“Unfortunately Stock Market Performance Despite Record ANR”, Interview

On Thursday morning, the group announced your departure, a surprise announcement as your mandate was renewed in December 2020. What is the reason?

Indeed, I will tender my resignation to the Supervisory Board when we find a successor to serve in tandem with David Darmon on the Board for the coming years. My mission to reorient the organization and portfolio is complete, I am fully invested in it, I want to have a “multiple” life again. Discussions have begun with a handful of people, and the hiring decision is made by a supervisory board, including a management committee that includes Nicolas ver Hulst (chairman of the supervisory board) and Priscilla de Moustier, who is also chairman of Wendel-Holdings. [actionnaire familial de référence]. This will happen in the second semester.

What exactly was your mission?

I arrived in Wendel at the end of 2017, started my duties 1uh January 2018. At that time, it was necessary to achieve better alignment between the board and the supervisory board in order to focus on creating value in our companies, and in particular in Bureau Veritas, where energy needed to be released. The portfolio consisted of several small companies in different regions, including Japan, and we had eight offices … We needed to refocus our efforts. We also had to rethink our internal processes, think about new threats related to cybersecurity risk, find growth drivers, recruit talent… It was both interesting and very stressful. My trademark is to work with companies to ensure that our investments bring the highest possible return, which, in part, involves having the right leaders. Secondly, to support the work of companies, improve their growth potential, and there is still room in this issue. Third – ESG. [intégration de critères environnementaux, sociaux et de gouvernance dans les décisions d’investissement]. The priority, in particular the aspect of climate change, has gone up a notch. We tried to be ahead in this matter. Last year, we conducted a climate audit of all our audited companies. Now we want to launch a scientifically validated decarbonization plan (SBTi), which is a long process. Given the composition of our portfolio, which includes Bureau Veritas, as well as CPI, Acams [services de formations]we are already well positioned. Because of this concern, we turned down some investments, companies that emitted too much CO2.2.

Some analysts have been waiting for you to make a big acquisition…

In the past, Wendel has made big bets, for example, on Legrand or Saint-Gobain. But the environment no longer lends itself to this, especially for a group that has more than 60% of shareholders who are individuals who want ever-increasing dividends. We have acquired stakes in three companies and invested almost 1 billion euros in the US. This is a market that has made us a lot of money, with Allied Universal, CSP Technologies, Deutsch… Given what’s going on in Europe today, between rising energy prices, rearmament, it’s very good to expose yourself in the United States. states.

Does this mean that you don’t watch files that might appear in Europe?

We recently made proposals in France, for example, on a business in the field of education. This is a stable and predictable business. We made very high bids, but they were not enough to win, about 10 or 20 million euros. However, we chose to remain disciplined.

How has Bureau Veritas, Wendel’s main investment, changed since you joined the company?

Bureau Veritas, which we control, with 35.5% equity, concentrates half of our revalued net assets. The name has changed in the same way as the SBF 120 since the end of 2017, but it has become much better than its competitors, English Intertek and Swiss SGS. Today it is trading with the same multiples as the first one. Bureau Veritas deserves to be in Cac 40, I hope it gets in! We are very proud that Bureau Veritas is part of Cac ESG. When I arrived, I decided to let Didier Michaud-Daniel lead the group. The company has made a leap forward in terms of information systems, but also commercially. Its organic growth is higher than that of its peers. The group became less cyclical, with its “Green Line”. [activités liées à la transition écologique]accounting for over 50% of sales, very busy markets. Its financial structure, deeply reorganized, may enable it to accelerate external growth. Bureau Veritas has also begun a succession process with the recent arrival of Hinda Gharbi as Chief operating officer and who will be appointed Deputy CEO in early 2023. A Tunisian and Australian citizen, she is from Schlumberger, where she has risen to the top three. She will become CEO at the end of the general meeting in 2023. We always draw lots in the future of Bureau Veritas.

Is the return of inflation affecting your business?

Our companies are performing well at the moment, some because they have anticipated inflation, others because they are exposed to the United States, a buoyant market. We don’t really see an economic downturn, but we are very attentive. They also have a very strong financial structure, which we have strengthened over the past four years. This is in contrast to the fact that on the financial side, we are seeing that funds are less aggressive in new operations and that funding is becoming more difficult to obtain. Some assets are not for sale; for others, it takes longer than before. Since the beginning of January, CCC bond market rates have doubled to 12%! Today we see tensions in relation to the debt of the Italian state at the level of 4%. The European Central Bank is still buying assets until July, but who will buy then? With such a shock from inflation and rising rates, the question of IRR arises.[taux de rendement interne]: Will future earnings match past earnings? An impact on exit ratios is to be expected: a doubling of US 10-year bond rates to 3.1% will inevitably have a significant negative impact on the value of the asset.

Does this speak in favor of acquisitions?

Through Wendel Lab, we already wanted to invest in unicorns. At the moment we prefer investing in funds of funds. This turns out to be a good choice, we will be able to invest directly at more reasonable prices.

What could change the market’s perception of IHS?

If there is no takeover bid, the market should see that the company is performing efficiently and time should take its toll. In addition, there is currently little appetite for developing countries.

How do you explain the strong permanent discount on Wendel stock, which currently exceeds 45%?

We do not understand the extent of this discount, while the portfolio is high quality, we have an attractive shareholder return policy and our financial risk profile has been significantly reduced, with LTV [loan to value] historically low. Maybe there weren’t enough catalysts? True, portfolio growth is not enough yet, but our assets are stable. Our shares are not very liquid. But in the current environment, Wendel is a solid company made up of quality assets and a very solid financial structure. We also periodically use this discount to buy back shares and reread our shareholders, but our goal is rather to reposition ourselves.

Why not expand Wendel’s skills to manage on behalf of third parties, like some of your competitors? Isn’t that a way to reduce the discount?

This is a strategic question that the board regularly asks itself, but so far has not spoken in favor of this option. True, in addition to reducing the discount, in the context of fierce competition for quality assets, the question of size may arise. We have a really great investment team that has recently been strengthened with the arrival of young talent as well asoperating partners high quality on which such a strategy could be based, if chosen. The Council should reconsider this option and, if necessary, my successor should implement it.

Despite the hectic market environment, the general meeting confirmed the payment of a dividend of 3 euros against 2.90 euros last year…

We have kept dividends, including in 2020, during the pandemic. Our financial structure allows us to do this even in a stress test scenario with a deterioration in our debt ratio. credit for the cost which would be associated with a fall in the markets.


What is your main regret?

Wendel results in the stock market while our NAV [actif net réévalué] hit a record high last year. Had to rethink expectations from IHS [société de gestion de tours télécoms en Afrique]. We have not yet made money from these investments. But we did not sell our shares in IHS because we believe they are undervalued. Our estimates were about 15 times EBITDA, IHS pays for half of that. I think it’s a great company and we continue to support it as a long-term shareholder.