Norbert Dentressangle: Undemanding Relative To Peers

Internationalising success
Norbert Dentressangle's, (GNDP) 2013 revenue release highlighted the continued progress the group has made in its strategy of internationalisation, and its focus on emerging drivers such as e-commerce. With revenues up 3.9% and accelerating trends in H2, the group has several growth drivers. These include its exposure to a UK economic upswing, a strengthened position in Southern Europe through the acquisition of the Fiege Group’s logistics operations in H113, and new logistics contracts such as the start up in Russia with partner Danone. With logistics the clear stand-out performer, we believe the group is demonstrating its potential to replicate its success with the emerging freight forwarding business.

2013 revenues up with improvements in H2
Revenues increased by 3.9% in 2013 to €4.0bn (2.4% like for like), driven by a strong performance in Logistics (up 9.4%) – despite a slight decline in Transport (1.2%) – while Freight Forwarding benefitted from consolidation of the acquired Daher Group since October, ending up 1.3% ahead. With trends showing improvements in all divisions in H2, the results are encouraging and the group has indicated that operating income will be in line with expectations, at a similar level to the past two years, and that net debt will decrease despite recent acquisitions.

Strategy to provide international balance
With conditions remaining difficult in the core French market, the group has delivered on its strategy to broaden its international exposure. France accounts for 40% of revenues and, after the acquisition of Christian Salvesen in 2007, the UK accounts for 30%. 2013 saw a strengthening of its position in Southern Europe with the acquisition of the Fiege’s logistics activities in Spain and Italy, while the start of operations in Russia via a JV with Danone has extended the group’s reach into this developing logistics market. We believe the evolution has not finished yet and the expansion in Freight forwarding and new market access in Saudi Arabia and Brazil show that the group is not standing still.

Valuation: Undemanding relative to peers
We view the rating of 12.3x CY14 EPS as extremely undemanding relative to the industrial transportation peer group (c 20x). We feel this is due to the concern over the French transport operations, but we believe the robust results and upside from international operations offset this.

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