Annual accounts press conference / analysts’ meeting

Annual accounts press conference /

analysts’ meeting

Engelskirchen

30 June 2016

1.Business model

2. Financial year 2015/2016


4. Capital market and M&A

5. Portfolio strategy 2022

Overview

2

GESCO – an association of industrial SMEs including

market and technology leaders

Currently 17 operating subsidiaries under the roof of GESCO AG.

We think and act on a sustainable and entrepreneurial basis.

We operate in established sectors with innovative technologies.

We offer technology “made in Germany” for the world’s markets.

GESCO is comprised of flexible, operationally independent and

entrepreneurially-managed entities that benefit from being part of a strong group.

GESCO AG – long-term investor and safe haven

for succession solutions

We acquire and develop industrial SMEs on a long-term basis without exit intentions.

Majority acquisitions, generally 100 %.

Usually as part of a succession arrangement.

New management is offered opportunity to acquire stake of

up to 20 % of the new company (“entrepreneur company”).

1. The business model

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Please note:

FY subsidiaries = calendar year

4


1 Jan 2015 31 Dec 2015

31 March 2016 1 April 2015

FY GESCO AG / GESCO Group = 1 April to 31 March

Economic environment

German GDP 2015 +1.7 %

VDMA: stagnant production (original forecast: +2 %)

low oil price

zero interest rate environment

more subdued sentiment from summer onwards,

subsiding economic growth in China

GESCO Group

Expansion of portfolio with Setterstix Inc. in Jan 2015,

included in income statement for first-time in reporting year

lively demand

USA replaces China as main export market

incoming orders and sales growing organically and through acquisition

results improving disproportionately

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Sectors that remained difficult:

Agricultural machinery (Frank Walz- und Schmiedetechnik GmbH)

Oil and chemicals industry (SVT GmbH)

Better than expected:

Large tools for car body parts (WBL): cyclically-induced

weak new business was offset by reworking external tools

Robust demand for wire erosion and 3D printing:

CFK above budget, exceptionally good year

The two restructuring cases:

MAE: developing machines processed, 2015 better than planned,

restructuring successfully completed; 2016 clearly positive

Protomaster: good progress, 2015 better than planned, balanced results

targeted for 2016, but ongoing risks, especially in terms of capacity

utilisation

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2014/2015

2015/2016

Change

Incoming orders € mn 448.8 483.2 7.7 %

Group sales € mn 451.4 494.0 9.4 %

Group EBITDA € mn 46.2 53.3 15.4 %

Group EBIT € mn 27.3 31.5 15.2 %

Earnings before tax € mn 24.6 28.8 17.4 %

Taxes on income

and earnings

€ mn

10.4

10.3

0.9 %

Earnings after tax € mn 14.2 18.5 30.9 %

Group net income

after minority interest

€ mn

12.4

16.1

30.6 %

Earnings per share

pursuant to IFRS

€

3.72

4.85

30.6 %

Cash flow € mn 33.1 40.1 21.2 %

Employees No. 2.465 2.537 2.9 %

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Organic *): +6.9%

Organic *): +5.1%

Operating

improvement,

progress with

restructuring

Organic *): +1.3%

*) organic = excl. addition of Setterstix Inc.

2. Financial year 2015/2016 – budget-actual comparison

Group sales (€ mn)

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Outlook June 2015

480 to 490

Actual

494

Group net income after minority interest (€ mn)

12.5 to 14.0

16.1

Outlook June 2015

Actual

50

100

150

200

250

300

350

400

450

31.03.2015 31.03.2016 31.03.2016 31.03.2015

Current liabilities

Non-current liabilities

Equity

Liquid assets

Receivables and

other assets

Inventories

Fixed assets

Assets Equity and

liabilities

in € mn

135

73

35

161

133

77

37

196

101

113

183

104

117

410 410

163

404 404

Equity ratio 47.7 % Investments € 25 mn

Sufficient liquid assets Net bank debt to EBITDA: 1.5 9


€ 5.8 mn paid in dividends

Conclusion

business was generally lively

the reporting year was much better than expected,

especially in terms of earnings

The main reasons were:

restructuring proved more effective than anticipated

operating business exceeded the budget at some companies

positive one-off effects

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Starting position and expectations for new financial year

Forecast GDP growth: 1.7 % to 1.8 %

Forecast VDMA: stagnation at best

Agricultural machinery and oil industry: still no growth impetus

Industrial customers still generally showing reluctance to invest

New growth stimuli still lacking in capital goods industry

of relevance to the GESCO Group

Our measures:

Short term: cost reduction, questioning investments

Medium term: optimisation projects on cost and opportunities side

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2015/2016

Actual

2016/2017

Budget

Change

Group sales € mn 494.0 480 to 490 -2.8 % to -0.8 %

Group net income after minority interests

€ mn 16.1 13.5 to 14.5 -16.1 % to -9.9 %

Earnings per share pursuant to IFRS

€ 4.85 4.06 to 4.36 -16.1 % to -9.9 %

Budget figures

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Why is the outlook subdued?

still no growth impetus for capital goods industry,

steel industry under consolidation pressure

widespread low capacity utilisation, prices under strong pressure

positive one-off effects of the prior year won‘t occur

in the new financial year

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What are the opportunities?

Tool manufacture: additional orders for reworking external tools

(not plannable)

Significant recovery of steel market (currently no sign)

Increase in general willingness to invest

What are the risks?

Economic setbacks for Protomaster, especially in terms

of capacity utilisation

General economic downswing

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Brexit: another cause of uncertainty

direct sales of GESCO Group with UK

in financial year 2015/2016:

around € 4.9 mn = 1% of Group sales

direct implications are therefore limited

indirect implications cannot be reliably estimated at the moment

general uncertainty is growing, which could further undermine

the general investment climate

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3. Financial year 2016/2017 – Q1 (operating period Jan. to March 2016)

Start to new financial year (preliminary figures for the first quarter)

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Incoming orders Q1 approx. € 122.4 mn

Sales Q1 approx. € 113.5 mn

Incoming orders below prev. year’s Q1, but above previous quarter; book-to-bill > 1

Q1 sales still weak due to low incoming orders in previous quarters

0

20000

40000

60000

80000

100000

120000

140000

160000

Q1 Q2 Q3 Q4 Q1

2015 2016

─ Incoming orders

─ Sales

Q1 prev. year incl. large order

GESCO share

underperformed the SDAX benchmark in reporting year

delisted from SDAX in December 2015

two largest shareholders increased shareholding

Mr Heimöller acquired roughly 30,000 shares, currently holds around 14.6 %

Investmentaktiengesellschaft für langfristige Investoren TGV

exceeded the 10 % threshold in Dec 2015, currently holds around 13.0 %

the two biggest shareholders now hold almost 30 % of the shares

Proposed dividend (€ per share)

Dividend policy: payout ratio approx. 40 % of Group net income

after minority interest

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2015/2016 2014/2015

€ 1.75 € 2.00

4. The GESCO share

Free float: 85.4 %

Stefan Heimöller, entrepreneur, member of supervisory board: 14.6 %

Investmentaktiengesellschaft für langfristige Investoren TGV: 13 %

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4. Share price development (in %) – Financial year 2015/2016

GESCO vs. Indices, Financial year 2015/2016

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GESCO DAX SDAX

4. Share price development (in %) – 1 and 10 years

GESCO vs. Indices, 1 year GESCO vs. Indices, 10 years

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406080

100120140160180200220240260

GESCO DAX SDAX

Proposal to Annual General Meeting on 25 August 2016:

capital increase from company funds and share split

Objective: to make the share “lighter” through higher number of shares in

order to enhance the share’s attractiveness for private investors and to

improve liquidity

Implementation:

Increase in share capital by € 1,330,000 through capital increase from

company funds

Redistribution of share capital through share split 1:3

All shares are fully entitled to dividends for financial year 2016/2017

New share capital of € 9,975,000 divided into 9,975,000 shares with a

calculated nominal value of € 1.00 each

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M&A remains a seller’s market

High demand, limited number of candidates rising multiples

Last acquisition was Setterstix Inc. in early 2015

Numerous offers have since been analysed,

evaluations have been carried out

GESCO AG has intensified its activities,

is increasingly approaching companies directly

Focus on 4 end customer market segments

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GESCO’s portfolio strategy

Spring 2016: development of a portfolio strategy of profitable growth

based on tried-and-tested GESCO business model

Criteria: long-term positive megatrends, comparable end customer markets,

similar economic fluctuation and growth rates

Definition of 4 relevant end customer market segments

Grouping of existing GESCO Group companies into the new segments,

new segment reporting as of Q1 2016/2017

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Production process

technology

Resource

technology

Health and

infrastructure

technology

Mobility

technology

Production process

technology

Sales*): € 76.7 mn

EBIT *): € 4.5 mn

Features: Dynamically growing markets,

high degree of innovation, automation,

trend towards “batch size 1”

Products /

services:

Robotics and automation solutions in

machine and plant construction,

technology-intensive manufacturing

services

End

customers:

Serial producers, e.g. in automotive,

steel and consumer goods industries

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*) unaudited pro-forma figures, financial year 2015/2016

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Resource

technology

Sales*): € 220.2 mn

EBIT *): € 18.8 mn

Features: Consolidating markets, focus on

niches and customer service

Products /

services:

Customised preparation of primary

materials, e.g. materials supply,

transport and loading technology

End

customers:

Material-intensive industrial

companies, globally distributed

production structures, broadly

diversified

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Health and

infrastructure

technology

Sales*): € 112.0 mn

EBIT *): € 9.5 mn

Features: Close to end consumers, not very

cyclical, relatively resilient to

economic fluctuation

Products /

services:

Components, modules and primary

products

End

customers:

Providers for mass markets close to

end consumers (construction, sanitary

equipment, food, hygiene, medicine)

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Mobility

technology

Sales*): € 85.5 mn

EBIT *): € 8.2 mn

Features:

Cyclical automotive market,

positive outlook driven by

technological leaps, e.g.

electromobility

Products /

services:

Tools and moulds, components, parts

End

customers:

Vehicle industry, e.g. car,

commercial vehicle and rail

Objective of the GESCO portfolio strategy: enhance value

of investment portfolio organically and through acquisitions

Respective managing directors continue to have exclusive

operating responsibility for GESCO Group companies

As the majority shareholder GESCO AG has “3 levers”

1. Appointment of best possible management

2. Prioritisation of investment projects within the individual companies

which promise the highest return on capital employed in the long term

3. Active consulting and support role of shareholder:

Monthly discussions, regular exchange, sparring, best practice

Setting focal themes on strategy days: digitalisation and Industry 4.0

Support for technical optimisation projects for profitable growth and

cost efficiency, from the beginning of a project to its implementation

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Appendix – GESCO Group overview

Company Sales 2015

€‘000

Staff as at

31/12/2015

GESCO AG

shareholding

AstroPlast Kunststofftechnik GmbH & Co. KG 16,262 92 80%

Paul Beier GmbH Werkzeug- und Maschinenbau & Co. KG 12,117 117 100%

C.F.K. CNC-Fertigungstechnik Kriftel GmbH 9,708 66 80%

Dömer GmbH & Co. KG Stanz- und Umformtechnologie 15,661 104 100%

Dörrenberg Edelstahl GmbH 179,243 509 90%

Frank Group 27,629 258 90%

Franz Funke Zerspanungstechnik GmbH & Co. KG 15,383 80 80%

Haseke GmbH & Co. KG 12,969 64 80%

Hubl GmbH 12,775 106 80%

Georg Kesel GmbH und Co. KG 11,239 60 90%

MAE Group 44,359 222 100%

Modell Technik Formenbau GmbH 13,961 115 100%

Protomaster GmbH 17,688 123 82.17%

Setter Group 26,984 98 100%

SVT GmbH 33,464 186 90%

VWH Vorrichtungs- und Werkzeugbau Herschbach GmbH 11,421 109 80%

Werkzeugbau Laichingen Group 26,594 177 85%

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Founded: 1989

Share capital: € 8,645,000

Shares: 3,325,000 registered shares

Free float: 85.4%

Stock markets: Xetra; Frankfurt (regulated market); Berlin, Düsseldorf, Hamburg, Hanover, Munich, Stuttgart (open market)

Sec. identification number: A1K020

ISIN: DE000A1K0201

IPO: 24/03/1998

End of financial year: 31 March

Designated sponsors: equinet Bank AG Oddo Seydler Bank AG

Appendix – Facts and figures for GESCO AG

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Appendix – Financial calender

Financial calendar

30 June 2016 Annual Accounts Press Conference /

Analysts’ Meeting

15 Aug. 2016 Figures for the first quarter (1 April to 30 June 2016)

25 Aug. 2016 Annual General Meeting, Wuppertal

15 Nov. 2016 Figures for the second quarter

(1 April to 30 September 2016)

Feb. 2017 Figures for the third quarter

(1 April to 31 December 2016)

29 June 2017 Annual Accounts Press Conference / Analysts‘

Meeting

Aug. 2017 Figures for the first quarter (1 April to 30 June 2017)

31 Aug. 2017 Annual General Meeting, Wuppertal

Nov. 2017 Figures for the second quarter

(1 April to 30 September 2017)

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Appendix – Investor Relations contact

Investor Relations GESCO AG Telephone: +49 202 24820-18 Investor Relations Fax: +49 202 24820-49 Oliver Vollbrecht E-mail: [email protected] Johannisberg 7 Internet: www.gesco.de 42103 Wuppertal

Germany

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Annual accounts press conference / analysts’ meeting

Economy & Finance

Transcript of Annual accounts press conference / analysts’ meeting