Chargeurs

Our FY20 EPS estimate sees a major upgrade after the inclusion of the superb H1 results led by Chargeurs Healthcare Solutions. We expect H2 2020 and FY21 to be challenging for the group's historical businesses, CFT-PCC and CLM in particular due to their exposure to the weakened fashion and luxury sectors. In spite of this cautious scenario (in our view), we stand clearly above the €750m in revenues and €60m in operating profit guidance provided by management for 2020. We also see potential upside on a relatively stronger H2 for CPF, which proved quite resilient in H1.

Our target price is virtually unchanged following the review of our assumptions post the H1 results. The valuation boost from our estimated NAV, thanks to the inclusion of a fifth division (CHS), was counterbalanced by the slightly lower DCF and multiple-based valuation due to lower earnings expectations in FY21-22.

Nonetheless, we are encouraged by the strategic shift, prioritising organic growth above bolt-on acquisitions. As a result, we have removed our assumption for a future capital increase of €100m, as we believe Chargeurs' organic growth ambitions will be primarily funded by internal resources. We see this change, made viable (at least in part) by the accomplishments made in H1, as a clear positive for shareholders.

Our NAV/SOTP valuation is mainly impacted by the inclusion of Chargeurs Healthcare Solutions, a division that was entirely built-up with internal resources, explaining the significant valuation boost. In addition, the removal of an expected capital increase resulted in a mechanical increase to our NAV per share due to the decreased equity dilution. We still expect equity capital to increase by c.150k shares per year on account of dividends that can be electively paid in shares.