While Luxempart’s overall performance generated a return of 29.3% for its shareholders, it also achieved a consolidated net result of €499m.
“The year 2021 saw a rebound in the economy and a very satisfactory performance of the financial markets in Europe,” stated managing directors John Penning and Olaf Kordes in the annual report. The main highlight of the past year was the 27.4% increase in net asset value, which exceeded the €2bn mark. This resulted in a net asset value per share of €107.8.
Portfolio re-concentration
“This increase in net asset value is partly linked to realisations, i.e. sales of holdings”, said Penning, adding that “almost 25% of the result we have achieved is linked to company sales.” As confirmed in the company's activity report, managing a concentrated portfolio of direct investments in target markets is one of Luxempart's strategic objectives.
“Fewer companies, but with larger unit sizes”
Kordes and Penning spent the first six months of their mandate analysing ways of adapting the existing strategy. “We have defined two important axes. The first was that in the direct investment part we had a lot of lines with relatively small unit sizes. We then decided on higher unit amounts, so we looked for slightly larger transactions,” said Kordes.
As a result of Luxempart's new strategy, its portfolio has been reduced from 42 companies at the end of 2019 to 33 by 31 December 2021. The goal is to have only 20 companies in the portfolio by 2025. “Fewer companies, but with larger unit sizes,” said Kordes.
In takeover bids, normally, if the prices are good, you have to sell, otherwise you end up in companies where you are a minority shareholder with no rights and no liquidity
Disposals due to takeovers
Luxempart exited eight companies from its portfolio for a total of €284m, with Schaltbau and Zooplus being the subject of public takeover bids.
“We were involved in the negotiation and were therefore able to get a price that we felt was right to dispose of these holdings,” said Penning. Luxempart's philosophy is based on long-term support for the companies it invests in, he said. “in takeover bids, normally, if the prices are good, you have to sell, otherwise you end up in companies where you are a minority shareholder with no rights and no liquidity”.
All the disposals in 2021 generated capital gains of 12-15%. Luxempart allocated €206m mainly to four new companies in France and Germany, as well as in the strengthening of two listed companies.
A diversified approach on the fund side
In terms of its fund activity, Luxempart sought to diversify its geographical exposure, making more commitments in the United States, while reducing the weight of its sponsored funds in Europe. These new commitments were made to nine mainly US investment funds for a total volume of €98m. The company also increased its commitments to its historical partner funds by €67m.
The investment fund portfolio generated approximately €109m euros of income, mainly from funds in Belgium, France and Germany.
While Luxempart's fund strategy has historically been buy-out oriented, its managers have opted for a diversified approach, notably with more venture and growth investments in high-growth companies. “We have been quite successful because we have taken €98m in new commitments, of which a little over 80% were outside Europe," said Kordes.
This story was first published in French on . It has been translated and edited for Delano.