• Net Asset Value (NAV): Increased to EUR38.3 billion at June 30, up from EUR35.4 billion at January 1.

• Net Debt: Decreased to EUR3.7 billion at June 30, down from EUR4 billion at the beginning of the year.

• Loan-to-Value Ratio: Improved to 9% at June 30, down from 10% at the beginning of the year.

• NAV per Share: Increased by 9% in the first half of the year.

• Gross Asset Value (GAV): Increased by EUR3.3 billion or 8% in the first half of the year.

• Listed Companies Value: Increased by EUR2 billion or 6% in the first half of the year.

• Investment in Philips: Increased by EUR622 million, reaching a 17.5% shareholding.

• Unlisted Companies Value: Increased by EUR70 million or 2% in the first half of the year.

• Investments and Others: Increased by EUR281 million or 10% in the first half of the year.

• Cash and Cash Equivalents: Increased by EUR691 million in the first half of the year.

• Free Cash Flow Generation: EUR1 billion of dividends received and EUR400 million of proceeds from reinsurance vehicles.

• Share Buyback: EUR130 million as part of the EUR1 billion buyback program.

• Dividends Paid: Approximately EUR100 million to shareholders.

• Management Costs: Approximately 6 basis points of GAV on an annualized basis.

• One-off Positive Impact: EUR11.8 billion due to the change in reporting as an investment entity under IFRS 10.

• Warning! GuruFocus has detected 6 Warning Signs with EXXRF.

Release Date: September 25, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Net asset value increased to EUR38.3 billion at June 30, up from EUR35.4 billion at January 1.

• Net debt decreased to EUR3.7 billion at June 30, down from EUR4 billion at the beginning of the year.

• NAV per share increased by 9% in the first half of the year.

• Total shareholder return has been growing at a compounded annual growth rate of 20% since inception.

• Strong performance from listed companies like Ferrari (up 25%), Philips (up 12%), and Iveco (up 29%).

Negative Points

• NAV per share growth of 9% underperformed compared to the MSCI World Index's 40% increase.

• Ferrari's share price dip before the half-year end negatively impacted NAV per share.

• Stellantis and CNH saw declines of 13% and 15% respectively in the first half of the year.

• Negative performance of listed securities resulted in a EUR280 million loss.

• Management costs and financial expenses contributed to a negative EUR57 million impact.

Q & A Highlights

Q: Can you provide an overview of Exor's financial performance for the first half of 2024? A: Our net asset value (NAV) increased to EUR38.3 billion at June 30, up from EUR35.4 billion at January 1. The main driver was the positive performance of our listed companies. Net debt decreased to EUR3.7 billion from EUR4 billion, improving our loan-to-value ratio to 9%. We also transitioned to reporting as an investment entity under IFRS 10, making our financial reports more concise and clear.

Q: How did Exor's NAV per share perform compared to the MSCI World Index? A: Our NAV per share increased by 9% in the first half, compared to a 40% increase by the MSCI World Index. Ferrari's share price dip just before the half-year end impacted our NAV per share, but Ferrari has since outperformed the MSCI. Long-term, our NAV per share has grown at a compounded annual rate of nearly 19%, compared to 12% for the MSCI World Index.

Q: What were the main contributors to the increase in Exor's gross asset value? A: Our gross asset value increased by EUR3.3 billion or 8% in the first half. EUR2 billion came from increases in valuations, and EUR1.3 billion was driven by dividend inflows. Listed companies, which represent around 80% of our GAV, were the main drivers, with Ferrari up 25%, Philips up 12%, and Iveco up 29%.

Q: Can you elaborate on Exor's investments in Philips and Clarivate? A: In the first half, we increased our investment in Philips by EUR622 million, reaching a 17.5% shareholding. This investment has gained approximately EUR1.2 billion in value. We also became a long-term investor in Clarivate, reaching a 10% shareholding and securing a Board seat.

Q: How did Exor's unlisted companies perform in the first half of 2024? A: The value of our unlisted companies increased by just below EUR70 million or 2%. This was primarily due to additional investments in TagEnergy, Nuo, Lifenet, and GEDI for approximately EUR124 million, partly offset by fair value adjustments.

Q: What were the key changes in Exor's net financial position? A: Our net financial position improved to EUR3.7 billion from a net debt position of EUR4 billion at the start of the year. This was driven by strong free cash flow generation, including EUR1 billion of dividends received and EUR400 million from reinsurance vehicles.

Q: How has the transition to investment entity reporting under IFRS 10 impacted Exor's financial statements? A: The transition resulted in a one-off positive impact of EUR11.8 billion. This change aligns our financial reporting with how we measure performance and make capital allocation decisions. It also makes our financial statements easier to read and more relevant for stakeholders.

Q: What are Exor's future plans for capital allocation and shareholder returns? A: We continue to maintain disciplined capital allocation, deploying EUR900 million into companies, Lingotto, and ventures. We also bought back shares for EUR130 million and paid EUR100 million in dividends. Our aim is to keep management costs below 10 basis points of our GAV.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.