"Evergent Investments' private equity portfolio - a novel construction for a listed investment company"

Reporter: Evergent Investments reported, for last year, a preliminary net profit increasing by 73% compared to that of the previous year, while the value of managed assets amounted to 2.95 billion lei, 25% higher than the value of at the end of 2022. What are the factors that determined this evolution?

Claudiu Doroş: Evergent Investments continued to develop through the solidity of the business model and ended an exceptional year, with a net result of over 200 million lei, representing an increase of 73% year/year. Indeed, the last quarter significantly contributed to this result through the positive evolution of the financial-banking and energy-industrial portfolios, the two pillars of stability and performance included in our active investment strategy. In terms of assets under management, we reached three billion lei during December, a record for our company.

Our company's financial performance is supported by a strategic investment approach, carefully constructed and updated annually by the Evergent Investments Board, applied to a rigorous and complex system of corporate governance. More specifically, we practice an active management of our resources, sectorally and within specialized portfolios, diligently following financial planning (BVC), investment and risk procedures specific to a regulated and supervised fund. We continuously analyze the national market and the companies in which we invest in a global context, in order to optimize the weightings of each exposure within the portfolios and extract returns in conditions of volatility. At the same time, we ensure a level of liquidity to be prepared for the opportunities offered by certain market conditions.

Reporter: What were the main investment directions or projects last year? What sums were involved?

Claudiu Doroş: In line with the investment strategy, the company reached an investment level of 195 million lei in 2023 and we continued to pay special attention to companies in the energy and financial-banking sectors. Our capital has been allocated to the listed equity portfolio. We followed the evolution of companies in the two sectors to identify the optimal way for portfolio construction and strengthened risk analysis to anticipate potential events that could affect portfolio performance.

The second strategic direction was the consolidation of private equity investments, the differentiator of Evergent Investments.

Our private equity portfolio is a long-term construction, unique to a listed investment company such as Evergent Investments, precisely because of the different principles that typically guide such investments. Usually, private equity companies grow away from the public eye, through an intense operational involvement of specialized teams and can be followed by a successful, publicly visible exit, while a listed fund must be very transparent in financial reporting and non-financial and to look at market opportunities from multiple perspectives to bring value to shareholders of various categories. However, this particular approach, a well-defined strategy with clear objectives for each project, differentiates us from other investment funds that are members of the Association of Fund Managers (AAF). Few people know, for example, that we do not invest in a project without a double-digit estimated internal rate of return (IRR), as we analyze in detail in our multi-year financial projections.

Also, for project companies, in various stages of development, we follow the scheduled stages and the proposed targets. The colleagues responsible for the private-equity portfolio get involved in operational decisions and collaborate closely with the specialists of these companies, to strengthen and grow them. In private-equity, an investment is made for the long term, in the first years we bring capital, then we work to consolidate revenues and operations, with an effect on the visibility of profitability, and finally we will concern ourselves with finding the right investors for a partial or total exit.

In agribusiness, a favorite area of ours, we have two companies that develop blueberry farms, Agrointens and Ever Agribio, applying a growth model based on the income of existing farms and the capital invested by Evergent Investments, adding also a leverage effect given by loans banking.

In the residential real estate sector, an active project in which we are involved is the Atria Urban Resort, with a total of 1,378 apartments, in its third phase of development.

In order to develop other projects on the land we own in Bucharest and Iaşi, we must take into account additional elements related to the market, development costs, taxation, but also behavioral or marketing trends. In the last two years we have faced difficulties in obtaining urban planning documentation, also explainable by a differentiated application of the legislation by the public institutions involved. But the biggest problem has been created by the aggressive rise in prices of construction materials and labor, amid the decline in bankable demand due to high interest rates. The effect is still visible, the number of sold housing transactions decreased dramatically, as well as the announcements of new projects.

The year 2024, being a dense election year, may bring additional risks, such as a possible increase in the times to obtain various approvals and authorizations. We are confident, however, that we will see an unlocking of sales with the arrival of spring and possible interest rate cuts, with the effect of stimulating demand.

Reporter: Evergent Investments has made a tradition of proposing to shareholders, at the balance sheet meeting, a combination of dividends and share buybacks. What are the plans for this year?

Claudiu Doroş: We are well positioned to grow in 2024 as well, so that we deliver financial results in line with our shareholders' expectations. We will also continue to propose the distribution of value directly to shareholders through an optimal mix of dividend policy and buyback programs. It should be noted that, through the strategy applied to the portfolios and these combined policies, we have returned value to the shareholders, a total of 1.1 billion lei from 2009 to the present, also achieving an increase of around 250% of the company's assets, up to almost three billion lei.

In the context of an economic environment with permanent challenges, our company is ready to continue its performance, and as investors give us more confidence, we expect that Evergent Investments and its shares will become even more sought after on the capital market in Romania.

Reporter: How do you assess the macroeconomic environment this year and what impact do you think it will have on the activities of Evergent Investments?

Claudiu Doroş: The macroeconomic context is still difficult, with visible effects on the new geometry of the connection of economies.

Multiple sanctions were imposed on Russia after the invasion of Ukraine. Companies from Europe, Japan and the United States have withdrawn their operations in Russia, and the rerouting of shipping lanes due to the Red Sea crisis that began in December 2023 has involved additional costs, increased delivery times and security issues, on top of the potential to create shock waves beyond nearby affected regions. The number of global trade restrictions increased to more than 3,000 in 2023.

Regarding the evolution of the national economy, in the short and medium term among the risk factors we could mention the dynamics of macroeconomic indicators in the USA, China and the Eurozone, the perception of risk on the international financial markets, the internal mix of economic policies in an electoral context and climate changes. The negative effects of inflation can still be seen, but we are seeing positive interest rate cuts with immediate effects on the real estate market.

We will follow the evolution of the global capital markets, because the stock markets are interdependent, and any change on these markets can also influence the Romanian stock market. We expect the local market to continue its positive evolution. We believe that the major issuers, both banking and energy companies, will perform and deliver returns above what we see on the major exchanges. In the energy sector, there is an effervescence of investments, both in conventional and green, alternative energy. We are paying close attention to these moves to strengthen our exposure to ESG-aligned companies.

Regardless of the political noise of the election year, Romanian companies have demonstrated resilience in very difficult times and are adaptable to the market, so that they will continue to show performance in 2024.

Reporter: What investments are you planning to make this year? Can you elaborate?

Claudiu Doroş: During this period, we are working on the activity program and financial projections for the year 2024, which the Board of Directors submits to the approval of the Evergent Investments shareholders at the April General Assembly, according to the financial calendar published at BVB. However, we are already operating in the market, following our successful strategy in the financial-banking and energy-industrial sectors. We consider the profitability growth prospects of the companies in which we invest or that we track, their ability to generate cash and the soundness of their business model over the long term.

Reporter: Thank you!