years. The investment activity remains our core business, and that dynamic is due to the strong growth in our balance sheet over the period, the good performance of our investments as well as the diversification of our business lines. And that's thanks to the balance that we're able to launch new strategies.

Today, there wouldn't be Eurazeo Growth if we hadn't chosen, along with Philippe and the teams of the Executive Committee, to launch Eurazeo Growth a few years ago. And of course, there's the contribution of the third-party investors, the opening of our historic strategy, the capitals and SMEs to a minority shareholding by the third-party funds. It's because we have growth and performance to boast, not to mention our group's reputation, that we were able to expand over these years and develop a management for third-party accounts. That's the third part of our activities. Our model is -- really sets us off from our competitors in the market. It means we have less risk. We can increase the size of our investments. We can guarantee a recurrent income to the group and a foreseeable income through management fees.

Let me speak about synergy. When we look at what we are in terms of our business, there's a product synergy that's coming into being. We can offer our institutional investors a panel of products and investment strategies that we didn't have at all 5 years ago. Some of you know that. The cross-selling, that is the ability to sell to the same institutional investors, several different investment strategies, is one of the keys to those synergies. 56% of our limited partners have invested in at least 2 of our strategies, but you know that there are 8 today. So therefore, there's a major potential for cross-selling with our investors and those were the amounts invested as well as the number of investment strategies purchased by investors.

The second sort of synergy is synergies that we haven't really addressed very much but which we will be speaking of more and more in the future that the synergies with the retail customers. When we bought -- when we buy Idinvest, we buy a team of talents, a good track record and know-how in venture capital. We also buy a team that knows how to raise funds. And over the EUR 9 billion managed, Idinvest manage EUR 1.4 billion from more than 100,000 individual investors, EUR 1.4 billion placed with -- well, for individual investors, we are deeply convinced. And many of the players in private equity in France, and Europe would agree with us, is that the time has come to give access to retail investors. And not just to those that are on -- that have access to private equity yields given the minimum you need to enter a fund. But today with Idinvest, we can roll out an offering that will be multi-product and that will really meet the needs of retail investors who invest over the long term in investments that have a much higher yield. Just to give you an idea, Eurazeo and Idinvest have taken -- are taking part along with the Primonial Group in a product called [Primo Pack], which is the first private equity fund of institutional quality destined to individual investors.

And the third type of synergy, well, is made up of operational synergies related to the maximum volume of assets managed by Eurazeo Group. Those of you who've been with us for a while know that we've developed that new management activity for a third-party money using our existing resources with additional marginal costs that are very low. The results, as you can see, are already forthcoming because that activity covers the operational -- operating costs of the group, which was far from the case just 4, 5 years ago, of course. So it's by pursuing the growth of our AUMs and our management fees that we can enjoy the full operational leverage effect, which will increase our margins over the coming months and years.

If you look at Page 15, you've got all of the indicators for the half year, the tangible results of that asset management. The growth of -- the strong rise in management fees is 13%; fee-related earnings, up 30%; and performance-related earnings over the 2 major disposals in the half year, Neovia and Moncler. The first -- the main reason for our success in asset management is the originality of our offering.

Let's look at Page 16, a unique, diversified range of strategies between Capital, SME brands and venture capital but also the originality of our model. We propose access to the strategies both to our retail customers but also, of course, to our institutional investors.

Private equity isn't all that's enjoyed a very dynamic semester. You can see on Page 17, where we sum up the highlights, the activity with private debt, private funds and real assets as your fund. The closing of the debt funds, the senior debt, for example, that activity -- secondary fund activity that's been particularly well sustained [that would help you] with 27 new investments with secondary funds. And also, as you saw earlier this week, there was a very promising operation, which is the acquisition of a minority shareholding at Emerige, a major player in real estate.

Another very important key performance indicator to judge our strategy, and its first tangible results is of course fund raising in H1 $1.2 billion over the last 6 months. That's very well balanced between Eurazeo Capital. We communicated the day before yesterday on this week. We finished our fund-raising for Eurazeo Capital IV with nearly EUR 400 million raised, 40% with respect to Eurazeo Capital III, which itself was raised and announced in January 2017. Idinvest also significantly contributed to this performance through the private debt pole, which was very active over the first quarter.

Just to help you understand the quality of this round of fundraising. As you know, not all assets under management generate the same fees. And therefore, they do not generate the same margins. As you can see here, we had EUR 1.2 billion raised. We position ourselves for the half with average fees in EC IV of 1.85%. And for the entirety of the half, we have fees on the debt fund, around 0.7%. If you wanted to calculate the blend, it would come out at about 1.4%. I would like to draw your attention to the fact that as this money is raised over the half, the aggregated fees across the first half is not fully reflected in the management fees figures as logged in Eurazeo's accounts for the first half. Part of that will be present in the announcements for the second half and full year 2020.

As you can see in the next slide, we are on Page 19, we are very active when it comes to fundraising. We have no less than 12 Eurazeo funds that are or will be in the next 18 months on track. That is what we have under ongoing funds and future funds. What I would like to take away from this slide when it comes to our dynamism and our model is that Eurazeo is always present on the market. We are always in contact with our investors.

Third highlight and also a strategic priority for the group is continuing our geographic expansion. We now have presence in 9 countries, 3 different continents. 1/2 investments in countries other than France were high in volume. As you can see on the slide, we will be glad to answer any questions you may have on the investments in the Netherlands, Asia, the U.S. or Germany. We opened up an office in Seoul, Korea as well to better serve our Korean investment partners. And we also have significant business and strengthening of our teams in Germany and in Spain.

What I would like to draw your attention to -- on this and we've already explained it, but we, the Management Board at Eurazeo, believe that the 2 transactions with CIC and the minority stake in MCH in Spain are strategic partnerships for Eurazeo as a group because thanks to the CIC, not only does Eurazeo acquire a position as one of the choice players within CIC's sphere to work on investing in French and Continental European companies and help them better develop themselves in Asia, especially in China, we have an ambitious financing plan of EUR 1 billion thanks to French and European companies. BNP, CIC and also Eurazeo will be investing significant amounts in this venture. On Page 21, you can see that.

If there was one thing to take away from this partnership, which was announced in a very strategic and visible way with the signing with the 2 CEOs, with Xi Jinping and Mr. Macron present as well, is that Eurazeo's presence on Continental Europe should be compared to Goldman Sachs in the U.S. in that our intent is to develop a strategic, long-term partnership with the CIC just as Charterhouse might in the U.K.

MCH -- and Olivier Millet is, of course, with us this evening and will be able to answer any of your questions on that strategic access. MCH is a strategic building block that in the coming years will help us undertake the Europeanization of Eurazeo SME through a partnership with a high-level team and historical presence on the Spanish market with excellent track record over the last years, strong growth dynamic, therefore, growth in investment, a trend that is already leading to tangible benefits for management.

And now I would like to give the floor to Philippe, who can go into the more granular detail of our strategy for the first half. Philippe?


Philippe Audouin, Eurazeo SE - CFO & Member of Executive Board [3]


Thank you, Virginie. Thank you, everyone, also on the phone for joining us this evening. I would like to run down the financials with regards the annual announcement. There will be 3 parts to this: first of all, the contribution from our consolidated companies that will be the first part; then the second part will be the contribution of the investment business; and thirdly, the asset management business. It's important to remember that the figures are fully IFRS compliant and have been reviewed and approved by our statutory auditors.

Moving now on to the figures. Consolidated EBITDA for consolidated companies, EUR 357.5 million, up 4.5% over the half -- over the first half 2018, therefore. Consolidated EBIT, adjusted and consolidated, is up 5.4%, EUR 234.8 million. Net contribution of portfolio companies is almost stable, EUR 125.3 million, down 2.6%. This can be explained by the growth in financial fees. The growth in financial cost can be explained in 2 ways. First of all, the implementation of 2 transactions for renovating 2 of our companies. Two of our companies had excellent performance in cash flow generation, which has enabled us to deload the debt. This is for Eurazeo Capital and [therefore] at Eurazeo SME. This is, of course, positive for Eurazeo shareholders. This means that we reinject liquidity into Eurazeo and also improves our ROI for the investment. But of course, it does mean a slightly increase in financial fees, although it should be noted that the financing rate has been improved by the same action.

Next, the buildups that were carried out over the first half were carried out, of course, spread over time and a number of them have been integrated, were integrated, rather, in the consolidated scope only this month that weighs down the figures for the first half. But we are not yet seeing a contribution of consolidated EBITDA because that revenue has not yet been included and the scope although it will be for the second half. The third reason is the structure of some of our investments with an equity mix. Rather than just going pure equity, this structure gives us more flexibility. If we want to access capital it's much easier to pay back a shareholder debt than to raise capital. And it's also a benefit to Eurazeo, because it means we get preferential revenue. Even though the interest is only built at the end, it does remain privileged versus equity.

So the 3 positive things do indeed lead to a slight drop in the contribution of portfolio companies. I will be coming back to the contribution of investment activity and asset management activity. At the bottom of the balance sheet, you can see amortization of contracts and other financial items related to the consolidation scope are down minus 78.4 versus minus 113.5 last year. This is due to a drop in the fees, which increases our tax base and also the IPO of one of our companies, which generated financial fees. Nonrecurring items are also up, this can be explained by a base effect. You may remember that last year, Europcar on the first half divested of car2go to Daimler that generate EUR 62 million for Europcar and about EUR 21 million or EUR 22 million for Eurazeo that we don't get this year, of course.

Given these various elements, the net revenue group share is at EUR 176.1 million for the half. On the next page, you can see the breakdown of the contribution of the portfolio companies, so the business units. Turnover, first of all, up 7.1% for the half, an increase in the second quarter of the half, plus 9.3%. In the second quarter, business EBITDA, as I was saying earlier is, for its part, up 2.7%. Many of our companies are currently in a ramp-up phase, which explains why turnover is growing faster than EBITDA. As you can see on the slide.

On the next page, contribution of the investment activity. This generated net profit of EUR 197.6 million. Hedge ratio is about the same level as last year. Last year, of course, we had the impact of Moncler which was a positive impact over the half. For this half, the sources of the increase come from the divestment of Moncler for EUR 54 million; and Neovia for EUR 93 million (sic) [EUR 83 million]; and also the variation of the valuation of Eurazeo growth, which are not consolidated, as we explained, therefore, they are valued based on their revenue. Operating expenses and other, EUR 57.5 million. This is calculated for the balance sheet by Eurazeo investor. This is stable over the -- this year to last year.

Moving on now to Asset Management, EUR 63 million of contribution to revenue for this half, significantly up over last year, management fees, EUR 95.9 million. The main part of that, EUR 61 million, comes from management fees invoiced to third-party managers. That is -- that share is growing 22%. The share that is invoiced direct to Eurazeo remains stable at EUR 35 million.

Operating expenses, EUR 78.2 million. A reminder that these expenses include 100% of the operating fees for Eurazeo Group. So Eurazeo itself, Idinvest, iM Square and also our share in Rhone Capital. And the breakdown is done by the management fees, calculated it with the standard indicators applied. As Virginie remind you -- reminded you, the conditions that you can see on these slides do not fully reflect the fundraising potential. As we saw, this is all pro rata temporis.

Here with the next slide side. You have distributed earnings and the performance related to earnings. You have the lines that we already mentioned, I won't come back to them. But the growth was 30% over the half year. On the lower part of the slide, you have the performance-related earnings achieved that are according to IFRS standards, performance fees accrued on the basis of the valuation of the NAV of the different entities, taking account of whether the potential added value amounts to EUR 29.1 million. Performance fees as you realized include what was generated by the disposal of Orolia and Moncler -- sorry, Neovia, not Orolia.

Just a word on our financial structure. We began the year with EUR 126 million in treasury in cash, and we ended with EUR 732 million. So the situation is very solid. The post-closing operations pro forma, which were announced but which were not closed on June 30, well, the pro forma -- Treasury is EUR 600 million. Now a word on the valuation, NAV per share, about 7.1%, including the dividends; 5.5%, excluding dividends.

Per brands. Eurazeo Capital went up by 5%, with an identical growth for the nonlisted and the listed assets that come to the listed assets, that includes the added value of Moncler, between January 1 and disposal in March. But that is partly offset by the drop in the share price of Europcar over the period. And Eurazeo SME -- or PME the growth is 7%. That includes the value of Smile, 51% more than the value on the 31st of December. In Eurazeo growth, 16%, handsome performance, reflecting the latest to the table in the -- with the -- in the Eurazeo Growth companies and Eurazeo Patrimoine. I think that 11% is worthy of note for our real estate activity. That growth comes mainly from the very good results of Reden Solar and in hotels.

The investment model that we have has borne fruit with investment in hotels to be renovated. And the first -- we began the first tranche, we're concluding the second tranche of renovation. The figures are very good on renovated hotels. The graph is a platform, so therefore, we could consider disposal of certain hotels, while Grape continues to invest in new hotels.

Finally, Eurazeo Development. I'll come back to this in a minute. It brings together investments and the general partners and our management of third-party funds. It went up 17% mainly because of the reevaluation of Idinvest, which published very good figures for the half year as well as the closing of Eurazeo Capital cap, our coinvestment funds that invest along with Eurazeo. The growth at Eurazeo Brands is not very significant because all those investments are very recent, so most of them haven't yet been reevaluated.

Let me draw your attention to the -- our very young portfolio. We have 25 companies -- subsidies, 49% of the NAV that are less than 2 years. So that -- and that haven't been reevaluated or sold, given their youth. And we have 13 companies, amongst the 25 that have not been reevaluated at all because they've been in our portfolio for less than a year.

A word on Eurazeo Development. I think it's important to recall the perimeter of Eurazeo Development, you have it in the middle of this slide. First of all, manage the third-party asset management alongside Eurazeo, basically, Eurazeo Capital, Eurazeo PME, funds or investment in Idinvest, our investment in Rhone, majority of shareholding and iM Global Partners and a few others, those that impact investing that you are familiar with.

Now let's conclude with our AUM went up 9%, up to EUR 17.7 billion, mainly due to the very good results of fundraising. EUR 692 million raised for Eurazeo Capital account; more than EUR 500 million raised for Idinvest; value creation, EUR 622 million; and subsequently, after that is June 30, the final closing of Eurazeo Capital, EUR 86 million. And following the signature of investment in MCH, 25% share in those activities, that is EUR 250 million.

Let me finish with the supply chart that shows you 2 major characteristics of our managed assets, assets under management. First of all, our assets are very diversified, which reduces the risk for our shareholders. And also most of our AUMs are made up of private equity assets. As Virginie recalled, they generate the high management fees. And therefore, the value -- an attractive valuation of our activities. Let me give the floor back to Virginie now.


Virginie Sarah Sandrine Morgon, Eurazeo SE - Chair of Executive Board & CEO [4]


Just 2 slides by way of conclusion, to leave you time for questions. I consider that we've achieved all of our objectives that we announced in March. We will -- we set out our objectives for the half year and for the year. We continue to have a very selective approach to our investments. We broadened our investment opportunities internationally. We've accelerated the development of our portfolio companies. We've used our balance sheet in order to launch new investment strategies and, therefore, to accelerate value creation for Eurazeo. We have been successful in raising funds, very successful in recent months.

And therefore, the takeaways for us is that we've gone from a period of transition to one of acceleration. We can already see the first results of our new model in our half yearly results. That's what you were expecting, especially when it comes to our asset management activities, which is rather new. We think that the balance sheet really plays its role in fast-tracking our future development by -- with organic deployment or by accelerating our own development through acquisitions such as Rhone and Idinvest and more recently, of MCH. That's exactly what we want to continue doing in order to gather more expertise in buoyant sectors and more investment partners for the coming years.

Now all of that would be impossible without the determination and the know-how that we have to continue to deliver performance, performance in our companies, but also performance, the times that we select or to invest or to disinvest from a company.

Let me conclude with some news that some of you have already seen. We initiated an investment in accelerated book building, what remained of our investment in Elis. We will communicate on that tomorrow morning. That is the final results of that operation. We disposed all of our shareholding in Elis, in excellent conditions, this very evening. This closes 12 years of partnership with a very good company. Its management team, associates with Xavier Martire, who was there from the very beginning and in whom we've -- to whom we entrusted the chairmanship, which he took over very successfully. That operation has lasted for about 2 years. An excellent integration and the organic growth is more than 3%, as is announced yesterday. That's a very nice story that has come to an end.

We'll communicate on this on Monday, but the cash and cash level is good. Gearing is calculated over -- to 12 years. So you will see tomorrow that all this has held up very well for a portfolio company that we had since September 27, 2007. So let me conclude my presentation, and I will now entertain questions.


Questions and Answers


Operator [1]


(Operator Instructions) To receive questions by e-mail, telephone questions, too. Let's begin with the telephone questions. Then we'll have a wrap-up of the written questions that came in through our web platform. Very well. We have a question from Pierre Bosset.


Pierre Bosset, HSBC, Research Division - Head of French Equity Research [2]


I'd like to come back to the fundraising activities for Eurazeo Capital cap. I would like -- I have 2 or 3 questions. First of all, when you acquire -- when you did your fundraising, what did you notice on ROI for Capital I and Capital II and Capital III? And the second thing is, at what price is certain -- or certain acquisitions made, Iberchem or WorldStrides that date back to 2017, was it book value? Or did you revaluate some of those? And thirdly, I think that the third-party funds in Eurazeo Capital cap only amount to 28%, and got 3 of us, it was lower. And it's a lot lower than what you find in Eurazeo PME or Idinvest. Are you satisfied with that result?


Virginie Sarah Sandrine Morgon, Eurazeo SE - Chair of Executive Board & CEO [3]


Thank you, Pierre. You spoke about Eurazeo Capital cap for -- are we satisfied with that? So yes, why do you think that the growth is rather limited. Well, we should rather take a different view of this. We should look at the growth, 40% between what we raised not too long ago. We closed EC III in January 2017 and now it's July 2019. So 2.5 years down the road, we raised 40% more, with nearly EUR 700 million as opposed to EUR 500 million. I think that, that's the way you should see things, Pierre.

Secondly, the distribution between third-party management and the balance sheet, there will be closer to that of the PME today. But the question is how long will it take to convince investors of Eurazeo's model. The reason why I'm satisfied, this is right judgment. But I think that we have the problem of selling to invest this product rather conflicted, because we were selling -- and there are 3 sort of hybrid things. First of all, we were selling the performance for investment that in part was American and in part was European. It's the first time that we deploy investment in the U.S. Investors, therefore, took a close look at that and challenged us.

Secondly, this is a hybrid fund raising and that some of the investors were secondary investors and others are primary. And what I can tell you is that we have a lot more investors, primary investors than we did in EC III. So therefore, the amount might not seem to be significantly higher, plus 40%. But the quality and the profile of the primary investors that we got, it was a lot different from that of the previous operation.

And thirdly, we have the -- we think it's a good thing to have such a strong balance sheet in a fund, but it's perceived by investors as being more of a disadvantage. They don't really like the idea of such a heavy weight for a balance sheet, so yes, I'm satisfied. Still I'd like to say that the economic quality of that fundraising, is very satisfactory. They really have the best market standards and savings, which are a lot better than 2.5 years ago. This has to do with the amount actually raised, but that's the amount of savings and the fees that we obtained. So therefore, the result was very satisfactory.

We will communicate specifically on lines II and III but it was a lot better than many of our competitors. The return and the cash of all the disposals made, not the performance and not yet disposed assets. When it comes to ANR or the value, we share the deals that we sell, the 28% investors has made with ANR.


Pierre Bosset, HSBC, Research Division - Head of French Equity Research [4]


And ANR that you reevaluated, so it's the year ANR on June 30. Is that the figure that I should consider?


Philippe Audouin, Eurazeo SE - CFO & Member of Executive Board [5]


It's the ANR from December dated -- published in March. And most of the closing dates come in before the 30th of June. So based on the figures from back then, the first one was in January then April, and then EUR 86 million were actually fully deployed on the 30th of June.


Pierre Bosset, HSBC, Research Division - Head of French Equity Research [6]


Okay. No, I can't remember the exact dates, but the company said it first came about in 2017. They must have been revalued, I assume. And the new investors came in at the new price, is that correct?


Philippe Audouin, Eurazeo SE - CFO & Member of Executive Board [7]


Yes. The ANR for December that was communicated on in March, and then there was a carryover because a large part of that money was closed and invested over those months. So part of the investments are at cost, part of them are reevaluated with carryover.


Pierre Bosset, HSBC, Research Division - Head of French Equity Research [8]


How about the cost related to carryover?


Philippe Audouin, Eurazeo SE - CFO & Member of Executive Board [9]


Pierre, if you don't mind, maybe we could get back to you individually. We want to give some time to the institutional investors. Thank you, Pierre, for those questions.


Operator [10]


Next question from Alexandre Gerard, CM-CIC.


Alexandre Gérard, CM-CIC Market Solutions, Research Division - Research Analyst [11]


I have 3 questions. The first of all is on Virginie's introduction, Eurazeo. The last 3 tickets are significantly larger than what you normally deploy for these strategies. Is that correct? EUR 50 million, EUR 60 million? In the very short term, are you looking to continue on this trend, continue with this strategy? And in the longer term, how do you see the allocation of the strategy across the various businesses within the group? Secondly, on asset management, can you come back on the rationale behind the strategies that was launched yesterday or the day before? I felt that the stake was pretty toppish at the moment. Is it not quite risky to invest in real estate at this point of the cycle? And 40% for EUR 90 million, what kind of multiples are we looking at for EBIT or EBITDA? And my final question on Eurazeo Development, can you maybe give us your opinion on how NAV is split across asset management companies and the owned investment by Eurazeo? How is that split?


Virginie Sarah Sandrine Morgon, Eurazeo SE - Chair of Executive Board & CEO [12]


Okay. I'm going to start with Emerige, then I'm going to give the floor to Olivier for growth and then Philippe for development.

Emerige's Laurent Dumas has an excellent reputation, a highly respected entrepreneur with a great market share in the greater Paris region. That is the region where he is the most developed, that's the first thing. Secondly, this is very interesting opportunities for us in co-investing. This is probably development, remember, so Laurent Dumas' company is a management company that uses fees to get paid on property development, high-quality property development projects, very, very selective, very high added value, very responsible, very modern and quite high end in terms of offering.

So what's behind your question, is it really the right time, and what could be the fall out. Emerige is not an owner. They don't carry risk. There's a big split in Paris between supply and demand. There's a lot more demand than supply. So Emerige has a very breezy outlook for them. But even if there were delays, there are going to be elections coming up, all of this can have a negative impact on big projects in Paris or the greater Paris region. But nothing like you suggested related to corrections or changes on the values of properties held by Emerige because it's property development.

The multiples, I'm not sure we communicated them. Philippe is saying no, but we've got a minority stake alongside Laurent Dumas. And we're looking between 7 and 10, I guess, significantly under 10, at least. And I think that is EBITDA, but I don't think that makes a huge difference in this case.

There you go. That was for Emerige. There will be a lot of co-investment potential that was good for [us]. Well, in the past, we've been looking at investment opportunities in Emerige's project, so in the Greater Paris region. And we're very keen to be able to now deploy Eurazeo Patrimoine Capital alongside Emerige. So that's for Patrimoine.


Olivier Millet, Eurazeo PME - Chairman of Executive Board, Chairman, CEO and Chairman of Management Board [13]


As for Eurazeo growth, your question is a very relevant one. That market segment works on EUR 5 million to EUR 10 million, because we work with insurance companies that are no longer venture capital targets. They have overcome the threshold and now they're working with significant amounts. The American market and the U.K. market have these large amounts, EUR 50 million, EUR 100 million, EUR 150 million for growth companies. And if we want to break into that market, we can't be bringing just EUR 10 million. So we have decided to be a significant investor in this segment. Over the last 15 deals, on average, Eurazeo has been putting EUR 35 million on the table per transaction. And it's likely that in the future, we will be moving north of an average of EUR 50 million per transaction, given the ramp-up of the size of the business. There are a lot of upsides, but there's also a lot of risk involved.

Structure will be to have more external capital and balance sheet capital engaged, so that we can provide more capital to these companies. And we are going to be looking at an average EUR 30 million to EUR 50 million per transaction. We're not going to be laying EUR 100 million of our own money down on a single one there.


Philippe Audouin, Eurazeo SE - CFO & Member of Executive Board [14]


On Eurazeo Development, Alexandre, we have not communicated on the individual values. I do believe, however, that during our Investment Day, we presented the effective multiple for Idinvest, given the good performance put in by the company. I think that was about 30% lower than the theoretical multiple that we would otherwise have had to pay.

So you can do the math, I'm sure you can work out pretty much where we are at for Idinvest. Once again, excellent performance. As for the others, I can't give you precise numbers, but do remember that we had -- we do have positive impact for EC IV for our own third-party investment business and Rhone putting good performance as well, seeing as on top of the district -- despite the distribution that they've done, they do have revenue up, despite not having started fundraising for the 6 fund.

If the fundraising for fund 6 goes well, and there's no reason to think otherwise, then there is no reason to not think that there will be a significant reevaluation by the end of the year.


Operator [15]


We have no further questions on the phones. (Operator Instructions) Some other questions.


Virginie Sarah Sandrine Morgon, Eurazeo SE - Chair of Executive Board & CEO [16]


Do you have an investment limit for the unicorns?

I think Olivier has already sort of answered that question.

Growth, U.S. brands companies, what would be the maximum in the portfolio? Is another question. Remember that 2 years ago, we announced an investment program with an envelope of $800 million.

The principle is that for each team, we use the same approach as regards ratios to make sure that the track record of each of the team can support good returns and support the trust from our investors. That means that investment will not be more than 10% of the envelope that was given to Eurazeo brands. So individual investments of no more than $80 million to $100 million. And Philippe, 4 investments were made recently. No revaluation at the time being, although there have been solid performance by them in the past.

We've also got a program for $200 million. I think it's precisely $200 million. That means that there is about $600 million left over for investment between $40 million to $80 million each, up to that $600 million.

A few requests for more information on the cooperation with Rhone. Yes, we are regularly looking at a, 2 investments that can meet -- well, 2-person investments that can be done with Rhone in Europe and in the U.S.

There's no further to say on that, really. We are continuing to look at things. And I believe that this was in the papers, Webhelp that was quoted in the question, and it was actually another purchaser that bought Webhelp a couple of weeks ago.

That brings us to the end of our written questions though. Nothing else on our screen. So I think we've been able to get to everyone. I'd like to thank you. We do remain available especially to answer your specific questions, especially the ceiling for EC IV. Have a great summer, everyone.


Operator [17]


Ladies and gentlemen, this brings us to the end of today's web conference. You can now disconnect.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]