spring midcap event paris, 2 july 2015
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GESCO – an industrial group shaped by SMEs with market and technology leaders
Tool manufacturing/mechanical engineering and plastics technology segments
Currently 17 operating subsidiaries under the GESCO AG umbrella
We think and act sustainably and in an entrepreneurial manner.
We are active in established industries with innovative technologies.
We provide technology “Made in Germany” to the world’s markets.
GESCO consists of flexible, independently operating and managed units that benefit from belonging to a strong group.
1. The business model
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1. The business model
The GESCO AG investment philosophy
Acquisition and development of industrial SMEs Long-term orientation, no intent to exit Majority takeover, usually 100 % Usually as part of succession planning New managers hold a share of up to 20 % in their companies
(“entrepreneurial companies”)
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The GESCO share offers a focussed portfolio of 17 “Hidden Champions” serving broadly diversified customer sectors
1. GESCO Group
→
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3%
4%5%4%5%6%
12%
15%
15%
25%
6%
Passenger and commercial vehicles
Other
Agricultural engineering
Machine and plant construction
Consumer goodsEnergy / supply
Iron, plate and metal processing,tool construction
Chemical / petrochemical industryFoundries and rolling millsElectrical, medical technology, household goods
Construction, air conditioning, sanitary industry
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1. The 4 biggest companies (sales and staff: FY 2014)
Dörrenberg Edelstahl GmbH
• Leading European specialist for tool steel
• Steel mill, trading, mould castings andsurface technology
• Strong internationalization
• Sales € 172 m, staff 501
SVT GmbH
• Systems for (un)loadingliquids and gases
• Specialty LNG: No. 2 worldwide
• Export ratio: 80 %
• Sales € 44 m, staff 182
MAE Maschinen- und Apparatebau Götzen GmbH
• World market leader forstraightening machinesand wheel set presses
• Highly innovative
• Acquired US competitorin Jan. 2014
• Sales € 25 m, staff 160
Frank Walz- und Schmiedetechnik Group
• Europe‘s leading forgefor wearparts for theagricultural industry
• 70 % of sales to OEMs, 30 % to wholesale andfarmers
• Sales € 28 m, staff 274
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1. Two very special companies (sales and staff: FY 2014)
Setter Group
• Paper and plastic sticksfor the sweets and hygienicindustries, world marketleader for paper sticks
• 90 % export ratio
• 20 bn sticks producedin Germany each year
• Acquired US-basedSetterstix in Jan. 2015
• Sales € 15 m, staff 59
C.F.K. CNC-Fertigungs-technik Kriftel GmbH
• Leading centre in high-precision wire erosionand die sinking
• Cutting-edge production line, 45 machines
• Advanced laser meltingsystems (3D printing) forfunctional prototypes, medical implants etc.
• Sales € 8 m, staff 57
January 2015: Setter Group acquires Setterstix Corp. / USA
Setterstix is the leading US producer of paper sticks for the confectionary industry with approx. € 10 m sales and 40 employees
GESCO subsidiary Setter is market leader for paper sticks for the hygiene industry in the US acquisition rounds off Setter’s position in the US market perfectly
The companies have common origins, but have been separate companies for decades
2. Portfolio development and M&A
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Current situation with regard to M&A
On the one hand: M&A in the “good” SME sector is currently a seller’s market A lot of available funds, low interest rates, few attractive investment
opportunities Comparably small number of interesting SMEs
On the other hand: The market continues to be strongly fragmented at all levels (sellers, intermediaries, buyers), there are still interesting opportunities
GESCO strengthened its team in September 2014 (Christoph Borges, Head of M&A)
2. M&A
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3. Financial year 2014/2015
Financial year 2014/2015
Demand was satisfactory, but there wassignificant downward pressure on earnings –all in all a disappointing year
Keep in mind:
GESCO AG and GESCO Group financial year = 1 April to 31 March
Subsidiaries’ financial year = calendar year
Financial statement 2014/2015 encompasses calendar year 2014 in operating terms Financial statement 2015/2016 encompasses calendar year 2015 in operating terms 9
3. Financial year 2014/2015
The economic climate German GDP 2014 +1.5 % German Mechanical Engineering Association (Verband Deutscher Maschinen- und
Anlagenbau – VDMA): Increase in production 1 % (original forecast: 3 %) Association of Plastic Goods Producers (Gesamtverband Kunststoffverarbeitende
Industrie e. V. – GKV): Sales +2.6 %
GESCO Group Slight increase in incoming orders Sales unchanged, slight reduction in organic sales Frank Walz- und Schmiedetechnik GmbH’s sales and earnings were
negatively affected by the Ukraine/Russia crisis The two companies that are being restructured, MAE and Protomaster,
had a negative effect on earnings (announced at the 2014 annual accounts press conference) significant decrease in group earnings
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3. Financial year 2014/2015
Negative impact 1: Protomaster GmbH
Manufacturer of sheet metal forming tools Production of body parts and assemblies for small and medium series using those tools
2014/2015 Increased business volume from contracts concluded in previous years,
challenges due to the complexity and numbers of parts; tool manufacturing partially carried out by third parties; installation of semi-automatic production systems; many external specialists and workers
Significant negative impact on the organisation, high costs leading to a large loss
2015/2016 Production ramped up Goals: Further development of the organisation, transformation from a
producer of prototypes to a small and medium-sized series manufacturer, reduction of external support, cost optimisation
Continued negative effects on results, a further loss-making year 11
3. Financial year 2014/2015
Negative impact 2: MAE Maschinen- und Apparatebau Götzen GmbH World market leader in the market for automatic straightening machines
and wheel presses
2014/2015 Strong growth in previous years driven by innovation, therefore new
construction of administrative and production buildings Development machines from previous years tie up considerable staff
resources Organisational realignment to a consistently higher level of sales Delays in the processing of new orders, resulting in a decrease in sales,
significant loss
2015/2016 Processing of the development machines will be completed Organisational development will be largely completed Positive demand on customers' side Continued negative effects on results, significantly reduced loss 12
3. Financial year 2014/2015 Group key figures
2013/2014 2014/2015 ChangeIncoming orders € million 435.6 448.8 3.0 %
Group sales € million 453.3 451.4 -0.4 %
Group EBITDA € million 48.7 46.2 -5.2 %Group EBIT € million 32.0 27.3 -14.7 %Earnings before tax € million 29.0 24.6 -15.4 %Income taxes € million -9.3 -10.4 -12.3 %Earnings after tax € million 19.8 14.2 -28.4 %Group net income for the year after minority interest € million 18.1 12.4 -31.8 %Earnings per shares acc. to IFRS € 5.45 3.72 -31.8 %Cash flow € million 36.6 33.1 -9.6 %Employees No. 2,360 2,465 4.4 %
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50
100
150
200
250
300
350
400
450
31.03.2014 31.03.2015 31.03.2015 31.03.2014
Current liabilities
Non-current liabilities
Equity capital
Liquid assets
Receivables and other assets
Inventories
Non-current assets
Assets Equity and liabilities
in € million
3. Financial year 2014/2015 Group balance sheet structure
119
81
39
141
135
73
35
183
104
117
177
89
114
404 404
161
380 380
Equity ratio 45.3 %€ 31 million investment
Adequate liquid assets Net liabilities to banks to EBITDA: 1.714
4. Financial year 2015/2016
Initial situation and expectations Economic forecasts indicate growth
(GDP:+2.1 %, VDMA: Increase in production +2 %, GKV: Sales +2.6 %)
Frank Walz- und Schmiedetechnik GmbH: Continued weakness in the agricultural technology sector due to Russia/Ukraine etc.
SVT GmbH: low energy prices lead to restraint in investments of the oil industry decreasing demand for SVT GmbH’s loading arms
Tool manufacturers are expecting decreases in results, partly due to cyclical effects
Restructuring measures at two companies continue to have a negative effect on earnings
Among others, Dörrenberg, Setter, Haseke and CFK are operating at a satisfactory level
Overall sales within the GESCO Group should increase organically, further inorganic growth will be contributed by Setterstix, but margins continue to be far too low 15
4. Financial year 2015/2016
Q1: Very high level of incoming orders, continued poor results
Includes operations at the subsidiaries from January to March 2015
Incoming orders totalled approx. € 146 million (Q1 of previous year € 126.7 million): +15 % (organic +13 %)
Sales totalled approx. € 119 million (Q1 of previous year € 109.5 million): +9 % (organic +6 %)
Book-to-bill therefore considerably higher than 1, but incoming orders include major contracts partly relating to the following year cannot be projected for the year as a whole
Orders backlog at the end of Q1 approx. € 208 million
Q1 earnings continue to be negatively impacted by the two companies that are being restructured, in particular
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4. Financial year 2015/2016
2014/2015Actual figures
2015/2016Target Change
Group sales € million 451.4 480 to 490 6.3 % to 8.5 %
Group net income for the year after minority interest
€ million 12.4 12.5 to 14.0 1.2 % to 13.4 %
Earnings per share acc. to IFRS
€ 3.72 3.76 to 4.21 1.2 % to 13.4 %
Target figures
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Summary:
Overall, we expect satisfactory demand in 2015/2016
The two restructuring measures continue to have a negative effect on earnings
We are working to solve those issues as rapidly as possible
2015/2016 should be better than 2014/2015 –but we haven’t turned the corner yet
4. Financial year 2015/2016
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5. The GESCO share
The GESCO share as an underperformer
Share price development in financial year 2014/2015: +0.3 % (SDAX +17.4 %)
Share price development in calendar year 2014: -0.1 % (SDAX +5.9 %)
Proposed dividend of € 1.75 per share (previous year € 2.20) –distribution ratio slightly above our guideline value of 40 % of EPS
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Free float: 86.4 %
Stefan Heimöller, entrepreneur, member of supervisory board: 13.6 %
Investmentaktiengesellschaft für langfristige Investoren TGV: 6.4 %
Dividend policy: payout ratio approx. 40 % of Group net income after minority interest
5. The GESCO share
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13.6% Stefan Heimöller
6.4% Investmentaktiengesellschaft für langfristige Investoren TGV
36% Other institutional investors
44% Private investors
5. Share price development (in %) – 1 and 5 years
GESCO vs. SDAX, 1 year GESCO vs. SDAX, 5 years
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─ GESCO─ SDAX
80
85
90
95
100
105
110
115
120
80
100
120
140
160
180
200
220
240
5. Share price development (in %) – 10 years
GESCO vs. SDAX, 10 years
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─ GESCO─ SDAX
0
100
200
300
400
Founded: 1989Share capital: € 8,645,000Shares: 3,325,000 registered sharesFree float: 86.4 %Stock markets: Xetra; Frankfurt (regulated market);
Berlin, Düsseldorf, Hamburg, Hanover, Munich, Stuttgart (open market)
Sec. identification number: A1K020ISIN: DE000A1K0201IPO: 24/03/1998 Index: SDAX End of financial year: 31 MarchDesignated sponsors: equinet Bank AG
Oddo Seydler Bank AG
Facts and figures on GESCO AG
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Financial calendar and investor relations contact
Financial calendar25 June 2015 Annual Accounts Press Conference and Analysts’ Meeting
14 August 2015 Q1 figures (01.04. to 30.06.2015)
18 August 2015 Annual General Meeting
13 November 2015 Q2 figures (01.04. to 30.09.2015)
February 2016 Q3 figures (01.04. to 31.12.2015)
30 June 2016 Annual Accounts Press Conference and Analysts’ Meeting
August 2016 Q1 figures (01.04. to 30.06.2016)
25 August 2015 Annual General Meeting
November 2016 Q2 figures (01.04. to 30.09.2016)
Investor RelationsGESCO AG Phone: +49 202 24820-18 Investor Relations Fax: +49 202 24820-49Oliver Vollbrecht E-mail: info@gesco.deJohannisberg 7 Internet: www.gesco.de 42103 WuppertalGermany
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