Eurazeo SE (RF) Earnings Call Transcript & Summary

Hello, and welcome to the Eurazeo H1 2025 Results Call. Please note this conference is being recorded. [Operator Instructions] I will now hand you over to your host, William Kadouch-Chassaing, Co-CEO; and Christophe Baviere, Co-CEO, to begin today's conference.

Good morning. Thank you for joining this call. Christophe and I are pleased to welcome you to our 2025 half year results presentation. Our presentation, as customary, will be in 3 parts. First, I will share with you the financial and nonfinancial highlights for H1. Second, Christophe will focus on fundraising, commercial dynamic and asset rotation. Third and last, I will detail our financial results. We will then be available to take questions. Let me turn to the financial highlights. During the first half of 2025, we made further progress in the execution of our strategic plan. Let me share some key facts that summarize the performance in H1. First, as you can see, Asset Management continues to grow. Fund raising stands at EUR 2.1 billion for the first half with some notable closings in PE and debt. This confirms the attractiveness of our franchises to our clients. Fee paying AUM from third parties are up 10%. Management fees from third parties are up 6%. Asset management contribution is up 9%, thanks to good cost control and an increase of both management and performance fees. Second, we continue to have a dynamic rotation of our balance sheet. Year-to-date, we have realized and announced transactions for more than EUR 900 million of assets from the balance sheet or 12% of the value of the portfolio at the beginning of the year. We are just more than halfway to our historical annual average of 20%. Important to note, these realizations are all made in good conditions around NAV. Third and last, our portfolio remains resilient at EUR 103.4 per share. On an organic basis, fair value is down 1%, but this is 0% on a per share basis, thanks to the share buyback. Growth in our portfolio remains robust with underlying EBITDA in buyout up 17%. Our fair value is, nevertheless, negatively impacted by foreign exchange variations, particularly the euro-dollar parity of minus 2%. As you know, we follow a two-pronged strategy in sustainability, aiming at top rankings in ESG on the one hand and striving for leadership in impacts through dedicated funds and investments. We continue to be recognized for our best-in-class sustainability practices with new awards received again in H1 2025 on our private debt and all Article 9 funds, for example. We also continue to drive our impact investments with 13 new investments over 6 impact funds, both in Climate Solutions and Health care.

Thank you, William. Good morning, everyone. Let's now dig into details, starting with fundraise. Eurazeo raised EUR 2.1 billion from our clients in H1, in line with last year, but with a higher -- a significantly higher share of private equity in the mix. This is particularly encouraging given a challenging environment for fundraising. According to PEI, Private Equity International, private equity fundraising was down 17% in H1 2025. So no doubt, this success highlights the quality of our franchises as well as the relevance of Eurazeo positioning as a European mid-market growth and impact-focused investment firm. Let me give you a few details of this. We have had notable successes in private equity with the final close of the Eurazeo Capital V program at EUR 3 billion, with also a first close on Planetary Boundaries at EUR 300 million. We just announced the first close for Eurazeo Growth IV at EUR 650 million with a EUR 1 billion target size. Our talented growth team has been able to gather interest from marquee international investors to create one of the largest gross funds in Europe, already invested in several rising stars within the AI space like Cognigy or Fever. This is another proof that Eurazeo is able to build top franchises. Private equity continues to enjoy a strong and steady momentum with EUR 900 million in H1. Keep in mind that H1 2024 has been particularly strong, thanks to the successful first closing of our direct lending flagship EPD VII, which has now already raised more -- much more than EUR 2 billion. So Wealth Solutions continues to deliver. We raised EUR 479 million in H1, up 6% year-on-year, building on a strong position in France and expanding across Europe with notably some successes in the Benelux region. You will recall from our Capital Markets Day that we outlined our ambition to further expand our client franchise through the internationalization of our LP base and second, through the development of our wealth channel in France and abroad. We've made progress in both directions in H1 2025. We raised EUR 1.6 billion institutional money in H1, out of which 72% came from international LPs, a share that continues to grow year after year. To support the extension of our reach, we made senior appointments in our coverage team in key geographies, such as the Nordics, the Middle East and the DACH region, with expanded significantly on Milan office, and we opened an office in Tokyo to better cover Japan. Our Wealth Solutions franchise also continues to grow at a steady pace. In France, we continue to grow with our existing distribution partners, and we are adding new significant ones. Our strategy to expand outside of France is paying off. We begin to have flows from international markets, especially again from Benelux. And we prepared the launch of 2 new evergreen funds in H1 of this -- in H2 of this year. That should help us to continue to grow over Europe. For the rest of the year, we will pursue our fundraising on the back, as you can see, of a solid and diversified pipeline both on the institutional side as well as from the wealth segment. Our funds -- obviously, our funds are at different stages in their fundraising. We continue to raise on EPD VII in direct lending and on ESF V in secondaries. We had first closing in H1 in EGF IV in growth and EPBF impact buyout that we will continue to raise over the coming quarters. Additionally, we will have several new funds on the road in H2, a much anticipated fifth vintage for Elevate raising Eurazeo PME V, an operational real estate fund EZORE, a second vintage in SME in vessel decarbonation financing, and we will start the marketing of the second vintage in our sustainable infrastructure strategy. On Wealth Solutions, well, we are announced -- we are happy to announce that our blockbuster EPVE 3 has crossed the EUR 3 billion mark, which confirms its leadership status in Europe. We are about to launch our new prime line of evergreen funds that will be totally designed for European distribution. And finally, we are already launching Eurazeo Entrepreneurs Club 3, the successor of our growth fund dedicated to Wealth. So let me now turn to deployment and realization. After a promising start at the onset of the year, the M&A market has shown signs of weakness in Q2 with rising trade and geopolitical tensions. Nevertheless, we continue to see appetite for quality assets in the mid-market segment in Europe and Eurazeo has been able to seize opportunities both in terms of deployment and realizations. Eurazeo deployments amounted to EUR 2.2 billion in H1, up 37% from the same period of last year, with transaction reflecting an expanding pan-European investment approach. Let me give you a few details. Main deals include in Spain, Mapal, a clear leader in hospitality software that we intend to develop through a buy-and-build strategy in the U.K. PSG, a significant buyout -- buy-and-buildup, sorry, in cybersecurity with the acquisition of Midway. In Germany, OMMAX has been acquired. It's a leading digital consulting firm. And in Italy, we acquired Aquardens, a large spa operator. For that franchise, also continues to internationalize 70% of EPD VII deployment in H1 2025 was in Europe outside of France. And Eurazeo, Eurazeo is well placed to continue to grasp opportunities with EUR 7.4 billion firepower out of which EUR 5.5 billion of third-party firepower. Realization stood at EUR 1.3 billion, private equity exits are stable compared to H1 2024 is, for example, the sale of Albingia and of CPK in buyout. Eurazeo has also had several exits in venture and secondaries. This confirms our ability to generate distributions at the satisfactory base. I now hand over to William, who will get through our results.

Thank you, Christophe. I will now take you through the financial results for H1, as said. Let me start with the asset management activity. Overall, AUM growth and particularly fee paying AUM growth illustrates the dynamism of our asset management business. Total assets under management were up 4% in H1, reaching EUR 36.8 billion, with third-party AUM up 10%. Fee paying AUM were up 8% at nearly EUR 28 billion, with third-party fee-paying AUM growing also 10%. Management fees stood at EUR 211 million for H1, up 3% from the previous year on a comparable basis. Third-party management fees were up 6%. The difference between management fee growth and fee-paying AUM growth in H1 is largely explained by the fact that some fund raising pertaining to higher-yielding PE of the gross equity occurred towards the end of the semester. This should normalize through the end of the year. Of note, management fees from Wealth Solutions are up 13% in H1, thanks to strong fundraising over the last 12 months. Balance sheet management fees were down 2% as we voluntarily limit our new commitments in our funds. The contribution of the asset management activity, excluding financial costs and other income is up 9% in H1 on a like-for-like basis. Whilst investing in our future growth, we continue to be very disciplined on cost, with OpEx up 3% only year-on-year. This translates into a stable FRE margins at 34.8%. Let me remind you that we have increased our margin by nearly 500 basis points over 2023 and 2024, and that we have a midterm objective of 35% to 40% FRE margin. Realized performance fees amounted to EUR 6 million for the period, of which EUR 4 million are related to third parties. Besides a rather uncertain market, we have been able to accelerate the rotation of our balance sheet for the second year in a row. As you know, this is an essential part of our strategy to build an asset-lighter business model and execute on our promise to return more capital to our shareholders. Overall, close and soon to be closed deals relating to the balance sheet amounted to more than EUR 900 million in H1 2025, or around 12% of our portfolio value at December 2024. More in details, we have already announced, as Christophe mentioned, the realization of Albingia and the secondary transaction on some buyout assets. In July, we also announced the sale of CPK, which will return around EUR 200 million to the balance sheet. Halfway through the year, we already have announced and realized 12% to the balance sheet portfolio, as I just mentioned. Given our good and diversified pipeline of exits for H2 2025, we expect to be trending back to our historical average of around 20% for the full year, as we announced at the beginning of the year. Importantly, we've been able to consistently sell our assets at or above NAV. This continues to be the case as the sale of CPK should be done again at around NAV. Let me stress that this is the best proof point to assess the quality of our portfolio approach and process. Let's turn to the balance sheet portfolio value, starting with the underlying performance of portfolio companies. As you know, this is a very diversified portfolio that we have on the balance sheet with more than 70 companies and none representing more than 7% of the total. Overall, H1 2025 was another illustration of the quality of the assets in the portfolio. In buyout, which represents 60% of the total value portfolio, revenues and EBITDA were up, respectively, 6% and 17%. Companies in our growth portfolio, which represent 23% of the total portfolio value posted an aggregated revenue growth of 14%, with marquee assets such as Doctolib growing more than the average. The EGF IV portfolio, which is the most recently invested portfolio, continues to perform slowly at a pace of nearly 40%. Our real assets portfolio, which accounts for 12% of Eurazeo portfolio value has shown resilience. Hospitality business posted a 3% revenue growth, and infrastructure continues to perform strongly. As you can see, the net value of our portfolio was EUR 7.4 billion at the end of H1, down EUR 500 million or minus 6%. On a per share basis, the decrease was minus 4% only, given the positive impact of the share buyback program, which accounted for an accretion of 2%. The scope explains the figures by 3% or EUR 240 million, as we sold more than we invested in H1. This is consistent with our strategy to reduce balance sheet weight over time. Change in fair value was a negative EUR 273 million, of which EUR 170 million or 2% is explained by foreign exchange as the dollar depreciated against the euro. As you know, under IFRS 10, the main driver of the P&L of the investment activity is a change in fair value, so this translates into a noncash P&L event. On a per share basis, let me stress that the change in fair value at constant exchange rate is close to 0%. Asset value creation was positively impacted by the operating performance of the underlying portfolio. This bodes well for future value creation across the scope. On the other hand, ForEx moves has a negative impact, and we adjusted multiples or discounts applied to some specific clients in the portfolio to reflect market movements for some comparables and the overall uncertainties in the market. Given the current slow environment and uncertainties in the market and despite the strength of the underlying figures, we expect value creation for the year to range from flat to a slight decrease. Let me stress again that over the duration of the plan, i.e., through 2027, we continue to expect a return to significant value creation and that the 10 years -- consistent with the 10-year average being 10%. Turning to the P&L of the investment activities. Overall, contribution of the investment activity was a negative EUR 364 million in H1 2025 with the following main drivers. As I said, change in fair value of minus EUR 258 million, which as said as a negative -- is contributed by the negative ForEx impact of EUR 176 million. Management fees paid to the asset management amounted to EUR 58 million. This is an institutional flow. They are, as you now, considered as cost to the investment companies. Selling costs were flat year-on-year, reflecting, again, cost discipline at all levels. In a nutshell, at group level, net results group share for H1 2025 stood at minus EUR 364 million for the year compared to minus EUR 156 million negative in H1 2024. This is largely a noncash figure. This reflects a strong contribution from the asset management activity on the one hand and a noncash negative contribution of the investment activity. Thank you for your attention. We can now open the Q&A session.

[Operator Instructions] We will take our first question from Nicolas Vaysselier from BNP Paribas.

I just had two questions, which are related on the value creation dynamics. So clearly, if we exclude the FX impact, we still have minus 1% negative value creation. Your portfolio companies seem to be growing earnings, although maybe a little bit slower, but still the outcome is minus 1%. So I was wondering if you had been taking down valuation multiples further across the portfolio. And if you could give more color on the process here? And the second question is really related, but you seem to be still pretty pessimistic for the rest of the year in terms of value creation despite the improvement in markets that we are seeing, but also we have noticed deal velocity picking up over the last couple of months. So I was wondering what makes you be so cautious on that front.

Thank you, Nicolas. You're right to point out that the underlying metrics are pretty good across the board. Let me remind everyone that in the remarking of the books, you have to take stock of what happened in -- also in the past. There was a remarking of nearly 40% in 2021, 14% in '22 and then flat '23, slightly negative '24 mostly pertaining to the gross assets. And so when we look at valuations at a given point in time, we look at the calibrations relative to the market multiples. And of course, we factor in the positive on the underlying metrics. But we take stock of also the remarking that has already happened, so that we are in a situation where we are comfortable with the calibration. At the end of the day, these assets are meant to be sold. So it has to be consistent with what we think we trade the asset for, which is exactly what happened. Despite the strong discounts factored in by the market operators, we managed to sell our assets at or above NAV. So if you take stock of this element of time, what we had said is there will be kind of a plateau before we resume value creation, which will come in the years to come as we liquidate the portfolio and the previous timing elements that I mentioned are absorbed, but this is where we are. So now we also -- and this is linked to your second question. We are not pessimistic. We are rather optimistic on the asset management. As you can see, we operate in a market where fundraising is down across the board. We continue to have good momentum. We continue to make -- to win market share, to win new clients, rotation, you allude to it, talking about deal velocity, we do better than market. We said in 2024, we would have an increase in rotation. This came with some degree of skepticism at the outset. This is what we delivered. We said at the outset of 2025, we will have a further increase. This is what we deliver, and we are confident we will deliver that, and that will be -- and that's the reason we reiterate our commitment to execute the full EUR 400 million share buyback. So we are optimistic people, but we also are cautious people. And where we are given what happened in the world, I know that the markets are somewhat relaxed or seem to be quite relaxed on some things like the Europe, U.S. negotiations on tariffs and the overall geopolitical environment, nothing seems to be -- to harm this optimism. But when we look at what can happen fundamentally in the economy, we are rather cautious. So we have decided, yes, to maintain some calibration that we had historically on the multiple side. So that has translated in some increase of the discount or decrease of the multiple relative to the market because we consider we operate in a cautious environment. Let me stress as well that foreign exchange. We operate now in a world where we are back to where we were decades ago, i.e., volatility between OECD currencies. I don't expect -- I don't have a view as to where the dollar will be at the end of the year. So yes, I think it's a cautious approach to consider that where we are with the dollar, we stay for the rest of the year at least. So this is what we have. So it's not pessimistic. It's cautious. We are on the plateau. It's a transition year. We should resume value creation because the underlying performance is good. And this all approach will help us sell assets at a decent price close to mark.

We will take our next question from Joren Van Aken from Degroof Petercam.

Just one question from my side. On the real assets segment, which was down 6%. Could you explain a bit what the drivers are here? Are there like any particular assets that were devalued because if you look at peers, in real estate like Covivio or Gecina, their real estate is like down 2% to up 3%. So the minus 6% seems a bit on the high side.

Thank you. Remember that what we have in real estate, it's 2 strategies. So our investment as a balance sheet in real estate, which is what you refer to, rightly. And then we have infra, which is the balance sheet investment in our energy transition infrastructure fund. Starting with infrastructure. We continue to have very good performance. You see the underlying performance, and you can see -- and in fact, we had value creation through double-digit value creation in '24 and in '25 first half, we had also a positive value creation for the infrastructure portfolio. On the real estate, this is a program that -- of a high quality, when you look at returns, both IRR and DPI, they continue to be in the top quartile as a program. Those 6 are not completely linear. There are a few assets in the portfolio. Limited number. This is the beauty of this portfolio. I mean, not too exposed to the professional real estate that we had to adjust. This is one asset that we adjusted in le-de-France. The rest of the portfolio is largely adjusted because there were some weaknesses in the comparable multiples. It's more the comparable multiples, but you can see the figures operational are pretty good. So I think it's pretty much a one-off event, unless the 10-year yields increased massively in the next quarter, which will have implication on the cap rates. I do consider that we had to make these adjustments for one asset. But otherwise, it's a very sound portfolio, very geared towards pretty exciting sectors such as hospitality. So we are confident about the capacity to deliver top-notch returns, which helps on the fundraising. I mean, there's a good dynamic and good traction on the fundraising for this strategy.

We are now taking our next question from Oliver Carruthers from Goldman Sachs.

Just two questions for me. The first one, the EUR 400 million buyback target for 2025 that you've reiterated today, is that contingent on any additional exits in the second half? If you could kind of parameterize the -- any moving parts that would lead to the decision-making process behind that not being EUR 400 million that would be very, very helpful. And then the second question, just on -- I have to come back to this, just on the comment around value creation for full year 2025. Is this just really a comment based on what has happened, including the FX impact in the first half? Or are there any known negative impacts that would affect the second half value creation that are influencing this statement in the release today?

Thank you very much, Oliver. Question number one, we are committed to deliver the return to shareholders that we had said. And so it is not dependent upon having the full visibility on processes. I mean, by the way, there are ongoing processes. It is fair to say that should we enter into a systemic crisis globally in 2008 or 2020 type, probably we will revisit, but everyone will be revisiting their share buyback program. So clearly, we are committed to the EUR 400 million second half. And we have a pipeline of exits that makes us comfortable that we will be able to do that in a sound manner. Value creation. As we know further markdown to be implemented, we would have implemented those markdowns. Simply put, this is what our duty when we perform valuations. This is obviously what our statutory accountants would force us to as a management. So it's more what you said. ForEx had a negative impact. We consider, okay, for the full year, we'll see a negative impact. The calibration I talked about earlier on, we'll see if the multiples, there's a big rally in the market, then maybe we could be in more positive mindset, but we don't not necessarily assume that. You live in a world where you have to do to run your company with scenarios and a stress test. And sometimes, you -- given the uncertainties, you're closer to the stress test approach than to the central scenario. But no, I mean clearly, I think at any given point in time, we perform valuations on the basis of what we know. So we don't have unknown events. We don't have no events that lead us to that statement.

[Operator Instructions] We are now taking our next question from Alexandre Gerard from CIC.

I have three questions. The first one on the interest on the value creation. Can you confirm what was the -- what is the investment return realized on CPK? And if I understand where there is no positive effect of the disposal of that asset on your portfolio value. So that's my first question. Second question for us to be able to better understand the sensitivity of your portfolio to the euro-dollar parity. Can you tell us what is, generally speaking, the impact -- the percentage depreciation impact on your portfolio value of, let's say, 1% depreciation of the dollar versus the euro? And my third question is regarding brands. I had in mind that you wanted to get rid progressively of that segment, which accounts for close to 9% of your portfolio. Can you tell us exactly where you stand on that initiative?