AlphaValue Corporate Services
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From an industrialist to a luxury player
Upside 7.87%
Price (€) 13.12
Market Cap (€M) 326
Perf. 1W: -0.76%
Perf. 1M: 15.9%
Perf. 3M: 10.1%
Perf Ytd: 12.3%
10 day relative perf. to stoxx600: 0.94%
20 day relative perf. to stoxx600: 14.4%
Earnings/sales releases11/03/2014

Solid operations combine with zero debt


2013 EBIT at €17.8m stands above our expectations, above consensus views and above management’s latest guidance (c. €14m).
Net earnings are back in the black at €3.6m vs. a €15.2m loss last year.
The group has managed a strong performance in a recession context across Europe and adverse currencies in its emerging market operations.
2013 sales, down at €466.5m vs. €523.8m (pro forma, accounting wise), primarily reflect the drop in volumes in the Wool business combined with asset disposals.

Above all, the tight cash management which has been a feature of 2013 continued at a brisk pace with a group net cash position of €3.2m whereas we expected a €13m net debt.


FY 2013 is clearly a positive surprise due to robust operational and financial management over H2. AlphaValue’s own 2013 EBIT expectations were regarded as high but we kept these as a confidence indicator in the underlying operations. It so happens that Chargeurs’ two main divisions delivered even higher EBITs.

The main operation, Protective Films, has managed to grow its sales from €182m to €191m in an adverse context and to grow its EBIT to €10.8m from €9.5m pro forma. Protective Films appears to have gained market share in Europe, thanks to a combination of steady servicing to industrial customers and innovation. The upside potential for the years ahead is to regain market share in the car sector while any pick up in European construction will also help. It looks as if the decision to focus on the most demanding segments of the market has also helped avoid price-dominated competition.

Interlining, the second largest business, sprung quite a positive surprise with quasi stable EBIT (€5.1m in 2013 vs. €5.3m pro forma in 2012) on turnover down c.2.5% to €173.7m. This is an achievement in a highly competitive textile industry where being a supplier of interlining (a not so visible part of a garment) is not a cozy business. The pruning of clients relying on Chargeurs’ balance sheet to get going has had a dramatic impact on the receivables front and thus on profitability. The group has in addition weathered relatively well the currency weaknesses of Brazil and Argentina where it has operations by cranking up prices rapidly.
In addition, the Interlining business has recognised that some parts of the business would have to be either sold or wound down. The corresponding costs, €4.6m, have been provisioned, so that 2014 begins with a resolutely clean slate.

The narrowing of the Wool business to the bare bones of what is effectively a raw wool combing capability via equity-held subsidiaries that is no longer tying up any significant working capital has been efficiently implemented. In effect the wool exposure is undemanding while retaining the full upside potential of (ultimately?) stronger demand derived from the shift of wool to luxury status.

Chargeurs management’s drive to extract the group from its indebted status reached a final point at the end of 2013 with a net cash position where it started the year with a €33m net debt. This was a surprise and looks like a tour de force achieved through a combination of good WCR control and a systematic review of cash-tying “traps” at the operational level. Needless to say that Chargeurs is now free of the constraints imposed by its bankers five years ago so that it can be entrepreneurial again.


The outlook is rosier than expected as the group starts 2014 on a healthy financial base and rather robust market positions in its three main divisions. The pricing discipline of the previous financial years looks like paying off as underlying demand picks up a bit from a low base. In Interlining in particular, the EBIT margin recovery over the next few years may be more substantial than originally expected. The benefits of a no debt situation will also impact Chargeur’s valuations. AlphaValue expects to increase both the near-term earnings outlook and the target price; both are under review.


15 May 15 Target Change
Chargeurs Redux

23 Mar 15 Earnings/sales releases
Faster forward

10 Feb 15 Earnings/sales releases
2014 sales above expectations

18 Nov 14 Earnings/sales releases
Volume growth confirmed

03 Sep 14 Earnings/sales releases
Sparkling H1 results from Protective Film busin...

12 May 14 Earnings/sales releases
Chargeurs has released Q1 sales up 1.9% pro-f...

09 May 14 EPS change
Solid operations and zero debt

11 Mar 14 Earnings/sales releases
Solid operations combine with zero debt