Gérard Perrier Industries (2)

An asset light business model which focuses on long term relationships with clients

A constellation of SME’S

GPI has three business units: Industry, energy and manufacturing. The entities are organized so as to answer to the needs of specific markets rather than on technical specialization. They each have different entities making them a constellation of SME’s with autonomy and managed by in house employees who began at an entry position and then who gradually got promoted. GPI clearly favors internal promotion as it enables to ensure the right corporate culture.

The Industry BU (Soteb) acts as the electrician of important industrial sites. Maintenance is an important aspect. Their clients are essentially in the industry but their recent acquisition of AECE in 2021 brings them within a new industry: aeronautic and defense sector where electronics and electrical circuits have a growing importance.

The Energy BU (Ardatem, Technisonic) also includes nuclear energy. France has a number of nuclear sites which are quite old and require maintenance. Let it be noted that the amortization length of French nuclear sites has been lengthened. Maintenance has great days ahead. To be able to intervene on a nuclear site, accreditations are required and even a police check up. It is not necessarily a moat in itself but still makes it harder for a newcomer to compete.  The certification delivered by EDF to Ardatem is difficult to get but above all to keep as it is subject to an annual rating/review.

To ensure proximity with clients, branches are set up in the different regions so as to enable quick response times as well as a 24/24 availability. The network is adapted and can lead to the sale of some branches and of their real estate at a profit. M&A is part of the business model as it enables GPI to improve the geographic network and to acquire new expertise.

An asset light business

Two BU’s (Industry and Energy) solely require a workforce of expert technicians. The main difficulty is to find, train and retain employees which explains the HR’s importance.

In house schools to attract and train expert technicians

In order to ensure a good sourcing of employees which GPI prefers to train internally, internal training schools have been set up. Three academies (nuclear, management and electrical engineering) have been created and have just been regrouped under one school (EFGPI).

There is no operational leverage. They need to recruit additional employees if they wish to accompany their sales growth. Attracting and training the right talent has been identified as a top priority. Turnover is relatively high (between 10 and 18% depending on which indicator one uses) and is a proof of the quality of GPI employees. GPI entities are historically situated in regions where unemployement is high. Sourcing is made easier but the whole challenge is to train and retain them. Finally, experts in these areas are highly sought after and is a major key for success.

Product integration and tailored made products

The Manufacturing BU (Geral) builds tailored made electric and electronical industrial equipment which helps with the automatisation and the electrical alimentation of machines and industrial processes. These tailored made products require long term contracts to spread the costs of the initial development. They aim to have long term contracts with their clients as they prefer a recurring business where they will lose money at first (setting up costs…) rather than a bolt on contract with a quick win. This enables them to install a high level of mutual confidence with their clientsThis explains why long term contracts are favored and brings additional recurrence.

They internalize the production of tailormade products and have an integrated offer rather than resorting to subcontractors.

International growth by accompanying French clients outside of France and cross selling

Organic growth comes both from having new clients but also by cross selling to existing clients. The growing importance of electricity and electronics on the industrial sites helps them to take advantage of a structural demand.

Their international growth is mostly linked to their following their French clients outside of France. Although this can be nuanced as they now have direct exposure to Germany with their Bontronic entity.

Disclaimer: The above article constitutes the authors’ personal views and is for entertainment purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. The authors may from time to time hold positions in the aforementioned stocks consistent with the views and opinions expressed in this article. Disclosure – we hold a position in Gérard Perrier Industrie at the time of publishing this article (this is a disclosure and NOT A RECOMMENDATION).