MPC Münchmeyer Petersen Capital AG (MPCK) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and a warm welcome to today's earnings call of the MPC Capital AG following the publication of the preliminary financial year figures of 2024. I'm delighted to welcome CEO, Constantin Baack; CFO, Dr. Philipp Lauenstein; as well as Head of Investor Relations and Corporate Communications, Stefan Zenker. [Operator Instructions]. So having said this, Stefan, the stage is yours.

Yes. Thank you, Sarah. Ladies and gentlemen, good afternoon. This is Stefan Zenker speaking, Head of IR at MPC Capital. A warm welcome to our preliminary results presentation for the 2024 financial year. Please be reminded that certain information and statements shared in this presentation and the related documents may constitute forward-looking statements, as you know, under the securities laws. Therefore, please read the disclaimer attached to this presentation carefully. Please also note that the financial figures for 2024 mentioned in this presentation and in the corresponding communication are still preliminary and unaudited figures. We plan to publish the full annual report with the final and audited financial figures for 2024 on March 27. With me today are our CEO, Constantin Baack; and our COO -- CFO, Dr. Philipp Lauenstein. Both will provide you with an update on our operating activities and share insights into our results for the full year 2024, followed by an outlook for the 2025 financial year. After that, we are happy to take your questions. And I now hand over to Constantin and Philipp, the floor is yours. Constantin?

Yes. Thank you, Stefan, and good afternoon also from my side. This is Constantin Baack speaking. I would also like to warmly welcome you to our earnings call in connection with today's release of our preliminary figures for the financial year 2024. Before we start today's presentation, I would like to briefly reflect on the fourth quarter and our full year 2024. We are very pleased to report another solid performance and a strong quarterly and full year financial results today despite prevailing macroeconomic and geopolitical uncertainties. With solid revenue growth and also strong co-investment returns in 2024, the year has been an excellent year for MPC Capital and the growth in assets under management in combination with our improved profitability confirms our strategy and our growth ambitions. During 2024, we have taken several strategic steps as we have continued to execute on our refined strategy, focusing on maritime and energy infrastructure. We have grown our assets under management to EUR 5.1 billion by further developing our existing platforms, entering new sectors whilst maintaining a rock-solid balance sheet. And very importantly, we have continued to reward you, our shareholders. With that said, let me introduce the agenda for today's earnings call. Stefan, if you could -- yes, thank you. We will start with an executive summary or company update, followed by financial highlights and then an outlook and the Q&A section. Now let me start with the company update section, looking at Q4 '24 and the full year. Again, we are very pleased to report a strong operational and financial performance on the back of continuous growth across the business, and this positive trend is also reflected when looking at our KPIs. Now let me summarize the key highlights of 2024 as depicted on this slide. Firstly, in terms of platform expansion, we have further expanded our existing platforms, which have performed extremely well. Recurring management fees have increased by 14% year-on-year. And at the same time, transaction fees have been on a resilient level. In that respect, we have increased our AUM by 24%. Sustained returns from co-investments is also a key ingredient. We have significantly grown the co-investment portfolio and have been able to generate significant returns from our co-investments as such. On this basis, we are pleased to report a strong set of financials with an EBT of EUR 24.5 million for 2024, reflecting a significant 27% year-on-year increase in EBT. And at the same time, we continue to operate on a very healthy balance sheet with an equity ratio of 81%. On the back of this and based on a very good performance in 2024 as well as high earnings visibility, ahead, we expect to continue on the growth trajectory, both in terms of revenue and earnings, which is also reflected in our guidance for 2025, which I will elaborate on in a bit more detail later on. And finally, and certainly not least, since end of '24, we also have a new strategic shareholder on board, fully supporting our refined strategy and growth ambitions, and we are very happy to move forward in the new constellation. Let me continue with the next slide, being a bit more detailed on the execution of our refined strategy. The refined strategy already bears fruit as we have, as I mentioned, grown the established platforms, executed new business initiatives that establishing, for example, establishing a new offshore platform and completing a bolt-on -- a few bolt-on M&A measures, growing our asset management activities and enhancing the depth of our maritime services. And last but not least, we have generated attractive returns and continuously expanded our co-investment portfolio. Now let me provide, and this slide gives some more color, details on the achievements, key achievements in 2024. Starting off with the growth of the existing platforms. We have added a number of projects, amongst others, we have added energy-efficient container vessels, various secondhand transactions with institutional investment partners, including projects with long-term cash flows. That is a very good achievement and is a continuation of our path of enhancing not just the transaction side of things, but also our commercial and technical management platforms. Secondly, we have furthermore been involved in a few strategic new building projects that provide further visibility and recurring management fees and transaction fees for the years ahead. In addition, we have also executed a number of sizable renewable projects in Latin America, the start of construction of a 66-megawatt solar PV park in Guatemala as well as an increase of an existing solar PV park in the Dominican Republic to now 76 megawatts, just a selection of existing growth measures in the established platforms. At the same time, we have also been able to develop new business initiatives and had quite some transaction activity going on this year. First of all, we have established an investment platform for offshore service vessels that we have reported on end of last year, but also early this year with bringing together a pool of investment partners. The initial project consists of building up to 6 state-of-the-art offshore survey and service vessels with a total investment volume of around EUR 130 million. And that has been led by an investor group led by Eurazeo, the French-based infrastructure investor and a large European family office. But we, as part of our strategy, have co-invested alongside those parties. We do see significant growth potential in that platform and the sector in general. Last but certainly not least, we have also executed by further expanding our maritime service activities, on the one hand, through the acquisition and integration of Zeaborn Ship Management. This has clearly been an important milestone for the company as it has significantly increased our AUM whilst at the same time, boosting our recurring management fee base. The integration into our management activities is well on track as expected and planned. Certain integration costs in 2024 have led to a temporary increase in personnel expenses and other operating expenses in 2024. Going forward, the target structure is expected to materialize already 2025, i.e., this year. Secondly, we have just recently added complementary maritime services by acquiring 50% in the performance management firm BestShip. BestShip operates a fully digitized IT platform to improve and optimize energy efficiency of commercial vessels being basically an ancillary service to our existing services and expanding our activities in that field. Now let me jump to the next slide, where you can see the development of our assets under management along the lines of some of the achievements that I've mentioned on the previous slide and basically translating the execution of our refined strategy into numbers into a solid AUM growth, which in turn drives our recurring fee basis. AUM have increased to EUR 5.1 billion due to a number of new investment businesses and growth in maritime services and that is up from EUR 4.1 billion as per end of last year, representing a growth of 24% for 2024. In total, MPC Capital added new assets worth EUR 1.1 billion throughout the year, of which roughly EUR 670 million is attributable to the acquisition of Zeaborn Ship Management and the remaining addition is a result from a series of newly initiated investment projects. Exits and asset disposals also linked, for example, to the ramp down of our real estate activities has resulted in an outflow of around EUR 0.4 billion, whilst positive valuation and currency effects amounted to EUR 0.4 billion. Excluding the revaluation effect, we have, therefore, executed on a transaction value of EUR 1.5 billion throughout the year. And as per the end of the year, we have 270 individual assets in management. With that said, I would like to hand over to Philipp, who will present some of the financial highlights for 2024. Over to you, Philipp.

Thanks, Constantin. And also once again, a warm welcome from my side, everyone. Good to have you on the call and the presentation. Turning to the financial update. We are quite excited to have this morning published what we think is a very strong set of preliminary financials for the full year 2024. And at the same time, we've provided an outlook for 2025 that, in our view, clearly demonstrates that MPC Capital is well on track, both in terms of executing our strategic objectives, but also in terms of driving profitability. If we now turn to the next slide, looking at the P&L, we have seen very good momentum across all income streams in 2024 compared to an already quite strong 2023, good momentum, namely in management fees, transaction fees as well as in terms of co-investment returns. Total revenues are up on the back of increased management fees. We've seen robust transaction fees. And in addition, total returns from our co-investment portfolio have reached an all-time high actually since we've established the co-investment strategy about 10 years ago. All this resulted in an increase in EBT by almost 1/3, underlying the good profitability potential and scalability of our business model. Some more detail in terms of revenue. Management fees are up 14% compared to 2023. This is mainly driven by the integration of Zeaborn Ship Management, as you've seen that this was quite an important factor of driving AUM growth in the past year. And with this, recurring management fees now represent about 80% of our total revenue, which obviously highlights very well the stability and also the high quality of our revenue base and business model in total. Reflecting on resilient activity in terms of asset acquisitions and disposals, management fees came in at EUR 6.2 million, slightly below the solid level of 2023. So both in addition to, let's say, overall AUM growth, this deal flow shows that our platform and our teams can obviously execute and secure deals and also in periods of macro uncertainty, again, underlying resilience of the business model, complementing recurring management fees. In addition to the positive trend in terms of service fee-based revenue, our co-investment portfolio has delivered very strong returns throughout 2024. Compared to the previous year, income from co-investments is up by just north of 60%. And in 2024, those returns were both composed of running yields from our strategic co-investments as well as more exit-driven returns from more opportunistic structures, both mainly from the maritime part of our business. And now before turning to the bottom line, let me have a word on cost structure and cost position in 2024. And as communicated on multiple occasions in the past, we have, over the past years, worked significantly on cost position and efficiency. And looking at 2024, the cost position is increased by one-off drivers and nonrecurring effects in the personnel and other operating expenses. And this is, as Constantin mentioned, first and foremost, due to the acquisition and subsequent integration of Zeaborn Ship Management. Looking at 2025, just to give you an example, our expectation is that, for example, personnel expenses will be down by EUR 6 million to EUR 7 million compared to 2024. Turning to the bottom line. Pretax profit increased by 27% year-over-year, reaching EUR 24.5 million for the full year 2024. And as I said, this earnings growth is mainly fueled by higher management fees and increased co-investment income compared to the previous year. Turning to the next page, looking at the balance sheet. In addition to strong operating momentum in terms of profitability, we are also pleased to once again report on what we think is a rock-solid balance sheet. We continue to look at a net cash position of roughly EUR 30 million, an equity ratio of 81%. And with this, our balance sheet gives us significant room and flexibility to support the growth of our business. But the balance sheet not only allows us to invest in further development of the company, both in terms of M&A as done with Zeaborn or engaging in co-investments, we are also, at the same time, able to execute on a well-balanced capital allocation approach with returning significant parts of our earnings back to shareholders, and I'll touch upon the dividend proposal in a minute. Turning to the next page. As communicated in the past and also visible from our 2024 financials, our co-investment portfolio has grown into the main component of our balance sheet, obviously, and is, at the same time, a substantial and visible source of income for our overall profitability. So over the past years, we have systematically expanded this co-investment portfolio as a strategic part of our business model. And as mentioned in the last quarter of 2024, we've made a new co-investment into the new investment structure -- investment platform for offshore service vessels, now bringing the book value of our co-investment portfolio to EUR 96 million, which is spread across 15 different investment structures that are managed by us. And as mentioned on previous occasions, again, important to note that the co-investment portfolio that we report on our balance sheet is accounted as per the German accounting standards, where the co-investments are listed under historical acquisition costs. When valuing a mark-to-market, the net asset value of our co-investment portfolio is in excess of EUR 150 million, representing a markup of roughly 60% on historical acquisition costs. And maybe just very quickly on the next page, something to highlight is obviously the excellent track record that we've built up in terms of co-investing over the past years by now having exited 31 different co-investment structures. Over the past roughly 10 years, we have generated an IRR of almost 30% for our exited co-investments. And this is realized IRRs on completed and exited co-investments, which is very well above our internal and communicated IRR target of 15% blended on co-investments. Turning to the next page. With today's publication, we've also announced our dividend proposal to be paid out for the 2024 financial year. And continuing our approach of having a well-balanced capital allocation policy, we will propose to the next general meeting a dividend payout of EUR 0.27 per share, which equals roughly 57% dividend payout ratio on EPS of EUR 0.48 for the 2024 financial year. As you are aware, our established dividend policy foresees a dividend payout of up to 50% on net profit. And looking at the past years, we've consistently paid out, let's say, we call it supplemental dividends, which are highlighted in green on the chart on the left, in addition to regular dividends that are paid out as per our dividend policy highlighted in blue. This consistent payout in excess of our 50% dividend policy has been due to solid cash position of the company and a highly cash-generative business model. And as you can see from the graph, regular dividends have increased over time and are expected to increase over time with profitability, and in line with prudent capital allocation approach, supplemental dividends are expected to be paid out depending on the financial position of the company and cash requirements to further develop the company. In terms of yield to highlight, the now proposed dividend represents a yield of 6.5% on the average 2024 share price, which is well in line with the average yield over the previous years. And maybe just a final comment on dividend payout. We do expect that the upcoming dividend will be paid out of the company's tax contribution accounts, meaning that no tax will be withheld when paying out the dividend. And to wrap up the financial update, let me have a word on capital market activity, also taking into account that we have welcomed Thalvora as our new majority shareholder in MPC Capital in late 2024. In the past year, in particular, we have increased our capital market activity significantly. The share has developed well, both in terms of pricing and in terms of trading volumes. And we do want to take this opportunity to emphasize and reiterate that we will continue to focus on capital market profile of MPC Capital in various shapes and forms. This will include continued work in terms of conference activity and roadshows, but this will also include a further broadening of our analyst coverage, which we think should be good for the stock and further development of the stock. And with this, I'll pass back to Constantin for an outlook and the summary.

Yes. Thank you, Philipp. Let me continue with the outlook section of the presentation. If we move on to Slide 17, please. Over the past 10 years, we have built a very solid fundament, which together with our strategic positioning provides an excellent basis for profitable growth. As you can see from the graph, we have grown our AUM over the past years with an average of around 12% per annum, whilst the relative share of the so-called energy transition-related AUM, i.e., AUM that are somewhat linked to the energy transition, more efficiency, less emissions, et cetera, has increased disproportionately stronger. Over the next 5 to 10 years, we want to follow this trajectory, and we have the ambition to grow at least with the same pace, if not disproportionately stronger, going forward. And we are confident to achieve this because we are operating in, firstly, structural growth markets, and that is markets that require significant investments in highly capital-intensive maritime and energy infrastructure. So the funding is needed, the investments are needed in those markets. Furthermore, based on our track record, execution capabilities and the pipeline of projects, we see an appealing supply and demand dynamics in maritime and energy infrastructure. And with our refined strategy, we see ourselves very well positioned for further growth and to benefit of that. And lastly, and certainly very importantly, we can we can follow that path based on a very healthy base in terms of balance sheet composition, which will facilitate our growth ambitions. Moving forward to the next slide, we do see significant growth potential for our investment and service activities in various established but also new growth themes that are illustrated here on this slide. They show a number of our established themes in terms of commercial maritime transport, but also power generation. And they also show on the right-hand side, selected new growth themes, which include the offshore service market, maritime decarbonization and other energy topics. In terms of offshore service vessels, we're not just seeking to grow in the offshore survey and service vessel market, we also believe neighboring sectors are quite attractive, for example, crew transfer vessels or cable layers or similar assets with a focus on energy transition. The expansion of maritime service offering into new sectors, including offshore, can be achieved through organic as well as inorganic growth. On the maritime decarbonization, we see many projects and growth potential. We have, in fact, already executed on a number of them, the decarbonization of the maritime industry being a driver that spans from new fuels over new technology and infrastructure investment needs, for example, in new fuel or bunker infrastructure, but this is not only driven by regulation, but it's also by economically interesting innovation and dynamics that also significantly reduce cost for operating commercial vessels. And therefore, we see a very attractive path there as well. And lastly, on the energy side, renewable power is now the lowest cost of energy and hence, fully competitive. We believe this will lead to ongoing adoption and build-out of the renewable power. Storage as another aspect, storage costs or cost for storage has decreased by 40% over the last 5 years. That makes the storage investment case economically viable and highly attractive, both on a co-located as well as stand-alone basis, and we see attractive opportunities there as well, and the same applies to repowering. At the bottom of the slide, you see the level of integration or degree of integration in the respective schemes, i.e., being way more integrated from a service standpoint with the established schemes, growing the investment platforms in the new growth themes, and we see also further potential for additional integration of our investment and service activities within the various themes illustrated on this slide. Moving to the next slide. And basically, on the back of our refined strategy, we are focusing on what we have been most successful with in the past, and that is operating in structural growth markets by identifying attractive niches that are scalable. Thanks to our track record and ramp-up of institutional assets under management over the past years, we have established strong platforms, which see sustained growth momentum at high levels of profitability actually. And at the same time, the recurring income streams of our business offer, on the one hand, substantial visibility and on the other hand, a high degree of resilience. And based on this, we have issued our financial guidance for 2025, as you can see on this slide. And as such, we expect to both increase our revenue line as well as our profitability, and we have communicated a range in terms of revenue guidance of EUR 43 million to EUR 47 million and our EBT to come in, in the range of EUR 25 million to EUR 30 million, reflecting our matured business model on the one hand, solid visibility of earnings on the other hand and certainly documenting our growth ambitions. Before we now open the floor for questions, let me summarize today's session with a short summary and outlook. We are obviously living in a world that is currently experiencing a high degree of geopolitical uncertainty. Having said that, we at MPC, looking at ourselves, we firmly believe that we are very well positioned for what lies ahead to execute opportunities, to generate opportunities and to facilitate the growth path. We operate on what we think is a very attractive platform in interesting markets that will continue to benefit from some of the global megatrends. And we will continue to further build on our position as a leading infrastructure investment manager and operator for maritime transport and energy assets. Looking at our growth in AUM and earnings, we are on track and in line with our refined strategy. With a well-filled pipeline, we are confident to further ramp up our AUM in 2025 and beyond, and we can execute this from a solid financial base, which creates ample flexibility for growth paired with the continuation of our disciplined capital allocation. And finally, as evidenced by our financial guidance for 2025, we see profitable growth ahead for MPC Capital, and we look forward to continuing our journey. And with that said, I would like to hand back to Sarah to open the floor for the Q&A. Thank you.

Thank you so much. [Operator Instructions] So we first start with Marius Fuhrberg.

Yes. I hope you can hear me. First question would be on the one-off costs that you mentioned with relation to the acquisition of Zeaborn Ship Management. Can you quantify that? And by how much would have the EBT improved if you would not include that? The second question is on current trading and the transactions that you are currently seeing and probably also for whole H1. Is it more in the area of purchases or disposals? And how does this compare to 2024? And the last question would be, in 2024, we saw that renewable energy stocks have lost quite some attractiveness for the market. Do you also see that in less projects in your pipeline? Or is it still fairly stable with regards to energy production?

Thanks, Marius. Let's take it in order. On the first one, one-off effect from Zeaborn, and that includes basically actual one-off costs and, let's say, the results of the realization of synergies that will kick in starting this year. I think I mentioned the number, you can assume, let's say, EUR 5 million to EUR 7 million in reduced cost position in 2025 as opposed to 2024 on that item. Maybe deal flow projects, acquisitions and realizations I think one aspect we mentioned already one of -- we acquired the strategic stake in BestShip, the performance management company, which will be consolidated starting 1st of January this year. This will also -- it's obviously included in our guidance, but this will bring in new recurring management fees. That's more on the service side. On the investment side, the newly launched offshore service vessel platform will contribute to AUM starting, let's say, midyear. Other acquisitions will be around the themes of container shipping, more, let's say, strategic aspects such as, let's say, deals associated with long-term cash flows and acquisitions may include Latin American renewables. On the other -- on the exit side, also seeing macroeconomic uncertainty. We obviously do expect that also on the container asset side, there will be sales from our container investment platforms in the coming months. Thirdly, on renewables deal flow, I -- we see plenty of deal flow in terms of new projects when it comes to renewables, both in Latin America as well as in Europe. We have seen, let's say -- you mentioned share price developments in the renewable space. We have seen, let's say, investors being cautious and taking a step back when it comes to taking new exposure in the renewable space over the past, let's say, 2 years. So from our perspective, it's not really an issue of project volume pipeline, but it has been an issue of investor sentiment, which our view has -- at least in Europe, is looking more positive, but it needs to be monitored, obviously.

Thank you so much for your questions, Marius. So by now, I think no further questions. So let's wait a couple of seconds, maybe another question pops up.

There is a question regarding composition of revenue in the guidance, management fees versus transaction fees. Our expectation is that transaction fees will be, let's say, on par in 2025 compared to 2024. And that growth in total revenue will be driven by especially a corresponding increase in management fees. So a ramp-up in the management fee position, further driving, let's say, the portion of recurring revenues in the total revenue position.

All right. Thank you so much. So I think we did not receive any further questions in the meantime. So we, therefore, come to the end of today's earnings call. So thank you, everyone, for joining and you showing interest. If you have further questions maybe at a later time, please feel free to contact Stefan from Investor Relations. So from my side, I wish you all a lovely remaining week and hand back to Constantin for some final remarks, which concludes our call for today.

Yes. Thank you, Sarah, and thanks, everyone, for your interest in our preliminary results presentation today. As explained throughout the presentation, we are excited about 2025. I think as MPC Capital, we're on a very good track. We have shown a good trajectory, and we are confident that we will continue that path. And we're looking forward to do that together with all our stakeholders and shareholders. And on that note, I'm happy to conclude the call. Looking forward to the next updates and looking forward to 2025, all the best and take care from my side. Thank you very much.