stratec erste group innovation conference 20190425 · 2.the ivd market 3.financials 4.outlook and...
TRANSCRIPT
INNOVATION CONFERENCE ERSTE GROUP
Warsaw, April 25, 2019
SAFE HARBOR STATEMENT
Forward-looking statements involve risks.
This company presentation contains various statements concerning the future performance of STRATEC. These statements are based on both assumptions and estimates. Although we are convinced that these forward-looking statements are realistic, we can provide no guarantee of this. This is because our assumptions involve risks and uncertainties which could result in a substantial divergence between actual results and those expected.
It is not planned to update these forward-looking statements.
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AGENDA
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1. OVERVIEW AND BUSINESS MODEL2. THE IVD MARKET3. FINANCIALS4. OUTLOOK AND STRATEGY
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OVERVIEW AND
BUSINESS MODEL
• Leading OEM player for automation solutions for the diagnostics industry and translational research
• Three decades of experience in highly regulated healthcare markets and growing technology pool
• More than1.200 employees worldwide
More than 50% allocable to R&D
• Production sites in Germany (HQ), Switzerland, Hungary and Austria
• High number of systems installed globally
More than 13,000 medium to high throughput systems
More than 25,000 low throughput systems
• Sales of € 187.8 million in 2018
CAGR sales since IPO in 1998: ~15%
• Dividend payments raised over 14 consecutive years
OVERVIEW AND BUSINESS MODEL
STRATEC AT A GLANCE
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SELECTED PRODUCTS
OVERVIEW AND BUSINESS MODEL
UNIQUE MARKET POSITION STRATEC IN THE IVD VALUE CHAIN
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DiagnosticCompanies
Blood Banks,Laboratories
Patients
STRATEC develops and manufactures fully automated analyzer systems and disposables focusing on the high growth segments in diagnostics
Partners market systems together with reagents and consumables to laboratories, blood banks and hospitals worldwide
Laboratories performing tests and offering service to doctors and patients using reagents from diagnostic companies
Growth drivers:
• Aging population
• Developing healthcare systems worldwide
• Rising prevalence of chronic diseases
• High volume of new tests
OVERVIEW AND BUSINESS MODEL
BUSINESS MODEL
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STRATEC provides instrumentation, consumables, software and automation solutions
OEM development and manufacturing
Around 8,000 fully automated analyzer systems and modules manufactured annually
Wide range of intellectual property rights
Extensive collaboration with partner during design phase
STRATEC: Engineering / automation, software, QM
Partner: System / reagent / market requirements
Systems have long market lifecycles
Product lifecycles typically in an area of 12 to 15 years
Leads to longstanding partnerships
Expanding installed base of systems
Product enhancement and extension drives value
Dev
elopm
ent
and m
arke
t la
unch
of su
cces
sor
pro
duct
OVERVIEW AND BUSINESS MODEL
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Long-term agreements with partners Milestone payments during development stage
Operating sales during series production stage
Recurring sales from service parts & consumables sales
Minimum volume commitment Firm purchase orders
STRATEC an integral part of partners’ plans
Reliable partnership Shortened development time
Integration of analyzer system and reagents
Agreed development budget & transfer price
High commitment by both partners
SECURING RETURN ON INVESTMENT
INDICATIVE SALES CHARACTERISTICS OF AN ANALYZER OEM PROJECT
8
2 to 4 yearsDevelopment
phase
12 to 15 yearsMarketing phase of the analyzer system
Another 5 yearsof service parts & consumables
Service part & consumables
Sale
s
9
THE IVD MARKET
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THE IVD MARKET
IVD MARKET SEGMENTS / IVD MARKET: ~ 68 BILLION USD IN 2018
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Market growth CAGR 2018-2023
Total IVD-Market: ~5% p.a.
Molecular Diagnostics: ~9% p.a.
Immunodiagnostics: ~6% p.a.
Point of Care: ~8% p.a.
Growth drivers
Aging world population
Rising prevalence of chronic diseases
Expansion in healthcare systems, especially in emerging markets
New technologies broadening scope of IVD applications (e.g. oncology, personalized medicine or non-invasive prenatal testing)
Increasing automation
Total instrumentation market ~ 8.9 billion USD
Source: Kalorama: “The worldwide market for In Vitro Diagnostic Tests, 10th Edition”, Aug 2016MarketsandMarkets: “In vitro diagnostics market – forecast to 2023”, Dec 2018
THE IVD MARKET
OUTSOURCED VS IN HOUSE INSTRUMENTATION MARKET
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Total instrumentation
market~ 8.9 billion
USD
In House~ 60 %
Outsourced~ 40 %
In House73 %
Outsourced27 %
2010 2018
Source: Own estimates based on historical market data and recent industry trends
Trend of outsourcing towards specialized players set to continue, due to:
Engineering of automation solutions often not core competence of diagnostics companies
Shorter development timeframes due to already existent technology pools
Guaranteed project budget and firm transfer prices
Keeping up with regulatory developments easier for specialized players
Structured processes in order to address end customer needs, such as ease of use, user experience, workflow efficiencies, remote access, serviceability and preventive maintenance
THE IVD MARKET
A SELECTION OF STRATEC CUSTOMERS
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Source: IVD News / non-public companies estimated / non-reported sector sales estimated
… AND OTHER GAME-CHANGING COMPANIES
(acquired by Bio-Rad in January 2017)
STRATEC customer
Not a STRATEC customer
GLOBAL TOP 20 IVD COMPANIES Sales 2017 (USD billion)
1. Roche Diagnostics 10.2
2. Abbott Diagnostics 7.3
3. Danaher 5.8
4. Siemens 5.0
5. ThermoFisher 3.5
6. Sysmex 2.4
7. bioMerieux 2.1
8. Ortho Clinical Diagnostics 1.8
9. BECTON DICKINSON 1.4
10. BIO-RAD 1.4
11. Hologic 1.2
12. CH Werfen 1.0
13. Grifols 0.8
14. Agilent 0.8
15. Diagnostica Stago 0.7
16. Qiagen 0.7
17. DiaSorin 0.7
18. Perkin Elmer 0.6
19. Fujirebio 0.4
20. Immucor ~0.4
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FINANCIALS
FINANCIALS
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KEY FIGURES - TRACK RECORD
Sales in € millionCAGR ~12%
EBIT in € millionCAGR ~9%
1 Figures adjusted for comparison; adjusted for depreciation and amortization from purchase price allocation for acquisitions, related integration expenses and other extraordinary effects. Reconciliation to IFRS figures can be found in the respective annual report.
6176
102116.6 122.7 128
144.9 146.9
184.9
207.5
187.8
0
50
100
150
200
250
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
11.2
14.7
17.6
21.8
15.6
19.5
24.1
26.9
32.3
36.4
26.2
0
5
10
15
20
25
30
35
40
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
1
1
1
FINANCIALS
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KEY FIGURES - TRACK RECORD
Net income in € millionCAGR ~9%
Dividend per share in € CAGR ~9%
8.2
11.713.0
15.3
12.4
15.5
19.8
22.1
25.4
28.9
20.2
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
0.35
0.450.50
0.55 0.560.60
0.700.75 0.77
0.80 0.82
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
1
1
1 Figures adjusted for comparison; adjusted for depreciation and amortization from purchase price allocation for acquisitions, related integration expenses and other extraordinary effects. Reconciliation to IFRS figures can be found in the respective annual report.
1
FINANCIALS
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SALES BY OPERATING DIVISIONS
56% 55% 49% 49%
26% 29%32% 33%
18% 15% 18% 16%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2015 2016 2017 2018
Systems Service parts and consumables
Developement & services Others
In % of total sales
As of December 31
Continuously growing share of service parts and consumables sales
• At 33% of total sales in 2018 versus 26% in 2015
FINANCIALS
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• Organic sales decline of 5.9% to € 187.8 million as forecast; nominal: -9.5% (2017: € 207.5 million)
- Postponements (now overcome; e.g. US partner attained CE-IVD certification in March 2019)
- Negative effects from first time adoption of IFRS 15 (-2.2 ppts) and foreign exchange rates (-1.4 ppts)
- Improved order dynamics throughout Q4 2018
• Adjusted EBIT margin down by 360 bps yoy to 13.9% (FY 2017: 17.5%)
- Slightly above forecast of 11-13%
- Negative scale effects and increased expenses to process a large number of development projects
• Continuously growing project pipeline
• Number of employees up by 13.1% to 1,228 in the light of full project pipeline
- R&D employees now account for 54% of total workforce
• Implementation of group-wide ERP system
- Successful “Go-Live” at Headquarters in Birkenfeld (GER) and production site in Beringen (CH) in January 2019
• Dividend proposal of € 0.82 per share (2017: € 0.80 per share) 15th consecutive increase
17
FY 2018 AT A GLANCE
FINANCIALS AT A GLANCE1
FINANCIALS
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bps = basis points
1 For comparison purposes, adjusted figures exclude amortization resulting from purchase price allocations in the context of acquisitions and the associated reorganization expenses, as well as other non-recurring effects.
2 Subject to approval by the AGM on May 29, 20193 Not retrospectively restated to reflect IFRS 9 and IFRS 15 (modified retrospective approach). Retrospectively restated to reflect the classification of the nucleic acid
preparation business as a discontinued operation in accordance with IFRS 5.4 Results from continuing operations.
18
2018 20173 Change
Sales (in € thousand) 187,820 207,478 -9.5%
Adjusted EBITDA (in € thousand)1 36,190 43,405 -16.6%
Adjusted EBITDA in % of sales1 19.3 20.9 -160 bps
Adjusted EBIT (in € thousand)1 26,157 36,369 -28.1%
Adjusted EBIT in % of sales1 13.9 17.5 -360 bps
Adjusted consolidated net income (in € thousand)1, 4 20,238 28,855 -29.9%
Adjusted diluted earnings per share (in €)1, 4 1.68 2.41 -30.3%
Diluted earnings per share IFRS (in €)4 0.92 2.22 -58.6%
Dividend per share (in €) 0.822 0.80 +2.5%
FINANCIALS
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SALES
2018 sales down 9.5% yoy• Negative effects from foreign exchange
rates (-1.4 ppts) and first-time adoption of IFRS 15 (-2.2 ppts)
organic sales decline of 5.9%
• Postponement and delays (now overcome)
• Improving order dynamics throughout Q4 2018
ppts = Percentage points
As of December 31
128.0
144.9 146.9
184.9
207.5
187.8
0
20
40
60
80
100
120
140
160
180
200
220
2013 2014 2015 2016 2017 2018
In € million
19
FINANCIALS
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2018 adjusted EBIT margin at 13.9% • Margin decline of 360 bps yoy
- Negative scale effects
- Increased expenses related to strong project pipeline
• 2018 margin slightly ahead of revised target range (11% to 13%)
- Strong product mix in Q4
EBIT EBIT margin
EBIT in € million EBIT margin in %
19.5
24.1
26.9
32.2
36.4
26.2
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
4
8
12
16
20
24
28
32
36
40
2013 2014 2015 2016 2017 2018
As of December 31
ADJUSTED EBIT AND EBIT MARGIN
20
In € million 2018 2017 yoy 2018 2017 yoy 2018 2017 yoy 2018 2017 yoy
Sales 131.3 149.6 -12.2% 35.3 37.0 -4.6% 16.8 15.6 7.7% 4.4 5.2 -15.4%
Adjusted EBIT 21.0 30.6 -31.4% 4.7 4.5 4.4% 0.2 0.9 -77.8% 0.3 0.4 -25.0%
Adjusted EBIT margin 16.0% 20.5% -450 bps 13.3% 12.2% +110 bps 1.2% 5.8% -460 bps 6.8% 7.7% -90 bps
OthersInstrumentation Diatron Smart Consumables
SEGMENT OVERVIEW
FINANCIALS
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• Postponements and delays
• Signing of new development agreements
• High number of market launches expected in 2019
• Higher development and software licensing sales
FINANCIALS
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CASH FLOW AND NET DEBT
IFRS (€ million) 2018 2017 yoy
Cash flow – operating activities
12.0 30.0 -60.0%
Cash flow – investment activities
-10.8 -15.6 -30.8%
Cash flow – financing activities
-0.9 -16.0 -94.4%
Free cash flow 1.2 14.4 -91.7%
• FY 2018 operating cash flow down to € 12.0 million (2017: € 30.0 million)
- Lower earnings levels
- Higher inventories due to ERP system implementation and upcoming product launches
• Higher investment spending due to significant capacity expansion in Birkenfeld and increased investments in development projects
22
IFRS (€ million) 2018 2017 Change
Cash and cash equivalentsat end of period
23.8 24.1 -1.2%
Net debt 53.1 48.8 8.8%
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OUTLOOK AND STRATEGY
OUTLOOK AND STRATEGY
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FINANCIAL GUIDANCE 2019
• Group sales are expected to increase by at least 12% (at constant exchange rates)
Several new product launches
Strong sales growth can already be expected for the first quarter
• Adjusted EBIT margin of around 14% to 15% (2018: 13.9%)
Positive scale effects
First positive impact from already defined earnings improvement measures
Adverse effects from continuing high development activities
• Investments in tangible and intangible assets of around 12% to 14% of sales (2018: 10.3%)
Ongoing construction measures for significant capacity expansion
Investments due to high number of development projects
Investment ratio will likely decline considerably from 2020 onwards once construction projects for capacity expansion have been completed
24
OUTLOOK AND STRATEGY
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FOCUS IN 2019
• Reaccelerate top-line growth and reduce earnings volatility across business units
• Sign several new development and supply agreements
• Prepare path to efficiency gains following successful ERP system implementation in Q1
• Achieve significant number of product launches
Repeatedly postponed system for US customer finally launched in March 2019
Further expected launches within 2019 among others include a CLIA instrument, a blood banking instrument and a proprietary analyzer platform
• Drive results from defined earnings improvement initiative
• Expand development capacities including significant expansion of buildings
• Enable customers and STRATEC to grow sustainably above the long-term market average
Focus on high growth areas of application within in-vitro diagnostics and healthcare research
Secure and further boost expertise and technology portfolio with intellectual property rights
• Broadening of product/value offering without entering into competition to partners
Organically and via selective M&A transactions
Widen offering in areas not perceived as core for/by our customers
• Increase proportion of service parts & consumables
Utilize tailwind from increasing system complexity
Further expand smart consumables business (microfluidic chips, cartridges, etc.)
Utilize combined product offering of instruments, software and consumablesto increase proportion of recurring sales
• Drive costumer diversification
Utilize extended platform offering
Extend components business
Accelerate diversification (e.g. veterinary, translational research)
OUTLOOK AND STRATEGY
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STRATEGIC PRIORITIES
27
APPENDIX
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APPENDIX
28
KEY FIGURES AT A GLANCE1
1 Figures adjusted for comparison; adjusted for depreciation and amortization from purchase price allocation for acquisitions, related integration expenses and other extraordinary effects. Reconciliation to IFRS figures can be found in the respective annual report.
2 From continuing operations3 Subject to approval by AGM
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IFRS (€ million) 2014 2015 2016 2017 2018
Sales 144.9 146.9 184.9 207.5 187.8
Adjusted EBIT 24.1 26.9 32.2 36.4 26.2
Adjusted EBIT margin (%) 16.6 18.3 17.4 17.5 13.9
Adjusted Consolidated net income2 19.8 22.1 25.3 28.9 20.2
Adjusted Earnings per share (€) 2 1.68 1.87 2.14 2.43 1.70
Dividend per share (€) 0.70 0.75 0.77 0.80 0.823
No. of employees 544 583 976 1,086 1,228
Total assets 137.8 158.9 258 264 275
Equity ratio (%) 81.3 82.0 55.7 59.8 55.3
Free cash flow 32.9 17.3 -70.4 14.4 1.2
APPENDIX
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Consolidated net incomeEBIT
ADJUSTMENTS 2018
29
€ 000s 2018
Adjusted EBIT 26,157
Adjustments:
PPA amortization -9,267
Transaction-related expenses and associated restructuring expenses
-1,653
Impairment losses recognized on intangible assets
-642
Other positive one-off items 416
EBIT 15,011
€ 000s 2018
Adjusted consolidated net income 20,238
Adjusted earnings per share in €(basic)
1.70
Adjustments:
PPA amortization -9,267
Transaction-related expenses and associated restructuring charges
-1,653
Impairment losses recognized on intangible assets -642
Other positive one-off items 416
Current tax expenses 529
Deferred tax income 1,488
Consolidated net income 11,109
Earnings per share in € (basic) 0.93
APPENDIX
Date Event
05/24/2019 Publication quarterly statement (call-date Q1)
05/29/2019 Annual General Meeting 2019
08/22/2019 Publication half-yearly financial report
11/07/2019 Publication quarterly statement (call-date Q3)
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FINANCIAL CALENDAR
APPENDIX
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SHAREHOLDER STRUCTURE(AS OF: DEC 2018)
SHARE
IPO Aug. 1998Number of shares 11,969,245Share price (04/12/2019) € 64.50Market capitalization € 772 million
Fixed and family ownership(incl. their investment companies)
Treasury shares
Retail investors incl. notidentified institutional investors
Institutional investors
Institutional investors > 3%:Allianz Global InvestorsAmeriprise FinancialBNP Paribas Investment PartnersNN GroupOppenheimerFunds
41.2%
0.1%
37.0%
21.7%
STRATEC SEGewerbestr. 3775217 BirkenfeldGermany
Phone +49 7082 7916-0Fax +49 7082 7916-999www.stratec.com
CONTACT
THANK YOU
FOR YOUR
ATTENTION
CONTACT
Marcus Wolfinger, CEO
Jan Keppeler, Head of IR & CC
Phone +49 7082 [email protected]
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