PATRIZIA SE (PAT) Earnings Call Transcript & Summary

Hi, and welcome to our financial results presentation for the first 9 months of 2021. My name is Karim Bohn, and I'm the CFO of PATRIZIA. For those of you watching us for the first time, PATRIZIA is a leading partner for global real assets and currently manages close to EUR 49 billion of assets under management for our international client base, ranging from pension funds and insurance companies to domestic retail investors. We are active in a long-term structural growth market, driven by lower for longer interest rates, increased allocations to real assets and ongoing industry consolidation. I'm very pleased to guide you through some of our strategic and operational highlights followed by our financial results for the first 9 months of 2021. So what have we done since the end of the second quarter until today? Let me give you 3 examples for how well we progressed on our strategic agenda. First, we announced the acquisition of Whitehelm Capital, which is based in the U.K. and in Australia. The acquisition tripled our assets under management and infrastructure to around EUR 5 billion. It further enhances our quality of earnings with a high level of recurring management fees and accelerates our sustainability strategy. But most importantly, it offers our clients an even broader and diverse range of investment opportunities in the structural growth market for infrastructure. We expect closing of the transaction during the first quarter of 2022 and can't wait to welcome all Whitehelm experts to the PATRIZIA family. Second, we continue to expand our product offering for clients organically. A good example is the PATRIZIA Global Real Estate Debt fund, we announced a few days ago, backed by a major Hong Kong insurance company. At the same time, we further invested in our Asian business with a strategic senior management hire for our Japan operations. Third, we extended our Supervisory Board to 5 members and now have an experienced, internationally diverse and very important tech-savvy Board composition. They will accompany and advise us in the next phase of becoming a leader in the tech disruption of real asset investment management. Feel free to visit our website for further information and detailed CVs of our new supervisory Board members. Let's move to the financial results for the first 9 months of this year. My 3 messages for today are as follows: first, with our solid 9-month 2021 results, we are on track to reach our full year guidance range. We narrowed the guidance range for the full year 2021 from EUR 100 million to EUR 145 million to EUR 115 million to EUR 135 million. The midpoint of the new guidance range with equal growth in operating income of more than 7% year-on-year, with an operating income of EUR 90.8 million in the first 9 months of 2021. We are on our way to deliver on our narrowed full year guidance range of EUR 115 million to EUR 135 million. What makes us optimistic is the continued growth in recurring management fees and a well-filled transaction pipeline for our global clients for the remaining 3 months of 2021. We are confident to reach our goal to sign a transaction volume of between EUR 6 billion and EUR 9 billion in 2021, despite continued market uncertainties due to COVID-19. This should lead to an organic increase in assets under management to between EUR 50 billion and EUR 53 billion until year-end. Second, the quality of our earnings continues to increase, and we show organic growth. Management fees in the first 9 months of 2021 increased 6.8% compared to last year, and transaction fees are even up 16.9% year-on-year. Performance fees came in around 5% below last year's level, but remain an important contributor to our overall performance. This confirms that organic growth is the driver for increasing revenues. At the same time, the quality of earnings continues to increase with growth in recurring fees. Let's look at some of our operating KPIs. During the first 9 months of 2021, we signed transactions worth EUR 3.7 billion for our global client base, which is an increase of 40% to last year. Through our pan-European network of real estate experts, we were able to source attractive deals for our clients. This is a remarkable team success in times of temporary lockdowns throughout Europe. And we grew faster than the overall European transaction market, which was up only 8% during the same period. At the same time, we raised EUR 2.1 billion of fresh equity from our clients for investments in European and global real assets. Assets under management continued to grow to close to EUR 49 billion, which confirms the high quality of the assets we manage for our clients and the successful investment strategies be run in a constantly changing market environment. Third message, we have a rock-solid balance sheet. Both the net equity ratio of above 78%, and our available liquidity of close to EUR 600 million are testimony to our strong positioning. This gives us great flexibility to continue our growth path. On the one hand, it allows us further organic growth through investments in technology and sustainability. On the other hand, we are a strong player in a consolidating industry. We keep screening attractive M&A opportunities, fully in line with our midterm strategy. We are also continuing our share buyback program to build further M&A currency and to align the interest of future partners with a long-term strategy of PATRIZIA. Last but not least, it is a matter of heart. This quarter, I would like to draw your attention to the PATRIZIA foundation website. As many of you know, the foundation is an elementary part of our corporate DNA. Our goal is to provide children with access to education worldwide. PATRIZIA, on a regular basis, supports the foundation's activities. Just as an example, in October of this year, 40 PATRIZIAN's, together with our main sponsors managed to fund raise over EUR 100,000 for an urgently needed renovation and extension of a school in Uganda. I would personally appreciate if you took some time, besides analyzing our facts and figures, to study the many projects of the foundation that help to make a positive impact on society. Thank you so much for your attention. We hope to speak to you on one of our next investor roadshows or conferences. Stay healthy.