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SFPI Group

Bloomberg   SFPI FP
Misc. Bldg & Construct Prod  /  France  Web Site   |   Investors Relation
Hands-on conglomerate with a locks forte
Businesses & Trends
Focus on niches

SFPI Group is a capital goods company with fully-owned operating units specialised in building-related businesses, notably locking solutions for buildings (locks, windows and so on) be it residential or commercial, as well as industry related businesses, notably air-processing and thermal equipment for Heating, Ventilation and Air Conditioning (HVAC) equipment.
The businesses are split between a Building universe and an Industrial one, with reporting organized around 4 main legal entities. The main businesses have historically been loosely interconnected with a shift, as of 2022, to more experience sharing and intra group business wherever possible.

Good to know would include the following:
• The group was founded in 1985 by a group of entrepreneurs who still own and manage the company.
• It is striving to be more European (about 40% of sales) with international ambitions.
• Growth largely depends on bolt-on acquisitions which essentially ceased in 2020-2021 before restarting in 2022.
• The building product exposure is centered around the concepts of protection/safety with solid growth potential.
• The industrial businesses are naturally driven by an increased servicing content.
• ESG gains are at operating unit level with the center now sharing best practices and deployment in a systematic effort from mid-2021.

A subdued 2022

In 2021, SFPI had extracted itself brilliantly from the mess created by Covid lockdowns with earnings up 83% to €32m. In 2022 SFPI earnings down 33% expressed the counter shock of an enthusiastic post-Covid recovery: tight supply chains and fast-rising input costs. SFPI also incurred the full cost of reshaping its MAC business, which is a 3-year process.

Very cautious financial management is a feature of this small industrial group with a €25m net cash position at the close of 2022. This is €50m down on the previous year and largely due to working capital needs but it remains a very healthy situation. The 2022 dividend was cut to €0.05 from €0.08, to reflect the lower earnings and protect the net cash position.

2023 outlook

SFPI is confident for 2023 with a sales target of €715m, a 14% increase, of which 10% or so stems from recent acquisitions. An expected macro slowdown in 2022 never showed up and may still happen in 2023 but SFPI is a cautious company. The unknowns are more on the profitability front as input prices may retreat only with a time lag and wage inflation, which was well contained in 2022, may be harder to escape in 2023. SFPI is certainly able to adapt rapidly and smartly as attested by the efforts to optimise its industrial set up for MAC but the risks are that the operating conditions may not be that friendly. The MAC unit (windows, renovation) is likely to face a soft market while the two industrial units (Neu JFK and MMB) are driven by substantial orders and orderbooks.

SFPI is mostly about locks & closures

SFPI is a rather complex legal entity as its operational units retain a high degree of autonomy but it can be summarized as a two-pronged group: construction-related businesses accounting for 70% of the total and industry-related for the balance.

Locks have mattered the most (48% of 2022 EBIT, 33% of sales) since SFPI bought out the minorities in DOM, the dedicated unit, back in 2018. Recent acquisitions include the Italian VIRO Spa (padlocks specialist), acquired in March 2023 for €14m, and DOM adding 60% of Austrian Tapkey (cloud based locking solutions) for €3m.

Locks are about recurring revenues (maintenance, renovation, upgrades tend to be made with the same brands), technology improvements (smart locks & remote locking, predictive maintenance) and mega-trends (safety concerns rise with revenues and asset building). SFPI/DOM happens to be a challenger in the locking solution industry and hence a price-taker but against companies that have a sense of a proper return on capital for their shareholders, meaning strong cash flow discipline. In the oligopolistic locking solutions market, SFPI can happily follow the leaders.

The addressable market of DOM Security is about €3bn (locking business + possibly $2bn for the smartlock one whose boundaries are harder to define), meaning that DOM Security has a market share in locking solutions of more than 5%. The significant competitors are Dormakaba and Assa-Abloy. The worldwide market has been estimated by Dormakaba at $40bn (locking and electronic access control). Only a few competitors manage more than €1bn in sales. Indeed, the top four locking solutions companies have a combined market share of below 30%.

Energy driven windows market

In other building-related markets such as windows and doors, SPFI is small but operates in a highly fragmented universe. The company, via its MAC sub-holding company is trying to foster innovation (just-in-time inventory management meaning lower costs than French producers of windows but also quicker in terms of distribution, meaning lower installation time for final end-users in order to differentiate with East-European window producers). The strategy is effectively to retain installers through the offering of higher-value-added services and hence to increase the company’s pricing power.

The windows & doors business is 75% driven by renovation i.e. energy savings which are fairly uncorrelated with the construction cycle. It is as predictable as the next set of subsidies/tax cuts to promote energy savings but the overall trend is positive. Since 2021 the sharp increase in fossil energy prices has been a positive shockwave for the whole European industry. It is likely to resonate for a long while as the push for lower carbon consumption is an essential plank of the broader European energy policy

With some 500k units leaving its factories each year, SFPI has a market share of less than 5% in terms of units sold. The competitors include, but are not limited to, Tryba, groupe Liebot, groupe Lorillard, FPEE, Oknoplast and Fenstar.

In 2022, SFPI/ MAC came to the conclusion that its industrial setup of 11 locations across France had to be redefined to improve its performance. Accelerated capex of up to €30m, ERP investments and greater specialisation are part of a big reorganisation plan extending into 2025. An ad hoc charge of €4m was taken in 2022 as a first step. The aim is to increase Ebit margins from c.2% to above 4%.

Industry too for c.30% of revenues

NEU-JKF designs and manufactures equipment and turnkey systems for air processing in industrial environments. Such equipment is aimed at ensuring environmental protection internally and externally. According to SFPI there are no competitors in industrial air-treatment and improvement with the same size and organisational structure. On its home market, namely France, the company competes with a number of regional players (revenues of between €1m and €4m). In the export market, the company faces players such as Donaldson, Camfil, Nederman, Coral.

The global air pollution control systems’ market was estimated at around $12bn quite a few years back. It can only have increased with concerns about pollution not to mention Covid avoidance. The European air processing market addressable by NEU-JKF is estimated at about €2bn, with NEU-JKF holding a 5%-6% market share in Europe.

Stronger emission standards and protection for workers in air-polluted plants as well as higher energy efficiency requirements are driving the growth of the HVAC market. A possible future regulatory tightening would clearly be a positive for the Industrial businesses.

The industrial Air Filtration market size alone is set to surpass $6.5bn by 2024, up from $4bn in 2017 according to a market researcher, which should benefit NEU-JKF to a great extent as the CAGR for Europe is expected to be 6.5%.

MMD, another unit of SFPI’s industrial businesses, designs, develops, produces, installs and maintains heat exchangers and sterilisers, mainly for industry but also to a lesser extent for the agro and pharmaceutical businesses.

Heat exchangers are designed and made to order according to the thermal requirement of each application. Barriquand, the ad hoc sub-unit, has built its reputation on the quality of its compact heat exchangers. The competitive environment is brisk and composed of international groups such as Alfa Laval, GEA, Hamon, Sondex, SWEP, SPX and French SMEs such as Ziemex, ACM KAPP, ASTRA, Delaunay and Vitherm.
Steriflow, an MMD sub-unit, is one of the world leaders in industrial sterilisation and pasteurisation and has been dedicated to the design and manufacture of autoclaves for more than 35 years. The competitive environment is mainly composed of companies with sales between €5m and €15m. Some competitors belong to specialised groups in agribusiness capital goods, such as JBT Foodtech, Allpax and Hermasa.

Note that both NEU JFK and MMD work from short order books with substantial volatility in their workloads.

Synergies across a seemingly motley group

Although SFPI may be regarded as a collection of discrete entities, there share common grounds. Moving to digital manufacturing is one, sharing clients is another obvious reality (think of thermal systems and air cleaning as essentially sharing similar clients), safety & security concerns are across the board, energy savings too.

SFPI’s prime challenge is to multiply the bridges between the operational entities which are highly regarded by their BtoB clients without breaking those long-term relations. This is a common issue in industry as barriers across businesses break down and digitalisation offers opportunities to reshape a business.

The SFPI management is certainly moving in the right direction with group-wide plans to share best practices on Management, ESG and Financial reporting, as well as to enhance a deeper customer culture where needed. The Covid fears and post Covid boom fostered an accelerated rethink of the group’s organization that encompasses sustainability factors. C. Two years down the road, this small group is seeing the positives of tighter coordination.

Upside 125%
Price (€) 1.79
Market Cap (€M) 177
Divisional Breakdown Of Revenues
Change 23E/22 Change 24E/23E
  Sector 12/22A 12/23E 12/24E 12/25E €M of % total €M of % total
Total sales 629 715 740 787 86 100% 25 100%
Building - MAC Misc. Bldg & Constr... 232 277 285 318 45 52% 8 32%
Building - DOM Security Misc. Bldg & Constr... 208 232 240 248 24 28% 8 32%
Industrial - MMD Misc. Bldg & Constr... 60.2 65.6 68.2 70.3 5 6% 3 10%
Industrial - NEU-JKF Misc. Bldg & Constr... 129 141 146 151 12 14% 5 20%
Other -0.20 -0.20 -0.20 -0.20 0 0% 0 0%
  Revenues Costs Equity
Dollar 2.0% 2.0% 2.0%
Emerging currencies 0.0% 0.0% 0.0%
Long-term global warming 40.0% 40.0% 40.0%
Sales By Geography
France 60.0%
Other 40.0%
Changes to Story : 30/05/2023, Changes to Forecasts : 30/05/2023.