Precia update: an interesting 2022 year

A new CEO, closing the Australian entity, continuing to expand by small acquisitions

This is a quick update to put forward a series of interesting news which took place during 2022. René Colombel, the historic CEO retired in 2022. He did a magnificent job through international expansion and buying a software company (Creative IT) to add an additional brick to Precia’s offering. He did a great job, I had to chance to meet him many times and wanted to thank him for everything he did. This is the type of CEO I would like to have in all my companies.

The new CEO  Frédéric Mey is the former CEO of Titanoble which was was sold to the Australian  Incitec Pivot Limited . Interestingly, Titanoble is in the same business area as Explosifs et Produits Chimiques which is a company I own (and which I will discuss about in a future post). The new CEO is here to industrialize the company (process…) One of his first decisions was to close the Australian entities which unfortunately haven’t been able to show a profit for quite a while. A lack of size and the difficulty to visit the entity during the covid pandemic could explain why it was difficult to fix it. This is quite a change from the past. Now all the subsidiairies are profitable (a great comeback from the UK entity is to be noted) or nearly flat. Interestingly a child of the founding family has joined the company.

Precia is applying its game plan: acquiring small entities to expand geographical reach or improve market share. This has been the case in western Africa with Capi Senegal (as a reminder Precia acquired CAPI Ivory Cost and Burkina Faso in 2017), at la Réunion (Vaucelle  Nouvelles Technologies was bought with a badwill) and in New Zealand (Scaletec). The highest margins (excluding Precia Molen Services) are in India, Western Africa and Lituania. And that isn’t including Creative IT and its software margins. 

Treasury shares represent 5,7 % of the capital and will clearly not be cancelled as they have been there for quite a while. They could be used for an external growth operation. Precia has been an expert in small acquisitions. We will see if they go for a larger acquisition even though historically their last one (Molen) did bring about some serious difficulties.

Valuation with 2021 numbers gives us an 12,9% FCF yield (IFRS 16 impact has been adjusted) and for the first 9 months of 2022 growth has been 8,8% and organic growth is 5,9%. We also get a 1,4% dividend yield. 

2021 was a special year as for many companies so 2022 should be impacted by higher raw materials prices, growth capex. Nevertheless valuation appears interesting as the company has recurring revenues, subsidiaries contribute positively to net result, balance sheet is solid with a net cash position, small acquisitions which are easy to integrate and a nice mix of capital allocation in the past (external growth ,raising dividend and buying back shares). Finally, Precia is building an interesting offering: equipement, services and software.

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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 – I hold a position in Precia at the time of publishing this article (this is a disclosure and NOT A RECOMMENDATION).