AlphaValue Equity Research & Stock Reports

Key information: • Orders received grew by 5.2% and by 5.6% in local currencies. • Revenue rose by 2.7% and by 2.9% in local currencies. • Operating profit increased by 10.7%. • EBIT margin reached 11.7% vs 10.9% in H1 16. • Net profit grew by 12.6%. • Cash flow from operating activities increased by 3.3%.

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Swiss Life Holding

Pre-tax profit increased by 5% to CHF676m for H1 17 compared to the same period last year. Net earned premiums were down by 9% to CHF7.5bn for H1 17. Investment income declined by 2% to CHF2.2bn for H1 17 compared to H1 16. Total income was down by 7% to CHF10.7bn for H1 17 compared to H1 16. Insurance benefits and claims declined by 12% to CHF8.0bn for H1 17 compared to H1 16. Total expenses decreased by 8% to CHF9.9bn in the same period. Net profit attributable to common shares was up by 4% to CHF521m for H1 17 compared to H1 16. Shareholders’ equity rose by 2% to CHF14.0bn at end June 2017 compared to the previous year-end. The SST ratio was 161% and the Solvency II ratio was above 200% at January 2017.

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Gaussin

Financial freedom by 2019? TARGET CHANGE CHANGE IN TARGET PRICE€ 0.53 vs 0.61 -12.2% Note that we changed our recommendation from a Call option recommendation (held for almost two years) to a Buy in June 2017. We believe that the debt restructuring and the strong guidance (namely €18m of revenue and a positive reported net profit for FY17) are positive elements. We believe that the company could become cash break-even from 2019 onwards, which would be a very positive element and a strong catalyst for the share price. Finally, in our view, Gaussin's dependence on capital increases is approaching an end (we forecast only a €5m capital increase in 2018). Gaussin's financial freedom will be significantly rewarded by the market. In anticipation of this, we have switched to a positive recommendation. CHANGE IN EPS2017 : € 0.00 vs 0.02 -76.2% 2018 : € 0.04 vs 0.05 -22.9% Following a Q2 that was disapointing relative to Q1, we have decided to lower our EPS forecasts. We now expect the company to be break-even in 2017 on an adjusted basis. We still expect Gaussin to deliver positive adjusted net income in FY 2018. CHANGE IN NAV€ 0.67 vs 0.71 -6.68% Following the issuance of convertible bonds, we have adapted our assumptions about the future capital increase, namely the conversion of debt into shares. We now expect this to takes place at c.€0.25 per share vs €0.30 previously, explaining all the decrease in our NAV. CHANGE IN DCF€ 0.76 vs 0.83 -8.51% Following the issuance convertible bonds, we have adapted our assumptions about the future capital increase, namely the conversion of debt into shares. We now expect this to takes place at c.€0.25 per share vs €0.30 previously, explaining all the decrease in our DCF.

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SEGRO

Segro posted its first half 2017 results. Adjusted EPS was up by 3.2% to 9.7p against 9.4p yoy, incorporating the new shares issued in the March rights issue. The vacancy rate remains low at 5.5% against 5.7% in FY16. LTV stood at 29% vs 33% in FY16. EPRA NAV was up by 5.4% to 504p (vs 478p in FY16). The board proposed an interim dividend of 5.25p per share, up by 5% from the previous year. The group’s property portfolio was valued at £7.3bn at H1 17 (+4.9% lfl), of which a £5bn portfolio of warehouse properties in the UK and Continental Europe.

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Groupe Bruxelles Lambert

A year ago, we wrote that GBL was about to succeed in its challenge of evolving its portfolio towards greater geographic and sector diversification (see our Latest dated 02/08/2016). The appointments of Ian Gallienne and Gérard Lamarche as Group Managing directors in 2012 have effectively led to a change in GBL’s strategy. Even though the new managers declared that they would keep a patrimonial approach and a long-term view, GBL’s portfolio has significantly evolved over the last five years. As announced, the shift in the portfolio was gradual, while maintaining the principles of a “ friendly ” approach, a main shareholder position (1st or 2nd largest) and a sound financial situation (with a net cash position or a time-limited debt). One of GBL’s strategic priorities remains to “ optimise the balance between growth and yield investments ” with the view to creating value for its shareholders over the long term. “ GBL invests and disinvests depending on the development of the companies and on market opportunities to reach its objective of value creation, while maintaining a solid financial structure. ” To implement the portfolio diversification, GBL strengthened its financial flexibility by the launch of two exchangeable bonds, respectively into Suez Environnement shares in September 2012 and into GDF Suez (ENGIE) shares in January 2013, while continuing to collect the dividends of the holdings for three and four years. The proactive rotation of the portfolio was accelerated through a mix of spot and forward sales of historic assets (Total, ENGIE, Iberdrola, Arkema). The position held in Lafarge (21.1% since 2008) became 9.4% in LafargeHolcim in 2015, after the merger (supported by GBL) of Lafarge with the Swiss company Holcim. The cash issued from the divestments and GBL’s indebtedness position allowed the company to purchase new investments. In June 2013, GBL announced that it had reached an agreement with the Agnelli family’s holding Exor to acquire its interest in the capital of SGS, the world’s leading testing, inspection and certification group – becoming its reference shareholder, next to the von Finck family. Other investments followed, GBL buying a stake in some listed companies and then intending to increase its stakes further, the timing dependent on the share prices. In this way, GBL acquired a first stake in Umicore (in 2014), Ontex and Adidas (2015), Burberry (2016) and Parques Reunidos (2017) and increased its shareholding in these companies during the four-year period.

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Relx

RELX produced slightly higher than expected H1 17 revenues at £3,718m (+£461m) and reflecting a solid +4% organic growth. Adjusted OP grew a bit faster, up +5% to £1,154m (+£151m), implying a 20bp margin improvement to 31% compared with 30.8% a year earlier. The adjusted EPS at CER rose by 8% and +19% in sterling and the interim dividend per share is raised by 14% to 11.70p. The group specified that the £500m share buy-back programme was completed and further £200m will be made in H2 (£40m completed over July), i.e. £700m for the full-year as previously announced. An update will be made on the FY18 buy-back plan (thus implying there will be another one) in February 2018. The FY17e guidance was reiterated, i.e. delivering “another year of underlying revenue, profit, and earnings growth in 2017”. This is as vague as usual but the solid H1 results and the current trends (in line with FY16) indicate that risk for disappointment remains very low at this stage for this very well-managed company.

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