Wendel (MF) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. And welcome to Wendel 2019 Annual Results Conference Call. [Operator Instructions] I must advise you this conference is being recorded today. And I would now like to hand the conference over to your speaker today, André François-Poncet. Please go ahead, sir.

Yes. Thank you very much. Good morning, everyone. This is André François-Poncet speaking. I'm on the line with David Darmon, who's the Deputy Group CEO at Wendel now based in New York; and Jérôme Michiels, Wendel CFO; Olivier Allot and Lucile Roch, who are also in Paris. We are all operating from home office formats, which comes with its hazards, its tech hazards, so apologize if there's anything that goes wrong. I think most probably not. Maybe the biggest hazard is I get strangled by my spouse or the cat jumps on my computer. And so there we go. As we all know, the outbreak of the virus has changed a lot of things in everybody's daily life. We're holding this annual results presentation virtually instead of being all of us together, and we hope that you're all well and fine, your families, your communities, your firm. So our best wishes for that. We will record the call. It will be available on the website for 1 year. You can download the presentation, follow it on the website in real time. We'll try to refer to the pages every time we're speaking from a page. And we'll answer the questions at the end. You can send them through a dedicated section on the webcast platform. We have been told that there were some difficulty for some of you in joining via the teleconference numbers, so don't hesitate to use the platform if you find the access difficult orally. So let's now go into the main features of the full year results. And then, of course, we'll do our best to update you on the COVID-related developments, the current impact on Wendel and on our companies, although we all recognize, I'm sure, it's early days. So I'm now on the Slide #2, which is called 2019 in Brief. While we have done a lot to ensure Wendel's long-term development, I really want to say that the last couple of years have been dedicated to focusing our portfolio and our geographic footprint, so you saw that; deleveraging, we've been doing this now for quite a while; and being highly selective on acquisitions. We faced a lot of pressure at the top of the bull market and in the face of ever-rising record valuations to deploy capital quickly with significant leverage. This pressure came from investors. It came from analysts, it came from our investment teams, it came from the media. We were pictured sometimes as too cautious. But fortunately, the Board was supportive, as was our largest shareholders, the Wendel-Participations family vehicle, and the firm's conservative portfolio management enables us today to face hardship with a solid financial structure. I hope -- I heard a noise so I hope that I'm connected.

You are.

I am. So on I go. Of course, no one expected the virus, but risks had been mounting in the system, and there were signs now for several years that reckoning would come sooner or later. And that is why we did what we did, and we'll go over that. In 2019, we also put a lot of emphasis on what will be pivotal in our view for future value creation, maybe even more tomorrow than today, which is engagement and ESG. 2019 itself, I'm going to go through that, was a pretty good financial year, mainly driven by the excellent set of results of Bureau Veritas and the capital gain which we made on the sale of Wendel's large stake in Allied Universal.. So I turn to the next slide, Slide 3, to discuss the main highlights of our conservative portfolio management, which is the title of the slide. I hope you're all on that page. So as I said, in a year with record private market valuations reflecting investor confidence, we remain disciplined with our deployment of capital. Our acquisition of Crisis Prevention Institute in the U.S., CPI, which was the one exception to our ironclad rule, adds to our portfolio a vibrant company, which is uniquely positioned for growth. In the current very stressful environment, the value of its service is blatantly obvious. We strengthened our balance sheet by selling down the bulk of our stake in Allied Universal. Allied is a great company, no doubt, but it was too large an exposure for us. And we also reduced our market exposure by exiting Saint-Gobain company, which can probably be fairly characterized as cyclical. We also rewarded shareholders with a growing dividend, and we effected a larger-than-usual share buyback. Overall, when you compare on this slide the disposals to capital deployment, we sold more than we invested by roughly 25% to 30%, EUR 1.2 billion proceeds versus EUR 946 million invested, of which EUR 200 million is for our share buyback. So I'm now on Slide 4. We also worked to strengthen our internal processes in our portfolio companies. In addition to our usual work to support our companies in their external growth and in the permanent improvement of their financial structure, we tightened requirements on compliance, control, sustainability, systems. Society expects more and more from companies in these areas. They're not very glamorous, they're not visible, although increasingly so, but we have prioritized them as a key means of risk reduction. CSR and digital, also pivotal for the company's development areas where Wendel could build a competitive strength, and that is another reason, maybe a major reason, going forward why we particularly focused on ESG, the strategic competitive strength that it can provide. Of course, as you know, there have also been significant senior appointments throughout our portfolio. I cannot list them all today. But for illustration, the Constantia Flexibles has a new chief financial officer. Allied Universal also has a new chief financial officer. Stahl has a new chief financial officer replacing Bram Drexhage, who a number of you have met, who's been very successful in the role. Tsebo has 2 new joint CEOs. And Bureau Veritas has appointed various new senior executive, most recently a new head of CPS, a Chinese woman who has been the deputy to the head of the division for Bureau Veritas and, as I understand, is making a terrific contribution in turbulent times. At Wendel, the Supervisory Board appointed David Darmon as Group Chief Deputy CEO, and we jointly decided to promote 3 senior team members to support us and run the firm alongside us as Executive Vice President: Jérôme Michiels, Managing Director, Group CFO; Josselin de Roquemaurel, Managing Director, Co-Head of Wendel's investment activity in France, Belgium and Switzerland; Félicie Thion de la Chaume, Managing Director, CEO of Wendel London. Several other senior colleagues were entrusted greater roles and responsibilities. And this is today also something which is obviously a source of help, strength and confidence. On Slide 5, we talk about our financial structure, which is maybe one of the slides that everybody wants to hear more about. If we had a punch line, it would be that we probably have never been in such a strong financial position entering a time of crisis. Thanks to huge efforts made over the last couple of years, we've tremendously strengthened our balance sheet with a very low level of net debt, a solid BBB credit rating from 2 agencies, extended debt maturities, the first maturity -- bond maturity being in 2023. Our LTV ratio was 6% at the end of December 2019. And thanks to this low net debt, the LTV sensitivity is quite low. It's basic math. When you have almost 0, if your asset value drops, you're still almost 0. So Wendel is in a very comfortable situation, relatively speaking. As of March 16, after mechanically adjusting for the current BV share price drop, for unlisted companies' share price drops and only taking share prices, not adjusting the multiples because we don't know what the true consensus earnings -- revised consensus earnings would be, but we didn't adjust our own budgets either, this LTV would remain at less than 9% in spite of markets collapsing 35% in the interval. So we feel comfortable in financial situation. So I'm now turning to Slide 6, which are a few numbers for the year. NAV as of December 31, 2019, was EUR 166.3 per share, up 12.8% for the year of course, given this market fall, the figure is not very meaningful anymore. To give you an idea of the market collapse impact, recomputing the NAV as of March 16 but only with the way I described earlier so it's a quick and dirty approach as opposed to something which has gone through all the normal and very serious processes which lead to our NAV, the order of magnitude would be 30% to 35% below the December 31 number. So the consolidated sales were up 2.1%, most of the growth being attributable to Bureau Veritas. And our consolidated net income was positively impacted by a large capital gain on Allied Universal sale. Given these good 2019 results, Wendel will be proposing a dividend of EUR 2.90 per share, EUR 2.90 per share for 2019, up 3.6% compared to 2018. This is subject to the approval of our shareholders meeting, of course, to be held on June 4. The dividend will be paid in cash on June 11, and the share will go ex-dividend on June 9. Now moving to Slide 7. Slide 7, I'd like to come back to our ESG strategy that is now a key feature of our investment strategy. Wendel's corporate team has worked hard on this front in 2019, and all the deal teams on the investment side have been involved and are engaged in the project. As a long-term shareholder, Wendel strongly believes that a commitment, engagement and action on ESG areas is key to creating shareholder sustainable value. Our ambitious new ESG focus will be described in our universal registration document to be published in April. So there will be a lot of detail in there, and I think you'll find it interesting -- I trust you will find it interesting. In that spirit, in May 2020, we signed the PRI -- UN PRI, Principles for Responsible Investment, as well as the more local France Invest's gender parity charter. We will continue to transparently share information about our commitments throughout the year with some very specific KPIs. May I add that this positive forward-looking project is a nice priority to have right now as we cope with very short-term development across the portfolio. It gives us something to look over the hill towards. Now on Slide 8, there is a global overview of what we can say about the global crisis induced by the virus outbreak. I realize we'd all like greater clarity, I would like greater clarity myself, but we have to take matters step by step. So first and foremost is the health and safety of our employees, those of the portfolio companies and communities and yourselves. It's a top priority. We're implementing business continuity plans at Wendel and throughout the group. Bureau Veritas, our largest asset, has already communicated on their -- on the outlook on February 27. And as you will appreciate, we cannot say more than what has been already provided by the company because they are listed and they have their own financial communication, but I'll come back on BVI in my next slide. For other portfolio companies, January and February performance was pretty unaffected by the virus. Any impact is very limited. But we're entering a new phase, undoubtedly, and it is too early to tell if things are changing or change every day. We'll get back to that. Most companies are expecting to suffer but at varying degrees. They're not all affected the same way at the same time completely, although there's a correlation induced by the fact that the virus has spread globally. And contingency plans are in place, focusing on supply chains and employees' health and safety. We'll seek to provide color through the -- about their respective situations to give at least a few pointers. The positive thing, if there is one, is that most companies had been reducing their leverage to more corporate levels with cash on hand, with manageable covenant headrooms, with reasonable levels of absolute net debt and, in many cases, cash on the balance sheet. Take a few examples of some of the bigger ones. Stahl has been effectively generating cash and mainly had not pursued any acquisitions since they combined with the BASF assets. Constantia sold its MCC shares after having sold the Labels division. And that is also the case in some of the other companies where we had provided capital. So by and large, many of them have 2x EBITDA/debt or a bit more. There are some exceptions, but generally speaking, the pools of debt are not considerable either. The biggest pool of debt in absolute terms was Allied Universal, which we have effectively disposed of. So now if we go to slide -- the following slide, which is Slide 9. I'm going through it myself. I will discuss -- I am going to Slide 10. Remind you that figures are before IFRS 16 unless otherwise specified. So I'm on Slide 10. And before I leave the floor to David, I will say a few words about Bureau Veritas. Bureau Veritas has definitely delivered strong fundamentals in 2019. It was -- they were very good in absolute and in relative terms, and the 2019 set of results were really excellent. There was everything we wanted in there. There was -- organic growth was at 4.3% in the first half, of which 5.3% in Q4, so a very sustained growth, industry-leading, I would say. Adjusted operating margin was up 25 basis points from -- to 16.1%, so up 20 basis points. Strong improvement in free cash flow of 29.2% year-on-year. And leverage, which we had addressed, was further improved with adjusted net debt-to-EBITDA ratio down from 2.3 at the end of '18 to 1.9 at the end of '19. We had at the Board level worked with management such that management focused very much on working capital, containing CapEx, very disciplined and actually reasonably limited acquisitions. And the dividend was largely taken in shares last year. So BV starts with a very much improved starting point. Company performed 5 acquisitions in 2019 of modest size, focusing -- all focusing on the strategic growth initiatives and adding EUR 46 million of annualized revenue. There was a portfolio review undertaken, which led to the disposal of the nonstrategic North American HSE Consulting business, which was $30 million in sales. Regarding COVID-19, as I said, BV published on February 17 and has not provided new information. The initial impact was China, 17% of group revenues, 16,500 employees; and Italy. But obviously, this guidance will evolve over time because now France and other geographies -- U.S., other geographies are taking steps to combat the virus. So BV will have to give further information. They are monitoring the situation carefully, and they are taking appropriate steps to protect people and the business. So that's all I can say for now. So I leave the mic to David. David, I hope you're still there, having been speaking in a vacuum for the last 20 minutes. But the floor is for you.

Thank you, André, and good afternoon, everyone. Good morning for people based in the U.S. So David Darmon speaking, and I'm on Slide 11 to talk about IHS Towers results. IHS sales for 2019 totaled $1,231 million, up 5.4% versus the prior year, with growth in all countries. Organic growth stands at plus 7.5%, driven by new lease amendments, such as 3G and 4G upgrades; new tenants, increase in the total number of own and managed stores; price escalation mechanisms. So all those features impacted the growth. The changes in local exchange rates to the U.S. dollars had a negative impact of 2.1% on the revenues. Revenues for the year ended in 2018 also benefited from a one-off $38 million revenues, resulting from reaching an agreement with the customers on the application of certain contractual terms, which permitted the recognition of revenues in the current year for services provided in prior years. So the base was slightly inflated. IHS continued the successful development and rationalization of its installed base of towers. The company also maintained a tight operating cost control policy and lower CapEx since the start of the year. EBIT for the year increased by 11.2% to $276 million to be compared to $248 million in 2018. That represents a margin of 22.4%. The slower growth of the recurring EBIT in H2 can be explained by the mentioned one-off settlements received by IHS in 2018. Regarding the M&A activity, in February 2020, IHS completed the acquisitions of 1,600 towers from Zain Kuwait, a transaction which was signed a long time ago but closed very recently; and 2,300 towers from Cell Site Solutions, mostly in Brazil and some towers in Peru and Colombia as well. IHS now operates in 9 countries and is more and more diversifying its geographic exposure and has grown its tower count from 24,000 in 5 countries to 28,000 in 9 countries over the last 12 months. Before switching to the virus impact, maybe some words about the company focus on ESG as well. IHS is doing a lot for its communities and helping people in places where it operates. And IHS is paying a lot of attention to health and safety. We see on the graph here some few numbers on the improvements on the safety of its staff. It also has an impact on the environment, with over 9,000 sites with hybrid solar power systems deployed for a while now. Regarding the virus, IHS has not been impacted from a trading perspective by the COVID-19 outbreak over the first 2 months of 2020. March seems as well to be immune from the impact and is monitoring the impact on the supply chain very carefully. IHS is not anticipating a significant impact as IHS is a long-term, stable infrastructure business. I'm now moving to Slide 12 to talk about Stahl. Sales in 2019 totaled EUR 808 million over the year, representing a decrease of 6.7% versus EUR 866.9 million of sales in 2018. In 2019, Stahl was impacted by the overall macroeconomic weakness in China linked to the GDP slowdown, trade war and the downturn in global industrial production, which appear to have affected the wider chemical sector. Challenging market condition in the automotive segment and shoe industry weighed notably on leather chemicals with a double-digit decline in volumes and, to a lesser extent, on Performance Coatings. Foreign exchange rate fluctuation had a slightly favorable impact around plus 1.1%. In spite of a negative 7.8% organic sales growth and thanks to its management focus and resilient business model, Stahl quickly adjusted its fixed cost base to market conditions. Huub van Beijeren mentioned that at our last Investor Day. The management team is constantly focusing on the fixed cost basis. Therefore, the profitability was also supported by synergies associated with the acquisition of BASF Leather chemicals, such that the EBITDA for the year totaled EUR 180 million, translating into a margin of 22.2%, which is down moderate 40 bps year-on-year compared to the previous year. As of December 31, 2019, Stahl's net debt was EUR 346.8 million, down $69.1 million from a year earlier. Leverage was reported as 1.9x EBITDA at the end of 2019, thanks to Stahl's strong cash generation capacity. Some words about ESG. Stahl built a large part of its success on its ESG approach, offering customers products which are generally ahead of regulation. And if I can quote a couple of figures to highlight this. Maybe I can mention that more than 85% of Stahl's products are now water-based and 1,200 Stahl products are certified in external safe chemistry database. Stahl achieved the highest level of ZDHC conformer certification, which is level 3. A quick word about the COVID-19 impact on Stahl. Stahl is carefully monitoring the economic slowdown associated with the virus outbreak and its potential direct impact on its operation. Geographies affected so far are China, Republic of Korea and Italy, which altogether represent around 30% of Stahl sales. The impact of January and February was limited and mainly relates to China, where production has been restarting progressively since mid-February. The situation is expected to worsen in the short term. The company is making its best effort to manage this exceptional situation, focus on its production, supply chain and logistics and take the appropriate action to protect its employees' health and safety. I am now turning to Constantia Flexibles on Slide 13. So Constantia Flexibles sales were at EUR 1,534 million in 2019, down 0.3%, of which minus 2.4% organically. The fluctuation in foreign exchange rate had a slightly positive impact of plus 0.7%, driven predominantly by the U.S. dollar and the Indian rupee. The consolidation of the Indian company Creative Polypack and the Russian company Constantia TT did contribute positively to growth with a scope effect of plus 1.4%. The Consumer division, which accounts for 80% of sales, experienced a decline in revenue, mostly due to a challenging competitive environment. In addition, it also suffers temporary negative effect that should recover in the medium term. The Pharma division, which accounts for 20% of sales, had a better performance, but it was exposed to the adverse impact of lower volumes, induced by weaker demand and difficulties experienced in certain emerging markets. Constantia Flexibles 2019 EBITDA was $176.8 million (sic) [ EUR 176.8 million ], representing a 60 bps year-on-year decrease in margin to 11.5%. As in the first half of 2019, lower volumes combined with the time lag in passing raw material price increases to customers had a negative impact on profitability, which were not fully offset by the additional cost containment measures taken in Q2. As a result, the combined effect of the challenging top line environment and cost inflation negatively impacted profitability in 2019. In 2020, management is focusing on organic sales growth and additional cost reduction, and we expect to preserve margins. 2020 will also be an exciting the year for ESG with the rollout of its EcoLam sustainable technology launched last year. The company is aiming for 100% fully recyclable packaging for 2025. As of December 31, 2019, Constantia Flexibles net debt was $362 million (sic) [ EUR 362 million ] to be compared to $452.7 million (sic) [ EUR 452.7 million ] in 2018. That is a 2x EBITDA/debt leverage. This decrease in net debt was driven by the improving cash generation trend in 2019 and also reflects the onetime effects from the sale of the MCC share. A few words about COVID-19 on Constantia. To date, Constantia Flexibles had a limited exposure to geographies impacted by the virus. China, Italy and South Korea represent less than 5% of total sales. Constantia Flexibles had recently seen some sustained orders from a surge in demand from packaged goods and tablets. The company is monitoring the situation very closely, particularly on supply chain impact and it's making its best effort to keep a safe environment for its employees and customers around the world. I am now turning on Slide 14 to talk about Tsebo. Tsebo sales were $505.7 million in 2019, down organically by 4.6%. The sluggish South African macro environment resulted in a depressed local business environment that impacted companies and consumers alike, fostering accrued competition among local players. These conditions resulted in increased pressure on organic growth and on margins. In order to strengthen its financial structure, Tsebo is contemplating the disposal of ATS, its remote camps activity outside South Africa. And therefore, under IFRS 5 rules, this potential disposal generates an $80.9 million restatement, contributing to an 18.1% reported sales decrease. External growth was plus 7.6% in 2019, driven by the acquisition of Servcor in 2018 and Compass Egypt in 2019. And favorable exchange rate fluctuations, especially the weakening of the South African rand against the U.S. dollar had an impact of minus 5.7%. As an example of the very tough competitive environment I just mentioned, we can mention that at the end of 2019, a major South African customer did not renew its contract with Tsebo effective April 2020. So it's not seen in the results I just mentioned previously. These very difficult conditions on the top line had an impact on profitability, which declined over the period, with EBITDA reaching $25.4 million, down 34.9% year-on-year; and margin decreasing to 5%, to be compared to 6.3% a year earlier. Tsebo undertook substantial restructuring measures in the second half of 2019. As of December 31, 2019, Tsebo's net debt stood at $126.4 million, up 6.6% year-on-year, and its leverage increased to 5.0x EBITDA, according to the loan documentation. In order to strengthen the company's financial structure, to support its turnaround plan and fund the acquisition of Compass Egypt, Wendel injected $12.1 million in the first half of 2019 and an additional $5.7 million in December 2019. Concurrently, Tsebo has initiated discussions with its vendors in order to ease the constraints induced by its banking documentation. A few words about the virus impact. At the time of publishing, South Africa started implementing strict COVID-19 containment measures, including but not limited to school closures, with a significant negative impact to be expected on sales and profitability. Tsebo monitors the situation closely and has contingency measures in place to keep its employees and customers safe. I'm now going to Slide 15 to talk about Cromology, so Cromology which started to benefit from its turnaround plan. The company sales totaled $667 million (sic) [ EUR 667 million ] in 2019, up 0.4% compared with last year. Organic growth was up 0.4%. Change in scope, which is primarily explained by the disposal of integrated stores in Italy in 2018, had a negative effect of 0.2% while changes in foreign exchange rates had a positive impact of 0.2%. Cromology 2019 business activity was driven by the good performance of its integrated network in France; international markets, in particular Spain, Morocco and Portugal, but did suffer from difficult market conditions on the DIY segment in France. EBITDA totaled $41.5 million (sic) [ EUR 41.5 million ], up 43%, benefiting from first effects of the cost reduction program. Margin stood at 6.2%. Improvements in operational efficiency in 2020 compared with 2019 will depend on COVID-19 impact, and I will come back to this in a few minutes. As you know, in May, we announced EUR 125 million equity injection to provide the company with sufficient resources to carry out its recovery plan. In conjunction with the equity injection, Wendel and Cromology have obtained significant concessions from the lenders. Specifically, senior debt maturity has been extended to 5 years and financial covenants have been eased considerably and covenant holidays have been obtained until March 2022. In addition, Cromology management invested close to $5 million (sic) [ EUR 5 million ] in 2019. As of December 31, 2019, Cromology net debt was $110.6 million (sic) [ EUR 110.6 million ]. Regarding ESG, Cromology, in addition to its corporate social responsibility strategy, continued to develop in 2019 more and more sustainable products. For example, 60% of Cromology's new products are with eco-label and A-class environmental standards, and 97% of paint products are today sold in their country of production. A few words about the COVID-19 impact on the company now. As you already know, Cromology realized 96% of its sales in Europe, of which around 2/3 in France and 12% in Italy. As of end of February, Cromology observed limited impact from COVID-19. Monitoring and contingency plans are in place to face and adapt to future developments, particularly in the field of supply chain and to focus on the health of its employees. The most recent developments of the virus in European countries will clearly translate into a more severe slowdown as confinement restrictions lead to a closure of most sales outlets and warehouses. I'm moving now to Slide 16 to talk about CPI. So we announced on October 2019 the acquisition of Crisis Prevention Institute for an enterprise value of $910 million. The acquisition was completed on December 23, 2019. Wendel made an equity investment of approximately $569 million for a 96% ownership interest in the company, alongside CPI management team and certain other minority investors. The company will be fully consolidated from 2020, but I will nevertheless comment on its performance for 2019. First, I draw your attention to the fact that the historical figures I will comment are U.S. GAAP figures while, in the future, we will report numbers using IFRS GAAP standards. The figures we presented in our presentation in October were cash figures. So sorry for those technical points, but it's important to note those different standards. In 2019, CPI generated revenues of $87.7 million, those are U.S. GAAP numbers, representing a 7.8% increase over the prior year. 2019 published revenues was negatively impacted by a new accounting standard in U.S. GAAP. On a like-for-like basis, revenue growth would have been 10.2% growth. Growth was underpinned by strong customer loyalty and a continued expansion of the installed base of certified instructors through growth in both current and new markets. As part of this growth, international market posted a double-digit increase in sales. In addition, 2019 results were also driven by an expansion of program offerings to provide its certified instructors base with even more options for special topics and with new programs being developed. CPI generated an adjusted EBITDA of $38.9 million, representing a 7.5% increase year-on-year and a margin of 44.4%. In 2019, CPI continued to invest in curriculum development, delivery methods, technology and personnel. In late 2019, CPI implemented a new CRM, which, combined with a realignment of the sales organization, should further enhance sales force activity and increase penetration in new growth markets. As of December 31, 2019, CPI's net debt totaled $330.4 million or 7.2 EBITDA according to its loan documentation. As per its valuation methodology, Wendel's 96% stake in CPI would be valued at transaction value, which is $569 million in its NAV until December 31, 2020. Regarding the virus, as of mid-March, CPI had not seen any meaningful impact on its trading financial results, in part due to the comparatively later development of the virus in the U.S. CPI is focusing on ensuring the health and safety of all employees and customers. However, when the virus developed in the U.S., we expect a significant short-term slowdown in revenues. On Slide 17 now, a quick overview of the leverage globally in the group. We worked a lot, as André mentioned, over the last few years to improve the leverage of the various portfolio company and therefore, the financial headroom. Few additional comments to this table. Cromology, which could be strongly hit by temporary confinement measures in its 2 main countries, France and Italy, is benefiting from covenant holiday until March 2022. Regarding CPI, which has the largest number on this table, it was acquired a few months ago, and it has sufficient headroom. And even if the situation was deteriorating longer, the total amount of debt is easily manageable and the loan documentation allows significant cure measures. There is on this table, which is not very significant, is our NAV, that is in a tight situation here. In addition to this, our companies are usually quite cash generative and in terms of EBITDA minus CapEx over EBITDA, those numbers are typically exceeding 60%. For Bureau Veritas, this ratio is 90%. For CPI, it's over 90%; Stahl and Cromology, over 70%. And last, IHS, is well known to have quite a low leverage compared with its industry standards, but I cannot disclose EBITDA, as you know. Moving to Slide 18. Now it's important to highlight the fact that our portfolio and geographic exposure is quite balanced. We are relatively under-invested in several very highly hit industries, such as leisure, hospitality, travel, commodities, oil and gas or retail, for example. And our businesses have a strong capacity to rebound when the virus outbreak will be behind us. Thanks for your time. I'll be at your disposal at the end of the call for Q&A. And I now leave the floor to Jérôme Michiels, our CFO. Thank you.

Thank you, David. Good morning, ladies and gentlemen, and thank you for attending this call. I am now on Slide 20, and I will start with consolidated sales, which have reached EUR 8,562 million, an increase of 2.1% versus 2018. Most of this increase has been driven by Bureau Veritas, which posted a 6.3% total growth of its revenues and plus 4.3% organically. Scope and foreign exchange have also contributed positively to the increase of our consolidated sales by 0.4% and 0.7%, respectively. Net income from operations on the right-hand side of the slide, which represents the recurring contributions from our portfolio companies, net of operating and financing expenses of the holding company, came in at EUR 449.7 million in 2019, down 12.2% versus last year. To make a long story short, the good performance of Bureau Veritas and the reduction in Wendel's financial expenses did not totally offset the lower performance of unlisted assets and some accounting noncash items. Moving now to the net income on Slide 21. Total net income group share has reached EUR 399.7 million in 2019, boosted by the capital gain on Allied Universal, which has added EUR 644 million of income to the nonrecurring items line that you see on the slide. Impairment and goodwill allocation are broadly stable at EUR 266.2 million, resulting in a consolidated net income of EUR 625.6 million and EUR 399.7 million group share. Moving on to Slide 23. The net asset value as of December 31 was EUR 166.3 per share, which is up roughly 13% versus the end of 2019 -- '18, sorry. Most of the growth came from the good performance of Bureau Veritas during the year as well as from the increase in value of our unlisted assets to a lesser extent. Bear in mind, as André said, that the net asset value as of December 31 does not take into account any impact related to COVID-19 as, at this time, it had, had no impact yet on financial markets nor on estimates for 2020. Since then, the share prices of Bureau Veritas and of the comparable companies we use for the calculation of the NAV have dropped quite significantly. And if we were to adjust for this decrease only, i.e., not taking into account any revision in the estimate for 2020, which are not available at this stage, the net asset value would be 30% to 35% below the level of December. Note that this calculation has not been done for -- has been done, sorry, for March 16 closing price and that the situation has continued to be fluid since then. Moving to Slide 24. You can see the detail of net asset value and Bureau Veritas at EUR 3,775 million, based on a share price which was then at EUR 23.5. The total value of our unlisted assets was at roughly EUR 4 billion. Please note that within this total, our residual stake in Allied Universal is valued as per the transaction closed late 2019 and that CPI is valued at the acquisition price, in accordance with our methodology. Cash on hand was EUR 1,142 million while net debt was at EUR 473 million, meaning our net asset value was EUR 7,429 million as of December 31, 2019. In terms of numbers of shares, to derive the value in terms of euro per share, we have the positive impact of the consolidation of shares carried out late December when our EUR 200 million share buyback program was completed. Moving to Slide 25. As you can see, 2019 enabled us to further reduce our financing costs and extend the maturity of our debt, which now stands at 5.5 years. We have no maturity before 2023 and have a very high level of liquidity, with cash on hand at EUR 1.14 billion and EUR 750 million of available credit facility fully undrawn. Our rating levels are on par at S&P and Moody's at BBB and Baa2 with stable outlook. Slide 26. In terms of LTV, we were at 6% at the end of 2019 and have calculated that when adjusting for current share prices as for the spot net asset value we referred to earlier, we would be at 8% to 9% and is still very below -- well below what is considered by rating agencies as the limit for investment-grade issuers. Our net debt is low, and we face no significant immediate cash outflows as we speak. Slide 27. In terms of dividend, in line with our dividend policy, which is to increase the dividend every year, we propose to pay a dividend of EUR 2.9 per share, a modest increase of 3.6% versus last year. I now hand it over to André for key takeaways, and we'll be happy to take your questions on financials at the end.

Thank you, Jérôme. So I'm now on Slide 29, which is key takeaways. It's a somewhat crowded slide, but basically, what we're trying to say is that -- a reminder of what I said when we started. We simplified the portfolio from 13 companies down to 7, which makes it much better to focus particularly at a moment like now. We've effectively disposed the smallest assets, noncontrolled assets generally, and some very leveraged companies. We have increased our focus on the company's operating performance and their strategic moves in order to enhance their ability to face difficult market conditions, where we are, and to see opportunities in due course. And we have tightened compliance, digital and data protection, put in place internal audit programs across the portfolio and strengthened our investment process and portfolio monitoring. We've redeployed very cautiously in a year with record private market valuations and a high degree of investor confidence. And now we are extremely disciplined with our deployment of capital and analyzing the situation at hand. We will launch, nevertheless, in 2020, an ambitious ESG strategy, which we feel will help us create sustainable value. And of course, we'll have to, as I said, cope with the COVID-19 crisis. Thanks to what's been done in the recent past, we're well equipped to face this unprecedented situation with a strong balance sheet and adequately levered companies. So that's really it. And I now open the floor to Q&A, either on the phone or by the web device. Thank you.

[Operator Instructions]

I think we have questions coming from the web.

Your first question comes from the line of Geoffroy Michalet of ODDO.

Geoffroy Michalet from ODDO BHF. I have first 3 questions. The first one is that, in 2009, you didn't have really the choice of your capital allocation because you didn't have much cash. Today, you have a lot of cash. My question is, what will be your capital allocation policy, first? My second question is also linked with that, but isn't it the right timing to buy back share massively? And the third question has to do with your current deal flow. You see a lot of distressed opportunities coming to you from bankers all over the world. And is it the philosophy of Wendel to be positioned in such special situation?

Okay. Thank you for these questions. Let me say this, one way to say is marked from my experience of living through 2007, big market decline as you will remember -- 1997, sorry. Then we had the Internet bubble. And then we had 2011. I'm skipping the Kuwait crisis. And then we got the big financial crisis of 2008, 2009. You don't make decisions off the cuff. That's a basic principle. I mean if you're a speculator, with my own money, you could buy it, et cetera. But you don't do that, okay? You have to be analytical. You have to look at the consequences of what's going on. You have to watch the falling knife come close to planting itself in the floor. Right now, what's the situation? Basically, governments have declared people be in confinement, and it's stopping a lot of the industrial facilities. Most people are running around like in 1940. When the war were up, they go on the roads, they resettle in some distant geographies. Everybody sort of figured out his own strategy. And it is not a time where we understand the consequences of what's going on. We don't know what tomorrow's pricing is going to be like either. That will play out over some period of time. We don't know where -- it's like when a tsunami comes and it breaks windows and trees, et cetera, you've got to wait and see what's been the damage. So hell no, we're not going to rush and do just about anything on instinct, certainly not. That's why we put everywhere the word discipline. So we're going to be disciplined. We have -- the scarce commodity right now is our balance sheet. And so if we allocate EUR 1 to one thing, it's a euro that's not going to help for something else. So if you're sitting in our shoes and you're responsible, you look at your portfolios, you understand what's going on. In different geographies, different things are happening. Some geographies like France, employees can go into chômage technique. Basically, it means that salaries get paid by the state. Some other countries will go into no work, no pay. So basically, the risk has been transferred from the company onto the individuals. In some countries, there will be situations where you've got basically the company has to continue paying everybody and there's no state help. So you've got to look at what is the impact on your order book, whether your factories can function and whether or not your cost structure, you can manage during this period of time. From that scenario planning, which is underway, and it doesn't happen by a click of the fingers, from that scenario -- and it's a moving target because governments are making decisions, et cetera. So from that, you derive what are the potential residual needs and what is the best use for our capital. The last thing you want to do is to turn around and make an instinctive decision and ultimately find that your valuable resource has been depleted and you're the one who needs the money. That is not a good policy. So I hope I'm clear on how we're going to think about these things. As to deal flow, of course, there's no deal flow at the moment. People, even the bankers, they don't even know if they're going to have a job so they are out there trying to focus on their own situation. They're getting lots of calls from their clients, which is understandable. They're trying to understand their own position and what comes from them, what comes from the government, et cetera. So they're counting what to do. And the first deals that come up many times are the bad deals. You only get part of the story. The company is -- with the money has not itself analyzed what its needs are going to be. So that's -- that reminds me of people -- some of the first bank deals in the last crisis, where some banks were going south and people bought banks with no due diligence and they just bought a massive hole. So where we are now is we, I think, have a very reasonable position. As we said, our companies have a good starting point generally, and they're trying to figure out their situation and then come to us and we will review all this. I'm finished with my answer. Sorry, maybe it was long.

Your next question comes from the line of Pierre Bosset from HSBC.

So you actually have answered my question, but if I can just do a follow-up. There are 2 assets that you know better than anyone else, which is Bureau Veritas and Wendel. It's easy to react, as you say, if the level is attractive. But does it tell that it will also be the same principle to what you were explaining before, you don't want to take any decision now even on the asset that you know very well?

Yes. Of course, yes. Because if you sit in the CEO -- Didier Michaud-Daniel's shoes at BV, you're running a major enterprise operating in -- I forget the precise number of countries, let's call it at 120 for the case of -- sake of argument. You've got to figure out how -- what's the plan for each one, aggregate all this and understand what's your -- how long. It's not the same thing if this whole thing lasts for 1 month or 2 months or if it lasts for 6 months or a year. So we all need to get used to that idea. I'm sure you've got the same thing in your own firms. Your revenues will not be the same if assets stay low or if they bounce back. And that's a function of a number of things that need to be understood, which include such things as the development of curative drugs; in the longer term, the development of vaccines; and government policy. Will government basically decide that at some point everybody needs to get back to work? The only encouraging sign one has is China because China at the moment is ahead of everybody by maybe, I don't know, 30 days, 40 days, you pick your number, and has come back to some level of work. Not necessarily producing what it used to produce, not necessarily as efficiently, but it's coming back to some level of activity. And at the same time, we're shutting down. So we have to see this thing play out.

[Operator Instructions] Your next question comes from the line of Frank Bijleveld of IBS.

Could you give some more light on the recent acquisitions of IHS in relation to currencies they receive? Is it in the Middle East local currency or is it U.S. dollars? And in Brazil and South America, is it as well local currency or is it U.S. dollar and on top, a question about the debt level at IHS as far as you could give us.

Okay. I'll turn it to David, who is the Director. What I would say is that the 2 transactions in Brazil and in Kuwait are relatively small compared to the overall EBITDA and sales of the company. But David, that leaves you time to respond.

Yes. So the -- in Latin America, which has the 3 countries I mentioned, Brazil, Peru and Colombia, it's mainly local currency and local costs, which is not typical of IHS, which usually have a hard currency business model, which is reflected in Kuwait. Regarding the leverage, I mentioned during the presentation that the leverage is much lower than what you typically see for tower companies, which are, let's say, 4 to 5, and IHS is under half these numbers. So it's a comfortable number, and we're happy that they have this healthy balance sheet.

There are no further questions on the line at this time. I will hand the floor to Mr. Allot for questions on the webcast.

Thank you. So we have questions from the web. Olivier Allo speaking. We have an anonymous question, but it's an interesting one, so I will ask it. Cromology's EBITDA is disclosed at EUR 41.5 million in this presentation and press release versus EUR 73 million in the consolidated financial statements. Can you please explain the significant discrepancy?

Yes, of course. Jérôme, would you like to address that?

Yes, sure. So this is the result of the application of IFRS 16, which has a massive impact on Cromology's EBITDA given the nature of its operations. Cromology is renting most of its stores, which results in a very strong increase of EBITDA when you consider the IFRS 16 impact.

We have a question from David Cerdan. Overall, do you see any risk of covenant breach, liquidity issues that could occur in your assets? Among your assets, which one are the most or less enabled in case of a tougher global realization in 2020? What is your current investment policy? Have you frozen your activity?

So I think we've, in many ways, dealt with those questions indirectly by saying that for a substantial part of our assets, we feel that the situation of the COVID-19 is highly workable or they're -- because there's plenty of headroom or because there's no covenants, et cetera. It's not true everywhere, but where it might become true or is true, it's not a significant cause of concern for us as we stand. And in any event, the pools of debt in the aggregate that might be confirmed -- concerned are not big pools of debt such that we can cure with modest part of our stockpile. So that's the vision today. It can't last forever, but I think if it ever went to -- come closer to some of our bigger companies, we would then have much bigger problems at the French or general business environment, and we would get a lot of collective support for these. So I really don't feel that covenants are an issue of concern for Wendel. And with regards to investments, yes, we have effectively pretty much shut down investments, pending understanding where we live collectively.

Thank you. We have a question from [ Steve Levy ]. I understand this is too early to make any assumptions or announcements, but I'm sure you have already made many simulation that you can elaborate on the current mindset at Wendel on the liquidity position. Given Wendel's liquidity position, I would like to know how much would be dedicated to helping companies of your portfolio and how much will be taking profit of the situation. In other words, would you take profits from the current situation to invest in new opportunities?

We'll answer that when the dust settles. Generally speaking, the first priority is -- well, we have plenty liquidity. First priority is to support companies if and when needed. And then we will see what the environment is. It is quite possible, by the way, that the significant repricing is the result of all of this. People like to think that we left the world of assets/companies being sold at 16x EBITDA, 17x, 18x EBITDA, and tomorrow, we're going to enter the same world. There's no indication. There's no good -- it's not sure at all that's going to be the picture. If you think about what's going wrong in the world, significant debt is one of the issues. Whether the collective states will have a lot of debt -- more debt when we emerge from this, whether or not the debt is going to be viewed the same way going forward is an interesting discussion. We think that deductibility will continue at these levels or will governments want to rein in debt more generally. So pricing could suffer. Pricing could suffer quite a bit. So we will answer this question but not now. The crisis has just erupted. And so we have to recognize that.

Thank you. Three questions from Alexandre Grard from CIC. I'd say the first one. Can you please make a summary of the investment activity in 2019, i.e., how many companies did you look at? How many offers did you make?

I would say we looked at a lot of deals. I've stopped counting them because I think it's somewhat, frankly, theoretical. David, how many -- we made relatively few offers because we were very focused. We liked CPI a lot for its strong characteristics, and I think in the future we'll see a lot more of CPI. But we didn't make that many firm offers other than that.

We -- I would say we had a handful of situations we looked very carefully.

Thank you. Another question from Alexandre Gérard About Crisis Prevention Institute. Do you still plan to syndicate part of the $569 million in equity invested? What control level do you target? Is there a risk of breach of covenant given the high leverage and likely EBITDA decrease in 2020?

Okay. So I'll let David answer the second part. On the first part, we thought that opportunistically, we might open up the capital to a few investors, but we didn't engage in any sort of broad syndication. Would we do that today, we would have 0 success. Let's be clear. It's just not the world in which we are in. Whether tomorrow we will be interested in sharing the investment with some people who can bring something to it, maybe. It's not -- I'd say it's not something on our radar screen. We're very happy with our commitment to CPI. But David, I'll leave it to you.

On the risk of covenant breach, so CPI has a 12x EBITDA leverage limits, which is pretty high. So as I mentioned during my presentation, January and February were not impacted and March doesn't look that bad. So we don't expect the LTM on March numbers would be any different than December 31 trading numbers. So we don't see a risk short term. And to get to a 12x, you probably need 1 or 2 or 3 very, very bad quarters ahead of us. Should that happen, because -- as André mentioned, we don't know if this is a crisis for a month or 6 months or 12 months, but if the world continues to collapse for 12 months, then if we have to cure, we have a very gentle loan documentation, which allows us to cure any bridge in a very efficient way, i.e., we can inject capital and improve EBITDA. And as you can see, that makes the equity injection very minimal if need be.

Plus, I would say, it's only $325 million of total debt. So that's my point about small pools of debt. And it's a small company. So the amount that -- if everybody's put on hold and the company just incurs its costs with no revenues, you can calculate for yourself, it's a very small amount of lost income. So we're pretty relaxed.

Thank you. Last question from the web from Alexandre Gérard again. Cash burn in 2020, can you give us an idea of the cash burn situation for 2020, dividends received versus bundled OpEx and financial interest?

Jérôme?

Yes. I'm sure I can comment this one. So in terms of dividend received, we expect to receive the dividend from Bureau Veritas. The dividend we expect to pay, EUR 2.9, is going to represent an outflow of roughly EUR 130 million, and the dividend coming in from BV is around EUR 90 million, as announced by BV. In terms of financing costs, we have decreased significantly the total amount to, say, EUR 60 million, 6-0. And on top of that, you have to take into account around EUR 70 million, 7-0, of operating costs, although not all of these costs are cash. So the cash amount would certainly be maybe EUR 5 million lower or even a bit more. So these are the items you need to consider when calculating the cash burn for 2020.

So given our level of liquidity, we feel pretty comfortable about that and also the LTV.

Right. Thank you. No more questions from the web.

Okay. So I bring this to a close. My closing statement will be take care of yourselves. We'll -- this will be over at some point. So the key is to keep our collective level of energy and enthusiasm and just look beyond the hill.

Thanks, everyone.

That does conclude our conference for today. Thank you for participating. You may all disconnect.