SFPI Group

Sustainability score

Company (Sector)
2.4 (6.1)

Sustainability is made of analytical items contributing to the E, the S and the G, that can be highlighted as sustainability precursors and can be combined in an intellectually acceptable way. This is the only scale made available

More on Sustainability / ESG ...

	Score	Weight

Governance
Independent directors rate	3/10	25%	More ...
Board geographic diversity	0/10	20%
Chairman vs. Executive split		5%

Environment
CO² Emission	1/10	25%	More ...
Water withdrawal	2/10	10%

Social
Wage dispersion trend	7/10	5%	More ...
Job satisfaction	10/10	5%
Internal communication	10/10	5%

Sustainability score

2.4/10

100%

Sustainability matters

In 2022, SFPI launched a group-wide effort to share best practices in ESG matters. Like any corporate of its size, more structured information is an incremental process that is bound to be a steep learning curve. The efforts launched in 2018 to identify risks as per ISO 26000 were complemented in 2021 by the adoption of procedures relating to the European Taxonomy. AlphaValue does not expect SFPI to fail on the adoption of sustainability measures where needed as the family-dominated governance is largely driven by long-term efforts to do well as opposed to quick earnings delivery with higher risks

Governance score

Company (Sector)	Independent board
4.9 (7.0)	No

Parameters	Company	Sector	Score	Weight
Number of board members	8	9	8/10	5.0%
Board feminization (%)	42	37	8/10	5.0%
Board domestic density (%)	100	73	0/10	10.0%
Average age of board's members	64	59	3/10	5.0%
Type of company : Small cap, controlled			4/10	10.0%
Independent directors rate	25	50	3/10	20.0%
One share, one vote				10.0%
Chairman vs. Executive split				0.0%
Chairman not ex executive				5.0%
Full disclosure on mgt pay				5.0%
Disclosure of performance anchor for bonus trigger				5.0%
Compensation committee reporting to board of directors				5.0%
Straightforward, clean by-laws				15.0%
Governance score			4.9/10	100.0%

Governance matters

The governance reflects a family-controlled set-up:
1. The CEO is the chairman and majority owner.
2. Only two out of seven board members are independent as per AlphaValue rules.
3. One share does not equal one vote due to double-voting rights.
The governance front could be improved by having three or more independent directors.
SFPI is striving to meet the recommendations of the governance code provided by Middlenext, its listing venue. This is suited to the company’s size.
Fully aligned governance with quality growth principles implies that the firm is well capitalized and can finance its long term objectives without any compromise.

Name (8)	Indep. (2/8)	Function	Completion of current mandate	Birth date	Date in	Date out	Fees / indemnity, in k€ (year)	Value of holding, in k€ (year)

Henri MOREL	M	President/Ch...	2024	1957	2015	0.00 (2022)	10,000 (2022)
ARC MANAGEMENT SAS		Member			2019	0.00 (2021)	119,400 (2021)
Franck CHEUVREUX	M	Member	2024		2015	12.0 (2022)	16,000 (2022)
Hervé HOUDART	M	Member	2024	1951	2015	12.0 (2022)	0.00 (2022)
Helene LAPLANTE	F	Member	2024	1962	2018	ND (2022)	0.00 (2022)
Valentine LAUDE	F	Member	2024	1978	2015	12.0 (2022)	0.00 (2022)
Marie-Cécile MATAR	F	Member	2024	1959	2018	10.0 (2021)	0.00 (2021)
Jean-Bertrand PROT	M	Member	2024	1945	2015	ND (2022)	24,900 (2022)

Changes to Board of directors : 23/05/2023

Name (8)	Indep. (2/8)	Challenged (conflicted interests, distant or current)	Die hard (7 years or more)	Improbable (too young, disconnected profile)	Overloaded (too many boards, too old)	Specific agenda (gov. or staff rep)	Tied (family, business relations, executive)	Unknown (lack of history, short CV)

Henri MOREL
ARC MANAGEMENT SAS
Franck CHEUVREUX
Hervé HOUDART
Helene LAPLANTE
Valentine LAUDE
Marie-Cécile MATAR
Jean-Bertrand PROT

Name (3)				Function	Birth date	Date in	Date out	Compensation, in k€ (year)
Name (3)				Function	Birth date	Date in	Date out	Cash	Equity linked

Henri MOREL	M	CEO	1957	1985	536 (2021)	0.00 (2021)
Damien CHAUVEINC	M	Deputy CEO	1970	2016	305 (2021)	ND (2021)
Nicolas LOYAU	M	CFO	1960	2003	ND (2021)	ND (2021)

Changes to Management : 16/05/2022

Existing committees

Audit / Governance Committee
Compensation committee
Financial Statements Committee
Litigation Committee
Nomination Committee
Safety committee
SRI / Environment

Environmental score

Company (Sector)
3.8 (4.3)

Data sets evaluated as trends on rolling calendar, made sector relative

More ...

Parameters	Score	Sector	Weight
CO² Emission	1/10	4/10	30%
Water withdrawal	2/10	5/10	30%
Energy	9/10	5/10	25%
Waste	4/10	5/10	15%
Environmental score	3.8		100%

Environment matters

Data wise SFPI only discloses its energy consumption which rose in 2022 on a per sales basis. This was also the case on a capital employed basis. Carbon emissions and water usage are missing which handicaps the scoring of the small group on that front. It also makes its best efforts on the taxonomy reporting front with c. 30% of sales meeting the concept of sustainable as per the taxonomy and another 10% falling into the taxonomy but not being sustainable. Taxonomy matching is work in progress and we would not be surprised to see a higher proportion of the existing business falling into that framework.

Environmental metrics

599 Energy (GJ) per €m in capital employed	959 CO² tons per €m in capital employed	n/a Cubic meter water withdrawal per €m in capital employed	n/a Tons waste generated per €m in capital employed

SFPI Group Building Prod. & Materials

Sector figures

Company	Environment score	Energy (total, in GJ)	CO2 Emissions (in tons)	Water Withdrawal (in m3)	Waste (total, (in tons)

Belimo^BH	10/10	38,520	1,320	11,984	1,048
Buzzi	5/10	104,757,000	20,218,000	7,964,000	170,800
CRH	3/10	196,200,000	35,900,000	114,700,000	2,500,000
dormakaba^BH	8/10	909,266	74,770	841,474	36,685
Forbo^BH	7/10	1,161,978	56,753	1,300,000	33,992
Geberit^BH	8/10	2,790,000	217,009	925,230	74,989
Heidelberg Materials	3/10	347,068,000	66,490,000	281,651,000	953,100
Holcim	4/10	407,000,000	77,000,000	118,000,000	1,990,000
Imerys	3/10	28,080,526	2,130,000	68,130,000	122,182
Saint-Gobain	5/10	156,459,600	10,300,000	48,100,000	1,413,000
SFPI Group^CR	4/10	203,800	326,327	n/a	n/a
Sika^BH	9/10	4,430,000	316,000	3,522,335	152,237
Vicat	2/10	84,417,600	18,700,000	18,000,000

MORE DATA

Social score

Company (Sector)
7.4 (7.0)

Social matters

Although small and organized around discreet units, SFPI bears the all the hallmarks of sensible management of industrial units. The efforts are aimed at coordinating some HR efforts at the group level without impeding flexibility in terms of operations. The HR coordination efforts are also aimed at lowering the churn which accelerated as has happened in so many industries post-Covid.

Quantitative metrics (67%)

Set of staff related numerical metrics available in AlphaValue proprietary modelling aimed at ranking on social/HR matters

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Parameters	Score	Weight
Staffing Trend	7/10	15%
Average wage trend	6/10	30%
Share of added value taken up by staff cost	9/10	20%
Share of added value taken up by taxes	4/10	15%
Wage dispersion trend	7/10	20%
Pension bonus (0 or 1)	0
Quantitative score	6.7/10	100%

Qualitative metrics (33%)

Set of listed qualitative criterias and for the analyst to tick

More ...

Parameters	Score	Weight
Accidents at work	10/10	25%
Human resources development	7/10	35%
Pay	10/10	20%
Job satisfaction	10/10	10%
Internal communication	10/10	10%

Qualitative score	9.0/10	100%

Sector figures

Company	Social Score	Quantitative score	Qualitative score	Staffing

dormakaba^BH	8.2	7.6	9.7	15,352
Belimo^BH	8.1	7.1	10.0	2,200
Geberit^BH	7.9	6.9	10.0	10,702
Forbo^BH	7.8	6.8	10.0	0.00
Sika^BH	7.8	6.7	10.0	32,376
Imerys	7.2	7.0	7.6	14,170
Saint-Gobain	7.1	6.7	7.9	171,126
Heidelberg Materials	6.7	6.8	6.5	50,976
CRH	6.5	6.7	6.2	77,908
Vicat	6.5	5.1	9.3	9,842
Holcim	6.5	6.3	6.9	61,630
Buzzi	4.4	5.1	3.2	9,858

MORE DATA

Sustainability / ESG by AlphaValue:

Doubt driven, focused on dynamics

AlphaValue was set up in 2009 as an ESG native firm: since inception, no research could be published without filling up the ESG relevant items. ESG has always been there as a natural building block of the research effort.

Without much pretence, AlphaValue has accumulated 11 years of proprietary, practical data in a consistent way that has been made to “talk” with financial data. The efforts have been aimed at solving the main conundrum of ESG analytics: avoiding useless and noisy data. AlphaValue ESG data is intimately connected to the fundamental research work and its continuous updating process. In other words, AlphaValue ESG data can be made to resonate at will in terms of financial implications for those investors with the willingness to do so.

Over the last 3 years, this data, or rather the dynamic of this data, has been put at work so that it impacts directly and consistently on valuations across AlphaValue’s 450 + stocks universe. This is considerable progress vs. the dominant “consumption” of ESG raw data: ESG-type conclusions are sitting next to valuation fundamentals but hardly any investor is in a position to bridge effectively the two in a consistent and repeatable way. It takes more than a spreadsheet to get stable and auditable results that work 100% of the time.

AlphaValue reckons that it currently is the only equity research provider in Europe to have reached this stage: a perfectly smooth on-boarding of ESG data, on a continuing basis, impacting valuation fundamentals day and night.

This is available on every stock, every sector, every stock selection, every day.

Heretical ESG opinions?

ESG is a contradiction in terms. Without a good Governance, the Social and Environment items will never show progress. Social is for stakeholders and thus unlikely to please shareholders. The long-term view that good pay/working conditions are ultimately good for shareholders is, like any promise, better left to those who want to believe in it. It does not work for normal investment horizons

Environmental gains will not happen without good Governance but this is not enough as environmental progress will not happen without coercion from governments/supra-governments. There is no reason why a corporate will spend more for a possible collective gain tomorrow when it can have better returns now for its shareholders.

The environment is a cost of massive complexity and a universal one as data improves and allows for intricate tracking of what corporates are up to. There is no practical way a corporate can be valued through a web of changing definitions of environmental data. AlphaValue holds the view that all corporates are made to pay through lower GDP growth expectations resulting from friction costs. The only dimension that really matters from an investment perspective is whether a given corporate makes an extra effort vs. peers. A good ‘E’ rating shall not be driven by absolute levels but by the dynamic of emission controls relative to peers. Dumping cement stocks because they spit out carbon is a narrow view of what ESG implies.

Sustainability scores only

AlphaValue always refused to supply a pecking order of its coverage along some improbable ESG scale. It just does not make sense to mix opposing signals in a single ranking.

Sustainability is a different proposition where analytical items contributing to the E, the S and the G can be highlighted as sustainability precursors and combined in an intellectually acceptable way. This is the only scale made available by AlphaValue.

Sustainability impacts target prices

From 1-12-2020, AlphaValue substituted sustainability metrics for its Governance and Social ones when it comes to impacting valuations;

Indeed since 2019, all DCF (or DCF equivalents for Financials) have been impacted by Governance and Social metrics to connect directly ESG-type findings into share price targets and bring consistency across the board. The impact is driven by adjusting the small ‘g’ conventionally used to assess the growth to infinity. This is being tweaked to recognise, say, that good governance ultimately pays off.

The same procedure is now stemming from Sustainability metrics instead.

For the record, this has been made possible as AlphaValue has finalised its proprietary E scoring, now extended to 4 items (GHG, Waste, Water, Energy) on which a degree of data stability seems to emerge.

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