Wendel (MF) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to our annual results presentation live from our Paris headquarters. I'm André François-Poncet, Wendel Group's CEO. With me today in person are David Darmon, Deputy Group CEO; and Jérôme Michiels, Executive Vice President and Group CFO; as well as Christine Anglade-Pirzadeh, Head of ESG at Wendel; Olivier Allot, Head of Investor Relations; and his deputy, Lucile Roch. It's the second annual results presentation held virtually instead of us all being together in Paris, hopefully for the last time this way. We have done everything we could to ensure that the meeting is as interactive as possible. Should technical problems occur, we apologize in advance. We will have a Q&A session at the end of this presentation. [Operator Instructions] As always, I shall first provide a general update. Jérôme will present our current trading and our December 31 NAV; and finally, David will cover our 2024 road map and strategy. So let's go into key aspects of full year 2020. 2020 exhibited strong resilience in our portfolio. Q4 actually evidenced an overall recovery in sales and earnings across our portfolio levels to levels close to 2019, largely driven by companies which has initially been hardest hit by COVID. This resilience is clearly reflected in our net asset value, which ended almost flat year-on-year. Our companies and their management teams successfully safeguarded Wendel's intrinsic value. During 2020, we rolled out ambitious ESG strategies across our companies and for Wendel. ESG is a firm-wide priority. These efforts led to Wendel's inclusion in the Dow Jones SI World Index and in the DJSI European Index and to improvements of our other ESG ratings. Wendel and our portfolio companies' financial structures remain solid. I may even say more solid than before the COVID-19 crisis outbreak. During our second term of office, David and I plan to continue to vigorously reposition Wendel's investment portfolio in order to accelerate value creation through active capital redeployment. We are well positioned to do this. 2020 was active on many fronts. Faced with tremendous uncertainty in the first half, we focused our efforts on preserving value against steep declines in revenues and profits at most of our companies. For virtually each controlled company, we designed crisis scenarios with their management teams. These scenarios anticipated one or more lockdowns of various lengths. Based on these scenarios, companies secured liquidity, and they pursued almost every opportunity to generate cash. Management teams also deployed energy and creativity to develop new sources of digital business while continuing to spend on innovation, R&D, ESG and compliance for the future. Company leaders really worked hand-in-hand with Wendel's investment team, and I would like to thank them for this joint effort. Because of what we've done since 2018 in terms of deleveraging, and I should also say before 2018, and improvements in cash generation, Wendel did not have to inject equity in our portfolio. It turns out that us and our company's initial forecasts turned out to be very conservative, which is better, I suppose, than the opposite. Our NAV devalued mechanically by almost 30% as of the end of May and by 17% over the first half. So that's H1. H2. Fortunately, markets and economies rebounded after the first lockdowns, and our company's relative competitive strengths paid off. Our NAV quickly bounced back. So 2020 was really a year of two very different halves from managing the crisis in H1 to resuming our investment activity in H2 when we turned into fully financed offers spilling into the first quarter of this year. Unfortunately, these offers were not accepted. That's the feature of our business, but we are back in full swing. We are more confident and more determined than ever to redeploy capital and to find the right assets that meet our high standards. Now I shall list a variety of highlights for the year. We sold our remaining stake in Allied Universal, and we turned in ownership of Tsebo to the company's lenders, which appeared to be the best outcome for the company and for its stakeholders. Wendel and our companies further strengthened our balance sheets. We rightsized our international office footprint, concentrating our resources in Paris, New York and Luxembourg. Our next step will be to recruit additional investment and operating professionals with complementary expertise to reinforce our European team, and this initiative is underway. We accelerated Wendel Lab, and we committed to 3 leading U.S. technology funds. In total, commitments now amount to $125 million in this sector. We deployed ESG initiatives, and I shall cover this later. Wendel was one of the few French SBF 120 companies to serve a dividend in 2020. Only half of them maintained the dividend payment last year. We preserved this dividend in the face of potential pressure. Lastly, David and myself have been reappointed for a period of 4 years to April 2025 on the basis of a new roadmap, which we prepared in the second half of the year. At portfolio company level, all 6 companies exceeded our expectations at the outbreak of the crisis, the best example being Cromology, which experienced an impressive rebound in activity and a material increase in profitability over the course of the year. We attracted Pim Vervaat to become Constantia's CEO. And IHS renegotiated contract terms with MTN in Nigeria. Now turning to Slide 5. Our net asset value as of December 31, 2020, was EUR 159.10 per share, up 14.8% since the end of June 2020 and down only 4.3% for the year. If we actually restate EUR 159.1 for the EUR 2.80 dividend per share paid in 2020, our NAV per share is only down 2.6% for the year. Unlike our share price, our NAV clearly outperformed the SBF 120 index, which was down 7.6% over the course of the year, which was nevertheless disappointing. Our consolidated sales were down 8.1%. Most of this is decline being attributable to Bureau Veritas, and we published a consolidated net loss of EUR 231 million. Jérôme will outline the consolidated financial statements in his section. Given the resilience of our portfolio companies and the level of available liquidity, Wendel will propose a EUR 2.90 per share dividend for 2020, up 3.6% compared to 2019. This dividend is subject to approval, of course, at the shareholders' meeting to be held on June 29. It represents -- it would represent a 3% yield on the basis of the current share price. I personally cannot think of many opportunities to collect such a good and hopefully secure yield in our times of negative interest rates. Slide 6 highlights our financial structure. Over the course of 2020, our balance sheet has remained very strong and healthy. As you can see, our LTV ratio came down to 6.2%. Thanks to efforts in the past years, we have tremendously reinforced our firepower with a very low level of net debt, long debt tenures. The first maturity arises in 2023, and we have solid BBB credit ratings. In 2020, Wendel has entered into one of the most recognized and competitive sustainability indices, the DJSI World and actually to the DJSI Europe. Wendel has also consistently improved our ratings or retained them where they were already high, such as our AA at MSCI, which also makes us a sectoral leader. We completed new assessments for the first time, such as the Carbon Disclosure Project climate change assessment, with encouraging first-time result of B. As a responsible investor, we rigorously track our extra financial performance and that of our companies. Wendel pays careful attention to the quality of the extra financial information we collect, and we follow leading reporting standards such as GRI, SASB and the Principles for Responsible Investment standards. We support our portfolio companies in meeting these standards in their own sustainability reporting. Moving now to Slide 9. We highlight the significant increase in our share price discount to NAV in 2020 from 27.3% in December to -- '19 to 38.5% in December '20. Our NAV decreased by only 4%, yet our stock price fell by almost [ 20% ]. We feel this is clearly unwarranted. We have a low leverage at Wendel and generate our portfolio companies. We have a resilient, refocused portfolio. We're one of the few companies that have paid a dividend in 2020 in spite of the crisis, and we are about to accelerate our capital redeployment. Much will be done to create value with -- by David and myself and our team in the second term. Investors have the opportunity to buy Wendel shares at still very attractive discount by historical and relative standards. Now let's move to our portfolio of company individual performance in 2020. I shall start with Bureau Veritas. David will present the unlisted assets. I'll be brief about BV because it presented its annual results at the end of February, so you already have had the opportunity to hear directly from the company. We commend BV's 2020 performance. It's been very resilient, and we are certainly very happy about the rebound, which took place in H2, with revenues down 3.2% compared with a revenue decrease of 9% in the first half. Despite the decline in profit, the company generated strong free cash flow delivered by optimization measures, including tight working capital management. With our help, Bureau Veritas enhanced its solid financial position in 2020. They canceled the dividend, obtained a waiver to relax financial covenants and raised their liquidity line. As a consequence, the adjust -- of all these efforts, the adjusted net financial debt-to-EBITDA ratio was further reduced to 1.8 from 1.87 the previous year, notwithstanding a lower denominator, and total net debt declined by nearly EUR 500 million year-on-year. It is worth mentioning that in the context of the pandemic, health, safety and hygiene issues have become a top priority for clients around the world. We are proud that BV launched the Restart Your Business with BV suite of solutions, targeting clients who are resuming their business operations to help them adopt the best practices and to provide reinsurance to stakeholders. BV also launched a Green Line, a wide range of services and solutions dedicated to sustainable development in order to help all clients and stakeholders across multiple sectors bring transparency and reliability to their ESG commitments. Bureau Veritas provided an outlook for fiscal year 2021. The strategic plan is under preparation and will be presented to the market in Q4. I will now leave the floor to David.

Thank you, André, and good morning, everyone. I'm now moving to Slide 13 for a brief summary on how our portfolio of companies reacted to the crisis. Those are the key takeaways on the current trading. Actually, this slide speaks by itself. Stahl protected its margins and cash, thanks to strong cost management. Constantia Flexibles improved its adjusted margin and, overall, maintained its topline despite the difficult environment in some emerging countries and in the Consumer division. IHS Towers delivered strong organic growth and did successfully amend its contracts with MTN Nigeria. Cromology posted a remarkable rebound since the end of the lockdown in May. CPI developed virtual learning programs to adapt to the challenging lockdown situation in the U.S., and the second part of the year is more in line with last year's levels. To summarize, we are very proud of how our companies and all our companies' employees adapted to this situation. They all did a tremendous job, and we want to thank you -- them again. Moving to Slide 14. When looking at monthly sales index at 100 for the graph displayed here, you can clearly see an uptick at CPI, Cromology and Stahl in the last few months of the year. Although CPI has not yet fully caught up with 2019 levels, Cromology and Stahl ended up in December with sales level above last year. Constantia has been very resilient since the beginning of the year despite headwinds in a few of its core markets. We hope that the positive trends will continue over the next quarters. It certainly depends on the pace and effectiveness of the vaccine campaigns. On Slide 15, reflecting the critical nature of IHS activity, you can see that the company performed very well despite the challenging global macro environment in 2020, with revenues totaling $1.403 billion, up 14% versus prior year. IHS Towers grew across all its markets, with Nigeria posting the best performance. Organic growth was at 16.3% for the year, driven by new tenancies, new lease amendments, inflationary escalation mechanism as well as the positive impact of foreign exchange reset mechanism for U.S. dollar-based fees. The devaluation in local exchange rate for the U.S. -- to the U.S. dollar had a negative impact of 6.4% on total revenues. The acquisitions of Kuwait and CSS in Q1 contributed to 4% of revenue growth in the year. EBIT for the year increased by 44.4% to $410.4 million, representing a margin of 29.2%. EBITDA is also up year-on-year, but as you know, we did not disclose it. It's important to remind that in July 2020, IHS in Nigeria expanded and amended some key terms in its tower lease agreement with MTN Nigeria, its largest customer in the region. Furthermore, IHS and MTN Nigeria have agreed to change the foreign exchange reference rate used contractually for the U.S.-based indexation of a portion of IHS revenues from the Central Bank of Nigeria's official rate, the so-called CBN rate, to the NAFEX rate. On August 14, 2020, IHS also announced, in accordance with Rule 135 under the Securities Act of 1933, as amended, that it is exploring a potential registered IPO in the United States. We won't comment any further than that. In Q1 2021, IHS Towers completed its second acquisition in 12 months in Brazil, with the acquisition of Skysites Holdings, a specialist provider of small cells and urban telecommunications infrastructure. In addition, team Brazil announced that it had entered into exclusive talks with IHS over the potential sale of its stake -- of a stake in its fiber network asset unit. On Slide 16, regarding Stahl. You can see that Stahl sales totaled EUR 669.4 million in 2020, representing a decrease of 17.2% versus EUR 808.7 million sales in 2019. The COVID-19 shifted the company's focus away from growth towards navigating the crisis. While over the first quarter, the COVID-19 outbreak was mainly limited to China and the drop in sales was contained to minus 2.4%, lockdown measures all over the world impacted Q2 sales by minus 45%. With customers gradually reopening over H2, a steady month-over-month improvement was reflected in Q3 sales, down minus 19% versus Q3 2019; and in Q4, with the return to positive organic growth, plus 3.6%, while the order book development has been consistently positive since beginning of July. Stahl's automotive business, representing about 1/3 of total sales, has been rebounding since Q2. The performance in other main end market was more mixed, with a very strong development in the Upholstery segment but a slower recovery in Footwear and Luxury goods markets. The smaller Polymers division also capitalized on increasing demand from the print and packaging markets. Despite this challenging context and thanks to management's focus and a resilient business model, Stahl took swift measures and quickly adjusted its fixed cost basis, translating into a margin of 22.7%, slightly up year-on-year. We announced last week the appointment of Maarten Heijbroek as new CEO of Stahl. He will join the company on July 1, 2021, and he will take over the CEO responsibilities from Huub van Beijeren, who will retire from Stahl after 14 years in the country -- in the company, sorry. Until now, Maarten was holding the position of President Consumer Care at Croda International PLC. We thank Huub sincerely for all these years working to make Stahl the global leader it is today. Under his leadership, Stahl really took another dimension with transforming deals and an amazing margin growth. We look forward to working with him as an adviser for Wendel and as a Board member of Stahl. Huub, we sincerely thank you for all your achievements. Moving to Slide 17 and Constantia. Constantia Flexibles' organic sales were overall stable, down by 0.5%, reflecting a robust performance from the Pharma end market, up 6.3%, but a decline in the Consumer end market, down 2.4%. Total sales amounted to EUR 1,505.3 million, down 1.9% compared to last year, hindered by foreign exchange impacts. Consumer end markets were primarily impacted by lockdown measures due to COVID-19, in particular, in India, South Africa and Mexico. In addition to its overall resilient activity, Constantia worked on improving its profitability, conducting various cost reduction initiatives over the past 12 months. In addition to these efforts, a positive business/regional mix and favorable raw material cost fluctuations generated higher margins. Adjusted EBITDA was up plus 1.8% at EUR 189.4 million, representing a 50 bps year-on-year increase in margin to 12.6%. From a peak in activity level in March and April 2020, due to the essential nature of Constantia's products within the context of the COVID-19 outbreak, the overall order intake has remained resilient. This resilience is expected to continue over the course of 2021, although there are still some lingering effects of lower demand in certain product categories. There might also be a much less favorable raw materials price environment in 2021. A new strategy called Vision 2025 is currently under preparation at Constantia. This strategic road map should refocus strategic priorities primarily towards boosting growth and profitability. It should also strengthen the sustainable technology segment and the new Ecolutions suite of sustainable products. Moving to Slide 18 and talking about Cromology. Cromology posted strong performance despite COVID-19 lockdown in March and a remarkable recovery since, with a return to organic growth in H2. Sales totaled EUR 627.6 million, down only 6%, actually 6.2% organically. As you know, outlets were largely closed between mid-March and mid-April, resulting in sales down approximately 70% during that period. However, once the lockdown ended, recovery was much quicker than expected with a significant rebound in paint sales following end consumers strong demand. This led to total H2 sales growth of 5.7%, thereby confirming the sharp recovery observed since lockdown measures were lifted in May. Cromology's EBITDA was EUR 96.9 million, up a brilliant 34%, benefiting from favorable customers, products and country mix and positive pricing dynamics, combined with the rapid implementation of temporary cost-saving measures to address this extraordinary situation. EBITDA margin stood at 15.4%, much, much higher than in 2019, demonstrating the positive trajectory driven by Cromology's management and also benefiting from a supportive raw material cost environment. In addition, structural cost reduction continued, with savings achieved for various line items. The company generated increased cash flow and reduced its already low leverage by optimizing working capital, particularly thanks to better management of receivables. Cromology is focusing its efforts on planning and managing operations in the context of resumption of the pandemic in Europe as well as pursuing the execution of transformation plans. It also monitors closely its supply chain since the strong rebound of activity has resulted in tight material supplies and raw materials prices increase. Given its solid financial structure, we are working hand-in-hand in the company -- with the company is positioned to look for potential bolt-on acquisitions. Moving to Slide 19 and CPI. In 2020, CPI reported revenue of $63.8 million, down 27.3% compared to the same period in 2019. This decline reflects the impact of COVID-19-related lockdowns, which began in mid-March and have persisted since then in most of the company's markets. As a result, CPI's ability to hold in-person, on-site training session has been very limited. But since the low point in Q2, CPI has reported sequential revenue improvement in Q3 and Q4 2020. Amidst the pandemic, CPI accelerated the deployment of its virtual training program and its e-learning offering allowing certification renewals for its installed base of customers and introducing blended virtual and physical offering for new certifications. The progressive shift towards digital training solution has accelerated, with volumes of e-learning offering used by CIs to train their colleagues, or the so-called Learners, nearly doubling over the course of 2020. Nearly all trainings were completed remotely and through this blended offering since the beginning of the lockdown. The decline in sales had a similarly negative impact on profitability but was partially offset by cost management initiatives implemented shortly after the lockdown began. CPI generated an EBITDA of $26.1 million, representing an overall decrease of 35% year-on-year, resulting in a still healthy margin of 40.9% over the period. As of December 31, 2020, leverage was 11.45x EBITDA, as defined in CPI loan documentation. In August 2020, CPI negotiated a leverage covenant waiver with its lenders through Q1 2021 included, with covenant testing resuming at the end of Q2, in exchange for a minimum liquidity covenant set at $7.5 million. While its leverage ratio has increased, the company has continued to generate cash, and net debt has remained largely stable over the past year. The company's leverage level is expected to remain elevated until its very depressed Q2 2020 EBITDA is no longer included in the trailing 12-month EBITDA calculation. While many customers continue to face challenging work environments, including those in health care and education, CPI is helping customers maintain their certifications, as required by regulation and needed to ensure a safe work environment. Short-term prospects for pickup in demand are largely based on success of vaccination campaigns but -- although the pace and timing of recovery remain difficult to predict. CPI is already returning to higher levels of forward bookings, and the company anticipates a sustained need for its services in the future. On Slide 20, now a quick view on leverage on those portfolio companies, something which is very important in the current difficult market condition. The remarkably strong financial resilience of our companies can be seen on this graph. I remind you that these leverages are according to company's credit documentation. They might differ a bit from net debt-to-EBITDA we published. We paid a particular attention to the cash generation of our companies over the crisis, and they all managed the situation extremely well, taking actions to manage costs and payables appropriately. As a result, you can see here that our company's leverage metrics are extremely low in absolute value and compared with the PE industry. It confers some benefits for being very well positioned to invest on growth projects, including external growth and organic growth. One additional comment on this table. As I said in the slide before regarding CPI, its leverage level is expected to remain elevated until the depressed Q2 2020 EBITDA is no longer included in the trailing 12 months EBITDA calculation. While the leverage ratio has increased, the company has continued to generate cash, and net debt has remained largely stable over the past 6 months. I leave now the floor to Jérôme for the financials and NAV presentation.

Good morning, ladies and gentlemen. Let's start with consolidated sales, which came in at EUR 7.459 billion, down 8%, of which minus 5.8% organically. As you have seen on the previous slides, the activity of our portfolio companies has rebounded progressively from the low point of Q2 through the end of the year, with the fourth quarter showing a 1% decline on an organic basis. In terms of net income from operations, the performance has been impacted by that of Bureau Veritas, driving the decrease in contribution down to EUR 316.5 million despite some significant savings in terms of operating and financing costs achieved at Wendel level in 2020. On Slide 23, the contraction of net income from operations, combined with the absence of capital gain in 2020; the increase in nonrecurring items; and impairments and impacts of goodwill allocation have resulted in a loss of EUR 231 million compared to a profit of EUR 626 million in 2019. In 2020, our portfolio companies have recorded higher nonrecurring items, including restructuring and depreciation charges. Main items at Wendel level relate to the full depreciation of Tsebo and an EUR 87 million impairment charge recorded on our investment in CPI. Let me now walk you through some adjustments on Slide 25 that we have made to our methodology, as we typically revisit it every 2 or 3 years for the net asset value. But actually, there is only one message you should take away from this slide. These adjustments result in no significant change to our net asset value, only plus 0.3% as of December 31, 2020. Now bear with me for the technicalities of what we call the standstill, where the most significant change has been made. Until now for new investments, we were keeping the value at costs in the net asset value for the first 12 months following the acquisition. The experience of this year, combined with the ever-increasing gap between public companies' valuation multiples and transaction multiples for private companies, have led us to revisit this specific part of our methodology. To better take into account evolutions in the trading activity of new investments right after their acquisition, instead of 12 months after previously, and to ensure a smoother transition from acquisition value to multiples-based valuation, we will now use a time-weighted average of multiples at acquisition and listed peer group multiples over a period of 18 months. So we will actually follow a continuum between 100% acquisition multiples, 0% peer multiples for the first NAV following the acquisition and -- sorry, 100% peer multiples, 0% acquisition multiples for the NAV following 18 months after the acquisition using a straight line between these two points in terms of weighting. Other adjustments are more of clarification nature and taken together with the above as well as with the annual review of the peers. As I said, there is no significant impact on the net asset value. Lastly, let me remind you that the auditors check the consistent application of this methodology, and that our NAV is benchmarked by an independent valuation expert. Lastly, as announced, we have used a multiples-based approach for the first time for the valuation of CPI in the net asset value of December 2020, which resulted in circa EUR 6 per share negative impact on the overall number, lending in the same ZIP code that we indicated to you over the course of 2020. As no pure comparables exist for CPI, we have used a broad set of companies that have similar characteristics in terms of business model, recurrence of revenues based on licenses or subscriptions as well as companies specializing on the provision of training or certification services required by regulation. Let's now move to the change in net asset value in 2020 on Slide 26. As André put it, this year has been a tale of two halves from EUR 166.3 at the end of 2019 to EUR 138.6 at the end of June and back to EUR 159.1 or EUR 161.9 adjusted for the dividend paid in 2020. The rebound has been across the board, both at Bureau Veritas and our -- at our unlisted companies. As you see, all in all, 2020 ended up on a small decline of only 2.6%, which shows the resilience of our portfolio in this unprecedented crisis. As of December 2020, the value of our stake in Bureau Veritas is of EUR 3.6 billion, and the value of our unlisted investment is of EUR 3.9 billion, which is actually very close to the level where it was at the end of '19, despite the valuation of our investment in CPI having been impacted by the COVID crisis. So as you see, our portfolio has been very resilient, and our financial situation is still very healthy. Our LTV remains at a very low level as well as our net debt despite the COVID crisis, giving us the required room for maneuver to make investments going forward in compliance with our road map. In line with our financing strategic guidelines, we will be proposing a EUR 2.9 per share dividend at the next AGM, up 3.6% versus last year, where we decided to maintain a cash dividend in spite of the context. As you know, we aim at paying a regular and growing dividend year-on-year. In addition, Wendel contemplates buying around EUR 25 million of its own shares, starting from March 19 this year. Thank you very much for your attention. I now hand it over to André for more details on our road map and our investment strategy.

Thank you, Jerome. Before discussing the 2024 road map, I'd like to remind you of what we did over the last 3 years. If we are able today to deliver a strong resilience across the board, this is the result of hard work by Wendel and by its portfolio management teams. Regarding Wendel, we dramatically refocused our organization on our largest assets. Early 2018, we had 7 companies in our portfolio with equity valuations below EUR 200 million. The vast majority was small or very small assets requiring a lot of work and attention for a potential absolute return that would not move the needle. Our companies and Wendel were still quite levered, starting with BV, our largest investment, which did not prioritize cash generation. We fixed all this by focusing attention on cash flow generation, liability management, asset sales and sometimes, reinjection of equity in our companies. We ourselves had a scattered team across 8, in some cases, far-flung offices, generating inefficiencies, inexperience and costs. Our investment process needed attention. We had no operating partners. We needed to address new incoming critical demands for compliance and controls, cybersecurity, GDPR, ESG and modern HR practices, to name a few. Wendel and its portfolio have changed a lot. We've made no secret about the fact that we were more in a seller's mode than in a buyer's mode. We wanted to make sure that we could redeploy capital based on a strong bedrock and face a tough change in economic circumstances that we expected was around the corner. We didn't quite know why it was, but we certainly know that there was this potential turnaround in the economy. So we did all this. Now we can have a bolder attitude while keeping our feet on the ground and while still taking advantage of opportunities to further reposition our portfolio. Through 2020, Wendel investment and corporate teams were mobilized to design a comprehensive road map, a collective exercise. This road map has been endorsed by a Supervisory Board, and we would like to give you some color about how we expect Wendel to look like by 2024. As you will appreciate, we'll not be extremely specific in order to retain complete flexibility as to the nature and the timing of our moves. We hear the market. We hear you when you suggest greater diversification for new and for more assets across our portfolio. We will work on this portfolio diversification with as little [ macro ] correlation as possible between companies. We expect generally to redeploy capital towards higher-growth assets, fueling our portfolio performance. We expect to own 7 to 10 companies at that point with new equity investments of between EUR 150 million to EUR 500 million each, generally. We will also look for opportunistic investments in growth equity along the way. All these guidance are notwithstanding the dose of opportunism which we will keep within our investment approach, i.e., not only growth, but also occasionally some value. David will now give you more insight on the road map. David?

Thank you, André. If we were to define our capital allocation strategy, we remain committed to a balanced exposure to listed and unlisted companies. With the development of the Wendel Lab, we will also gain more exposure to growth equity and venture capital. I'll come back to it later. In terms of sectoral approach, Wendel seeks market-leading businesses with long-term growth prospects and pricing power. We will typically aim at avoiding highly cyclical or capital-intensive assets and look for companies with demonstrated resilience through economic cycles and pandemic. Attractive sectors meeting those criteria include technology services and software, business services, health care and industrial technology, to call some of them. Nevertheless, as André mentioned earlier, we remain opportunistic and consider situations in different industries that otherwise meet our criteria. We will stick with the geographies we know the best: Western Europe and, in particular, France, Wendel's home country; and North America, i.e., U.S. and Canada. ESG is a core component of our investment strategy. We have already insisted on this point over our latest publication, but the ESG strategy that we unveiled recently provides an exclusion list and a consistent process embedded into our due diligence approach. We will consider assets that have a positive impact on society and on its employees. Moving to Slide 34 and a better description of what we're looking for. Standalone equity investments should amount to around EUR 150 million to EUR 500 million, targeting majority, control, large minority investments in unlisted or listed companies. The average size of company we target has an enterprise value of EUR 350 million to EUR 2.5 billion and a minimum EBITDA of EUR 30 million to EUR 40 million. We focus our energy on market leaders with strong management teams. We remain convinced it is core to partner with like-minded management teams with demonstrated track record. We mostly focus on majority of control investments, but minority or co-control investments can be envisaged opportunistically, depending on partners, governance and path to liquidity and so long as it remains a limited portion of the private equity pocket. On Slide 13 (sic) [ Slide 35 ], a bit more words on the Wendel Lab. We are focusing our efforts on new opportunities with strong growth, and we have resumed our effort on the Wendel Lab. And we will commit a moderate but growing part of our balance sheet in growing funds and growth situations. So we want to be more exposed to the long-term trends we can see in terms of technology and higher growth segments. At the same time, for our own benefit and the benefit of our portfolio companies, we want to get more exposure to these trends and knowledge and create some interactions with our portfolio companies and the portfolio companies of those funds. In order to do so, we are looking to deploy more capital through Wendel Lab, committing capital to some external investors manager with strong track record in venture capital and growth equity. To illustrate this acceleration, we committed $70 million in a new dedicated partnership with Accolade Partners, Accel, Andreessen Horowitz, and we'll do as well with Bond Capital to target new investments. This brings our total commitments through Wendel Lab to around $125 million. We also led the door open to small direct investments as we did in AlphaSense. In total, Wendel Lab should represent 5% to 10% of our NAV by 2024. We also recently hired a new colleague with a strong background in investing in high-quality funds. Moving to Slide 36. In terms of targeted portfolio breakdown, we want to keep the balance between listed and unlisted while making more room for more growth investments. Wendel Lab, as I said before, will also become a bigger part of our portfolio. In terms of IRR per asset class, for the first time, we give publicly our targets. It's a question asked quite often by the financial community. So here it is. For listed equity, we target above 7% return in average. For private equity, we're targeting double-digit returns. And for private and growth equity and venture capital, given the higher risk, we look for 10% up to 15% return for our investment in funds and above 25% for direct investments. To summarize, the portfolio balance will not change dramatically but will be still more growth and slightly more risks. Moving to Slide 37. While we will clearly have an ambitious investment strategy, we will also maintain a strong financial discipline, as Jérôme mentioned, as to be long term, you need to be agile anytime. To be more opportunistic, we need also to keep a sufficient amount of liquidities at all time. We want to be able to invest EUR 300 million at almost any time. During the 2020 worst market conditions, Wendel has never been in a dangerous financial position. That's why we intend to keep an investment-grade profile to be able to refinance in good conditions at any time. Please note that I did not say commitment to investment-grade rating, as we cannot anticipate market collapses or changes in rating agencies' methodologies or metrics. And we will keep this discipline while paying a regular and growing dividend year-on-year as we did in 2020, while half of SBF 120 companies did not.

Now my final remarks. Wendel is well positioned to seize further opportunities. We have a resilient portfolio overall, with significant exposure to companies benefiting from their strong business models and from ESG tailwinds. We have a well prepared road map to deploy our capital with clear objectives. Our organization and portfolio are tight and agile with a strong focus, new leadership and renewed energy. We will add further talent to our team by H2 to step up our pace of acquisitions. Sustainable value creation for our shareholders and our communities is very much at the heart of our concerns. So thank you for listening to us. We'll now move to the Q&A session. [Operator Instructions] So with this, on we go. Thank you.

[Operator Instructions]

Okay. So maybe before we start, until we have questions from the telephone, we have a few questions coming from the web. The first one relates to IHS. The question is the following. Can we have some details on the potential of the development of IHS since the group is now in Latin America? Second question, can we have an update on how Wendel values its stake in IHS? What has changed since the last NAV in June 20? Can we have an update on the potential projected IPO of the company?

So IHS, I will just say, unfortunately, that we cannot comment on the potential prospect of an IPO. Perhaps, Jérôme, you can say a word about the IHS valuation. Well, the short answer is nothing substantial has changed.

Exactly, yes. So that's a short and long answer. So we reviewed the sample of peers as we do annually for all of our companies, including IHS. Apart from that, nothing specific to be reported.

Regarding IHS development, we expect to continue -- the company to continue to focus on our organic growth, adding additional tenants and building new towers, and at the same time, to continue to grow inorganically, expanding, in particular, in Brazil, as was mentioned during the question. The company recently made another acquisition in Brazil earlier this year, which, combined with the acquisition made last year, is creating a group of scale in the region now.

We have further questions on the road map. The first one is the following. How do you expect to finance your new investments in your road map for the next years, further leverage at the group's holding, disposal of some assets or capital increase? Second question on that, if I may. Just a clarification, you target a portfolio of 7 to 10 investments versus 6 currently. Do you include any disposal among your current assets? Are you open to enlarge Bureau Veritas' free float?

Yes. So on the financing the road map, we have no plans to increase Wendel's equity during this period, so to be clear. So therefore, it's, how should I describe, self-financed. We will, generally speaking, maintain a conservative -- as David has explained, a conservative financial structure. We will clearly, has been, in effect, explained, be over time rotating some of the assets in our portfolio. That's what you would expect and what we expect. I must also say that we have had, for many years now, significant interest expressed in various of our companies. And then with regards to the number of 7 to 10, yes. So therefore, it's 7 to 10 in total, but it's not 6 plus 1 equals 7. It's with the various changes that we discussed. Regarding the BV free float, enlarging the free float. I think the question is, will you sell BV shares? Right now, I should say that we have no tangible plans in this regard because we have a great deal of support, and we believe that BV has a tremendous opportunity coming from sustainability. You see the massive plans that are being launched in this regard. You see the big efforts that companies are making. They recently conducted analysis of their sales. 60% of their sales, they were able to track very, very carefully. They said this publicly. And of the 60%, they tracked very carefully. 50% of that 60% relates directly to what they call the Green Line, which is the full suite of services and industries which they serve, which are sustainability -- which are related to sustainability. So we see a lot of potential. But I'd say we have no -- we have in the past, occasionally sold BV shares. There's no indication of what we will do for the next 4 years. So that's really what I'm prepared to say today.

I will just add maybe one other small source of financing. Some of our companies are paying us this dividends and management fees, which are another source of financing new acquisitions.

Regarding these potential new acquisitions, another question, do you feel growing competition from SPACs trying to find adequate investment targets? Do you expect the kind of mispricing due to the urgency of SPACs to find targets?

It's actually a very interesting question, the development of SPACs. I think everybody has in mind, I think the number was $80 billion raised in the U.S. last year, $80 billion raised year-to-date. So it's obviously a very significant number with different mandates, different sponsors, something we had not seen before. Wendel has a history way before I joined of itself launching a SPAC based in Germany in the turn of the 2009, 2010, I'm not quite sure. So we've been watching this for a while. We have not seen them against us on the projects that we have pursued, not to say that will not happen. SPACs tend to offer a different proposition. Most cases, I believe, it's a vehicle for entrepreneurial companies to find a way to the stock market. So we don't usually provide that as such, except as a minority investors from time to time. So we would not -- it's more competitor -- the IPO is more the competitor than a trade sale, probably in most cases. But we can't rule it out. In Europe, it's still emerging trend. So we shall see. There's already plenty of competition, as we all know here on the call, coming from private equity firms, family office, sovereign funds and others. So this is a new breed. I don't think it's going to be the most directly competing with us.

Okay. [indiscernible] on the telephone, I think.

So your first question comes from the line of Geoffroy Michalet calling from ODDO BHF.

My question has to do with your unlisted assets. I was wondering if you could give us some color maybe on some exit rates in December 2020 and maybe some update as well on the beginning of 2021 for your unlisted assets.

Yes, I can surely give you some update on the exit rate for Q4. So as I said, the overall trend for Q4 in terms of organic growth was at minus 1%. If I go company by company, Bureau Veritas was at minus 2%. That's for Q4 organic. Constantia was at minus 2.9%. Cromology was at plus 6.2%. Stahl, plus 3.6%; CPI, minus 18.2%; and IHS, plus 19.4%. That was for Q4 2020 organic. For the first months of 2021, we don't have very precise numbers yet. And we will obviously give you a further update as part of our Q1 trading update.

Well, we have the numbers, but we're keeping them to ourselves. I apologize for that.

Your next question comes from the line of Alexandre Gérard calling from CIC.

Thank you for that presentation and the quality of your results. Three quick questions on my side. The first one relates to how material prices on Constantia and Cromology. Can you elaborate a bit on what were the impacts last year and what you have in mind for 2021? Second question, you said that you wanted to grow your investment teams. Can you remind us how many professionals you have at the moment? And how many people do you intend to recruit? And what particular expertise are you looking for? And the third question is for Jérôme on your NAV methodology. If I understand whether it's calculated ex-IFRS 16 impact, if I understand well. And are you going sooner or later to, I mean, calculate these -- I mean, implement these impact in your NAV calculation?

So Alexandre, I'll take the last one, which is going to be very quick, and then I hand it over to André or David for the first two. Yes, we are still -- excluding IFRS 16 from the net asset value calculations, we hope to transition to -- including that as for 2021. Until now, we had difficulties with regards to consensus, making sure that consensus were including these adjustments. So now that I think all companies have transitioned and that analysts are able to build their consensus, taking that into account, we will try to implement it in 2021. Although we must bear in mind that in the U.S., this does not apply. So it raises some questions with regards to the comparability of the multiples between European and U.S. companies. But I think we will try to implement that in 2021.

Regarding the investment team, it's -- it depends who you count in the investment team. Do you count David and I in the investment team? Do you count the head of our Luxembourg operation, who spent significant time on the investment side? Do you count the summer interns or the long-term interns that we have? But let's call it a little bit shy of 20 professionals equivalent full-time working on the investment side, which is split, essentially about 2/3 in Europe and 1/3 in the U.S. And this is round numbers. And we are looking to add 4 to 5 people on the European side. So it's actually a significant boost in the investment team in Europe. It's not far from a 40% to 50% boost because we will fine-tune the specific expertise. First of all, we need a number of people who just provide sheer manpower coming from investment banks and consultants. We are looking to add to the health care and TMT knowledge and capability that we have to be more specific on sectors. And we are also looking to beef up our operating partner expertise with someone who brings operating partner type expertise, plus more of a digital new economy focus. And generally, we have other objectives. We want to continue working on our gender balance and grow female professionals into the senior ranks of the firm. So we're also trying to significantly emphasize this when we can and when it makes -- when it works.

On raw material on Constantia and Cromology, you're right to point out that those companies did benefit of a favorable environment in 2020. And this did contribute to their good margins during that period. We saw some tension at the end of the year, and we expect this tension to continue early in 2021. As you know, this takes 6 to 12 months to flow through the P&L. So earlier this year, we are probably not going to see that, but we expect at the end of this year to see more tension on this cost line.

Yes. So when they can, our companies are definitely trying to be ahead of the curve.

Our next question comes from the line of Patrick Jousseaume calling from Societe Generale.

Yes. Can you hear me?

Very well.

Okay. Perfect. Well, first question on IHS. There was this amendment negotiated in 2020 announced mid-year. I guess that the impact of this amendment was only half -- only on the second half. So could you give us the impact of this amendment on a full year basis, if possible? Second question on Cromology. Well, obviously, the results are amazing. The improvement is very strong. The company has been in the portfolio for now 15 years, if I'm not wrong. And we have seen in the market transaction at recently 17x EBITDA. Could you elaborate a bit on that? And finally, on Stahl, would you expect there is a revenue for 2021 coming back to the level of 2019, please?

Okay. So regarding Cromology, yes, it has been an exciting year, both what's happened within the company but also what's happened in the market. Very interesting to watch the land grab, I would say, in the northern part of Europe, the fight for Tikkurila, where the biggest players, the very sophisticated players competed for this company, which, I guess, is the only listed peer for Europe of that kind of profile. It has not gone unnoticed by us. And I would say we see interest definitely in the asset because effectively, Cromology is a fantastic play on a number of major markets in the sector. So we certainly saw that we -- that being said, each party can figure out their own -- what that means for our valuation and so forth. So that's one part. On Stahl, should I let you say something? And then there is the other question as well.

So on IHS, we can't publicly disclose the terms of this contract amendment. MTN made some public comments about it if you want to look at their own disclosure. But you're right to say that this new agreement was signed with only an impact in H2 last year. And so we expect to have twice the impact of this contract occurring in 2021. And the magnitude is in tens of millions of dollars. So it is significant, but we can't give more insight on this. On Stahl, your question was, should we expect 2021 to be back to 2020? Was...

I think it's unlikely for the moment. We -- it's very difficult to predict the level of Stahl because there is the restocking and destocking in the supply chain. So we watch closely what's happening in that regard. It's not only automotive, but it's also automotive. And it's hard to predict what the automotive production is going to be this year in part because of the -- of what's been happening in the supply chains and the semiconductors, as an example of that. So we think that Stahl will have a much better year. It's off to a very good start. There's really no predicting with ease as to exactly where it will end up.

Yes. The share of pent-up demand in the first few months is difficult to assess. So a very strong start of the year, but it's hard to know if this is going to be sustainable for the 12 months.

A follow-up, if I may, on Cromology. Did you take into account in your NAV calculation the transaction on Tikkurila for the valuation of Cromology? And second, you made a capital increase a few years ago, 120 -- a few quarters ago, EUR 125 million in Cromology. Do you intend to try to get this money back given the low leverage of the company?

Well, the answer is that we did not take into account the Tikkurila multiple. As you know, our net asset value does not take into account IPO discounts nor does it take into account transaction premium. So it's not in there. That's comment number one, I think important comment. Secondly, we have always said that our investment to -- in Cromology as part of the debt restructuring was in the context of an ownership, which was a little bit different from our whole portfolio, I'd say, probably a shorter ownership than most. So we are certainly monitoring the situation and that's happened in the industry. And we will have to make a decision about our investment horizon. It's clearly on our to-do list. You're asking about the road map. It's certainly one of the questions. But we have no timing pressure. That's also why we want to make sure that everybody understands we're not going to be explicit about when and how we will make our decisions. So that's really what I can say, I think, about that one.

Yes. And regarding the potential dividend, I think we are not in a rush to do so. The companies have some growth projects that are exploring, and they might need that cash. So we want to leave them some flexibility at the level to use these proceeds efficiently.

There are no further questions on the phone lines at the moment. Please continue.

Okay. We have a question on the web, which is the following. Can you give an order of magnitude of the gap between initial budgets for 2020 approved the end of 2019 and the actual outturns for each of the companies? So maybe to answer this one, I will, first, obviously, remind you that we don't disclose budgets. And I will, if you allow me, maybe classify our companies in different buckets. The first one, obviously, I'm not going to comment is on Bureau Veritas. And then I will start by the bucket of companies that have performed below their budget. In there, you will find Stahl because of what's been just detailed. Although the company was expecting some slowdown to take place, obviously, COVID hit much harder than expected. CPI was expecting another year of growth, but they faced difficulties during the first months of lockdown to provide their services. Then I will classify companies that were spot on their budget. And there, you will find Constantia Flexibles. They -- as you have seen, they increased slightly their adjusted profitability, and they were very much in line. And the last bucket is for the companies which massively outperformed their budgets. Cromology was one of them. IHS was one of them. But of course, they have been helped by M&A, so that's why it's not purely comparable, and also by the contract amendments that they were able to negotiate with some of their key customers. No further questions from the phone nor from the web, so we should conclude.

So thank you for your time and for your questions, and we wish you a safe, well, I guess, lifestyle. And hopefully, you are not locked up or you will not be locked up. I think we will be -- David and Jérôme probably locked up starting this weekend in the Paris region. I'm not looking forward to it, so -- but keeping good spirits. So see you all soon. Thank you.

Thanks, all.

Thank you.