John Elkann, the letter to the shareholders: “A billion from Exor for Health. European football lacks clarity”

Focus on the Health sector, where Exor invested 1 billion euros in 2022, and on the evolution of CNH Industrial in the now traditional letter to shareholders by John Elkann. But also substantial chapters dedicated to the unsatisfactory performance of the sports sector of Ferrari and Juventus, and to relations with European football institutions. Besides, of course, the new challenges of Stellantis and investments in innovative sectors.

Returning from a trip to Asia where he had been missing for four years, the managing director of the Agnelli family holding company begins by recalling the conflict in Ukraine, the geopolitical tension between America and China, global inflation rising to 9%, which in together they are driving unprecedented losses for both stocks and bonds. «After leaving India-he begins-I keep in mind the wisdom of Mahatma Gandhi. As a quote often attributed to him says: “Peace is not the absence of conflict, but the ability to face it”.

Here are the most significant chapters.

Health
«In 2022 we deepened our knowledge in the health sector (healthcare) and invested almost 1 billion euros. It is an industry that will continue to grow over the next few decades, to respond to the needs of an aging global population. For example, while US health care costs for people ages 0-44 hover between ie and $5,000 a year, these costs rise eightfold for people ages 85 and older. In a world with a growing and longer-lived population, there is an increasing need to reduce costs and improve the quality of healthcare systems, thus creating attractive capital employment opportunities.

Among investments in healthcare, Elkann mentions Institut Mérieux, Lifenet Healthcare and several early stage tech companies through Exor Ventures. «Thanks to the increasingly close relationship with the Institut Mérieux and the Mérieux family – he says – we want to support the development of their companies and benefit from their deep knowledge and expertise while we seek future investment opportunities in the fields of genomics, proteomics, tools for scientific analysis, diagnostic imaging and medical components…

We also acquired 45% of Lifenet Healthcare, an Italian company that manages clinics and outpatient centers led by Nicola Bedin: it is making itself known in the sector for its ability to innovate and improve health services and patient care, while achieving good financial results. Through Exor Ventures we are also developing partnerships with early stage healthcare companies: emerging companies located at the intersection of technology and biology will create significant value by solving structural inefficiencies in the healthcare industry through more personalized care, improved manufacturing capacity and greater decentralization of services.

Juventus
Elkann does not hide the serious problems afflicting the Juventus team which lost 239 million euros last year and met the board of directors 18 times to deal with legal actions. «To a greater extent than many of our clubs – he writes – in 2022 Juventus found itself facing growing internal and external difficulties, which put the Club to the test. Juventus made a significant loss of €239m for the year and, for the first time since 2011, the men’s team did not win any titles. But it was the lawsuits against the club that ended up occupying the company’s board, which met 18 times throughout the year. The level of pressure has grown to such an extent that the Board has decided to resign to allow the company to protect itself most effectively against allegations ranging from alleged accounting irregularities to inaccurate communications to the financial markets mainly relating to the buying and selling of players and agreements on salaries of the same. Juventus denies any wrongdoing. I would like to thank the board of directors for having acted responsibly and in particular the president Andrea Agnelli, who led Juventus in a phase full of changes and victories”.

The Agnelli leader recalls that now the Juventus club has moved on anyway. «Juventus now has a new president, Gianluca Ferrero, and a new managing director, Maurizio Scanavino, who is also at the helm of our media company Gedi, where he is successfully carrying out a recovery plan. At Juventus, Gianluca and Maurizio will be aided by a new board of directors, and they have made a good start, ensuring that Juventus can meet its many current challenges, while protecting its reputation so that it can come back stronger both on and off the pitch. ».

Elkann is also launching a controversial message to the European football institutions. “Continental European football is failing to keep pace with the growing financial power of the Premier League, whose revenues are expected to triple those of Serie A by the end of the current season. The effects of this dominance can be seen in the transfer market, which in turn is able to play a key role in the success of the clubs: in the 2022 summer window, the gross transfer spend in the Premier League was equal to the total spend of Serie A, LaLiga, Bundesliga and Ligue 1 combined, and this situation continued into the winter window, with Chelsea alone spending more than all the clubs in these four leagues combined. Football is still in transition to a fully professional industry. There is still a lack of clarity as a whole, and this is creating financial and regulatory tensions».

Ferrari
«Ferrari ended 2022 with record results. The strategic plan presented by Benedetto Vigna foresees that by 2026 internal combustion engines (ICE) will represent 40% of the offer, while the remaining 60% will be made up of hybrids and full electric. Thanks to the leap forward in the evolution of its range, Ferrari expects an increase in turnover to 6.7 billion euros by 2026 and an adjusted Ebitda margin close to 40%, in line with the best luxury companies. While profound changes are underway within the walls of Maranello, in particular in strengthening sporting activity on the track and developing lifestyle collections on the catwalks, the drive towards progress that our founder Enzo Ferrari had in his heart continues to humble and the people of Ferrari are ambitious in building the future of the Prancing Horse».

Stellantis

“Stellantis has already consolidated its position in the automotive world as the third largest operator by revenue and margin and, taking into account the reporting differences between global manufacturers, as the market leader in absolute operating profit. The company intends to continue to achieve excellent financial results, with the ambition to double net revenues to 300 billion euros by 2030 (compared to 2021), ensuring double-digit adjusted operating profit margins throughout the decade.

Cnh Industrial

“The company is continuing to develop its precision and digital technologies, explore alternative energy sources, and create more specialized approaches to construction. To support this, in 2021 CNH Industrial acquired Raven, a leader in precision agriculture, for 2.1 billion dollars: precision technologies have helped generate 0.9 billion in revenues for the company in 2022, with forecasts of annual growth of 10-15% in the years to come».

Investments

Investments (“public funds”, “private funds” and Ventures activities) grew by around 1 billion euros in 2022

«Matteo Scolari’s portfolio (“Public Funds”) – recalls Elkann – has produced a cumulative gross return of 191.9% in dollars or 19.3% annualized since the beginning of its management, without any year with negative results, thanks to the hedging activity. By comparison, the performance of the MSCI World Total Return Index over the same period was 68.8% or 9.0% annualized (with negative returns in 2018 and 2022).

Nikhil and his team, despite the general declines in the private asset market, have seen rounds to raise new funds at higher valuations for their investments (“Private Funds”); Examples include ClearBank (founded in 2015 and headquartered in London, it is the first digital clearing bank in the UK and was also the first to receive a new UK clearing license in over 250 years) and myTVS, which is grown to be India’s largest offline to online digital platform in automotive aftermarket parts and services.

And again «Noam Ohana and his team have renamed Exor Seeds in Exor Ventures, thus reflecting our ambition to collaborate with the best entrepreneurs, both those “early stage” and those of more mature companies. To date, we have invested approximately $500 million in 75 companies through Exor Ventures, mainly in the areas of mobility, fintech and healthcare (which is increasingly becoming a priority for us today). We have also started to explore the opportunities in climatetech, mainly on the reduction of greenhouse gas emissions. In 2022 Vento was launched, our Italian seed fund which focuses in particular on entrepreneurs engaged in building their company: it has financed over 30 startups in the last year and is now one of the most active Venture Capitals in Italy. We’ve seen encouraging results so far and expect to reap some disruptive successes in the coming years.”

In 2023, Lingotto arrives, an alternative asset management company wholly controlled by Exor, with approximately 2.5 billion euros of assets. Under the leadership of Enrico Vellano, Lingotto will start life this year as a wholly owned alternative asset management company, with approximately €2.5 billion of assets under management, thanks to the equal contribution of Covéa and Exor.

Esg Strategy
«We have identified 3 “passions” for each of the ESG pillars – Elkann writes – Reducing emissions for the “Environment” pillar, education as a means to reduce inequalities and promote innovation for the “Social” one and l diversity and inclusion for governance. Many of our companies have set ambitious climate goals, with clear deadlines, in line with global standards such as the Science-Based Targets initiative.

In education, last year The Economist Educational Foundation involved more than 200,000 students from disadvantaged families and is on track to reach the ambitious goal of 1 million children worldwide by 2026. Exor has launched the Matabì program , an education initiative managed in collaboration with the Agnelli Foundation, which aims to promote spatial skills and reduce the gender gap in STEM subjects at school through construction games with Lego bricks. The program will be extended to almost eighty classes of eighteen schools in four Italian regions: Piedmont, Veneto, Tuscany and Campania».

Investor Day

The date has been set: November 30 in Turin at the Lingotto.