“Unfortunately, stock market performance, despite the record ANR,” Interview

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

In fact, I will announce my resignation to the supervisory board when we find a successor to work in tandem with David Darmon on the board for years to come. My mission to refocus the organization and portfolio is over, I have fully invested in it, I want to find “multiple” life again. Discussions have begun with several people, and hiring decisions are made by the supervisory board, including the management committee, which includes Nicolas Ver Hulst (chairman of the supervisory board) and Priscilla de Moustier, who is also chairman of Wendel-Holdings [actionnaire familial de référence]. It will take place in the second semester.

What was your exact mission?

I arrived at Wendel in late 2017 and took up my duties 1is January 2018 Then it was necessary to create better coherence between the board and the supervisory board, focus on value creation in our companies, and in particular in Bureau Veritas, where it was necessary to release energy. The portfolio consisted of several smaller companies, in different geographical regions, including Japan, and we had eight offices… We needed to refocus our efforts. We also had to review our internal processes, think about new threats related to cybersecurity risks, find drivers for growth, attract talent … It was both exciting and very intense. My brand is to work with companies so that our investments bring the highest possible return, and this primarily means having the right leaders. Secondly, to continue the work of companies, to improve their growth potential, and there is still room in this regard. The third is ESG [intégration de critères environnementaux, sociaux et de gouvernance dans les décisions d’investissement]. The level of priority, particularly in terms of climate change, has risen. We tried to be ahead in this matter. Last year, we conducted a climate audit of all audited companies. Now we want to launch a scientifically proven decarbonisation plan (SBTi), a long process. Given the composition of our portfolio of Bureau Veritas, as well as CPI, Acams [services de formations], we already have a good position. We have given up certain investments because of this concern, companies that have emitted too much CO2.

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

Wendel has made big bets in the past, for example, with Legrand or Saint-Gobain. But the environment is no longer suitable for this, especially for a group that has more than 60% of individual shareholders who want ever-growing dividends. We acquired a stake in three companies and invested almost 1 billion euros in the United States. This is a market that has brought us a lot of money, with Allied Universal, CSP Technologies, Deutsch … Due to what is happening in Europe today, between rising energy prices, rearmament, it is very good to expose yourself in the United States. states.

Does this mean that you are not viewing files that may be available in Europe?

We have recently made proposals in France, for example, on business in the field of education. This is a stable and predictable business. We made very high offers, but about 10-20 million euros were not enough to win. However, we preferred to maintain discipline.

How did Bureau Veritas, Wendel’s main investment, develop after your arrival?

Bureau Veritas, which we control, concentrates half of our revalued net assets with 35.5% of the capital. Since the end of 2017, this name has changed in the same way as the SBF 120, but it has become much better than its competitors, the English Intertek and the Swiss SGS. Today it is traded on the same multipliers as the first. Bureau Veritas deserves to be in Cac 40, I hope it will come in! We are very proud that Bureau Veritas is part of Cac ESG. When I arrived, I decided to entrust Didier to Misho-Daniel at the head of the group. The company has made a leap forward in terms of information systems, as well as commercially. His organic growth is higher than that of his colleagues. The group has become less cyclical, with its “Green Line” [activités liées à la transition écologique], which accounts for more than 50% of sales, are very active markets. Its deeply reorganized financial structure could allow it to accelerate external growth. Bureau Veritas has also begun a succession process, with the recent arrival of Hindi Garbi as chief operating officer and who will be appointed Deputy General Director in early 2023. A citizen of Tunisia and Australia, she comes from Schlumberger, where she was in the top 3. She will become CEO at the end of the 2023 general meeting. We believe that there will always be a lot in the future of Bureau Veritas.

Does the return of inflation affect your business?

At the moment, the results of our companies are good, some because they predicted inflation, others because they are prone to the United States, a viable market. We do not see much of a slowdown in the economy, but we are very careful. They also have very strong financial structures, which we have strengthened over the last four years. This contrasts with the fact that, on the financial side, we are seeing that new operations are less aggressive 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, rates on the CCC bond market have doubled to 12%! Today, we see tensions over Italian debt at 4%. The European Central Bank is still buying assets until July, but who will buy then? In the face of such a shock from inflation and rising rates, the question of the IRR arises[taux de rendement interne]: Will future income match the past? Expectations are expected to have an impact: doubling 10-year US rates to 3.1% will inevitably have a significant negative impact on asset value.

Is this an argument in favor of acquisitions?

Through Wendel Lab, we already wanted to invest in unicorns. At the moment, we prefer to invest in funds. This is a good choice, we can invest directly at more affordable prices.

What can change the market perception of IHS?

If there is no takeover offer, the market must see that the company is working and time must do its job. In addition, there is currently no appetite for developing countries.

How do you explain the strong permanent discount on Wendel’s share, which now exceeds 45%?

We do not understand the scale of this discount, although the portfolio is of high quality, we have an attractive shareholder return policy, and our financial risk profile has decreased significantly with LTV [loan to value] historically low. Maybe there were not enough catalysts? True, portfolio growth is still insufficient, but our assets are stable. Our shares are not very liquid. But in the current environment, Wendel is a solid stock consisting of quality assets with a very strong financial structure. We also periodically use this discount to repurchase shares and reread our shareholders, but our goal is to change position as soon as possible.

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

This is a strategic question that is regularly asked by the Council, which has not yet spoken out in favor of this option. In addition to reducing the discount, however, in conditions of fierce competition for quality assets, the question of size may arise. We have a really great investment team, which has recently been strengthened by the arrival of young talent, as well asoperational partners high quality on which such a strategy could be based, if chosen. The Council should reconsider this option and, if necessary, my successor will implement it.

Despite the tense market environment, the general meeting confirmed the payment of dividends of 3 euros against 2.90 euros last year …

We supported dividends, including in 2020, during the pandemic. Our financial structure allows us to do this, even in a stress test scenario, with a deteriorating debt ratio loan to value that would be due to falling markets.


What is your main regret?

Stock market indicators Wendel, and our NAV [actif net réévalué] reached a record last year. IHS expectations had to be reconsidered [société de gestion de tours télécoms en Afrique]. We have not yet earned on this investment. But we did not sell our IHS shares because we believe they are undervalued. Previously, our estimates were about 15 times EBITDA, IHS pays half that. I think it’s a great company and we continue to support it as a long-term shareholder.