Wendel (MF) Earnings Call Transcript & Summary

Good morning and afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Wendel's 2021 Half Year Trading Update Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today. I would now like to hand the conference over to Mr. André François-Poncet, Wendel's CEO. Please go ahead, sir.

Thank you very much. Ladies and gentlemen, this is André François-Poncet speaking. I'm here with David Darmon. We are the member of the Executive Board. And Deputy CEO; Jerome Michiels, our Group CFO and Executive Vice President; as well as our Investor Relations team, Olivier Allot and Lucile Roch. Welcome to the call. We'll present our half year trading update and take questions. First, we'll present the main items for the half, and then we'll get on with the dialogue. [Operator Instructions] Apologies. And I'm now on Slide 2, half year trading update, key figures. At the end of June, Wendel registered its highest NAV in the history of our company, an increase of roughly 19% since the beginning of the year and around 36% over the last 12 months. Our net asset value strongly benefited from improved performance and prospects of our unlisted companies and also from increased market valuations of comparable companies. Bureau Veritas, our largest investment, also contributed to leading our NAV to historical high. Consolidated sales are up 11.3% overall, with strong organic growth across the portfolio companies with EBITDA growing as well across the board. Wendel LTV remains at a low level, 9% at the end of June, and most portfolio companies have very low leverage levels, especially for the unlisted companies. As already mentioned in the past, in spite of the COVID crisis, our companies kept on generating cash and reduced their net debt when not realizing external acquisitions. And moving to Slide 3. During the first half, we deployed EUR 260 million of capital at Wendel, EUR 216.7 million through Tarkett Participation, EUR 18 million in the Wendel Lab. In addition to these investments, we also bought back 25 million of our own shares in the first half. We increased our investment team with 5 new colleagues joining recently, including 3 investors "with PE experience" or PE background, one operating partner and a expert in fund investment, [ VC ] fund investment. We signed the principles for responsible investment and decided to align our financial policy with our ESG commitments by integrating ESG targets into our revolving credit facility. At portfolio level, Bureau Veritas posted a strong first half and revised upwards its outlook for the full year 2021. At Stahl, Maarten Heijbroek started as the new CEO on July 1. Beginning of June, Constantia announced the closure of the acquisition of Propak, a packaging producer located in Turkey and a leading player in the European packaging industry for snacks. IHS announced 2 acquisitions, expanding its footprint in South America, and the successful flip-up of its bond debt, thus triggering 2 credit rating updates on its upgrades that -- beg your pardon, on its senior unsecured notes, meaning credit updates by 2 agencies. Turning to Slide 4. The performance of group companies taken individually. I will start, and David will take over for me. On the first slide, Slide 5, Bureau Veritas. Bureau Veritas published its first half 2021 figures yesterday. It posted revenue of EUR 2.4 billion, up 9.9% year-on-year and plus 14.3% organically, benefiting from improving end markets across most businesses and the return to a more normal operating environment compared to H1 2020. More than half of the business portfolio, including certification, consumer products, buildings and infrastructure, strongly recovered at 23.2% organically on average. Certification was the best-performing activity, up 38.6% in H1. Consumer products strongly returned to growth, up 23.4% in half 1, fueled by Asia, the resumption of product launches and helped by favorable comparables. Turning to sales in H1. They're also being more specific relative to 2019. They were up 4.1% on an organic basis, which is really what I look at is how we're doing versus '19. I'm sure you do, too. Adjusted operating profit increased by 75.3% to EUR 378.2 million. The first half 2021 adjusted operating margin rose 583 basis points to 15.6%. Bureau Veritas continued to see a rising demand towards quality, safety, traceability and environmental stewardship, which perfectly positions the company for a new step forward in its development. Through the BV Green Line of services and solutions dedicated to sustainability, Bureau Veritas is uniquely positioned to help its clients across multiple sectors implement, measure and monitor their ESG commitments in a more transparent, credible and data-driven way and purely self-declaration. During the first half of 2021, Bureau Veritas resumed its targeted bolt-on M&A activities, completing 4 transactions in strategic areas, representing around EUR 25 million in annualized revenues, with notably the acquisition of Secura B.V. specialized in security testing, audit and cybersecurity as well as Bradley Construction Management, a provider of construction management services for the renewable energy sector. BV's financial position remains strong, with net financial debt-to-EBITDA ratio further reduced to 1.3x from 2x last year, its lowest level since the IPO of Bureau Veritas in 2007. And I'll now turn the mic to David.

Thank you, André, and hi, everyone. Before -- I'm now on Slide 6. Before going into details of each private company performance, I would like to give you a quick and global overview of the first semester. Our private companies delivered outstanding results, highlighting the policy of the business model, management and team. We are really proud of being the [indiscernible] shareholder of companies, which have been able to work the [ COVID ] storm with so much agility. All our private assets delivered in H1 2021, EBITDA performance is above H1 2019, and for most of them reaching record levels of profitability with record low leverage. Constantia, which has been strongly resilient during the crisis, improved its margin, [indiscernible] its best performances quarter-after-quarter. Stahl, which has been able to keep its margin above 20% during the pandemic, delivered in H1 2021 a record 26% EBITDA margin. And CPI, which was the hardest hit during the COVID during lockdown, already beat 2019 levels of EBITDA. We are trying to see all the efforts deployed to be rewarded with best figures. On Slide 7, regarding Constantia. You can see that H1 2021 sales totaled EUR 752.1 million, slightly up by 0.7% on an organic basis, driven by the 3% organic growth in the consumer market, mainly due to a good performance in personal hygiene, coffee capsules and beverage, which was partially offset by the minus 5.7% decline in sales in the pharma industry since the activity was affected by lockdown-induced mild flu and cold season and due to a very strong competitive period. The first 6 months of the 2021 period were also adversely impacted by minus 1.2% by unfavorable FX. Constantia renewed its efforts towards improving its profitability, collecting the new cost reduction incentive program since the beginning of the year. Despite a negative total top line growth, EBITDA was up plus 1.8%, representing a 30 bps year-on-year margin increase to 13.1%. Significant increases across all raw material categories since the beginning of 2021 is likely to impact performance in the second half of 2021 as there is usually a temporary time lag between changes in raw material and adjusting prices to customers. At the end of June, net debt was at EUR 477.2 million. The increase is due to the Propak acquisition closed in June 2021. I'll come back on this on the next slide. The strong cash flow generation capacity combined with our increased profitability resulted in leverage standing today at 2.2 LTM EBITDA. A new strategy called Vision 2025 has been prepared by Pim Vervaat, Constantia's new CEO. This strategic road map refocuses priorities primarily towards boosting growth and profitability. It is predicated on both growth, the acquisitions and internal improvement measures. It also emphasizes and furthering the focus on sustainable products and, in particular, the Ecolutions suites of sustainable products. Let's talk now about the acquisition of Propak that I just mentioned on Slide 8. On June 9, 2021, Constantia announced the closing of its Propak acquisition, a packaging producer located in Dücze in Turkey. The purchase price is based on an EV -- sorry, enterprise value of EUR 120 million, representing an EBITDA multiple of 6.4x 2020 actual EBITDA. Propak is a leading player in the European packaging industry for the snacks market, operating out of one plant with approximately 360 employees and complements Constantia Flexibles' packaging solutions portfolio. This significant acquisition elevates Constantia Flexibles to one of the leading players in the European snacks market. This acquisition enhances the Constantia Flexibles' presence in the growing film packaging market segment. Propak has delivered a very strong historical financial performance. It is highly complementary to Constantia Flexibles' existing site in Turkey, adding flexo printing capabilities and access to an adjacent market times. It significantly reinforces Constantia Flexibles' position with the key customers in this market and, furthermore, increases potential for future business growth. I'm turning now on Slide 9 on Cromology now. During the first half of 2021, Cromology sales totaled EUR 370.7 million, up 27.7%, compared with H1 2020, which was heavily impacted by the first lockdown measures instituted in Europe. Compared with 2019, Cromology sales were up by plus 6.3%. Since H1 2020 lockdown, paint sales have bounced back significantly driven by strong demand from the end consumer, which made organic growth still positive in Q3 and Q4 2020. This trend continued in the first half of 2021, with strong performances in all of Cromology's key geographies. Cromology's EBITDA was EUR 72.9 million in H1 2021, up 80.4%, reflecting the combined impact of a favorable base comparison, a positive mix in terms of customers, products and countries and a favorable price trend in addition to the cost saving measures that have been implemented. EBITDA margin stood at 19.7%, much higher than in 2019, demonstrating the positive trajectory driven by Cromology's management despite tension in raw material prices. These tensions in raw material prices have not yet had a significant impact on margin. In addition, structural cost reductions continued with savings achieved in various line items. As in 2020, the company reduced its already very low financial leverage by optimizing working capital and continuing to make use of factoring. The company's net debt was EUR 110.3 million as of June 2021, and the financial leverage ratio as defined in the bank documentation, is now near 0 at 0.05x. Let's remind you that in May 2019, at the time of Cromology's debt renegotiation and Wendel's EUR 125 million equity injection, Cromology received significant concessions from its lenders. Cromology is focusing its efforts on planning and managing operations amid a resurgence of this pandemic as well as pursuing the transformation plan it has launched since 2019 and implementing sources of value creation. It is also monitoring its supply chain closely, resulted in tight material supplies and increases in the price of raw materials. Given its sound financial structure and the successful reorganization of the company, Cromology is well positioned to look for potential bolt-on acquisitions. I'm turning on Slide 10 to talk about Stahl. Stahl sales totaled EUR 419.8 million in H1 2021, representing an increase of 32.5% over H1 2020 and 0.8% over H1 2019. Organic growth was 36%, and foreign exchange rate fluctuations had a negative impact by minus 3.9%. After a challenging 2020, Stahl continued its recovery that started in Q3 2020 but accelerated since the end of 2020 despite disruptions in supply markets. This was driven by a strong order book and broad-based volume growth across all regions and end markets, in part due to restocking effect observed across several industries. Growth was particularly strong in Asia Pacific. In addition, Stahl automotive business continued its good rebound. The restocking effect could ease later in 2021, although timing is unclear. In 2020, thanks to the management focus on a resilient business model, Stahl took swift measures and quickly adjusted its fixed cost base to the market conditions. Stahl was still able to largely maintain this low level of fixed costs in the first half of 2021. Therefore, EBITDA for the half year totaled EUR 109.3 million, translating into a record EBITDA margin of 26%. The full year EBITDA margin is expected to adjust to more normative levels in H2 2021. Stahl's net debt was EUR 199 million, thus a EUR 46 million reduction year-to-date and almost halving over the last 12 months. Leverage was reported at 0.96x EBITDA as of June 30, 2021. On March 11, 2021, Stahl announced the appointment of Maarten Heijbroek as the new CEO of Stahl. Maarten Heijbroek, who joined Stahl -- he started at Stahl on July 1. Stahl's sustainability efforts have been rewarded again in July with a gold rating from EcoVadis, placing it within the top 5% of companies assessed by EcoVadis. In 2020, Stahl has been awarded a silver award. So they are keeping and making good progress. Stahl's 2030 target is to maintain the EcoVadis gold rating through continual improvement. Earlier this year, Stahl has taken another important step in its sustainable development strategy after achieving certification for the highest level of ZDHC compliance for multiple performance coating products. The new Level 3 certification demonstrates Stahl's commitment to rigorous product stewardship. I'm turning now to Slide 11 to talk about CPI, Crisis Prevention Institute. CPI is a company which has been the most strongly impacted by the lockdowns last year in our group. Today's rebound demonstrates its strong underlying demand for this mission-based company and the resilience of its business model. CPI recorded first half 2021 revenue of $44 million, up 68.3% from H1 2020, and plus 8.3% versus the same period in 2019. Since Q4 2020, CPI has reported an upward revenue trajectory quarter-to-quarter, with Q2 2021 revenue surpassing Q1 2020 figures by 38%. This continued improvement month-to-month and versus prior years is the result of several factors, including: higher customer engagement since March as training activity has increased with lessening restrictions on travel and gathering; stabilizing overall Certified Instructor count; first half 2021 new Certified Instructor volumes, which nearly doubled 2020 levels; and continued mix shift towards digital solutions for both new and existing Certified Instructors. Learner Material sales continue to hold strong virtual presence, with e-Learning delivery representing 34% of total Learner Material volumes. Of this plus 68% half year sales increase, plus 5.6% was related to a purchase accounting adjustment to deferred revenue, which had an impact of minus $1.5 million in H1 2020. This sales increase is also related to FX movements for plus 3.5% and for plus 59% for organic growth. CPI's activity should continue to benefit from the positive near-term recovery trend in the market amidst accelerating vaccinations and warming weather, especially in the U.S., which are lessening restrictions around travel and gathering and driving a more usual virtual environment for customers, especially in hospitals and schools. Furthermore, CPI generated EBITDA of $20.5 million, representing an overall increase of plus 188% year-on-year, 188% year-on-year. That's a pretty strong result. This result corresponds to a strong margin of 46.6% over the period. Compared to H1 2019, EBITDA is up plus 20%, and margin has also increased by over 475 bps versus H1 2019. H1 EBITDA benefited primarily from the flow-through of higher sales to earnings as well as effective cost management. It did benefit to a lesser extent from temporary timing differences related to marketing spend and delayed hires in sales and administrative roles. As of June 30, 2021, net debt totaled $333.6 million or 7.86x EBITDA as defined in CPI's loan documentation. Liquidity has increased to $24.5 million, in line with the company's total liquidity level at the time of the 2019 transaction. I'm now turning to Slide 12 to talk about IHS Towers. As you probably already know, in June, IHS Towers successfully split up its listed bond, effectively expanding the bond's restricted group to include the IHS Holding Group that's willing to upgrade from both S&P and Fitch of its senior unsecured notes. As a consequence, the company now reports on a quarterly basis its financial results on a full consolidated scope. It will publish its Q2 2021 results next month. That's why we cannot yet update you on its first half results. You can find now a very granular financial information on the company's website. In Q1 2021, the company posted strong results with sales up 14.5% organically and adjusted EBITDA up 15.5% and a group EBITDA margin over 59% at 59.4%. IHS Towers has also been very active in terms of external growth, with 2 additional acquisitions in South America, enhancing its portfolio diversification. On April 12, 2021, IHS Towers announced the acquisition of Centennial Towers' Brazilian and Colombian tower operations, bringing an additional 602 towers in Brazil and 217 towers in Colombia. In May 2021, IHS Towers announced it has entered into an agreement with TIM to acquire a controlling interest in fiber operations, which will include selected TIM fiber assets and provide fiber optic infrastructure services as an open fiber network service provider. Let's move on to Slide 13 and talk about the Wendel Lab. Our Wendel Lab initiative is growing and moving forward with the hiring of Christopher Witherspoon to lead the activity on our behalf. In H1, we've been quite active with $40 million newly committed to 40% and EUR 18 million of capital called. The lab value in our NAV is today at EUR 130 million. It has grown significantly with a 60% growth in NAV since March 2021. Most of this growth is following the IPO of an indirect portfolio company in one of our fund called Tuya. As you know, we expect the Wendel Lab represent 5% to 10% of our NAV by 2024, group fund and direct co-investments. Moving to Slide 14 to talk about Tarkett now. On July 15, 2021, we closed the offer initiated by Tarkett Participation. We now held directly 56,300,463 shares, representing 85.89% of the shares. Since July 20, 2021, and as of July 28, 2021, Tarkett Participation increased its share in Tarkett's capital to 88.4%, including treasury shares. As a result, Wendel has invested a total of EUR 216.7 million for a total stake of 25.5% of Tarkett Participation's capital. With the current level of holding, as expected, Wendel will have 2 seats at Tarkett Participation board. Before giving the floor to Jerome, one more thing about another great results we can be proud of. On Slide 15, we can here see the evolution of our company's leverage throughout COVID, which is quite impressive, as you can see. Despite this COVID crisis, our companies have been able to reduce dramatically the leverage ratio through a strong increase of the EBITDA, but also thanks to the cash generation profile. Cromology eventually no more debt. Stahl leverage is below 1 and also achieved an impressive deleveraging. Regarding Constantia, the ratio increased because of the acquisition of Propak and CPI, which leverage was at 11.5x only 6 months ago. This demonstrated by [indiscernible] of its business model with a net debt-to-EBITDA ratio, which is today below 8x as of June 30, 2021. Our company delivered outstanding results and benefited from very, very solid financial structure and can now finance their future growth. Thanks for your time, and I now leave the floor to Jerome.

Thank you, David. Good afternoon, ladies and gentlemen. Let me start by giving you a bit more color on our net asset value as of June 30. I am now on Page 17, and I'm glad to report that with a level of EUR 189.1 per share, Wendel posts the highest net asset value in its history. I think it reflects the fact that our portfolio is of good quality, that our businesses have performed well over the past 12 months, bouncing back from the pandemic while improving their balance sheet and that multiple, of course, have also increased compared to 15 months ago. Bear in mind that Wendel also distributed a EUR 2.9 dividend per share. In the meantime, meaning that our net asset value would have been actually EUR 192 before the payment of this dividend. Now let's have a look at the main components of our net asset value on Page 18. Listed equity investments represent a total of EUR 4.3 billion. Within this category, you will have noted that we added a line and included our investment in Tarkett Participation, which was representing EUR 99 million as of the end of June. We have invested further since then. And as of July 28, our total investment in Tarkett has reached EUR 217 million. The value of our unlisted assets and Wendel Lab investments is at EUR 4.8 billion at the end of June, significantly above the level of March. Our net debt at the end of June stood at EUR 832 million, taking into account the dividend paid a few days later after June 30. However, it does not include the dividend received from Bureau Veritas on July 1, which was roughly EUR 58 million, and our additional investment in Tarkett of EUR 118 million since June 30. Overall, the net asset value of EUR 189.1 per share exhibits a roughly 40% discount when compared to the average 20 days share price as of this date. Given the good performance of the portfolio, the increase in our net asset value over the past 12 months, the decrease in our cash burn in our level of indebtedness, this level still strikes us as being overly wide and unwarranted. On Page 19 now. Sequentially, our net asset value has increased by EUR 30 per share year-to-date. Now on Slide 20, showing the net debt and loan-to-value ratio. As you will have seen with regards to the past 10 years, our LTV ratio stands at a low level, 9%. Adjusted for the additional investments made in Tarkett since the end of June and taking into account the dividend received from Bureau Veritas, our LTV would stand at 9.5%. This is in line with our objective to retain a strong and flexible financing structure, which can withstand sudden brutal market shocks whilst retaining an investment-grade rating profile. Thank you very much. I now hand it over to André for the conclusion.

Okay. I get to apologize as well for the interruption, the second interruption that we've undergone. We think it's because everybody is reporting at the same moment the same day. So probably overwhelmed the network. So apologies again for that. So to conclude, we're very pleased with the performance of our companies in the first half of 2021, showing that collective intense efforts deployed are paying off. Sales have either continued to increase or have recovered from 2020 and generally exceed half 1 '21, '19 -- 2019. EBITDA grew across the board, and some margin levels are at record highs, translating into additional cash flow generation and further strengthening of capital structures across the portfolio. This strong rebound comes with new challenges regarding the availability and price of raw materials, but our companies have thus far demonstrated an ability to adapt to volatile market conditions. We are more than ever well equipped to weather any extraordinary times. And as previously announced, we have actively resumed our search for new investments in line with the new strategic road map, which was endorsed by our Supervisory Board in the final quarter of 2020. The first transaction took place in April with the announcement of an investment in Tarkett in partnership with the founding family, which illustrates our team's ability to identify investment opportunities, which fit our long-term investor profile. We also made additional investments in the Wendel Lab, which was recently reinforced by the arrival of an experienced professional to run this investment department dedicated to high growth companies. While our dividend and NAV have grown from 2017, we observe that our share price remains significantly below levels prevailing at that time, with a very strong discount to underlying value. We have therefore continued to take advantage of this discount by opportunistically buying back some Wendel shares on the market, EUR 25 million in H1, and we intend to continue doing so in the second half of 2021 while focusing on diversifying and repositioning our portfolio towards higher growth. Thank you for your time. So we'll now answer the Q&A phase, hoping that we can continue uninterrupted until the end of the allotted time. Thank you. So I turn it back to the operator.

[Operator Instructions] Your first question is from the line of Patrick Jousseaume from Societe Generale.

Can you hear me?

Yes.

Yes. So first on Slide 19 and Slide 18 on which there was some interruption, could you explain or reexplain how you deal with the valuation of CPI given the good performance of the first half? Have you reduced the provision that you have applied previously on CPI? Second on -- in unlisted assets. As far as I understand, you have Wendel Lab, which is neat. Could you give us an idea of the value that you have retained for Wendel Lab? Third question. So Stahl obviously made a very strong EBITDA margin in first half. To what extent is this sustainable for the next half, especially with raw material price increases? And finally, regarding Constantia. Could you share with us the revenue of Propak on a full year basis, please?

Okay. Patrick, I'm going to address your first 2 question, and then I'll let maybe David cover the other 2, again will jump in obviously for the figures. So the first one on CPI. In the net asset value, what we do is that we use market multiples that multiply past year's and current year's EBITDA. So that's what we have done as of the end of June. We've used the 2020 EBITDA, which has been audited, and we have used current year EBITDA, which is the lending for this year. What we do on the accounting side is slightly different. We actually have depreciated the value of our investment in our balance sheet by EUR 87 million at the end of 2020. And as per the accounting rules, you cannot reverse this depreciation charge, which is based on an impairment test. And to make it simple, this is based on a DCF valuation. If ever there is a difference between the DCF valuation and the net book value of your assets in the accounts, then you need to depreciate, which is what we have done. But that's not the same for the net asset value, which is based on multiple. So currently, we have the benefit of the good performance of 2021, which results in a good level of EBITDA anticipated for this year. But I guess we will have obviously to take into account 2022 EBITDA, and that would be at the end of this year when we will get the budget from CPI and then we will transition to 2021 and 2022.

So said differently, there's been some uplift in the NAV, but not a full uplift because we still have the full 2020 in the calculation. And there is no provisioning. It's the strict application, as we always do, of our methodology. Yes. [indiscernible]?

On your second question, so Wendel Lab, you remember we've committed $125 million. And actually, given the good performance that we've had, as we have said, we are close to that, although we have only deployed EUR 70 million -- 7-0 euros -- the value of the EUR 70 million deployed is actually close to $125 million. But bear in mind that it's because we've had a very good performance of one portfolio company in one particular fund. So not to say that this is a one-off, but just bear in mind that a large part of that is actually accounted for by this good performance of one company. And in terms of valuation, we are using the valuation provided by the funds in which we invest. We didn't do anything -- any retreatment. We just use the valuations that are given to us.

So just to provide further clarity, Wendel Lab investments in funds usually, as most fund investments, follow a J curve. So you start by incurring fees and costs. And the increases in value only happens after 1 or several years. So usually, you have this J curve. So you don't expect that there would be a big uptick. The uptick comes back later as companies in the underlying portfolio do further financing rounds and get up-marked or exit. This is what's happened here, in part. So that's how it works. On Stahl, do you want -- would like to do it, David?

Yes. So on Stahl -- if you go back to Slide 6 where we have showed up the trend on margin for each of our private companies, you can see that Stahl now is trending at a 26% EBITDA margin. And as you've mentioned, this is probably exceptional. And long term, we expect the company to get back to the low 20s where it has been trending for 4 years. So we are benefiting from low raw material prices that we had in our books, but there is a lot of one-off here. So...

So for several of our businesses, it's sort of a race between, as you can imagine, the uptick or the increase -- significant increase of raw materials on the one hand and volumes, which entail as reversing some of the savings that have been taken over the past; and on the other hand, improved volumes. So for instance, the auto industry is still held back in production because of the lack of semiconductor. So if you read the publications from the auto sector, you get the sense that there's likely to be further upside also some significant parts of the world where there's still lockdowns or activity is not fully recovered. So we look at the balance of the 2. We are always cautious because it's rather unpredictable where it ends up. And most of our companies have been either pushing through product price upticks, upgrades or temporary surcharges and the like, sometimes more than once a year. So we've got that with a few of our companies. So far, so good, though.

And last -- on your last question on Propak, the annual sales are around EUR 75 million.

Can I ask a follow-up question on CPI and Wendel Lab? Because I am a bit lost. Should I understand that the value that you retain for CPI is somewhere between the EUR 520 million that you paid and the EUR 550 million that you paid minus, I think, EUR 270 million that you mentioned before and -- or in previous presentation? And for Wendel Lab, should I understand that the value retain is $125 million?

So on your second question, we are close to that, yes, for the Wendel Lab. With regards to the value of CPI, in the net asset value, we are still below the investment value, okay? And in the accounts, the investment value, as you said, was EUR 520 million, and the depreciation was EUR 87 million. So in the book, in the accounting, it's 100 -- EUR 520 million minus EUR 90 million. So we are talking maybe EUR 430 million, but that's accounting. And as you know, that's not really something that we look at. What we look at is the net asset value, and we are not yet -- we have not yet recovered the value of CPI in the net asset value.

It's higher than it was at the last publication, and it's less than the price we paid. I think that was your question.

The next question is from the line of Alexandre Gérard from CIC.

Congratulations for that good set of numbers. A few questions on my side. The first one relates to Tarkett Participation. Can you give us the indebtedness of the holding company? And are there any liquidity options for you in the future to sell back your stake to the family or to dispose in some way of your 26% stake? So that's my first question on Tarkett Participation. Second question, Constantia Flexibles, I mean, you said that the 2025 strategy had been designed. Can we know more about the long-term margins that you target? It's been pretty stable in the past, around 12% or 13% EBITDA margin-wise. What level of margin do you target going forward? And maybe on the asset rotation side for the second half of the year. Can we expect an acceleration of your asset rotation? And also, can you give us examples of deals from Tarkett Participation that you consider for the first half of 2020?

Okay. A lot of questions, which are obviously a bit tricky here. On Tarkett Participation, I turn it to Olivier to comment on. I don't know what we are able to disclose on the leverage on Tarkett Participation.

Not much what has already been public in the offer document.

Yes. The company is listed. There's information in the offer document. It's published on the site. If you call Olivier, he can pass on to you the information that's on the site, but there really -- nothing more to say. Options for liquidity, we don't have a [indiscernible] to the family, if that's the question. There -- obviously, as any investment we do, there are some options for liquidity at some point or another, but not options in the sense of call options, put options, options. There are routes to achieve, ways to achieve liquidity over time after an initial lockup. On Constantia Flexibles, unfortunately, another difficult question for us to answer, and we don't want to give the long-term margin target. I will venture to say that the targets are higher as you would expect, that we would want higher than the current level of profitability. And on the asset rotation in half 2, we don't have that many, how to say, investment lines. We only have 7 with Tarkett. So if I start saying there's going to be high rotation, you might read more into it than I would like to say. But -- and then on the buy side, we are looking actively at several situations with no indication. Too early to tell. Nothing imminent again. But I think in December, we said nothing imminent and then Tarkett [indiscernible] in April. So these things can happen quicker than one sense. So really not much I'm prepared to disclose right now, except I -- please rest assured that we're not sitting on our hands and that everybody is extremely busy at the firm.

Maybe we can illustrate with a few recent opportunities we have reviewed to give you some kind of flavor of the sectors we're looking at. So we did spend time on education and training on various opportunities in Europe and in the U.S. We spent time in the health care services and animal health as well. And we are currently spending time on our high-end manufacturing company as well. So diversified the type of assets we're looking at, but growth is the key focus on all those opportunities.

Yes. As we said at our shareholders meeting, we did turn in a number of firm and financed offers in the last few months.

Okay. Can I just maybe ask a last question regarding Constantia? So you said that the revenues for the full year were close to EUR 75 million. On the EBIT margin -- on the EBITDA margin side, can you -- can we have an idea also, please?

EUR 75 million was Propak annual sale. Sorry, maybe I misunderstood what you were asking for.

But we're not going to give the detail. I'm sorry, we already give more than we thought we were going to give. So well done. But we're not breaking down the profitability of either our division's profit -- we're not giving that level of detail. Sorry.

The next question is from the line of Geoffroy Michalet from ODDO.

Can you hear me?

Yes, Geoffroy.

My question has to do with Tarkett. Since the takeover, you have increased your participation. It is now to a bit less than 90%. Could you remind us the rules that you need to follow before maybe trying to launch a new takeover or going upper than 90% threshold on Tarkett?

Yes. There is a period of time during which we could not do a new offer or reopen, but that's not on the table anyway. So it's kind of irrelevant. We can, if we wish to, buy more shares in the market at prices equal to or below the price that has been offered. So we might do that opportunistically because after all, we were bidders recently. But we're watching what's going on in the rest of the world. If ever we may or may not do it, and I might also add, we are not the -- as you know, we're not the sole decision-maker here. It's also with the family. Like we said before, we were very happy to increase -- make this investment with the company. As you know, we have a minimum investment size around EUR 150 million. We are over that. We have the right -- we have the full rights that we wished we had. And so now it's [Foreign Language] and say we don't really care.

And the technical threshold in France today is 90%.

Yes. Exactly. But -- so that's the way it is. People -- some people forgot the tender. Some people may not have want it, probably did not want to tender whatever [indiscernible] and we move on. If we have no more questions by phone?

There are no further questions.

Again for anyone who -- is there another question? The question, the written questions.

Okay. Read on the questions. So from Mourad Lahmidi. The first one is, is the impairment written in full year 2020 on CPI prevails or will be taken back?

So Jerome will answer that one, Jerome Michiels, our CFO. Accounting rules do not allow for a take back of the accounting impairment.

Second question is, how IHS is valued in your NAV at end of H1 '21?

So the answer to that is the same method has been -- methodology has been consistently applied, i.e., we've taken a basket of comparables, which, as we said in the past, are in the basket of emerging market comparables. We have taken into account 2 years, last year and this year. We have taken into account EBITDA. It's -- IHS is on EBITDA only given the state of development of the company. And then we've deducted the debt, applied our percentage, and that was the value. So that's all I am prepared to say now. We cannot give the number.

Third question is, is 20% EBITDA margin at Cromology the new norm for the company?

Well, it's a pretty good margin, I'd first like to say. And is this the new norm? Tell me how much people will be painting, and I'll tell you what the likelihood of that being. So the company continues to feel they have plenty to -- the sell side is dependent on markets. And we're very positively inclined to think that it will continue to be good markets out there. But obviously, that's -- we are in uncertain times in Europe, but I think it might be -- there is pressure on raw materials like there is in other sectors of the economy. But the company also looks at what it can do on the pricing side. And so that's ongoing. In terms of costs, they're still focusing very much on costs, and management feels that there still is plenty to go for with Cromology, which we feel over time since the new management team came in, there was just a lot of low-hanging fruit and other things to do. So that's why I'm not going to give -- make any forecasts. But again, we feel there's plenty to be done inside the company, and we need to be helped by what is the situation outside in the product markets.

The last question is about Tarkett, but we already answered to it. Several Tarkett shareholders have not tendered shares to the offer. Do you intend to leave Tarkett listed?

Like we said, we extended an offer. We -- our intention was to do a squeeze out. It will remain to be seen what happens next. But for those who didn't tender, they're now our partners.

And I have a question as well from Samarth Agrawal from Citi. So congratulation on the strong set of results. I have 3 questions. One, first one around growth runway in H2. Is it fair to expect normalized growth rate from second half of 2021 following the strong rebound since past [ 2 ] quarters? The second question is around input prices and the impact on EBITDA margins. How much of any future raw material price increases can be passed on to customers? Third question, the last one on current market environment. Do you see a recovery in earnings and valuation multiples could accelerate timing of potential disposals?

Okay. Those questions, trying to take the number one, growth runway normalization. Look, we don't know. I mean I wish I could say I include BV, Cromology, all the various companies. There's been a lot of stuff going on underlying. There's been some catch-up in some areas where people have either understocked or under the gates of BV have been under certified or needed to comply with some deadlines. So it's clearly been in some sectors, in some places, some recovery. In other places, it hasn't happened. There's still some hard hit industries, whether it's commercial, often -- think travel, retail, consumer sales in certain areas, et cetera, traditional channels. So it's really hard to stop and say we've got it full now. And we look at the month, it's a fully stabilized month. Even in the case of a CPI providing its training, there's some moments, it was slowed down, they might be catching up. So to be very prudent in terms of determining what is a normalized level. Input prices, how much could be passed on? I don't know. That's the same -- there is a lot of increase in the cost of raw materials. Salaries in the U.S., up. Salaries in Europe, not particularly. Sometimes in Europe, scarcity of manpower. So that's for a big input, which is cost of labor. And then you've got the raw materials, they're up. And we are -- our companies are pushing through price increases everywhere they can and where -- and their clients are doing it as well. So as well, we have to be very cautious on that. Do we feel that there will be more divestitures if the valuation of multiples continue to go high, et cetera? We've now reached a balance where we want to add assets. That's the main work here is adding assets, but we also know we want to keep our leverage contained. So we're looking also at disposals. But we don't want to be -- if you think about what is driving the cart, what is the horse and what is the cart, I'd say the first -- 2018, 2019, it was the disposals dragging the investments. I'd say at this point, it's more the investments dragging the disposals, if I may try to find a way to describe it. I don't -- David, if you'd like to add. I see you agreeing and nodding.

Yes. No, no, no. I agree with all those. Just on the visibility on H2 on sales, it's very hard to project where we will be on Q4. I think in Q3, we can see the order book in some companies and where they stand in terms of looking for training for CPI and the order book for deliveries for Stahl. And so we have a decent visibility for the next 2 months, and we don't expect a change in the level of service for those companies. But it's true that for end of the year, it's clear. So it's hard to know.

Yes. The general tone is pretty confident. I mean people are fired up. They're working hard, and they're reasonably positive. And the trend in budgeting and sort of forecast lending has been rather on the uptick. It's been positive momentum. Having said that, everybody -- when you look at the heat map of countries against the Delta strain, COVID, et cetera, you will see that as you look east, there is a very significant still pressure on COVID, including in Asia, including the question marks regarding Shanghai. So it's a moment of uncertainty also in terms of the epidemic, although I really don't think we're going to have a shutdown experience like we had last year, which was horrible, but it's not completely gone away. We have a biased view, all of us, who sit in some of the better countries in terms of vaccination, I'm afraid. So anyway, we feel cautiously optimistic, happy with the first half. We have plenty of means to carry out our strategy. We will not do it all at once. We'll not do it all in one vintage. And we'll do -- we'll continue doing it very energetically. We're very happy with the people we've added. We've expanded our investment team further. It looks -- the numbers -- we put 5 people. It looks like not a lot, but for us, it's a 25% increase in our team. So we can process more opportunities. And we feel that the fact that we're working out of just Paris and New York means that our team is continuing to gain experience, cohesiveness, drive experience. So we're ready to go on holiday exhausted, but we'll come back with a lot of energy.

Thank you. A very last question. This one is in French, so I will say it in French. [Foreign Language]

Good afternoon. The consolidation on the paint market is accelerating, and multiples are reaching new highs. Is it not the best context to divest from Cromology after the recovery of EBITDA over the last few years?

It is a good time to dispose of Cromology given valuations of recent transactions, the stepped up level of activity and also the improvements in the company. Well, it's a good question. Certainly something that we have to think about. We have not made any decision. But I can see why the question is being asked. And all I can say is, yes, it's a good question. Whether we will or we will not is the answer everybody would like to have, and we'll be considering.

So no more questions.

Thank you very much.

Thanks, everyone.

Have a good break. Good holidays. See you soon.

Thank you. That does conclude the conference for today. Thank you for participating, and you may now disconnect.