WGZ adesso BANK AG RESEARCH November 5, 2012 p. 1 Update November 5, 2012 Recommendation: Buy Company data before: Hold as of 08/16/12 Sector IT Target price (EUR) 8.90 Market segment General Standard Share price (Xetra) (EUR) 6.74 ISIN DE000A0Z23Q5 11/02/12 5:30 PM Reuters ADNGk.DE Share price potential 32% Bloomberg ADN1 Higher licence revenues and successful restructuring At the end of last week, adesso posted preliminary Q3 figures. After the weak Q2 figures, the Q3 figures were a positive surprise. Quarterly sales increased to EUR30m (26.1; Q2 2012: 28.9) thus beating our forecast of EUR28.9m due to higher licence revenues of FirstSpirit (in-house developed content management system). According to preliminary figures, EBITDA increased to EUR2.5m (1.8; Q2 2012: 0.1) and thus were clearly higher than our forecast of EUR1.9m. We have raised our full-year forecast after the preliminary Q3 figures were posted: sales 2012E: EUR115.5m (before: 114.4); EBITDA 2012E: EUR5.4m (before: 4.5). When figures were posted the company pointed out that especially the EBITDA company forecast will very likely be beaten. When the Q2 figures were posted, adesso had revised its own sales forecast to EUR114-116m (before: 118-120) and EBITDA forecast to EUR4.4-5.1m (before: 8.8-9.1). As part of a revaluation of the adesso share, we raise our price target to EUR8.90 (before: 7.30; DCF/peer group valuation). We newly recommend to Buy (before: Hold). Share data Shares (m) 5.744 Freefloat 35.4% Market cap. (EURm) 38.7 Trading volume (shares) 1,860 52W High 03/23/12 EUR7.89 52W Low 08/19/11 EUR5.60 Termine Final Q2 figures 08/28/12 Q3 figures 11/13/12 Performance absolute relative to DAX 1M 14.2% 14.8% 3M -0.9% -7.6% 6M -6.4% -16.6% 12M -0.7% -19.6% Index weighting CDAX 0.002% 8.00 7.00 6.00 5.00 Sales 66.8 71.3 85.7 106.0 115.5 125.0 Sales growth - 6.8% 20.1% 23.7% 9.0% 8.1% EBITDA 8.1 5.8 5.6 8.6 5.4 9.1 EBITDA margin 12.1% 8.1% 6.5% 8.1% 4.7% 7.3% Net income 4.2 3.5 2.4 4.1-0.2 4.2 Net margin 6.3% 4.9% 2.8% 3.9% -0.2% 3.4% EPS 0.74 0.61 0.42 0.72-0.04 0.74 DPS 0.00 0.15 0.15 0.18 0.18 0.20 Net financial debt/ebitda -1.8-2.0-1.5-1.4-2.0-0.8 Net Gearing -0.6-0.3-0.3-0.5-0.2-0.2 Free cash flow (EUR) 7.7-2.6 3.6 8.3-6.3 4.1 FCF per share (EUR) 1.35-0.46 0.63 1.44-1.10 0.72 EV / sales 0.5 0.4 0.4 0.4 0.3 0.3 EV / EBITDA 3.8 5.1 5.9 4.4 7.2 4.3 EV / EBIT 6.7 9.7 12.4 7.3 13.3 5.6 EV / FCF 3.9 neg. 9.1 4.5 neg. 9.4 P/E 7.2 8.3 13.8 9.0 neg. 9.2 P/B 1.2 1.0 1.1 1.1 1.1 1.0 Dividend yield 0.0% 2.9% 2.6% 2.8% 2.7% 3.0% Figures in EURm except EPS, DPS and FCF per share (EUR), Source: ; own estimates 4.00 11/07 11/08 11/09 11/10 11/11 11/12 Source: Bloomberg Contact Research Department Head: Dr. Frank Wohlgemuth, CIIA/CEFA Equity Sales Team +49 (0) 211 778-3370 Thomas Aldenrath / thomas.aldenrath@wgzbank.de Jörg Eberhardt / joerg.eberhardt@wgzbank.de Oliver Garbe / oliver.garbe@wgzbank.de Ansgar Krekeler / ansgar.krekeler@wgzbank.de Alexander Lachmann / alexander.lachmann@wgzbank.de Thomas Reher / thomas.reher@wgzbank.de Peter Richards / peter.richards@wgzbank.de Udo Zartner / udo.zartner@wgzbank.de Author: Matthias Engelmayer (analyst) Please notice the indications concerning the preparation of this document, the indications concerning potential conflicts of interest, the compulsory information required by paragraph 34b WpHG 1)2)3)4)6) (Wertpapierhandelsgesetz Please notice - Securities the advice Trade regarding Act) and the possible liability declaration conflicts at the of end interests of this document. as well This as financial the disclaimer analysis in the at meaning the end of paragraph of this document 34b WpHG shall only be distributed to professional clients or eligible counterparties according to 31a WpHG.
November 5, 2012 p. 2 In addition to the positive topline development in the software (FirstSpirit) and IT consulting business (higher level of utilisation in the consulting business due to positive market environment and higher number of work days) successful restructuring caused an income improvement in the energy and water management segment. After the end of the development of the software project dynamic.suite (in-house software solution for the (municipal) energy and water management) and the lack of further operating losses the break-even point was reached in Q3 2012 at subsidiary evu.it (SAP business for energy utilities) after loss-making preceding quarters. We estimate that these two effects caused an income increase by over EUR1m. Further positive income effects came from the successively declining burdens from the unprofitable fixed-price contract and business figures above plan at ARITHNEA (e-business specialist; expansion of content management system activities). The preliminary Q3 figures show that the expanding - and compared to IT consulting more profitable - software business and the licence revenues generated make it more difficult to forecast the business development. In addition to the low valuation level (P/B ratio 2012E: 1.1; P/E ratio 2013E: 9.2) the attractive dividend yield of 2.7% favours the adesso share. With regard to the high capital position and liquid funds (net cash of EUR4.4m as of June 30, 2012) a stable dividend of EUR0.18 per share is to be expected for 2012 - despite the decreased income compared to 2011. Successful restructuring of the energy and water management business Business development above plan at ARITHNEA (Volatile) software revenues make forecast difficult Attractive dividend yield
November 5, 2012 p. 3 Valuation Conclusion of the valuation Our valuation of the adesso share is based on a DCF model and a peer group analysis. The DCF model calculates a fair value of EUR8.96 (before: 7.77) per share (raised 2012 and 2013 estimates; EBIT 2013E: EUR6.9m (before: 5.8) and the peer group analysis of EUR8.92 (before: 7.01) per share. Weighting the DCF model and peer group analysis at 50% each, we have calculated a fair value of EUR8.94 (before: 7.39) per share. The (average) fair value corresponds to a P/E ratio 2013E of 12.2. Fair value of EUR8.94 (before: 7.39) per adesso share DCF model EURm 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E Sales 115.5 125.0 127.5 130.0 132.6 135.3 138.0 140.7 143.5 146.4 Growth y/y - 8.1% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% EBIT margin 2.5% 5.5% 6.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% EBIT 2.9 6.9 7.6 6.5 6.6 6.8 6.9 7.0 7.2 7.3 - Income taxes -0.1-1.5-2.3-2.0-2.0-2.0-2.1-2.1-2.2-2.2 + Amortisation and depreciation 2.5 2.2 2.2 2.3 2.3 2.4 2.4 2.5 2.5 3.4 +/- Change in long-term provisions 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 +/- Others (e.g. minority interests) -0.5-0.5-0.5-0.5-0.5-0.5-0.5-0.5-0.5-0.5 Gross operating cash flow 5.1 7.4 7.4 6.6 6.7 6.9 7.0 7.2 7.3 8.3 -/+ Change in net working capital -3.2-0.7-0.3-0.3-0.4-0.4-0.4-0.4-0.4-0.4 - Investments in fixed assets -8.2-2.5-3.0-3.1-3.1-3.2-3.2-3.3-3.4-3.4 Free cash flow -6.3 4.1 4.0 3.2 3.3 3.3 3.4 3.5 3.6 4.5 Present values -6.2 3.4 3.0 2.1 1.9 1.8 1.7 1.5 1.4 1.7 Total present values (2012E-2021E) 12.2 Terminal value 23.3 in % of total value: 71% Value of operating business 35.4 Model parameters + Cash and cash equivalents 22.5 - Financial debt/pension provisions -6.5 Target capital structure Equity 80% Financial debt 20% Fair market value of equity 51.5 Risk-free rate: 4.0% Beta: 1.3 Risk prem. debt: 2.0% Risk prem.: 5.0% Tax shield: 30.0% Number of shares outstanding (m) 5.7 Cost of equity: 10.7% Cost of debt: 4.2% Fair value per share (EUR) 8.96 Source: own estimates Growth FCF (TV): 2.0% WACC: 9.4% Date: 11/05/2012 Sensitivity analysis (EUR) Discount rate (WACC) 8.9% 9.4% 9.9% 10.4% 2.0% 9.63 8.96 8.47 8.03 2.5% 9.91 9.28 8.73 8.25 3.0% 10.35 9.64 9.03 8.51 3.5% 10.88 10.07 9.38 8.80 Source: own estimates Growth FCF (TV)
November 5, 2012 p. 4 Peer group analysis P/E EV/EBIT EV/EBITDA 2012E 2013E 2012E 2013E 2012E 2013E Allgeier Holding 17.2 8.2 12.1 7.2 5.4 4.1 GFT Technologies 10.4 8.5 4.1 3.6 3.6 3.2 SQS Software Quality Systems 10.9 8.5 9.2 7.1 5.5 4.6 COR&FJA neg. 37.2 neg. 34.2 15.9 9.9 Seven Principles neg. 8.7 neg. 5.4 14.3 3.7 Mean 12.8 14.2 8.5 11.5 8.9 5.1 Median 10.9 8.5 9.2 7.1 5.5 4.1 neg. 9.2 13.3 5.6 7.2 4.3 Figures in EURm, only EPS in EUR EPS EBIT EBITDA 2012E 2013E 2012E 2013E 2012E 2013E -0.04 0.74 2.9 6.9 5.4 9.1 Enterprise value (EV) 31.6 58.8 43.5 42.4 Liquid assets Financial liabilities 22.5-6.5 22.5-6.5 Fair market capitalisation 47.7 58.8 59.6 42.4 Number of shares (units m) 5.7 5.7 Fair value n/a 8.60 8.30 10.24 10.37 7.38 Average value 8.60 9.27 8.88 Weighting 0.33 0.33 0.33 Fair value per share (EUR) 8.92 Source: own estimates; Bloomberg Closing prices as of 11/02/2012
November 5, 2012 p. 5 Appendix Profit and loss statement EURm Sales 66.8 71.3 85.7 106.0 115.5 125.0 Other internally generated assets 0.0 0.0 0.0 0.9 0.6 0.0 Other operating income 2.3 2.1 1.4 1.7 2.5 1.5 Gross profit 69.1 73.5 87.0 108.6 118.6 126.5 Costs of material -6.4-8.0-9.4-13.3-14.2-15.2 Personnel costs -40.1-45.4-54.6-65.5-75.9-77.2 Other operating expenses -14.4-14.4-17.4-21.2-23.1-25.0 EBITDA 8.1 5.8 5.6 8.6 5.4 9.1 Depreciatin on property, plant and equipment -3.6-2.8-2.9-2.0-2.5-2.2 Depreciation on goodwill 0.0 0.0 0.0-1.4 0.0 0.0 EBIT 4.5 3.0 2.7 5.2 2.9 6.9 Income from investments 0.0 0.0 0.0 0.0-2.4 0.0 Other financial result 0.0 0.3 0.0 0.0 0.0 0.0 Interest income and similar income 0.5 0.3 0.2 0.2 0.2 0.2 Interest expenses and similar expenses -0.4-0.3-0.4-0.4-0.4-0.6 EBT 4.6 3.3 2.5 5.0 0.3 6.5 Income taxes -0.4 0.3 0.0-1.1-0.1-1.5 Net income 4.3 3.6 2.5 3.9 0.3 5.0 Share of minority interests -0.1-0.1-0.1 0.2-0.5-0.8 Net income after minorities 4.2 3.5 2.4 4.1-0.2 4.2 Number of shares (unit) 5.7 5.7 5.7 5.7 5.7 5.7 EPS (undiluted, EUR) 0.74 0.61 0.42 0.72-0.04 0.74 EPS (diluted, EUR) 0.74 0.61 0.42 0.72-0.04 0.74 Source: ; own estimates Profit and loss statement (as % of sales) Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Other internally generated assets 0.0% 0.0% 0.0% 0.9% 0.5% 0.0% Other operating income 3.5% 3.0% 1.6% 1.6% 2.2% 1.2% Gross profit 103.5% 103.0% 101.6% 102.5% 102.7% 101.2% Costs of material -9.6% -11.2% -11.0% -12.5% -12.3% -12.1% Personnel costs -60.1% -63.6% -63.7% -61.8% -65.7% -61.8% Other operating expenses -21.6% -20.1% -20.3% -20.0% -20.0% -20.0% EBITDA 12.1% 8.1% 6.5% 8.1% 4.7% 7.3% Depreciatin on property, plant and equipment -5.4% -3.9% -3.4% -1.9% -2.2% -1.8% Depreciation on goodwill 0.0% 0.0% 0.0% -1.3% 0.0% 0.0% EBIT 6.7% 4.2% 3.1% 4.9% 2.5% 5.5% Income from investments 0.0% 0.0% 0.0% 0.0% -2.1% 0.0% Other financial result 0.0% 0.5% 0.0% 0.0% 0.0% 0.0% Interest income and similar income 0.8% 0.5% 0.2% 0.2% 0.2% 0.2% Interest expenses and similar expenses -0.6% -0.5% -0.5% -0.3% -0.4% -0.4% EBT 6.9% 4.6% 2.9% 4.7% 0.3% 5.2% Income taxes -0.5% 0.4% 0.0% -1.0% -0.1% -1.2% Net income 6.4% 5.0% 2.9% 3.7% 0.2% 4.0% Share of minority interests -0.1% -0.1% -0.1% 0.2% -0.4% -0.7% Net income after minorities 6.3% 4.9% 2.8% 3.9% -0.2% 3.4% Source: ; own estimates
November 5, 2012 p. 6 Balance sheet EURm Intangible assets 4.1 3.9 3.0 3.0 1.8 1.2 Goodwill 6.6 12.3 12.6 11.5 17.6 17.6 Property, plant and equipment 0.9 1.0 1.2 1.4 1.2 1.1 Financial assets 0.4 0.3 0.3 0.2 0.2 0.2 Other assets 0.3 0.3 0.3 0.3 1.9 1.9 Receivables from income taxes 0.1 0.1 0.1 0.1 0.0 0.1 Deffered taxes 5.1 5.7 5.9 6.8 6.8 7.2 Non-current assets 17.5 23.6 23.4 23.2 29.5 29.2 Trade accounts receivable 9.5 14.3 17.2 19.1 22.8 24.0 Receivables PoC 4.8 2.2 3.1 3.7 3.9 4.0 Receivables from income taxes 0.8 0.7 0.8 0.5 0.0 0.6 Financial assets 0.1 0.3 0.3 0.1 0.1 0.1 Other assets 0.4 0.5 0.6 0.9 1.0 1.1 Fiduciary held cash on hand and at bank 4.1 0.0 0.0 0.0 0.0 0.0 Cash on hand and at bank 18.7 17.3 17.0 22.5 15.9 17.5 Current assets 38.3 35.3 38.9 46.7 43.7 47.2 Assets 55.8 58.9 62.3 69.9 73.2 76.5 Subscribed capital 40.0 5.7 5.7 5.7 5.7 5.7 Capital reserve -23.3 11.0 11.1 11.4 11.4 11.4 Other retained earnings 4.2 8.4 11.0 12.5 16.2 16.2 Reserve for currency conversion 0.1 0.1 0.4 0.5 0.6 0.6 Consolidated earnings 4.3 3.6 2.5 3.9 0.3 5.0 Minority share 0.1 0.1 0.2 0.3 1.1 1.1 Equity 25.3 28.8 30.9 34.4 35.2 40.1 Financial liabilities 2.1 5.6 5.5 3.6 7.9 6.3 Pernsion and similar liabilities 0.5 0.5 0.5 0.6 0.6 0.7 Provisions 0.1 0.3 0.3 0.5 0.5 0.6 Other non-current liabilities 0.0 0.0 0.0 0.1 0.1 0.2 Deferred taxes liabilities 1.7 1.4 1.2 1.4 0.1 1.8 Non-current liabilities 4.5 7.9 7.5 6.2 9.3 9.5 Financial liabilities 5.3 3.0 2.2 2.2 2.0 2.0 Trade accounts payable 4.4 3.8 3.5 6.2 7.0 7.5 Liabilities PoC 2.9 2.1 2.2 2.0 2.0 2.0 Liabilities from income taxes 0.9 0.7 0.4 1.3 0.1 1.7 Provisions 1.9 1.6 1.5 1.5 1.6 1.7 Other current liabilities 10.5 10.9 14.1 16.0 16.0 12.0 Current liabilities 26.0 22.2 23.9 29.3 28.6 26.9 Liabilities 55.8 58.9 62.3 69.9 73.2 76.5 Source: ; own estimates
November 5, 2012 p. 7 Balance sheet (as % of sales) Intangible assets 7.4% 6.6% 4.9% 4.2% 2.4% 1.5% Goodwill 11.8% 21.0% 20.2% 16.5% 24.1% 23.1% Property, plant and equipment 1.7% 1.7% 1.9% 2.0% 1.7% 1.4% Financial assets 0.8% 0.5% 0.5% 0.3% 0.3% 0.2% Other assets 0.4% 0.4% 0.4% 0.4% 2.6% 2.5% Receivables from income taxes 0.1% 0.1% 0.1% 0.1% 0.0% 0.1% Deffered taxes 9.2% 9.7% 9.5% 9.7% 9.3% 9.5% Non-current assets 31.4% 40.1% 37.6% 33.2% 40.3% 38.3% Trade accounts receivable 17.1% 24.2% 27.5% 27.3% 31.2% 31.3% Receivables PoC 8.5% 3.7% 5.0% 5.2% 5.3% 5.2% Receivables from income taxes 1.4% 1.2% 1.2% 0.7% 0.0% 0.8% Financial assets 0.1% 0.4% 0.4% 0.1% 0.1% 0.1% Other assets 0.7% 0.9% 0.9% 1.4% 1.4% 1.4% Fiduciary held cash on hand and at bank 7.3% 0.0% 0.0% 0.0% 0.0% 0.0% Cash on hand and at bank 33.5% 29.4% 27.3% 32.2% 21.7% 22.9% Current assets 68.6% 59.9% 62.4% 66.8% 59.7% 61.7% Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Subscribed capital 71.7% 9.7% 9.2% 8.2% 7.8% 7.5% Capital reserve -41.8% 18.7% 17.8% 16.3% 15.6% 14.9% Other retained earnings 7.6% 14.2% 17.7% 17.9% 22.1% 21.2% Reserve for currency conversion 0.2% 0.2% 0.7% 0.8% 0.8% 0.8% Consolidated earnings 7.7% 6.1% 4.0% 5.6% 0.3% 6.6% Minority share 0.1% 0.1% 0.3% 0.4% 1.5% 1.4% Equity 45.4% 49.0% 49.6% 49.2% 48.1% 52.4% Financial liabilities 3.8% 9.5% 8.8% 5.2% 10.8% 8.3% Pernsion and similar liabilities 0.9% 0.8% 0.8% 0.8% 0.9% 0.9% Provisions 0.3% 0.6% 0.5% 0.7% 0.7% 0.8% Other non-current liabilities 0.0% 0.0% 0.0% 0.2% 0.2% 0.2% Deferred taxes liabilities 3.1% 2.5% 1.9% 2.0% 0.1% 2.3% Non-current liabilities 8.0% 13.4% 12.0% 8.9% 12.7% 12.5% Financial liabilities 9.5% 5.1% 3.5% 3.2% 2.7% 2.6% Trade accounts payable 7.9% 6.5% 5.7% 8.9% 9.5% 9.8% Liabilities PoC 5.2% 3.6% 3.6% 2.9% 2.7% 2.6% Liabilities from income taxes 1.7% 1.2% 0.6% 1.9% 0.1% 2.2% Provisions 3.4% 2.7% 2.4% 2.1% 2.2% 2.3% Other current liabilities 18.9% 18.6% 22.6% 23.0% 21.8% 15.6% Current liabilities 46.6% 37.6% 38.4% 41.9% 39.1% 35.1% Liabilities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Source: ; own estimates
November 5, 2012 p. 8 Cash flow statement EURm EBT 4.6 3.3 2.5 5.0 0.3 6.5 Income from financing and investment activities -0.1-0.3 0.2 0.2-2.4 0.0 Depreciation and amortization on PP&E and intangible assets 3.6 2.8 2.9 3.5 2.5 2.2 Expenses from the disposal of PP&E 0.0 0.0 0.0 0.0 0.0 0.0 Other non-cash income 0.0 0.0 0.1 0.2 0.2 0.2 Change in pension provisions 0.0 0.0 0.0 0.0 0.1 0.0 Change in other provisions 0.1-0.1-0.1 0.1 0.2 0.1 Tax payments -0.9-1.2-1.2-0.2-0.1-1.5 Cash earnings 7.3 4.4 4.3 8.7 0.9 7.7 Change to net operating assets 1.1-2.1-0.1 1.5-3.2-0.7 Cash flow from operating activities 8.4 2.3 4.2 10.2-2.4 7.0 Disinvestments of PP&E 0.0 0.0 0.0 0.0 0.0 0.0 Payments-in for investments in intangible assets 0.0 0.0 0.0 0.0 0.0 0.0 Change of cash and cash equivalents from the disposal / deconsolidation of consolidated companies 0.0-0.3 0.0 0.0 0.0 0.0 Change in cash and cash equivalents from initial consolidation -0.1-4.3 0.1 0.1-5.0 0.0 Payments for investments in PP&E -0.5-0.6-0.7-1.0-2.4-2.0 Payments for investments in intangible assets -0.1-0.1-0.1-1.0-0.7-0.5 Cash flow from investment activities -0.7-5.3-0.6-1.9-8.0-2.5 Dividend payments 0.0-0.1-0.9-0.9-1.0-1.0 Capital increase 0.0 0.0 0.0 0.1 0.0 0.0 Acquisition of minority interests -0.1 0.0 0.0 0.0 0.0 0.0 Repayment of liabilities from finance leases -0.1-0.1 0.0 0.0 0.0 0.0 New liabilities to banks 0.0 5.0 2.2 0.0 6.0 0.0 Repayment of financial liabilities -0.9-3.5-5.1-2.0-1.0-1.6 Payment from other financial loans received 0.0 0.2 0.0 0.0 0.0 0.0 Interest paid -0.2-0.3-0.3-0.2-0.4-0.6 Interest received 0.5 0.3 0.2 0.2 0.2 0.2 Cash flow from financing activities -0.8 1.6-4.0-2.9 3.8-3.0 Change in cash and cash equivalents 7.0-1.4-0.4 5.4-6.6 1.5 Currency differences 0.1 0.0 0.1 0.0 0.0 0.0 Cash and cash equivalents at the beginning of the period 11.6 18.7 17.3 17.0 22.5 15.9 Cash and cash equivalents at the end of the period 18.7 17.3 17.0 22.5 15.9 17.5 Source: ; own estimates
November 5, 2012 p. 9 Key figures Growth analysis Sales growth - 6.8% 20.1% 23.7% 9.0% 8.1% EBITDA growth - -28.8% -2.8% 53.8% -37.2% 67.6% EBIT growth - -33.5% -11.2% 93.6% -43.6% 136.0% EBT growth - -28.9% -25.3% 103.5% -93.4% 1,883.6% EPS growth (diluted) - -16.9% -32.3% 74.4% n/a n/a Margin analysis EBITDA margin 12.1% 8.1% 6.5% 8.1% 4.7% 7.3% EBIT margin 6.7% 4.2% 3.1% 4.9% 2.5% 5.5% EBT margin 6.9% 4.6% 2.9% 4.7% 0.3% 5.2% Net margin 6.3% 4.9% 2.8% 3.9% -0.2% 3.4% Yield analysis ROI 7.6% 6.1% 3.9% 6.3% -0.3% 5.6% ROCE 17.0% 11.1% 7.5% 10.7% 5.3% 11.2% ROE 16.7% 13.0% 8.0% 12.8% -0.7% 11.5% ROIC 12.5% 9.1% 6.9% 10.0% 5.2% 11.1% Balance sheet analysis Equity ratio 45.4% 49.0% 49.6% 49.2% 48.1% 52.4% Equty / LT assets ratio 144.5% 122.1% 132.0% 148.4% 119.5% 137.1% Equity + LT debt / LT assets ratio 170.0% 124.2% 134.2% 150.9% 121.6% 139.3% Asset intensity 31.4% 40.1% 37.6% 33.2% 40.3% 38.3% Debtor turnover 4.7 4.3 4.2 4.7 4.3 4.5 Debtor terms / -days 78.1 84.1 86.4 78.2 84.3 81.5 Working capital / sales ratio 10.4% 12.2% 14.6% 13.7% 14.0% 14.5% Days of payables outstanding (days) 417.6 272.5 223.6 225.3 229.5 228.1 Debt ratios Net financial debt -14.9-8.3-8.8-16.0-5.3-8.5 Net financial debt / EBITDA -1.8-2.0-1.5-1.4-2.0-0.8 Net gearing -0.6-0.3-0.3-0.5-0.2-0.2 EBITDA interest coverage 19.3 17.0 13.7 24.2 12.7 16.5 EBIT interest coverage 10.7 8.8 6.5 14.5 6.8 12.5 Cash flow analysis Free cash flow (FCF) 7.7-2.6 3.6 8.3-6.3 4.1 FCF / sales 11.6% -3.7% 4.2% 7.8% -5.4% 3.3% FCF / net income 182.6% -75.3% 152.6% 199.5% 2809.6% 97.8% FCF per share (EUR) 1.35-0.46 0.63 1.44-1.10 0.72 FCF yield 25.4% -9.1% 11.0% 22.1% -16.3% 10.7% Capex (EURm) -0.7-5.0-0.6-1.9-8.1-2.5 Capex / Depreciation and amortization 19.2% 179.5% 19.8% 94.0% 322.0% 115.1% Capex / sales 1.0% 6.9% 0.7% 1.8% 7.0% 2.0% Valuation multiples EV / sales 0.5 0.4 0.4 0.4 0.3 0.3 EV / EBITDA 3.8 5.1 5.9 4.4 7.2 4.3 EV / EBIT 6.7 9.7 12.4 7.3 13.3 5.6 EV / FCF 3.9 neg. 9.1 4.5 neg. 9.4 P/E ratio 7.2 8.3 13.8 9.0 neg. 9.2 P/B ratio 1.2 1.0 1.1 1.1 1.1 1.0 P/CF ratio 3.6 12.6 7.8 3.7 neg. 5.5 P/S ratio 0.5 0.4 0.4 0.4 neg. 0.3 Dividend yield 0.0% 2.9% 2.6% 2.8% 2.7% 3.0% Source: ; own estimates
November 5, 2012 p. 10 Sales development Sales by region (2011) 140 120 100 80 25% 20% 15% 20% 60 40 20 10% 5% 80% 0 0% Sales (EURm) Change y/y IT Services IT Solutions High double-digit growth rates since 2009; 2012 forecast includes sales impact from company's majority takeover of ARITHNEA CAGR 2008-2013E of 13% IT Services segment still dominating (80% (2010: 86%) of group sales) Above average sales growth in software business Earnings development (EURm) ROE 10 9 8 7 6 5 4 3 2 1 0 45 40 35 30 25 20 15 10 5 0 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% EBITDA EBIT Equity excl. minorities (EURm) ROE Volatile earnings development in the past years; CAGR EBIT 2008-2013E: 9% Expansion of software business leads to higher economies of scale ROE level of the past years in the low double-digit area; ROE 2013E: 11.5% Shareholders' equity 2012E of EUR34.2m equal to P/B ratio of 1.1 Operating cash flow (EURm) Net cash 12 10 8 6 4 2 0-2 -4 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2.5 2.0 1.5 1.0 0.5 0.0 Operating cash flow Net working capital Net cash (EURm) - left axes Net cash / EBITDA - right axes Extraordinary high operating cash flow in 2011 (EUR10.2m) - positive impact due to working capital reduction Operating cash flow 2012E: EUR-2.4m Strength of operating cash flow traditionally leads to high net cash position; decrease in 2012 because of the majority stake in ARITHNEA Net cash position to continue the buy-and-build strategy Source: adesso; own estimates
November 5, 2012 p. 11 Peer group companies in EURm except EPS Share price Market cap EV Sales EBITDA EBIT EPS 2012E 2013E 2012E 2013E 2012E 2013E 2012E 2013E Allgeier Holding 10.60 96.2 136.3 436.0 522.7 25.4 33.6 11.3 18.9 0.62 1.29 Growth (sales) or margin (EBITDA, EBIT) 19.9% 5.8% 6.4% 2.6% 3.6% - - GFT Technologies 3.23 84.9 45.3 246.8 246.0 12.5 14.3 11.0 12.6 0.31 0.38 Growth (sales) or margin (EBITDA, EBIT) -0.3% 5.1% 5.8% 4.4% 5.1% - - SQS Software Quality Systems 2.72 75.9 88.9 201.0 217.0 16.0 19.2 9.7 12.6 0.25 0.32 Growth (sales) or margin (EBITDA, EBIT) 8.0% 8.0% 8.8% 4.8% 5.8% - - COR&FJA 0.93 39.8 63.3 139.0 146.0 4.0 6.4-0.3 1.9-0.02 0.03 Growth (sales) or margin (EBITDA, EBIT) 5.0% 2.9% 4.4% -0.2% 1.3% - - Seven Principles 4.80 19.3 19.3 98.5 105.0 1.3 5.3-0.1 3.5-0.04 0.55 Growth (sales) or margin (EBITDA, EBIT) 6.7% 1.4% 5.0% -0.1% 3.4% - - Source: Bloomberg Closing prices as of 11/02/2012
November 5, 2012 p. 12 Disclaimer Recommendations concerning particular shares Buy: Hold: Sell: According to our assessment, the stock should register an absolute profit of at least 15% within a 6-month period. According to our assessment, the stock should register an absolute profit between 0 and 15% within a 6-month period. According to our assessment, the stock should register an absolute loss within a 6-month period. Compulsory information required under 34b of the German Securities Trading Law (WpHG) and the Financial Analysis Regulation Key sources of information Key sources of information used in the preparation of this document are publications in foreign and domestic media such as information services (e.g. Reuters, VWD, Bloomberg, DPA-AFX etc.), the financial press (e.g. Börsenzeitung, Handelsblatt, FAZ, FTD, Wall Street Journal, Financial Times etc.), specialised journals, published statistics, rating agencies and publications of the issuers analysed. Summary of the evaluation principles used: Analyses of shares: In valuing companies standard and accepted valuation methods (amongst others the Discounted Cash Flow Method (DCF Method), Peer-Group Analysis) are applied. Under the DCF Method the capitalised value of the issuers is calculated which shows the sum of the discounted company results, i.e. the current value of the issuer s future net distributions. The capitalised value is therefore determined with reference to the anticipated future company results and the capitalisation yield applied. Under the Peer-Group Analysis Method issuers quoted on the Stock Exchange are valued with reference to the comparison of ratio indices (e.g. share price / profit ratio, share price / book value ratio, enterprise value / sales, enterprise value / EBITDA, enterprise value / EBIT). The comparability of the ratio indices is determined above all by business activity and commercial prospects. Sensitivity of the evaluation parameters: The figures taken from the income statement, the cash-flow statement and the balance sheet upon which the evaluation of companies is based are numerical estimates and therefore subject to risks. These may change at any time without prior notice. Quite apart from the evaluation method applied, there exists a very real risk that the share price goal may not be reached in the anticipated period of time. These risks include unforeseen changes in competitive pressure or in the demand for the issuer s products. Such fluctuations in demand may arise as a result of changes of a technological nature, the overall level of economic activity or in some cases as a result of changes in business moral concepts. Changes in tax law, in currency exchange rates and, in certain business segments, in regulations are further factors which can influence evaluations. This discussion of evaluation methods and risk factors makes no claim to be exhaustive.
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