“My regret, the stock market performance, despite a record ANR”

Thursday morning, the group made public your departure, an unexpected announcement when your mandate had been renewed in December 2020. What is the reason?

Indeed, I will present my resignation to the Supervisory Board when we have found a successor to work in tandem with David Darmon within the Management Board for the years to come. My mission of refocusing the organization and the portfolio is over, I have fully invested myself in it, I want to find a “plural” life again. Discussions have started with a handful of people and the decision to recruit is up to the supervisory board, including the governance committee on which sit Nicolas ver Hulst (chairman of the supervisory board) and Priscilla de Moustier who is also chairwoman of Wendel- Holdings [actionnaire familial de référence]. It will take place in the second semester.

What was your mission more precisely?

I arrived at Wendel at the end of 2017, I took up my duties on the 1^er January 2018. It was then necessary to create a better alignment between the management board and the supervisory board, to focus on the creation of value in our companies, and in particular at Bureau Veritas, where it was necessary to release energies. The portfolio was made up of several smaller companies, in different geographies, 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 risk, find growth drivers, recruit talent… It was both exciting and very intense. My trademark is to work with companies so that our investment generates the most possible return, which notably supposes having the right leaders. The second thing is to keep companies running, to improve their growth potential, and on this point, there is still room. The third is ESG [intégration de critères environnementaux, sociaux et de gouvernance dans les décisions d’investissement]. The degree of priority, in particular on the aspect of climate change, has gone up a notch. We tried to be ahead on this subject. Last year, we carried out the climate audit of all our audited companies. We now want to launch a decarbonization plan, validated by a scientific method (SBTi), it is a long process. Given the composition of our portfolio, with Bureau Veritas but also CPI, Acams [services de formations], we are already well positioned. We have given up on certain investments because of this concern, companies that were emitting too much CO₂.

Some analysts were waiting for you to make a big acquisition…

Wendel has made big bets in the past, with Legrand or Saint-Gobain for example. But the environment no longer lends itself to it, especially for a group which has more than 60% of natural person shareholders, who want a steadily increasing dividend. We have taken stakes in three companies and invested almost 1 billion euros in the United States. It’s a market that has made us a lot of money, with Allied Universal, CSP Technologies, Deutsch… With what is happening today in Europe, between the rise in energy prices, rearmament, it’s is very good to expose oneself in the United States.

Does this mean that you do not look at the files that may arise in Europe?

We recently made offers in France, for example on business in education. It is a stable and predictable business. We made very high offers but which, at around 10 or 20 million euros, were not enough to win. However, we preferred to remain disciplined.

How has Bureau Veritas, Wendel’s main investment, evolved since your arrival?

Bureau Veritas, which we control, with 35.5% of the capital, concentrates half of our revalued net assets. The title has evolved much like the SBF 120 since the end of 2017, but it has done much better than its competitors, the English Intertek and the Swiss SGS. It is trading today on the same multiples as the first. Bureau Veritas deserves to be in the Cac 40, I hope it will enter! We are very proud that Bureau Veritas is part of the Cac ESG. When I arrived, I decided to trust Didier Michaud-Daniel at the head of 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 colleagues. The group has become less cyclical, with its “Green Line” [activités liées à la transition écologique], which represents more than 50% of sales, very buoyant markets. Its financial structure, deeply reorganized, can enable it to accelerate external growth. At Bureau Veritas too, a succession process has begun, with the recent arrival of Hinda Gharbi as chief operating officer and who will be appointed Deputy CEO at the start of 2023. A Tunisian and Australian national, she comes from Schlumberger, where she had climbed into the top 3. She will become CEO at the end of the 2023 general meeting. We believe always a lot in the future of Bureau Veritas.

Is the return of inflation affecting your businesses?

The performance of our companies is good at the moment, some because they anticipated inflation, others because they are exposed to the United States, a buoyant market. We do not really see the economic slowdown, but we are very attentive. They also have very solid financial structures, which we have strengthened over the past four years. This contrasts with the fact that, on the financial side, we observe that on new operations the funds are less aggressive and that financing becomes more difficult to obtain. Some assets do not sell; for others, it takes longer than before. Since early January, on the CCC bond market, rates have doubled to 12%! We see today the tensions on the debt of the Italian State, at 4%. The European Central Bank is still buying assets, until July, but then who will buy? With such a shock of inflation and rising rates, the question to ask is that of the IRR[taux de rendement interne]: Will future returns match past returns? An effect on exit multiples is to be expected: a doubling of US 10-year rates, to 3.1%, will inevitably have a significant negative impact on the value of an asset.

Does this argue in favor of acquisitions?

Through Wendel Lab, we already wanted to invest in unicorns. For the moment, we have favored investments 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?

Unless there is a takeover offer, the market should see that the company is delivering performance, and time must do its work. Furthermore, there is little appetite for emerging countries at the moment.

How do you explain the strong persistent discount on the Wendel share, currently over 45%?

We do not understand the extent of this discount, while the portfolio is of high quality, we have an attractive shareholder return policy and our financial risk profile has been considerably reduced, with an LTV [loan to value] historically low. Maybe there weren’t enough catalysts? Admittedly, growth is not yet sufficient in the portfolio, but our assets are resilient. Our stock is not very liquid. But in the current environment, Wendel is a solid stock, made up of quality assets, with very sound financial structures. We also periodically take advantage of this discount to buy back shares and re-read our shareholders, but our objective is rather to reposition ourselves.

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

This is a strategic question that the Board regularly asks itself, which has not come out in favor of this option so far. Beyond the reduction of the discount, it is true that, in a context of fierce competition for quality assets, the question of size may arise. We have a truly remarkable investment team, which has recently been strengthened with the arrival of young talents as well asoperating partners of high quality, on which such a strategy could be based if it were chosen. It will be up to the Board to reconsider this option and, if necessary, to my successor to implement it.

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

We maintained a dividend, including in 2020, during the pandemic. Our financial structure allows us to do so, even in a stress test scenario, with a deterioration in our debt ratio loan to value which would be due to a fall in the markets.