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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 33.9%
Price (€) 68.6
Market Cap (€M) 497
Perf. 1W: -4.72%
Perf. 1M: -4.72%
Perf. 3M: 4.03%
Perf Ytd: 8.97%
10 day relative perf. to stoxx600: -5.68%
20 day relative perf. to stoxx600: -4.93%
Earnings/sales releases13/04/2023

FY22: IDI in a solid stand amidst an adverse environment

After a record-breaking FY2021, IDI enjoyed another solid and active year with NAV per share up 12%. This strong momentum was driven both by the robust operating performance of its portfolio companies against an inflationary backdrop (i) and disposals at attractive terms (ii). 2022 proved to be a milestone year in the equity story of IDI, which has decided to strengthen its presence in third-party management with the acquisition of Omnes’ private equity and private debt activities under the newly created entity, IdiCo. While IDI is resilient in the face of macroeconomic headwinds, prudence remains the watchword.


Fact

Key FY22 figures
  • IDI’s NAV reached €673m at the end of FY22. The NAV per share stood at €89.45, up 12% yoy, corresponding to a significant 40.9% discount to NAV based on the current share price.
  • Although below the €126.2m achieved in the peak year 2021, IDI recorded an impressive net result of €80.4m, well above the €32.4m of 2020.
  • The company’s total liquidity position stood at €124m at the end of 2021, down 13.8% yoy, with €60m of credit lines (€30m drawn in Q1 23) and a €5m overdraft facility.
  • In 2022, IDI completed 15 transactions including 1 acquisition, 10 build-ups, 2 disposals, 1 reinvestment and the Omnes deal.
  • The major strategic transaction with Omnes was completed on March 23, 2023. IDI acquired 40% in Omnes’ renewable energy, venture capital and co-investment activities, and a 100% stake in IdiCo which regroups Omnes’ small, lower, mid cap private equity and private debt activities.
  • In terms of dividends, IDI has proposed a dividend of €2.5 per share or 2.8% of NAV and 4.57% of its average share price for 2022.

Analysis

Strong performance in a hostile private equity environment

While our HoldCo universe has not been spared by the equity market downturn and the hostile 2022 environment, IDI has proven resilient with NAV up 12% yoy to €673m (vs €611m) or €89.45 per share. A notable feat in today’s climate explained by (i) the excellent operational performances of the portfolio companies in the face of inflationary pressures and (ii) the active investment activity in 2022.

IDI’s investment activity was buoyant in 2022, with 15 deals completed, including one acquisition, ten build-ups, two disposals, one reinvestment and the signature of the agreement with Omnes. In terms of exits also, IDI is thriving regardless of the current environment, with notably the sale of the SaaS software publisher Groupe Positive (ex-Sarbacane), which allowed IDI to record a cash-on-cash multiple of 3.1x and a net IRR of more than 70%, and the sale of Formalian for a multiple of 3x and an IRR of 32%. The healthy performance of the Private Equity business in Europe allowed the HoldCo to post a significant result from investment activities of €94.2 million, below the €146 million recorded in the exceptional year of 2021, but well above the €40 million recorded in 2020.

A new era impelled by the Omnes acquisition

If 2022 was a busy year for investments, 2023 is also shaping up nicely for IDI, which has already completed 4 deals: the external growth of Talis Education into the Fore group and 2 disposals, including that of Freeland, the French leader in services to the self-employed, to MML Capital, enabling IDI to achieve a solid investment multiple of 2.2x and an IRR of c. 24% in less than 4 years.

The biggest deal in 2023, however, remained the acquisition of a significant stake (>40%) in Omnes’ renewable energy, venture capital and co-investment businesses (representing €5bn of AuM) and 100% of IdiCo, a newly-created entity that combines Omnes’ private equity and private debt businesses. IdiCo is designed to be IDI’s new European third-party management arm, managing €1bn of AuM. The transaction, which closed on March 23, 2023 instead of in the expected Q4-22, totally transforms IDI in that it will double the size of IDI’s third-party management business to €1.5 billion in assets under management (including $620 million for Emerging Markets IDI). Although no figures have been disclosed, the deal will change IDI’s financial statements in terms of revenues, with stable management fees and some performance fees on IdiCo’s fee-paying AuM. In terms of costs, we expect the transaction to result in an increase in personnel costs owing to some 30 additional people according to our estimates. We see the transaction as a way for IDI to leverage its size in investment opportunities. Details of the transaction and integration dates have not yet been disclosed although, according to sources in Les Echos, Omnes has an enterprise value of around €120m.

Looking ahead to 2023

In terms of outlook, despite the acquisition of Omnes, IDI’s core business remains direct investment in SMEs/ITCs, with a target of 12 to 15 companies in its portfolio. The company does not limit itself in terms of sectors but rather looks for opportunities. In view of its growing balance sheet, IDI expects to invest in tickets above €25m with co-investments of up to €100m.

Although the macroeconomic context is unfavorable, IDI can pride itself on a portfolio of quality companies with a degree of pricing power. Moreover, in an environment of rising interest rates and difficult financing, IDI has the financial strength and privileged relationships to face the challenges. Valuation-wise as well, the HoldCo looks attractive with a 41% discount to NAV at present. Finally, we see the acquisition of Omnes as being positive for IDI, which will be able to (i) diversify its revenues (ii) pocket a steady stream of income from stable management fees (iii) position itself on larger tickets with a scale effect (iv) share competencies between IDI and Omnes managers and (v) create synergies in the field of ESG. However, even if IDI is well positioned to meet the challenges ahead, caution remains our watchword for the comprehensive PE industry as the tightening in financial condition at a precipitated clip in 2022 will inevitably take its toll in 2023.

Making progress on the ESG front

On the ESG front, IDI has strengthened its commitment with the creation of an ESG committee at the supervisory board level. 2022 marked the formalization of IDI’s ESG approach, which is integrated into the entire investment cycle from due diligence, to the investment decision and the investment agreement, to the management of IDI’s holdings. Finally, in line with the objectives of the PRI, to which IDI has become a signatory, IDI is in the process of setting up an effective reporting system. By 2023, IDI intends to establish its first carbon footprint (Scopes 1, 2 and 3) measurements at both the holding and the portfolio company level.


Impact

We will revalue the underlying companies to estimate our NAV with the revision of the listed peer group multiples. We will incorporate the FY22 numbers into our model and roll forward our estimates to 2025 taking into account the Omnes acquisition which brings a significant twist to the original business model (third party money, more staff). The strong FY22 results continue to support our positive stance on the stock even if we remain dubious about private equity players in the prevailing context.


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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