Adjusted Net Asset Value calculation methodology
Preparation of the ANR and External Evaluator
The independent expert verifies the compliance of the valuations carried out with IFRS 13 and the recommendations of the IPEV (International Private Equity Valuation Organisation). The expert shall apply a multi-criteria approach whenever data is available and for each assessment, he shall define, on the basis of the relevance of the information available, the methods which are best suited to the related company.
The ANR is prepared by NextStage AM under the responsibility of Mr. Grégoire Sentilhes, with the intervention of the Chief Financial Officer, Mr. Christophe Pasquier and the assistance of Deloitte.
The external evaluator in charge of examining the value analyses of the Company’s shareholdings, carried out by NextStage as part of the calculation of its NAV, is Sorgem Evaluation.
The methods used to value the investments are as follows:
Stock market comparables method: This is an analogical valuation method based on a comparison of the company’s data with those of a sample of comparable companies in terms of activity, size, risk, growth… The multiples are constructed from a sample of comparable listed companies. An average or median multiple is then applied to the company to be valued. In the case of a non-listed company, it is customary to apply an illiquidity discount to the value obtained to take into account a valuation differential compared to comparable listed companies, due to the liquidity of their securities on the market.
Comparable transactions which is an analog valuation method using multiples observed on a sample of past transactions considered comparable to evaluate a new transaction. After the multiples have been constructed, the average or median multiple should be used to evaluate the transaction in question.
Target price: This is an evaluation method based on the selection of target prices published by brokers for a given company. In the case of a non-listed company, it is customary to apply an illiquidity discount to the value obtained to take into account a valuation differential compared to comparable listed companies, due to the liquidity of their securities on the market.
Discounted Cash-Flow: is based on the principle that the value of an asset is equal to the net present value of the future cash flows it generates. The value of an asset or entity is thus calculated as the sum of the cash flows generated, discounted at a rate that reflects the level of risk of the asset or entity in question. The valuation of a company by the DCF method is based on an explicit construction of the assumptions underlying a valuation, namely the forecasts of growth, investment and long-term profitability as well as the discount rate of future cash flows reflecting the level of risk of the business and its financial structure.
The expert implements and applies, where applicable, a size and illiquidity discount determined by analysing the differences in size premiums between small and large capitalisation companies – with reference to the “2016 Valuation handbook – Guide to Cost of Capital” (Duff & Phelps).
The Audit Committee, set up by the Company’s Supervisory Board, is responsible for preparing and facilitating the work of the Supervisory Board in its ongoing monitoring of the Company’s management, which includes verifying the reliability and clarity of the information provided to shareholders and the market.
The role of the Audit Committee is in particular to exercise control over the financial statements (including the ANR, which is reviewed semi-annually by the statutory auditors and validated quarterly by the Audit Committee) and the valuations within the framework of the Supervisory Board.
At least four meetings are held annually before the Supervisory Board reviews the annual financial statements, half-yearly financial statements and quarterly financial statements.
The scope of the role of the statutory auditors includes:
Accounting controls and audits, in particular the existence and valuation of equity securities, the existence and valuation of investment securities, sample controls on expenses, exhaustive verification of income;
Legal audits, including the audit of the management report and other controls, such as regulated agreements;
The signature of an ad hoc certificate on the ANR published every six months
The ANR is the subject of a quarterly press release.