EuroBusiness Media (EBM): Wendel, one of Europe’s leading listed investment firms, reports its 2010 annual results. Frédéric Lemoine welcome, you are the Chairman of the Executive Board of Wendel. What are your comments on the Group’s 2010 results?
Frédéric Lemoine (FL): 2010 has been a good year. I think one can say that. After a growth in our net asset value of more than 80%, we have created €2.25 billion of value, which is our main objective. Our net result is above €1 billion and the consolidated sales have grown by 17.5%. So growth has come back, both organically and external growth.
EBM: Briefly, what are your key takeaways today regarding the different companies in the portfolio in terms of their outlook?
FL: Well, I think their outlook, obviously, differs from one company to another. However, all have regained real momentum, notably on emerging markets, but also on more mature economies. I would say that most of our companies would grow between 5% and 10% in 2011, which is quite in line with their normative growth.
EBM: You have set a value creation target of €1.5-€2 billion for your unlisted companies by 2013: are you on track to reach this target and what is your strategy in this respect?
FL: Yes, we confirm the objective of having Materis, Deutsch and Stahl valuated around €2 billion at the end of 2013. We said between €1.5 and €2.5 billion to be cautious regarding the level of valuation of financial markets. However, I would like to remind you that these three companies had a value close to zero in 2009, so we are progressively regaining value around these three companies. We have announced today that their total valuation is very close to €1 billion already.
EBM: At your Investor Day in December, you indicated that you had a 26% exposure to high-growth markets. Do you see your exposition to these markets as increasing? And do you not see a return of growth in more mature economies?
FL: Actually, our consolidated sales have been in emerging countries, or fast growing countries, for 27%. That’s the final result, because of the very strong momentum - it was 22% in 2009 - so it goes quite quickly. We are still focusing on the development of our companies on these markets by launching new initiatives, acquiring companies, investing in new industrial facilities. However, we are much more confident on mature economies than we used to be six or twelve months ago. We see real momentum in the housing market in most countries in Europe, but also in the United States. We have certainly overcome the lowest point of the market, so our overexposure on the construction market is going to be a strength for the future.
EBM: You recently sold a large stake in Legrand. What was the rationale for this decision?
FL: Well, that’s our business to invest, to develop and to divest companies. Clearly, we have reduced our exposure to Legrand over time from 32% to 11% today. We are quite confident in the outlook of Legrand, notably after the astonishing and impressive results for 2010 and the outlook for 2015. So 11% is perfect for us. We have announced today the new agreement that we have signed with KKR to manage the incorporation of our stake in Legrand for the future.
EBM: Your priority for 2009 was to improve your financial situation. Your debt was restructured and reduced by €1.1 billion. You continued in 2010 with a further decrease of €951 million. Where do you stand today? Will you continue to decrease your leverage in 2011?
FL: Yes, progressively. We have already reduced by €2.5 billion overall our gross debt, which is a lot. But we also want to keep our leverage for the future. It was too high; it has been progressively and strongly reduced. We will adapt the pace in the future, but we certainly don’t want to keep too much debt on our balance sheet in the long term.
EBM: You’ve stated that Wendel’s five levers of value creation have now all been activated. Could you just please remind us what they are?
FL: Well, the first and the main lever is the performance of our companies, both their revenue and their profitability. The second lever is precisely this leverage effect on our balance sheet. The third is the objective of having €2 billion for non-listed companies which have their own debt and their own leverage. And the fourth and the fifth levers are around new acquisitions. On the one hand, for the companies of the group which we always help and encourage buying selected targets. And on the other hand, direct investments by Wendel and we are very happy to restart our investment process nowadays.
EBM: You still have lots of cash. What will be your acquisition strategy in 2011? What types of companies are you most interested in, and more generally, what is your overall outlook for the company in 2011?
FL: Well, we’ve just announced the acquisition of Parcours, which is a very interesting, fast growing company in France and in other European countries. It’s a company dedicated to long-term car rental which provides very high level types of services for their customers. And we are very happy to have found, eventually, the real jewel that we will add to our collection. So this is the start of the Orange-Nassau development, our new structure dedicated to innovative situations, growth situations, diversifying situations, which has already launched last year Helikos in Germany and owns a stake in the waste treatment in the Netherlands. Obviously, in the future we will continue to look for new, interesting investments. This is our job. This is the way we will create value for the very long term. We are not in a hurry. Our main goal is to remain very selective and rigorous for finding companies that we will be able to keep, possibly, for the next 20 years.
EBM: Will all of this positive newsflow translate into good news for shareholders in terms of dividends?
FL: Well, shareholders have already experienced a very nice share price evolution, I believe, since the beginning of 2009, from €14 to more than €70 today. But it’s fair to provide them with a good dividend after such a good year, so we have proposed to our general meeting of shareholders to increase the dividend by 25%, at €1.25.
EBM: Frédéric Lemoine, Chairman of the Executive Board of Wendel, thank you very much.
FL: Thank you.
