ROTHSCHILD (EPA:ROTH) - Press release - 3rd quarter 2019

Transparency directive : regulatory news

12/11/2019 17:41

Press release
3rd quarter 2019
Paris, 12 November 2019

Robust revenue despite less favourable M&A environment

* Global Advisory: revenue for the nine months to September of EUR766 million,
down 18% compared to the same stage last year, which was a record period (9
months 2018: EUR932 million) and down 25% for the third quarter to EUR221
million (Q3 2018: EUR296 million), directionally consistent with the global
trend in completed M&A transactions

* Wealth & Asset Management: strong net new assets and equity markets resulted
in robust growth in Assets under Management, up 14% from December 2018. Revenue
for the nine months to September up 1% at EUR363 million (9 months 2018: EUR360
million) and up 3% to EUR123 million for the third quarter (Q3 2018: EUR119
million)

* Merchant Banking: strong growth of Assets under Management of 16% from
December 2018. Revenue for the nine months to September up 10% to EUR141
million (9 months 2018: EUR128 million), up 31% for the third quarter to EUR30
million (Q3 2018: EUR23 million) and up 27% when compared to the average first
nine months revenue for the previous three years

* Nine months revenue was impacted positively by currency translation effects
of EUR14 million

                            Third quarter           9m to Septembe
In EUR million          2019    2018  % Var      2019     2018  % Var

Global Advisory        221.3   295.9  (25)%     766.1    932.0   (18)%
Wealth & Asset
Management             123.4   119.4     3%     362.6    360.3      1%
Merchant Banking        30.3    23.2    31%     140.7    128.2     10%
Other businesses         4.5    10.5  (57)%      17.8     44.0   (60)%
TOTAL before           379.5   449.0  (15)%   1,287.2  1,464.5   (12)%
IFRS Reconciliation      1.8     4.9  (63)%      (8.4)    (4.1)   105%
Total Group revenue    381.3   453.9  (16)%   1,278.8  1,460.4   (12)%

1. Business review

1.1 Global Advisory

Our Global Advisory ("GA") business focuses on providing advice in the areas of
M&A and strategic advisory and Financing Advisory encompassing Debt Advisory,
Restructuring and Equity Advisory.

Revenue for the three months to September 2019 was EUR221 million (Q3 2018:
EUR296 million), down 25%. Revenue for the nine months to September 2019 was
EUR766 million, down 18% compared to the same period in 2018 (9 months 2018:
EUR932 million), directionally consistent with the trend in completed M&A
transactions over the same period and follows a record nine months period to
September 2018 for this business. We ranked 8th globally by revenue for the
twelve months to September 2019(1).

Our M&A business remains strongly positioned, ranking 2nd globally by number of
completed transactions for the twelve months to September 2019(2. In Europe, we
continue to advise on more M&A transactions than any of our competitors, a
position we have held for more than a decade(2).

In Financing Advisory, we ranked 6th globally and joint 1st in Europe by number
of completed restructuring transactions for the twelve months to September
2019. During the twelve months to September 2019 we maintained our position as
adviser on more European equity capital market assignments than any other
independent financial adviser(3).

At the end of October, we announced the acquisition of Livingstone in the
United Kingdom, subject to regulatory approval. Livingstone is a successful and
long-established business focusing on the UK lower mid-market segment. As we
continue to explore strategic options to extend our client services and to
support the future development of the business, we believe this is a unique
opportunity for us to take advantage of a significant transactional flow which
we see but in which we do not actively participate. GA continues to focus on
mid and large-cap transactions for both public and private corporates, as well
as financial sponsors, sovereigns, and family-controlled businesses. We
therefore expect Livingstone to be additive to our GA business in the same way
in which our lower mid-market team in France has enhanced the firm's business
there.

Rothschild & Co advised the following clients on significant assignments
completed in Q3 2019:

* EQT, ADIA and PSP Investments on its acquisition of Nestlé Skin Health
(CHF10.2 billion, Switzerland)
* BTG on its recommended cash offer by Boston Scientific (£3.3 billion, United
Kingdom and United States)
* Nyrstar (adviser to shareholders) on its restructuring (EUR2.6 billion,
Belgium)
* Marks & Spencer on its online grocery retail joint venture with Ocado (£1.5
billion, United Kingdom). Our advice also included a rights issue (£0.6
billion), concurrent debt refinancing (£0.25 billion) and Investor Advisory
support of its post-launch investor roadshow to underserviced accounts
* Bouygues on its sale of a 13% stake in Alstom (EUR1.1 billion, France)

In addition, we continue to work on some of the largest and most complex
announced transactions globally, including acting as financial adviser to:

* Greene King on its recommended cash offer by CK Asset Holdings (£4.6
billion, United Kingdom and Hong Kong)
* Cision on its sale to Platinum Equity (US$2.74 billion, United States)
* Teck Resources on its project financing of the Quebrada Blanca Phase 2 copper
development project (US$2.5 billion, Canada)

(1) Companies filings
(2) Refinitiv, completed transaction, Excludes accountancy firms
(3) Dealogic

* Groupe Bruxelles Lambert on its acquisition of Webhelp (EUR2.4 billion,
Belgium and France)
* Cobham on its recommended cash offer from Advent (£4.2 billion, United
Kingdom)

1.2 Wealth & Asset Management

Wealth & Asset Management is made up of our Wealth Management businesses in
France, Switzerland, United Kingdom, Belgium, Germany, Monaco and Italy and our
Asset Management activity in Europe. In addition, we operate an Asset
Management business in North America.

The business model, based on organic growth thanks to synergies between our
three businesses, continues to flourish. Net New Assets (NNA) for the first
nine months of 2019 was strong at EUR2.8 billion (EUR0.8 billion for the third
quarter) providing 6% growth in AUM (on an annualised basis) from 1 January
2019. Wealth Management saw strong positive net inflows of EUR2.7 billion in
all geographies. Asset Management achieved net inflows of EUR0.1 billion.

Assets under Management (AuM) increased by 14% (or EUR8.9 billion) to EUR73.7
billion as at 30 September 2019 (31 December 2018: EUR64.8 billion and 30 June
2019: EUR71.5 billion). The growth was driven both by strong NNA as well as
more favourable market conditions, which recovered during the first nine months
of 2019 following the decline in the fourth quarter of 2018.

The table below presents the progress in Assets under Management.

                            Third quarter      9m to Septembe
In EUR billion               2019    2018      2019      2018

AuM opening                  71.5    68.9       64.8     67.3
Net new assets                0.8     0.2        2.8      2.1
of which Wealth Management    0.8     0.3        2.7      2.2
of which Asset Management     0.0    (0.1)       0.1     (0.1)
Market and exchange rate      1.4     0.9        6.1      0.5
AuM closing (30 September)   73.7    70.0       73.7     69.9
% var / AuM opening             3%                14%

Revenue for the three months to September 2019 was EUR123 million (Q3 2018:
EUR120 million), up 3%. Revenue for the nine months to September 2019 was
EUR363 million, up 1% versus the previous period (9 months 2018:
EUR360 million).

Revenue is penalised by the low interest rate environment in our French and
Swiss businesses given our historic level of cash deposits. The flat revenue
reflects two opposing factors: an increase in commissions supported by positive
market performance during the first nine months of 2019 and excellent net asset
inflows, offset by lower income on our treasury activity and the increasing
impact of negative interest rates on higher European Central Bank deposits as a
result of the strong asset inflows which increased clients' cash balances. This
has impacted our net interest income by around 8% between the first nine months
of 2019 and the first nine months of 2018.

1.3 Merchant Banking

Merchant Banking is the investment arm of Rothschild & Co which deploys the
firm's and third parties' capital in private equity and private debt
opportunities.

Revenue for the three months to September 2019 was EUR30 million (Q3 2018:
EUR23 million), up 31%. Revenue for the nine months to September 2019 was
EUR141 million (9 months 2018: EUR128 million) up 10%. When compared to the
average first nine months of the last three years, revenue is up 27%.

The table below presents the progress in revenue.

                               Third quarter        9m to September
In EUR million              2019   2018   % Var   2019   2018   % Var

Recurring revenue           21.8   16.1     35%    63.1   51.7    22%
Investment performance
related revenue              8.5    7.1     20%    77.6   76.5     1%
of which carried interest    4.0    2.8     43%    37.5   26.6    41%
of which realised and
unrealised investments
gains and dividends          4.5    4.3      5%    40.1   49.9   (20)%
Total revenue               30.3   23.2     31%   140.7  128.2    10%
% reccuring / Total revenue   72%    69%             45%    40%

During the first nine months of 2019, Rothschild & Co's investment in the
division totalled EUR101 million, of which EUR97 million was attributable to
the Group's own investment in funds managed by Merchant Banking and EUR4
million was in proprietary investments. Disposals and distributions generated
proceeds of EUR83 million, of which EUR61 million was from Merchant Banking's
managed funds (the majority, EUR40 million, being from FAPI I and FAPI II
following several successful portfolio companies exits).

Assets under Management ("AuM") as at 30 September 2019 stood at EUR12.9
billion, up 16% versus 31 December 2018 (EUR11.1 billion), of which EUR1.0
billion has been committed by Rothschild & Co.

The increase of EUR1.8 billion since the start of 2019 relates to:

- growth of AuM within Rothschild & Co Credit Management, with the launch of
  new CLOs,
- the first closure of Five Arrows Secondary Opportunities V (FASO V); and
- the unrealised value accretion within the portfolio across the Merchant
  Banking funds.

2. Outlook

In Global Advisory, following a robust first half revenue performance, third
quarter completions have been lower. However, we foresee a strong final quarter
of the year based on the expected level of completions and on our visible
pipeline for the rest of the year. Looking outward, publicly available data
indicates that announced global M&A activity during the last twelve months has
declined and, whilst we believe the general environment continues to be
supportive for M&A and our market position, particularly in Europe, continues
to be very strong, we remain alert to the signs of a more significant downturn
in market activity which could adversely impact our business volumes.

Wealth and Asset Management has a solid base from which to grow and to continue
to deliver strong net new assets in Wealth Management across all main
geographies. The macro economic factors, however, are uncertain resulting in
increased market volatility, and the low interest rate environment will
continue to impact profitability.

Merchant Banking expects to continue growing its AuM and to maintain a
significant contribution to the Group's results. The division will be focused
on the deployment of the recently launched funds, will look for attractive exit
opportunities for some of the more mature investment positions and will
continue its fundraising efforts, mainly in secondary private equity, direct
lending and credit management. Our portfolios' performance remains strong and
we continue to apply our investment philosophy that is centred around cautious
and disciplined capital deployment, focusing on attractive risk-reward
opportunities with appropriate downside protection features.

Whilst 2018 was a very strong year, 2019 is more challenging due to the
increased uncertainty surrounding the macro environment. We maintain our focus
on our strategy of growing our three businesses and improving the synergies
between them, while, in the event of a decline in market conditions, remaining
ever vigilant to control our cost base.

Financial calendar:

* 10 March 2020:     Publication of Full year results 2019
* 12 May 2020:       First quarter information 2020
* 14 May 2020:       Annual general meeting

For further information:

Rothschild & Co                              Media Contact
Investor Relations                           DGM
Marie-Laure Becquart                         Olivier Labesse
Marie-laure.becquart@rothschildandco.com     labesse@dgm-conseil.fr

Media Relations
Caroline Nico
Caroline.nico@rothschildandco.com

About Rothschild & Co

With a team of c.3,500 talented financial services specialists on the ground in
over 40 countries across the world, our integrated global network of trusted
professionals provides in-depth market intelligence and effective long-term
solutions for our clients in Global Advisory, Wealth & Asset Management, and
Merchant Banking. Rothschild & Co is family-controlled and independent and has
been at the centre of the world's financial markets for over 200 years.

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 EUR155,135,024. Paris trade and companies registry 302 519 228.
Registered office: 23 bis avenue de Messine, 75008 Paris, France.

Quarterly progression of revenue

In EUR million            2019    2018     Var

Global Advisory

1st quarter               292.5   261.7     12%
2nd quarter               252.3   374.4   (33)%
3rd quarter               221.3   295.9   (25)%
Total                     766.1   932.0   (18)%

Wealth & Asset Management

1st quarter               118.5   119.7    (1)%
2nd quarter               120.7   121.2    (0)%
3rd quarter               123.4   119.4      3%
Total                     362.6   360.3      1%

Merchant Banking

1st quarter                24.1    25.2    (4)%
2nd quarter                86.3    79.8      8%
3rd quarter                30.3    23.2     31%
Total                     140.7   128.2     10%

Other business
and corporate centre

1st quarter                 9.8    17.0   (42)%
2nd quarter                 3.5    16.5   (79)%
3rd quarter                 4.5    10.5   (57)%
Total                      17.8    44.0   (60)%

IFRS reconciliation

1st quarter                (1.0)   (3.5)  (71)%
2nd quarter                (9.2)   (5.5)    67%
3rd quarter                 1.8     4.9   (63)%
Total                      (8.4)   (4.1)   105%

Total Group
Revenue

1st quarter               443.9   420.1      6%
2nd quarter               453.6   586.4   (23)%
3rd quarter               381.3   453.9   (16)%
Total                   1,278.8 1,460.4   (12)%

ROTHSCHILD's latest news

10/10/2023 15:46

ROTHSCHILD (EPA:ROTH) - Press release - 3rd quarter 2019

Transparency directive : regulatory news

ROTHSCHILD's latest news

Other stories