“We are well positioned to grow in 2024 as well, to deliver financial results in line with our shareholders’ expectations,” says Claudiu Doroș, President and General Manager of EVERGENT Investments, one of the biggest investment companies listed on the Bucharest Stock Exchange.

EVERGENT Investments (BVB: EVER), increased its total assets under management by 25% in 2023 to a record level of almost RON 3 billion while its net profit went up by 73% compared with 2022 to RON 203 million.

The financial performance in 2023 was supported by the positive evolution of the financial-banking and energy-industrial portfolios, the two stability and performance pillars included in EVERGENT’s active investment strategy, according to Claudiu Doroș.

“The financial performance of our company is sustained by a strategic investment approach, carefully built and annually updated by the Board of EVERGENT Investments, applied to a rigorous and complex system of corporate governance,” the EVERGENT Investment President says.

“We are well positioned to grow in 2024 as well, to deliver financial results in line with our shareholders’ expectations. Additionally, we will continue to propose the distribution of value directly to shareholders through an optimal mix between the dividend policy and buyback programs,” he adds.

Since 2009, EVERGENT Investments has distributed RON 1.1 billion to its shareholders through dividends and share buyback programs while it also increased its total assets by 250% to almost RON 3 bln.

In this interview, Claudiu Doroș, President and General Manager of EVERGENT Investments, talks about:

• The financial performance in 2023
• The company’s investment strategy
• The action plan for 2024
• EVERGENT’s private equity strategy
• The company’s investments in agriculture and real estate
• The investment in Hidroelectrica’s shares
• Opportunities on AeRO market

How was EVERGENT Investments’ financial performance in 2023 in terms of profitability and portfolio evolution?

Claudiu Doroș: Our company has concluded an exceptional year, with a net result of over RON 200 million (EUR 40 mln), which represents a growth of 73% YOY. Indeed, the last quarter significantly contributed to this result through the positive evolution of the financial-banking and energy-industrial portfolios, the two stability and performance pillars included in our active investment strategy. Regarding the assets under management, we reached the value of RON 3 billion (EUR 604 mln) in December, a record for our company.

How did you manage to achieve this financial performance in a relatively volatile economic context?

Claudiu Doroș: The financial performance of our company is sustained by a strategic investment approach, carefully built and annually updated by the Board of EVERGENT Investments, applied to a rigorous and complex system of corporate governance. More precisely, we practice an active management of our resources, both sector-wise and within specialized portfolios, diligently following the financial planning (budget), and the risk and investment procedures that are specific to a regulated and supervised fund. 

We continuously analyze the national market and the companies in which we invest, within a global context, to optimize the weights of each exposure within the portfolios and to extract returns under volatile conditions. Furthermore, we ensure that a liquidity level is prepared for opportunities offered by certain market circumstances.

What are your plans for 2024 in terms of portfolio management and how do you plan to distribute the 2023 profits to your shareholders?

Claudiu Doroș: During this period, we are working on the activity program and financial projections for 2024, which the Board of Directors will submit for the EVERGENT Investments shareholders’ approval at the General Meeting in April, according to the financial calendar published at the Bucharest Stock Exchange. 

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 have investments or which we monitor, their ability to generate cash, and the solidity of their long-term business model.

We are well positioned to grow in 2024 as well, to deliver financial results in line with our shareholders’ expectations. Additionally, we will continue to propose the distribution of value directly to shareholders through an optimal mix between the dividend policy and buyback programs. 

It’s worth mentioning that, through the strategy applied to portfolios and these combined policies, we have returned value to shareholders, totaling RON 1.1 billion from 2009 to date, also achieving a growth of around 250% of the company’s assets, up to almost RON 3 billion.

In the context of an economic environment with ongoing challenges, our company is prepared to continue to perform and, as investors will have more confidence in us, we expect that EVERGENT Investments and its shares to become even more sought after on the Romanian capital market.

EVERGENT has also built a private equity portfolio in recent years. How do you approach private equity investments and what is their place in the company’s strategy?

Claudiu Doroș: Our Private Equity portfolio is a long-term construction, unique for a listed investment company like EVERGENT Investments, precisely due to the different principles that usually guide such investments. Typically, private capital companies grow far away from the public’s eyes, through intense operational involvement of the specialized teams and may be followed by a successful, publicly visible exit, whereas a listed fund must be very transparent in its financial and non-financial reports, and look at market opportunities from multiple perspectives to bring value to shareholders of different categories. 

However, it is this specific approach, a well-defined strategy with clear objectives for each project, that differentiates us from other investment funds that are members of the Fund Managers Association (FMA). Few people know, for example, that we do not invest in a project unless the estimated internal rate of return (IRR) is in double digits, as we analyze in detail in the multiannual financial projections.

Furthermore, for the project companies at various stages of development, we follow scheduled milestones and proposed targets. The colleagues responsible for the private-equity portfolio are involved in operational decisions and collaborate closely with the specialists of these companies, to consolidate and grow these companies. 

In private equity, investments are made for the long term. In the first years, we provide capital, then work on consolidating the revenues and operations, with an effect on profitability visibility and, finally, we focus on finding the right investors for partial or total exit.

Agriculture and real estate are two relatively recent additions to EVERGENT’s portfolio. What are your perspectives related to the investments in these two sectors?

Claudiu Doroș: In agribusiness, a preferred field of ours, we have two companies that develop blueberry farms, Agrointens and EVER Agribio, that apply a growth model based on the revenues of existing farms and the capital invested by EVERGENT Investments, while also adding a leverage effect from bank loans. 

In the residential real estate sector, an active project in which we are involved is Atria Urban Resort in Bucharest, with a total of 1,378 apartments, currently in its third development phase. To develop other projects on the land plots we own in Bucharest and Iași, we must consider additional elements related to the market, development costs, taxation, as well as behavioral or marketing trends. 

Over the past two years, we have faced difficulties in obtaining urban planning documentation, which can also be explained through a differentiated interpretation of the legislation by the involved public institutions. However, the biggest problem has been caused by the aggressive increase in the prices of construction materials and labor, alongside a decrease in bank-financed demand due to high-interest rates. The effect is still visible, there has been a dramatic decrease in the number of transactions, houses sold, and announcements of new projects. 

Since 2024 is a dense electoral year, additional risks may arise, such as a possible increase in the time required to obtain various permits and authorizations. However, we are confident that we will see an unlocking of sales, once spring arrives and potential interest rate reductions may occur, with an effect in boosting the demand.

In conclusion, we focus on consolidating the ongoing projects rather than actively seeking new ones. Our purpose is to create sustainable value for investors, therefore we invest thoughtfully, carefully analyzing the associated complex risks.

Hidroelectrica’s IPO was surely the main event on BVB in 2023. Has EVERGENT invested in Hidroelectrica and what are your thoughts about the H2O shares?

Claudiu Doroș: We participated in the public offering of Hidroelectrica and subscribed a substantial amount; however, a modest allocation rate resulted in a smaller number of shares in our portfolio than desired. Our investment analysts’ reports were well documented, accurately observing the financial performance of this company, thus the price level was well anticipated. Hidroelectrica is a company that brings great added value to the Romanian investment universe. However, for the moment, the share price seems overvalued. Like other energy producers in Europe, the company is facing a general decline in prices after the peaks from 2022-2023, and governmental interventions in business decisions are not necessarily auspicious. 

This leads us to reiterate our support for the idea that the State should have a majority stake in certain strategic companies for the safety of its citizens’ lives, but there is enough room to courageously sell surplus packages beyond a 50% holding, thus contributing to the growth of the stock exchange and the Romanian investment ecosystem.

Returning to Hidroelectrica, it is a strong producer of „green” energy, perfectly aligned with ESG principles; therefore, H2O shares are worth monitoring and including in investors’ portfolios for the long term.

With a relatively low number of new listings on the BVB’s Main Market, the AeRO segment could be a pool where investors can find new opportunities. What is EVERGENT’s approach to AeRO?

Claudiu Doroș: Regarding the companies listed in the AeRO category, we carefully analyze their performance and each new listing. Being less regulated compared to the main market of the Bucharest Stock Exchange, this market, in our opinion, aims to educate companies on understanding good corporate governance practices and communicating correctly and transparently with shareholders to enhance their reputation and attract capital for development.

Although there are some companies showing financial performance and we carefully monitor their evolution, we are very selective in investing capital in companies of this category. Some of them are not stable enough because of inconsistent financial performance, weak corporate governance practices, poor financial discipline, and ineffective communication with the shareholders. These aspects, which can erode the investors’ trust in the entire market, must be much better analyzed, as early as from the process of preparing for the listing and afterward. 

As institutional investors, we have the responsibility to highlight these deficiencies. Therefore, we reiterate the recommendation that professionals working in the capital market should be much more selective with the offering documents they present to individual investors. We want this investor category to grow in strength and trust in the market, to earn and to become professional in the long term. To support and protect them, the Bucharest Stock Exchange must strengthen its admission and maintenance conditions for the newly listed companies and rigorously enforce them. As shareholders of the Bucharest Stock Exchange, we have expectations in this regard from the new Board of Directors.