EURAZEO REPORTS FURTHER ASSET MANAGEMENT GROWTH IN Q1 2023

Dynamic asset management growth in Q1 2023

• Assets Under Management (AUM): +10% in one year to €34.8bn
• Fee Paying Assets Under Management (FPAUM): +26% to €25bn
• Third-party fundraising: €866m, including €185m raised in the wealth segment
• Management fees: +28% at €105m

Selective deployment; significant financial leeway

• Realizations: €0.3bn (€0.4bn in Q1 2022)
• Deployments: €0.9bn (€1.7bn in Q1 2022)
• Significant financial leeway: dry powder of €5.3bn and undrawn balance sheet commitments in the funds of €2.4bn

Solid performance of portfolio companies

• Sustained revenue growth across all segments
• Good momentum in the Growth segment against high comparison bases

New steps forward in ESG

• Eurazeo and Société Générale have joined forces to support the decarbonization of the maritime sector
• New €420m closing for the ETIF fund dedicated to energy transition

Eurazeo classified as an “Investment Company” under IFRS 10

• From January 1, as announced on the publication of the annual results
• Non-recurring P&L gain of €1.9bn recognized in H1 2023

Attractive shareholder return

• Payment on May 3, 2023 of a €2.20 dividend per share approved by shareholders on April 26, 2023, or circa €168m
• Launch of the previously announced €100m share buyback program

Christophe Bavière and William Kadouch-Chassaing, Co-CEOs, declared:

“Eurazeo reports a good first quarter in a complex and uncertain environment. Double-digit growth in management fees, satisfactory inflows and strong revenues from portfolio companies are evidence of the quality of our strategies. We are being particularly selective and disciplined in the execution of our asset rotation and have significant financial flexibility. This quarter marks another step forward in our ambition to become the leading European alternative asset manager in the mid-market, growth and impact segments.”  

1. ASSET MANAGEMENT ACTIVITY

A. ASSETS UNDER MANAGEMENT

As of March 31, 2023, Eurazeo Group Assets Under Management (AUM) totaled €34.8bn, up 10% year-on-year:

- third-party AUM (Limited Partners and private clients) totaled €24.6bn (+8% over 12 months), including dry powder of €5.3bn.

- balance sheet AUM include the investment portfolio within the Group’s balance sheet (€7.8bn) and Eurazeo balance sheet commitments in Group funds (€2.4bn).

Fee Paying AUM amounted to €25bn, up +26% over 12 months. Q1 2022 FPAUM are presented in Appendix 2

B. FUNDRAISING

In Q1 2023, Eurazeo raised €866m from its clients (+42% year-on-year excluding Rhône fundraising in Q1 2022):

- Private Debt fundraising remained strong, exceeding €500m in the quarter for the Direct Lending and Asset based finance strategies.

- the transition infrastructure fund completed a new closing at €420m (including €144m in Q1) and has already reached 80% of its initial target.

- Private Equity fundraising totaled €209m in the quarter, driven by ongoing fundraising in Venture and Secondaries

The inflowing trend from private clients observed in 2022 continued. With €185m raised in Q1 2023, it accounts for 21% of total fundraising on the quarter. Wealth Solutions assets AUM now represent €3.7bn or over 15% of third-party AUM.

Eurazeo did not make any further balance sheet commitments to its funds during the quarter.

C. ASSET MANAGEMENT REVENUE

Management fees totaled €105m in Q1 2023, up 28% at constant scope and exchange rates and break down as follows:

i) Third-party asset management activity, up +19% to €75.0m;

ii) management fees on Eurazeo’s balance sheet of €30.5m, up +56% mainly due to commitments to the EC V fund.

Realized performance fees were negligible during the period due to the limited number of realizations.

2. ASSET ROTATION

Realizations totaled €0.3bn in the first quarter (€0.4bn in Q1 2022). In a less favorable environment and a context of rising interest rates, exit volumes and conditions remain satisfactory for high-quality deals in the mid-caps segment, in which the Group specializes.

Eurazeo was highly selective in its investments: Group deployment totaled €0.9bn in Q1 2023 compared with €1.7bn in Q1 2022. The Private Funds Group activity successfully seized opportunities in the secondary market and accounted for close to half Private Equity investments in the quarter.

Going forward, Eurazeo benefits from substantial leeway for its future investments: dry powder of around €5.3bn and balance sheet commitments in the funds of €2.4bn.

3. PORTFOLIO COMPANIES

As of December 31, 2022, the investment portfolio carried on the balance sheet is valued at €7.8bn net (€100 per share), invested almost exclusively in Group funds and programs. This portfolio includes over 70 companies, none of which represent more than 6% of the total value. Those companies are mostly positioned in structurally buoyant sectors, such as healthcare, business services, digital, strong consumer brands and energy transition.

These companies reported further revenue growth in the quarter :

- Mid-large buyout (+24% in the quarter): The portfolio reported strong organic growth virtually across the board, against a particularly high comparison base (+55% in Q1 2022). This performance reflects the Group’s positioning in high-quality companies within the most buoyant market segments as well as the ongoing recovery of the Travel & Leisure segment.

- Small-mid buyout (+8%): Business services and healthcare companies continued their strong growth. Companies positioned on the consumer environment experienced a slight slowdown during the quarter, with virtually stable revenue.

- Brands (+13%): The portfolio reported further robust growth during the quarter.

- Growth (+21%): Growth remains strong against high comparison basis (+50% in Q1 2022), notably with the good performance of circular economy companies. All companies are bringing a sharper focus on cost control.

- Real Assets (+38%): Robust growth in hotel activities and good performance of the real estate portfolio

As a reminder, the portfolio is not revalued quarterly and Eurazeo no longer consolidates its portfolio companies since January 1, 2023, in accordance with the consolidation exemption provided in IFRS 10 for “investment companies”.

4. CASH AND FINANCIAL LEEWAY

As of March 31, 2023, Eurazeo’s net debt was €55m. Gross cash and cash equivalents totaled €5m.

Eurazeo has a confirmed revolving credit facility (RCF) of €1.5bn, maturing in 2026, drawn for €60m at the end of March 2023.

The Group held 3,484,195 treasury shares, i.e. 4.4% of total outstanding shares (79,224,529 shares) as of March 31, 2023.

5. SHAREHOLDER RETURN

The Shareholders’ Meeting of April 26, 2023 approved the Executive Board’s proposed dividend of €2.20 per share, (i.e. a 26% increase on the ordinary dividend for 2021), representing a total distribution of circa €168m.

The Executive Board launched a new €100m share buyback program and initiated it at the end of March 2023. The shares purchased will be canceled. This program, which will be accretive for shareholders, it reflects management’s confidence in the Group’s prospects and in the value of its assets. The Group will also buy back shares to cover the Long Term Incentive Plans (LTIP).

6. NEW ESG PROGRESS

Eurazeo and Société Générale are joining forces to develop an innovative solution in order to support the decarbonization of the maritime sector. Leveraging their respective expertise in the shipping sector and asset financing, the aim is to support ship owners by helping them improve the performance of their ships through a sale and leaseback scheme. Eurazeo will formally launch the offering to its clients in 2023. This new joint initiative comes in addition to ESMI (Eurazeo Sustainable Maritime Fund) launched by Eurazeo in 2021.

The roll-out of the Eurazeo Transition Infrastructure Fund (ETIF), classified as Article 9 (SFDR), also continued. A further €420m closing was completed in March (80% of the initial target), merely 3.5 months after the first closing. In February, a fourth investment was signed in Etix Everywhere, a French company focusing on regional edge colocation data centers and in TSE in April, expert in photovoltaic and agrivoltaic development, the fifth investment of the fund.

7. OUTLOOK

As a strong player in the alternative asset management sector, which continues to benefit from favorable structural trends, Eurazeo confirms the outlook announced on March 10, 2022, upon presentation of its annual results and notably the doubling of assets under management, which could reach €60bn in 5 years, and an increase in the FRE margin in the medium-term to 35-40%. Third-party performance fees, which are currently limited, should become more substantial once the Group’s funds have reached maturity. For 2023, and in a normal market environment, the Group is targeting further robust growth in its Fee Related Earnings, which should be driven by increasing management fees and disciplined cost management.

8. SUBSEQUENT EVENTS

Unwinding of the partnership with Rhône Group

On April 12, 2023, the Group announced the unwinding of its cross-ownership with Rhône Group. In this context and on the sale by Rhône Managing Directors and other stakeholders of 1.1 million Eurazeo shares through an accelerated book building launched on April 12, 2023, the Group announced the buyback of 400,000 shares, representing circa 0.50% of the share capital at a unit price of €63.89 per share.

Changes in the Supervisory Board

Robert Agostinelli, Co-Founder and Managing Director of Rhone Group, decided to terminate his term of office as a non-voting member on the Supervisory Board with effect from March 13, 2023

Patrick Sayer, President of the Paris Commercial Court, decided to terminate his term of office as a member of the Supervisory Board with effect from July 31, 2023.  

 

APPENDIX 1: STRATEGIC PARTNERSHIPS

iM Global Partner (AUM not consolidated)

It is recalled that iM Global Partner’s assets are not included in assets under management published by Eurazeo.

The Assets Under Management of iM Global Partner (IMG share) total US$36.9bn at the end of March 2023, stable on March 2022 despite the current uncertain macro-economic environment. iM Global Partner nevertheless maintained its dynamic M&A strategy in 2022, notably through the acquisition in December 2022 of 45% of Berkshire Asset Management, an investment advisor specialized in dividend-focused US equity portfolios.

APPENDIX 2: FEE PAYING AUM

 

APPENDIX 3: ASSETS UNDER MANAGEMENT

 

APPENDIX 4: IFRS 10 CLASSIFICATION AND 2022 SIMULATION

On January 1, 2023, Eurazeo determined that it now satisfies the criteria of an “Investment Company” as defined in IFRS 10 “Consolidated financial statements”. This standard provides an exemption for Investment Companies on the consolidation of their portfolio companies.

Eurazeo has taken into account this change in classification prospectively as of January 1, 2023, with the following impacts on the financial statements as of January 1, 2023 and in the future:

- Eurazeo’s subsidiaries which provide investment services (mainly asset management entities) continue to be consolidated;

- Other subsidiaries are no longer consolidated;

- These investments are recognized at fair value and subsequently measured at fair value through P&L; and

- The non-recurring gain arising from the difference between the fair value of these investments and their carrying value prior to January 1, 2023 is recognized in the income statement in “other revenue and expenses”. This non-recurring gain is €1,942bn and will be recognized in the accounts as of June 30, 2023.

To facilitate the understanding and comparison of the 2023 financial statements, the Group presents below a simulation of the 2022 income statement as if the Group had applied the IFRS 10 consolidation exemption as of January 1, 2022. These figures are for information purposes only and have not been audited. They do not take into account the non-recurring gain that would have been recognized at that date.

 

A. CONTRIBUTION OF THE ASSET MANAGEMENT ACTIVITY

The accounting recognition of balance sheet PRE has been aligned with the methodology adopted for third parties (realized performance fees only).

B. CONTRIBUTION OF THE INVESTMENT ACTIVITY 

Change in Fair value on the portfolio includes provisions for taxes and carried interests and only concern portfolio assets. Investment costs now directly impact fair value gains and losses on portfolio assets. Other changes in fair value refer to assets that are not included in the portfolio, notably those related to the asset management activity.

 

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(1) Assets under management are not revalued quarterly. March 31, 2022 figures are pro forma. They include Eurazeo balance sheet commitments in Group funds and exclude the value of the asset management activity.

(2) Including the balance sheet investment portfolio and balance sheet commitments in Group funds

(3) Including €270m raised by Rhône

(4) Portfolio company revenue, proportional to the percentage of assets held by the Eurazeo balance sheet.

(5) Balance Sheet investment portfolio, net of carried interests and taxes