Chargeurs

While 2018 EBIT developments were up to scratch, below the line friction costs associated with an acquisition-based expansion strategy started to bite. The 2019 EPS downgrade reflects the same continuing friction costs plus a more cautious macro view of top-line growth and operating margins, most notably on the group's cash cow ("Protective Films"). From 2020, we allow for additional acquired growth, a €100m capital increase and higher debt to try and gauge the impact of ambitious acquisition projects aimed at reaching €1bn in consolidated revenues.

The target price's slight erosion is the net of near-term earnings downgrades (costs associated with acquisitions including opex and slower top-line growth) and the projected benefits of a successful deployment of the said external growth strategy. The fast growth plans are now allowed for in the prospective P&L and balance sheets as Chargeurs has been fairly accurate about its 2021 objective in top-line terms (€1bn in revenues).

The NAV combines a resetting of the valuation of various businesses to higher market levels and forward-looking higher net debt with a quasi-zero net impact. This assumes that we give no value to the future acquired businesses for the time being while having a partial purchase cost.

As out-years start from 2022, i.e. after an acquisition spree of value-enhancing businesses, the DCF is mechanically positively impacted even though we have allowed for an expanded number of shares (€100m rights issue).