03 March 2015

Earnings review

DLSI

France | Support services

Buy (Buy)

Target price

EUR 15.40



Current price

EUR 11.80

Baptiste de Leudeville

bdeleudeville@keplercheuvreux.com

+41 22 994 1573

FY 2015 outlook deserves better valuation

4% LFL sales growth in 2014, in line with our expectations

Drivers are international expansion, development in Nuclear

Improved prospects for 2015 (growth, margins, newsflow)

Current discount to peers excessive, Buy - TP EUR15.40

LFL growth (+3.7%) in line with expectations

DLSI released revenues of EUR181m for 2014 compared to EUR183.8m a year ago (-1.6%). The top-line performance is in line with our expectations on a LFL basis (+3.4%), and below our FY 2014 initial forecast (EUR185) since we underestimated the decrease in sales associated with restructuring measures (EUR9.3m against EUR4.4m expected). The main growth driver is the international business (30% of total revenues in Switzerland, Germany and Poland), where DLSI recorded growth of 2.8% (+5.7% LFL).

International expansion on the agenda

The satisfactory performance reported on the international front comforts management's aim of expanding abroad where margins and needs for temporary staff are greater than in France. In our view, DLSI is

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Market data

Market cap (EURm)

30

Free float

34%

No. of shares outstanding (m)

3

Avg. daily trading volume('000)

2

YTD abs performance

11.7%

52-week high (EUR)

15.90

52-week low (EUR)

8.90

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likely to conclude at least one deal in 2015 in countries where it already has a presence (Switzerland, Germany and Poland). At the same time, DLSI continues to develop the nuclear activity through the opening of dedicated agencies close to large French nuclear facilities.

Positive newsflow, excessive discount

With a P/E of 6x and EV/EBITDA ratio of 5x in FY 2015E, DLSI is suffering an excessive discount compared to sector peers (40% estimated discount), which cannot not be entirely justified by the liquidity discount in our view. Taking into account the 1) better conditions in the French domestic market in 2015 (latest figures for January show a turnaround), 2) improved operating profitability: management once again expressed its confidence that it can deliver on that specific aspect thanks to the restructuring measures undertaken last year (closing or grouping of agencies). Therefore, we expect the EBITDA margin to grow at 4.3% and
4.8 respectively in 2014 and 2015 versus 3.6% in 2013, and 3) the positive newsflow likely from new acquisitions in other countries, we keep our Buy rating and a target price of EUR15.40, offering 30% upside from current prices.

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Price

DJ Stoxx 600 (rebased)

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