French Value Situation; Gevelot SA Unlocking Value, Hefty Cash Balance

Gevelot SA, is a French company that produces industrial equipment. Like the majority of European industrial companies, Gevelot has suffered over the past five years. Between 2008 and 2013 revenue declined 1.6% and net profit has been erratic. However, the group had value hidden in its balance sheet.

This year Gevelot raised €62.8m from the sale of its minority interest in the Canadian firm KUDU Industries Inc. This sale did skew results, net profit for the first half of this year came in at €59m, after adjusting for this one-off gain. Consolidated operating income of the group excluding special items came in at €4.8m for the period. Net profit from continuing operations came in at €2.9m for the first half.

Still, after this cash infusion Gevelot’s balance sheet is strong and the company is trading below its cash balance. At the end of the first half the group had €146.4m in cash and short-term investments and €126.1m in liabilities. Total assets amounted to €316.1m. Shareholder equity at the end of the period amounted to €190m, with just under 1m shares in issue, book value currently stands at €211m per share — 93.6% above current levels.

It remains to be seen how the company will deploy its capital, however management commenced a share repurchase plan over the summer, authorising share purchases up to €3m. Additional moves to create value could be on the cards including special dividends, or tender offers.

This information is only intended to act as a starting point for further research. You should always do your own research before initiating a position. If you have any ideas or reflections on the above information, or informative insights, please leave a comment below.

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