accounts press conference / analysts‘ meeting · market and product excellence mapex analysis of...

28 April 2020

Accounts Press Conference /Analysts‘ Meeting

GESCO – Accounts press conference - 28 April 2020

GESCO

Intro

2

from the technology-driven German „Mittelstand“

Hidden Champions

… in one share

GESCO – Accounts press conference - 28 April 2020 3

Agenda

Strategy NEXT LEVEL Excellence Programmes

GESCO on the

stock market

Appendix

Business model

0 1 0 2 0 3

M & A

0 4Abbreviated financial year

2019

0 5 0 6

Financial year 2020

0 7 0 8


01 Business model


GESCO – The Industrial Group

▌18 operating subsidiaries, growing internationallly, under the roof of GESCO AG

▌ Flexible, operationally independent companies that benefit from being part of a strong group

▌ Innovative technology „Made in Germany“ for global markets

GESCO

Group

GESCO

AG ▌ Acquisition and development of industrial SMEs on

a long-term basis, ▌ Majority acquisitions, generally 100 %, mostly as succession arrangements

▌ Managers can acquire stake of up to 20 % in their company

Hidden Champions des technologie-getriebenen deutschen Mittelstands in einer Aktie

5

01 Business model

Industrial SMEs including market and technology leaders

Long-term investor and safe haven for succession solutions

Hidden Champions from the „Mittelstand“ in one share


GESCO – The Industrial Group

01 Geschäftsmodell


6

01 Business model

Technologies

Production processDynamically growing markets, high

degree of innovation,

Robotics and automation solutions in machine and plant construction

Health & InfrastructureStable markets, relatively resilient

to economic cycle

Modules, componentsand perishable goods

RessourceConsolidating markets, focus on niches and customer service

Customised preparation of primary materials, loading equipment forgases and liquids

Tools and moulds, components, parts etc. for vehicle industry

Currently strategic shifts, market development unclear and challenging

Mobility

end-market oriented segments


02 StrategyNEXT LEVEL


GESCO – the Vision

8

02 Strategy NEXT LEVEL

▌ All companies are Hidden Champions or well on track to becoming Hidden Champions

▌ Well-balanced, robust and resilient portfoliowith three core holdings and basic holdings of substantial size

▌ Strong corporate culture, attracting employees, offering them room for development, resulting in High Performance teams

▌ Well established Excellence Programmes

an attractive goal


The strategy

9

02 Strategy NEXT LEVEL

a holistic concept

EN

TX

P O R T F O L I O

A R C H I T E C T U R E

H I D D E N

C H A M P I O N S

M & A| Buy bigger companies

| Stronger focus on add - ons

| Optimise processes

| Intensify direct approach

PROGRAMMESCANVAS - Business Model |

MAPEX |

OPEX |

LEADEX |

E

TX

NHOLDING

Analyse the portfolio

Encourage visionsto achieve next levels

Strengthen corporate cultureand team spirit

Add skills in terms of methods and know-how


03 Excellence Programmes


Market and Product Excellence MAPEX

Analysis of customer segments, product offerings, customer channels and relationships. New ideas

for product portfolio and market position

Expand market shares, tackle new market

segments, develop product innovations

Leadership Excellence LEADEX

Sharpen leadership skills in a dynamic environment,

support attractivity as employer

Promote and develop executives,strengthen corporate culture

OPEX Operational Excellence

Analysis of the value added processes, in particular the parameters quality, lead time and delivery performance as well as cost structures

Increase efficiency and margins

CANVAS Business model analysis

Upstream workshops for a holistic analysis of the respective business model

Create a common understanding in the management team, identify development potentials

11


Systematic and adjusted process

The elements


The targets

12


clearly measurable

OperationalExcellence

Market andProductExcellence

9 – 12 months lead time before effectiveness

3 %p. a.

3 %p. a.

Sales per employeegrows by

Sales growsabove market by

Target margin8 – 10%

p. a.EBIT

12 – 24 months lead time before effectiveness

Throughout the economic cyle


Our schedule

GESCO auf die nächste Ebene entwickeln

13

HUBL

Sommer & Strassburger

DÖMER

MAE Group

Frank Group

Pickhardt & Gerlach Group

Dörrenberg Group

C.F.K.

Paul Beier

Modell Technik

AstroPlast

Georg Kesel Group

SVT

2019 2020

OPEX Analysis OPEX Implementation

OPEX Analysis OPEX Implementation

OPEX-Analyse OPEX Implementation

MAPEX Analysis MAPEX Implementation



MAPEX Analysis

MAPEX Analysis

1) postponed due to Corona

1)

MAY JUN JUL AUG SEP OCT DEC FEB MAR APR MAY JUNNOV JAN

1)

1)


Hidden Champions are being created


Highlights 2019

14


O P E X

Sommer & Strassburger improves delivery reliabilityto > 90 %and increases margin

M A P E X

Pickhardt & Gerlachdevelops

new branding conceptand enters new markets

I N N O V A T I O N

FRANK Groupwinsinnovation award of Agritechnicafor sensor system mower units

E X P A N S I O N

Setter Group opens

two new plants and furtherincreases sales by 45 %

Fundament for profitable growth


04 M&Afurther


04 M & A

Readjusted

Directed towards target portfolio

Network

still generatesgood dealflow

Direct approach

selected targets basedon own market analysis

Target profile

Sales of€ 20 mn € to € 100 mnfor direct investments

Add - ons

with strategic added value for existing companies

from € 5 mn sales

GESCO

Always looking forHidden Champions


Produktionsprozess Ressourcen Gesundheit und Infrastruktur Mobilität

IST

17

04 M & A

Portfolio Architecture

balanced and resilient

Target

3 core holdingwith different end markets

several basic holdingswith substantial sales and earnings contribution


05 Abbreviatedfinancial year 2019


Change of financial year

19

05 Abbreviated financial year 2019

Resolution of AGM on 29.08.2019

MFJDNOSAJJMAMFJDNO…

DNOSAJJMAMFJDNO…

GESCO AG

subsidiaries

as reported

OSAJJMAMFJDNOSAJJMA DN

OSAJJMAMFJDNOSAJJMA DN

MFJDNOSAJJMA

DNOSAJJMA MFJ

GESCO AG

subsidiaries

financial year2020

abbreviated FY01.04 – 31.12.20193

1.1

2.2

01

7

31

.03

.20

18

31

.12

.20

18

31

.03

.20

19

31

.12

.20

19

31

.12

.20

20

*) adjustment according to IAS 8 due to deficiency finding

of FREP with regard to Group accounts 31.03.2018

adjusted *)


The environment 2019

20


Subdued environment

German economy

• GDP expected : +0.5 %

• GDP actual: +0,6 %

• Consumption als trigger

Investment goods industry

VDMA expectation for production:

• Initially: 1 % growth

• From July 2019: 2 % decline

• Actual: 2.8 % decline

Automotive

• OEMs and large suppliers arestill reluctant to invest

• High uncertainty due to shifts in automotive industry

Margins under pressure

• Decreasing demand

• Increasing pressure from competition

• Customers focus on prices


Ord. int. 62.0 93.2

Sales 76.4 87.5

EBIT 7.7 8.1

EBIT margin 10.1 % 9.3 %

Ord int. 200.1 289.2

Sales 211.4 287.2

EBIT 17.9 31.8


Ord. Int. 108.5 161.2

Sales 112.7 145.2

EBIT 8.3 14.3


Ord. int. 32.5 59.3

Sales 39.5 61.0

EBIT -2.1 2.1

EBIT margin -5.4 % 3.4 %


Heterogeneous picture

Ressource Technology

Health & Infrastructure Technology

MobilitätyTechnology

ProductionProcessTechnology

Demand in automotive declining Based on calendar year order intake slightly decreasing, sales and earnings increasing due to acquisition

Environment extremely difficult; significant decline in order intake, earnings under considerable pressure from restructuring

Based on calendar year order intake almostunchanged, sales increasing, margindecreasing

Based on calendar year order intake and sales slightly decreasing, earnings and margin below last year’s record figures due to economic environment

Abbreviated FY 2019 (9 months)

2018/2019 adjusted

(12 months)

Segment development


Key figures

22

Abbreviated FY2019 (9 months)

2018 / 2019(12 monthy)

Adjusted

Order intake / € million 403.2 602.9

Group sales / € million 439.6 580.3

EBITDA / € million 44.0 68.4

EBIT / € million 23.5 42.1

Group net income after minorityinterest / € million 12.4 22.6

Earnings per share acc. to IFRS / € 1.14 2.08

Staff / No at reporting date 2,718 2,684

Investments in tangible assets / € million 15.8 23.3

Decline in demand mainly in automotive and investment goods

EBIT margin 5.3 % (prev. year 7.3 %) Effect IFRS 16: € +0.1 million

Staff adjustments mainly visible from beginning of 2020 on; staff increase at Setter, staff decrease mainly in Mobility segment

Focus: new machinery at Setter Group domestic and abroad, new production hall at VWH; reporting year incl. € 1.7 million due to IFRS 16


Based on calender year sales slightly increasing

EBITDA margin 10.0 % (prev. year 11.8 %) Effect IFRS 16: € +2.5 million

Corresponds to outlook from Nov. 2019


Key figures Cash flow

23

AbbreviatedFY 2019

(9 months)

2018 / 2019(12 months)

Adjusted

Result for the period / € mn 13.7 25.8

Cash flow for the year / € mn 34.0 51.6

Operating cash flow / € mn 38.6 13.7

Cash flow from investment activities / € mn -13.8 -41.3

Cash flow from financing activities / € mn -23.2 9.1

Net change in cash and cash equivalents / € mn 1,534 -18,473

Cash and cash equivalents on 01.04. / € mn 29.3 47.8

Cash and cash equivalents on 31.12. and 31.03. / € mn 30.9 29.3


Improvement in operating cash flow

In reporting year slight decrease, in prev. year clear increase in working capital

Solid amount of cash

In reporting year incl. depreciation on rights of use (€ 3.3 mn) for the first time

Prev. year included company acquisition

In reporting year reduction of net cash € -7.0 mn and repayment of lease liabilities (IFRS 16) of € -3.2 mn


Key figures balance sheet

24

Assets Liabilities

30

102

178

215

31

97

151

227

145

111

250

158

117

250

31.03.2019adjusted

31.12.2019 31.12.2019 31.03.2019adjusted

Sufficient liquid funds

Non-current assets

Inventories

Receivables andother assets

Liquid funds

Equity

Non-current liabilities

Current liabilities

0

100

200

300

400

500

600

+ € 15 mn from new IFRS 16 accounting Equity ratio

49.5 %

in € mn


+ € 15 mnlease

liabilities due to IFRS 16

525 525506 506

Working capital reduction € 12 mn

Solid balance sheet ratios, full capability to act

Net bank debt to EBITDA on annualized basis 1.8

(adjusted previous year 1.6)


06 GESCOon the stock market


GESCO share

26

GESCO AG (incl. dividends) vs. SDAX

01.04.2019 31.03.2020

SDAX

GESCO AG100%

06 GESCO on the stock market

Price decoupled from SDAX since Nov. 2019

End of financial year31.12.2019


Dividend

27


Dividend policy OLD

Distribution ratio approx. 40 % of Group

net income after minority interest

Dividend policy NEW

• 20 % to 60 % of Group net income

after minority interest

• Higher flexibility, especially with regard

to the implementation of the M&A

strategy of NEXT LEVEL

• In phases of strong earnings and cash

flows distributions significantly above

recent level

Dividend proposal for 2019

• Due to the Corona crisis, application

of the new policy was brought forward

• Proposal of € 0.23 / share corresponds

to lower end of range

• Dividend proposal is subject to the

further development of the corona

pandemic

• AGM to be held on 18.06.2020

as virtual AGM

Higher flexibility


Shareholder structure

28

13.7 % Stefan Heimöller

71.5 % Freefloat(acc. to definition ofDeutsche Börse)

rd. 32.7 % otherinvestors

rd. 32.7 % other institutionalinvestors

3.0 % LGT Capital Partners Ltd.

3.1 % LBBW Asset Management Investmentgesellschaft mbH

14.8 % Investmentaktiengesellschaft für langfristige Investoren TGV


Shareholder structure essentially unchanged


07 Financial year 2020


Dominated by the pandemic

30


Consequences with delay

German economy

Extrem degree of uncertainty

Outlook depends on duration of

lockdowns

IfW: GDP -4.5 % to -9.0 % (19.03.2020)

Investment goods industry

VDMA reduced expectation for

production from -2 % to -5 % on

12.03.2020, stressed uncertainty

Automotive

Situation already difficult due to shifts,

exacerbated by pandemic

Sales already weak in 2019,

now worldwide slump in sales

GESCO Group: measures

Measures to protect staff and business

partners started immediately

Contact to customers and partners

maintained as far as possible, close

dialogue

GESCO Group: customers

Shutdowns at OEMs for several weaks

Situation complicates orders for

investment goods

GESCO Group: status of production

Supply chains mainly inact, no shutdowns

due to lack of supply

Beginning of 2020 state-ordered

shutdowns in China, currently in one

company in the USa


Our approach

31


keep on working consistently

Target 1

We want to cope with the crisis in good

health - each one of us personally, we as a

group economically

Target 3

As a group we want to emerge

strengthened from the crisis

Target 2

We want to strengthen partnerships in the

crisis - through fair cooperation both

internally and externally

Basis: Solid financials

€ 30 mn cash, approx. 50 % equity ratio in

the Group, broadly diversified debt

Subsidiaries generally with solid financials

Basis: SME character

Agile operating units, decentralized

decision making, quick implementation

Basis: Strategy NEXT LEVEL

Moves in the right direction, suppors in

overcoming the crisis


Preliminary figures Q1 (01.01. - 31.03.2020)

32

Financial year2020

Financial year2019

adjusted

Order intake / € million approx. 136 156.9

Group sales / € million approx. 129 145.8

Group net income after minority interest / € million approx. 0.4 4.0


Publication of figures Q1: 29.05.2020

Decline in demand results in lower order intake

Production process technology still EBIT negative; production of machines started which will only haveimpact on sales and earnings later in the year

Ressource technoloy with declining margin; orders in project business contribute sales and earnings only laterin the year

Health and infrastructure technology with stable earnings

Mobility technology EBIT negativ


Segment outlook for the full year

33

Ressource Technology

Health & InfrastructureTechnology

Mobility Technology



Corona exacerbates the economic downturn

Declining sales in mechanical and plant engineering, margins under pressure; growth in stainless steel processing

Environment deteriorates further, revenue declines, losses increase, negative EBIT in the full year

Overall positive development, earnings grow disproportionately

Tool steel with decline in sales and earnings, strip steel stable, margin improvement in loading technology

SALES

EBIT

SALES

EBIT

SALES

EBIT

SALES

EBIT


Group outlook

34

(Outlook before M & A / changes to scope of consolidation)

Financial year2020

Abbreviated FY2019

(9 months)

Group sales / € million 540 – 560 439,6

Group net income after minority interest / € million 8 – 11 12,4


a difficult year, but manageable

Expectations may change significantly at short notice in light of the dynamic development of the Corona pandemic.


08 Appendix


GESCO – group overview


36

Company Sales 2019€‘000

Staffas at 31.12.2019

GESCO AGShareholding

MAE Group 37,875 218 100%

Sommer & Strassburger GmbH & Co. KG 20,753 144 100%

VWH GmbH 16,977 129 80%

Georg Kesel Group 12,596 60 90%

C.F.K. CNC-Fertigungstechnik Kriftel GmbH 7,177 60 80%

Dörrenberg Group 204,862 527 90%

SVT GmbH 44,768 177 100%

Pickhardt & Gerlach Group 31,268 45 100%

Setter Group 50,435 180 100%

Frank Group 37,434 336 90%

Franz Funke Zerspanungstechnik GmbH & Co. KG 20,285 95 100%

Hubl GmbH 16,356 118 80%

Haseke GmbH & Co. KG 14,404 81 80%

AstroPlast Kunststofftechnik GmbH & Co. KG 13,550 90 100%

Werkzeugbau Laichingen Group 21,469 173 100%

Dömer GmbH & Co. KG Stanz- und Umformtechnologie 17,286 96 100%

Modell Technik Formenbau GmbH 10,356 107 100%

Paul Beier GmbH & Co. KG 8,548 63 100%

ResourceTechnology

Health & Infrastructure Technology

Mobility Technology


08 Appendix


Facts and Figures

37

Stock markets

Xetra; Frankfurt (regulated market);Berlin, Düsseldorf, Hamburg/Hannover, München, Stuttgart (open market)

Sec. identification number A1K020

ISIN DE000A1K0201

IPO 24.03.1998

End of financial year 31 December

Designated sponsorsM.M. Warburg & CO,Pareto Securities AS

Share capital

10,839,499 €

Shares

10,839,499

71.5 %Freefloat

Founded

1989

08 Appendix


Financial Calendar

38

29 May 2020Q1 figures

18 June 2020Annual General Meeting

(online)

31 August 2020Q2 figures

27 April 2021Annual Accounts Press

Conference / Analysts‘ Meeting

May 2021Q1 figures

30 June 2021Annual General Meeting,

Wuppertal

2020

2021

08 Appendix

30 Nov. 2020Q3 figures

GESCO AG

Investor Relations

Johannisberg 7

42103 Wuppertal

Germany

Phone +49 202 24820-18

Fax +49 202 24820-49

[email protected]

39

Shareholder contact

08 Appendix

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