Wendel (6761.TWO) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Wendel's H1 2024 Results Conference Call and Webcast. [Operator Instructions] Olivier Allot, Director of Financial Communications and Data Intelligence, will read them. I must advise you that this conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Laurent Mignon, Wendel Group, Chief Executive Officer. Please go ahead, sir.

Thank you very much. Good morning to all of you. Thank you for being on that call on July 31. I know there's a lot of other publication today. So we are very honored to have you there. I'm here with David Darmon, with Jérôme Michiels and Benoit Drillaud as well as with Olivier Allot to present you the half year results of Wendel and to answer any questions you may have afterwards. So let me start with the first key highlights of the half year. On the principal -- we have, as you know, two pillars of our strategy. One is the principal investment. The other one is the development of the asset management platform. If I start with the largest part of it, which is the principal investment, as you've seen, the listed portfolio has a pretty good momentum across the board on the second quarter compared to the first quarter. We've been active by selling some of our -- through a forward -- Forward Sale -- sorry, part of our shares, 6.7% of Bureau Veritas during this half year, which has generated EUR 750 million of proceeds. On the non-listed portfolio, to be fair, it is a disappointing quarter. We have value has been impacted by current trading and by peers multiple as well as FX. We'll come back on it. We think that we have taken action in order to make sure that we can have better situation in the quarters to come. I think on the two more disappointing companies have been Stahl and Scalian. But I think on both sides, we've got good vision on how this will improve, David will come back on that in more detail later on. In terms of management of this company, we have two new CEOs that have joined or will join one for CPI, where our existing CEO, Tony Jace is retiring, and he's been -- he will be -- and the transition with the new CEO and the Harris will take place mid-August. So it's really ongoing and it's starting well. And this profile is, I think, a very good profile for putting CPI on a growth perspective, and she's got a very good tech background, which we think also is a very important element of the future of CPI. For Scalian, we have a new CEO that will join within the course of September is experienced and highly recognized professional of the industry. He will succeed to Yvan. Yvan, as you know, has been the CEO of Scalian since we made the acquisition, and then we had agreed at the time that he will retired within a period up to 4 to 5 years. And as we have a new chapter to open, we all agree that it was the right moment to do it. And we think it will -- but David will come back also very much on that later on. On the asset management, there is no significant news in terms of addition to the platform, but the platform is being put in place. Monroe Capital now is included in our account for the first time. It represents now 22% of the gross asset value of Wendel. The AuM globally, if we compare it to last year, is up 184%. Obviously, there's an element of organic growth, but also inorganic growth. We'll come back to that. We have had a good fundraising quarter with EUR 4.3 billion raised during H1, both at Monroe and IK part. And our Total Asset Management on third party now reached EUR 39.1 billion. Overall, if we add all of it, it's EUR 45 billion plus of assets that are managed now by Wendel, EUR 6.2 billion on the Principal Investments, EUR 39 billion for third-party clients. Our NAV, fully diluted NAV is EUR 167.7 per share. It is down compared to last quarter. It is down for two main reasons. One is the coupon, which was paid in May, EUR 4.7. And we also have a significant impact of the dollar depreciation. Dollar stand at EUR 1.17 plus at the end of June compared to dollar, which was around EUR [indiscernible] I think, at the quarter -- at the beginning of the -- EUR 1.08 at the beginning of the quarter. So there has been a significant shift in the dollar value, which had impact on our assets, which are denominated in dollars. Otherwise, the rest is pretty flat. Altogether, the gross value of the listed assets and asset management taking -- being compensated by the non-listed assets. New, and I think it's important that we have decided to move to sort of symmetrical dividend policy. It's not a real -- it means that we will serve an interim dividend now on a half year basis. We've decided to set this half year dividend, which will be paid in November at EUR 1.5 per share, which is roughly 1/3 of last year dividend, and then we will put the rest of the dividend will be paid as obvious in May '26 based on the 2025 numbers. I think it's important that we move to that because as you know, we want to have a policy that is of a significant return to our shareholders through increasing dividend and to have a regular payment of dividend, I think, is becoming a sort of benchmark on the way you should do when you pay a significant dividend. If we move to the next page, EUR 45 billion of assets, I'm going to be very quick on this one, EUR 6.2 billion on direct assets, direct Principal Investments, you know the asset, no change in the asset base compared to where it was. Business services with Bureau Veritas and Scalian, 45% of the total, education, professional training and tech, CPI, Globeducate, ACAMS are here. And then we've got in industrial Stahl and Tarkett. I don't go back on the performance of the assets. David will come back. On the third-party asset management, 60% now is coming from Monroe, 15 -- 40% from IK, 480 professionals in 11 countries in the platform. Now if we look to what has impact on the value creation on the NAV. As I mentioned, Principal investment has been a disappointing quarter, EUR 1.5 negative, positive impact of the value of listed assets plus EUR 3.5 per share. On the other side, minus EUR 5 from non-listed assets. As I mentioned, the main two disappointing thing are Stahl and Scalian, but David will go back on it, but we are hopeful that we have now a much brighter future for all of those non-listed assets, but will come back. Asset Management has created EUR 3.8 per share, good growth of the platform, metrics of each of the IK and Monroe has been better than expected over previous years, plus a little bit of a multiple effect, but most of it is coming from the FRE growth. And this increase is despite -- then we have ForEx. ForEx is 4.7. It has a significantly impact, as I mentioned, at the dollar at 1.17 -- what was it, 1.1711 or something 1.172. 1.172 as of 30th of June. It is -- our dollar-denominated asset represents 33% of our GAV today. Altogether, we have down a NAV, which is down EUR 4.3 per share, including that 4.7 point on dollar. It would have been slightly up without it, but it doesn't mean that we're not disappointed by the Principal Investments performance as all of us. Now maybe I pass over to David on that so that we can give a clear view of where we are on the portfolio and what perspective we feel on each of the lines. And then I will take over on the asset management part.

Thank you, Laurent, and good afternoon, everyone. So I'm now on Slide 8, and we're going to discuss the performance of the listed assets. During H1, the operational performances of the three investments in listed assets were actually good. Starting with BV, BV had a of plus 5.7% sales increase during H1 does include a growth -- organic growth of plus 6.7%, driven by 2 reporting lines growing double digits. The Industry Lines and Marine & Offshore were particularly strong. FX had a negative impact of minus 2.3% on the BV during H1, which slightly reduced this organic growth. BV also announced the completion of 6 small bolt-on acquisitions. So there were a very slight and small change in scope. And the company did confirm its 2025 outlook. So a good start of the year for Bureau Veritas. Tarkett had a mixed performance during H1 with some very positive results in EMEA, but to be opposed to low performance in North America, where the company had an operational issue in its warehouse, which did disrupt the deliveries. IHS will published its number in August, but we understand that the operational performance are going well on that front. I'm moving now to Slide 9 to show and discuss the performance of the unlisted assets. Starting with Stahl, Stahl had a soft H1 sales with weak performance in leather, both in the wet end and the Finnish sales. The underlying markets, which are the footwear and the automotive industries were impacted by the noise of the tariff discussion. And hopefully, with better clarity that we have now on that front, we shall see a recovery of those markets by year-end. Margins have been partially impacted as well by the slowdown in the leather and also with the integration of Vibo Graphics, which pre-synergies had margins below 20%, so slightly dilutive pre-synergies. The company is still making progress on the carve-out, which we hope to conclude by year-end. Crisis Prevention Institute. H1 sales were growing only by 4%, which is lower than the pace that we were used to for this company. The new U.S. administration policy did create a bit of noise on the budget of some school districts, and we saw some customers pushing back some orders. We expect some sales acceleration in H2 and see better numbers by year-end, but the beginning of the year was slow, as you can see with this plus 4% in terms of sales. The EBITDA growth is slightly higher. There was a marginal -- small margin expansion due to some delays in hiring and some cost savings initiatives. As Laurent mentioned, a new CEO is about to join in August, Andee Harris, she's the former CEO of HighGround Software. She has a very strong digital and IT background, and she will help the digital transformation of CPI. So we are pretty excited with this new hiring. I'm moving now to ACAMS. As you can see, ACAMS had a very strong H1 performance with strong results in the Americas in this -- in their conference businesses and in APAC. Europe was slower compared to those business units. You can see that the new leadership is driving a lot of sales force effectiveness, and we can see some good results showing up. The margins have been particularly strong during this semester. We expect those margins level to normalize during H2. First, because the Vegas conference has a lower margin, and it's happening in Q3. We also have some hiring that we need to make in H2, which will drive the margin back to close to 25%. So don't get too excited with this 44% -- 54% growth. it is good, but it will stabilize at the recurring level by year-end. On Scalian, as Laurent was mentioning, the company and its peers is facing tough market conditions. The company is especially impacted for the service it provides to small French IT customers and in the automotive sectors, in particular. There is a strong resilience in the engineering services and in the international part of the activity. So it balances those headwinds in the French IT business. The company, Wendel invested EUR 41 million in the company since the beginning of the year, boost to finance and acquisition called [indiscernible] and also to strengthen the balance sheet. And last, as Laurent was mentioning, we can see some early signs, anecdotal signs of a stabilization of the performance with some new contract wins, which are very encouraging and a growth in the number of consultants, which is also a good sign. So as we say in France, [Foreign Language], but we can see some positive signs. And hopefully, we are reaching and close to the bottom now. Last, as Laurent was mentioning, a new CEO will join the firm starting in September at a very strong professional coming with a background very similar to Scalian. So someone very experienced who is going to bring his experience in international background in a very dynamic endemic firm. So we are very excited as well with this hiring. And we will introduce him to you during our Investor Day by year-end. Last, Globeducate, some good growth coming both from growth in terms of enrollment in number of students and also good growth in tuition fees. And this is combined as well with some strong M&A. We believe that since our acquisition last October, we have close to EUR 5 million of EBITDA from acquisition, which is a good pace. The company is actually accelerating on that front. And we believe that next year, we will outgrow this M&A number quite significantly. There is a lot of opportunities for consolidation in this industry.

Thank you. And to have for that, David, a little bit of highlight on the asset management platform. We can now talk about the platform because we are -- there's two asset manager into it. It's still on the building. So there's more to do, but it's still pretty good today. Assets under management are reaching EUR 39 billion plus. We were at 0, 18 months ago. Fundraising has been successful, and I will come back to that. If you look to the assets under management by activities, I already mentioned it, 40% is buyout. 60% is U.S. private credit. By investor type, you see that it's a pretty diversified type of investors that are giving their money to Monroe or to IK to be managed, whether this is retail and high-net-worth individuals for 20%; pension fund 23%; insurance company 20% and so on. So a very good diversified base of investors. And also in terms of geography with North America representing 50% of the total investors into IK and Monroe products; Europe, 33%; and APAC, MENA others has small 16%. AuM, December -- last December, we had close to EUR 14 billion of AuM, EUR 13.8 billion only on IK -- since then and fee-paying AuM, which was of EUR 10 billion, you have to get used to both things, AuM by that one side, fee-paying AuM on the other one. If we make the bridge to the -- we'll make the bridge for the fee-paying AuM and then you'll see the end of the AuM itself. We could have made the bridge on 2, but we thought it was too complex to make on the same slide the same. But you'll see the detail also for IK and Monroe. So to those -- which was EUR 10 billion of fee-paying AuM as of 31st of December, -- to that, we have the addition of Monroe. As of 31st of December, Monroe was EUR 19.5 billion of AuM. So it's the conversion of those funds at the euro -- at the dollar-euro rate at 31st of December. Then we had the new fee-paying AuM that were either raised or invested because the fee-paying AuM doesn't have the same status being private equity or private credit, just to one minute for the [indiscernible] you have fee-paying AuM on private credit when you've raised fund on the committed fund, while in the private credit, you've got it's becoming fee-paying AUM once you've invested the funds. So the undeployed raised money doesn't generate revenue in the private credit. It's an element of margin to get higher fee-paying AuM in the future. So new fee-paying AuM during the quarter -- the semester was EUR 5 billion. Exit and payoff were EUR 3 billion negative. So it's either reimbursement or payback from existing product managed both by IK and by Monroe. And then we have the impact of dollar. As I say, we've taken the conversion of the 19.5% based on the dollar as it was at the 31st of December. Based on today, it's 2.4% negative compared to where it was. So altogether, we end up with EUR 29 billion of fee-paying AuM at the basis of EUR 1.1720 to $1 -- well, dollar per euro, in fact. In terms of Assets under Management, and it's an important notice, it's EUR 39.1 billion with a significant amount of Dry Powder and Undeployed amount of capital, specifically at Monroe, which means that whenever it is invested, then it start its fuel back in the fee-paying AuM. Global management fee for this first half is EUR 152 million. This is the reported number. So it just includes 1 quarter of Monroe and 2 quarters of IK. In terms of fee-related earnings, again, 1 quarter for Monroe, 2 quarters for IK is close to EUR 60 million. And the profit before tax is also close to EUR 60 billion. There's virtually at this quarter, no PRE because we made the first integration of Monroe today and Monroe value, most of the NAV is made on the 31st of March. So we don't include yet the PRE for that quarter. If we move to IK to highlight the very good capital raising momentum of IK. IK have moved from EUR 13.8 billion of AuM to EUR 15.5 billion with fee-paying AuM moving close to EUR 1 billion up, EUR 1 billion of fundraising, which is the end of the fundraising cycle that they've started in '24, both on IK Small Cap Fund IV and they finished also the IK MidCap X plus the IK Development Cap II altogether, so it's EUR 1 billion additional. Both mid-cap and small cap has closed and development and DC has closed to their hard cap. so maximum of what we could have. So we are very pleased with that fundraising cycle. There was a few exits during the period, EUR 500 million of value of exit, which goes away from the fee-paying -- that leads to the EUR 10.6 billion. If we look to the Liquidity for LPs -- there was EUR 260 million of sales that were made during the quarter with a EUR 2.6 billion. It's still a small number. It will increase during the second half. And last year, as you remember, we've made above EUR 1 billion of sales. Fundraising, I've mentioned it, EUR 1 billion during the first half, EUR 6 billion during the vintage. We've invested EUR 800 million in 8 deals during the first half and the portfolio is on average developed by -- an average deployment per year per fund of 25%, 3% of valuation increase of all funds since the 1st of December. No material impact on the companies within the fund of the tariff very much. We have a portfolio, which is very much Europe focused, so has been really not much impacted. If we look to Monroe, very good dynamic at Monroe. AuM reached $27.8 billion. Here, we're talking about dollars so that you see the dynamic of Monroe itself. Fee-paying AuM has gone from $20.3 billion to $21.6 billion, 6% growth in the fee-paying AuM. You see that deployed capital has moved $4.2 billion, payoff $2.6 billion negative, rest is -- so that leads to $21.6 billion. As you see, the average fee-paying AuM per year have grown by 20% on the last 5 years, and we're still on that trend, and we expect that also this year. So a very good dynamic at Monroe today. If we look to now because the complexity is that we still have only one quarter of Monroe. So if we want to have a vision of what is our platform in terms of Assets under Management and that will start to generate earnings and cash flow throughout our P&L. We have a pro forma 6 months of Monroe plus IK of EUR 200 million of management fee for the first 6 months, 135 basis point margin. Carried interest is EUR 4 million. But as I mentioned, it's based on, in fact, 1 quarter compared to our expectation for the full year. And that gives total revenues for the first half of EUR 204 million; expenses, EUR 123 million negative pretax profit, PRE and FRE, EUR 81 million margin 40%, of which FRE is 77%. And we -- our pro forma expectation for the year is EUR 166 million, and we are confirming that with a share of Wendel of EUR 100 million, which we also confirm. So we are well on track to deliver on our asset management platform, and we think it is really starting to become a real growth and profitability engine for Wendel. This is really new, but it started. Now let's move to the financial impact, and I will pass over to Benoit.

Thank you. Good afternoon. The net income for the period. The revenues have reached EUR 4.2 billion, that is 7% above the same period in 2024. That is a result of -- from the good bolt-on activity of the principal investment portfolio, the development of the asset management platform and the organic growth that is 3.9% of the Principal Investment portfolio that has been described by David a few minutes ago. The contribution to the net recurring income from the asset management is EUR 49 million with only 2 months from Monroe. The net income from the principal investment is EUR 354 million. We have no capital gain booked through the P&L in 2025 because the capital gain on the forward sale of Bureau Veritas shares has been booked through the equity in accordance with IFRS. This amounts to EUR 582 million. We have also the change in fair value on our stake in IHS that has been booked for EUR 121 million in the equity. After the depreciation and the entries that relate to the purchase price allocation and the nonrecurring items, the net income for the period is EUR 268 million. And in group shares, it's EUR 4 million. The difference comes from the minority interest on Bureau Veritas. But once again, this EUR 4 million is excluding the capital gain on Bureau Veritas and the positive change in fair value on our stake in IHS, if we turn to the following page, you can see that we have a very strong financial structure with a huge amount of cash, EUR 1.8 billion and an undrawn credit facility that is EUR 875 million with a maturity in 2029. The EUR 2.4 billion of bond debt includes the exchangeable bond in Bureau Veritas that can be settled in shares. It amounts to EUR 750 million. And the other bonds mature between 2026 and 2034. The LTV ratio is below the S&P ceiling, it's 18.5%. But if you look at the detail of this ratio, it's only 10% coming from the ratio between the net debt and the value of our assets. And then we take into account our commitment not called in the funds managed by IK and Monroe. And we have to take to be in accordance with the methodology of the credit agency. We also take into account [indiscernible] granted to the minority shareholder of Monroe. We don't take into account put for IK's manager because it can be settled in shares. The credit rating agency has confirmed our rating at BBB with a stable outlook.

Thank you, Benoit. And just to wrap up, Asset Management, again, is ramping up with very good organic growth, successful fundraising in the market, which is not an easy one, but I think we've got great managers, both IK and Monroe, and they're doing both very well. The platform is starting to create the synergies. We have had ample discussion between the different teams, and we are starting to see how we can leverage the position both in Europe and the U.S. from both. And develop new products, develop Monroe in Europe, develop further product at IK, and I think it's well underway. So we are very, very positive. And we're still looking to new verticals that we can add to that platform in order to create one of the, I think, mostly high-value mid-cap platform with great teams in Europe. So we're still on the way to create that. It's starting well, but it's a journey, so but it's well underway. On Principal Investment, as you've seen, strong rebound from ACAMS, good growth from Globeducate. I think we have had a difficult period for Scalian and Stahl, but we are hopeful in the fact that the second half will bring much better news on to that. And from what we've seen in July, I think it's -- on its way. There's a new comers in the show, the new CEO from CPI and Scalian, which is always the way to have a new look to some companies and to put open new chapter, which we think is very good. And we think that some of our companies have suffered from not the tariffs themselves, but the sort of -- yes, the noise of the charge, the fact that people were waiting before they make acquisition or the fact that in the supply chain, there was a lot of perturbation and there was inventories, sales, which has had impact specifically for a company like Stahl. So we feel that despite the fact that you can appreciate or not the way the tariffs are being settled, at least uncertainty is going away, and we think it will be good for this company to rebound. So we're pretty confident on that. We had the Temporary adverse FX impacts. The dollar was 1.172 when we closed the account on the 30th of June. But we are happy to have a company in the U.S. because we still think that the U.S. is a very dynamic market, and we still need to have investment there. So sometimes you have to suffer from the movement on the currency. But long term, we think it's a great thing to do. And as we mentioned, we're becoming a company that will serve significant dividend, more predictable, higher dividend, and we think it's the right moment to turn into a more regular payment of the dividend like many companies are doing in the U.S. and some companies are coming in Europe. So we move to a sort of semestral half year dividend policy through interim dividend policy, starting payment in November 2025. That's it for this presentation. Good news, bad news. But overall, we think we're firm on our direction, and we are very -- we are all optimistic for the future. So let's take your question now.

[Operator Instructions] We will take our first question, and the question comes from the line of Joren Van Aken from Degroof Petercam.

Just one question from my side. Given the capital injection of EUR 41 million at Scalian, does that mean that your stake in the firm has increased? Or did the minority shareholders also match the injection?

The other shareholders have invested, but not exactly their [indiscernible] stake. So we have a slight dilution on the capital increase. But part of the investments were made under the form of pref shares, which is not a dilutive instrument. So the -- I would say the percentage have very marginally changed.

So we can still use the 82%?

Yes.

Your next question comes from the line of Geoffroy Michalet from ODDO BHF.

I have one regarding this exchangeable bond you have in Bureau Veritas maturing in March 2026. Given the fact that currently, we are not at the strike level, can you remind us what is at your hand and what is not at your hand in case BVI share is not reaching the strike price in March '26.

Yes. We can deliver shares instead of cash up to a number of shares that is 150% of the underlying shares and the underlying shares are about 23 million shares.

But does that mean that you would have to complement by cash?

It depends because today's share price is not low enough to put more than 150% of the underlying shares. But we could decide to put cash as well. We are very -- it's very flexible. And the value of the share is the average of a few days before the maturity of the bond. So it's in our hands, and we can decide. By the way, today, it's not considered as being -- it's considered as being a debt. So -- and we are very cash rich. So should we repay it by shares, we will reduce our LTV and the part we will pay by cash will make the LTV not to move to make -- we don't -- I mean, we have plenty of cash. So it's not an issue of cash. It will be us to decide whether we do. But today, given the current price of BV, we can do it all share, all cash, mix of both.

We will take our next question. Your next question comes from the line of Arnaud Palliez from CIC Market Solutions.

I have two questions, if I may. The first one is regarding the accounting of the sponsor money with IK and Monroe. I would like to know where is accounted in your NAV calculation, the uncalled sponsor money? Is it in the cash position or not? And then my second question is about your gross debt. I would like to know what share of this debt is denominated in U.S. dollars.

So the uncalled commitment in the fund, as it's uncalled, it's -- the money is still in cash. So in the balance sheet, it's cash. It is, however, taken into account on the LTV. So we take it as a commitment. So as it was -- but it's not on balance sheet. But as when we calculate our LTV, we take that as a commitment. So we include it in the LTV, but it's still in cash in our balance sheet. We are talking today the total -- we're talking about uncalled commitment of a total of EUR 600 million potentially. And the called is EUR 35 million, something like that. The investment... Part of the dollar-denominated debt is 0. We are fully euro debt denominated.

Just one point coming back to the LTV. The net debt of Wendel is low compared to the portfolio, the value of the assets. It's only 10% of the value of the assets.

Yes. And that's because you had the commitments to it, that you end up with 18%. So in reality, our net debt position is low.

We will take our next question. And the question comes from the line of David Cerdan from Kepler.

I have a couple of questions regarding the, I will say, the asset management environment. Do you see any change in the trend? Some operators are facing some tougher condition regarding the fundraising, the deal flow. So do you see the same for your Monroe and IK partners? And globally speaking, are you aligned with this kind of warning?

So let me just answer to this one first. Well, I think we've tried to explain it, but maybe we've not been good that we've been very pleased by the fundraising of IK and Monroe. Despite the fact that the environment is tough. I think that IK has made the maximum -- they have filled the maximum they could raise for all funds they've raised. So they've been very successful in doing it, which is, I think, a tribute to the quality of the teams and the fact that the LPs are very happy about the performance they are generating and want to commit more money to them. So the environment, and it is tough, I can't confirm, but we've been able to raise exactly what we wanted to raise, and we've reached the hard cap on all the funds, small cap and mid-cap funds. You've seen the last one was 2 weeks ago, which was a week ago, the announcement of IK on Small Cap. Midcap was closed, I think, end of January or beginning of February and the Small Cap was just closed mid-July, and we've made a communicate -- IK made a communicate on that, which we -- so we've been very, very happy about it. In Monroe, I think we've got a strong fundraising activity during the first half. Again, the environment is also more difficult on debt despite the fact that it's probably more easy for funding on debt and the market is hotter on debt than on PE. But nevertheless, in that environment, the performance of Monroe is very good. I think also the positioning of both Monroe and IK on Midcap is a very good one. And that's where we are, I think, seeing that the performance we're generating are good, and that helped our ability to raise funds. So my answer to your question is, are you -- is the environment more difficult? It's 2 years and the environment is more difficult in fundraising, specifically for company in the private equity that have low DPI. I think we've tried to explain that to you during the last presentation on IK. IK has a good DPI, strong DPI. And that's why I think IK has been successful in raising funds despite a very difficult environment. Same for Monroe, good quality of portfolio, good returns, high amount of fundraise, and we expect that to continue in the second half. But it doesn't mean -- don't quote me wrong. It doesn't mean it's an easy journey, but I think it really illustrates the quality of both Monroe and IK.

Yes. And to continue this discussion regarding [indiscernible] is it correct that roughly the fundraising is over for the next quarters because they have raised so much money and it's time to deploy?

Yes. They won't raise money in the third quarter because they've reached the hard cap on those. So now they are starting to invest the money for their investors. We have a few small -- there is still one fund, which is under fundraising, which is a small fund with a potential hard cap of EUR 500 million, and we are on to it. So -- but it's still a marginal one. And on the other side, we have -- we're thinking about a new initiative that will come by the end of the year. But globally, most of the fundraising for 2025 has been done in line with our plans.

And for Monroe, is the fundraising activity quite, I would say, regular recurring or...

It's much different because you have -- we have a much larger number of products at Monroe and on private credit, so it's much more regular. There's less vintage onto that. So yes, we expect to have, as I mentioned a few minutes ago, significant fundraise during the second half at Monroe.

And in terms of deployment, this is the same for both operators or...

Deployment is -- as you see, we have significant margin from moving AuM to fee-paying AuM at Monroe because we have significant amount of money to deploy, which will come, and we have a regular basis of doing so. So no, we're very confident that fee-paying AuM will grow in line with the growth that we do on AuM during the second half of this year.

Last question is regarding your ambition to further develop this platform. So have you still the same objective in today for acquisition?

No, exactly the same. And we have pretty good targets in mind. And I think it's a question of making sure that everything we're looking at, we want to make sure that we've got great quality team, that they are compatible with the rest of the platform, that the culture is fine, that the alignment of interest is done and that we can use them and create synergies with the rest of the platform. So yes, that's our criteria. So we're still looking to further expand that platform. But today, we also put a lot of energy on the organic growth of the platform by creating cross-selling between IK and Monroe, starting to develop Monroe in Europe, starting to develop new products on both sides, having a retail initiative in Europe, which we're starting -- we've been starting to work since the beginning of the year, which will be probably ready by the end of this year and start to raise next year. So yes, we have a lot of initiatives in order to grow organically the platform. And also, we look to some inorganic growth opportunities. But as I say, on a careful basis to make sure that it does fit with the platform philosophy.

We will take our next question. Your next question comes from the line of Alexandre Gerard from CIC.

Two questions on my side. The first one is related to Stahl. Could you maybe give us some more color on how you see the second half of the year? And I had in mind that you had a project of disposing of that asset. Is it still on track? Or is it on proposal? This is my first question. And second question is related to the sensitivity of the group's NAV to the euro-USD exchange rate. Could you maybe tell us what is the sensitivity of the gross asset value, let's say, to 1% depreciation of the exchange rate is the question. And to come back to a question that has been asked by Arnaud a few minutes ago, don't you think that given the fact that a non-negligible part of your NAV is derived from USD being -- having part of your debt in USD might also help you offset any variations in the exchange rate?

Thank you, Alexandre. So on Stahl, as you know, we don't give guidance. So like I did on Scalian, I'll give you some anecdotes. But as Laurent was mentioning, we see a lot of disruption in the supply chain and destocking and some customers using their inventory rather than doing some -- making some orders, which has impacted Stahl during H1. Our feeling and -- and Stahl's management feeling is that this destocking is smoothing and reducing and H2 looks better than H1. So I know it's not very helpful in terms of guidance in terms of numbers. But when we do reforecast for the year, we are revising up our numbers rather than revising down. On Stahl, you're absolutely right. We -- on the wet end business, which is the historical business of Stahl, we are working actively on carving out this business. We were initially hoping to finish this work over summer. It's probably going to be more like by year-end, but we are still putting a lot of energy to carve out this business...

For the rest of Stahl, I mean, is it -- my question was related to the rest of the business, not the wet end, for the company...

So my comment on H2 being better than H1 was on the new Stahl. But then you asked about the wet business and then I was saying that you're right, the wet business is still being carved out.

And I was mentioning the fact that you might -- I mean, we read in the financial press that you had mandated JPMorgan to dispose of not the wet end, but the group itself, the new.

Thank you for preceding the question. I missed that. Sorry.

Well, let's say that we think that once the carve-out is done, we've got a new style that is, I think, a company that is a leader in that sector with attractive margin, attractive positioning. And then it's an asset where we can open a new chapter. The sensitivity to the dollar, I think I mentioned during the call that 33% of our net asset value is sensitive to the dollar. So it's -- so for -- for EUR 1 change in -- how would you express it for 1% change, it's a 0.3% change for us, 33%. It's pretty simple. Should we have dollar debt, the reality is that our -- first of all, as we mentioned, our debt globally, if we put debt to net asset value is 10%. So it's not a big amount of leverage because the rest of the LTV is future commitments that have not been committed. So you don't have exchange risk to that. So we don't have much of debt in reality apart from the commitment to come, which are included in the LTV. So -- but -- what we've done in order to cover ourselves rather than being putting some debt in dollars is that we've put some tunnels to cover hedging to cover roughly, well, exactly what, 1/3 of the yes, 25% potentially of the net asset value of the firm with -- I cannot give you where are the strikes, but we have that. In order to cover not an average movement, but an excessive movement in the dollar. So it's ups and down. It has -- so as its called it's tunnel -- so it covers an upward move on the dollar, give you an excessive -- well, we feel excessive would be above $1.20 for euro. And in the other side, we would give up a little bit of the value if it were to go down below 1.04, or 1.05.

But for the moment, that hedging mechanism has not been activated.

Well, it is there, but it's not -- we've never -- we've not gone through the barriers. So it has a marginal impact. It's a sort of insurance policy rather than a full hedging.

And I would just add Alexandre, just to state the obvious, we have a few companies in the portfolio who use the dollar as functional currency as CPI, ACAMS or IHS, for instance. And to state the obvious, their own debt is dollar denominated.

Yes. The debt of CPI is in dollar, the debt of -- maybe I come back 1 minute on that on the philosophy of that. For example, we own now an asset, which is not for sale. Which is an asset which is a part of our business, which is Monroe Capital. Monroe, we don't want to sell Monroe one day. And Monroe business -- Monroe value is denominated in dollars. Monroe business is in dollars. Do we want to hedge the value of an asset that we don't want to sell while the business and its development is linked to the U.S. economy. I think it's a question. When you have an activity, I mean, you don't hedge the value of the -- your subsidiary in dollars. So it's -- implicitly, it means that we have operationally, we are in part a dollar currency. That's why your question about debt is relevant. However, the debt level, in fact, when you look at it compared to the -- to that business is not much. We can say that the debt level is more on the other side of the business. But we are managing that carefully. It's -- you're right. If we had more debt to that, it could be a question and putting some dollar into our debt situation.

There are no further questions from the phone lines. I would like to hand back for any webcast questions please.

Thank you. So the first question from the web. Do you have a share repurchase program for 2025? Given NAV is almost double of the current share price, don't you think it will be a natural and easy way to grow NAV and drive the share price higher?

I've always said that we will be opportunistic on to that. So I still stay opportunistic on to it. And we've done share buyback last year. So it illustrates the fact that we are.

What other verticals do you think would be most attractive to add to your third-party asset management platform? Is it realistic to think you may do this in the next 1 or 2 years? Or you will instead prioritize organic growth what does the fundraising and product pipeline look like for IK and Monroe?

So as I mentioned, what are the verticals? We've mentioned since the beginning, the type of vertical we want to be in. PE and buyout, private credit, infrastructure secondaries. We filled the first two ones. So obviously, the two others are secondaries and infra. Will we fill them in the next 2 years? Probably, I don't know if we will fill both of them, but one of them, probably. But again, I don't want to put any pressure on to that. My -- today, my priority is making sure that we develop organically Monroe and IK, which we are doing. As I mentioned during the call, the pipe is good. IK has fulfilled its objective already in terms of fundraising because the fundraising cycle of their products is done. They will restart another one afterwards. But for the time being, a big part of it has been done. Monroe, which is a more regular one, has still a very good pipe and the pipe both of deployment and the pipe of fundraising is very good. Again, it will depend on the environment -- but we are optimistic on to that. So will we fill it? Yes, within the next 2 years, our objective is to continue building the platform. Again, it's not -- we'll do that only if we find the right opportunity. So we're constantly scanning the market. We have multiple discussions with people where many of them were just dropping because they are not part of what we want to do. But out of that, there is a few of them that are interesting and can fit our strategy, midcap, good quality team that can be integrated, that answer to our willingness to have long-term commitment, alignment of interest, good diversified LP base. Yes, things we're looking at. And I can never bet on an opportunity. I don't want to commit myself on doing something, but we're looking.

You seem confident in achieving your full year '25 pretax FRE guidance of EUR 160 million pro forma on a full year basis. You reported EUR 77 million which -- do you expect to reach this mostly through additional fundraising or margin improvement?

Not margin improvement because the margin is already embedded. So it's through fundraising, yes, but it's from all the -- I mean, very close to -- just what we have, we're very close to it by doubling it. So with no additional or low additional fundraising, and we just have to deploy money from Monroe. The reality is that, yes, we are very optimistic that we'll reach the EUR 160 million.

Yes. Under what conditions would you consider disposing of Stahl given the strong IRR generated, should we assume you are ready to sell it as soon as possible as you can secure price in line or you can secure price in line with your NAV valuation? Or are you waiting for improved market conditions and higher multiples?

David, may I take that one. I think that no stage, what we want is to -- there's no -- we have no obligation to sell any asset. No obligation to sell any asset. What we want to do it is good conditions. It doesn't mean that we have to wait and say we want the best condition in the world. We want to have good conditions. We think that the work that has been done by the current management of Stahl by repositioning Stahl, making the different two main acquisitions that has been done over the last 2 years, integrating those companies, carrying out the wet end, make that Stahl new Stahl has become, I think, an asset that is potentially of interest for other parties and that can take over that and create a new chapter for Stahl. However, we are in no hurry. We want to make sure that we are in good condition to do it, and we'll do it this way. It doesn't mean that we want to keep it for the next 5 years. It means that we are -- we think that now the work has been done to put us in the best condition to sell it at a price, which is a reasonable price, and that's how we look at it. If we want to sell, but we can keep it. I mean it's a cash-generative asset. We can get dividend out of it if we want. So it's -- we can have boost. But again, I think that the work in order to reposition Stahl has been done largely. And it's now -- it's a leader in its market segment. A lot of, I think, industrial companies are looking at it as being a great company, a great addition to their potential business. So I think it's -- David, am I overstating what I'm saying? No, I'm fine.

Thank you. Wendel has grown NAV at 4% to 5% level over the last 10, 15 years. In light of this track record, would it have more sense to externalize all the investment decision or dismantle the investment teams within Wendel?

I will pass this message to them. Thank you.

Regarding Scalian, do you think it was a wrong timing, a wrong price? What are the lessons that you learned about this investment?

Well, definitely, Scalian is a great company and a good industry. But as we all know, it's a cyclical industry. So it's a very fair point to say that the timing was far from ideal. I think we invested mid-2023. And as early as end '23 or early '24, we saw the trends going south. So there was a question of timing for sure. Now we have had a lot of investment in the past where we did not time perfectly our entry. [indiscernible], even for Stahl, where we had in the following 2 or 3 years, some difficult time because the cycles actually went down. But when you are long-term investors, it actually brings you a lot of opportunities for consolidation of our investments. So -- it's not a place where we are very happy. We prefer to have better market conditions. But with our type of capital, we can go through the cycle and take some -- and make it actually a good time to grow, for instance, in terms of M&A.

Thank you. And the last question, how would you describe the levers your operating partners focus on when it comes to value creation in your main portfolio companies? What is the role of your operating partners?

Yes. So as the name say it, they are partners, partners with the management team to create value. So the key work is to design a value creation plan with the management team and to make sure there is some cadence and momentum to deliver on this plan. So it's really a partnership and then to work in a sort of project management office to make sure that every initiative is delivered. It's really like a free resource for the Diamond teams.

Thank you. This was the last question, so we can close the call.

Thank you, everyone.

Thank you very much, and I wish you a great month of August. And hopefully, some of you will take some time to rest and benefit from this summer break. Thank you. Goodbye.

This concludes today's conference call. Thank you for participating. You may now disconnect.