Family Holdings #13 - European holding companies and the financial results of their flagship companies

This week's topics:

In Brief:

Addtech(Stockholm: ADDT.B) recently received a vote of confidence when board member Fredrik Börjesson purchased SEK 2.1 million worth of shares. This purchase on the Stockholm Stock Exchange is in line with the recent trend of insiders at our Swedish holdings further increasing their stakes in their own companies.

Investor AB (Stockholm: INVE.B), a major shareholder of Atlas Copco, purchased 214,635 shares in the industrial serial acquirer this week. The shares were purchased at a price of SEK 138.23 per share, representing a transaction value of SEK 29.7 million.

KKR(New York: KKR) underscores the success of its widely supported ownership model with the sale of CoolIT Systems to Ecolab for $4.75 billion, a deal that yields the investment firm a return of 15 times its initial investment. Thanks to the “skin in the game” of the 650 employees, they are directly sharing in this success with substantial payouts ranging from one to as many as eight years’ salary per person.

Brookfield(New York: BN) is teaming up with investor La Caisse to acquire Canadian renewable energy producer Boralex in a deal valued at approximately CAD 9 billion. This privatization will give Boralex access to Brookfield’s extensive capital resources and global network, which is essential for the accelerated expansion of its portfolio in wind, solar, and hydroelectric power across North America and Europe.

Berkshire Hathaway(New York: BRK.B) is increasing its exposure to Japan by acquiring a 2.5% stake in insurer Tokio Marine Holdings for approximately $1.8 billion. The investment holding company, led by newly appointed CEO Greg Abel, is thereby committing to a long-term partnership in the reinsurance sector and has not ruled out further expanding its stake in the future.

Addtech, Investor AB, KKR, Brookfield, and Berkshire Hathaway closed the trading week on the Stockholm and New York stock exchanges at prices of SEK 308.80, SEK 345.50, USD 88.50, USD 39.00, and USD 468.49 (Class B shares) per share.

Is a "compounding machine" heading toward standardization?

The British investment holding company 3i Group (London: III) recently held its annual webinar on Action, a holding that, accounting for 75% to 85% of net asset value, forms the absolute core of the portfolio. During this event, management provided detailed insight into the underlying figures and the strategic direction of the discount chain, with a specific focus on current performance in core markets such as France and plans for intercontinental growth.

Insights from 2025 and the first weeks of 2026
Action has built an unprecedented track record since 3i Group’s initial investment in 2011. The chain operates as a true compounding machine: since 2005, annual revenue growth has averaged 24%. Operating profitability (EBITDA) rose by as much as 27% per year during that same period, driven by a margin expansion from 8.7% to 14.8%.

The results for 2025 show revenue growth of 16.1% (to €16 billion) and a 14.0% increase in profitability. Although these figures are below both the long-term and short-term averages (see figure below), Action’s fundamentals remain extremely stable. It is quite conceivable that we are seeing the first signs of a future normalization here. That is, in itself, a logical development; after all, few companies are able to sustain a growth rate of +20% for decades. A certain degree of leveling off simply seems to be an inevitable consequence of the enormous scale the company has now reached.

Although this could mark the beginning of a broader return to normalcy, a closer analysis shows that the current slowdown in growth is primarily concentrated in certain geographic regions. France, which accounts for approximately one-third of the group’s revenue, has been underperforming for two consecutive quarters, thereby dragging down the group’s results. In 2025, organic growth (LFL) in France stalled at a modest 1.3%, while the other markets posted a strong 7.2%. Although the weakness in France is likely to persist in the first half of 2026, an initial recovery is already visible. LFL growth improved from -2.7% in the fourth quarter of 2025 to +0.9% over the first twelve weeks of 2026.

The argument that the weakness in France, in addition to consumer confidence, is also due to market saturation or structural normalization is refuted by a comparison with the Netherlands. Although the Dutch market is virtually saturated (Action opened only three stores in the Netherlands in 2025) and holds the most mature position within the portfolio, this market actually showed above-average organic growth. This suggests that the current pressure in France is likely temporary and that growth figures will probably stabilize again in the longer term toward the group average.

While organic growth is currently under some pressure, inorganic growth paints a very different picture. Over the past year, Action managed to open no fewer than 384 new stores, representing a 13.2% increase in its store portfolio, which is fully in line with the historical average.

This growth was partly driven by the successful expansion into Switzerland and Romania, where, according to management, the response has exceeded all expectations. In Romania, the rollout is proceeding so smoothly that a first distribution center (DC) is being opened. As is customary in Action’s logistics strategy, this DC is located near the border; in this case, in preparation for entering the Bulgarian market in 2027.

Action Goes to the U.S.A.
In addition to its expansion plans in Europe, management also unveiled concrete plans for entering the U.S. market for the first time. Following a thorough two-year study, Action has decided to enter the market in Georgia, North Carolina, and South Carolina by the end of 2027 at the earliest. By the end of 2030, 100 stores are expected to be operational in this region.

However, this expansion comes with a higher cost. Action is investing in a local procurement team and stepping up its marketing efforts to build the necessary brand awareness. In addition, capital expenditure (CapEx) per store opening in the U.S. is higher than in Europe. However, the company has already gained valuable experience with such a cost profile during its recent entry into the Swiss market. Although the payback period there is slightly above the group average due to higher costs, it is still only about one year. All of this leads to a longerbreak-even period per store, a point that investors view critically. The memory of other European retailers, such as Tesco and Sainsbury’s, which struggled in the U.S. market, is causing the market to exercise caution.

Although the United States is a challenging market with a different consumer profile and formidable competitors such as Costco, Dollarama, and Five Below, Action’s management has repeatedly demonstrated its ability to successfully scale a proven formula to new markets. Current concerns about a failure therefore seem premature.

Supply chain management
Now that revenue growth is slowing slightly, investors’ focus is inevitably shifting to margins. After all, a normalization of growth should not be accompanied by a decline in profitability. Although the margin fell slightly last year, this effect was minimal when excluding the one-time employee bonus awarded to celebrate the opening of the 3,000th store.

CFO Joost Sijpenbeek explained that the pressure on margins was partly due to a strategic investment in the supply chain. Action is increasingly sourcing products directly from manufacturers and holding them in stock itself. Although this process entails costs during the initial phase, it will ultimately lead to lower procurement costs and thus an improvement in margins.

Management is clear about how these economies of scale are distributed:

• One-third is reinvested in streamlining logistics processes.
• Two-thirds of it is used to improve quality and further lower prices.

The latter is a crucial weapon in today’s market. CEO Hajir Hajji emphasized that Action in France actively lowered prices in late 2025 and early 2026 to boost flagging consumer confidence. The company can afford this aggressive pricing strategy thanks to the structural cost advantage it has built up over its competitors (see photo below).

Outlook Looking ahead to 2026, management is adopting a broader range of expectations. This caution can be directly attributed to the current geopolitical turmoil, particularly in the Middle East. After all, rising fuel prices could drive up transportation costs and, through persistent inflation, put further pressure on consumer confidence.

• Store openings:Action aims to open at least 400 new stores by 2026, with a focus on the second half of the year.
• Organic growth:The projected LFL growth of 4–5% appears conservative, but makes sense given the ongoing pressure in France. By comparison, the rest of the countries (excluding France) already posted 5.8% growth in the first twelve weeks of 2026.
• Profitability:The EBITDA margin is expected to remain stable at 14.8%.

In our view, management is thereby building in a small safety margin. Increased short-term uncertainty has led to a sharp correction in the stock market, but for the long-term investor, the fundamentals remain intact. Action is a mature organization that has proven its ability to weather economic headwinds. With the upcoming expansion in Southeast Europe and the United States, this discount giant’s growth story is far from over.

When Action’s multi-million-euro dividend starts coming in, we wouldn’t be surprised if 3i Group launched a share buyback program to take advantage of the current undervaluation. We’re also keeping a close eye on insider purchases, which can be seen as an additional sign of confidence.

3i Group PLC ended the trading week on the London Stock Exchange at a price of GBP 33.51 per share.

Mixed results at D’Ieteren

D’Ieteren Group (Brussels: DIE) recently presented its 2025 results, showing that actual reported pre-tax profit fell by 10.3% to €955.6 million. This decline is the stark economic reflection of a year in which the group had to absorb heavy additional interest expenses due to substantial debt financing at the end of 2024, combined with an unfavorable dollar exchange rate. 

At constant exchange rates and excluding these additional financing costs, underlying profit growth came in at 3.8%. Although the holding company believes this better reflects the operational strength of the core businesses, this modest increase masks significant differences among them:

• Belron (Carglass):The undisputed leader. Despite headwinds in the first half of the year, a strong recovery in the U.S. led to record revenue of €6.7 billion and an impressive margin of 23.0%.
• D’Ieteren Automotive:Profit fell by nearly 10% to €215.3 million. Although the division maintained its market leadership in electric vehicles (28.8% market share), it is grappling with a challenging Belgian market and pressure on margins from manufacturers (OEMs).
• At TVH, profits plummeted by 26.3% to €72.1 million due to a global slowdown in the agricultural and forklift sectors. In addition, start-up costs for new distribution centers in the U.S. and Poland weighed on margins, while the search for a new CEO is still ongoing.
• PHE reaffirmed its role as a growth driver with a 9.7% increase in profit to €181.6 million, partly due to market share gains in France. The division is fully committed to further consolidation and is currently in exclusive negotiations regarding two major acquisitions in Spain.

Belron Heads Toward Its IPO
However, the focus of the financial results inevitably lies on Belron, the holding company’s undisputed crown jewel and primary cash flow generator. After a challenging first half of the year, during which the company grappled with “claim avoidance” by U.S. insurers, Belron showed an impressive recovery in the second half of 2025. This resulted in record revenue of €6.7 billion and an adjusted operating margin of 23.0%.

According to CEO Francis Deprez, this success is due not only to higher volumes, but primarily to the increasing technological complexity of automotive glass. Nearly half of all repairs now require complex calibration of advanced driver-assistance systems (ADAS), which structurally increases the value per job. Management is optimistic about 2026 and expects further margin improvement toward the goal of more than 25% by 2028, supported by a normalizing U.S. market in which insurers are abandoning their defensive stance.

During the call with analysts, the IPO was the topic that could not be ignored, fueled by recent media reports about the appointment of investment banks to oversee the public offering. Although Deprez emphasized that D’Ieteren is and remains a “happy majority shareholder,” he acknowledged that the private equity partners in the capital will eventually seek an exit. “I can’t say exactly when that moment will come, because they’re the ones pulling the trigger more than we are,” said the CEO. However, the group is preparing meticulously by reducing Belron’s debt ratio at record speed; in fact, it fell from 5.2x to 4.5x in just one year. Lower leverage combined with strong free cash flow of €374 million positions Belron optimally for an IPO at a maximum valuation.

Conclusion
D'Ieteren's lackluster figures at the holding company level reflect the mixed results of its subsidiaries. This demonstrates the importance of diversifying across various investments.

Belron’s operating performance and its upcoming initial public offering will influence the stock price in the coming months. In the longer term, TVH and PHE, as serial acquirers, should continue to drive the holding company’s growth.

With a rock-solid global market leader like Belron, a local market leader in D'Ieteren Automotive, and two well-positioned acquisition vehicles, D'Ieteren Holding certainly has several irons in the fire to continue creating value for its shareholders in the coming years.

D'Ieteren closed the trading week on the Brussels Stock Exchange at a price of EUR 158.40 per share.

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