the 2017 european small & mid cap...

THE 2017 EUROPEAN

SMALL & MID CAP OUTLOOK

2017 edition

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Key findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

I. Market performances: small & midcaps outperformance confirmed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II. Small & midcaps: market performance = economic performance? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

III. European market structure: the small cap segment is contracting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

IV. Country focus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Conclusion & proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Appendix: methodology & typology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INDEX

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PREFACE

European small and midcaps offer asset managers with a passion for the world

of enterprise, an exceptional hunting ground. Thousands of human adventures,

initiatives, new markets, products and services, thousands of entrepreneurial

visions in the process of being transformed into reality, represent at the same time

the roots, the trunk and the sap or lifeblood of the economy of our continent: more

than 90% of listed companies in Europe are mid or small caps.

For those of us who, in different roles, have devoted much of our existence to the

promotion and development of these enterprises, the spectacle of watching these

familiar landscapes blossom over recent years represents a genuine source of

satisfaction. Over the last ten years, an investor who put money into European small

and midcaps would have made the right choice both in terms of performance and

volatility in challenging markets.

This buoyancy and resilience are now attracting the attention of all investors:

demand is increasing – too fast, too high, too strong, some might say – capital is

pouring in at such a rate that the better funds are trying to slow the inflow of new

subscriptions to protect the fund management*. Bolstered by this inflow of new

cash, the prosperity of many of these companies is pushing them up into the ranks

of the higher segments.

However, this attractive picture should not mask the more troublesome reality

that has been undermining the very foundations of the European financial market

landscape over the past 10 years. The number of listed companies has been declining

as the years pass. Since 2007, the number of listed companies has fallen 13% from

6,349 to 5,498 and in the small cap segment alone, declined by as much as 20%.

This third edition of our European small and midcap overview confirms these findings

and the underlying trends observed. Our ecosystem continues to favour large caps

at the expense of small caps. The number of micro caps has been contracting from

one year to the next while there have been too few IPOs to offset the number of

de-listed companies (299 vs 320 in 2016).

Faster, Higher, Stronger

*Echiquier Entrepreneurs, a European small cap growth fund, has soft-closed after reaching €350 million in early 2017.

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didier le menestrel

Chairman & CEO

La Financière de l’Echiquier

caroline weber

General Manager

MiddleNext

In the absence of attractive regulations, the situation will only worsen and the

introduction of MIFID 2 in early 2018 will surely further concentrate flows towards

a smaller number of global players. Without new blood, the European system is

deprived of oxygen, becoming poorer and the market is inexorably ageing.

How can this trend be reversed and the market regain its vitality? As we have seen,

market prices have recovered. This in itself is an excellent first observation. On this

basis, solutions exist and are known: more stable regulations, providing incentives

to encourage market listing and channelling savings into small and midcaps through

tax schemes, while attracting candidates based on exciting valuations.

With little hope of seeing the European partners reach an understanding in the

near future regarding shared objectives in this area, we welcome local initiatives

offering tax incentives to invest in companies. Examples include the promotion

of the start-up market landscape in Sweden, detailed in this study, and in Italy,

the individual investment plans (piani individuali di risparmio or PIR), a scheme

providing incentives to hold assets invested in the local economy ... and in France,

there is hope that new ideas referred to in the programme of the recently elected

parliament will be rapidly implemented.

Is this a prelude to European harmonization? Who knows?

PRÉFACE

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KEY FINDINGS

Market & economic performances

- Small & midcaps have outperformed steadily over the past decade, on average returning double the performance of large caps over 3, 5 and 10 years

- The inversion of risk indicators observed in 2015 has been confirmed. Small & midcap risk indicators are now in-line with large caps over 5 years and lower over 3 years

- Economic performances are in-line with market performances: small & midcaps have proven outstandingly dynamic over the past decadee

European market structure

- Stock market listing plays a key role in company dynamism: 25% of listed companies in 2006 had moved into a superior market cap segment 10 years later

- After a two-year pause, the number of listed companies has begun to decrease again as IPOs are not fully offsetting de-listings

- Small caps in particular are decreasing in terms of weighting and number, which is jeopardising the future of the whole ecosystem

- The number of large caps increased by 12% over the review period. 125% of the increase is attributable to companies being promoted from the small & midcap segments

Country focus

- The global trends observed are also present in most European countries, particularly among the major economies, including France, the UK and Germany, where the investment universe is shrinking due to the lack of bottom-up renewal

- The number of companies is increasing in Mediterranean countries (Italy, Spain and Portugal) as the region recovers from an unfavourable economic and market environment, which bodes well for the future

- Sweden has set a fine example with a 74% surge in the number of companies over the past decade, increasing across all segments

Potential MIFID 2 impact

- MIFID II constraints should have a major impact on brokerage firms research and on the small cap investment universe

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For the third year in a row, the MiddleNext Research institute and La Financière de l’Echiquier have published the Small & midcaps European panorama to analyse the major trends within the broader European market landscape. This report aims to assess the major trends at play and analyse the main issues at stake within this vital system for the European economy.

The two previous issues1 published in 2015 and 2016, highlighted several key aspects regarding the 2000-2015 period:

confirmation that small & midcaps have steadily outperformed large caps,

an inversion of volatility levels between small & midcaps vs large caps over the past three years,

a historic peak in European large caps and the persistent contraction of the micro caps segment,

an ageing listed market and the risk of mobility between segments progressively drying-up unless there is a fresh wave of IPOs among micro & small caps.

This third issue, focusing on the analysis of European listed companies over the past ten years, has confirmed the major trends previously detected and highlighted some further specific national issues.

The study updates the market (I) and economic (II) performances in the asset class, and analyses the European small & midcaps market structure (III) in order to establish the major issues at stake.

This European panorama also focuses in-depth on several countries, notably in Scandinavia. It also analyses the potential impact of the MIFID 2 directive, which comes into force in 2018, on the broader European financial industry, particularly the small caps investment universe.

This Pan-European study concludes with a number of specific proposals and suggestions for improvements contributing towards consolidation in the broader European market landscape and the development of budding companies.

1. The two previous issues are available on the following websites: www.lfde.com & www.middlenext.com

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INTRODUCTION

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Our study focuses on analysing listed European companies over the past ten years, from 31 December 2006 - 31 December 2016. It updates performances among European and national indices over 3, 5 and 10 years, and analyses risk indicators in order to check whether the volatility differential between small & midcaps vs large caps remains inverted, as detected in the previous issue.

1. European indices

10-year comparative performance analysis

The chart and the table below present comparative 10-year performances2 for the STOXX indices, including the Large 200 index (median market cap 24.2 billion euros), the Mid 200 index (median market cap 6.2 billion euros) and the Small 200 index (median market cap 3 billion euros). These indices are calculated on a total-return basis and therefore include reinvested dividends

STOXX indices: 10-year comparative performances

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Large Europe Index Mid Europe Index Small Europe Index

10-year Performance Annualised perf. Volatility Max. drawdown

Large Europe Index 28% 2.5% 21.1% -58%

Mid Europe Index 55% 4.5% 21.0% -61%

Small Europe Index 51% 4.2% 21.4% -64%

Sources : Bloomberg / La Financière de l’Échiquier

The data confirms our findings published over the past 3 years, i.e. that the small & midcap segments have continued to significantly outperform vs large caps.

2. Base 1,000 on 31 December 2006.

MARKET PERFORMANCES: SMALL & MIDCAPOUTPERFORMANCE CONFIRMED

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The total-return structure of these indices is a key factor. Dividend reinvestment enabled the large caps index to deliver an equivalent performance to the midcap indices until 2012. This factor also highlights that the performance gap between the different European segments widens during phases of economic expansion. On the other hand, the different segments tend to perform in line during market stress phases.


To appreciate the performance levels between the different asset classes over 3 years, we have referred to the European MSCI indices which are sub-divided into 4 market cap sections: large caps, midcaps and small & micro caps. The micro caps segment was introduced in 20123.

MSCI indices 3-year comparative performances

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3 years Performance Annualised perf. Volatility Max. drawdown

Large Europe Index 17% 5,4% 18,2% -27%

Mid Europe Index 26% 8,1% 17,8% -22%

Small Europe Index 33% 9,9% 17,0% -20%

Micro Europe Index 34% 10,2% 10,7% -14%

Sources: Bloomberg / La Financière de l’Échiquier

Mid & small caps have outperformed significantly over the past 3 years, with micro caps making strong progress in 2016 and bridging the gap to join small caps at the head of the field.

I. MARKET PERFORMANCES: SMALL & MIDCAP OUTPERFORMANCE CONFIRMED

3 The MSCI micro caps reference refers to companies with a market cap of below 500 million euros. The index nonetheless remains sufficiently coherent with the segmentation that we have selected, i.e. median/average market cap of around 100 million euros. The small caps index refers to companies with a market cap of 500 - 5,000 million euros, with a median/average market cap of around 1,000 million euros. The mid & large caps indices correspond to our definition of large caps, with a market cap of in excess of 5,000 million euros. NB, performances are stated on a total-return basis with dividends reinvested.

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It should also be noted that since the peak observed in spring 2015, the large cap index has lost over 9%, while the midcap index has shed only 5.6%. Meanwhile, the small & micro indices have returned broadly flat performances of +1.5% and +0.4% respectively.

Lastly, the 2013 - 2016 period confirmed the trend observed in our previous findings, i.e. that risk indicators have improved steadily among mid & small cap indices.

2. National indices


We opted to restrict the scope of our study to the UK, Germany and France, which together account for 51% of combined listed European companies across all categories. The benchmark indices that we have selected represent the performance returned by the various segments on a total-return basis. We have back-dated the analysis over 5 years, as there was no UK midcap index 10-year data available.

MSCI indices: 5-year comparative performances

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Large Europe Index Midcap index DE Midcap index FR

Midcap index UK Small cap index UK Small cap index FR



Midcap index DE 124% 17,5% 17,7% -18%

Midcap index FR 132% 18,3% 15,8% -20%

Midcap index UK 86% 13,2% 15,5% -19%

Small cap index UK 143% 19,4% 9,8% -15%

Small cap index FR 123% 17,4% 11,1% -19%

Sources: Bloomberg / La Financière de l’Échiquierr

The large cap index is once again tailing the field, followed closely by the UK midcap index. Over 5 years, all of the other mid & small cap indices have returned far stronger


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performances, delivering almost double the returns from the large cap index. performances proches du double de celle de l’indice Large.

In terms of risk levels, we observe the same gap between large & midcap indices vs small cap indices.

3-year comparative performances analysis

Our analysis of market performances over the past 3 years is based on the same national indices on a total-return basis.

National indices vs European indices over 3 years

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Midcap index DE4 34% 10,3% 18,2% -18%

Midcap index FR 42% 12,4% 16,4% -20%

Midcap index UK 20% 6,3% 16,3% -19%

Small cap index UK 24% 7,4% 10,2% -15%

Small cap index FR 55% 15,8% 12,0% -19%

Sources: Bloomberg / La Financière de l’Échiquier

Small & midcap indices have significantly outperformed over 3 years, returning more divergent performances over 5 years. France has returned remarkable performances, which may appear counter-intuitive given the macroeconomic situation in France com-pared to its European partners.

4 We changed benchmark index for German midcaps, as the original choice no longer seemed comparable to the other indices given the divergent profiles of its components (large & midcaps). For midcaps, we have since adopted the CAC Mid in France and the MSCI Mid Germany and the MSCI Mid UK. For small caps, we have adopted the CAC Small in France and the FTSE Small Cap for the UK. The indices are euro-denominated, except the UK indices which are denominated in GBP. Over 5 years and over 3 years, GBP has depreciated by around 4% vs the euro. There is no small cap German index for the period, as it was launched in 2009.


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UK small & midcap indices are being impacted by the Brexit.

In terms of risk indicators, we observe that the inversion noted last year, with mid & small cap indices recording equivalent, or even lower, levels of volatility, was confirmed in 2016. Maximum drawdown was also lower among these indices. These results cor-roborate our European findings.

Summary

2016 has confirmed the trend observed in Europe over the past 15 years. Mid & small cap indices have significantly outperformed and are continuing to do so, including with dividends reinvested.

These findings also confirm that as well as outperforming, the mid & small caps segments do not represent any greater risk and are also sometimes less volatile, as is the case in the small cap segment.

We would like to stress that our analysis is based on indices composed of a large number of companies providing data, and that diversification is essential to avoid concentrating investment risks on just one or a few companies.


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European and national small & midcap indices have steadily outper-formed over 10 years without fail

The inversion of risk indicators observed last year was confirmed in 2016. Volatility among small & midcaps has remained below the levels recorded in the large caps segment and the gap is continuing to widen

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x2Small caps have returned, on average, over twice large cap performances over 3, 5 and 10 years


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II. MARKET & ECONOMIC PERFORMANCE:

PARALLEL DYNAMICS

Are economic performances observed to be in-line with market performances? Is the sharp outperformance staged by small & midcaps, which was confirmed in 2016 as in the 2006-2016 period, reflected in the economic performances of the companies involved?

1. 2,390 companies analysed in 2006-2016

Monitoring 10-year economic performance among European companies involved es-tablishing a sample group composed of companies with similar business models which were listed throughout the period. The sample drew on a database of 5,498 companies in 2016. Only 2,390 out of the 5,498 companies in our initial database were eligible over the review period. The table below shows a snapshot of the investment universe covered by our study and the sample analysed.

2016 Investment universe (M€) Nano Micro Small Mid Large Blue Chip Total Number 2 121 859 1 303 758 202 255 5 498 Aggregate market cap 35 475 76 225 557 312 1 738 623 1 404 228 8 780 822 12 592 684 2016 sample (M€) Nano Micro Small Mid Large Blue Chip Total Number 581 385 664 449 131 180 2 390 Aggregate market cap 11 703 35 206 290 769 1 058 632 919 688 6 701 326 9 017 325 Number% 27% 45% 51% 59% 65% 71% 43% Aggregate market cap% 33% 46% 52% 61% 65% 76% 72%

This sample of 2,390 represents more than 50% of companies in the segments rang-ing from small caps to blue chips and 72% of the total market cap of the investment universe.

2006 sample Nano Micro Small Mid Large Blue chip Total Number 573 450 697 421 104 145 2390 Aggregate market cap 14 047 41 381 304 591 964 485 739 353 4 680 836 6 744 692 2016 sample Nano Micro Small Mid Large Blue chip Total Number 581 385 664 449 131 180 2390 Aggregate market cap 11 703 35 206 290 769 1 058 632 919 688 6 701 326 9 017 325 Number var% 1% -14% -5% 7% 26% 24% 0% Market cap var% -17% -15% -5% 10% 24% 43% 34%

Sources: Capital IQ / La Financière de l’Échiquier


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An analysis of variations in the sample on a like-for-like basis over 10 years reveals a contraction of the micro & small cap segments, which lost 65 and 33 companies respectively, and a partial shift towards the mid & large caps segments, which gained 28 and 27 companies respectively.

The chart below shows a clear correlation between the annual variations in the aggregate market cap of the sample of 2,390 companies, compared to the annual variation in the MSCI Europe index, which confirms the pertinence of our sample.

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2,390 companies MSCI Europe

Sources: Bloomberg / Capital IQ / La Financière de l’Échiquier

2. Economic performance 2006 - 2016

We shall now analyse the economic performance of our sample, which we have observed from two perspectives for the purposes of the study:

• firstly by aggregating all data, as if it were a single company, in order to measure the global economic impact (table 1),

Table 1 – Aggregated economic data (billion euros)

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

6 074 6 547 5 799 6 527 7 202 7 599 7 368 7 563 7 547 7 423 6.9% 7.8% -11.4% 12.6% 10.3% 5.5% -3.0% 2.7% -0.2% -1.6%

722.6 711.5 564.6 738.0 792.0 756.9 695.6 701.6 666.1 689.2 11.9% 10.9% 9.7% 11.3% 11.0% 10.0% 9.4% 9.3% 8.8% 9.3%

7 192 4 127 5 437 6 293 5 708 6 486 7 647 8 024 8 855 9 017 56.6% 69.5% 65.6% 54.0% 55.5% 55.6% 53.1% 53.6% 55.2% 55.9%

-7.3% -7.4% -7.4% -6.4% -6.2% -6.5% -6.4% -6.4% -6.5% -6.2%

1.46 0.93 1.27 1.25 1.07 1.12 1.31 1.34 1.48 1.55 12.26 8.58 13.07 11.04 9.71 11.29 13.87 14.44 16.82 16.69

2.44 1.45 1.83 1.84 1.60 1.75 2.03 2.04 2.08 2.02

Median M€SalesChangeUnderlyingMarginMarket capGearing

EV/SalesEV/EBITP/BV

Capex as% of Sales


II. MARKET & ECONOMIC PERFORMANCE: PARALLEL DYNAMICS

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• secondly, by using median data in order to validate the trends observed in stage one, under a more finely-tuned approach (table 2).

Table 2 – Aggregated economic data (billion euros)

Median M€

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Sales 198.6 207.7 191.0 212.5 226.5 236.2 229.2 242.8 260.3 263.8 Change 9.3% 4.1% -5.7% 8.6% 6.9% 4.8% -0.4% 3.5% 6.9% 1.4% Underlying 18.9 17.1 10.2 14.6 16.1 15.1 15.2 15.6 17.7 19.7 Margin 9.5% 8.2% 5.3% 6.9% 7.1% 6.4% 6.6% 6.4% 6.8% 7.5% Market cap 222.0 104.1 154.7 180.5 142.3 165.4 214.1 225.4 262.3 282.5 Gearing 26.4% 32.7% 27.5% 22.0% 25.0% 23.2% 21.8% 22.4% 21.8% 21.2%

-3.7% -3.7% -2.8% -2.6% -2.9% -2.8% -2.7% -2.8% -2.9% -2.9% EV/Sales 1.26 0.70 0.99 1.05 0.83 0.94 1.16 1.13 1.22 1.26 EV/EBIT 11.34 7.24 10.10 11.11 9.21 10.46 12.85 12.48 13.15 13.26 P/BV 1.97 0.97 1.30 1.45 1.15 1.28 1.55 1.52 1.66 1.71

Capex as% of Sales

Several clear observations are revealed by the data.

- The downturn-recovery cycle appears to be highly erratic since the 2009 crisis, particularly in terms of aggregated data, whereas median data reflects greater regularity. We believe that the sharp downturn in 2016 is associated with the impact of sterling, given the heavy weighting of the UK market, which represents around 25% of our sample, where business activity contracted by 5.2% in 2016. Median data reflects more dynamic growth. The disparity reveals divergences between larger and smaller companies.

- Changes in the level of operating margins and consequently EBITDA are relatively similar whichever analysis method is used. In terms of both aggregated and median data, corporate margin levels have not yet returned to their previous peak. In both types of data, a capping effect can be observed since 2012. It would appear however that in 2015/2016 median data trended sharply higher, as was the case with small cap indices, which were hitting new highs.

- Market cap levels are still at all-time highs, forcing EV/ROC multiples to new peaks, both in terms of aggregated data and median data. The EV/sales multiple, which until now remained below its historic highs, has also reached, or even exceeded, the record set in 2007. Only the P/NAV ratio remained below the 2007 peak at the end of 2016.

3. Economic performance = market performance?

The analysis of market performances in Europe demonstrates that small & midcap indices have largely outperformed indices composed of large companies. Is this outperformance corroborated by economic performance?



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In order to analyse economic performances, and as our sample has been standardised, we have chosen sales as a differentiating indicator, instead of market cap, while main-taining the same spread ranges5.

2006-2016 economic indicators within the 2,390 sample companies

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Afin d’obtenir la comparaison la plus simple et la plus lisible possible, nous avons restreint le nombre d’indicateurs économiques utilisés : pour chacun des six segments3, nous avons retenu le chiffre d’affaires et le résultat opérationnel, recalculés en base 100 en 2006, et choisi comme indicateur de performance la capitalisation boursière. Tous ces indicateurs sont agrégés, le volume de création/destruction de richesse étant le critère le plus pertinent, et non le pourcentage, trompeur et peu adapté pour analyser l’univers des Small/Mid. Le principe de construction des segments est tout aussi simple : nous utilisons le volume d’activité de 2006 pour générer les six segments dont le nombre de sociétés reste constant sur la période étudiée (2006/2016). Nous avons choisi de transformer ces données en graphique pour illustrer les écarts de tendances. L’échantillon de 2 390 sociétés

Source : Capital IQ / La Financière de l’Echiquier Ce graphique représente l’évolution en base 100 des données agrégés affichées dans le tableau 1. On constate parfaitement la stagnation du chiffre d'affaires, la rechute des marges et la progression continue des valorisations boursières : Le segment des Nano

Source : Capital IQ / La Financière de l’Echiquier Ce graphique est à relativiser au regard des montants en jeu. Il illustre toutefois plutôt bien la dynamique de l'univers des Nano. Le tableau qui suit présente l’évolution des Nano entre 2006 et 2016 : Nano Micro Small Mid Nano 68% 21% 10% 1%

3 Cf. méthodologie page XX

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The chart tracks aggregated data trends from a 100 base, detailed in table 1. Stagnation in terms of sales can clearly be observed, along with a decline in margins and a steady increase in market valuations. How are these trends reflected within the different segments of the sample?

2006-2016 economic indicators: nano caps segment

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Afin d’obtenir la comparaison la plus simple et la plus lisible possible, nous avons restreint le nombre d’indicateurs économiques utilisés : pour chacun des six segments3, nous avons retenu le chiffre d’affaires et le résultat opérationnel, recalculés en base 100 en 2006, et choisi comme indicateur de performance la capitalisation boursière. Tous ces indicateurs sont agrégés, le volume de création/destruction de richesse étant le critère le plus pertinent, et non le pourcentage, trompeur et peu adapté pour analyser l’univers des Small/Mid. Le principe de construction des segments est tout aussi simple : nous utilisons le volume d’activité de 2006 pour générer les six segments dont le nombre de sociétés reste constant sur la période étudiée (2006/2016). Nous avons choisi de transformer ces données en graphique pour illustrer les écarts de tendances. L’échantillon de 2 390 sociétés

Source : Capital IQ / La Financière de l’Echiquier Ce graphique représente l’évolution en base 100 des données agrégés affichées dans le tableau 1. On constate parfaitement la stagnation du chiffre d'affaires, la rechute des marges et la progression continue des valorisations boursières : Le segment des Nano

Source : Capital IQ / La Financière de l’Echiquier Ce graphique est à relativiser au regard des montants en jeu. Il illustre toutefois plutôt bien la dynamique de l'univers des Nano. Le tableau qui suit présente l’évolution des Nano entre 2006 et 2016 : Nano Micro Small Mid Nano 68% 21% 10% 1%

3 Cf. méthodologie page XX

60708090

100110120130140

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Nano Micro Small Mid

Nano 68% 21% 10% 1%

Although the data in the chart should be viewed in perspective, given the capital amounts in play, it nonetheless illustrates the dynamic momentum in the nano caps investment universe. The table showing changes in this segment from 2006 - 2016 explains the sharp growth in aggregated EBITDA which comes from the 32% of nano caps which were promoted either to the micro caps segment (21%), or joined the small caps (10%), or midcaps segments (1%) during 2006 - 2016.

CA ROC Market cap


CA ROC Market cap

5. In order to achieve the simplest most legible comparison, we restricted the number of economic indicators used. For each of the six segments (see methodology page 71), we used sales and EBITDA, recalculated on a 100 base in 2006 and selected market cap as a performance indicator. All of these indicators are aggregated, wealth creation/destruction being the most pertinent criteria, rather than percentage, which is misleading and ill-adapted to analysing the small & midcap investment universe. The principle used for segment construction is equally simple. We used 2006 sales to generate the six segments with a constant number of companies over the 2006 - 2016 review period.



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2006-2016 economic indicators: micro caps segment

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La forte croissance du résultat opérationnel agrégé provient des 32% de Nano devenues, entre 2006 et 2016, soit des Micro pour 21% d’entre elles, soit des Small pour 10% d’entre elles, soit des Mid (1%). Le segment des Micro

Source : Capital IQ / La Financière de l’Echiquier On constate une évolution plus synchronisée des sociétés de ce segment en termes de chiffre d’affaires et de résultat opérationnel. Ce segment est encore très hétérogène, même si la maturité des sociétés qui le compose est naturellement plus importante qu'au sein du segment Nano. Nano Micro Small Mid Micro 30% 36% 33% 2% Ce sont ces 36% de sociétés, devenues des Small (33%) ou des Mid (2%) qui sont à l’origine de cette croissance, avec une progression pour ce segment de 120% de l’activité agrégée en l’espace de 10 ans. Remarquons également que la capitalisation n’a pas connu une telle performance, ce qui signifie que les multiples de valorisation n’ont pas augmenté pour ce segment entre 2006 et 2016. Le segment des Small

Source : Capital IQ / La Financière de l’Echiquier Il est intéressant de constater que plus la taille des entreprises augmente, plus les évolutions sont homogènes. Ce phénomène est visible dans le cas des Small, avec une performance assez corrélée des 2 agrégats retenus. Concernant la valorisation, on constate que la capitalisation boursière a progressé depuis 2013 plus rapidement que le résultat opérationnel, traduisant une augmentation/rattrapage des multiples de VE/ROC par rapport au pic de 2007 pour ce segment. Nano Micro Small Mid Large

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Nano Micro Small Mid

Micro 30% 36% 33% 2%

The data demonstrates more harmonious growth among companies within the micro segment in terms of sales and EBITDA. Growth in this segment nonetheless remains mixed, even though the companies are logically more mature than in the nano caps segment.

Growth is attributable to the 36% of companies which were promoted to the small caps (33%) or midcaps segments (2%), with an aggregated 10-year increase of 120%. It should also be noted that market cap has not increased at the same pace, meaning that valuation multiples did not increase in this segment from 2006 - 2016.

2006-2016 economic indicators: small caps segment

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La forte croissance du résultat opérationnel agrégé provient des 32% de Nano devenues, entre 2006 et 2016, soit des Micro pour 21% d’entre elles, soit des Small pour 10% d’entre elles, soit des Mid (1%). Le segment des Micro

Source : Capital IQ / La Financière de l’Echiquier On constate une évolution plus synchronisée des sociétés de ce segment en termes de chiffre d’affaires et de résultat opérationnel. Ce segment est encore très hétérogène, même si la maturité des sociétés qui le compose est naturellement plus importante qu'au sein du segment Nano. Nano Micro Small Mid Micro 30% 36% 33% 2% Ce sont ces 36% de sociétés, devenues des Small (33%) ou des Mid (2%) qui sont à l’origine de cette croissance, avec une progression pour ce segment de 120% de l’activité agrégée en l’espace de 10 ans. Remarquons également que la capitalisation n’a pas connu une telle performance, ce qui signifie que les multiples de valorisation n’ont pas augmenté pour ce segment entre 2006 et 2016. Le segment des Small

Source : Capital IQ / La Financière de l’Echiquier Il est intéressant de constater que plus la taille des entreprises augmente, plus les évolutions sont homogènes. Ce phénomène est visible dans le cas des Small, avec une performance assez corrélée des 2 agrégats retenus. Concernant la valorisation, on constate que la capitalisation boursière a progressé depuis 2013 plus rapidement que le résultat opérationnel, traduisant une augmentation/rattrapage des multiples de VE/ROC par rapport au pic de 2007 pour ce segment. Nano Micro Small Mid Large

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Nano Micro Small Mid Large

Small 8% 13% 53% 25% 1%

Growth was more uniform among companies with heavier market caps. This phenomenon is discernible among small caps, which reflect a relatively correlated performance among the 2 aggregated groups observed. In terms of valuation, a more rapid increase in market cap than in EBITDA can be observed since 2013. reflecting EV/ROC multiples increasing, or bridging the gap, compared to the 2007 peak in this segment.


CA ROC Market cap




CA ROC Market cap


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Performance was driven by a quarter of the companies in this segment, which were main-ly promoted to the midcaps segment, along with several other corporate success stories which became large caps as their market cap surged.

2006-2016 economic indicators: midcaps segment

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Small 8% 13% 53% 25% 1% On notera également que ces performances ont été tirées par un quart des sociétés de ce segment devenues pour l’essentiel des Mid, auxquelles s’ajoutent quelques success stories d’entreprises devenues des Large. Le segment des Mid

Source : Capital IQ / La Financière de l’Echiquier A nouveau, un graphique très homogène révélant la progression des données économiques agrégées des sociétés composant ce segment en 2006. On remarque cependant la très forte progression de la capitalisation agrégée depuis 2011, révélant un renchérissement des multiples de valorisation. Nano Micro Small Mid Large Blue chip Mid 1% 3% 20% 55% 17% 4% 21% des Mid ont été le moteur de cette progression, devenant soit des Large soit des Blue chip. Soulignons également qu'à l'inverse, en 2006, 24% des Mid ont été déclassées vers les segments inférieurs, un phénomène qui démontre l’importance du stock-picking pour tous les segments. Le segment des Large

Source : Capital IQ / La Financière de l’Echiquier La nouvelle segmentation Large que nous avons adoptée 4a réalisé des performances économique et boursière assez proches de celle des Mid. Elles ne pèsent pas suffisamment dans les indices Large car ces valeurs ne représentent que

4 Cf. méthodolgie, page XX

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Nano Micro Small Mid Large Blue chip

Mid 1% 3% 20% 55% 17% 4%

Another uniform chart revealing growth in aggregated economic data among the companies composing this segment in 2006, although the very strong growth in aggregate market cap since 2011 should be noted, reflecting a sharp increase in valuation multiples.The observed growth was driven by 21% of midcaps, which were promoted either to the large caps or blue-chip segments. It should also be highlighted that inversely, since 2006, 24% of midcaps have been relegated to the lower segments, a phenomenon which demonstrates the importance of stock-picking among all market segments. 2006-2016 economic indicators: large caps segment

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Small 8% 13% 53% 25% 1% On notera également que ces performances ont été tirées par un quart des sociétés de ce segment devenues pour l’essentiel des Mid, auxquelles s’ajoutent quelques success stories d’entreprises devenues des Large. Le segment des Mid

Source : Capital IQ / La Financière de l’Echiquier A nouveau, un graphique très homogène révélant la progression des données économiques agrégées des sociétés composant ce segment en 2006. On remarque cependant la très forte progression de la capitalisation agrégée depuis 2011, révélant un renchérissement des multiples de valorisation. Nano Micro Small Mid Large Blue chip Mid 1% 3% 20% 55% 17% 4% 21% des Mid ont été le moteur de cette progression, devenant soit des Large soit des Blue chip. Soulignons également qu'à l'inverse, en 2006, 24% des Mid ont été déclassées vers les segments inférieurs, un phénomène qui démontre l’importance du stock-picking pour tous les segments. Le segment des Large

Source : Capital IQ / La Financière de l’Echiquier La nouvelle segmentation Large que nous avons adoptée 4a réalisé des performances économique et boursière assez proches de celle des Mid. Elles ne pèsent pas suffisamment dans les indices Large car ces valeurs ne représentent que

4 Cf. méthodolgie, page XX

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Micro Small Mid Large Blue chip

Large 1% 4% 24% 34% 38%

The new segmentation that we have adopted6 among large caps reveals relatively

CA ROC Market cap


CA ROC Market cap


6. See methodology, page 71.


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close economic and market performances to midcaps. These stocks do not weigh significantly in the large caps indices however, as they represent only 25% of blue-chip market cap. The data nonetheless proves that these segments can harbour successful growth stocks.

This segment reflects the sharpest swings, with only 34% of companies generating sales of 5 - 10 billion euros in 2006 still producing sales in the same range 10 years later. 28% of companies have regressed to lower listed segments, whereas 38% have proven to be success stories.

Evolution (2006-2016) des indicateurs économiques : le segment des Blue chip

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25% de la capitalisation des Blue chip. Mais ces données prouvent que l’on peut également trouver de belles histoires de croissance au sein de ces segments. Micro Small Mid Large Blue chip Large 1% 4% 24% 34% 38% Le segment Large apparaît comme celui dont l’évolution est la plus marquée, puisque seulement 34% des sociétés réalisant un chiffre d’affaires compris entre 5 et 10 milliards d’euros en 2006 se trouvent toujours, 10 ans après, dans cette fourchette. 28% des sociétés ont régressé vers les segments inférieurs de la cote. Notons enfin et surtout que 38% d’entre elles sont des success stories. Le segment des Blue chip

Source : Capital IQ / La Financière de l’Echiquier Le poids des Blue Chip pèse considérablement sur le marché européen mais il est également, rappelons-le, celui qui génère le plus de commissions pour les sociétés de gestion et de bourse : il représentait en 2016 70% de la capitalisation boursière et des volumes de transaction. Ce segment est aussi en quelque sorte l’arbre qui cache la forêt. Les performances économiques des Blue Chip sont médiocres en terme de chiffre d’affaires, et désastreuses en ce qui concerne le résultat opérationnel. Pour autant, la capitalisation boursière de ce segment a progressé, expliquant une grande partie de l’inflation des multiples de valorisations constatés en agrégé. Précisions également que ces chiffres excluent le secteur bancaire. Mid Large Blue chip Blue chip 1% 9% 90% Synthèse Les chiffres parlent d’eux-mêmes : la hiérarchie des performances économiques coïncide bien avec celle des performances boursières. Les segments Micro, Small et Mid sont les plus dynamiques économiquement et leurs performances boursières suivent, sans pour autant créer de phénomène de bulle sur ces segments. Soulignons également un autre point clé, à l’heure où la gestion passive tend à prendre une place grandissante : le stock-picking est fondamental pour tous les segments de la cote. Les tableaux illustrant leur évolution sur une décennie démontrent que le pourcentage d’entreprises se hissant au segment supérieur est substantiel : il est de l’ordre de 20 à 25% – un chiffre toutefois similaire au nombre de sociétés ayant connu a contrario une phase descendante.

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Mid Large Blue chip

Blue chip 1% 9% 90%

Blue-chips represent a considerable weighting within the European market and also generate higher commissions for the investment management industry, representing 70% of market cap and trading volumes in 2016.

This segment masks the reality of the underlying situation, as blue-chips return mediocre economic performances in terms of sales, and disastrous performances in terms of EBITDA. However, the market cap of this segment has nonetheless increased, accounting for a significant proportion of the observed inflation in aggregated7 valuation multiples.



7. It should also be noted that this data excludes the banking & insurance sector, which is based on a different accounting structure.

CA ROC Market cap


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Summary

The figures clearly reveal that the hierarchy in terms of economic performances coincides with market performances. The micro and small & midcaps segments are the most economically dynamic and their market performances reflect this trend, but without creating a bubble in these segments.

Another key point should also be highlighted, particularly given that passive investment management is becoming increasingly prevalent. Stock-picking is fundamental for all of the market segments. The tables illustrating trends over a decade demonstrate that a significant percentage of companies qualify for a higher segment, i.e. some 20 - 25%, while a similar number of companies are relegated to a lower segment.

Lastly, an analysis on a like-for-like basis reveals the significance of the number of listed companies in Europe and therefore demonstrates the key importance of IPO-led dynamics. Without the introduction of new listed companies, this mechanism rapidly stalls, generally within less than two decades on a like-for-like basis, with stagnation caused by the segments at the base of the pyramid drying-up. The first decade could be considered to close at the end of 2017, with 2007 representing the previous peak in the market.


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Economic performances are in-line with market performances, with small & midcaps posting outstandingly dynamic returns over the past decade

Observations in the small & midcap segments demonstrate the fundamental importance of stock-picking in this investment universe

Trends among companies on a like-for-like basis over the review period reveal the key importance of IPO-led dynamism for the entire market landscape

Stock-market listing is a key driver for companies, with 30% of companies observed in 2006 qualifying for a higher segment

KEY

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+70%

Aggregate 2006 - 2016 sales growth among the 680 small caps in our sample


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III. EUROPEAN MARKET STRUCTURE: THE SMALL CAP SEGMENT IS CONTRACTING

After observing the market & economic outperformances staged by the small & midcap segments vs large caps over the past 10 years, we shall now analyse the structure of the European market. How has it changed in terms of number and quality?

Further to this analysis focusing on changes to the relative segment weightings since 2006, this year’s study also endeavours to cover the impact of the MIFID 2 European directive, which comes into force in January 2018, on the business models of financial industry players.

Analysis of the changes in the number of listed European companies 2006 - 2016

The chart below represents changes observed in the number of listed companies by market cap segment over the review period (commercial and investment companies only) based on the following segmentation:


ME < 50 50 / 150 150 / 1 000 1 000 / 5 000 5 000 / 10 000 > 10 000

What does the chart demonstrate? Firstly, the number of listed European companies peaked in 2007 at 6,349. The low point recorded in 2013 was 5,395 companies, i.e. 15% fewer. Since 2013, the number of listed European companies has increased once again, by 2% only in 2012 - 2016 and remains 13% below the 2007 peak.

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Nano Micro Small Mid Large Blue chip M€ < 50 50 / 150 150 / 1 000 1 000 / 5 000 5 000 /10 000 > 10 000

Le pic du nombre de sociétés européennes cotées est atteint en 2007 avec 6 349 entreprises. Le plus bas survient en 2013 avec 5 395 sociétés, soit une baisse de 15%. Depuis 2013, le nombre de sociétés européennes cotées augmente à nouveau ; il progresse seulement de 2% entre 2012 et 2016 et reste inférieur de 13% au pic de 2007. Cette baisse de 13% entre le pic de 2007 et le niveau de 2016 masque une évolution contrastée des différents segments : En nombre Nano Micro Small Mid Large Blue Chip Variation 2007/2016

-15% -29% -16% 8% 32% 11%

Les trois plus petits segments de la cote – Nano, Micro et Small – diminuent, alors que les trois plus importants progressent. Depuis le plus bas de 2013, les segments Nano et Micro se réduisent respectivement de -9% et -2%, alors que le segment Small se redresse (+16%), en ligne avec les Mid (+14%), les Large (+23%) et les Blue Chip (+15%). De manière intentionnelle, nous n’avons pas retenu 2008 comme référence, la forte chute des cours de bourse ayant généré cette année-là des mouvements artificiels entre les segments. Observons à présent le poids des différents segments et leur évolution entre 2006 et 2016 :

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Blue chip 237 229 125 164 191 168 191 222 241 262 255Large 169 153 104 127 129 120 136 164 169 193 202Mid 707 703 459 562 620 550 588 663 697 740 758Small 1 503 1 549 1 114 1 183 1 191 1 109 1 103 1 128 1 160 1 257 1 303Micro 1 126 1 214 988 989 969 928 871 879 908 873 859Nano 2 280 2 501 3 391 2 956 2 737 2 831 2 574 2 339 2 303 2 194 2 121

01 0002 0003 0004 0005 0006 0007 000


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The 13% decline from the 2007 peak to the 2016 level masks contrasting variations among the different segments however:

Number Nano Micro Small Mid Large Blue chip

Variation 2007 - 2016 -15% -29% -16% 8% 32% 11%

The three smallest segments, nano caps, micro & small caps, have contracted, whereas the three largest have increased. From the 2013 lows, the nano caps and micro segments contracted (-9% and -2% respectively) whereas the small cap segment increased (+16%), along with midcaps (+14%), large caps (+23%) and blue-chips (+15%)8.

Let us now examine the variations in weightings of the different segments from 2006 - 2016.

2006-2016 segment weightings

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Blue chip 3.9% 3.6% 2.0% 2.7% 3.3% 2.9% 3.5% 4.1% 4.4% 4.7% 4.6%Large 2.8% 2.4% 1.7% 2.1% 2.2% 2.1% 2.5% 3.0% 3.1% 3.5% 3.7%Mid 11.7% 11.1% 7.4% 9.4% 10.6% 9.6% 10.8% 12.3% 12.7% 13.4% 13.8%Small 25.0% 24.4% 18.0% 19.8% 20.4% 19.4% 20.2% 20.9% 21.2% 22.8% 23.7%Micro 18.7% 19.1% 16.0% 16.5% 16.6% 16.3% 15.9% 16.3% 16.6% 15.8% 15.6%Nano 37.9% 39.4% 54.9% 49.4% 46.9% 49.6% 47.1% 43.4% 42.0% 39.8% 38.6%

0%10%20%30%40%50%60%70%80%90%

100%


Number Nano Micro Small Mid Large Blue chip

Avg. weighting. 2006/2016

44.4% 16.7% 21.4% 11.2% 2.6% 3.6%

The smaller caps segments (nano caps, micro & small caps) comprise more than 80% of listed European companies, whereas the larger companies (large caps & blue-chips) represent 6%.


8. We have intentionally omitted 2008 as a reference, as the sharp market movements during the year generated artificial swings between the segments.

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Our observations

• The smallest stocks in the market represent almost 80% of listed European companies

• The number of listed European companies has fallen 13% since the 2007 peak

• The smaller stock segments have contracted, whereas the larger segments (large caps, blue-chips) have increased significantly (+32% for large caps, +11% for blue-chips)

2006 - 2016 market cap weighting analysis

Market cap is the key indicator used to determine the different segments in our investment universe. The table below details the weighting for each aggregated market cap segment over the past decade.

2006-2016 segment weightings


0%10%20%30%40%50%60%70%80%90%

100%


∑ market cap Nano Micro Small Mid Large Blue chip

Avg. weighting 2006/2016

0.5% 0.9% 5.4% 14.8% 10.8% 67.7%

The results of the analysis based on the sum of market caps are almost the exact inverse of the analysis by number. Although the lower segments (nano caps, micro & small caps) comprise 80% of listed companies, they represent only 7% of market cap.


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Analysis of variations in trading volumes in the different segments

The structure of listed European companies may also be analysed in terms of aggregated trading volumes, which represent the total transaction amount in stocks over the 10 years of the review period, aggregated by segment.

2006-2016 segments weightings


0%10%20%30%40%50%60%70%80%90%

100%


∑ trading volumes Nano Micro Small Mid Large Blue chip

Aggregated volume weighting

0.6% 0.5% 4.1% 15.8% 13.7% 65.3%

The analysis of trading volumes corroborates the findings of the market cap analysis. The three higher segments (midcaps, large caps, blue-chips) comprise on average 95% of volumes, for 93% of the market cap, whereas they represent 17% of the total number of companies.

Inversely, the three lower segments (nano, micro & small caps) i.e. 83% of listed companies comprise only 5% of volumes and represent 6.8% of total market cap.

The sharp variation in the weighting of the smallest stocks vs the other segments since 2011 should also be noted, excluding 2008 data which was clouded by sharp swings in valuations during the year. The smallest stocks have collapsed from 5.5-6% in 2006/2007 to 2.3% in 2015/2016. In absolute value, the swing results from a 50% increase in volumes for the large cap & blue-chip segments which hit a low in 2009, whereas volumes in the three lower segments fell by 25%.

=+95%


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Nano Micro Small Sub totalSmall

Mid Large Blue Chip Sub totalLarge

2009 44 451 32 860 336 376 413 687 1 295 435 1 114 241 4 749 859 5 864 100 2010 21 717 50 905 319 934 392 556 1 182 161 1 042 843 5 735 265 6 778 108

2015 34 484 33 220 315 491 383 195 1 684 804 1 545 607 8 148 026 9 693 633 2016 22 394 35 370 252 230 309 995 1 499 406 1 488 968 7 504 448 8 993 415

Var% 2009/16

-49,6% 7,6% -25,0% -25,1% 15,7% 33,6% 58,0% 53,4%

Source: Capital IQ / La Financière de l’Échiquier

Analysis of the impact on business models in the financial industry

A company is listed on the stock market for four main reasons. An IPO is organised to raise funds and to enable shareholders and founders to sell part of their holdings and also to simplify acquisitions and divestment at a determined price and lastly, to improve visibility and credibility with regard to other stakeholders such as clients, suppliers employees and shareholder

The main protagonists involved in the financial markets, namely stock exchanges, brokers and investment management companies, all share a common business model based on traded volumes. This analysis focuses on the role of brokers handling intermediation and on asset management companies, rather than on the specific situation of stock exchange infrastructures such as Euronext, the London Stock Exchange and Deutsche Börse.

Until 2016, brokers provided two types of services, namely order execution and publishing research on listed companies. Each time an investment management company placed an order, the broking house charged an average percentage commission of 1 - 1.5‰ in payment for the provision of both services.

Given that this business model is based on trading volumes, the smaller cap segments suffer from a double handicap, as these segments include a large number of companies which trade in very thin volumes. This factor poses an economic problem for the brokers, as illustrated by the two following tables.


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Median annual volumes by segment (2006-2016)

M€ Nano Micro Small Mid Large Blue chip 2006 6.0 30.3 141.7 1 491.7 7 611.8 20 169.9 2007 5.7 31.5 181.1 2 300.1 9 036.8 28 236.6 2008 3.5 26.9 216.2 2 988.9 12 213.0 34 331.4 2009 2.1 15.6 88.3 1 277.5 5 880.1 18 316.4 2010 2.3 15.8 91.0 1 210.9 5 874.2 18 706.0 2011 2.5 18.3 115.3 1 421.5 6 528.0 21 007.1 2012 2.0 15.0 78.4 1 207.9 5 845.1 17 750.8 2013 2.6 15.7 85.9 996.6 5 277.8 16 411.1 2014 2.9 18.5 109.2 1 039.5 5 460.8 18 586.3 2015 3.1 17.4 97.4 1 103.0 6 473.4 21 316.0 2016 3.0 15.4 80.7 1 021.0 6 248.1 19 162.1

Median annual volumes by segment (2006-2016)

K€ Nano Micro Small Mid Large Blue chip Commission rate 9

0.015% 0.015% 0.015% 0.010% 0.010% 0.010%

2006 1.8 9.1 42.5 298.3 1 522.4 4 034.0 2007 1.7 9.4 54.3 460.0 1 807.4 5 647.3 2008 1.0 8.1 64.8 597.8 2 442.6 6 866.3 2009 0.6 4.7 26.5 255.5 1 176.0 3 663.3 2010 0.7 4.7 27.3 242.2 1 174.8 3 741.2 2011 0.8 5.5 34.6 284.3 1 305.6 4 201.4 2012 0.6 4.5 23.5 241.6 1 169.0 3 550.2 2013 0.8 4.7 25.8 199.3 1 055.6 3 282.2 2014 0.9 5.6 32.8 207.9 1 092.2 3 717.3 2015 0.9 5.2 29.2 220.6 1 294.7 4 263.2 2016 0.9 4.6 24.2 204.2 1 249.6 3 832.4

Average 1.0 6.0 35.0 292.0 1 390.0 4 254.4

What do these tables demonstrate? Over the 2006/2016 review period a nano cap generated on average 1,000 euros in commission fees over one year, compared to 4.25 million euros for a blue-chip. For a midcap, commissions were around 300,000 euros, which is a low fee for an industry with high fixed costs. It should also be highlighted that a financial analyst covers a maximum of 5 - 20 companies depending on their complexity. Therefore, by covering 20 small caps, the analyst is involved in a market worth around 700,000 euros (20 x 35,000 euros) compared to some 7 million euros if the same analyst covers 5 large caps. Brokers have therefore no immediate economic interest in covering small caps.

Investment management companies’ business models on the other hand are based essentially on an annual percentage remuneration of 0.3 - 2.5% depending on a variety of parameters, including the source of the funds, investment type and the investment universe covered. Over the past decade, the average rate has been 1.5%.9. Commission rate determined taking buy and sell orders into account.

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Two operational constraints determine the strategies adopted by investment management companies..

Firstly, liquidity, as the size of the fund (in million euros) is limited by the liquidity of the companies used as investments. As a fund expands, its investment universe is reduced to the most liquid companies. Furthermore, in order to avoid impacting the market price of a stock too heavily, order execution cannot exceed 30% of the daily traded volume.

The second constraint involves coverage limitations. As is the case with sell-side analysts, asset managers can only reasonably cover a limited number of companies. In practice, an actively-managed portfolio focuses on forty stocks or so.

The table below illustrates the constraints weighing on investment management companies:

Therefore a fund specialising in the micro investment universe cannot exceed 50 million euros, as liquidity would become unmanageable beyond this threshold, given that 76 days’ trading would be required to liquidate a fund of around 75 million euros. However, the profitability of a fund is directly linked to its size. 50 million euros x 1.5% = 750,000 euros of revenues for an investment management company. For a mid or large cap fund, 1,000 million euros can be managed without any liquidity stress on a similar fixed-costs basis, i.e. 1,000 million euros x 1.5% = 15 million euros of annual revenues for the investment management company.

Number of positions 40 40 40 40 40 40 40 Fund size M€ 30 50 75 100 200 300 400 Position size M€ 0,8 1,3 1,9 2,5 5,0 7,5 10,0

% max vol./day 30% 30% 30% 30% 30% 30% 30%

SSegment Average position time-to-construction / time-to-liquidationNano 3 189 314 471 629 1257 1886 2514 Micro 20 31 51 76 102 204 306 408 Small 117 5 9 13 17 35 52 70 Mid 1 460 0 1 1 1 3 4 6 Large 6 950 0 0 0 0 1 1 1 Blue Chip 21 272 0 0 0 0 0 0 0

Annual median volume

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26

Summary

The three smallest market segments represent the vast majority of listed compa-nies (80%) but weigh only 6.8% of total market cap and count for less than 5% of trading volumes. This data can be considered structural given its persistence over the 10-year review period.

These factors imply economic constraints for the two main protagonists in the finan-cial industry, i.e. brokers and investment management companies. From an economic point of view, it is in the interest of both brokers and investment managers to focus on the larger cap market segments.

Several questions arise from these findings. Does the financial market need this gal-axy of listed nano, micro & small cap companies? What do these companies contribute to the broader market landscape, given that their coverage represents an economic cost for the protagonists who manage these means of financing? Will their decline, observed since 2006, remain without impact?

Company flow analysis 2006 - 2016

The aim of our 2006 - 2016 company flow analysis is to understand how the number of listed companies has declined from 6,022 in 2006 to 5,498 in 2016. Above all, how can we account for certain small cap segments drying-up, whereas the midcap, large caps & blue-chip segments are growing?

Six flow categories need to be taken into consideration, classified into four main groups:

- initial public offerings (IPOs);

- de-listings, primarily on account of three factors, i.e. a decision by the majority shareholder, a takeover bid launched by a non-majority holder or bankruptcy filing, which is infrequent and generally difficult to quantify;

- inflow corresponding to listed companies in 2006 which integrate the segment studied in 2016. We distinguish on the one hand, “Inflow >” signifying companies promoted from a lower segment and which have seen their market cap increase (success stories), and on the other hand, “Inflow <” regarding struggling companies which have been relegated from a higher segment;

- outflow corresponds to listed companies in 2006 which have exited their original segment and switched to another segment in 2016. Once again, we distinguish “Outflow >” which signifies companies promoted to a higher segment, and on the other hand, “Outflow <” for companies relegated to a lower segment.

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33


2006 2280 1126 1503 707 169 237

IPOs 44% 31% 32% 31% 24% 11% De-listings -53% -46% -43% -27% -27% -15% Net -9% -15% -11% 4% -3% -3%

Inflow 13% 26% 25% 36% 69% 26% > 57% 72% 82% 80% 26% < 100% 43% 28% 18% 20% Outflow -11% -35% -28% -32% -46% -15% > 100% 50% 49% 47% 50% < 50% 29% 53% 50% 100% Net 2% -9% -3% 4% 22% 11% 2016 93% 76% 87% 107% 120% 108%

The table below summarises flows from 2006 - 2016.

Large caps analysis.

IPOs / de-listings

Out of 169 listed large caps on 31 December 2006, IPOs launched between 2007 and 2016 added 24% to the segment (+41 companies). On the other hand, de-listings between 2007 and 2016 represented 27% of the 169 large caps (-46 companies). IPOs therefore failed to adequately replace de-listings, leading to a net outflow of -3% (5 companies). This was the case across all segments, with the exception of the midcaps segment which experienced net positive flow (+25 companies). On a consolidated basis, net flow was negative (-524 companies) and corresponded to a 9% drop in listed companies from 2006 - 2016, or -13% from the 2007 peak until 2016.

Inflow

116 companies were added to the 169 large caps listed on 31 December 2006 (+69%) by transfer from other segments. Of these 116 companies, 80% were success stories promoted from lower segments. On the other hand, 20% were relegated from the higher blue-chips segment in 2006 to the large caps segment, with a market cap of below 10 billion euros, on 31 December 2016.

Outflow

Of the 169 large caps listed on 31 December 2006, 46% (78 companies) exited the segment. 50% were upgraded to blue-chips, while 50% were relegated into the lower segments.


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This analysis provides three key points:

- IPOs fail to adequately cover market de-listings. Representing an annual average of 6% for the market as a whole over the 2006/2016 review period, de-listing should be considered a structural factor;

- outflow resulting from companies regressing towards lower segments is also a structural factor. Relegation was triggered by various phenomena such as technological migration, management errors and heightened competition.

- the increase in the number of companies in the three higher segments stems from the reservoir provided by the lower segments. If this phenomenon continues, inflows > will logically diminish over the course of the next ten years, leading inevitably to stagnation, followed by the contraction of the large caps & blue-chips segments.

The financial market business model is therefore based exclusively on the large caps & blue-chips higher market segments. Any durable contraction in these segments would have a major impact on the financial industry and on the broader systems which depend on the world of finance, notably retirement pensions. This phenomenon would also damage European economic dynamism as a whole and therefore weigh on employment market dynamics.


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MIFID 2 the dawn of a new era?

We have demonstrated that the financial market business model depends chiefly on less than 10% of listed companies (large caps) and also that the increase in the number of large caps depends on the lower segments, as the number of IPOs among large caps does not fully offset de-listings. Mid & small caps therefore constitute a reservoir for large caps, while the current large caps finance the entire system.

These rules will be modified on 3 January 2018 with the enforcement of the MIFID 210 European directive, which is a regulation designed to improve financial market transparency. Although its impact remains uncertain for the time being, some of the possible consequences can be predicted covering the major issues at stake for the broader European market landscape and the smallest stocks in particular.

Forthcoming changes

Until now, an investment management company places orders and remunerates a global service including order execution and research services, i.e. broker reports, access to analysts and the organisation of meetings with the management teams of listed companies. We estimate the average level of commissions to be around 0.08% for active investment management in Europe over the past ten years. This approximate estimation is based on market feedback, as no specific statistics are available. We should also specify that commissions charged to funds are paid by investors.

Grievances voiced by consumer lobby groups, mainly in the US and the UK, against the European authorities focus essentially on two points:

- investment management company broker selection criteria,

- equity research being a product rather than a service which depends, like order execution, on flows and must therefore remain independent from portfolio rotation.

These reflections have led to the introduction of the MIFID 2 directive which will impose an unbundling of order execution and research. Two major changes arise from this distinction in terms of the way in which the financial markets business model functions.

10. A key point of the Markets in financial instruments Directive (MIFID) 2, includes the introduction of a new category of organised trading facility (OTF), governing algorithmic and high-frequency trading and over-the-counter trading, and also covers the creation of a smaller growth-company market, as an extension of the transparency and investor-protection enhancement measures concerning incitation and best-execution obligations, etc.


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36

Investment management companies are obliged to respect best-selection procedures for brokers handling their orders, with quality of execution considered the key determining factor in broker selection. This service will be remunerated at around 0.05%. Until now, the remuneration price for research services was adjusted on an ex-post basis, whereas it will now be fixed on an annualised ex-ante basis.

These changes have a dual impact:

- execution flows will become increasingly concentrated towards global or regional players, which are capable of investing heavily in increasingly complex execution technologies covering all sources of liquidity;;

- a probable significant deflationary impact on fees charged by brokers to the detriment of remuneration for research service provision.

The impact will be even greater on the small caps environment, as traded volumes in these segments are insufficient to remunerate specialist broking houses, which are often locally-based.

The new regulations will no longer make it possible, under the best execution principle, for investment management companies to remunerate brokers for small caps research services via orders in large caps, which is the current practice. There is therefore a risk that large cap flows (85% of the total) will move away from local brokers, whereas the small cap flows for which they will qualify will undoubtedly be insufficient to maintain an execution and research service. These local brokers are key players however, as they ensure a flow of IPOs among the smallest cap segments, some of which will become large caps ten or twenty years later.

What will happen?

It is hard to be certain at this stage regarding the consequences for brokers, or for research, which will undoubtedly be the main victim of the new regulations. It is highly likely however that we shall witness three phenomena over the next few years as a result:

1. a concentration of flows towards a restricted number of global players, led by the major US banks which are likely to be the biggest gainers under this reform,


31

37

2. a global reduction in research published, and therefore a reduction in the diversity of available information, as the deflationary phenomenon underway over the past fifteen years accelerates sharply. The recent decision announced by Union Asset Management, the third-largest German investment management company in terms of size, with 310 billion euros of AUM, to drastically cut-back the number of sell-side research providers is likely to be followed by other players over the next few months.

3. local brokerage business models will be jeopardised with the probable disappearance of certain local players in Europe.

What is the future of the small caps investment universe?

Although the future may look bleak for the small caps universe, one specific case has provided an interesting lead. The Swedish market has bucked the trend in Europe, recording a 74% increase in listed small caps over the past ten years.


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The lower market segments, including nano, micro & small caps, repre-sent 80% of the market, but only 7% of the market cap, whereas the large cap & blue-chip segments represent 6% of listed companies and account for 80% of total market cap

Smaller caps continue to decline in terms of weighting and number, which is jeopardising the future of the broader market landscape

3 After a marginal improvement over the past two years, the number of IPOs declined in 2016 and was insufficient to offset market de-listings

5 MIFID 2 should have a substantial impact on brokers and research and also on the small caps investment universe

KEY

1

2

3

4

125%

of the increase in the number of large caps over 10 years comes from the mid cap segment


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IV. COUNTRY FOCUS

Like last year, we have carried out a country by country analysis in order to examine the various local trends at play and, where applicable, detect the best practices aiming to enhance national systems. We have also introduced some new countries this year. Besides France, the UK, Germany, Italy, Spain and Belgium, we have this year also undertaken an analysis of the Benelux countries, Scandinavia, Switzerland / Austria and Spain / Portugal, aggregating their data into combined units.

Let us begin with an overview in order to compare the respective weightings of the companies from the European countries studied

Number of companies in Europe

UK Germany France Italy Benelux ScandinaviaSwitzerland / Austria

Spain / Portugal

2006 29% 13% 13% 5% 6% 15% 6% 4%

2007 28% 13% 13% 5% 6% 16% 6% 3%

2012 25% 14% 13% 5% 7% 16% 7% 4%

2016 25% 12% 13% 6% 7% 20% 6% 4%

∑ Market cap weighting in Europe


Spain / Portugal

2006 29% 12% 15% 6% 10% 9% 10% 7%

2007 25% 14% 16% 6% 10% 9% 10% 8%

2012 30% 13% 14% 4% 10% 10% 12% 5%

2016 27% 14% 14% 4% 11% 11% 13% 5%

∑ Volume weighting in Europe


Spain / Portugal

2006 36% 12% 10% 6% 8% 10% 9% 9%

2007 35% 11% 10% 6% 7% 9% 9% 10%

2012 32% 13% 11% 6% 7% 9% 11% 9%

2016 36% 12% 11% 6% 9% 9% 11% 6%

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FRANCEERODING AT AN INCREASING PACE

Variation in the number of companies (2006-2016)

24

***

FOCUS PAR PAYS (une page par pays)

Une vue d’ensemble permet de comparer les poids respectifs des entreprises des pays européens étudiés.

Nombre d’entreprises│Europe

Royaume-Uni

Allemagne

France Italie Benelux Scandinavie

Suisse / Autriche

Espagne / Portugal

2006 29% 13% 13% 5% 6% 15% 6% 4% 2007 28% 13% 13% 5% 6% 16% 6% 3% 2012 25% 14% 13% 5% 7% 16% 7% 4% 2016 25% 12% 13% 6% 7% 20% 6% 4%

Poids ∑ capitalisations│Europe

Royaume

-Uni Allemagne

France Italie Benelux Scandinavie

Suisse / Autriche

Espagne / Portugal

2006 29% 12% 15% 6% 10% 9% 10% 7% 2007 25% 14% 16% 6% 10% 9% 10% 8% 2012 30% 13% 14% 4% 10% 10% 12% 5% 2016 27% 14% 14% 4% 11% 11% 13% 5%

Poids ∑ volumes│Europe

Royaume

- Uni Allemagne France Italie Benelux Scandina

vie Suisse / Autriche

Espagne / Portugal

2006 36% 12% 10% 6% 8% 10% 9% 9% 2007 35% 11% 10% 6% 7% 9% 9% 10% 2012 32% 13% 11% 6% 7% 9% 11% 9% 2016 36% 12% 11% 6% 9% 9% 11% 6%

France L’érosion des Micro accentuée, les Mid en progression. Attention aux valorisations

Var. en nombre Nano Micro Small Mid Large Blue chip Total 2007/2016 -21% -35% -9% 9% 9% 26% -16%

600

650

700

750

800

850

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Var. Number Nano Micro Small Mid Large Blue chip Total

2007/2016 -21% -35% -9% 9% 9% 26% -16%

The number of French listed companies fell by 16% between the 2007 peak and 2016. This trend is in-lie with the European average, which has hit the small caps segment particularly hard, resulting in a substantial contraction, whereas midcaps and large caps on the other hand have increased significantly. The disconcerting erosion in the micro segment referred to earlier has also been amplified locally.

French companies close-up

Weight by number Nano Micro Small Mid Large Blue chip

10-year average 45.1% 17,7% 20.7% 9.0% 2.9% 4.5%

2007 41.3% 20.7% 22.6% 8.4% 2.8% 4.2%

2016 38.9% 16.0% 24.5% 10.8% 3.6% 6.3%

∑ Market cap weighting Nano Micro Small Mid Large Blue chip

10-year average 0.4% 0.8% 4.4% 11.5% 10.6% 72.2%

2007 0.4% 0.9% 4.6% 9.9% 9.6% 74.6%

2016 0.3% 0.5% 4.0% 10.1% 9.0% 76.1%

∑ Weighting volumes Nano Micro Small Mid Large Blue chip

10-year average 0.2% 0.5% 2.5% 12.0% 11.3% 73.6%

2007 0.2% 0.4% 2.7% 9.3% 9.6% 77,9%

2016 0.2% 0.3% 1.8% 9.6% 9.0% 79.1%

IV. COUNTRY FOCUS

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The erosion of the smallest stocks has been confirmed: in 2016, the small caps segment represented 79.3% of the number of listed companies in France (vs 84.6% in 2007), 4.8% of the aggregate market cap (vs 5.9% in 2007) and 2.3% of trading volumes (vs 3.2% in 2007).

The number of midcaps on the other hand increased by 9% between 2007 and 2016 and now represents 10.8% of French listed companies (vs 8.4%). Their decrease in terms of market cap and in volume is primarily due to significant growth in the large caps segments, with median market cap average weightings remaining stable at around 2.2/2.4 billion euros.

Although the large caps segments have gained ground, blue-chips have increased at a faster pace, in both relative and absolute terms.

French market IPOs/de-listings balance (2006-2016)

Nano Micro Small Mid Large Blue chip Total

IPOs 113 52 22 15 3 1 206

De-listings 161 54 61 10 2 5 293

Balance -48 -2 -39 5 1 -4 -87

The increase in the large cap segments was exclusively attributable to the promotion of companies from the lower market segments. Within this reservoir of stocks, the large cap segments appear to be in decline.

The negative balance between new listings and de-listings in the small caps segment is very clear, whereas the mid & large caps segments on the other hand are more evenly balanced.

Economic performances: a miniature version of Europe

To simplify the approach, for all countries, we have divided the investment universe into 3 major market categories.

NANO/MICRO/SMALL Collectively referred to as Small

MID LARGE/BLUE CHIPCollectively referred to as Large

IV. COUNTRY FOCUS

26

- Nano/Micro/Small que nous appellerons « Small » - Mid - Large/Blue Chip que nous appellerons « Large » (ou à placer dans la partie méthodo ?)

Les données agrégées de l’échantillon

Les Small

Les Mid

74%

14%

12% Small

Mid

Large

60708090

100110120130140

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


507090

110130150170190210

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


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42

Sample data

26



Les Small

Les Mid

74%

14%

12% Small

Mid

Large

60708090

100110120130140

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


507090

110130150170190210

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


26



Les Small

Les Mid

74%

14%

12% Small

Mid

Large

60708090

100110120130140

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


507090

110130150170190210

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


27

Les Large

Synthèse performance économique - France L’approche consolidée n’est pas enthousiasmante : le volume d’activité stagne, les résultats sont sous pressions et les valorisations augmentent. Dans le détail : les Small performent économiquement et la valorisation a progressé moins vite (sans risque de bulle). La performance économique des Mid a également progressé mais la valorisation a progressé plus rapidement et pourrait devenir un sujet d’inquiétude. La performance économique des Large en revanche stagne depuis 2011, alors que les valorisations sont entrées dans une zone d’inconfort en 2015.

Royaume-Uni et Irlande : des Nanos en chute libre et les premiers effets du Brexit


406080

100120140160180200

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


1200

1300

1400

1500

1600

1700

1800

1900

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

27

Les Large




406080

100120140160180200

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


1200

1300

1400

1500

1600

1700

1800

1900

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

CA ROC Market cap

CA ROC Market cap

CA ROC Market cap

CA ROC Market cap

IV. COUNTRY FOCUS

Aggregate

Small

Mid

Large

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43

We can draw several conclusions for the above charts. Firstly, the consolidated approach does not incite enthusiasm. Sales volumes have stagnated, earnings have come under pressure and valuations have increased.

In greater detail, small caps have performed economically and valuations have increased less rapidly without risk of a bubble forming. The economic performance of midcaps has also increased although valuations have increased more rapidly and could become a factor for concern. Economic performances among large caps, on the other hand, have been stagnating since 2011, whereas valuations have reached demanding levels since 2015.

IV. COUNTRY FOCUS

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UK & IRELANDTHE COLLAPSE IN NANOS AND THE FIRST BREXIT EFFECTS


27

Les Large




406080

100120140160180200

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


1200

1300

1400

1500

1600

1700

1800

1900

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


2007/2016 -40% -25% -14% 8% 55% 20% -24%

The sharp decline in the number of listed companies, by around 24% between the 2007 peak and 2016, was due to the collapse in the number of small caps. The sharp contraction in the smallest stocks in the market has been accompanied by an increase in the number of midcaps and an even greater increase in the large cap segments.

UK & Irish companies close-up


10-year average 47,6% 14.8% 19.5% 11.5% 2.9% 3.7%

2007 48.1% 16.3% 20.5% 10.1% 2.1% 2.9%

2016 37,8% 16.0% 23.1% 14.3% 4.3% 4.5%


10-year average 0.4% 0.7% 4.5% 13.9% 10.3% 70.1%

2007 0.5% 0.9% 5.1% 13.9% 10.1% 69.5%

2016 0.3% 0.6% 4.1% 13.8% 12.2% 69.1%


10-year average 1.3% 0.4% 4.2% 16.5% 16.6% 61.1%

2007 0.2% 0.4% 8.9% 19.3% 14.9% 56.3%

2016 0.1% 0.2% 1.9% 14.2% 14.2% 69.4%

IV. COUNTRY FOCUS

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45

The small caps segment represented 76.9% of the number of listed companies in the UK & Ireland in 2016 (vs 84.9% in 2007), 4.9% of the aggregate market cap (vs 6.5% in 2007) and 2.2% of trading volumes (vs 9.5% in 2007).

Midcaps on the other hand saw their number increase by 8% and their weighting rise to 14.3% (vs 11.5% in 2007). The decline in their weighting, in terms of market cap and volumes, was linked to the strong increase in the large cap segments, with median market cap average weightings remaining stable at around 2/2.3 billion euros. There has therefore been no contraction in this segment.

The higher market segments increased more in terms of weighting than in terms of market cap. There has nonetheless been a remarkable increase in blue-chip volumes in the region relative to the other segments.

UK & Ireland market IPOs/de-listings balance (2006 - 2016)


IPOs 216 99 132 56 9 4 516

De-listings 586 117 137 48 10 10 908

Balance -370 -18 -5 8 -1 -6 -392

The negative balance between new listings and de-listings was due primarily to nano caps, whereas the other segments maintained more balanced ratios.

The increase in the large cap segments was attributable exclusively to an increase in the number of companies promoted from lower segments. Without this reservoir of companies, the large cap segments would have contracted.

Economic performances: a dreary picture

29

Performances économiques du Royaume-Uni et de l’Irlande


Les Small

Les Mid

Les Large

70%

19%

11% Small

Mid

Large

50

70

90

110

130

150

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


30507090

110130150170190

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


406080

100120140160180200

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


IV. COUNTRY FOCUS

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46

Sample data

29



Les Small

Les Mid

Les Large

70%

19%

11% Small

Mid

Large

50

70

90

110

130

150

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


30507090

110130150170190

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


406080

100120140160180200

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


29



Les Small

Les Mid

Les Large

70%

19%

11% Small

Mid

Large

50

70

90

110

130

150

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


30507090

110130150170190

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


406080

100120140160180200

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


29



Les Small

Les Mid

Les Large

70%

19%

11% Small

Mid

Large

50

70

90

110

130

150

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


30507090

110130150170190

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


406080

100120140160180200

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


30

Synthèse performances économiques - Royaume-Uni & Irlande En consolidé, le parcours n’a pas de quoi soulever l’enthousiasme : le niveau d’activité plafonne à partir de 2011 et les résultats chutent. La capitalisation suit la performance du volume d’activité, avec une baisse notable en 2016 liée à l’effet de change consécutif au Brexit. Les Small et les Mid font quasiment jeu égal sur la période tandis que les Large sont en décalage surtout en ce qui concerne les résultats opérationnels (ROC).

Allemagne (locomotive de l’écosystème européen / perf boursière : 20/20 pour le Mid allemand /perf éco : la dynamique des Mid dessert les Small/ structure : l’assèchement des Micro) - Des Large en pleine croissance

Le nombre de sociétés cotées allemandes a chuté de 31% entre le pic de 2007 et 2016. Les segments Small se sont fortement contractés, alors que les segments Mid et surtout Large ont quant à eux affiché une progression significative. Remarquons également que, contrairement au Royaume-Uni ou à la France, le nombre de Blue chip allemandes est resté stable entre 2007 et 2016.

Les entreprises allemandes sous la loupe

Poids en nombre Nano Micro Small Mid Large Blue chip Moyenne 10 ans 49,5% 17,4% 18,1% 9,1% 2,1% 3,9%

2007 45,3% 19,6% 20,4% 8,6% 1,8% 4,3% 2016 40,6% 16,5% 21,5% 12,4% 3,5% 5,5%

Poids ∑ capitalisations Nano Micro Small Mid Large Blue chip

40

60

80

100

120

140

160

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


600

700

800

900

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


On a consolidated basis, the picture does not incite enthusiasm. The level of sales reached a ceiling in 2011 and earnings were in sharp decline. Market cap tracked sales volumes performance, falling notably in 2016 due to the currency effect following the Brexit referendum. Small & midcaps returned highly similar performances over the review period, with large caps diverging, particularly in terms of EBIT.

IV. COUNTRY FOCUS

Aggregate

Small

Mid

Large

CA ROC Market cap

CA ROC Market cap

CA ROC Market cap

CA ROC Market cap

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47

GERMANYTHE MARKET IS DRYING UP AT ITS ROOTS


33

Les données économiques consolidées révèlent une sensibilité à la crise, plus forte qu’en France, à la baisse en 2009, puis à la hausse jusqu’en 2012 : à cette date, le volume d’activité stagne alors que les marges et les valorisations repartent à la hausse. Nous ne sommes donc pas dans la configuration européenne, les Large allemandes s’en sortent mieux. Quant aux Small, elles affichent des performances économiques et boursières nettement supérieures à celles des Mid et des Large et apparaissent économiquement moins volatiles en 2008/2009.

Italie Un écosystème boursier efficient, des Nano en hausse et des Small en pleine croissance

Var. en nombre Nano Micro Small Mid Large Blue chip Total 2007/2016 150% -8% -43% -2% 18% -9% 3%

Le nombre de sociétés cotées en Italie est resté stable sur la période étudiée, avec toutefois une progression particulièrement notable du nombre de Nano.

Si le solde introductions en bourse /retraits est légèrement positif, l’explosion du nombre de Nano italiennes est surtout lié aux flux négatifs des transferts descendants des segments supérieurs. La très mauvaise configuration économique, et donc boursière, de l’Italie a ainsi généré une baisse des capitalisations boursières aboutissant à ce résultat en trompe-l’œil.

Soulignons cependant qu’en dépit d’une conjoncture économique et boursière moins favorable que celle des autres grands pays européens, l’Italie a vu le nombre de ses entreprises cotées augmenter. Cette progression devrait favoriser le marché domestique sur le long terme. Un phénomène qui révèle l’efficience de l’écosystème italien, armé pour assumer son rôle d’alternative face à un système bancaire sous pression.

Les entreprises italiennes sous la loupe

Poids en nombre Nano Micro Small Mid Large Blue chip Moyenne 10 ans 29,5% 21,4% 28,1% 14,8% 2,9% 3,4%

2007 14,7% 21,3% 41,0% 15,7% 3,7% 3,7% 2016 35,7% 19,2% 22,7% 14,9% 4,2% 3,2%

Poids ∑ capitalisations Nano Micro Small Mid Large Blue chip Moyenne 10 ans 0,5% 1,3% 7,4% 20,5% 12,0% 58,4%

2007 0,2% 1,0% 7,8% 17,0% 12,4% 61,6% 2016 0,5% 1,1% 5,7% 21,7% 17,7% 53,3%

Poids ∑ volumes Nano Micro Small Mid Large Blue chip Moyenne 10 ans 0,4% 0,6% 5,5% 20,4% 10,3% 62,8%

200

300

400

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


2007/2016 -31% -35% -18% 11% 53% 0% -31%

The number of German listed companies fell by 31% between the 2007 peak and 2016. The small caps segment contracted sharply, whereas the midcap and particularly large caps segments increased significantly.

Unlike in the UK and France, the number of German blue-chips remained stable between 2007 and 2016.

German companies close-up

Weighting Nano Micro Small Mid Large Blue chip

10-year average 49.5% 17,4% 18.1% 9.1% 2.1% 3.9%

2007 45.3% 19.6% 20.4% 8.6% 1.8% 4.3%

2016 40.6% 16.5% 21.5% 12.4% 3.5% 5.5%


10-year average 49.5% 17,4% 18.1% 9.1% 2.1% 3.9%

2007 45.3% 19.6% 20.4% 8.6% 1.8% 4.3%

2016 40.6% 16.5% 21.5% 12.4% 3.5% 5.5%


10-year average 49.5% 17,4% 18.1% 9.1% 2.1% 3.9%

2007 45.3% 19.6% 20.4% 8.6% 1.8% 4.3%

2016 40.6% 16.5% 21.5% 12.4% 3.5% 5.5%

IV. COUNTRY FOCUS

42

The small caps segment represented 78.6% of the total number of German companies listed in 2016 (vs 85.3% in 2007), 4.2% of the aggregate market cap (vs 6.1% in 2007) and 2.3% of trading volumes (vs 4.4% in 2007)

The number of midcaps increased by 11%, with other factors remaining broadly stable over the review period

The large caps segment recorded growth of 53% with the number of companies increasing from 15 to 23. This segment of the market therefore bridged the gap compared to France, gaining ground on all of the other segments, with the exception of midcaps. The segment accounted for 9.4% of the market cap in 2016 and represented 11.4% of German volumes.

German market IPOs/de-listings balance (2006-2016)


IPOs 93 49 43 18 5 3 211

De-listings 197 62 61 25 9 3 357

Balance -104 -13 -18 -7 -4 0 -146

None of the segment recorded a positive balance over the review period, with a notable decline once again observed in the nano segment. The increase in the mid & large cap segments was fed exclusively by market inflow, i.e. through the promotion of companies already listed in the lower segments.

Economic performances: a good student

Sample data

32

Les Small

Les Mid

Les Large

Synthèse performance économique - Allemagne

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


50

100

150

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250

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

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100

120

140

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180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

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140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


31

Moyenne 10 ans 0,5% 1,0% 4,6% 12,3% 9,3% 72,3% 2007 0,5% 0,9% 4,7% 10,7% 7,4% 75,8% 2016 0,2% 0,6% 3,4% 11,1% 9,4% 75,3%


2007 0,5% 0,7% 3,2% 10,4% 6,5% 78,7% 2016 0,1% 0,2% 2,0% 11,0% 11,4% 75,2%

Les segments Small représentent 78,6% du nombre total de sociétés allemandes cotées en 2016 (vs 85,3% en 2007), 4,2% de la capitalisation agrégée (vs 6,1% en 2007) et 2,3% des volumes de transactions (vs 4,4% en 2007). Les valeurs moyennes ont vu leur nombre augmenter de 11% ; les autres métriques sont toutefois plutôt stables sur la période. Le segment Large enregistre quant à lui une croissance de 53% en nombre de sociétés. Passant de 15 à 23 entreprises, ce segment de la cote a donc rattrapé son retard par rapport à la France. Il a gagné du terrain sur tous les autres segments, à l’exception de celui des Mid. Il pèse, en 2016, 9,4% de la capitalisation et représente 11,4% des volumes allemands.

Solde introductions en bourse/retraits de la cote allemande entre 2006 et 2016

Nano Micro Small Mid Large Blue chip Total IPOs 93 49 43 18 5 3 211 Retraits 197 62 61 25 9 3 357 Solde -104 -13 -18 -7 -4 0 -146

Aucun segment ne ressort en positif sur la période étudiée, le segment des Nano se distinguant néanmoins une fois de plus par une forte baisse. La progression des segments Mid et Large se nourrit donc exclusivement des flux internes à la côte, donc de sociétés déjà cotées issues des segments inférieurs. Performances économiques - Allemagne


77%

13%

10% Small

Mid

Large

48

IV. COUNTRY FOCUS

Aggregate CA ROC Market cap

43

49

32

Les Small

Les Mid

Les Large


60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


50

100

150

200

250

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


32

Les Small

Les Mid

Les Large


60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


50

100

150

200

250

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


32

Les Small

Les Mid

Les Large


60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


50

100

150

200

250

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


Consolidated economic data reveals a stronger downside reaction to the crisis than in France in 2009, followed by a sharper increase through until 2012. Sales volumes stagnated from 2012 onwards, whereas margins and valuations rallied. German large caps bucked the European trend and fared better than the regional average.

Small caps returned sharply stronger economic & market performances than midcaps & large caps and were also less economically volatile in 2008/2009.

Small

Mid

Large

CA ROC Market cap

CA ROC Market cap

CA ROC Market cap

IV. COUNTRY FOCUS

44

50

ITALYPROMISING?


1

ITALIE : UNE PROMESSE ? Variation du nombre de sociétés (2006-2016)

Var. en nombre Nano Micro Small Mid Large Blue chip Total 2007/2016 150% -8% -43% -2% 18% -9% 3%

Le nombre de sociétés cotées en Italie est resté stable sur la période étudiée, avec toutefois une progression particulièrement notable du nombre de Nano. Si le solde introductions en bourse/retraits est légèrement positif, l’explosion du nombre de Nano italiennes est surtout lié – comme en Espagne et au Portugal nous le verrons plus loin – aux flux négatifs des transferts descendants des segments supérieurs. La très mauvaise configuration économique, et donc boursière, de l’Italie a ainsi généré une baisse des capitalisations boursières aboutissant à ce résultat en trompe-l’œil.

Soulignons cependant qu’en dépit d’une conjoncture économique et boursière moins favorable que celle des autres grands pays européens, l’Italie vu le nombre de ses entreprises cotées augmenter – dans de très faibles proportions, mais tout de même. Cette progression devrait favoriser le marché domestique sur le long terme. Un phénomène qui révèle l’efficience de l’écosystème italien, armé pour assumer son rôle d’alternative face à un système bancaire sous pression.

Les entreprises italiennes à la loupe Poids en nombre Nano Micro Small Mid Large Blue chip Moyenne 10 ans 29,5% 21,4% 28,1% 14,8% 2,9% 3,4%

2007 14,7% 21,3% 41,0% 15,7% 3,7% 3,7% 2016 35,7% 19,2% 22,7% 14,9% 4,2% 3,2%


2007 0,2% 1,0% 7,8% 17,0% 12,4% 61,6% 2016 0,5% 1,1% 5,7% 21,7% 17,7% 53,3%


2007 0,8% 0,9% 6,8% 23,2% 7,9% 60,4% 2016 0,1% 0,2% 2,1% 18,0% 12,5% 67,0%

Contrairement aux autres grands pays européens, les flux nets de la cote italienne ont été négatifs sur tous les segments, le nombre de sociétés dont la capitalisation boursière a progressé ayant été inférieur au nombre d’entreprises qui ont emprunté le chemin inverse. En résulte la forte progression du nombre de Nano, tempérée par une chute de leurs poids à la fois en termes de capitalisation comme de volumes, phénomène également visible dans le segment Micro.

200

300

400

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


2007/2016 150% -8% -43% -2% 18% -9% 3%

The number of listed companies in Italy remained stable over the review period, although the number of nano caps increased sharply.

Although the IPOs/de-listings balance was marginally positive, the surge in the number of Italian nano caps, like in Spain & Portugal, as we shall see further on, was due primarily to relegation from higher segments. The highly challenging economic and market situation in Italy also weighed on market cap, which exacerbated the results.

It should be highlighted however that despite a less favourable economic and market situation than in the other major European countries, the number of listed companies in Italy nonetheless increased, albeit only marginally. This increase should drive the domestic market over the long term, which illustrates the efficiency of the Italian market landscape, which is able to assume its role as an alternative to the distressed banking system.

Italian companies close-up


10-year average 29.5% 21.4% 28.1% 14.8% 2.9% 3.4%

2007 14.7% 21.3% 41.0% 15.7% 3.7% 3.7%

2016 35.7% 19.2% 22.7% 14.9% 4.2% 3.2%

IV. COUNTRY FOCUS

45

51


10-year average 0.5% 1.3% 7,4% 20.5% 12.0% 58.4%

2007 0.2% 1.0% 7,8% 17,0% 12.4% 61.6%

2016 0.5% 1.1% 5.7% 21.7% 17,7% 53.3%


10-year average 0.4% 0.6% 5.5% 20.4% 10.3% 62.8%

2007 0.8% 0.9% 6.8% 23.2% 7,9% 60.4%

2016 0.1% 0.2% 2.1% 18.0% 12.5% 67,0%

In contrast with the other major European countries, net flows in the Italian market were negative across all segments. The number of companies seeing their market cap increase was lower than the number of companies moving in the opposite direction.

As a result, there was a sharp increase in the number of nano caps, offset by a decline in market cap and volumes. This phenomenon was also observed in the micro segment.

Midcaps, large caps & blue-chips, which are more international players, proved more resilient, illustrated by the growth in market cap and volumes.

Italian market IPOs/de-listings balance (2006-2016)


IPOs 56 37 26 11 5 0 135

De-listings 32 22 35 16 4 1 110

Balance 24 15 -9 -5 1 -1 25

Despite, or because of, these macroeconomic issues, nano & micro caps sought funding solutions in the financial markets, as reflected in the positive balance in these two segments.

Economic performances: small caps (and only small caps) are beautiful

2

Les Mid, Large et Blue chip, plus implantées à l’international, ont pour leur part mieux résisté, comme en atteste la croissance de leurs capitalisation et volumes. Solde introductions en bourse/retraits de la cote italienne (2006-2016) Nano Micro Small Mid Large Blue chip Total IPOs 56 37 26 11 5 0 135 Retraits 32 22 35 16 4 1 110 Solde 24 15 -9 -5 1 -1 25

En dépit ou à cause de ces troubles macroéconomiques, les Nano et Micro ont recherché des solutions de financement sur les marchés financiers comme l’illustre le solde positif sur ces deux segments.

Performances économiques : Small (and only Small) is beautiful


Les Small

Les Mid

68%

23%

9% Small

Mid

Large

50

70

90

110

130

150

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


30

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170

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


IV. COUNTRY FOCUS

46

52

Sample data

2





Les Small

Les Mid

68%

23%

9% Small

Mid

Large

50

70

90

110

130

150

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


30

50

70

90

110

130

150

170

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


2





Les Small

Les Mid

68%

23%

9% Small

Mid

Large

50

70

90

110

130

150

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


30

50

70

90

110

130

150

170

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


3

Les Large

En consolidé, les agrégats économiques de notre échantillon sont assez mauvais au cours des 10 dernières années. Les Small font office d’îlot de croissance et de sérénité, avec des performances plus qu’honorables et un parcours boursier qui semble conserver du potentiel pour l’avenir. Le bilan est plus mitigé pour les Mid, qui ont stagné, comme pour les Large, en déclin. BENELUX : CES PLATS PAYS… Variation du nombre de sociétés (2006-2016)


Le nombre de sociétés cotées dans les trois pays du Benelux a baissé de 10%, un résultat honorable en comparaison de ceux des grands pays européens (France, Allemagne et Royaume-Uni). Les segments Small enregistrent cependant des baisses en ligne avec les tendances observées en France et en Allemagne. Les segments Mid et Large profitent quant à eux pleinement des flux ascendants d’entreprises provenant des segments Small.

40

60

80

100

120

140

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

160

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


350

400

450

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

3

Les Large




40

60

80

100

120

140

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

160

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


350

400

450

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

On a consolidated basis, aggregate economic data in our sample was relatively poor over the past 10 years.

Small caps represented the sole segment posting steady growth and returning highly satisfactory performances, and apparently harbouring further upside potential.

IV. COUNTRY FOCUS

Aggregate

Small

Mid

Large

CA ROC Market cap

CA ROC Market cap

CA ROC Market cap

CA ROC Market cap

47

53

BENELUXTHE FLAT COUNTRIES


3

Les Large




40

60

80

100

120

140

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

160

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


350

400

450

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


2007/2016 -10% -41% -22% 29% 29% 8% -10%

The number of listed companies in the three Benelux countries fell by 10%, reflecting a satisfactory result compared to the major European countries (France, Germany and the UK).

The small caps segment however recorded a decline which was in-line with the trends observed in France and Germany. The mid & large caps segments gained strongly from inflow from companies promoted from the small caps segment.

The midcap segment, like small caps, also benefitted from a significantly positive IPOs/de-listings balance, which is a sufficiently rare phenomenon to merit highlighting and which contributed to growth in midcaps on an equal basis with the transfer of companies between segments.

Les entreprises du Benelux à la loupe


10-year average 30.5% 15.5% 28.8% 15.7% 4.2% 5.3%

2007 25.5% 17,8% 31.0% 16.3% 3.5% 6.0%

2016 25.6% 11.7% 27,0% 23.4% 5.0% 7,2%


10-year average 0.2% 0.6% 5.1% 13.5% 11.6% 68.9%

2007 0.2% 0.6% 5.0% 11.5% 8.7% 74.1%

2016 0.1% 0.3% 2.9% 13.4% 9.0% 74.4%

IV. COUNTRY FOCUS

48

54


10-year average 0.2% 0.3% 4.7% 18.0% 14.9% 62.0%

2007 0.1% 0.3% 3.6% 14.0% 7,7% 74.4%

2016 0.0% 0.2% 1.7% 14.8% 13.9% 69.4%

Midcaps accounted for the greatest increase in the number of companies, with growth driven by IPOs among fledgling companies and transfers from lower segments, which also accounts for the decrease in midcap market cap weightings and volumes over the review period. This decrease does not detract from the fact that the segment was generally highly dynamic through positive growth.

On the other hand, the situation in the small caps segment proved to be just as disconcerting as in the other major European countries.

Benelux market IPOs/de-listings balance (2006-2016)


IPOs 25 18 60 33 3 4 143

De-listings 62 25 50 22 4 3 166

Balance -37 -7 10 11 -1 1 -23

The positive balance in the small & midcaps segments should be highlighted, as this trend has otherwise been extremely rare in Europe over the past decade.

Economic performances: in-line with Europe

Sample data

5

Les Small

Les Mid

Les Large

Le profil des agrégats économiques de cette zone est assez proche de celui que nous constatons pour l’Europe avec un volume d’activité en stagnation, voire en légère baisse, des résultats en baisse et des valorisations au plus haut.

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


30

80

130

180

230

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


4

Le segment Mid, tout comme le Small, bénéficie de plus d’un solde significatif d’introductions/retraits – un phénomène suffisamment rare pour être souligné et qui contribue, à parité avec le transfert de sociétés entre segments, à la croissance des valeurs moyennes.

Les entreprises du Benelux à la loupe Poids en nombre Nano Micro Small Mid Large Blue chip Moyenne 10 ans 30,5% 15,5% 28,8% 15,7% 4,2% 5,3%

2007 25,5% 17,8% 31,0% 16,3% 3,5% 6,0% 2016 25,6% 11,7% 27,0% 23,4% 5,0% 7,2%

30,5% 15,5% 28,8% 15,7% 4,2% 5,3% Poids ∑ capitalisations Nano Micro Small Mid Large Blue chip Moyenne 10 ans 0,2% 0,6% 5,1% 13,5% 11,6% 68,9%

2007 0,2% 0,6% 5,0% 11,5% 8,7% 74,1% 2016 0,1% 0,3% 2,9% 13,4% 9,0% 74,4%


2007 0,1% 0,3% 3,6% 14,0% 7,7% 74,4% 2016 0,0% 0,2% 1,7% 14,8% 13,9% 69,4%

Les valeurs moyennes sont les championnes de la progression en nombre de sociétés, une croissance alimentée par de jeunes pousses issues d’introductions en bourse ainsi que de transferts des segments inférieurs, ce qui explique la diminution en poids de capitalisation et en volumes des Mid sur la période. Un phénomène qui n’altère en rien cette dynamique générale positive.

En revanche, la situation des segments Small se révèle aussi préoccupante que dans les autres grands pays européens.

Solde introductions en bourse/retraits de la cote du Benelux (2006-2016) Nano Micro Small Mid Large Blue chip Total IPOs 25 18 60 33 3 4 143 Retraits 62 25 50 22 4 3 166 Solde -37 -7 10 11 -1 1 -23

Retenons le solde positif des segments Small et Mid, une situation trop rare en Europe sur la dernière décennie.

Performances économiques : l’Europe à cœur


64% 21%

15% Small

Mid

Large

IV. COUNTRY FOCUS

Aggregate CA ROC Market cap

49

55

5

Les Small

Les Mid

Les Large


60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


30

80

130

180

230

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


5

Les Small

Les Mid

Les Large


60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


30

80

130

180

230

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


5

Les Small

Les Mid

Les Large


60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


30

80

130

180

230

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


40

60

80

100

120

140

160

180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


Aggregate economic performance in the region was broadly in-line with the rest of Europe, with sales volumes stagnating or even falling marginally, while earnings declined and valuations hit all-time highs.

Although small caps posted strong economic performances, valuations increased more rapidly, leaving no leeway for further upside. Midcaps reflected a more balanced profile although valuations also hit all-time highs in this segment. Large caps have also become overvalued with regard to economic performances, unless earnings increase sharply over the next few years.

Small

Mid

LargeCA ROC Market cap

CA ROC Market cap

CA ROC Market cap

IV. COUNTRY FOCUS

50

56

SCANDINAVIAIN FULL HEALTH


6

Les Small ont connu une belle performance économique mais le niveau de valorisation a progressé plus rapidement ce qui laisse peu de potentiel pour la suite. Les Mid font apparaître un profil plus équilibré mais là encore avec des valorisations au plus haut. Les Large sont dans une situation de survalorisation au regard des performances économiques sauf à attendre une forte progression des résultats dans les années à venir. SCANDINAVIE : EN PLEINE SANTE Variation du nombre de sociétés (2006-2016)

Var. en nombre Nano Micro Small Mid Large Blue chip Total 2007/2016 15% -19% 1% 20% 100% 35% 6%

Si la progression globale du nombre d’entreprises scandinaves cotées par rapport au pic de 2007 n’est pas spectaculaire, elle l’est relativement au reste de l’Europe. Le solde introductions/retraits de la cote est particulièrement positif pour les segments Small ; la baisse du segment Micro et la stagnation du segment Small sont donc liées à un transfert ascendant assez fort vers les segments Mid et Large. La progression positive des Micro augure d’un réservoir vivifié suffisant pour nourrir dans les années à venir les segments Micro et Small. C’est le type de dynamique que nous aimerions observer sur l’ensemble des marchés européens.

Les entreprises scandinaves à la loupe Poids en nombre Nano Micro Small Mid Large Blue chip Moyenne 10 ans 46,6% 18,4% 20,9% 9,8% 2,0% 2,4%

2007 39,0% 22,8% 24,7% 9,7% 1,6% 2,3% 2016 42,4% 17,3% 23,4% 11,0% 3,0% 2,9%


2007 0,8% 2,0% 10,1% 21,7% 10,6% 54,8% 2016 0,6% 1,1% 7,8% 19,2% 16,8% 54,5%


2007 0,5% 0,9% 5,8% 25,3% 12,1% 55,4% 2016 0,7% 0,9% 5,4% 22,0% 21,2% 49,8%

La progression des Nano scandinaves, en nombre et en volumes, révèle le dynamisme sous-jacent de l’écosystème et constitue un réservoir pour la progression ultérieure des Micro. Les segments Micro et Small accusent le coup en nombre d’entreprises mais surtout en capitalisation puisque ce sont les sociétés les plus importantes qui ont quitté ce segment pour alimenter celui des Small.

800

900

1000

1100

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


2007/2016 15% -19% 1% 20% 100% 35% 6%

Although the overall number of Scandinavian listed companies compared to the 2007 peak has not increased spectacularly, the region has outpaced the rest of Europe.

The regional market IPOs/de-listings balance was highly positive for the small caps segment. The decline in the micro segment and the stagnation observed in the small cap segment resulted from a strong upswing towards the mid & large cap segments. Meanwhile, the increase in the micro segment reflects a revival in the reservoir of stocks available to feed into the micro & small caps segments over coming years.

We would like to see this dynamic trend across all European markets.

Scandinavian companies close-up

Weight in Number Nano Micro Small Mid Large Blue chip

10-year average 46.6% 18.4% 20.9% 9.8% 2.0% 2.4%

2007 39.0% 22.8% 24.7% 9.7% 1.6% 2.3%

2016 42.4% 17,3% 23.4% 11.0% 3.0% 2.9%


10-year average 0.9% 1.7% 8.7% 21.9% 13.1% 53.8%

2007 0.8% 2.0% 10.1% 21.7% 10.6% 54.8%

2016 0.6% 1.1% 7,8% 19.2% 16.8% 54.5%

IV. COUNTRY FOCUS

51

57


10-year average 0.6% 1.0% 6.6% 26.8% 16.3% 48.6%

2007 0.5% 0.9% 5.8% 25.3% 12.1% 55.4%

2016 0.7% 0.9% 5.4% 22.0% 21.2% 49.8%

The increase the Scandinavian nano segment, both in terms of number and volumes, illustrates the underlying dynamism in the broader market landscape and provides a reservoir for a future increase in the micro segment. The micro & small cap segments contracted in terms of the number of companies and particularly in terms of market cap, as the largest companies left this segment and fed into small caps.

Midcaps on the other hand remained broadly stable and the large caps segment surged, particularly in terms of market cap, meaning that the success stories fed into the blue-chip segment.

Scandinavia market IPOs/de-listings balance (2006-2016)


IPOs 330 85 94 25 1 1 536

De-listings 220 61 70 14 0 0 365

Balance 110 24 24 11 1 1 171

The significantly positive balance across all segments composing the base of the pyramid should be highlighted, as these segments have contracted everywhere else in Europe.

Economic performances: in-line

Sample data

7

Les valeurs moyennes tiennent en revanche leur rang et le segment Large explose, une suprématie en termes de capitalisations, qui nourrit de ces success stories le segment des Blue Chip.

Solde introductions en bourse/retraits de la cote scandinave (2006-2016) Nano Micro Small Mid Large Blue chip Total IPOs 330 85 94 25 1 1 536 Retraits 220 61 70 14 0 0 365 Solde 110 24 24 11 1 1 171

Soulignons le solde significativement positif sur tous les segments qui composent la base de la pyramide et qui partout ailleurs en Europe souffrent de décroissance. Performances économiques : en ligne


Les Small

Les Mid

74%

19%

7% Small

Mid

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


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Les Small

Les Mid

74%

19%

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Mid

Large

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


AggregateCA ROC Market cap

IV. COUNTRY FOCUS

52

58

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Les Small

Les Mid

74%

19%

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Mid

Large

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


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Les Large

La Scandinavie a connu une évolution en ligne avec ce que l’on peut constater en Europe au cours des 10 dernières années. En consolidé, l’activité est étale depuis 2011, les résultats sous pression, les valorisations en hausse. Les Small ont réalisé un parcours remarquable sur le plan des performances économiques, de la volatilité de ces performances et ce, avec des valorisations qui ont progressé moins rapidement que les données économiques. Les Mid ont connu une évolution des agrégats économiques légèrement en-dessous du niveau européen alors que les valorisations ont suivi la même pente, ce qui suggère une inflation de multiples. Les Large ont chuté. Focus : Suède, l’exemple qui vient du nord Variation du nombre de sociétés (2006-2016)

Var. en nombre Nano Micro Small Mid Large Blue chip Total 2007/2016 53% 6% 67% 29% 167% 40% 44%

Une analyse plus fine permet de déterminer que les performances scandinaves proviennent essentiellement d’un pays, la Suède, qui connaît une croissance spectaculaire du nombre de ses sociétés cotées. Des données qui flirtent avec les niveaux de pays comme la France ou l’Allemagne, mais avec une population… six à sept fois moins nombreuse.

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Scandinavian economies performed in-line with Europe over the 10 year review period. On a consolidated basis, sales were flat from 2011 onwards, whereas earnings came under pressure and valuations increased.

Small caps returned remarkable economic performances, with low volatility and valuations which increased less rapidly than economic data. Midcaps returned marginally lower aggregated economic performances than Europe as a whole, whereas valuations remained on the same trend, implying inflation among multiples. Large caps fell sharply.

IV. COUNTRY FOCUS

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CA ROC Market cap

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59

SWEDENTHE NORTH SETTING THE EXAMPLE


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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


2007/2016 53% 6% 67% 29% 167% 40% 44%

A more detailed analysis determines that Scandinavian performances were driven primarily by a single country, namely Sweden, which returned spectacular growth in terms of the number of listed companies. Although national data approaches the levels recorded in countries such as France or Germany, the country has a population which is … six or seven times smaller.

What accounts for the Swedish phenomenon?

Although a variety of factors can be used to analyse the structure of the Swedish market, a review of market landscape and business models in the national financial industry immediately reveals one key local factor. One single financial intermediary dominates the domestic market and is involved in more than 70% of IPOs.

There are clear economic advantages implied by this situation, which structurally promotes the development of an efficient market, in an inherently complex segment such as small caps.

The Swedish success story certainly merits highlighting, particularly with the European MIFID 2 directive coming into force in January 2018, which is likely to structurally impact the financial industry, notably in terms of concentration.

IV. COUNTRY FOCUS

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Economic performances: Europe at heart

Sample data

9

Comment expliquer ce phénomène suédois ? De nombreux facteurs peuvent être mis en avant pour analyser la structure du marché suédois, mais si l’on se concentre sur l’écosystème et sur le modèle économique de l’industrie financière nationale, une spécificité saute aux yeux immédiatement : l’existence d’un seul et unique intermédiaire financier, qui domine le pays et est impliqué dans plus de 70% des introductions en bourse. Les avantages économiques de cette situation sont nets : ils peuvent conférer à un segment structurellement compliqué comme celui des Small des atouts structurants essentiels pour développer un marché efficient. De plus, alors que la directive européenne MIFID II, qui entre en vigueur en janvier 2018, devrait impacter de façon structurelle l’industrie financière, notamment en termes de concentration, le succès suédois est suffisamment frappant pour être mis en avant. Performances économiques : 0 fautes


Les Small

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77%

17% 6%

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Les Large

Nous avons isolé ce pays du reste de la Scandinavie pour comprendre si le dynamisme des introductions en bourse relevé trouve son appui aussi dans les sociétés cotées avant 2007. En consolidé, notons que la configuration graphique est l’une des plus séduisante que nous ayons pu observer sur les différents pays passés en revu. Seulement 6% de notre échantillon suédois est composé de Large, ce qui peut expliquer ce profil séduisant. Les Small ont réalisé un sans-faute, avec une progression des résultats identiques à celle des capitalisations, peu de volatilité, et l’indice des Small frôle 130%. Les Mid ont connu une évolution en-dessous du rythme européen avec des valorisations qui ont flambé. Les Large s’en sortent mieux que la moyenne européenne.

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Les Large

Nous avons isolé ce pays du reste de la Scandinavie pour comprendre si le dynamisme des introductions en bourse relevé trouve son appui aussi dans les sociétés cotées avant 2007. En consolidé, notons que la configuration graphique est l’une des plus séduisante que nous ayons pu observer sur les différents pays passés en revu. Seulement 6% de notre échantillon suédois est composé de Large, ce qui peut expliquer ce profil séduisant. Les Small ont réalisé un sans-faute, avec une progression des résultats identiques à celle des capitalisations, peu de volatilité, et l’indice des Small frôle 130%. Les Mid ont connu une évolution en-dessous du rythme européen avec des valorisations qui ont flambé. Les Large s’en sortent mieux que la moyenne européenne.

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Les Small

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77%

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IV. COUNTRY FOCUS

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61

We have singled-out Sweden from the rest of Scandinavia in order to understand whether the observed IPO-driven dynamism stems from listed companies prior to 2007. On a consolidated basis, it should be noted that the chart profile is one of the most appealing observed among the countries reviewed. Only 6% of our Swedish sample is composed of large caps, which may explain the compelling chart profile.

Small caps recorded a flawless performance, with earnings increasing in-line with market cap, accompanied by low volatility, whereas the broader small caps index recorded volatility of close to 130%. Midcap valuations increased more moderately than the European average, which surged over the same period. Large caps fared better than the European average.

IV. COUNTRY FOCUS

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SWITZERLAND & AUSTRIAA HEALTHY BUT CONTRACTING SMALL CAP SEGMENT


1

SUISSE ET AUTRICHE : DES SMALL EN PLEINE SANTE Variation du nombre de sociétés (2006-2016)

Var. en nombre Nano Micro Small Mid Large Blue chip Total 2007/2016 -28% -44% -22% 21% 22% 20% -16% Le nombre de sociétés cotées en Suisse et en Autriche chute de 16% sur la période observée, une tendance similaire à celle de l’Europe : la forte diminution des segments Small due au manque d’introductions en bourse et aux transferts vers les segments supérieurs, Mid et Large, se double de la croissance insolente de ces derniers. Comme nous le constatons au regard du solde introductions/retraits de la cote, les taux de croissance des segments Mid et Large s’expliquent exclusivement par les flux nets positifs en provenance des segments inférieurs. Les entreprises suisses et autrichiennes à la loupe Poids en nombre Nano Micro Small Mid Large Blue chip Moyenne 10 ans 26,8% 16,7% 27,9% 18,6% 4,2% 5,8%

2007 22,4% 18,2% 31,9% 17,0% 4,4% 6,1% 2016 19,0% 12,1% 29,4% 24,5% 6,3% 8,6%


2007 0,2% 0,6% 4,7% 13,4% 10,1% 71,1% 2016 0,1% 0,2% 2,9% 11,4% 9,1% 76,3%


2007 0,1% 0,2% 2,4% 8,7% 9,5% 79,0% 2016 0,0% 0,1% 1,4% 9,1% 13,3% 76,0%

Ces mouvements se retrouvent bien évidemment dans la structure du marché avec une réduction sensible du poids des segments Small au profit des segments Mid et Large. Comme dans la plupart des pays européens, ce mécanisme est en danger : sans nouvelles entrées, il ne saurait perdurer.

Solde introductions en bourse/retraits de la cote autrichienne et suisse (2006-2016) Nano Micro Small Mid Large Blue chip Total IPO 24 21 33 10 4 2 94 Retrait 55 24 26 14 1 2 122 Solde -31 -3 7 -4 3 0 -28

La situation n’est cependant pas aussi inquiétante que dans les trois grands pays européens – France, Allemagne, Royaume-Uni : à l’exception des Nano, qui évoluent négativement dans des proportions similaires, les autres segments Small sont globalement à l’équilibre.

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


2007/2016 -28% -44% -22% 21% 22% 20% -16%

The number of listed companies in Switzerland & Austria fell by 16% over the review period, in-line with Europe. The sharp decline in the small caps segment, due to a lack of IPOs and transfers towards mid & large caps, was exacerbated by very strong growth in these higher segments. As can be observed in terms of the market IPOs/de-listings balance, growth in the mid & large caps segments was attributable exclusively to net positive inflow from the lower segments.

Swiss & Austrian companies close-up


10-year average 26.8% 16.7% 27,9% 18.6% 4.2% 5.8%

2007 22.4% 18.2% 31.9% 17,0% 4.4% 6.1%

2016 19.0% 12.1% 29.4% 24.5% 6.3% 8.6%


10-year average 0.2% 0.5% 4.2% 14.0% 9.4% 71.7%

2007 0.2% 0.6% 4.7% 13.4% 10.1% 71.1%

2016 0.1% 0.2% 2.9% 11.4% 9.1% 76.3%

IV. COUNTRY FOCUS

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10-year average 0.1% 0.2% 2.2% 11.9% 14.1% 71.6%

2007 0.1% 0.2% 2.4% 8.7% 9.5% 79.0%

2016 0.0% 0.1% 1.4% 9.1% 13.3% 76.0%

The trends observed were clearly attributable to the market structure with a sharp reduction in the small caps segment weighting and a shift towards the mid & large cap segments.

As is the case in most other European countries, this trend is in jeopardy, as it is unsustainable without new entrants to the market.

wiss & Austrian market IPOs/de-listings balance (2006-2016)


IPOs 24 21 33 10 4 2 94

De-listings 55 24 26 14 1 2 122

Balance -31 -3 7 -4 3 0 -28

The situation is not as critical as in the three major European countries however, i.e. France, Germany and the UK. With the exception of the nano segment, which contracted in similar proportions, the other small cap segments remained broadly balanced.

Economic performances: watch-maker precision

Sample data

2

Performances économiques : avec une précision d’horloger


Les Small

Les Mid

Les Large

66%

21%

13% Small

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Large

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AggregateCA ROC Market cap

IV. COUNTRY FOCUS

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3

La Suisse et l’Autriche présentent des données consolidées très cohérentes entre elles, avec cependant un léger bémol sur les valorisations qui se sont emballées depuis 2013. Les Small ont généré des performances excellentes en tous points, les Mid souffrent depuis 2014, notamment sur les résultats. Les Large présentent le profil le plus équilibré et le plus dynamique des pays observés avec un point négatif sur les valorisations qui ont cependant légèrement corrigé en 2016. ESPAGNE ET PORTUGAL : SMALL ESPOIR Variation du nombre de sociétés (2006-2016)

Var. en nombre Nano Micro Small Mid Large Blue chip Total 2007/2016 105% 42% -6% -27% -25% -15% 12%

C’est l’une des exceptions notables de notre analyse par pays : le nombre de sociétés cotées de la péninsule ibérique progresse de 12% entre 2007 et 2016. Une évolution marquée dans un premier temps par une phase de stabilisation (2007-2013) suivie ensuite d’une progression sensible. Ce sont les segments Nano et Micro qui se sont développés, tous les autres, sans exception, étant en baisse. 50% de la progression du segment Nano émanent du solde positif entre les introductions et les retraits de la cote ; le reste est la conséquence d’une période macroéconomique difficile pour ces deux pays. Les capitalisations ont diminué et ce sont donc les transferts négatifs des segments supérieurs qui ont généré ces évolutions. Pour le segment Micro, 70% de la progression proviennent de ce mécanisme de transfert des segments supérieurs.

Retenons cependant que les écosystèmes financiers espagnol et portugais ont apporté des solutions de financement à des jeunes sociétés – un signal positif pour l’avenir alors que l’économie espagnole se redresse.

Les entreprises ibériques à la loupe Poids en nombre Nano Micro Small Mid Large Blue chip Moyenne 10 ans 28,9% 15,4% 25,2% 19,4% 4,6% 6,5%

2007 18,0% 12,0% 29,5% 25,8% 5,5% 9,2% 2016 32,8% 15,2% 24,6% 16,8% 3,7% 7,0%

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Consolidated data from Switzerland & Austria was highly coherent, although there is one drawback however, as valuations surged from 2013 onwards.

Small caps returned excellent performances across the board, whereas midcaps declined from 2014 onwards, notably in terms of earnings. Large caps presented the most balanced profile and the greatest level of regional dynamism, despite valuations correcting marginally in 2016.

IV. COUNTRY FOCUS

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SPAIN & PORTUGAL

SMALL HOPE


3

La Suisse et l’Autriche présentent des données consolidées très cohérentes entre elles, avec cependant un léger bémol sur les valorisations qui se sont emballées depuis 2013. Les Small ont généré des performances excellentes en tous points, les Mid souffrent depuis 2014, notamment sur les résultats. Les Large présentent le profil le plus équilibré et le plus dynamique des pays observés avec un point négatif sur les valorisations qui ont cependant légèrement corrigé en 2016. ESPAGNE ET PORTUGAL : SMALL ESPOIR Variation du nombre de sociétés (2006-2016)

Var. en nombre Nano Micro Small Mid Large Blue chip Total 2007/2016 105% 42% -6% -27% -25% -15% 12%

C’est l’une des exceptions notables de notre analyse par pays : le nombre de sociétés cotées de la péninsule ibérique progresse de 12% entre 2007 et 2016. Une évolution marquée dans un premier temps par une phase de stabilisation (2007-2013) suivie ensuite d’une progression sensible. Ce sont les segments Nano et Micro qui se sont développés, tous les autres, sans exception, étant en baisse. 50% de la progression du segment Nano émanent du solde positif entre les introductions et les retraits de la cote ; le reste est la conséquence d’une période macroéconomique difficile pour ces deux pays. Les capitalisations ont diminué et ce sont donc les transferts négatifs des segments supérieurs qui ont généré ces évolutions. Pour le segment Micro, 70% de la progression proviennent de ce mécanisme de transfert des segments supérieurs.

Retenons cependant que les écosystèmes financiers espagnol et portugais ont apporté des solutions de financement à des jeunes sociétés – un signal positif pour l’avenir alors que l’économie espagnole se redresse.

Les entreprises ibériques à la loupe Poids en nombre Nano Micro Small Mid Large Blue chip Moyenne 10 ans 28,9% 15,4% 25,2% 19,4% 4,6% 6,5%

2007 18,0% 12,0% 29,5% 25,8% 5,5% 9,2% 2016 32,8% 15,2% 24,6% 16,8% 3,7% 7,0%

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2007/2016 105% 42% -6% -27% -25% -15% 12%

As one of the notable exceptions in our country analysis, the number of listed Iberian companies increased by 12% between 2007 and 2016. The trend was initially marked by a stabilisation phase (2007-2013), followed by a sharp upswing. The nano & micro segments increased, with all other segments contracting.

50% of the increase in the nano segment came from a positive balance between IPOs and de-listings in the market. The remainder resulted from a challenging macroeconomic period in both countries. Market cap contraction led to relegations from higher segments. 70% of the increase in the micro segment was due to this transfer mechanism from higher segments.

It should nonetheless be noted that the financial landscape in Spain & Portugal provided new financing solutions for fledgling companies, which bodes well for the future, and that the Spanish economy is recovering.

Iberian companies close-up


10-year average 28.9% 15.4% 25.2% 19.4% 4.6% 6.5%

2007 18.0% 12.0% 29.5% 25.8% 5.5% 9.2%

2016 32.8% 15.2% 24.6% 16.8% 3.7% 7,0%

IV. COUNTRY FOCUS

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10-year average 0.2% 0.5% 4.0% 16.3% 12.2% 66.8%

2007 0.1% 0.3% 3.6% 15.8% 10.2% 70.1%

2016 0.2% 0.5% 3.7% 14.2% 10.0% 71.4%


10-year average 0.1% 0.2% 2.1% 11.2% 8.6% 77,8%

2007 0.2% 0.4% 2.6% 12.8% 6.1% 78.0%

2016 0.2% 0.2% 2.0% 13.7% 11.7% 72.3%

These ambivalent trends were also discernible in the market structure. The increase in the number the nano & micro caps was accompanied by stagnation in their market cap weightings and volumes, as most new entrants were either IPOs or companies which had seen their market cap contract. The increase in large cap weightings was attributable to relegations from the blue-chip segment.

Spanish & Portuguese market IPOs/de-listings balance (2006-2016)


IPOs 54 9 27 16 2 2 110

De-listings 27 7 25 18 0 2 79

Balance 27 2 2 -2 2 0 31

Key takeaways in this region include the positive performance among nano & micro caps and the neutral result among mid & large caps in a challenging macroeconomic context.

Economic performances: a structural decline… ahead of a stronger rally?

4


2007 0,1% 0,3% 3,6% 15,8% 10,2% 70,1% 2016 0,2% 0,5% 3,7% 14,2% 10,0% 71,4%


2007 0,2% 0,4% 2,6% 12,8% 6,1% 78,0% 2016 0,2% 0,2% 2,0% 13,7% 11,7% 72,3%

Les évolutions constatées se retrouvent dans la structure du marché. L’augmentation du nombre des Nano et des Micro s’est accompagnée de la stagnation du poids des capitalisations ainsi que des volumes ; il s’agit de petites sociétés introduites en bourse ou des entreprises dont la capitalisation a diminué. La progression du poids des Large se nourrit quant à elle du transfert négatif en provenance du segment Blue chip. Solde introductions en bourse/retraits de la cote espagnole et portugaise (2006-2016) Nano Micro Small Mid Large Blue chip Total IPOs 54 9 27 16 2 2 110 Retraits 27 7 25 18 0 2 79 Solde 27 2 2 -2 2 0 31

A retenir, les bilans positifs des Nano, Micro, et le bilan neutre des Mid et Large dans un contexte macroéconomique délicat.

Performances économiques : un recul contextuel… pour mieux rebondir ?


Les Small

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IV. COUNTRY FOCUS

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Sample data

4


2007 0,1% 0,3% 3,6% 15,8% 10,2% 70,1% 2016 0,2% 0,5% 3,7% 14,2% 10,0% 71,4%


2007 0,2% 0,4% 2,6% 12,8% 6,1% 78,0% 2016 0,2% 0,2% 2,0% 13,7% 11,7% 72,3%

Les évolutions constatées se retrouvent dans la structure du marché. L’augmentation du nombre des Nano et des Micro s’est accompagnée de la stagnation du poids des capitalisations ainsi que des volumes ; il s’agit de petites sociétés introduites en bourse ou des entreprises dont la capitalisation a diminué. La progression du poids des Large se nourrit quant à elle du transfert négatif en provenance du segment Blue chip. Solde introductions en bourse/retraits de la cote espagnole et portugaise (2006-2016) Nano Micro Small Mid Large Blue chip Total IPOs 54 9 27 16 2 2 110 Retraits 27 7 25 18 0 2 79 Solde 27 2 2 -2 2 0 31

A retenir, les bilans positifs des Nano, Micro, et le bilan neutre des Mid et Large dans un contexte macroéconomique délicat.

Performances économiques : un recul contextuel… pour mieux rebondir ?


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Les Mid

Les Large

En consolidé, le parcours économique s’est révélé compliqué car si l’activité a connu un rebond entre 2009 et 2012, la suite a été plus difficile et surtout les résultats ont connu une constante érosion sur la période, à l’exception de 2016. Les Small font apparaître un « safe haven » dans ces pays avec un niveau de valorisation qui pâtit de l’environnement macroéconomique local. Les Mid ont particulièrement souffert au niveau des marges (et la valorisation a suivi), une situation cependant plus positive que celle des Large. CONCLUSION ET PROPOSITIONS

Ce 3e panorama européen des petites et moyennes valeurs a confirmé les tendances mises en lumière par les deux précédentes éditions.

- La suprématie des segments Small et Mid sur le segment Large se poursuit, tant en termes de performance que de volatilité.

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


On a consolidated basis, economic performance is complex to analyse as sales rallied between 2009 and 2012, followed by a more challenging phase, particularly as earnings eroded constantly over the review period, with the exception of 2016.

Small caps represented the safe haven in this region as valuation levels were weighed down by the local macroeconomic context. Midcaps were hit particularly hard in terms of margins, followed by valuations, although the situation was more positive among large caps.

Aggregate

Small

Mid

Large

CA ROC Market cap

CA ROC Market cap

CA ROC Market cap

CA ROC Market cap

IV. COUNTRY FOCUS

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The trends observed at the European level were replicated in most countries. France, Germany and the UK saw their investment universes contract significantly from the base upwards

The increase in the number of listed nano/micro caps in Mediterranean countries (Italy, Spain & Portugal) was remarkable given the challenging economic & market conditions during the period, which bodes extremely well for the future

Sweden has set a positive example, with the number of listed companies increasing by 74% over the 2006-2016 review period across all market segments

KEY

1

2

3

-625

cumulative IPOs / de-listings balance for the market during the decade in France, Germany and the UK.

IV. COUNTRY FOCUS

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This third issue of our European small & midcaps panorama has confirmed the trends highlighted by the two previous reports.

• The small & midcap segments maintained their supremacy over the large caps segment, both in terms of performance and volatility.

• The financial industry business model is becoming increasingly based on the higher market segments, i.e. large caps & blue-chips, which represent 6% of listed companies and 80% of trading volumes.

• The number of IPOs is insufficient to offset de-listings from the market.

• The market profile continues to age, with heavy erosion among micro & small caps, which represent the core base of the pyramid and 80% of listed companies. This erosion, already observed in the past, is accelerating, whereas the constant renewal of the market is indispensable for the vitality of the European market landscape.

• Although passive investment management is becoming increasingly prevalent, our study demonstrates the pertinence of stock-picking, particularly among the small & midcap segments.

• At the national level, the major countries are struggling. Overall, very few countries in Europe are actually faring well.

Several new factors have emerged.

• The number of listed companies in Europe has declined sharply once again, after a two-year respite.

• At the national level, Sweden provides an excellent example. The past decade has seen the number of companies increase by 74%, across all segments.

• MIFID 2 is likely to have a major impact on the European financial industry, accelerating the concentration of flows towards a restricted number of global players and reducing global research and therefore ultimately jeopardising local broker business models.

CONCLUSION & PROPOSALS

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Like last year, we believe that there are solutions to stem the trend which we fear may be amplified by MIFID 2. Let us reiterate several specific themes and suggestions which may help promote a market landscape in which small & midcaps can thrive:

• Stabilising regulations: less stringent constraints on small & midcaps in recognition of their highly-specific profiles

• Promote more favourable conditions for listing stocks, by streamlining IPO procedures

• Systematically encourage a greater proportion of European savings to be invested in micro & small cap asset classes, by developing a specific European fiscal regulatory framework for micro/small cap funds, or by reducing constraints for insurance companies

• Set up a long-term fiscally-harmonised European retirement savings vehicle to encourage savings in small & midcaps

• For investment management companies, develop funds which are better-adapted to the liquidity conditions in these markets and the complexity of the investment universe with different liquidity clauses to promote investments for the longer term and also in unlisted securities

• Create a European equivalent of the French research tax credit system for research analysts in small & midcap investment universe specialist brokers.

CONCLUSION & PROPOSALS

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APPENDIX: METHODOLOGY & TYPOLOGY

Market segments characteristics

We apply the standard segmentation thresholds used by investment managers in continental Europe, enhanced by a more finely-tuned segmentation in order to enable UK & US investors to recognise their own specific segmentations more easily.

Segmentation by market cap:

5 50 / 150 << 50 < < 1000 / 5000 <

MicroNano Small Mid

The indices function on the basis of 3 indicators used to differentiate companies, i.e. size (market cap), trading volume and rotation rate (volume / free float).

We have established indices based on the median market cap.

STOXX indices

Small cap Index 3,000 M€

Midcap Index 6,200 M€

Large cap Index 24,200 M€

MSCI indices

Micro cap Index100 M€

Small cap Index1,000 M€

Midcap Index6,400 M€

Large cap index 10,800 M€

Methodology & sample construction

The methodology applied to this 3rd issue of the European listed companies panorama has been revised. In the preceding issues, we deliberately adopted a non-exhaustive approach, whereas in this 3rd issue, we have adopted a more systematic and more detailed approach covering a more limited timeframe.

Increasingly precise selection

We have adjusted our approach to business activities, deliberately avoiding the use of filters and excluding funds and exchange-traded funds (ETFs) from our sample panels. We have included commercial activities, investment management companies and private equity groups.

150 / 1000

Large Blue chip

5000 / 10 000 < > 10 000 <(en Me)

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APPENDIX: METHODOLOGY & TYPOLOGY

Market cap remains the key segmentation criteria in our investment universe as this is the criteria most commonly used in order to analyse listed companies.

We have adjusted from a stage-by-stage approach to a real-time year-on-year assessment over a ten year period from 2006 - 2016.

We have maintained a minimum market cap threshold of 5 million euros. If a company breaches this threshold during the 10-year observation period it is included in our panel for the entire duration.

We define three sub-segments within the small caps segment, namely nano, micro & small caps. Unless otherwise explicitly stated, the term “small caps” refers to all three sub-segments (nano, micro & small caps) combined.

Along similar lines, among the large cap segment we also define two sub-segments, namely large caps & blue-chips. Unless otherwise explicitly stated, the term “large caps” refers to both the large cap & blue-chip segments combined.

In order to establish the nationality of a company, we use the address of the registered offices as the determining criteria, rather than the market venue on which the stock is listed, which reflects a tactical choice made by companies.

SMALL CAP MIDCAP LARGE CAP

Nano Cap< 50 M€ > 1 000 M€ and < 5 000 M€

Large Cap> 5 000 M€ -

<10 000 M€

Blue chip> 10 000 M€

Micro cap> 50 M€ -

< 150 M€

Large Cap> 150 M€ -

<1000 M€

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This panorama has been published by La Financière de l’Echiquier and the MiddleNext Research institute

Coordination:Gaël Faijean, Head of La Financière de l’Echiquier quantitative analysis & portfolio manager

About Financière de l’Echiquier – www.lfde.com

Founded in 1991 by Didier Le Menestrel and Christian Gueugnier, La Financière de l’Echiquier (LFED) is one of the leading independent asset management companies in France, with a team of more than 100 staff managing over 8 billion euros in AUM. LFDE, which is fully-owned by its managers and employees, manages financial savings and investments for retail clients, wealth advisors and institutional investors. Based in France, LFDE is also present in Germany, Austria, Switzerland, Italy, Spain and the Benelux countries.

About the MiddleNext Research institute – www.MiddleNext.com

MiddleNext is an independent French professional association representing listed midcaps. Founded in 1987, MiddleNext represents and defends the interests of midcaps, by promoting and federating listed companies and guiding managers through its training institute. Its research institute helps increase midcap awareness. MiddleNext co-presides over the Smaller Issuer Committee of European Issuers, which is the leading European association promoting the interests of more than 9,200 listed companies across 15 countries and representing a combined market cap of approximately 8,500 billion euros. MiddleNext is presided over by Guillaume Robin and managed by Caroline Weber and a Board of Directors composed of 12 listed company managers.

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