CAC 40: Winners and Losers (Part 2)

Although there have been robust performers in the CAC 40 so far this year (Safran and Renault were discussed in our previous piece), some of the CAC 40’s components significantly underperformed in the first semester 2024. The French index is still rife with volatility, mostly due to the approaching elections in France (next Sunday). Let’s now look at the two CAC 40 companies that underperformed the most throughout the first half of the year.

Flop 1: Edenred (down more than 20% in S1 2024)

Edenred, a French multinational company, has carved a niche in the world of employee benefits and corporate payments. Founded in 1962 and originally called Accor Services, Edenred rose to prominence with the creation of the iconic “Ticket Restaurant” luncheon voucher in France. Today’s Edenred is present in 45 countries in different parts of the world, such as the Americas, Europe, Africa and the Middle-East, as well as Asia-Pacific.

Today, Edenred’s reach extends far beyond meal vouchers.The company now offers a comprehensive suite of special-purpose payment solutions catering to all stakeholders within the professional sphere. Businesses, employees, and even public institutions rely on Edenred’s services to encompass a diverse range of needs:

• Food: The company continues to be a leader in meal vouchers, offering programs that promote employee well-being and support local businesses.
• Engagement: Edenred fosters employee engagement through solutions like reward cards and gift platforms, recognizing achievements and boosting morale.
• Mobility: In today’s dynamic work environment, Edenred provides fuel cards and other mobility solutions to facilitate employee travel and commutes.
• Corporate Payments: The company streamlines business operations with expense management solutions and virtual payment options.

By offering a versatile portfolio of services, Edenred acts as a facilitator within the professional ecosystem. They connect companies with a network of partner retailers, streamline payments, and ultimately enhance employee satisfaction. This integrated approach has positioned Edenred as a global leader in the employee benefits and corporate payment solutions market.

Building on record-breaking results in 2023, Edenred demonstrated continued strong momentum in the first quarter of 2024. This impressive start aligns with the company’s exceptional performance over the past two years. Total revenue reached €685 million in Q1 2024, reflecting a significant 21.4% increase compared to the same period in 2023. Operating revenue also saw a notable rise of 18.8% year-over-year, reaching €625 million.

This impressive progress stems from Edenred’s consistent market penetration, particularly within the small and medium-sized enterprise (SME) segment. SEMs seem to be increasingly recognizing the value proposition of Edenred’s employee benefit solutions. Edenred’s consistent market penetration efforts within this segment are yielding positive results. By offering streamlined solutions and a flexible product portfolio, Edenred caters to the specific needs of SMEs, making it easier for them to implement and manage employee benefit programs.

Edenred’s core employee benefit solutions remain highly relevant in today’s workplace. These solutions offer convenience for employees, increased purchasing power, and tax benefits for companies. Additionally, Edenred constantly innovates by introducing new solutions that address evolving workplace needs.

The French company recognizes that traditional benefits alone are not enough in today’s competitive talent market. Their innovative new employee engagement offerings provide companies with flexible and targeted solutions to enhance employee experience. By empowering employees and fostering a positive work environment, these offerings become a valuable tool for attracting and retaining top talent. These offerings empower companies to attract and retain top talent in a competitive market.

Edenred’s stock price has been impacted by an investigation of four former Italian managers for alleged bid rigging and fraudulent practices related to a public tender in 2019, even as the company delivers strong financial results.

Edenred’s stock has experienced a reversal since its CAC 40 inclusion just a year ago. Once basking in the glory of all-time highs above €62 per share, the stock now languishes over 33% lower, a stark contrast to its former peak.

Flop 2: Eurofins Scientific (down more than 20% in S1 2024)

Eurofins Scientific, founded by Dr. Gilles Martin in 1987, has grown from a single company to a global network of life sciences companies. Today, it stands as one of the leaders in the field of analytical testing services, providing a vast array of solutions to clients across numerous industries.

A Diverse Portfolio for Different Needs

Through its subsidiaries, Eurofins Scientific offers a comprehensive suite of testing services. This includes, but is not limited to:

• Food Safety & Quality: Ensuring the safety and integrity of food products from farm to fork.
• Environmental Testing: Assessing the impact on the environment and ensuring compliance with regulations.
• Pharmaceutical & Cosmetics Testing: Guaranteeing the safety, efficacy, and quality of pharmaceuticals and cosmetic products.
• Agroscience Services: Supporting the agricultural industry with testing solutions for crops, soil, and fertilisers.
• Advanced Material Sciences: Evaluating the properties and safety of new and innovative materials.
• Discovery Pharmacology: Aiding in the development of new life-saving drugs.
• Forensics: Providing scientific expertise for criminal investigations.
• Clinical Diagnostics: Emerging as a key player in specialised and molecular diagnostics, Eurofins helps diagnose and monitor medical conditions.

Extensive Expertise and Cutting-Edge Technologies

With a portfolio exceeding 200,000 analytical methods, Eurofins offers big capabilities. Their services can evaluate the safety, identity, composition, authenticity, origin, and purity of biological substances and products. Additionally, they are at the forefront of innovative clinical diagnostics, aiding in accurate medical diagnoses.

A Global Presence with Local Focus

Eurofins Scientific’s reach extends across the globe. This allows them to cater to the specific needs of clients in diverse regions, while maintaining a commitment to local expertise and regulatory compliance.

Eurofins Scientific’s stock price has taken a significant hit in recent months, losing over 33% since reaching an all-time high above €62 per share in June 2023. This decline comes on the heels of two major setbacks:

• Disappointing Earnings: Last February, the company’s share price plunged by more than 17% after reporting worse-than-expected full-year earnings. Adjusted net profit in 2023 fell short of 2022 levels, with adjusted earnings per share dropping from €3.43 to €2.71.
• Allegations of Impropriety: More recently, Eurofins faced damaging allegations from Muddy Waters Research. The report claimed that founder and CEO Gilles Martin engaged in “covertly enriching” himself through questionable real estate deals over several decades.

These events have clearly shaken investor confidence, leading to the current decline in Eurofins’ share price.

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