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From an industrialist to a luxury player
Businesses & Trends

Chargeurs under the aegis of a new owner manager since 2015 has quietly shifted from a status of holding company essentially striving to pay back its bankers to that of an industrial group investing in profitable growth. This successful reenergising has been mostly achieved with the same business lines, more recently joined by the development of new growth avenues through strategic acquisitions and the reorientation of existing industrial assets.

Although we initially saw Chargeurs through the lens of an industrial conglomerate, given the strong delegation of daily execution to its different business units, the strategy pursued by the new owner and moves into new capital-light businesses by spinning off growth bits of existing businesses into fully-fledged divisions (Healthcare Solutions and Museum Solutions) have led us to reassess this view. Hence, we now consider Chargeurs as an industrial group in the Support Services sector, whose companies cater to various B2B services underlined by a low capital intensity.

Active management goes with one motto: growth in niche markets with a world scope. Unsurprisingly “niche but world reach” is the common feature of the 4 historical business lines. This geographical breadth is a clearly a plus as growth can be built out of the existing rather lean network of commercial units, plants and offices.

As of mid-2022, Chargeurs restructured its 5 activities into 3 strategic business areas: Technologies, Luxury and Diversification. While historically, the bulk of Chargeurs’ EBIT had come from its Technology division, in July 2022 Chargeurs announced that it wanted to achieve balanced contributions in terms of EBIT from its Technology and Luxury businesses by 2025 – strategy that would be implemented through the acquisition of a luxury goods player.

If this strategy appears ambitious, it is worth mentioning that the Chargeurs management team has shown an inordinate ability to capture major societal trends and turn them to its benefit. This is encapsulated in words like going “all digital”, going for “premiumisation” and upmarket, embarking ESG best practices and playing with the ever-more-intricate supply chains. There is nothing here that other companies cannot do, but Chargeurs seems particularly nimble at extracting more from such shifts.

Advanced Materials, a macro proxy

Advanced Materials is the world-leader in plastic-films and technical-solutions for temporary surface protection with c.40-years’ experience and a global market share estimated to be above 25%. Primary end-users (construction, household appliances, electronics, transport and auto sectors) reflect the pace of the global economy (components sourced from everywhere need to travel and be protected) all spurred by the general drive for quality, calling for the protection of parts comprising a finished product. The move to ever-thinner, usable films and associated glues also implies positive mix effects over the long run. Thin films are also widely used in manufacturing processes such as stamping where they contribute to mechanical properties. Thin films’ technology can be fairly complex when they unfold at great speed, must not break and avoid generating painful noise.

Thin films is one of those great (and discreet) businesses where the client needs a quality supplier for a component which is hardly visible in the final cost of the product. Services in effect matter as much as the film. Chargeurs strengthened that link by acquiring in 2017 designers and manufacturers of film-laying machinery. This magnifies the relationship with clients and the value proposition. In addition, Chargeurs increased “premium-grade” capacity from the new-fangled Italian production line that came online in late 2019.

Following an outstanding 2021, marked by record volumes against a backdrop of post-Covid supply-chain disruption, 2022 turned out to be a tougher year for Chargeurs Advanced Materials, which saw volumes fall as a result of inventory normalization and customer destocking. Accordingly, the division recorded a 6.3% organic yoy decline in revenues to €332.6m in 2022 coupled with a 12.8% decline in EBITDA to €32m representing a 120bps drop in margin. Fortunately for the division, the worst seems to be over, as volumes have again picked up from Q1-23 and were above their prior-year levels in the Q3-23.

Notwithstanding the sensitivity of the business to macroeconomic conditions, CAM’s products remain essential to the industrial supply chain worldwide, and the premiumization of the business towards the high-end market helps mitigate margin erosion. For the time being, Advanced Materials is still the most visible part of Chargeurs and where the industrial performance matters most.

Fashion Technologies: from product to service

The Fashion Technologies (CFT-PCC) division, which is the second-largest contributor to the Technologies division’s profitability, and very likely the largest in 2023, is Chargeurs’ interlinings operations. Today the division is the world leader in luxury and fashion interlinings, offering solutions to the world’s leading ready-to-wear brands. Through its technical fabrics, CFT gives structure to garments, an essential fabric for the manufacturing of coats, jackets, shirts and sportswear, responding to the trend towards greater sophistication in clothing.

As for Chargeurs Advanced Materials, the company has successfully transformed its operations within CFT through the years from a product to a service for the fashion industry – a shift accomplished through the acquisition of PCC in 2018, a coating company that has expanded into the field of interlining capable of heat-fusion in garments. Through this acquisition, Chargeurs extended its know-how in the USA and Asia, completed its interlining business and, above all, added a large service component as its stock in trade. This amounts to being selected as the “prime” contact by a given brand to ensure the timely supply of the various inputs to the actual manufacturers (usually a motley crew). Brand designers effectively rely on subcontractors with frequent issues of quality consistency.

Due to its exposure to the fashion sector, which was hit hard by the pandemic and the lockdown restrictions that significantly curtailed the activities of fashion retailers, this division did not escape the drag on revenues and earnings in 2020 with a 35.3% lfl yoy drop in revenues to €131.8m and shrinkage of its operating profit from €17.5m to €5.1m (i.e. from an 8.3% margin to 3.9%). After a persistently difficult 2021 for the division, CFT-PCC recorded a rebound in 2022 to its pre-pandemic levels, with revenues up 32.4%, an EBITDA margin up 360bps to 11% and EBIT up by 254.2% yoy to €17m. The segment benefited from a volume effect, with a pick-up in demand from fashion and luxury customers.

Although the division is also sensitive to macroeconomic conditions, which have a direct impact on global consumption, its diversification efforts in Asia, Europe and South America should help to offset any lags in consumption. In addition, the expansion of its global network across all apparel segments, coupled with an increasing market share, continue to support a resilient scenario for the division.

Museum Solutions: the new growth lever in a high-potential niche market

Conceived from the foundations of Chargeurs’ historical technical substrates business under the subsidiary Senfa Technologies, five strategic acquisitions carried out in 2018-20 led to the creation of a novel division focused on the niche market of museum services. Chargeurs seeks to intervene at every level of a museum’s decision-making chain, from project management, design and building to audiovisual content production and even the publication of art books. To this end, Chargeurs has broadened its portfolio with the acquisition of Skira, a renowned publisher of classic and modern art and design books, completed in June 2022. Through these acquisitions, Chargeurs has developed a leading and unique one-stop-shop offering in a very scattered market of multiple small players, to design and deliver the best visitor experience and fully capture the robust growth in the museum and luxury brands experience sector. The goal is to reinvigorate museums, increase their audiences and drive revenue growth.

Whereas this division was built from scratch, with sales of €13.7m in 2019, it proved capable of withstanding rough economic weather, securing revenues of €41m in 2020. CMS even reached €87.2m in sales in 2022. However Chargeurs’ aspirations for this division do not end there. In 2023, Chargeurs is targeting CMS sales of €120m, then €150m in 2024, before crossing the symbolic €200m threshold in 2025. This is an ambitious goal at first sight, but a realistic one in view of the division’s rapid expansion.

Luxury Fibers, expanding through Nativa

Chargeurs Luxury Fibers (CLF) has long been a leading world player in the “top making” and sale of combed, top-of-the-range wool. It knows the wool industry inside-out but essentially withdrew from the risk side (industrial processing, market making) back in 2012. It was about servicing with a high but stable turnover presenting no risk and hardly any profit.

The story is quite different today, with the gradual transformation of a product – the sale of quality wool – into a premium service through the Nativa label, which guarantees the traceability of wool and respect for animal welfare and the environment. In this way, Chargeurs acts as a de-facto quality guarantor over the end-to-end wool manufacturing process. To achieve this, CLF uses the blockchain technology with end-to-end quality control for top quality wools so as to capitalize on the demand for ever-higher-quality natural fibers and ever-thinner materials.

As for CFT-PCC, the CLF division was hit hard by the effects of the pandemic and lockdown restrictions on the fashion sector in 2020, with revenues falling by 34.6% lfl to €64.6m, and recurring operating profit swinging to a loss (€-2.3m). 2021 was not much better for Chargeurs Luxury Fibers, with a recurring operating profit of €1m, representing a margin of 1.16% compared with 2.7% pre-Covid. In 2022, margins returned to acceptable levels (2.1%) owing to a recovery in the fashion sector. While Chargeurs expects a sharp drop in the division’s revenues in 2023 in a context of 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), Chargeurs hopes to maintain its margins thanks to the premiumization of its business.

Chargeurs Personal Goods, a luxury player in the making

Much like Chargeurs Museum Studio, Chargeurs Personal Goods is a business unit that was built from the ground up and came into existence in 2022. The division brings together Chargeurs’ 3 acquisitions in the luxury personal goods and accessories brands sector. Chargeurs’ drive to expand in the luxury sector resulted in the acquisition of Fournival Altesse, a manufacturer of high-end hairbrushes, in 2021, and The Cambridge Satchel, a renowned brand of affordable Made in UK luxury, in August 2022. The latest addition to the division to date is Swaine, the world’s oldest leather goods brand.

In each of these activities, Chargeurs has undertaken a genuine business reorganization, with an upmarket strategy developed for Fournival Altesse, a multi-channel sales strategy for the Cambridge Satchel and, finally, a modernization of the collections with the extension of the target market to women for Swaine. Chargeurs’ determination to establish itself as a player in the luxury goods sector does not stop there. Last December, Chargeurs announced its intention to develop further in the luxury goods sector through a yet-to-be-acquired significant deal that would bolster its luxury goods division in order to reach balanced contributions in terms of EBIT from the Technologies and Luxury Activities by 2025.

In terms of operational performance, although we don’t have a reference year as the Cambridge Satchel and Altesse Studio brands were consolidated in December 2022, the division still has a favourable outlook with new partnerships expected for the Cambridge Satchel and new distributors, including Galeries Lafayette, for Altesse Studio. At the end of September, the division generated €6.2m in revenues.

Human assets

All in all, as we look retrospectively, Chargeurs has succeeded in breathing new life into its four businesses and in creating one from scratch, thanks to rigorous management and the conviction that any niche is worth exploring. By successively convincing existing staff to wake up, go for profitable growth and then hire young talents, train them and make acquisitions, Chargeurs has managed to surprise just about every observer.

Upside 37.3%
Price (€) 10.28
Market Cap (€M) 256
Divisional Breakdown Of Revenues
Change 24E/23 Change 25E/24E
  Sector 12/23A 12/24E 12/25E 12/26E €M of % total €M of % total
Total sales 653 730 810 888 77 100% 80 100%
Advanced Materials (ex... Chemicals-Specialty 272 292 310 329 20 26% 18 23%
PCC Fashion Technolo... Apparel,Textile,Fas... 193 193 203 213 0 0% 10 13%
Personal Care (ex Healt... Other Health Servic... 0.00 0.00 0.00 0.00 0 0% 0 0%
Museum Solutions (ex ... Advanced Materials 106 150 190 225 44 57% 40 50%
Luxury Fibers (ex Luxur... Apparel,Textile,Fas... 73.3 79.9 87.9 96.7 7 9% 8 10%
Personal Goods Apparel,Textile,Fas... 9.00 14.9 19.3 25.1 6 8% 4 6%
Other 0.00 0.00 0.00 0.00 0 0% 0 0%
  Revenues Costs Equity
Australian $ 0.0% 10.0% 0.0%
Dollar 15.0% 10.0% 0.0%
Emerging currencies 10.0% 10.0% 0.0%
Long-term global warming 0.0% 0.0% 0.0%
Oil price (Brent $/bl) 0.0% 13.0% 0.0%
Renminbi 12.0% 10.0% 0.0%
Sales By Geography
Europe 42.1%
    Of which Italy 11.7%
    Of which France 6.5%
    Of which Germany 6.1%
Asia 32.9%
    Of which China 9.5%
Americas 25.0%
    Of which United States 20.6%
Changes to Story : 20/05/2024, Changes to Forecasts : 20/05/2024.