Altamir SCA (AJY.SG) Earnings Call Transcript & Summary

Hello, everyone. Welcome to the presentation of Altamir's Half Year Results for 2025. I'm here with Maurice Tchenio, President and CEO of Altamir Gérance; and Eric Sabia, our CFO.

Thank you, Claire. We are pleased to present our half yearly earnings for the first half of 2025. We are entering Altamir's 30th anniversary year. As usual, we'll start by looking at what's happened in the private equity market in the first half of 2025. In terms of the buyout investment, you can see that the European market was fairly resilient with EUR 135 billion invested, i.e. exactly half of what was invested in 2024. But in this kind of extremely turbulent environment, in terms of disinvestment, we're in roughly the same category with EUR 90 billion disinvested versus EUR 200 billion for the full year 2024. But we can see that the bulk of divestments in 2025, there were some very large transactions, reflecting the dynamism of the market. And of course, the IPO transaction is totally closed. So it's fair to say that the big problem, and I'll come back to this today for private equity funds is the problem of liquidity, liquidity and the disposal of portfolios of assets that have already been in the portfolio for more than 5 years. How has Altamir performed in this environment? Well, as you can see, new assets declined by 1.3% over the year, including dividends compared with 2.7% in the first half of 2024. This effect is mainly due to a currency effect between the dollar and the euro. The dollar depreciated by 10% over the period. EBITDA growth is 3.7% over the rolling 12 months to June 30, 2025, compared with 13.1% for the rolling 12 months of the first half 2024. This shows the extent to which the portfolio companies are facing headwinds in most countries and in most sectors in which we are investing, economic times are tough. We'll come back to this when we analyze the portfolio. In terms of divestments, we sold EUR 80 million assets per donation compared with EUR 152 million assets in the first half of 2024. We are, therefore, significantly less than last year, but in line with historical trends. We made 6 new investments compared with 2 in the first half with EUR 93.5 million invested compared with EUR 70 million in the first half of last year. Finally, our cash position, taking into account the volume of disposals last year, improved significantly with a cash position of over EUR 17 million compared with less than EUR 18 million in the first half of 2024. If we now look at the details of these divestments we made over the semester, you can see that, in fact, these EUR 80 million in divestments are comparable with the EUR 333 million we had last year. But if we look at it from the perspective of previous years, I'd say we're in the right ballpark in terms of amounts divested in the first half. Most of the divestment in the first half came from the full sale of the company, Marlink. I would remind you that we sold Marlink 4 years ago to fonds Providence. And on that occasion, we have the occasion to reinvest it in Marlink. It was this reinvestment in Marlink that generated 2.1x our investment in 4 years and provided us with $75 million in proceeds. To this $75 million, we added 4 million, mainly from the dividends we received or disposals which are marginal comparing to the total. In terms of new investments, we made 6 new investments for EUR 88 million and follow-ons for EUR 6 million. Once again, you can see that we're on a par with last year. We're exactly half the market average. And when we compare ourselves historically, we're in line with our historical performance in terms of amounts invested. Where did we put our money in the first half of 2025. In 6 new transactions, 4 in new services. With CohnReznick, which is an American company specialized in tax and fiscal consulting for other companies in the United States, one of the biggest firms in this field after the top 4 or top 5 through the fund Apax LLP. After that, we have Seven2 mid-markets first investment in Germany in the German independent wealth management platform. Seven2 took advantage of its experience with Crystal and tried to duplicate it in Germany. Nova24 is a Norwegian IPO leading specialized in the field of infrastructure maintenance services through the Apax XI fund. And we reinvested in Crystal on the one hand, through the Fund X, which itself reinvested alongside Goldman Sachs to whom the company was sold. And on the other hand, through the duality fund, I'm about to talk about, we also reinvested in Crystal on a co-investment basis. We also reinvested in the same way in Marlink as part of the duality fund, EUR 11.1 million. And we invested EUR 10 million in a Department of Finastra, a global provider of software solutions for the financial sector. In addition to these EUR 66.5 million of investments, 4 in services and 2 in tech and telcos, we have also invested in funds, EUR 21 million in Altaroc funds, which continue to invest at a good pace as you can see, 91% for Odyssey '21, 55% for the '22, 31% for the '23 and 6% for the '24. Similarly, the Digital II and Apax Development II funds are well underway at 50% and 30%, respectively. In terms of follow-on, they are very limited, amounting to EUR 6 million and the 4 follow-ons that have all been made in an offensive way to help the companies to grow and to develop companies to develop either through organic growth or buildup. All in all, as indicated in the previous slides. Our ANR at June 30, 2025, stands at EUR [ 33.53 ] down 1.3% on December 31, 2024. But if we take a long-term view, we can see that compared with the December 31, 2021 peak of EUR 37.81, we have lost EUR 4.28, which are mainly coming from the dividends paid, which means that, in fact, over this, which longer period of '22, '23, '24 or 3.5 years, we've remained flat and essentially flat. The value of the portfolio has only compensated for the total cost of private equity, which amount to around EUR 40 million each year. In other words, we have covered EUR 140 million in costs by improving the value of the portfolio. I now turn to Eric to explain the bridge. Our net assets will evolve between December 31, 2024 and June 30, 2025.

Thank you, Maurice. Indeed, what explains the difference between the 2 dates? Firstly, the low level of value creation over the period at EUR 3.2 million. As Maurice was saying, we have negative effects, particularly in terms of the currency effect. If we hadn't had this negative currency effect of EUR 31 million over the period, growth in net assets would have been EUR 0.05 versus the minus EUR 1.3 we unfortunately recorded over the period. In other words, in addition to this relatively low value creation, EUR 20 million in expenses and the dividend, which has been provisioned and will be paid on September 30. If we now look in a little more detail at value creation over the period, it amounts to EUR 3.2 million. It is practically flat, breakeven in all sectors, except service, where it is slightly positive at 2.2%. And as I was saying a second ago, this value creation includes the negative and extremely important effect of exchange rates. That's why there's an impact on bidders in particular. That's why value creation is so low over the period. I will, however, briefly mention the latest deals, [ Vocalom ] at the bottom of the tech and telco sector and Cole Haan at the bottom of the consumer sector, which are the 2 latest deals from the respective funds of Apax France VIII, Apax VII, Apax France VIII managed by Seven2 and the Apax VIII LP fund. These 2 companies are in the process of aligning their valuations with the sale prices anticipated by the managers as they are the fund's last 2 assets. And finally, in the service sector, I'd like to mention Assured Partners, which had a negative value creation of almost EUR 3 million, since this company was sold over this annualization period, which was slightly lower than on December 31. On the next page, if we go into a little more detail, the value creation figures for this half year are not necessarily representative, since the value creation is on the unrealized part, which amounts to EUR 10.4 million. They are not necessarily significant, and they are also heavily polluted by THOM has a major impact on all levers. We won't go into further detail. On the right, however, we can see that the portfolio has fallen from [indiscernible]. This is linked to accounting entries since we have exited more companies over the period than we have made new investments. This explains why our portfolio was slightly down over the period. On the next page, you will see the evolution of the portfolio at cost price, which amounts to 113% of the social welfare situation. This is a very important indicator for us. It enables us to verify that the hard equity in the company's financial statements is properly invested. Today, we can see that they are. The company's social aid position stands at nearly EUR 895 million after the dividend attachment date, which compares with a portfolio at cost price of just over EUR 1 billion, EUR 1.14 billion. We remain well positioned in terms of investments. In terms of valuation, the following slide shows that 96% of the portfolio at June 30, '25 is valued using stock market comparables. We have virtually no listed companies and very few companies at cost price at the end of June. Page 25 shows a new situation for us. Uplift is negative over the first 6 months of 2025. Uplift, as you will recall, is a difference between the last valuation with which we have the assets on our books and the sale price. We can see that for the first half of 2025, this uplift is a downlift, a negative uplift, which can be explained mainly by the sale of Marlink, which was carried out in parallel with the transfer, as Maurice was saying, to the duality fund already a few months ago. Although the company continues to perform well, Marlink is doing very well. But this decrease meant that we recorded this negative uplift. In terms of commitments on the following slide, Page 26, commitments amounted to EUR 525 million at the end of June, of which EUR 167 million have already been invested by the funds in our portfolio. That's why they haven't yet been called. No real novelty compared to previous except that the funds are -- funds are calling in some capital to finance their new deals and follow-on rather stable. Funds calling capital, it doesn't necessarily impact cash. As we said, Altamir cash position over the period was in good shape at EUR 17.3 million with cash under IFRS at EUR 163 million. The company still has EUR 135 million of credit lines available, which are available as the cash position was positive at the end of June so we won't be following on them. I'll turn the floor back to you for post future events.

Absolutely. So first of all, in terms of investment, Apax has announced investment or divestment in this case. On the one hand, Apax announced a partial sale of its Fractal Analytics shares with a view to listing the company on the Indian market within the next 12 to 18 months. In addition, it has sold its shares in Verint, a New York-listed company, the proceeds of which are expected to be received early in the new year. Moreover, of course, as you know, Amboise launched a simplified public tender offer for the company's shares at a price of EUR 28.50 per share. This offer was approved by the College [ the AMF ] on June 11 and the period for tendering shares has therefore been opened, since that date. This offer is open from September 15 to September 26. Only those shares as the coupon will be detached on September 26. Shares tendered on the last day of the offer will be stripped of their coupons and will not be paid at EUR 28.50, but at EUR 27.44, i.e., the coupon of EUR 1.06 will be paid directly to them. This operation of purchase should come to an end by the end of September. As I said, every year and even twice a year, the value of your company is based on the value of its portfolio. The portfolio includes 69 companies that we identify separately for a total of EUR 1.569 billion -- EUR 1.569 billion, not quite EUR 1.569 billion because that also includes the companies in the funds. The 7% invested through funds are invested in a number of funds. In the Altaroc funds and in the funds of funds, we have more than several hundred companies. So the ones we identify are direct investments and investments made through the Apax 72 mid-market and Apax LP funds. You can see that the breakdown of the portfolio is 21% in fair market value in so-called direct investments, 72% in the Seven2 and Apax funds and 7% in the Altaroc funds. The portfolio is almost always diversified by sector with, as usual, tech, which represents 49%; services, 28%; consumer, 18%; and health care, which has been discontinued by the Apax and Seven2 funds, which now account for just 5%. And we can see that every year, given the delay in disposals, the weighting of companies prior to 2019 represents 30%. In other words, the volume of assets expected to be sold in the coming months or years. The geographical breakdown shows a huge weighting of Europe, but this takes into account takes head offices into account. However, most of the companies in our portfolio today are highly international. If I take Marlink as an example, its weight is essentially global, so it doesn't reflect the geographical breakdown of our portfolio. As for EBITDA's growth, which we compare with the 35 companies in the CAC 40, when I look at myself, I'm disappointed. When I look at myself, I feel sorry, but when I compare myself, I feel better. Our 4% growth in EBITDA is not great, but the CAC 40 at 1%, we haven't done any better. I'd go so far as to say we've done much worse. In fact, this explains the turnover of CAC 40 and SBF 120 executives because Indeed, times have become very tough. And as we'll see in a few minutes when we talk about our portfolio companies, they're encountering events to the contrary. The economic environment in which our companies operate has become very tense over the last few years. We can see the effect of the market very clearly on this chart, since 39 of our 69 companies representing 61% of the cost had negative sales growth in the first half of the year and only the remaining 17 companies representing 40% of the cost portfolio had positive growth. And in terms of EBITDA, it's a little better since only 39 companies representing 50% of cost has had negative EBITDA growth and the balance had positive growth. So of course, these figures are affected by the currency effect, since some companies may have grown in dollar terms, but have regressed in terms of EBITDA in euros. Nonetheless, this actually shows how difficult times are. But nonetheless, I'd like you to bear in mind that all the companies in the portfolio, even those which have not seen EBITDA growth are in positive EBITDA are in positive EBITDA. We don't have any companies that are making a loss and so on. In terms of multiples, we see a jump in the multiple between 2024 and June 30, 2025. There's a mechanical effect in the 2024 figures, there was the company Entoria, which we lost, and there was a very, very low multiple. This explains the drop in multiples. And we have the real story. It's a multiple increase of 1 turn or so, which can be explained by the fact that the companies in which the Apax and Seven2 funds invest are increasingly fast growing, mainly in the sector of softwares, et cetera, or companies with high recurrence rates valued at multiples in excess of 20, 25 or 25x. This is mainly the reason why we'll continue to see growth in the multiples of our portfolio. As far as debt is concerned, it's the same story in reverse, i.e., the reason why debt -- the debt multiple is falling is essentially due to Entoria. We can say that we have been flat for 4 years at 570. But here again, these multiples will increase because when you pay 25 or 27x EBITDA, you are raising debt levels of 7, 8 or 9x EBITDA because these are fast-growing high recurrence companies. Again we are now looking at the funds 20 largest investments from the funds, they now represent just 67% of the portfolio. Historically, they represented closer to 80%. So the portfolio is diversifying significantly. Nevertheless, 2 investments, THOM and Destiny together represent 20% or 3 investments, let's take Graitec, represent 25% of the portfolio. Most of the companies in the portfolio with the exception of InfoVista Mental Care are valued above cost of acquisition. If we're now looking at to each of the companies in the portfolio, Destiny, we remind you, is a major European player in on-demand unified communications. In fact, the company we are talking about is facing a shrinking market. Nevertheless, its recurring business continues to grow at a rate of 7%. And if EBITDA is down, it's simply to reflect the investments that are ready for the future. Graitec continues to perform well. Graitec is an international publisher and distributor of software specialized for the construction industry, building information modeling and design calculations. And so the company continues to perform very well and continues to invest massively to focus on its sales force. As for Odin, which is the company that is actually a leading Dutch provider of outsourced cloud services. The company continues to make good progress, both in terms of organic growth and growth through acquisition, broadening its geographical scope. Since it was focused on one region of Holland, it is now trying to expand across the whole of Holland and even across the border into Germany. Odigo, as you'll recall, is the leading provider of contact center solutions and services for industry and large corporations. As you know, we took a gamble on Odigo to transform its solutions into SaaS solutions. It was a very long and painful process. This process is now complete. The company is now fully SaaS, which means we can significantly reduce costs, hence, the growth in EBITDA. Nevertheless, the major challenge ahead is to redeploy sales and the new management team that has been put in place. That is its main mission. Vitaprotech is, therefore, a French leader in premium electronic security for sensitive sites in both hardware and software solutions. The figures you see here take into account the transforming acquisition of an American company called Hirsch, which was, in a way, Vitaprotech's twin in the United States. And so today, all the work that's being done is to draw commercial and I'd say cost synergies between the 2 companies -- cost synergies between the 2 companies. InfoVista, as you know, is a world leader in software solutions for improving the performance of telephone networks. For several years, the company has suffered from the fact that the major telephone operators have significantly reduced their investments. The company has, therefore, had to take strong initiatives to cut costs and reposition itself. And so of course, we put in place a new management team, and I'm pleased to report that the company is on budget for the year ending June 30, 2025. With the curves crossing, the company is thankfully now back on track for growth. Nevertheless, strong action on cost has enabled us to show an EBITDA of 5%. Once again, FSC is a European leader in the CRM software sector. In the last month, they changed their management team, and they have also launched of new important functionalities in their CRM products that introduce AI. I should have said that virtually all the companies in the portfolio today are working on introducing AI into their solutions. And secondly, to restart an acquisition process, that was the mandate given to the new management team. Lumion is in its side, a recent acquisition made by Seven2. It can be described as a reference 3D rendering software for architects. The company is developing well both organically and through a small Danish acquisition. And of course, we are continuing, as usual, to strengthen the management teams and develop the product range. ThoughtWorks, if you can remember. It's a company that has been a big winner for our portfolio since we've already made more than 4x our investment in ThoughtWorks. The company had been floated on the stock market and Apax took it public by buying out the minority shareholders. As a result, Apax now holds almost 100% of the company's capital. We decided to reinvest it alongside them. Like the other companies, the management team was changed and the company, given the fact that customers in the global context are extremely cautious, since the company has done its IPO. We have to make very substantial investments in customized software. As a result, sales are stable, but major measures have been taken to improve profitability and market access. And so we are expecting a strong recovery for the company over the next 12 months. IFS there everything is green for IFS. It's a world leader in software and AI solutions for industrial companies. It's SAP's big competitor to put it simply for industrial companies and those with complex models. The company continues to win logos. It continues to improve its product range. It launches new AI-based products. And as you can see, the numbers are there, both in terms of sales and in terms of EBITDA. AEB, again, in another field, which is the field of products for ingredients and services for beverages and different types of food products. In fact, let's be clear, it's essentially wine and beer. And so the company is experiencing an environment of negative harvest just about everywhere in the world and particularly in South America. Despite this and regarding the context of the market, a whole series of initiatives are being taken, of course, in order to strengthen our position with the new management team once again to strengthen the -- both to strengthen the R&D organization and to return to a satisfactory level of EBITDA levels. So ones of European leaders in motor insurance products and services, the company continues to perform well and has made a small acquisition in Italy, which gives it access to both the French, German and Italian markets -- German and Italian markets. Fulgard is a new investment made by Seven2 in the fire safety sector. It took a little while to get off the ground. The company, when we took it over, started with a backlog. A backlog that was lower than in previous years. So we're paying the price in terms of sales and EBITDA of this position at the time of the buyout and a new management team is in place, since we bought this company with a new leader, who is now taking action to execute the business plan to which we are committed. The PIB Group is a British insurance broker, which is expanding on the continent through acquisition. Since the investment by Apax in March 2021, the company has made 117 acquisitions, 85 of them in Continental Europe, and the figures you see here are mainly driven by external growth. Infraneo is therefore a market leader. Infraneo is a company that operates in the fields of maintenance and diagnostics of infrastructures and buildings is growing both organically and through external growth. And so once again, our major task has been to strengthen the management team. What we call Project Piper, and in fact, the new name of the company has not yet been found is the merger of 2 companies, Alcumus and Veriforce, an American company and a British company, which operate in the field of integrated solutions and services for supply chain risk management. And so all the work we're doing today is to leverage synergies, make the most of synergies between the 2 entities, both in terms of sales and cost. And the initial results are quite satisfactory with sales growth of 11% and a 20% increase in the top Crystal. So we're back in Crystal since we sold it to Goldman Sachs, but we're back in Crystal. The company had made 2 major acquisitions at the same time as we sold Crystal to Goldman Sachs, and the company continued to grow both organically and acquisitions. And so you can see the translation of 23% and 27% organic growth driven mainly by, first of all, unfortunately, it's due to the fact that the French are increasing their savings. And so savings inflows are rising. And Crystal is benefiting from this. And secondly, this explanation is essentially due to structured products in terms of structured products. As far as the consumer sector is concerned, the only is THOM, the chain, the European leader in affordable jewelry. THOM is faced with a major problem, the rising price of gold. And so for the time being, we have decided not to reflect these increases in the price of gold in our sales prices as this is a business in which we have very high margins and the drop in sales -- any drop in sales means a significant drop in profitability. The company continues to expand with 39 stores now open and above all, Agatha continues to perform extremely well. Finally, the last investment in the top 20 is an investment in the health care sector, Mentaal Beter, renamed Mental Care. As you know, we had quite a few concerns about this company from the outset due to the increase on the one hand, which were difficult to reflect in price increases and then the difficulty of recruiting therapists. But you can see that the company is on the way to a significant -- but you can see that the company is on the way to a significant recovery in sales and EBITDA, which means that it is slightly below the cost. And we hope that in 2026 or even by the end of 2025, it should be back in the green. So that's the story of the 20 companies. That these 20 companies for the most part, are facing complicated sales, which means that the performance as you see are driven by roughly 4 levers that are strongly activated by private equity, cost reduction, AI production in different ways, price increases and I'd say acquisitions, mergers, acquisitions to take account of the fact that the environment is difficult as these are mostly leaders. The competition suffers more, and we can buy them out on fairly good terms. And so this mainly explains why -- this is why independently of the dollar phenomenon, we have seen a further fall in average EBITDA growth. So you can see that the environment we're in and this environment means that today, it's extremely difficult for private equity funds to sell their assets. Only the very best assets that are experiencing very strong growth and are very highly valued are finding takers. And so the major problem facing the private equity industry today is how to access these assets, which are performing relatively well. But as long as the stock markets are closed, there are liquidity problems. So if we now turn to the chapter on how Altamir is performing in terms of its net asset value versus LPX Europe Index, you can see that we outperformed the index over 10 years. We underperformed the index over 5 years. We slightly outperformed the index over 3 years, and we are more or less roughly flat over 1 year. In terms of dividend, as we continue to pay 3% of net asset value and have a discount of around 20%, this still translates into a shareholder yield of around 4%. And in terms of share price, Altamir, because of the operation, the launch of the operation with a premium of 20% or 25% on the last quoted price and a 15% discount on the last published NAV. Altamir really outperforms these indices as well as [ CRC ], mid and small and LPX Europe over 10, 5, 3 and 1 years with large numbers for those shareholders, of course, who choose to sell their shares at the price -- [indiscernible] you know that I have announced long ago in 2020 that we would no longer be making annual target projections because this is a cyclical business, and we've just seen that for the last 3.5 years, we've mainly been treading water after 7 or 8 years of very, very significant scores. Nevertheless, I had announced that we would be investing an average of EUR 170 million on average. And as you can see that for the period over the 4.5 years, I have made this projection for 5 years ending in 2025, we're at EUR 202 million. So even if we make zero investments in the last half year, we'll still be in line with the targets I set 5 years ago. In terms of divestments, I had set a target of EUR 230 million. By the end of June 2025, we had reached EUR 260 million. So once again, even if we assume zero divestments, we'll be on target with what we said. And in terms of organic scheme growth of 7%, unfortunately, we don't have the organic figures. We have them for organic growth and acquisitions. But overall, we're at 14.8%. So we can say that we're on line with our target. I don't know what targets I'm going to set for the next 5 years. But for the moment, we are on line with our objectives to conclude. I would say that the main challenge I have raised and we face over the next 6 months or 18 months is a liquidity problem because if the funds don't reactivate their selling by taking proceeds and so we are not getting back our cash sales process, then of course, as we have commitments to the funds to invest, we won't be asked to do so. And we're not asked for our opinion for calling on the amounts we've committed. And the commitments we have made were made in anticipation of the sessions that were to come. So the #1 problem for the next 18 months is obviously to be very vigilant about the sessions that Apax and Seven2 will announce and to prepare Plan B in the event that their proposals are not accepted, even in the event in which -- the results are not up to our expectations. I'd like to thank you for your loyalty, for those who have been with us for 29, almost 30 years and for the loyalty of the newcomers who have joined us. Eric and Claire and myself will be available to answer any questions you may have. Good day.