technology-driven German Mittelstand

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1 From melting steel to 3D-printing: investing in the technology-driven German Mittelstand as at 9 October 2015

2 1. Business model GESCO Group an association of industrial SMEs with market and technology leaders Segments tool manufacture / mechanical engineering and plastics technology Currently 17 operating subsidiaries under the roof of GESCO AG as a holding company We think and act in a sustainable and entrepreneurial manner We do business in established sectors with innovative technologies We provide technology made in Germany for global markets GESCO is comprised of adaptable, independent operating units that benefit from being part of a strong group GESCO AG a long term investor and a safe haven for succession issues We acquire and develop industrial SMEs an a long-term basis exit is not part of the business model We take over majorities, almost always 100 % Most takeovers are part of succession planning The new managing directors invest up to 20 % in the company they run ( entrepreneur companies ) 2

3 1. GESCO Group The GESCO share offers a focussed portfolio of 17 Hidden Champions serving broadly diversified customer sectors 3% 4% 4% 5% 6% 6% 12% 15% 15% 25% Construction, air conditioning, sanitary industry Consumer goods industry Foundries and roller mills Electrical, medical technology, household goods Chemical and petrochemical industry Energy Agricultural engineering Other Iron, plate and metal processing, tool construction Machine and plant construction Passenger and commercial vehicles 3

4 1. The 4 biggest companies (sales and staff: FY 2014) Dörrenberg Edelstahl GmbH Leading European specialist for tool steel Steel mill, trading, mould castings and surface technology Strong internationalization Sales 172 m, staff 501 SVT GmbH Systems for (un)loading liquids and gases Specialty LNG: No. 2 worldwide Export ratio: 80 % Sales 44 m, staff 182 MAE Maschinen- und Apparatebau Götzen GmbH World market leader for straightening machines and wheel set presses Highly innovative Acquired US competitor in Jan Sales 25 m, staff 160 Frank Walz- und Schmiedetechnik Group Europe s leading forge for wearparts for the agricultural industry 70 % of sales to OEMs, 30 % to wholesale and farmers Sales 28 m, staff 274 4

5 1. Two very special companies (sales and staff: FY 2014) Setter Group Paper and plastic sticks for the sweets and hygienic industries, world market leader for paper sticks 90 % export ratio 20 bn sticks produced in Germany each year Acquired US-based Setterstix Inc. in Jan Sales 15 m, staff 59 C.F.K. CNC-Fertigungstechnik Kriftel GmbH Leading centre in highprecision wire erosion and die sinking Cutting-edge production line, 45 machines Advanced laser melting systems (3D printing) for functional prototypes, medical implants etc. Sales 8 m, staff 57 5

6 2. Financial year 2015/2016 Please keep in mind: GESCO AG and GESCO Group financial year = 1 April to 31 March Subsidiaries financial year = calendar year 6

7 2. Financial year 2015/2016 Initial situation and expectations (as at annual accounts press conference on 25 June 2015) 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 7

8 2. Financial year 2015/2016 Target figures 2014/2015 Actual figures 2015/2016 Target Change Group sales million to % to 8.5 % Group net income for the year after minority interest Earnings per share acc. to IFRS million to % to 13.4 % to % to 13.4 % 8

9 2. Financial year 2015/2016 Q1 Q1: lively business Includes operating months January to March 2015 at subsidiaries Incoming orders show strong growth in first quarter; exceptionally high figure, including large orders which will partly impact sales and earnings only in the next FY Sales are also up, but earnings continue to be weighed down Restructuring measures at two subsidiaries make progress, should be largely completed by end of FY Guidance for full FY confirmed 9

10 2. Financial year 2015/2016 Q1 Q1 2014/2015 Q1 2015/2016 Change Order intake million % Sales million % EBITDA million % EBIT million % Group net income after minority interest million % EPS acc. to IFRS % Equity million % Equity ratio % Liquid funds million % 10

11 2. Financial year 2015/2016 Q2 Q2: customer demand still on a satisfactory level Includes operating months April to June 2015 at subsidiaries Order intake approx. 112 million, +12 % yoy Sales approx. 117 million, +6 % yoy 11

12 2. Financial year 2015/2016 General current situation Customers willingness to invest suffers from general uncertainty In July 2015 VDMA cut outlook for production from +2 % to zero growth 12

13 3. M&A 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) 13

14 3. M&A and portfolio development 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 14

15 4. The GESCO share Free float: 85.8 % Stefan Heimöller, entrepreneur, member of supervisory board: 14.2 % Investmentaktiengesellschaft für langfristige Investoren TGV: 9.8 % Dividend policy: payout ratio approx. 40 % of Group net income after minority interest 15

16 4. Share price development (in %) 1 and 5 years GESCO vs. SDAX, 1 year GESCO vs. SDAX, 5 years GESCO SDAX 16

17 4. Share price development (in %) 10 years GESCO vs. SDAX, 10 years GESCO SDAX 17

18 Facts and figures on GESCO AG Founded: 1989 Share capital: 8,645,000 Shares: 3,325,000 registered shares Free float: 86.4 % Stock markets: Xetra; Frankfurt (regulated market); Berlin, Düsseldorf, Hamburg, Hanover, Munich, Stuttgart (open market) Sec. identification number: A1K020 ISIN: DE000A1K0201 IPO: 24/03/1998 Index: End of financial year: Designated sponsors: SDAX 31 March equinet Bank AG Oddo Seydler Bank AG 18

19 GESCO Group overview Company Sales Staff 31/12/2014 GESCO AG shareholding Astroplast Kunststofftechnik GmbH & Co. KG 16, % Paul Beier GmbH Werkzeug- und Maschinenbau & Co. KG 9, % C.F.K. CNC-Fertigungstechnik Kriftel GmbH 8, % Dömer GmbH & Co. KG Stanz- und Umformtechnologie 14, % Dörrenberg Edelstahl GmbH 171, % Frank Group 28, % Franz Funke Zerspanungstechnik GmbH & Co. KG 16, % Haseke GmbH & Co. KG 12, % Hubl GmbH 10, % Georg Kesel GmbH und Co. KG 12, % MAE Maschinen- und Apparatebau Götzen GmbH 24, % Modell Technik Formenbau GmbH 13, % Protomaster Riedel & Co. GmbH 8, % Setter Group 14, % SVT GmbH 44, % VWH Vorrichtungs- und Werkzeugbau Herschbach GmbH 11, % Werkzeugbau Laichingen Group 25, % 19

20 Financial calendar Financial calendar 1 September 2015 Small Cap Conference, Frankfurt/Main 13 November 2015 Q2 figures ( to ) 24 November 2015 German Equity Forum, Frankfurt/Main February 2016 Q3 figures ( to ) 30 June 2016 Annual Accounts Press Conference and Analysts Meeting August 2016 Q1 figures ( to ) 25 August 2016 Annual General Meeting November 2016 Q2 figures ( to ) 20

21 Investor relations contact Investor Relations GESCO AG Phone: Investor Relations Fax: Oliver Vollbrecht Johannisberg 7 Internet: Wuppertal Germany 21