As a symbol of Luxempart's Buy and Build strategy, Sogetrel (10% for 40 million euros at the end of 2020) acquired BTN in Germany, where the installation of fibre optics has been delayed. (Photo: Shutterstock)

As a symbol of Luxempart's Buy and Build strategy, Sogetrel (10% for 40 million euros at the end of 2020) acquired BTN in Germany, where the installation of fibre optics has been delayed. (Photo: Shutterstock)

Luxempart maintained the value of its portfolio above €2bn in the first half of the year, down 4.6% over six months, compared with a 21.5% decline for the benchmark, the MSCI Europe Mid Cap Index. Its Buy and Build strategy puts it in an ideal position to face a complicated year-end.

The analysis of financial results is very sensitive to movement as is reflected in the half-year results published by Luxempart on Monday 29 August. The net asset value (€2.078bn) fell by 4.6%--significantly less than that of the benchmark MSCI Europe Mid Cap Index (-21.5%)--even though the holdings recorded an increase in their weighted average Ebitda of around 6.8% compared to the end of December 2021.

"We are even more cautious than at the end of December about valuation levels," says Olaf Kordes, who co-manages the Luxembourg investment company with John Penning. This is due to Russia's war in Ukraine and the impact of covid on the Chinese economy, which have created inflationary trends and threats to energy supplies.

At the end of December, the businesses in which Luxempart has invested directly were valued at an average of 10.3x Ebitda, compared with 9.6x in the first half of the year, the company estimates, since it bases this figure on a comparison with similar listed companies.

Exit from eduPRO

This "theoretical" decline is not alarming if one considers the strategy implemented by the tandem, the Buy and Build, which targets less exposed and more resilient sectors--such as Le Foyer, assets in the healthcare sector or in financial services.

In the first half of the year, Luxempart sold three investments for €119m: the German company Novotergum and its physiotherapy centres, in which it had acquired a minority stake in 2019, the Belgian company Vivalto and its retirement homes, in which it had acquired a 12% stake in 2016--two divestments already announced at the end of the year--and the Austrian-German company eduPro, in which it had a majority stake, sold to a Swiss private equity group.

414 million available

It invested in two new companies, Metalworks and Salice, for €57m. The €32m in Metalworks gives it about a third of the capital of this company, which specialises in plastic and metal accessories for the luxury industry. The €25m invested in Salice, alongside Cobepa, sees it enter a family-owned company specialising in locking systems for luxury furniture.

A further €7m went to companies already in the portfolio. Its share in Technotrans' capital for instance increased from 15% to 20%.

Cashflow has increased by €70m since the end of December to €414m, allowing the company to be on the lookout for opportunities that may arise from the unstable international environment and to respond to calls from funds. Luxempart has pledged €68m in ten new funds, investing mainly outside Europe. The company also received distributions of €37m and invested another €32m in existing funds.

Sogetrel is eyeing Germany

The Buy and Build approach, which aims to give entrepreneurs time to grow and is outside the usual investment cycles, was also reflected in the first quarter by the new acquisitions of Evariste, a sort of "integrated" federation of companies and by the new positioning of Sogetrel, in which Luxempart took a 10% stake for €40m in 2020. While the fibre optic deployment market in France is maturing, the French company has started to tackle the German market, which seems to be lagging behind, with the acquisition of BTN Baran Telecom Networks.

"We continue to monitor our holdings closely against the backdrop of economic and geopolitical developments in Europe and the rest of the world, which could create increased pressure on inflation and commodity supplies. We therefore remain vigilant for the second half of the year, as we cannot rule out major shocks," Penning and Kordes concluded in a press release issued on 29 August. 

This story was first published in French on . It has been translated and edited for Delano.