Value Creation Awards 2009-2019

In search of the value champions in Belgium

For the fourteenth year in a row, Value Square calculated the fundamental value creation over the past ten years of all Belgian companies that have also been listed on the stock exchange for at least ten years. We do not look at the share price, but at the evolution of the book value. This is a good indicator of the evolution of intrinsic or 'real' value. After all, in the long term, the intrinsic values of companies and stock prices evolve towards each other.

Methodology

In our study, we assess fundamental value creation using the following formula: we calculate the evolution of the book value per share (at the end of 2019 compared to the end of 2009) and add the net dividends received by a private shareholder over the past 10 years. We obtain the book value per share by dividing consolidated equity (group share) by the number of shares at the end of the year (excluding the number of treasury shares). Furthermore, we make adjustments for capital increases at prices above book value (of the fiscal year preceding the capital increase).

We compare the performance of 89 Belgian listed companies with the value creation recorded by Warren Buffett through his investment company Berkshire Hathaway.

Finally, we rank these companies according to their value creation over the past 10 years and their respective stock market performance. We also consider the difference between family firms and their nonfamily counterparts.

Value Creation Awards

For the sixth consecutive year, Value Square is awarding prizes to the three highest scoring companies in this study, and management is awarded a gold, silver and bronze "Value Creation Award." This year's gold, silver and bronze award winners will be presented with their awards in person by a Value Square executive.

#1: Picanol

Picanol achieved a fundamental value increase of 1187% over the last 10 years or 29.11% per year over the period 2009-2019. Congratulations to CEO Luc Tack and Chairman Stefaan Haspeslagh and all other Picanol and Tessenderlo employees! But you too could have benefited from Picanol's resurgence by buying Picanol shares at the end of 2009. Had you kept them until the end of last year, you would have achieved a spectacular return of 2884% or 40.44% per year !

The years 2008 and 2009 were one of the most difficult in history for the textile industry and perhaps even more so for loom manufacturers. At both Picanol and Michel Van de Wiele, sales fell by as much as 40% between 2007 and 2009. Van de Wiele even remained profitable operationally during that period and had a gearing ratio (net debt to equity) of only 21.6% in 2008. Picanol, on the other hand, suffered operational losses in both 2008 and 2009. Moreover, the gearing ratio was 66% in 2008, making net losses even higher. In 2008 consumer confidence declined worldwide, causing a sharp drop in demand for clothing and other textiles. As a result, weavers bought fewer looms, causing demand to fall to an all-time low.

2009 also got off to a difficult start, but demand gradually picked up thanks mainly to the Chinese government's incentives. Picanol's weak balance sheet structure and the extreme impact of the crisis forced a restructuring (20% of staff was laid off) and a capital increase. After the internal struggle between various branches of the Steverlynck family - which we witnessed many times at general meetings - Luc Tack came more and more to the fore. As the family could not follow the capital increase of 15 million euros, Luc Tack saw in this the opportunity to take control of Picanol. The subscription price was 1.27 euros per share. An executive recently confided to us, "Luc has a nose for bats." Today, Picanol shares are trading at 55.40 euros.

That capital increase was the beginning of a spectacular recovery for this world leader in high-tech looms. By focusing on innovation and digitalization in this division, but also in the foundry Proferro and PsiControl (controls for machines), it increasingly supplies external customers in various sectors. Picanol's cash flows became so large that Luc Tack looked to diversify Picanol into other sectors that showed a different cycle than looms and also offered geographical diversification. This should better arm Picanol against the cyclical loom business and secure the Picanol group in the long run. Since Tack is a strong supporter of the manufacturing industry in Flanders, Tessenderlo landed on his study table as an interesting opportunity.

In 2013, he acquired the French state's controlling stake of 27.52% in chemical company Tessenderlo. This investment in Tessenderlo was a deliberate choice. The starting point was to broaden Picanol's activity radius with an industrial project, with decision center in Belgium and with global activities in a basic industry. Here again, Tack proceeded in a similar way, i.e. cutting unnecessary costs, investing in the most promising activities, putting the production apparatus back on track, all this financed with a capital increase, which also strengthened the balance sheet.

In recent years, he increased his stake through systematic purchases on the stock market. In 2016, Tack tried to merge Picanol with Tessenderlo, but that plan failed due to insufficient support among minority shareholders. Afterwards, the "buy" button was pushed a little harder, so that today Picanol's stake in Tessenderlo has grown to nearly 62% of the voting rights.

Today, the Picanol Group is a company active in five different sectors: Machinery & Technology (Picanol), Agro, Bio-valorization, Industrial applications and Energy through T-Power (steam and gas turbine plant). Sooner or later, no doubt, the merger project will end up back on the drawing board. Funny detail: Tessenderlo is almost at the bottom of our list (place 83), but will undoubtedly be catapulted up the rankings in our annual study within the next two years or so.

One of the management's main explanations of why Picanol has been so successful in recent years has to do with building a long-term industrial project, with sustainable projects that contribute to a more sustainable society with a focus on maximum profitability. At Picanol, this sustainability manifests itself primarily in the products and processes, including the use of simulations for the design of more energy-efficient weaving machines, the transformation of scrap iron into high-tech castings, advanced electronics and durable mechanical components that ensure optimal quality of fabrics and less waste. At Tessenderlo Group, management wants to ensure that everything living on earth can thrive by making the best use of available resources: "Every molecule counts." This vision includes greater food production than ever before, using water in the smartest way possible, and creating value from bio-residuals.

Picanol achieved a fundamental value increase of 1187% over the last 10 years or 29.11% per year over the period 2009-2019. Congratulations to CEO Luc Tack and Chairman Stefaan Haspeslagh and all other Picanol and Tessenderlo employees! But you too could have benefited from Picanol's resurgence by buying Picanol shares at the end of 2009. Had you kept them until the end of last year, you would have achieved a spectacular return of 2884% or 40.44% per year !

#2: Melexis

Melexis wins the silver Value Creation Award, with an annual increase in fundamental value of 27.74%. The stock market return (increase in stock price + dividends collected) over the past 10 years was 1025%, giving an average stock market return of 27.4%. Congratulations to CEO Françoise Chombar, CFO Karen Van Griensven, Chairman Roland Duchatelet and the entire Melexis team for this remarkable achievement. Melexis also celebrated its 30th anniversary in 2019.

Melexis ranks second in terms of value creation, after being number one for the past three years. 2019 was a particularly difficult year for the semiconductor producer. Net profit nearly halved in 2019 versus 2018. Global vehicle sales fell 5%. Melexis faced customer inventory corrections caused by an uncertain economic and geopolitical situation due to tensions in global trade. Due to this uncertainty, everyone seemed to take a wait-and-see attitude. In the fall, however, management was hopeful of a recovery as the inventory corrections gradually faded away, until the corona crisis erupted in February. Melexis also announced to reduce the dividend from 2.2 to 1.3 euro.  

Melexis has become a world leader in automotive semiconductor sensor ICs and circuits over the past decade. Today, every new car worldwide contains an average of 11 Melexis products. Significant progress has also been made in healthcare, consumer electronics and industrial applications. Over the past decade, Melexis has managed to grow faster than the market thanks to the execution of a consistent strategy focusing on a number of niches in semiconductor technology. Melexis has an ingrained culture for innovation, solving complex problems of its international customers through creativity, enthusiasm and a pioneering spirit among its many employees. The company remains constantly on the lookout for highly skilled talent and is also committed to retaining and enhancing it by providing high-quality training. It is the people who work at Melexis who make the difference.  

The share of electronics in passenger cars will continue to increase. Melexis targets a penetration of 20 Melexis chips in every new car within a few years. Melexis is focusing on three major long-term trends: further electrification of the car fleet with a view to zero emissions, advanced driver assistance systems (ADAS) with a view to reducing traffic fatalities to zero and more personalization that maximizes comfort for each individual. Melexis uses its knowledge and experience in the automotive industry (by far its most important market) to develop products for two-wheelers, consumer electronics, industrial applications and the promising healthcare sector.

#3: VGP

Van Geet Parks or VGP for short ranked fourth last year and is now on the podium in place three (Bronze) with an annual fundamental value creation of 18.92%. VGP's stock market return, at 19.43% per year, leans close to the fundamental trend. VGP is a developer, manager and owner of high-quality logistics and semi-industrial real estate. VGP operates in Germany, Hungary, Italy, Latvia, the Netherlands, Austria, Portugal, Romania, Slovakia, Spain and the Czech Republic.

VGP's success story rests first and foremost on a strong in-house team that was built up over the years. Everything then started with the development of a well-diversified land bank at strategic top locations in Europe. It then developed logistics business parks. VGP is also known for its quality services, including offering solutions for the incorporation and optimization of business processes to its tenants. Once the tenants move into the VGP buildings, property management services are provided to them. As a result, there is a good interaction with the tenants and the VGP teams. Any useful information from that interaction is then passed on to the development teams so that even better parks can be built in the future or existing ones improved. These developments were also only possible due to a strong balance sheet structure with a conservative debt ratio. VGP also created 3 successful joint ventures together with Allianz Real Estate, freeing up capital to further expand the development pipeline.

In the long run, VGP benefits from the ever increasing e-commerce activity, which will keep logistics buildings as an asset class in the future. Congratulations to Jan Van Geet (CEO), Dirk Stoop (CFO), chairman Bart Van Malderen and the entire VGP team!