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Public tender offer launched by Columbus Holding 2 (controlled by Michaël Fribourg and holding 6.6M shares or 26.5% of the capital) at a price of €12A very optimistic business plan for 2028 in the regulatory noteWe recommend to tender to this offer, which we believe is opportune and correctly values the company's prospects, taking into account its status as a holding company .
Chargeurs Chargeurs SA
Chargeurs has likely passed the cyclical bottom in protective film while its Museum division benefits from excellent visibility. However, for the stock to re-rate, the group needs to reduce leverage. This should come from a recovery at CAM and/or asset disposals. Cyclical bottom in protective films, strong visibility in Museums Chargeurs'' protective films activity seem to have reached a bottom as evidenced by the recent uptick in order intake. On the other hand, the Museum activity benefits from excellent visibility. We expect group earnings to recover next year thanks to operating leverage and efficiency gains. Leverage has likely peaked Chargeurs should reach net debt to EBITDA of 4.7x in 2023e (up from 1.6x in 2021) due earnings decline and MandA. With that said, 1) the group has no financial covenants based on net debt to EBITDA and is financing to covenants on net debt to equity (1.2x vs. 0.8x at end 2023); 2) it should be able to meet refinancing needs thanks to FCF and undrawn credit lines. Asset sale optionality Management has pointed to asset sales as viable strategic options. We see protective films and fashion technologies as good candidates for a disposal and value those two businesses at an EV of EUR245m and EUR134m, respectively. Estimates and valuation range reviewed We have cut our estimates in 2024 and 2025 to factor in a slow recovery at CAM. We have upgraded our valuation range (ROCE/WACC at EUR8 and DCF at EUR12) to reflect higher margins.
The Group recorded its sixth consecutive quarter of organic decline, and Q3 sales were almost 15% below our expectations.Further downward revision of our forecasts for 2023E and 2024EIn the current context, the 2024 targets (sales of €800m and EBITDA of 9-10%) seem particularly ambitiousReduce opinion maintained with a TP of €8.5 (vs €9) in view of the many doubts surrounding 2024
Adjustments to our FY 23-24 outlook TARGET CHANGE CHANGE IN EPS 2023 : € 0.18 vs 0.39 -53.5% 2024 : € 0.60 vs 0.74 -19.2% We have downgraded our EPS estimates for 2023 and 2024. The main factor impacting our revenue estimates is Chargeurs Luxury Fibers, whose sales are expected to decrease significantly vs. 2022 due to a negative price effect (strong drop in the conventional wool price (i.e.: micron 17 down by -30% on Q3 and -21% for 9M 23), and a change in product mix (less conventional and growing certified Nativa wool). In terms of margins, the main drivers of our downward revision are (i) we had been overly optimistic about Fashion Technologies' margins considering the figures published in H1 23, (ii) we have removed the Healthcare solutions division, which is no longer contributing to Chargeurs' sales and underlying profit, (iii) we have aligned our numbers with the guidance provided by Chargeurs for Museum Studio as we had been a bit too bullish and (iv) as we did not have any information on Swaine, and given the scale-up work that will require opex, we had assumed that Swaine would be consolidated in 2024 and will not contribute to margins. In 2024, our estimates have been negatively impacted mainly by the downward revision of our estimates for Museum Studio. Despite these revisions, we remain positive overall especially on CAM, on which we are confident of a rebound, leading to similar margins in absolute terms, despite the fall in our revenue estimates. CHANGE IN NAV € 28.1 vs 32.2 -12.9% Given that we have based our NAV valuation on EV/EBITDA multiples with an average estimated EBITDA for 2023, 2024 and 2025, the downward revision to our EBITDA forecasts has penalised our NAV estimate. Specifically, consistent with the downward revision of our EBITDA estimates for Chargeurs Fashion Technology, the division's valuation has fallen from €300m to €270m. In addition, we have removed Healthcare solutions, which has also penalised our NAV. CHANGE IN DCF € 11.8 vs 17.0 -30.6% The sharp fall in our DCF comes from the downward revisions to our FY 23-24 EPS forecasts (see EPS commentary). In 2023, we now expect revenues of €669m (vs. €702m) and an underlying operating profit of €27m (vs. €35m), representing a margin of 4% (vs. 5%). In 2024, we expect revenues of around €753m, compared with €788m previously, and an underlying operating profit of €43m (or a margin of 5.7%), compared with €49m (or a margin of 6.2%).
Chargeurs continued to be negatively impacted by a still-difficult environment for its various businesses in the Q3 23, with a 7.6% organic decline in revenues. However, the worst now seems to be over as the recovery in the Advanced Materials division is showing signs of picking up pace, with the monthly volumes in September and October higher than in 2022. Meanwhile, Chargeurs Museum Studio continues to assert itself as a new growth driver. The 2024 targets were reaffirmed.
Adjustments to our FY 23-24 outlook following the H1 results TARGET CHANGE CHANGE IN EPS 2023 : € 0.39 vs 0.80 -51.8% 2024 : € 0.74 vs 1.20 -38.2% We have revised our estimates for 2023 and 2024 downwards following H1 23. We were over-optimistic about top-line growth and now estimate sales of €702m with an underlying operating profit of 5%, compared with 6.1%. The downward revision comes mainly from the Chargeurs Advanced Materials division, where we were too enthusiastic about the prospects for a rebound in volumes in a macro-economic environment that remains unfavourable. We have also lowered our estimates for the Fashion Technologies division, which, despite the catch-up effect of the fashion and luxury goods sector, recorded a fall in sales in H1 due to the devaluation of the Argentinian peso. Top-line growth was also impacted by our downward revision of estimates for Chargeurs Luxury Fibers, whose growth was adversely affected by a cyclone in New Zealand. Lastly, our EPS forecasts were penalised by the rise in financial expenses in H1 23. CHANGE IN NAV € 32.2 vs 41.1 -21.5% Given that we have based our NAV estimate on EV/EBITDA multiples with an average estimated EBITDA for 2023, 2024 and 2025, our downward revision of EBITDA particularly for Chargeurs Advanced Materials has penalised our NAV. We now value the division at around €300m, compared with €452m previously. The downward revision of the estimated EBITDA for Fashion Technology has also had a slight negative impact on our NAV. Lastly, the increase in net debt from €174.4m at the end of 2022 to €194.4m in H1 23 contributed to the fall in our NAV. CHANGE IN DCF € 17.3 vs 26.3 -34.1% The sharp fall in our DCF comes from our downward revisions to the FY 23-24 EPS forecast (see EPS commentary). We expect revenues of €702m (vs. €789m) with an underlying profit of €35m for 2023 and revenues of €788m (vs. €872m) with an underlying operating profit of €49m (vs. €53m). In addition, as with NAV, the increase in estimated net debt weighs on our DCF.
H1 results disappointing and below our expectations The Group posted results close to those of H1 2012, while net debt doubled over the period to almost €195 million. Our hypothesis of buying back the 37% stake in GLAS in order to launch a takeover bid for SMCP seems less convincing in view of Chargeurs' lower stock market valuation and financial structure. Forecasts have been lowered for 2023E, and fiscal 2024E looks particularly uncertain, which leaves us skeptical about our targets (sales of €800m - EBITDA margin of 10%). We are returning to fundamentals and therefore to a negative recommendation on
Chargeurs reported results well below our expectations and aligned with consensus regarding both the top-line and profitability for H1 23, solely due to the cyclical weakness of the industrial protection film business. On the other hand, the Museum Studio division is firmly establishing itself as a group’s new growth lever within the Luxury division. Also worth noting is the good momentum of the group’s new growth drivers, which now account for nearly 60% of group revenue. The drop in profitability, compounded by a significant increase in financial expenses (net debt reaching €194.4m secured by ample credit lines), led to a sharp fall in the group’s net profit to €3.3m (vs. €10.2m).
Q2 23 sales down c.6% due to Advanced Materials Q2 23 revenues were EUR183m, down 5.7% LFL as a decline at Advanced Materials was partially offset by further strength at Museum Solutions. Advanced Materials was down 19% LFL, reflecting lower volumes in construction and energy intensive end markets. Museum Studio accelerated (+63% LFL) thanks to the ramp-up of projects gained in the past two years. H1 23 EBIT down c.45% due to lower volumes at Advanced Materials H1 23 EBIT came out at EUR14.1m down from EUR25m last year. The decrease was attributable to negative operating leverage and higher COGS at Advanced Materials. This was partially offset by a rebound of Museum Solutions profitability. Profitability at Fashion Technologies was resilient, with divisional EBIT down 4% thanks to a good level of price pass-through. Management aims at sales above EUR800m in 2024 The group did not provide an outlook for the current year but said it anticipates sales of at least EUR800m in 2024 (vs. our EUR837m forecast). This should be driven by 1) the gradual recovery at Advanced Materials on lower comparison basis and good momentum on the non-construction related activities (c.75% of sales); 2) continued project ramp-up at Museum Studio. Forecasts and valuation range lowered We have cut our EPS forecasts by 39% this year and 19% next year to account for lower growth and margins going forward as well as higher than expected financial charges. We have lowered our valuation range accordingly (ROCE/WACC at EUR11 and DCF at EUR14).
Q1 well below our expectations (-10% organic vs -18% reported), which has led us to revise our forecasts for 2023 downwardsCommunication as surprising as ever, given the reality of the company's economic performance, with confirmation of the €1,000m sales target for 2025 on a "like-for-like" basisThere is therefore one unknown factor in the equation, which can only be a "transforming" M&A operationFor the 1st time since 2020, we have upgraded our opinion to ADD vs REDUCE, with a target price unchanged at €13.
Adjustments to our FY 23-24 estimates EPS CHANGE CHANGE IN EPS 2023 : € 0.80 vs 1.24 -35.2% 2024 : € 1.20 vs 1.66 -27.8% We have revised our FY 23-24 assumptions following the Q1-23 release. We now estimate sales for 2023 at €788m versus €831m previously, and the underlying operating profit at 6.1% versus 7.2%. This decline is due to a downward revision in the sales and margins at Chargeurs Advanced Materials, on which we had been overly optimistic after an exceptionally high level in Q1-22 due to a post-Covid catch-up effect. We had also been too optimistic on Chargeurs Luxury Materials, with a sales growth forecast of 7%, despite the particularly high level of activity in 2022. We have also reduced our estimates for the HealthCare Solution division (with sales growth of 0% vs. 30% previously), as we no longer have any visibility on the division's revenues and margins in the context of an improving healthcare situation. For 2025, however, we are more optimistic, estimating strong sales growth for Chargeurs Museum Studio (+25%) to over €200m with a margin of 12%, 10% for Chargeurs Luxury Materials to €110m with a margin of c.4% and 50% for Chargeurs Personal Goods to c.€24m with a margin of 10%. CHANGE IN NAV € 41.1 vs 38.0 +7.98% Our NAV has increased on the back of updated EV/EBITDA multiples and peer groups. We now use average estimated EBITDA for 23/24 and 25. As a result, Chargeurs Advanced Materials has seen its value drop significantly, with a multiple of 11.5x versus 14.5x previously, while Chargeurs Fashion Technologies' value has risen sharply due to a change in methodology, from an EV/EBITDA of 9x to an EV/EBITDA of 11.6x. Finally, we have applied an EV/EBITDA of 11.4x for Chargeurs Museum Studio, compared with 10.5x previously. CHANGE IN DCF € 26.2 vs 28.7 -8.57% Our DCF-based valuation is reduced slightly from €28.76 to €26.20 after incorporating our adjustment to the FY23-24 EPS forecast (see EPS commentary). We expect revenues of around €788m (vs. €831m) for FY 2023 with an underlying profit of c.€34m (vs.€51m) and €872m (vs. €892m) for FY2024 with an underlying operating profit of €53m (vs. €67m). We are also less optimistic on the WCR, which we had underestimated due to the extremely low level in 2021 (3.8% of sales).
Despite Chargeurs’ somewhat expected 18% lfl yoy revenue contraction in Q1 ‘23 due to the record 2022 Q1, Chargeurs Advanced Materials showed signs of a volume recovery with 21% qoq volume growth. This business line is responding to the wait-and-see attitude in particular in China by expanding geographically and premiumizing. The Q1-23 confirmed the Group’s new growth drivers, with Chargeurs PCC Fashion Technologies’ business holding at high levels and Chargeurs Museum Studio posting a solid 30.2% lfl yoy growth. Following these results, Chargeurs confirmed its scenario of positive trends in the H2 23.
Chargeurs reported results that were down and broadly in line with our expectationsThe bad surprise was the sharp increase in net debtThe balance sheet situation leaves little room for manoeuvre to carry out the luxury goods acquisition strategy, with a target of €200m in additional sales by 2025The Group has not communicated a guidance for 2023, but has maintained its 2025 plan, which calls for €1,000m in sales and €100m in EBITDA, which implies a 10% organic growth rate per yearWe remain very dubious about the achievement of these targets as the company has never been able to reach this
After a record year in 2021 and despite a tough macro-economic environment, Chargeurs closed FY22 on a high note. Chargeurs’ resilient performance was driven by the impressive performance of the PCC Fashion Technologies division and a fast-growing Luxury segment. While a slowdown has been seen in the CAM business, there is little to worry about in view of the signs of a rebound currently observed. The solid results, combined with the anticipated normalisation, have prompted Chargeurs to reaffirm its 2025 targets.
Good earnings resilience Q4 22 sales of EUR173m were down 10% of which 17% LFL decline vs. our estimate of EUR183m (down 5% LFL). The downside to estimates was driven by Advanced Materials that continued to see weaker YoY end market trends including destocking in the channels. This was partially offset by strong activity at CFT PCC (+8.2% LFL) and CMS (+36.2% LFL). FY 22 Gross profit increased 5% at EUR195m thanks to sales recovery at CFT PCC while pricing more than offset cost inflation. Adj. EBIT came in at EUR45m tracking 6% above our estimates. Visibility improving Management indicated that order intake at Advanced Materials have started to recover in Q1 while price hikes have continued to carry over. The outlook for CFT PCC remains good on the back of continued growth of order intake and the effect of China reopening. CMS should also benefit from the ramp up of ongoing project as the business is expected to exceed EUR120m of sales i.e. +30% growth. Overall group''s outlook for 2023 points to sustained revenue growth (we anticipate 7% organic sales growth). Higher MandA activity in 2023 Management pointed to the possibility of a large deal in luxury related activities allowing the group to cross the EUR1bn sales threshold. Earnings and valuation range increased We have lifted our 2023 and 2024 EPS estimates by respectively 2% and 5%. We have raised our valuation range from EUR13-EUR19 to EUR14-EUR19.
The organisation of Chargeurs’ businesses into two strategic operating divisions in July 2022, far from being merely symbolic reflects a strategic shift, in which the company is striving to be more of a luxury player in addition to its supreme competency in niche industries. Ahead of a yet-to-happen significant acquisition, Chargeurs’ management creates optionality value that we see positively as per the strong track record to date. Chargeurs moves fast with a clear drive to extract value where it can.
Downwards revision following the Q3 release TARGET CHANGE CHANGE IN EPS 2022 : € 0.86 vs 1.05 -17.7% 2023 : € 1.24 vs 1.35 -8.43% We have incorporated the 9m 22 numbers into our estimates. In line with the strong increase in revenues observed over 9 months (+64%) for CMS and the management's outlook of €120m in 2023 for the division, we have revised our revenue estimates upwards to €83m from €78m for 2022 and to €121m from €91m for 2023. Our margin estimates are now €4.2m and €9.6m for 2022 and 2023 respectively. We have also revised upwards the figures for CFT, which is not yet experiencing the slowdown we had expected (+49% over 9m), and we now estimate revenues of €224m in 2022, compared to €193m and operational profit of €14.6m (versus €12.5m) in 2022. Concerning CPC, our estimates of €28.4m for 2022 were too ambitious in view of the strong setback owing to the health crisis in Europe, so we now expect turnover of €6.4m and a margin of €1.9m. We have also revised downwards the turnover of CAM which is experiencing a reduction in volumes despite the positive price effect, to €343m with a margin of 7% at €24m. Finally, CFL has also been revised downwards to €95m from €108m. All these changes have led to a decrease in our revenue estimates to €752m in 2022 (compared to €775m previously) and €827m in 2023 (compared to €831m previously) as well as in operating profit to €40m in 2022 (compared to €48m) and €53m in 2023 (compared to €60m), which has weighed on our EPS estimates in 2022 and 2023. CHANGE IN DCF € 29.6 vs 37.7 -21.5% In line with the downward revision of our EPS for the years 2022 and 2023 (see commentary on EPS), our DCF has seen a downward adjustment from €37.7 to €29.6. This downward revision is explained by the much more challenging environment for the group with lower volumes in the CAM division, the collapse of demand in sanitary ware for CPC despite the division's restructuring effort and CLF which has not yet come to fruition. Nevertheless, we believe that CMS and CFT will be the future growth drivers of the group, and that the group remains in a resilient position despite the macroeconomic headwinds. Our estimates are based on an organic growth scenario and therefore do not take into account any contribution from possible future acquisitions.
Chargeurs demonstrated its resilience in a difficult macro-economic environment with stable organic revenue growth over nine months. The group’s resilience in the deteriorating climate is underpinned by: i) its pricing power, ii) its favourable geographic mix with a strong exposure to the Americas and Asia, buffering the coming recession in Europe, and iii) the development of new growth drivers.
Sales tracking lower Q3 22 sales came in at EUR175m, down -5% LFL. We were expecting sales of EUR185m, up 3% LFL. Against a challenging comparison base, Q3 22 trends saw a sharp decline at advanced materials (formerly Protective Films) and no contribution from Personal care (formerly Healthcare Solutions). Furter slowdown at Advanced Materials, acceleration at CMS Advanced materials (-16.1% LFL) saw continued deterioration in volumes due to a downturn of its main end markets (construction, furniture, appliances) as well as some destocking in the channels (against high comps), partially offset by price hikes. Fashion technologies (+29.5%) continued to benefit from the catch-up vs pre-pandemic levels but also share gains and price increases. Museum solutions (+41.2% LFL) picked up on the back of strong recovery in retail and ongoing projects in the Middle East. Cautious outlook Management pointed to a more adverse economic environment for the end of the year and the start of next year characterized by continued destocking in the channels and a wait-and-see attitude at clients. Estimates and valuation range lowered We have cut our earnings estimates by c 20% this year and next year mainly to factor lower growth and margin at Advanced Materials. We have reduced our valuation range accordingly (ROCE/WACC at EUR13 and DCF at EUR19).
Adjustments to our FY 22-23 outlook following the H1 results EPS CHANGE CHANGE IN EPS 2022 : € 1.05 vs 1.32 -20.4% 2023 : € 1.35 vs 1.48 -9.08% Following the publication of the H1 22 results, we have adjusted our FY 22-23 EPS estimates downward. The FY 22 EPS forecast now sees a decline due to lower than expected revenues and margin contribution from Chargeurs Personal Care (formerly Chargeurs Healthcare Solutions), because of the improved sanitary situation. Based on this, we estimate Chargeurs Personal Care's revenues at €28.4m versus €85.3m previously and underlying profit of €7.1m versus €18m previously in FY 22. We have also lowered our estimates for the CMS (Chargers Museum Solutions) division in FY 22 to be in line with the 5% operating margin in H1. We now estimate an underlying operating profit margin for FY 22 of 6.5%, bringing the underlying profit down to €5.1m from the previously estimated €6.8m. However, we believe there will be an improvement in 2023 and 2024 as projects won in 2021 and 2022 should deliver profits in 2023-24. CHANGE IN DCF € 37.2 vs 38.3 -3.08% Our DCF-based valuation sees a marginal cut from €38.3 to €37.2 after incorporating our adjustments to the FY 22-23 EPS forecast (see EPS comment). We expect revenues to reach c.€905m against €926m previously in FY 24 and an operating underlying profit of €75m.
With its recent acquisitions of Swaine in 2021, the Cambridge Satchel Company in 2022, the development of the Chargeurs Museum Studio division and its luxury wool, Chargeurs looks like a luxury player in the making.
Chargeurs has once again demonstrated its adaptability and flexibility in an uncertain and challenging environment. Although less heady than H1 21, the group showed its resilience with solid operating results marked by revenue and profitability growth compared to pre-pandemic levels across all businesses. While H2 and FY 2022 will certainly be less impressive than in FY 21, Chargeurs displays an encouraging long-term outlook despite record inflation, the war in Ukraine and recessions in key geographies.
Chargeurs released excellent Q1 revenues across all the historical divisions (i.e. excluding Healthcare Solutions), posting solid double-digit organic growth rates. This was led by a record quarter for Protective Films and an encouraging recovery in the Fashion Technologies and Luxury Materials divisions to their pre-pandemic levels. The Q1 performance hints that Chargeurs’ pricing power should help to offset the effects from rising input costs, while full order books underpin confidence in the upbeat full-year outlook.
Chargeurs closed a successful FY21, with the performance of the core activities (ex-CHS) driven by the record sales performance of the Protective Films division, the further development of the museology activities, as well as a gradual recovery in the other historic businesses. The 2022 outlook, while still subject to the lingering effects of the pandemic, seems upbeat, with strong volumes expected in CPF and a more marked recovery in the textile activities.
Chargeurs released a solid set of results in Q3, with Protective Films continuing to perform strongly and Fashion Technologies showing signs that the recovery is picking up pace. The Museum activity will see a new addition to bolster its offer following the acquisition of Event Communications and Luxury Materials marks its return to pre-pandemic levels. All these elements support our upbeat FY21 view, although cost and raw material pressures loom over next year’s outlook.
We had initiated coverage of Chargeurs as a holding company then battling on to pay back its debt,. However, the strategy pursued by the new owner since 2015 and its moves into new capital-light businesses, with a B2B service-focused dimension, have had us reassess our view of Chargeurs to now as an industrial group.
The company reported an encouraging first half, driven by the strong performance of Protective Films and Healthcare Solutions, though all divisions contributed positively to the group’s profitability in H1. With cash generation from operations having reached €131m over the past 18 months, Chargeurs disposes of a sizeable war chest with its acquisition strategy now back on the offensive. On the organic growth front, strong order books for its core activities stand as encouraging signs of an upbeat FY22 performance.
Leveraging the strong demand from the construction sector, Chargeurs’ Protective Films recorded robust sales growth, which, in combination with the top-line contribution of the group’s novel division, Healthcare Solutions, allowed the group to record its best quarterly result in Q1. As the business lines most impacted by the pandemic continue on their progressive recovery, the solid momentum shown by CPF and CHS point to a very encouraging FY performance.
In a display of astute and agile management to face the difficult market context brought about by the pandemic, Chargeurs closed a successful FY20 with record profitability. This was driven by the group’s new personal protective equipment venture, in addition to a solid rebound at its core Protective Films division. Parting from an improved scenario in 2021, the group now looks forward to its ambitious 2025 objectives which put a bigger focus on nurturing lfl growth.
While the FY revenues were clearly driven by the success of Chargeurs’ venture into personal protective equipment under the Healthcare Solutions banner, the Q4 figures held a welcome surprise as the Protective Films business bounced back to organic growth.
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