Dynamic asset management growth over the first 9-months of 2023
- Assets Under Management (AUM): +11% pro forma in one year to €33.5bn
- Fee Paying Assets Under Management (FPAUM): +19% pro forma1 to €24.2bn
- Third-party fundraising: €1,723m, including €566m raised from private clients
- Management fees: +10% pro forma1 to €305m
Solid portfolio companies performance
- Sustained revenue growth across all segments excluding Growth (+11%)
- Good momentum in the Growth segment (+17%)
Selective deployment; increase in realizations expected in H1 2024
- Realizations down over 12M: €0.8bn compared to €2.4bn over 9M 2022; the Group expects realizations volumes to pick-up in H1 2024
- Selective deployment: €3.0bn (€3.8bn over 9M 2022)
- Significant leeway: dry powder2 of €4.0bn and undrawn balance sheet commitments in the funds of €2.2bn
New impact strategy developments
- Final closing of Eurazeo Smart City II fund above its initial target
- Strong fundraising momentum in the transition infrastructure fund (ETIF) which should soon close above its initial target
- For 2023, the Group anticipates a fundraising of around €3.0bn and confirms it is targeting strong growth in Fee Related Earnings
Christophe Bavière and William Kadouch-Chassaing, Co-CEOs, stated:
“Eurazeo reports a solid growth in the first nine months of the year, despite a complex and uncertain environment. This reflects the quality of our client franchises and the solid underlying performance of investments. We are confident in Eurazeo ability to achieve €3bn of fundraising and grow steadily the asset management operating income. The Group will present its medium-term strategy and outlook during a Capital Markets Day on November 30.”
ASSET MANAGEMENT ACTIVITY
A. ASSETS UNDER MANAGEMENT
As of September 30, 2023, Eurazeo Assets Under Management (AUM) totaled €33.5bn, up 11% over 12 months pro forma of the Rhône divestment
- third-party AUM (Limited Partners and private clients) totaled €22.8bn (+10% over 12 months at constant scope), including dry powder of €4.0bn. Following the sale of the stake, AUM no longer include Rhône which accounted for €2.4bn of third party AUM, including drypowder of €0.6bn prior to its sale.
- balance sheet AUM include the investment portfolio on the Group’s balance sheet (€8.5bn, up €0.5bn due to the investments completed during the quarter) and Eurazeo balance sheet commitments in Group funds (€2.2bn).
Fee Paying AUM amounted to €24.2bn, up 19% over 12 months pro forma of Rhône. Rhône FPAUM totaled €1.3bn prior to its sale.
In a wait-and-see market that has contracted compared to last year, Eurazeo raised €1.7bn from its clients in the first nine months of 2023:
- Private Debt fundraising remained strong, exceeding €900m in 9M 2023, up more than 30% compared to 9M 2022;
- the transition infrastructure fund maintained its robust fundraising momentum, collecting over €200m over the period. Considering the commitments received, the fund will soon exceed its initial target of €500m;
- Private Equity inflows totaled €625m over 9M 2023, driven by current fundraising in the Secondary segment and the final closing of the smart city and climate technologies program at €400 million, exceeding the initial target.
Private client fundraising maintained the good momentum observed in 2022. With €566m raised in the first nine months of 2023, in line with the same period last year, it represented 33% of total fundraising during the period. Private clients account for €3.9bn, or over 17% of third-party AUM. The development of the offer for private clients continues to gain momentum with the signature of a partnership with iCapital. This partnership complements the one signed with the digital platform Moonfare. It will enable Eurazeo to extend its product distribution to Wealth Managers in Europe, and particularly in Germany, Belgium, Luxembourg, Italy, Switzerland and in the Netherlands.
Post-closing, the MLBO strategy realized a first closing of the Eurazeo Capital V fund (EC V) at €2.3bn, including c.€600m from third parties. The successful third-party capital fundraising of MLBO, historically supported by the balance-sheet, marks an important milestone in the Group’s shift towards third-party management.
For the full-year 2023, the Group anticipates fundraising of around €3.0bn, compared to €2.9bn excluding Rhône in 2022.
C. ASSET MANAGEMENT REVENUE
Management fees totaled €305m in 9M 2023, up +10% at constant scope and exchange rates (Rhône exit). Excluding the base effect of catch-up fees, they rose by +12% and break down as follows:
i) third-party asset management activity, up +4% to €214m at constant scope and exchange rates. Excluding catch-up fees, third-party management fees increased by +7%;
ii) Management fees on Eurazeo’s balance sheet of €92m, up +27% mainly due to commitments to the EC V fund.
Realized performance fees were negligible during the period due to the limited number of realizations.
Realizations in the first nine months of the year totaled €0.8bn, down on realizations of €2.4bn in 9M 2022. In a less favorable market context, the Group chose to postpone some exits. The group initiated several divestment processes that should lead to an increase in realization volumes in the first half of 2024.
Eurazeo remained selective in its investments: Group deployment totaled €3.0bn in the first nine months of 2023, compared to €3.8bn in 9M 2022. Deployments are mainly split between Private Debt, secondary and Buy-out with the acquisition of BMS.
Going forward, Eurazeo benefits from substantial leeway for its future deployments: dry powder of €4.0bn7 and balance sheet commitments in the funds of €2.2bn.
The investment portfolio carried on the balance sheet is 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. They are primarily positioned in structurally buoyant sectors, such as healthcare, business services, technologies and energy transition.
In the first nine months of the year, these companies delivered a new increase in revenue growth8 :
- Mid-large buyout (+15% in 9M 2023): The portfolio reported strong organic growth in almost all segments. This performance reflects the Group’s positioning in high-quality assets in buoyant segments;
- Small-mid buyout (+3%): Business services and healthcare companies continued their strong growth. Companies in the consumer space experienced a slight slowdown;
- Growth (+17%): Revenue growth remained dynamic, ranging between +20% and +45% for most of the portfolio. All companies are focusing on cost control and accelerating their path to profitability;
- Brands (+11%): The portfolio reported further robust growth;
- Real Assets (+10%): Robust growth in hotel activities and resilient performance of the real estate portfolio.
Since January 1, 2023, Eurazeo no longer consolidates its portfolio companies, in accordance with the consolidation exemption provided in IFRS 10 for “investment companies”.
NEW IMPACT STRATEGY DEVELOPMENTS
Drawing on its recognized expertise in sustainable investment, Eurazeo develops "return first" impact investment strategies with profitability profiles in line with the best standards in their asset classes.
The Group achieved the final closing of the fund Eurazeo Smart City II, exceeding its initial target. It has received the support from tier-1 sovereign and institutional investors, and as of September 30, had already completed 11 investments, of which 57% in impact-driven companies. The program as a whole, should have the capacity to deploy €400 million.
Eurazeo Transition Infrastructure Fund (ETIF), classified as an Article 9 fund under SFDR regulations, is continuing its fund-raising momentum and should soon exceed its target of €500 million. The fund is pursuing its deployment in the energy transition and digital sector, with an investment in 2BSI, a French leader in the recovery and management of infrastructure waste. ETIF also enabled Etix to acquire 5 additional data centers in France during the quarter, while continuing to support this new entity in its decarbonization trajectory, the acquisition having been partly financed by a sustainability linked bond.
REINFORCEMENT OF TALENTS
The Group continues to strengthen its key areas of expertise in key growth areas, notably with the recruitment of a new Operating Partner for MLBO, a Private Debt Investment Director for the UK and the Nordic countries, a Managing Director in charge of fundraising in the Middle East, and new high-level senior advisors for the Growth and Impact strategies. During the first half of the year, the Group made a number of appointments to key positions (CFO, Group General Secretary, Compliance, Operations, and the leadership of MLBO and Growth strategies). Further senior appointments are expected in the coming quarters.
BALANCE SHEET AND CASH AND CASH EQUIVALENTS
As of September 30, 2023, the balance sheet investment portfolio was valued at net €8.5bn (€111.3 per share outstanding). As a reminder, the portfolio is not revalued quarterly. The change in value compared to end-June 2023 (€8.0bn or €103 per share) comes from acquisitions completed in the third quarter that are reflected in cash and cash equivalents.
As of September 30, 2023, net debt totaled €969m (€12.7 per share), including gross cash and cash equivalents of €16m. This debt represents a moderate gearing of around 12%. As of June 30, 2023, net debt totaled €426m (€5.5 per share).
Eurazeo has a revolving credit facility (RCF) of €1.5bn, maturing in 2026, and drawn €985m at the end of September 2023.
The Group held 5,150,783 treasury shares, i.e. 6.5% of total outstanding shares (79,224,529 shares) as of September 30, 2023. Excluding treasury shares held for cancellation, the number of shares outstanding is 76.4 million. The shares purchased will be canceled before the year end.
The Executive Board launched a new €100m share buyback program that came into effect at the end of March 2023. This program, which will be accretive for shareholders, reflects management’s confidence in the Group’s prospects and the value of its assets. The Group will also buy back shares to cover the Long Term Incentive Plans (LTIP).
As of September 30, 2023, the Group had used €71m of this amount. As of October 30, a total of €83m had been used.
For 2023, the Group anticipates fundraising of around €3.0bn (compared to €2.9bn excluding Rhône in 2022) and confirms it is targeting further robust growth in Fee-Related Earnings, which should be driven by higher management fees and disciplined costs.
The Group will present its medium-term strategy and outlook at a Capital Markets Day on the morning of November 30, 2023. This event will be presented as a webcast.
On October 31, the MLBO strategy realized a first closing of the Eurazeo Capital V fund (EC V) at €2.3bn, including c.€600m from third parties. This closing will result in a partial syndication of the assets already acquired by the fund (Cranial, Scaled Agile, BMS and Sevetys).
APPENDIX 1: PARTNERSHIPS
iM Global Partner (AUM not consolidated)
As a reminder, iM Global Partners’ assets are not included in the Eurazeo Group's published AuM. Assets under management of iM Global Partners (in iMG's share of interest) stood at $37.1 billion at the end of September 2023, up 16% compared with the end of September 2022. This growth is notably due to the good performance of affiliates despite the current uncertain macro-economic environment, and to the continuation of iM Global Partner's dynamic M&A strategy, in particular through the acquisition of a 45% stake in Berkshire Asset Management, a US equity and yield-focused asset management company, in December 2022, as well as through Litman Gregory Wealth Management's acquisition of Wedgewood Partners' private client business in August 2023 (AuM $275m).
APPENDIX 2: BREAKDOWN OF EURAZEO BALANCE SHEET AUM
APPENDIX 3: ASSETS UNDER MANAGEMENT
1 Pro forma of Rhône which represented €2.4bn of AUM and €1.3bn of FPAUM before its sale
2 Rhône drypowder totaled €0.6bn
3 Assets under management are not revalued quarterly. September 30, 2023 figures are pro forma. They include Eurazeo balance sheet commitments in Group funds and exclude the value of the asset management activity.
4 Including the balance sheet investment portfolio and balance sheet commitments in Group funds
5 Including MCH for €200m in Private Equity, excluding Rhône sold in 2023
6 Excluding Rhône fundraising for €270m
7 Rhône accounted for drypowder of €0.6bn prior to divestment
8 Portfolio company revenue, proportional to the percentage of assets held by the Eurazeo balance sheet. MLBO, SMBO, Growth, Brands and Real Assets represent c.95% of the balance sheet investment portfolio, see appendix 2.
Eurazeo financial timetable
|30 November 2023||Capital Market Day|
|7 March 2024||2023 annual results|
|16 May 2024||Q1 2024 revenue|
|25 July 2024||2024 half-year results|