Veolia Environnement (FR:VIE) is a global ‘multi-utility’ providing water, waste and energy management solutions to government and industrial customers. Its share price performance has been choppy since it listed on the Paris bourse in 2000. But restructuring and heavy cost-cutting since 2012 have revived momentum. Veolia’s after-tax return on capital employed (ROCE) has improved from 4.4 per cent to 9.0 per cent, after the company found €1.8bn (£1.6bn) of efficiency savings between 2012 and 2019. Crucially, this has remained above its weighted average cost of capital – estimated by the company to be 5.3 per cent in 2019 – meaning it is creating value for shareholders.
Fund manager pick
High net debt
Broker Berenberg views Veolia as “one of the world’s most important circular economy stocks”. With a mission to “resource the world”, it aims to increase access to natural resources while ensuring they are used efficiently amid the strains of rising urbanisation and climate change. This approach has attracted the attention of sustainability-focused fund managers. Veolia is a top 10 holding of Pictet Asset Management’s Water Fund (LU0448836600) and also features in Janus Henderson's UK Responsible Income Fund (GB0005027338) and European Growth Fund (GB0030617707). Andrew Jones, director of global equity income at Janus Henderson, points to the group’s “clear long-term strategy to increase investments in areas that aid the environmental transformation and reduce exposure to areas that have less of a positive impact”.