News
Issue 15
Edito
Reindustrialize
The revitalization of the French industrial landscape in response to the environmental emergency and sovereignty challenge
After the Covid-19 crisis, sky-rocketing air and sea freight rates, and the huge port congestions, there was hope that the global supply chain would return to normal. This hope was quickly shattered by Russia’s invasion of Ukraine. The global supply chain came under further strain, in a context of escalating inflationary pressure, as well as a sharp rise in energy prices and raw material shortages.
Paired with growing environmental awareness, these events are bringing out strong trends in terms of rebuilding the French industrial landscape, relocating part of production and integrating our businesses into a regional ecosystem.
Nevertheless, although “Made in France” enjoys international renown, it comes at a cost – financial and operational resources need to be deployed to make French industry competitive, both in France and internationally. What are the main challenges in the coming years, whether in terms of innovation and operational excellence, private investments or public mechanisms, to further boost French know how development?
To gain a better understanding of this fundamental trend, and the means to put in place to encourage it, we decided to bring in on this newsletter three directors of our portfolio companies as part of a joint interview: Messrs Fabien Mazarico and Vincent Godet, respectively CFO and Purchasing and Supply Chain Director of Praticima, and Mr Jean-Philippe Molinari, CEO of Louis Tellier.
Actualités du portefeuille
Acquisition of Génie Flexion
Sparring Capital acquired a majority stake in Génie Flexion in the first half of 2022, alongside the management team and CEIDF CI.
Founded in 2001, Génie Flexion is the second-largest French provider of on-site hydraulic hose repair services, with a leading position in the Paris region and Hauts de France, in addition to a presence in Normandy. Based in Villepinte with nearly 180 employees, the group has built its development around a dual model, combining fourteen counters and a fleet of over 100 intervention vans.
Thanks to its strong regional positioning and mixed model, the group benefitted from sustained growth in recent years, currently generating revenue of nearly €20 million from around 4,000 customers.
The partnership with its new shareholders should allow Génie Flexion to accelerate its growth, both by opening new agencies and through external growth, on a still fragmented market. This transaction will also provide the opportunity to strengthen the group’s management team.
Acquisition of Praticima
Sparring Capital acquired a majority stake in Praticima in the first half of 2022, alongside the management team led by Fabrice Léo, the group’s new chairman.
Established in 2014 from the merger between Praticdose, Cima and Adhesia Equipements, Praticima is the French leader for equipment dedicated to drug circuits and the management of care flows for healthcare establishments (hospitals, clinics, nursing homes, etc.) and medical equipment distributors. Praticima differentiates itself from its competitors through its unique ability to respond, thanks to the innovative nature of its solutions, to its customers’ specific concerns, such as promoting the well-being of nursing staff and securing the administration of medicines to patients.
The group employs nearly 100 people on two production sites, located in Reyrieux (Ain) and Avranches (Manche), and has a commercial presence in 50 countries. In 2022, the group expects to generate revenue of over €25 million.
With the support of its new shareholder, Praticima ambitions to intensify its expansion by leveraging on its recent innovations and its international development. The implementation of an external growth strategy in France and abroad also represents a key development driver for the Group.
Acquisition of Fauché Energie via NovaKamp
In the first half of 2022, NovaKamp acquired́ Fauché Energie from the Fauché group in order to expand its projectable technological solutions offering.
Specialising in the design, manufacture, installation and maintenance of diesel, gas, biogas and solar hybrid generators, the acquisition of Fauché Énergie enables the group to:
- Strengthen its support for the energy eco-responsibility drive of industrial sites in isolated and at-risk areas,
- Strengthen the Group’s identity as a major player in projects with specialised specifications,
- Bolster the Group’s positions among players in projectable new energies by expanding the portfolio of products and innovative technical solutions, particularly in the biogas field,
- Establish a technical development centre capitalising on the extensive complementary nature of Fauché Energie’s know-how and NovaKamp’s skills on its niche markets.
Disposal of IMX
Sparring Capital announced in June the sale of IMX to bpostgroup, Belgium’s leading postal player.
IMX is a cross-border e-commerce logistics specialist that has developed unique expertise in optimising international mail and parcel shipments. The company relies on agreements with nearly 250 operators around the world and a national collection network. With Sparring’s support, the company accelerated its cross-border e-commerce small parcels (< 2 kg) business between 2017 and 2021.
In 2021, the group generated revenues of around €30 million.
IMX’s pairing with Landmark Global (the department in charge of bpostgroup’s international affairs), a long-standing partner of the company, will enable to further develop (i) the group’s e-commerce offering and (ii) cross-border delivery services that the company offers to its customers.
Acquisition of a minority stake in Ulysse
In April, ReG Fund1 announced its first ever investment, with the acquisition of a minority stake in the Ulysse Group, alongside the founder, the management team and MACSF.
Founded in 1996 by Franck Vialle, Ulysse is the leading French network for transporting and supporting people with reduced mobility (PRM). The Group has a unique business model in France, combining its own network and a network of independent entrepreneurs operating under franchise agreements. Ulysse offers three solutions: regular transport to ordinary schools, regular transport to specialised establishments and transport on-demand. It also has a fleet of specialised vehicles available for hire and sale, and provides training for support staff. Based in Nice, Ulysse has a strong national presence thanks to its network of around 100 agencies, both owned and under franchise agreement.
Ulysse will capitalise on its long-standing expertise and strong reputation to expand its geographical coverage and double the size of its network by providing growing number of services to its franchisees.
As part of the operation, Franck Vialle will remain the Group’s Chairman while gradually handing over the Group’s operational management to his son Tom.
1 ReG Fund is the “small cap Responsible Growth” fund managed by Pechel, an AMF-certified fund management company, owned by Sparring Capital SAS.
Acquisition of a majority stake in Louis Tellier
ReG Fund announced in April the acquisition of a majority stake in Louis Tellier, alongside the management team and Bpifrance.
Louis Tellier specialises in the manufacture and sale of kitchen and baking utensils for professionals and consumers. The group owns the iconic brands Louis Tellier, founded in 1947 and renowned for its food mills, mandolin and raclette machines, and Gobel, founded in 1887 and dedicated to the pastry industry. Louis Tellier sells its products in France and internationally (35% of revenue), notably in North America. The group has two French production sites, in Joué-lès-Tours and Argenteuil, which both have the “Entreprise du Patrimoine Vivant” label, a guarantee of the group’s artisanal and industrial know-how.
The new shareholder will support the management team to develop the group in France and internationally, by strengthening its leadership in the B2B segment and continuing its growth in B2C. In a sustainable growth drive, the group will also work on optimising its production to improve employee well-being and optimise the consumption of raw materials.
Actualités de La Fondation
The Sparring Capital Foundation recently strengthened its commitment to climate concerns by joining the Coalition française des fondations pour le Climat, an initiative of French Centre for Foundations and Endowment Funds, whose aim is to face climate change.
Additionally, the Sparring Capital Foundation is also pursuing its efforts by supporting a new programme selected for the innovative solutions it provides to both social inclusion issues and environmental concerns: La Ferme de Moyembrie, a farm dedicated to hosting prisoners at the end of their sentence, 9 months before their release, to facilitate their reintegration by offering them accommodation and paid work (organic market gardening, animal husbandry, etc.). This farm has taken in over 500 prisoners since 2000, with 60% of former residents having found a job or undertaking training three months after their release.
Actualités de la société de gestion
Sandra Pezet (Partner): in March 2022, Sandra joined Pechel Industries Partenaires, a subsidiary of Sparring Capital in charge of managing the Professional Capital Investment Company ReG Fund, the small-cap fund dedicated to taking French SMEs towards a more responsible model.
Graduated from ESSEC, Sandra began her career in Transaction Services at Ernst & Young, before two investment experiences at Natixis Private Equity (Associate) and the French office of GIMV (Principal). She then worked for six years in the transformation department of the Elsan group. Her dual operational/investment expertise is a valuable asset for the investment and support system of the Professional Capital Investment Company ReG Fund.
Romane Parent (Analyst): Romane joined Sparring Capital in February 2022, after investment experiences at Sparring Capital and Apax Partners (Development team). Romane is graduated from EM Lyon.
Interview
Fabien Mazarico
CFO, Praticima
Vincent Godet
Purchasing and Supply Chain Director, Praticima
Jean-Philippe Molinari
CEO, Louis Tellier
1. How has your industrial and logistical organisation been affected by the Covid-19 crisis and the global supply chain disruptions?
Fabien Mazarico and Vincent Godet
Thanks to our local sourcing strategy, we have in large part avoided the logistical problems related to the Covid-19 crisis, as we have a lot of local suppliers, with a few European ones, and a marginal proportion of Asian suppliers.
This supply strategy enabled us, firstly, to avoid additional costs and the substantial increase in delivery times, and to have genuine daily contacts with some of our suppliers, with whom we’ve developed close partnerships for a number of years. For instance, during the 2020 crisis and the various lockdowns, we had the opportunity to have frank discussions with our suppliers who wanted to close their factories, in which we underlined the importance of having them by our side in order to meet the critical needs of medical staff in their daily tasks.
In addition, this geographical proximity with our suppliers also enabled us to overcome certain problems: when suppliers are just 20 km away, we can go and pick up our products from them by ourselves, with our own trucks. This regional proximity also enabled us to address and deliver new customers that our competitors didn’t know how to serve due to different strategies.
The Covid-19 crisis showed us the true strength of our sourcing model.
Jean-Philippe Molinari
During the Covid-19 crisis, we were completely shut down. The entire staff was on short-time work, except the logistics department in order to manage the remaining orders, particularly in e-commerce. Out of 100 people, 95 were on short-time work. Conversely, the resumption in activity was very strong from June to December, which meant we had a decent year in 2020 despite everything. All of our subcontractors suffered from the same problem, because the whole supply chain stopped.
At the end of 2020, then in 2021, we recorded a very strong increase in the price of containers, with prices increasing tenfold. Coupled with the exchange rate and the current euro-dollar parity, this led us to do some thinking. The container issue will be ongoing, as we won’t return to the price levels we saw three years ago. The carbon tax topic is also starting to emerge. This is encouraging us to bring a fraction of production back in-house. We’re also looking at relocating part of our supplies to Morocco or Poland. Part of our subcontracting will also be brought closer to France, which will also save us a few weeks of transportation time and reduce the cost.
The raw materials supply time was very lengthy following the Covid-19 crisis, and is still complicated now, with aluminium and stainless steel prices spiking, which is having a real impact on our cost price. However, we aren’t thinking about changing material, as there are criteria other than price. Tin plate is more ecological and far more durable than plastic for example.
2. Do you think we’re seeing a long-term enhancement of the French industrial landscape and/or the development of regional sourcing?
Fabien Mazarico and Vincent Godet
As far as we’re concerned, as we said, we’ve had a regional sourcing strategy for a long time, as our products and our volumes allow such a strategy. In terms of overall cost, we aren’t losing out, especially as we don’t have sufficiently large volumes to enable us to obtain advantageous rates in Asia. Moreover, the fact that we work with SMEs gives us room for discussion. We’re also making savings on the delivery cost, which is particularly beneficial due to the recent increase in the price of containers. Lastly, our sales strategy is partly focused on our responsiveness and our ability to deliver to our customers quickly, which would be impossible with sourcing from Asia given the delivery times.
More generally, there is a growing number of French industries that have automated their processes, to work on costs, lower the workforce requirement in order to be competitive compared to Asian productions. This operational excellence rationale has been combined with a rationale of lower energy consumption for several years. We’re already very competitive compared to Western and Southern Europe.
Businesses are realising that although the unit cost is higher with local sourcing, they can make up for it on the cost of transportation and the cost of financial assets connected with delivery times. We can also add the recent problems related to the exchange rate. Due to these additional costs, Asia is becoming less competitive.
We’ve accepted losing some gross margin, but I think we’re gaining in terms of operational margin and image. And our customers are happy to pay a little extra as their delivery times are very short, thanks to the geographical proximity of our suppliers.
Moreover, what wasn’t considered during the 1980-2000 period, and is increasingly considered now, is risk management. The geopolitical risk is now very high, and this factor will force us to be more and more independent in my opinion. The stranglehold that we had on Southeast Asia, a relic of the colonial past, no longer exists. The same goes for Africa. We have no choice but to reindustrialise, to relocate production in order to be independent. The return of certain types of production that had been relocated, for example in electronic boards, energy and even the motor industry, is something we’re currently seeing.
Two other points will strengthen local or European sourcing. Fifteen years ago, we relocated to low-cost countries to serve the national market. Now these factories in LCC are serving local markets, so we’re now looking for capacity in Europe to serve Europe. Secondly, I strongly believe in the groundswell at the generational level based on an environmental and societal rationale. The new generation wants a social project that isn’t just based on finance but strongly factors in environmental issues.
Jean-Philippe Molinari
Regarding the “Made In France” label, it’s necessarily an element consumers are sensitive to. However, they’re still very careful regarding purchasing power. Although French production can be economically viable on a small-series scale, to promote it significantly, huge industrialisation subsidies would be needed. We aren’t in a position of high technology or high added value at the product processing level. The quality may be better, but price is still a major factor. We could therefore improve the competitiveness of French industry by, for example, introducing border taxes to regulate labour gaps (or through the carbon tax), or by reducing wage costs in France.
But even if you lower the cost of labour, it’s very difficult to make up for a cost of labour that’s 5 to 10 times cheaper. This is why there are very substantial challenges for us around maintaining a very high level of quality but also the competitiveness of our production process and operational excellence.
In the end, in B2C, the trend in favour of “Made in France” always needs to be put in the context of concerns about purchasing power. The B2B market is different: we’re at the tail of the comet of French gastronomy, which has a very strong brand image around the world. The “Made in France” label for kitchen utensils is a very strong guarantee of know-how for chefs all over the world. This is a real asset for developing our export positions.
3. What financial and operational resources need to be put in place to enhance the reach of French know-how?
a. What are the company’s internal resources (e.g. operational excellence, innovation, etc.)?
b. What are the main external aid and financing mechanisms?
Fabien Mazarico and Vincent Godet
An issue that we will have in the coming years will be related to skills. People need to be retrained, because the main reindustrialisation resource is people, and at the moment we don’t have them.
Training is a big topic. But before training talent, talent needs to be attracted, by restoring the image of the positions in question. We need to make people understand the need to produce locally through environmental and societal issues. It’s up to central government, trade unions, the whole profession to work on this.
At the communities and regions levels, we’ll have to ask ourselves how to attract talent to business areas tens of kilometres away from urban areas. And the first answer is setting up public transport resources. Around us, there are hundreds of jobs to fill, and businesses aren’t managing to recruit. We need to set up training, increase public transport and restore the image of these professions, in order to attract and reindustrialise the French economic landscape.
In addition, to be competitive, the impact of wage costs also needs to be limited. The subjects of factory organisation and operational processes are therefore key.
If we can become proficient in these aspects and offer innovative products, the French brand image, our ability to manage after-sales service even for export, as well as the reliability of our production, should enable French industry to make its mark internationally.
Jean-Philippe Molinari
We need to create products with higher added value. It’s the only way to counter low costs, and that comes through innovation.
There have been quite a few aids to investment, such as interesting deferred loans. Meanwhile, regional aid is starting to dry up. We have a lot of support not at the industrial level but at the know-how, training and support levels. We also have export aid, for trade shows abroad for example.
Moreover, CSR is becoming a key topic for funds such as ReG and Bpifrance, due to their clients’ desire to invest in more sustainable companies. Lastly, we also have the operational excellence topic, which is crucial. High-end industry in France is performing well. Conversely, at the SME and SMI level that I discovered five years ago, there is a huge amount of room for progress to be implemented, whether in terms of automation, management, CSR, etc. There are factories today in France where you would think you were still in the 19th century! These are paternalistic, century-old, family businesses, for which the notion of investment has never been a priority. There are a lot of avenues for improvement there. Key performance indicators and targeted processes need to be put in place. This is what I have been working on at Louis Tellier since I joined the group, and this is what we want to further accelerate with our new shareholders.