Nothing to rattle IDI
Nothing to rattle IDIEARNINGS/SALES RELEASES
H1 24 may have been a flat start to the year for IDI, and yet the HoldCo has once again proved its resilience in a persistently challenging environment, with NAV per share remaining constant after taking the dividend into account. The decline in the number of transactions to two in the first half is not a cause for concern, given that the group has carried out more than 36 deals over the past two years. The company ended the half-year with a solid balance sheet totalling €700m of equity capital and significant investment capacity of €335.7m.
FACT
IDI’s NAV per share was almost flat (+0.53% ytd after dividends) at €92.35.
In H1 24, IDI’s shareholder equity amounted to €700m with significant investment capacity of €335.7m. In addition, there were €65m of facilities (of which €16m were drawn down).
Ytd, IDI completed two transactions: the acquisition of a majority stake in the group specialising in elastomer solutions, Exsto, and an external growth operation with the acquisition of Aston, a school specialising in IT and digital training, by the Talis group.
In line with the decline in transactions, the group’s net profit came to €5.5m (versus €77.5m in H1 23).
ANALYSIS
The uncertain environment leaves IDI unshaken
Despite the persistently tough environment, IDI has once again demonstrated its resilience, with NAV per share virtually unchanged (after taking into account the €5 dividend) at €92.35 (+0.53% ytd).
On the investment side, IDI saw a drop in its investment activity with only two deals completed, one acquisition and one external growth operation. In H1 24, IDI acquired a stake in Exsto, a group specialising in high-performance elastomer solutions, and the Talis Group (77.3%-owned by IDI) acquired Aston, a school specialising in IT, digital and cybersecurity training. In line with this downturn, IDI recorded a significant fall in net profit, from €77.5m last year to €5.5m. This compares with a particularly good H1 23 due to the sale of Flex Composite Group.
The drop in transaction volume shall not be a concern bearing in mind that IDI has carried out 36 transactions over the past two years, including 5 acquisitions, 8 disposals, 2 disposals, 1 disposal/reinvestment and 20 external growth transactions. We expect activity to pick up again in H2 24. The lack of completed deals can be construed as capital discipline on the part of the IDI investment team which has skin in the game. Too much private equity money has been fighting for a limited number of quality assets on one hand and a number of funds are too greedy in their selling stance. Ergo, the market has yet to find clearing prices both ways. IDI probably did well to stand on the side.
Solid balance sheet to fund new opportunities
IDI’s balance sheet remained solid in H1 24 with €700m of consolidated shareholders’ equity. The group’s investment capacity is stronger than ever at €335.7m, in addition to €49m in undrawn credit facilities. IDI is clearly not short ammunition but, again, seems better off keeping its power dry for now. The HoldCo also intends to diversify geographically, indirectly.
IDI continues to make progress on ESG front
IDI, fully aware of ESG issues, has made them a priority. It began with the creation of an ESG committee at the supervisory board at the end of 2022. Today, IDI is making a point of reporting on its ESG performance and its carbon footprint, as well as on all its portfolio holdings. By 2024, the majority of IDI’s holdings should have completed their first carbon footprint assessment. In addition, IdiCo is the first IDI affiliate to have obtained Mission Company status in accordance with the 2019 Pacte Act.
Looking ahead to FY 24
While IDI is not providing any specific financial guidance, we expect the investment activity to modestly recover in H2 24. In addition, the group has demonstrated its resilience with the stability of its NAV in a difficult environment for the Private Equity industry. IDI will deploy its investment punch when it sees fit. This is a continuing story that will not be derailed by half-year reporting vagaries.
IMPACT
We are likely to revise our EPS estimates downwards for FY 24 in line with the lower level of transactions. For all that, we maintain a very positive view on the stock.
Groupe IDI activity is divided in two areas: through its subsidiaries, EURIDI and Marco Polo Investissements, Co. is engaged in management buy-out/buy-in and growth capital investments in French small-mid caps valued between Euro7,000,000 and Euro75,000,000 also, through its subsidiary, IDI Mezzanine, is engaged in mezzanine financing. Also Co. is active in the purchase of secondary market portfolio.
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