ROTHSCHILD (EPA:ROTH) - Press release - Financial information 3rd quarter 2021
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09/11/2021 17:40
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Press release - Financial information
3rd quarter 2021
Paris, 9 November 2021
Record quarterly revenues driven by strong market conditions across all three
businesses
* Global Advisory: record quarterly revenue of EUR464 million, up 77% (Q3 2020:
EUR262 million) and nine- month revenue of EUR1,297 million, up 64% (9m 2020:
EUR791 million), reflecting continued very strong levels of activity across our
whole business.
* Wealth and Asset Management: very strong quarterly revenue of EUR151 million,
up 29% (Q3 2020: EUR117 million) and nine-month revenue of EUR425 million, up
15% (9m 2020: EUR369 million), driven by an increase in management fees in line
with the growth in Assets under Management (AuM), up 22% to EUR95.3 billion (31
December 2020: EUR78.1 billion). This is due to the combination of solid Net
New Assets (NNA) in Wealth Management (EUR4.8 billion), the acquisition of
Banque Pâris Bertrand (EUR6.4 billion), which we are reporting for the first
time (3 months of activity), and positive market performance.
* Merchant Banking: record quarterly revenue of EUR47 million, up 78% (Q3 2020:
EUR27 million), continued strong momentum in Q3 2021 led to a nine-month
revenue of EUR282 million, up 255% (9m 2020: EUR79 million) as a result of
significant realised and unrealised investment gains, combined with further
growth in recurring revenue. AuM up 10% to EUR17.4 billion, (31 December 2020:
EUR15.7 billion), of which Rothschild & Co's share was EUR1.5 billion.
Third quarter
In EUR million 2021 2020 % Var
Global Advisory 464.0 261.9 77%
Wealth & Asset Management 151.3 117.1 29%
Merchant Banking 47.4 26.7 78%
Other businesses and
corporate centre 4.3 2.2 95%
TOTAL before IFRS
reconciliation 667.0 407.9 64%
IFRS Reconciliation (0.3) (4.2) (93)%
Total Group revenue 666.7 403.7 65%
9m to September
2021 2020 % Var
1,297.4 791.3 64%
425.5 369.3 15%
282.1 79.5 255%
12.4 9.3 33%
2,017.4 1,249.4 61%
(0.8) (7.9) 90%
2,016.6 1,241.5 62%
The nine months revenue has been negatively impacted by currency translation
effects of EUR1 million.
1. Business review
1.1 Global Advisory
Our Global Advisory business focuses on providing advice in the areas of
Strategic Advisory and M&A, Financing Advisory encompassing Debt Advisory,
Restructuring and Equity Advisory, as well as Investor Advisory where we advise
clients around engaging with shareholders on a variety of topics including
activism, sustainability and governance.
Revenue for the third quarter of 2021 was a new record of EUR464 million, up
77% compared to the same period last year (Q3 2020: EUR262 million), reflecting
continued very strong levels of activity across our whole business.
Revenue for the nine months to September 2021 was a record high of EUR1,297
million, up 64% compared to the same period last year (9m 2020: EUR791
million). For the last twelve months to September 2021, we ranked 5th globally
by financial advisory revenue(1).
Our M&A revenue for the nine months to September 2021 was EUR955 million, up
86% compared to the same period last year (9m 2020: EUR513 million), based on
continued elevated levels of deal activity within our main geography and sector
franchises, and across both corporate and financial sponsor clients. We ranked
3rd globally by number of completed transactions for the nine months to
September 20212. In Europe, we continue to advise on more M&A transactions than
any of our competitors, a position we have held for more than 15 years(2).
Financing Advisory revenue for the nine months to September 2021 was EUR342
million, up 23% compared to the same period last year (9m 2020: EUR278
million). We ranked 2nd in Europe and 3rd globally by number of completed
restructuring transactions for the nine months to September 2021(2). We advised
on more European equity assignments than any other independent financial
adviser over the same period(3). Global Advisory was highly active in advising
clients, during the period, on innovative sustainability linked financing
transactions as well as in raising funding for renewable energy projects.
Global Advisory advised the following clients on significant assignments that
completed in the quarter:
* FirstGroup on its divestiture of First Student and First Transit to EQT
Infrastructure (US$4.6 billion, UK and United States)
* Fieldwood Energy (adviser to First Lien Creditors) on the restructuring of
Fieldwood and credit bid purchase of certain assets (US$3.7 billion and US$1.03
billion, respectively, United States)
* Groupe BPCE on its public tender offer to the minority shareholders of
Natixis (EUR3.7 billion, France)
* UDG Healthcare on its recommended cash offer by CD&R (£2.8 billion, Ireland
and United States)
* Asda and its shareholders on the sale-and-leaseback of Asda's distribution
and warehouse property assets to Blackstone (c.£1.6 billion, United Kingdom)
In addition, we continue to work on some of the largest and most complex
announced transactions globally, including acting as financial adviser to:
* Suez on the recommended tender offer from Veolia (EUR26.0 billion, France)
* Morrisons on its recommended offers from CD&R (£10.0 billion, United Kingdom
and United States)(4)
* HELLA Family Pool on the sale of its 60% stake in HELLA to Faurecia (EUR6.7
billion, Germany and France)
* Nordic Aviation Capital on its restructuring (US$5.9 billion, United
Kingdom)
* Clearlake Capital on its take-private acquisition of Cornerstone OnDemand
(US$5.2 billion, United States)(4)
(1) Source: Company filings
(2) Source: Refinitiv
(3) Source: Dealogic
(4) Transaction completed in October 2021
1.2 Wealth and Asset Management
Wealth and Asset Management (WAM) is made up of WAM Europe with Wealth
Management businesses in France, Switzerland, UK, Belgium, Germany, Monaco,
Italy and Spain and Asset Management activity in Europe; and AM US, an Asset
Management business in North America.
Despite mass vaccination in developed countries, the pandemic crisis is not yet
over, and the coming months remain uncertain. The markets are now focusing on
inflation, widespread commodity shortage and interest rate rises on the
horizon. The equity markets are still supported by the liquidity provided by
the central banks and governments. Within this context, the performance of the
business has remained very strong. Net new assets (NNA) for the nine months to
September 2021 were EUR4.3 billion; of which net inflows of EUR4.8 billion in
Wealth Management and EUR0.5 billion in Asset Management Europe and net
outflows of EUR1.0 billion in Asset Management US. During the third quarter,
WAM Europe continued to attract new clients and recorded EUR1.2 billion of NNA,
slightly offset by net outflows of EUR0.3 billion in North America.
The acquisition was completed at the beginning of July and the legal merger
between the two entities (Rothschild & Co Bank AG and Banque Pâris Bertrand)
was implemented on 1 October 2021. Hence, we are reporting the impact of the
acquisition of the Banque Pâris Bertrand (three months of activity) for the
first time. AuM reported by Banque Pâris Bertrand was EUR6.4 billion.
Our investment management teams (in all European locations and in the US) have
performed extremely well and are showing YTD performance above their respective
benchmarks in most client portfolios and currencies, often ranked in top
quartile when compared to peers.
Taking into account NNA, market effect and the acquisition of Banque Pâris
Bertrand, Assets under Management (AuM) for WAM Europe have increased by 24%
since the beginning of the year from EUR69.9 billion to EUR87.0 billion as at
30 September 2021. If we also include assets from our Wealth Management clients
invested in Rothschild & Co Asset Management products (EUR6.1 billion), AuM is
EUR93.1 billion.
AuM for AM US has increased by 1% since the beginning of the year from EUR8.2
billion to EUR8.3 billion as at 30 September. Overall, the performance of the
business is improving with enhanced investment performance across all
strategies being reflected in both slowing outflows and an increasing number of
new business opportunities.
The table below shows the development of AuM:
Quarter ended
In EUR billion 30/09/2021 30/06/2021 30/09/2020
AuM opening 87.5 83.6 71.3
of which Wealth Management 63.7 60.9 49.9
of which AM Europe 15.3 14.5 13.9
of which AM US 8.5 8.2 7.5
Acquisition of Pâris
Bertrand Banque 6.4 - -
Net new assets 0.9 1.5 (1.0)
of which Wealth Management 1.1 1.3 0.5
of which AM Europe 0.1 0.3 (0.1)
of which AM US (0.3) (0.1) (1.4)
Market and exchange rate 0.5 2.4 1.1
AuM closing 95.3 87.5 71.4
of which Wealth Management 71.8 63.7 51.3
of which AM Europe 15.2 15.3 13.9
of which AM US 8.3 8.5 6.2
% var / AuM opening 9%
9m to September
2021 2020
78.1 76.0
55.8 50.5
14.1 15.3
8.2 10.2
6.4 -
4.3 (0.7)
4.8 2.3
0.5 (0.2)
(1.0) (2.8)
6.5 (3.9)
95.3 71.4
71.8 51.3
15.2 13.9
8.3 6.2
22%
Revenue for the third quarter of 2021 was EUR151 million, up 29% compared to
the same period last year (Q3 2020: EUR117 million).
Revenue for the nine months to September 2021 was EUR425 million, up 15%
compared to the same period last year (9m 2020: EUR369 million). The growth was
driven by fees and commissions which increased by 18% at EUR366 million (9m
2020: EUR309 million), directly linked to the progressive increase of the AuM
over the period. Commissions and fees represent 86% of the total revenue.
This growth was negatively impacted, however, by the net interest income down
14% to EUR36 million compared to the same period last year (9 months 2020:
EUR42 million), due to the impact of USD and GBP interest rate cuts in March
2020, as well as prolonged negative interest rates in EUR and CHF. This low
interest rate environment continues to penalise our treasury revenue. However,
this was partly offset by the growth of the private clients lending book,
especially the Lombard Loan book.
Following the approval received from the Spanish regulators, we have officially
opened our new office in Madrid, which is now staffed and fully operational.
1.3 Merchant Banking
Merchant Banking is the investment arm of Rothschild & Co, managing capital for
the firm and third parties in private equity and private debt.
Revenue for the third quarter of 2021 was EUR47 million, up 78% compared to the
same period last year (Q3 2020: EUR27 million).
Revenue for the nine months to September 2021 was EUR282 million, up 255%
compared to the same period last year (9m 2020: EUR79 million) thanks to
significant realised gains on investment disposals, material unrealised value
accretion across the entire portfolio and year-on-year growth in recurring
revenue. When compared to the average first nine months for the last three
years, revenue is up 143%.
The table below illustrates the progression in revenue.
In EUR million 9m 2021 9m 2020 Var % Var
Recurring revenue 87.7 81.7 6.0 7%
Investment and performance revenue 194.4 (2.2) 196.6 n/a
of which carried interest 70.2 (0.7) 70.9 n/a
of which realised and unrealised
investments gains and dividends 124.2 (1.5) 125.7 n/a
Total revenue 282.1 79.5 202.6 255%
% recurring / total revenue 31% 103%
The strong revenue increase for the nine months to September 2021 continues the
momentum seen in previous quarters, and is driven by the combination of two
positive effects:
* an increase in recurring revenue of 7% compared to the same period last year
given the continued growth of fee-earning AuM base; and
* a record-high contribution from investment performance revenue of EUR194.4
million, representing a positive variance of EUR196.6 million compared to the
same period last year(1). This performance was mainly driven by:
o valuation uplifts achieved through successful exits from the private equity
portfolio;
o unrealised valuation gains across our private equity portfolios in Europe
and the US; and
o accrued income and positive mark-to-market movements in the Group's private
debt positions.
As pointed out in the half-year results announcement, the investment
performance revenue generated to date in 2021 represents a strong validation of
our robust investment approach and reinforces the fact that our portfolios have
continued to create value for our investors notwithstanding the challenges
posed by the pandemic.
(1) It is worth noting that, for the nine months to September 2020, Investment
and performance revenue was slightly negative at EUR2.2 million due to the lack
of material valuation uplifts in the private equity positions and negative
mark-to-market movements in some of the Credit Management products.
The resilience of the industry sectors we focus on (Data & Software, Healthcare
and Technology-Enabled Business Services), combined with the high quality of
our assets and our effective portfolio value creation initiatives, have
resulted in higher valuations for our private equity positions and were the
main drivers behind the successful realisations completed in 2021.
The alignment of interests between the Group and our third-party investors
continues to represent a key differentiator for Merchant Banking. In the nine
months to September 2021:
* Rothschild & Co's investments in the division's products totalled EUR128
million, of which EUR104 million was in private equity and EUR24 million in
private debt.
* Distributions to Rothschild & Co equaled EUR180 million, of which EUR125
million was from private equity and EUR55 million from private debt.
Assets under Management as at 30 September 2021 were EUR17.4 billion, up 10%
versus 31 December 2020 (EUR15.7 billion), of which Rothschild & Co's share was
EUR1.5 billion.
2. Outlook
In Global Advisory, announced global M&A market activity for the first three
quarters of 2021 was at record levels. This trend is evident in our visible
pipeline of business which is well diversified and significantly ahead of
previous years at this stage. We expect activity levels to remain solid through
the remainder of year with fourth quarter revenue anticipated to be
particularly strong. We therefore remain very positive regarding the
performance outlook for our business in 2021.
In Wealth and Asset Management, after an exceptionally robust first three
quarters, the outlook remains positive, thanks to our strong new business
pipeline, but we expect more volatility for the rest of the year. The coming
months will also be the opportunity to leverage the banque Pâris Bertrand
acquisition as well as accelerating the recruitments of new client advisors and
the digitisation of the business.
In Merchant Banking, we expect to continue to grow our recurring revenue base
as we launch new products and deploy capital across all our strategies.
Additionally, in line with the performance across our portfolios to date in
2021, we expect our investments to continue to fulfil their value creation
potential, which will generate further investment performance related revenue
for the Group. We are confident that our fundamental investing principles,
centred around capital preservation and providing attractive risk-adjusted
returns from our chosen sectors, continue to be a strong foundation for the
ongoing development of Merchant Banking.
The current macro environment is still positive for our three core businesses.
The clear strategies of each business line allow us to be optimistic for a
continuing strong performance for the rest of the year.
Financial calendar:
* 28 February 2022: Full year results 2021
* 12 May 2022: First quarter - Financial information
* 19 May 2022: Annual General Meeting
* 4 August 2022: Half-year results 2022
For further information:
Investor Relations - Marie-Laure Becquart
InvestorRelation@rothschildandco.com
Media Relations - Caroline Nico
Groupmediaenquiries@rothschildandco.com
Media Contact: DGM - Olivier Labesse
labesse@dgm-conseil.fr
About Rothschild & Co
Rothschild & Co is family-controlled and independent and has been at the centre
of the world's financial markets for over 200 years. With a team of c.3,600
talented financial services specialists on the ground in over 40 countries,
Rothschild & Co's integrated global network of trusted professionals provides
in-depth market intelligence and effective long-term solutions for our clients
in Global Advisory, Wealth and Asset Management, and Merchant Banking.
Rothschild & Co is a French partnership limited by shares (société en
commandite par actions) listed on Euronext in Paris, Compartment A with a share
capital of EUR155,465,024. Paris trade and companies registry 302 519 228.
Registered office: 23 bis avenue de Messine, 75008 Paris, France.
A. Quarterly progression of revenue
In EUR million 2021 2020 Var
Global Advisory
1st quarter 394.9 269.1 47%
2nd quarter 438.5 260.3 68%
3rd quarter 464.0 261.9 77%
Total 1,297.4 791.3 64%
Wealth and Asset Management
1st quarter 134.3 130.8 3%
2nd quarter 139.9 121.4 15%
3rd quarter 151.3 117.1 29%
Total 425.5 369.3 15%
Merchant Banking
1st quarter 103.4 20.7 400%
2nd quarter 131.3 32.1 309%
3rd quarter 47.4 26.7 78%
Total 282.1 79.5 255%
Other business
and corporate centre
1st quarter 5.0 3.1 61%
2nd quarter 3.1 4.0 (23)%
3rd quarter 4.3 2.2 95%
Total 12.4 9.3 33%
IFRS reconciliation
1st quarter (1.4) (7.3) (81)%
2nd quarter 0.9 3.6 (75)%
3rd quarter (0.3) (4.2) (93)%
Total (0.8) (7.9) 90%
Total revenue
1st quarter 636.2 416.4 53%
2nd quarter 713.7 421.4 69%
3rd quarter 666.7 403.7 65%
Total 2,016.6 1,241.5 62%
B. Merchant Banking: investment activities and business development in Q3 2021
Private Equity
* Five Arrows Principal Investments III (FAPI III), our 3rd generation European
private equity fund, completed two investments:
o Sygnature Discovery in July 2021, a provider of outsourced drug discovery
and pre-clinical research services; and
o RLDatix in September 2021, a leading healthcare Risk, Governance and
Compliance software provider. This investment was completed in the context
of a large acquisition performed by RLDatix in Q3 2021 which required
additional equity capital.
* Five Arrows Secondary Opportunities V (FASO V), our 3rd generation
secondaries fund, completed one further investment and has now committed 65% of
its capital across 14 transactions in Europe and the US.
* As announced in HY 2021 release, Merchant Banking is in the process of
launching a sustainable investment fund to invest in profitable SMEs that aim
to have a positive and measurable impact on the environment. The strategy is to
target companies that are focused on Energy, Food & Agriculture and Sustainable
cities.
Private Debt
* Five Arrows Debt Partners III (FADP III) secured new fund commitments of
EUR272 million in Q3 2021 and has now held its final closing having gathered
c.EUR1.4 billion of commitments for the fund and its related vehicles, in
excess of its target and more than double the size of its predecessor fund.
FADP III has also now deployed c.36% of its commitments, completing two new
transactions in Q3 2021:
o a unitranche financing for Better Healthcare, a UK provider of complex home
care for acute neurological conditions; and
o a unitranche financing for CAFPI, a leading network of independent mortgage
brokers in France.
* Five Arrows Credit Solutions (FACS), our 1st generation mid-market direct
lending fund, completed one successful exit with its loan to Witherslack Group,
a leading provider of specialist education and care for children and young
people with special educational needs, being repaid in full. Additional
material exit activity is in process and will be completed before the end of
the calendar year.
* During Q3 2021, the Credit Management team launched two new CLO warehouses,
Contego X and Ocean Trails XII, in Europe and in the US respectively, which are
expected to close in Q1 2022. In addition, the team has re-set and upsized two
CLOs launched in 2020 (Contego VIII and Ocean Trails 8), generating an overall
AuM increase of c.EUR170 million.