Value Creation Awards 2009-2019

Looking for 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, which have also been listed on the stock market for at least ten years. To do this, we are not looking at the stock price, but at the evolution of book value. This is a good measure 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 (end of 2019 compared to the end of 2009) and add the net dividends received by a private shareholder over the past 10 years. The book value per share is obtained by dividing the consolidated equity (group share) by the number of shares at the end of the year (excluding the number of treasury shares). We also make adjustments for capital increases at prices above book value (for the financial year prior to 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 look at the difference between family businesses and their non-family counterparts.

Value Creation Awards

For the sixth consecutive year, Value Square is awarding awards to the three highest-scoring companies in this study, and management is awarded a gold, silver, and bronze “Value Creation Award”. This year, the winners of the gold, silver and bronze awards will be presented with their awards in person by a Value Square director.

#1: Picanol

Picanol achieved a fundamental increase in value of 1187% over the past 10 years or 29.11% annually in the period 2009-2019. Congratulations to CEO Luc Tack and Chairman Stefaan Haspeslagh and all the other Picanol and Tessenderlo employees! But you could also have benefited from Picanol's resurrection by buying Picanol shares at the end of 2009. Had you kept it 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 years in history for the textile industry and perhaps even more so for loom manufacturers. At both Picanol and Michel Van de Wiele, turnover fell by as much as 40% between 2007 and 2009. In fact, Van de Wiele remained operationally profitable during that period and had a gearing ratio (net debt to equity) of only 21.6% in 2008. Picanol, on the other hand, made operational losses in both 2008 and 2009. In addition, the gearing ratio in 2008 was 66%, making the net loss even greater. In 2008, global consumer confidence fell, causing a sharp drop in demand for clothing and other textiles. As a result, weaving mills bought fewer looms, causing demand to fall to an historic low.

2009 also started off with difficulty, but gradually demand got back on track, mainly thanks to incentives from the Chinese government. Due to Picanol's weak balance sheet structure and the extreme impact of the crisis, restructuring (20% of the staff were laid off) and a capital increase were necessary. After the internal conflict between various branches of the Steverlynck family — which we ourselves witnessed many times at general meetings — Luc Tack came more and more to the fore. Because the family was unable to follow the capital increase of 15 million euros, Luc Tack saw this as an opportunity to take control of Picanol. The subscription price was 1.27 euro per share. An executive recently confided in us: “Luc has a nose for bats”. Today, Picanol shares are listed at 55.40 euro.

That capital increase was the start of a spectacular recovery for this world leader in high-tech looms. By fully focusing on innovation and digitization in this division, but also in the Proferro foundry and PsiControl (machine controls), it supplies more and more to external customers in various sectors. Picanol's cash flows became so large that Luc Tack looked to diversify Picanol into other sectors that had a different cycle than the looms and also offered geographical diversification. This was supposed to better arm Picanol against the cyclical weaving machine business and to secure the Picanol group in the long term. Since Tack is a big supporter of the manufacturing industry in Flanders, Tessenderlo ended up on his study table as an interesting opportunity.

In 2013, he took over the French state's 27.52% controlling interest in chemical company Tessenderlo. This investment in Tessenderlo was a conscious choice. The starting point was to expand Picanol's activity radius with an industrial project, a decision center in Belgium and global activities in a basic industry. Here, too, Tack worked in a similar way, namely cutting unnecessary costs, investing in the most promising activities, restoring the production equipment, financing all this 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 Picanol tried to merge with Tessenderlo, but that plan failed due to insufficient support from minority shareholders. Afterwards, the “buy” button was pressed even harder, so that Picanol's stake in Tessenderlo has grown to almost 62% of the voting rights today.

Today, the Picanol group is a company active in five different sectors: Machinery & Technology (Picanol), Agro, Bio-valorisation, Industrial Applications and Energy via T-Power (Steam and Gas Turbine Plant). Sooner or later, the merger project will undoubtedly return to the drawing board. Funny detail: Tessenderlo is almost at the bottom of our list (place 83), but will undoubtedly be catapulted up the rankings within two years in our annual study.

One of the management's main explanations why Picanol has been so successful in recent years has to do with developing a long-term industrial project, with sustainable projects that contribute to a more sustainable society and with a focus on maximum return. At Picanol, this sustainability is primarily reflected in its products and processes, including the use of simulations to design more energy-efficient weaving machines, the transformation of old iron into high-tech castings, advanced electronics and durable mechanical components that ensure optimal fabric quality and less waste. At Tessenderlo Group, management wants to ensure that everything living on Earth can thrive by making optimal 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-residues.

Picanol achieved a fundamental increase in value of 1187% over the past 10 years or 29.11% annually in the period 2009-2019. Congratulations to CEO Luc Tack and Chairman Stefaan Haspeslagh and all the other Picanol and Tessenderlo employees! But you could also have benefited from Picanol's resurrection by buying Picanol shares at the end of 2009. Had you kept it 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 fundamental value increase of 27.74%. The stock market return (increase in the stock price + the dividends collected) over the past 10 years was 1025%, providing 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. By the way, Melexis celebrated its 30th anniversary in 2019.

Melexis is second in value creation after being number one for the past three years. 2019 has been a particularly difficult year for the semiconductor manufacturer. Net profit almost halved in 2019 compared to 2018, and global car sales fell by 5%. Melexis was confronted with customer inventory adjustments caused by an uncertain economic and geopolitical situation due to global trade tensions. Because of that uncertainty, everyone seemed to be taking a wait-and-see approach. In the autumn, however, the management was hopeful of a recovery as the inventory corrections gradually subsided until the coronavirus crisis erupted in February. Melexis also announced to reduce the dividend from 2.2 to 1.3 euros.

Over the past ten years, Melexis has grown into a global leader in semiconductor sensor ICs and circuits for the automotive sector. Today, there are an average of 11 Melexis products in every new car worldwide. In addition, significant progress has also been made in applications in healthcare, consumer electronics and industry. Over the past decade, Melexis has managed to grow faster than the market by implementing a consistent strategy that focuses on a number of niches in semiconductor technology. Melexis has an ingrained culture of innovation, where the complex problems of its international customers are solved through creativity, enthusiasm and a pioneering spirit among its many employees. The company is constantly looking for highly skilled talent and wants to retain and strengthen this by offering high-quality training. It's the people who work at Melexis who make the difference.

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

#3: VGP

Van Geet Parks or abbreviated VGP was in fourth place last year and is now on stage in third place (Bronze) with an annual fundamental value creation of 18.92%. At 19.43% per year, VGP's stock return is close to fundamental evolution. VGP is a developer, manager and owner of high-quality logistics and semi-industrial real estate. VGP is active in Germany, Hungary, Italy, Latvia, Netherlands, Austria, Portugal, Romania, Slovakia, Spain and the Czech Republic.

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

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