AlphaValue Corporate Services
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IDI

CR
Bloomberg   IDIP FP
Holding Companies  /  France  Web Site   |   Investors Relation
Private equity players buffeted by macro-economic headwinds
Target
Upside 37.3%
Price (€) 75
Market Cap (€M) 543
Perf. 1W: 0.27%
Perf. 1M: 5.04%
Perf. 3M: 12.3%
Perf Ytd: 11.3%
10 day relative perf. to stoxx600: 2.12%
20 day relative perf. to stoxx600: 7.24%
Earnings/sales releases26/09/2023

Shielded against macro-economic turmoil

The uncertain macro-economic environment has left IDI unscathed, with NAV growth of 12.4% in H1 23 to €97.73 per share. The first half was particularly active for IDI, which announced 14 transactions, including the sale of Flex Composite Group to Michelin for more than 12x IDI’s initial investment, representing an IRR of 38%. All in all, these are outstanding results for IDI, which ended H1 23 with shareholders’ equity of €730m (+8.6%), investment capacity of €74.1m, and net income of €77.5m (vs. €30.1m in H1 22).


Fact

  • IDI’s NAV per share rose by 12.4% ytd to €97.73 compared to €86.95 at the end of 2022, bringing the NAV discount to 31% (from 42% in H1 22). On an absolute basis, NAV rose from €672.8m to €730.7m in H1 23.
  • In H1 23, IDI’s shareholders’ equity reached €730m (+8.6% ytd) and IDI’s investment capacity (net of debt) amounted to €74.1m, plus an undrawn investment credit of €30m and an overdraft facility of €5m.
  • Ytd, IDI has announced 14 transactions: 5 disposals, 4 external growths and 5 new acquisitions. In particular, IDI and Andera Partners sold Flex Composite Group for an EV of €700m in June, representing an investment multiple of 12x IDI’s initial investment and an IRR of 38%.
  • The net result (group share) came in at €77.5m in H1 23, substantially above the €30.1m reported the year before.

Analysis

A commendable performance in a persistently challenging environment

The persistently uncertain macro-economic environment failed to dampen IDI’s resilience in H1 23, with NAV per share up 12.4% ytd to €97.73 compared to €86.95 at the end of 2022. The positive development of NAV is explained by the solid operating performance of IDI’s investment portfolio and, above all, by the integration of the sale value of Flex Composite Group. A feat in a context of fast-declining valuations.

H1 23 was a particularly busy period for IDI, which announced 14 transactions, including 5 disposals, 4 external growths and 5 acquisitions. IDI continues to thrive, as demonstrated by the main deal of Q2 23: the sale of Flex Composite Group to Michelin for an EV of €700m, i.e. 12x its initial investment and an IRR of 38%. Beyond this transaction, IDI also finalised i) the acquisition of 40% of Omnes’ energy transition and innovation activities, ii) the disposal and subsequent reinvestment in Freeland to MML for a cash on cash multiple of 2.2x and an IRR of 24%, and iii) the disposal of Fidinav, a group specialising in the maritime transport of dry bulk, for an IRR of 6%. IDI also acquired a significant minority stake in Natural Grass, a major European player in the hybrid turf market, and carried out two external growth operations for Talis, a network of post-baccalaureate schools.

The solid performance of the private equity business, with the successful sale of Flex Composite Group enabled IDI to post a sizeable investment result of €89.5m compared with €34.4m in H1 22.

Solid balance sheet to face the challenges ahead

As of June 2023, IDI’s balance sheet is stronger than ever, with equity of €730m up 8.6% ytd, crossing the €700m threshold. The group’s investment capacity remains healthy at €74.1m, with an additional €30m of undrawn investment credit and €5m of undrawn overdraft facility. As a reminder, the value of the sale of Flex Composite Group was included solely in the NAV and was not included in the group’s liquidity position. Including the sale of Flex Composite Group, IDI should be sitting on a considerable liquidity hoard, which should enable it to finance new investments.

Looking ahead to the full year 2023

IDI had an excellent H1 23, with buoyant investment activity at a time when the private equity landscape was expected to be hit by the slowdown in dealflow and cutbacks in financing. As was the case in H1, H2 23 is looking particularly good for IDI, with five deals already in the pipeline or completed post-close including the acquisition of Prévost Laboratory Concept, the sale of B2B telecoms operator VOIP, two external growth deals and the winding-up of Dee Tech.

Clearly, the macro-economic environment remains lacklustre for private equity players, whose valuations are likely to suffer from rising interest rates alongside persistently high inflation. Yet, with a discount to NAV of around 31% and an undeniable track record of creating value, we remain positive on the stock, which we believe is a long-term hold.


Impact

We will revise our estimates in line with the H1 23 publication. Our figures will include the consolidation of IdiCo from 2023 and we will treat the stake in Omnes’ infrastructure business like the other financial investments. We will also include in our figures the capital gain on the sale of Flex Composite Group, which should boost our EPS for 2023.


Updates

15 Mar 24 Earnings/sales releases
FY23: IDI rewards its shareholders

28 Nov 23 Earnings/sales releases
Ending Q3 with firepower at its peak

28 Sep 23 M&A /Corp. Action
Masters the value creation playbook

26 Sep 23 Earnings/sales releases
Shielded against macro-economic turmoil

13 Apr 23 Earnings/sales releases
FY22: IDI in a solid stand amidst an adverse en...

14 Sep 22 Earnings/sales releases
H1 22: a new milestone for IDI

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