Company Report Germany
8 November 2013
Hörmann Finance GmbH Automobiles & Parts
Strong balance sheet meets structural growth
equinet Bank AG Gräfstraße 97 60487 Frankfurt am Main
Tel: +49 69 – 58997 – 433 Fax: +49 69 – 58997 – 299
Hörmann Finance is a leading German producer of metallic components, modules and systems for the commercial vehicles, agricultural machinery and construction machinery industry (Automotive division). Additionally, the company acts as a general planner for the full portfolio of engineering services in the construction industry (Engineering division) and provides services and systems related to communication and siren technology (Communication division). Growing but cyclical market: The market for commercial vehicles is in our view characterized by structural but cyclical growth. We believe that the market in Europe, which is Hörmann Finance GmbH’s main market, is currently near its cyclical trough and see thus more upside risks than downside. Strong balance sheet: At the end of FY 2012 Hörmann Finance GmbH showed an equity ratio of 44% and a net debt including pension liabilities of only EUR 1.8m. This is in our view a very solid balance sheet. Expected earnings development: We expect Hörmann Finance GmbH to grow its revenues by on average 2.6% to EUR 466m in the next three years. EBITDA should improve by on average 11% to EUR 27m, with the EBITDA margin likely to reach reaching 5.8% in 2015e. Planned bond offering: Hörmann Finance GmbH is currently in the process of issuing a corporate bond with a volume of up to EUR 50m. Planned maturity of the bond amounts to 5 years. The issuer Hörmann Finance GmbH is rated BB+ by Euler Hermes. Use of proceeds: Roughly 40% of the bond proceeds or EUR 20m are planned to be used for an acquisition in the Automotive division. 20% or EUR 10m are planned to be used for the repayment of existing bank credit. The remaining 40% of the bond proceeds (or EUR 20m) are planned to finance cooperation projects in new markets, further acquisitions and investments in new technology.
Tim Schuldt
+49 69 58997 433
The disclaimer to the Report is on Page 2.
[email protected]
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Hörmann Finance GmbH
Disclaimer EQUINET BANK AG IS THE LEAD MANAGER AND BOOKRUNNER FOR THE INTERNATIONAL PLACEMENT OF FIXED RATE NOTES OF Hörmann Finance GmbH. This document is published by equinet Bank AG (“equinet”). It was drawn up by its authors independently of Hörmann Finance GmbH (“Hörmann” or “the Company”), and neither equinet nor the company or its shareholders have independently verified the information contained in this document. equinet and/or their boards of management, managerial employees and staff or Investors could take up positions and effect purchases and/or sales as the customer or agent in respect of these Hörmann Finance GmbH securities or associated financial instruments. equinet could offer investment banking and/or other services to the companies referred to in this report and/or act on behalf of this company. This report is for information purposes only and does not constitute an offer or solicitation with respect to the purchase or sale of any security of Hörmann Finance GmbH (the company) nor shall it, or any part of it, form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase any securities of the company must be made solely on the basis of the information contained in the official offering documents relating to such securities and not on the contents hereof. The official offering document will be available at the company. Any opinions and projections contained in this document are entirely those of the authors and are given as part of its research activities and not as a syndicate member in connection with the Offering of any securities of the company or as an agent of the Company, its shareholders, any other syndicate member or any other person. None of the company, nor equinet or other person who acting in connection with the Offering of any securities of the company or any other investment in securities of the company or any person connected with any of them accepts any liability whatsoever for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection therewith. Any opinion, estimate or projection herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such opinion, estimate or projection. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company. None of the syndicate members for the offering of any securities of the company, the company itself, or any other person connected with the Offering has independently verified any of the information given in this document. However, this document was made available to the company prior to its distribution or dissemination and changes were made thereafter Accordingly, no representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information and opinions contained in this report and no reliance should be placed on such information or opinions. THIS DOCUMENT IS CONFIDENTIAL AND SHALL NOT BE REPRODUCED OR REDISTRIBUTED OUTSIDE THE RECIPIENT'S ORGANIZATION OR PUBLISHED IN WHOLE OR IN PART FOR ANY PURPOSE. BY ACCEPTING THIS REPORT, THE RECIPIENT AGREES TO BE BOUND BY ALL THE LIMITATIONS STATED HEREIN. 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Hörmann Finance GmbH
CONTENTS Issuance details ...................................................................................................... 4 Ownership / Issue Structure........................................................................................5
Comparable bonds ................................................................................................. 6 Company Profile ..................................................................................................... 7 Products and Services ................................................................................................7 Company history .........................................................................................................8 Management Structure ...............................................................................................9
Market environment .............................................................................................. 10 Financials .............................................................................................................. 12 Cash flow ..................................................................................................................13 Balance sheet ...........................................................................................................14
9m 2013 results ..................................................................................................... 15 Debt related ratios ................................................................................................ 16 Financing structure .............................................................................................. 19 ................................................................................................................................ 19 Main Risks ............................................................................................................. 20 Business risks ...........................................................................................................20 Financial risks ...........................................................................................................20 Other risks ................................................................................................................20
SWOT Analysis ..................................................................................................... 21 Appendix – Definitions ......................................................................................... 23 Profit & Loss and Cash Flow Statement ...................................................................23 Balance Sheet ..........................................................................................................24 Ratios .......................................................................................................................25
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Hörmann Finance GmbH
Issuance details
Hörmann Finance GmbH is currently in the process of issuing a corporate bond with a volume of up to EUR 50m.
Planned maturity of the bond amounts to 5 years. The issuer Hörmann Finance GmbH is rated BB+ by Euler Hermes.
The bonds will carry a coupon in a range of 6.25% to 6.75% p.a.. The precise coupon will be set before the 22.11.2013.
Hörmann Finance GmbH: Summary of planned bond issuance
Issuer Issuance Volume Denomination Subscription period Maturity First Interest Payment Interest Rate Issuer Rating Issuance Price Repayment Price ISIN
Hörmann Finance GmbH up to EUR 50m EUR 1,000 26.11. - 3.12.2013 5 years, 10.12.2018 10.12.2014 6.25% - 6.75% (coupon tbc until 22.11.2013) BB+ (Euler Hermes) 100% 100% DE000A1YCRD0
Exchange
Frankfurt
Call options
10.12.2016: 102% 10.12.2017: 101%
Payment rank
senior, unsecured; negative pledge clause So urce: Co mpany data, equinet Research
Post money analysis: For the purpose of this report we have assumed the issuance of a EUR 50m corporate bond with a fixed interest rate of 6.5%.
Use of proceeds: Roughly 40% of the bond proceeds or EUR 20m are planned to be used for an acquisition in the Automotive division.
20% or EUR 10m are planned to be used for the repayment of existing bank credit.
Hörmann intends to use the remaining 40% of the bond proceeds (or EUR 20m) to finance cooperation projects in new markets, further acquisitions and investments in new technology.
THIS DOCUMENT MAY NOT BE TAKEN OR TRANSMITTED INTO OR DISTRIBUTED IN THE UNITED STATES, CANADA OR JAPAN OR TO ANY U.S. PERSON OR TO ANY INDIVIDUAL OUTSIDE CANADA OR JAPAN WHO IS A RESIDENT OF CANADA OR JAPAN.
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Hörmann Finance GmbH
Ownership / Issue Structure
The planned corporate bond will be issued by Hörmann Finance GmbH, which is part of the Hörmann Group, controlled by Hans Hörmann. Hörmann Finance GmbH comprises the private companies of the Hörmann Group.
All figures stated in this report refer to the consolidated financials statements of Hörmann Finance GmbH. For FY 2011 we have used the “as if” numbers, which assume that Hörmann Finance GmbH would have existed in the same form as in FY 2012 since 1. January 2013. Indeed, Hörmann Finance GmbH was incorporporated only in the cause of FY 2011.
Hörmann Finance GmbH reports according to German GAAP (HGB).
Hörmann Family 100%
Hörmann Holding GmbH & Co. KG 100%
Hörmann Funkwerk Holding GmbH
100%
52,83%
Hörmann Finance GmbH Teilkonzern
100%
100%
100%
Hörmann Kommunikationsnetze GmbH
Hörmann Automotive GmbH Automotive
Funkwerk AG Teilkonzern
Engineering
Hörmann Automotive Gustavsburg GmbH (60%)
AIC Ingenieurgesellschaft für Bauplanung GmbH, Chemnitz (90,24%)
Hörmann Automotive Penzberg GmbH (100%)
AIC Süd GmbH, Kirchseeon (90,24%)
Hörmann Automotive St. Wendel GmbH (100%) Hörmann Automotive Saarbrücken GmbH (100%)
Hörmann Rawema Engineering & Consulting GmbH, Chemnitz (100%)
Hörmann Automotive Wackersdorf GmbH (100%)
Ermafa Guss GmbH, Chemnitz (95%)
Hörmann GmbH
Communication Hörmann KMT GmbH, Salzburg, Österreich (100%) Roland Sirenenbau + Anlagentechnik GmbH, Keltern (100%, at equity)
Hörmann Automotive Eislingen GmbH (100%) Hörmann Automotive Bielefeld GmbH (100%)
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Hörmann Finance GmbH
Comparable bonds
German bonds of mides-sized companies from the Automotive & Truck industry: We have selected a porttfolio of bonds issued by German mid-sized companies from the automotive and truck industry.
The peer group currently yields in a range of 2.9% (Dürr) to 7.1% for the recently issued Alfmeier Präzisions AG, with an average spread against the German government bonds with a similar maturity profile of 481bp.
German Mittelstandsanleihen - Truck and Automotive sector Industry
ISIN
Term to Maturity (years)
Maturity
Amount outstanding (million)
Currency
ALBERT REIFF GMBH CO KG
Auto/Trk Prts&Equip-Orig
DE000A1H3F20
2.5
27.05.2016
30
EUR
ALFMEIER PRAEZISIONS AG
Auto/Trk Prts&Equip-Orig DE000A1X3MA5
5.0
29.10.2018
30
EUR
Machinery-General Indust DE000A1EWGX1
1.9
28.09.2015
225
EUR
DE000A1K0FF9
2.9
20.09.2016
15
EUR
MASCHINENFABRIK SPAICHIN
Auto/Trk Prts&Equip-Orig DE000A1KQZL5
2.7
15.07.2016
30
EUR
MITEC AUTOMOTIVE AG
Auto/Trk Prts&Equip-Orig
DE000A1K0NJ5
3.4
30.03.2017
50
EUR
PARAGON AG
Electronic Measur Instr
DE000A1TND93
4.6
02.07.2018
20
EUR
PROCAR AUTOMOBILE FINANZ
Auto-Cars/Light Trucks
DE000A1K0U44
2.9
14.10.2016
30
EUR
SAF-HOLLAND GROUP
Auto/Trk Prts&Equip-Orig
DE000A1HA979
4.5
26.04.2018
75
EUR
UNIWHEELS HOLDING GMBH
Auto/Trk Prts&Equip-Orig
DE000A1KQ367
2.4
19.04.2016
50
EUR
Company Name
DUERR AG GIF - GESELLSCHAFT INDUS
Research&Development
Average
3.3
56
So urce: B lo o mberg, equinet Research
Yield Spread (BP)
Yield
103.90
244
5.61
101.50
652
7.01
7.25
107.60
268
2.89
BB+ (CR)
8.50
109.00
465
4.93
BBB- (CR)
7.25
108.00
325
3.83
BB+ (w atch) (CR)
7.75
103.50
597
6.43
PARAGON AG
BB+ (CR)
7.25
103.50
572
6.22
PROCAR AUTOMOBILE FINANZ
BB+ (CR)
7.75
101.00
686
7.07
SAF-HOLLAND GROUP
BBB (EH)
7.00
109.00
397
4.52
B- (EH)
7.50
102.34
604
6.27
481
5.48
Company Name
Rating
Coupon
ALBERT REIFF GMBH CO KG
BBB- (CR)
7.25
ALFMEIER PRAEZISIONS AG
BB (CR)
7.50
NR
GIF - GESELLSCHAFT INDUS MASCHINENFABRIK SPAICHIN
DUERR AG
MITEC AUTOMOTIVE AG
UNIWHEELS HOLDING GMBH Average So urce: B lo o mberg, equinet Research
Price (%)
A ll prices as o f 8. No vember 2013
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Hörmann Finance GmbH
Company Profile Hörmann Finance is a leading German producer of metallic components, modules and systems for the commercial vehicles, agricultural machinery and construction machinery industry (Automotive division). Additionally, the company acts as a general planner for the full portfolio of engineering services in the construction industry (Engineering division) and provides services and systems related to communication and siren technology (Communication division).
Products and Services
Automotive: The Automotive division is by far Hörmann’s biggest segment, accounting for roughly 88% of sales in FY 2012. Hörmann’s core competence here lies in the area of metal working, which among others includes coil stamping, forming, welding, coating and tool making.
Hörmann Finance GmbH produces mainly for the commercial vehicle industry (83% of Automotive sales in FY 2012) and related areas like Busses (6% of sales), Agricultural Equipment (6%) and Construction Machinery (1%). The passenger car industry is a relatively new customer group, which so far accounts for 4% of Automotive sales, but with a growing share.
Hörmann’s most important products are truck frame rails, for which the company is the exclusive supplier to MAN. Recently, Daimler was won as an additional customer Other products, among others, include body in white components, attachment parts and isolated exhaust pipes.
At a glance Revenue by segments 2012
Equity and liabilities 2012 Financial debt 5%
Engineering 4%
Communication 8%
Pension prov isions 13%
Other liabilities 38%
Automotiv e 88%
Net profit development
Revenue & EBITDA Margin
EUR m
EUR m
500
15.0%
15.0
400
12.0%
12.0
300
9.0%
9.0
200
6.0%
6.0
100
3.0%
3.0
0.0%
0.0
0
2011
2012 Revenue
Equity 44%
2013e
2014e
2015e
EBITDA margin
2011
2012
2013e
2014e
2015e
Net Profit before minorities
So urce: Co mpany data, equinet Research
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Hörmann Finance GmbH
Hörmann’s most important customer by far in the Automotive segment is MAN, which accounts for roughly 70% of the segment’s revenue. This is related to the history of the company, as Hörmann has acquired its biggest subsidiaries from MAN, which at that point in time supplied parts exclusively to MAN. The second biggest customer is Daimler (including EvoBus), which accounts for roughly 12% of Automotive sales. All other customers are relatively small and include John Deere (2%), CNH Global (2%), BMW (1) and Claas (1%).
Engineering: The Engineering division accounts for only 4% of sales of the Hörmann Finance GmbH. Hörmann provides world wide general planning and services for the construction of industrial and commercial buildings but also for the construction of residential buildings. Customers are supported all the way from the initial ideas to the ready-to-use object. Main competences in this area are construction, architecture, technical equipment as well as structural plannng and construction.
Communication: The communication segment accounted for roughly 8% of sales in FY 2012. One area of activity is the contruction and servicing of turn-key sirene warning systems, which is the nucleaus of the Hörmann group. On the other hand, the segment also offers services and complete solutions around the communication technology, overhead line construction as well as the construction of photovoltaic systems.
Company history
The predecessor of Hörmann Finance was founded in 1955 by Dipl. Ing. Hans Hörmann as an engineering office for the construction and examination of lightning protection systems.
In the 1960s the business was extended to the siren business.
In 2002 Hörmann Kommunikations GmbH was founded as a service provider for the construction of telecommunication infrastructure.
The automotive business, which today accounts for the large majority of the business, was started in 2003 through the acquisition of Michels GmbH Komponentenbau (today: Hörmann Automotive Saarbrücken Gmbh).
Further acquisitions were made in 2005 (Kuhn group, today: Hörmann Automotive St. Wendel GmbH) and 2007 (acquisition of a 50% stake in the MAN plant Penzberg (today: Hörmann Automotive Penzberg).
Additionally, in 2007 Hörmann founded a joint venture with MAN (Hörmann Automotive Gustavsburg GmbH), which took over parts of the business formerly done internally by MAN. Hörmann today owns 60% of the company with the remaining 40% belonging to MAN.
In 2008 Hörmann acquired the remaing 50% stake of Hörmann Automotive Penzberg GmbH from MAN.
In 2009 Hörmann acquired Prometall AG, which is today registered as Hörmann Automotive Bielefeld GmbH.
In 2010 the (for now) last additions to the portfolio were made by acquiring Modine Wackersdorf GmbH (today: Hörmann Automotive Wackersdorf GmbH) and NOWO-tech Alu GmbH & Co. KG (today: Hörmann Automotive Eislingen GmbH).
Today’s holding structure was formed in 2011 by the foundation of Hörmann Finance GmbH and the subsequent transfer of the subsidiaries to this company.
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Hörmann Finance GmbH
Management Structure
In our view, Hörmann Finance GmbH and its operational subsidiaries are run by a very experienced management team, which in most cases is active within the Hörmann group already for a very long time. Hörmann Finance Group
Alfons Hörmann CEO (since 2010) Formerly CEO of CREATON AG Since 2000 member of the advisory body of Hörmann Holding
Karl Bernhard Doniat Bild
Automotive divsion
Since 1984 in various financial management position in the Hörmann group
Engineering division
Andreas Meyer
Johann Schmid-Davis
CFO (since 2005) Bild
Corporate Finance (since 2013) Since 2001 in financial management positions in the Hörmann Group / Funkwerk
Communication division
Thomas Voigtländer
Johannes Antoni
MD AIC (since 2006)
MD Hörmann KN (since 2006)
Since 1997 in various technical posions in the Hörmann Engineering division
Formerly board member of Alpine Energie AG
Lothar Becker
Axel Edlich
Matthias Müllner
MD Hörmann Automotive (since 2006)
MD Ermafa Guss (since 1994)
MD Hörmann GmbH (seit 2001)
Formerly in leading positions in the plant construction for body contruction
Formerly head of the foundry at Ermafa Kunststofftechnik
Since 1992 active in the Hörmann group Formerly sd&m, Senior Consultant
MD Hörmann Automotive (since 2007) Formerly various management positions in the automotive and commercial vehicle industry
Bild
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Hörmann Finance GmbH
Market environment
Truck supplier market structure: Hörmann’s main products, especially truck frame rails and body in white components, are in most cases produced internally by the OEMs.
Main competitors: Besides the OEMs, Hörmann’s main competitors are Kirchhoff Automotive, Maxion, Metalsa and Gestamp.
Truck & trailer market: Hörmann Finance GmbH is active in a market with strong structural growth driven by the ongoing globalization and the subsequent demand for transportation. However the truck and the trailer markets are also characterized by a strong cyclicality, although the two markets do not develop completely alike over time.
Europe truck market set to grow in the medium term: At present, Hörmann is predominantly active in Europe. Heavy truck sales is forecasted to rise by a CAGR of 8.3% in the period 2010 – 2018 (source: IHS Jan 2013).
Euro 6: Starting 1. January 2014, trucks sold in Europe will have to comply with the new Euro 6 exhaust legislation. Euro 6 will require the amount of NOx in the exhaust gas to be reduced significantly. The truck manufacturers will have to install additional after-treatment technology such as lean NOx traps and SCR systems. These will lead to increasing prices for trucks. Additionally, the new systems will also lead to increasing fuel consumption of the trucks, which will further increase its total cost of ownership.
Uncertain toll rules for Euro 6 trucks: Daimler has lobbied for a reduced toll rate for Euro 6 trucks. However, as no decision has been taken until today, this has led to a high level of uncertainty for truck buyers across Europe, as it was impossible to forecast if the higher costs of the Euro 6 trucks would be compensated by lower toll payments. This uncertainty has resulted in a considerable buying constraint in H1 2013. Besides the difficult economic environment in the Southern European countries, this has in our view led to a weak development of the European heavy truck market, which declined by 8.0% in the first 8 months of 2013.
Pre-buy seems to have started now: Since the summer, the weak development of the European truck market has improved and demand has picked up substantially. MAN has reported order intake in August and September to have been above last year’s level. Daimler recently stated that they are trying to shift orders for Euro 6 trucks into next year, indicating that production capacities are limited for the rest of FY 2013.
While it is unclear, if the pick-up in demand is related to a pre-buy effect or mainly a catch-up effect from the weak first half of FY 2013, we believe that at least to a certain degree the market is benefitting from a pre-buy effect. Nonetheless, as sales for the whole year will not be very storng, we would not expect a sustainable weakness of sales in FY 2014. In contrast, we believe that the relatively low level of sales in the last years will result in a catch-up effect in the next years.
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Hörmann Finance GmbH
Unit Sales of the European Truck market (excluding Russia) 600k
500k 400k 300k 200k 100k 0k 2010
2011
2012e
2013e
2014e
2015e
2016e
2017e
2018e
Source: IHS Jan 2013
Market entry barriers: Strong market positions, high-tech products together with a high need for capital investments and long-term customer relationships represent high barriers of entry for new competitors.
Raw materials: Raw materials costs account for a significant portion of the costs of goods sold and could thus at first glance pose a risk for the company. However, the contracts of Hörmann are steel price linked. A rising steel price could thus lead to a lower margin but not to a lower operating result.
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Hörmann Finance GmbH
Financials We expect Hörmann Finance GmbH to grow its revenues by on average 2.6% to EUR 466m in the next three years. EBITDA should improve by on average 11% to EUR 27m, with the EBITDA margin likely to reach reaching 5.8% in 2015e.
Revenue development 2012: Revenue decreased by 3.3% in FY 2012, with sales in the automotive segment down 2.7% to EUR 384.2m, Engineering down 4.6% to EUR 16.6m and Communication down 10.6% to EUR 30.4m. This development was mainly driven by a weaker market for heavy trucks in Europe, which declined by 6% to 237,892 units. Unit sales of MAN Truck & Bus, which is as a customer accounts for 63% of Hörmann Finance GmbH’s revenues, declined by 5%. This shows that Hörmann has outperformed the market and won market share by acquiring new business.
EBIT development 2012: EBIT decreased by 5% to EUR 14.4m and thus almost in line with the decrease in revenue. Hörmann benefited from a process optimisation and portfolio measures. The negative operating leverage on lower revenue could thus be almost compensated. The EBIT numbers for the individual divisions (Automotive -28.9% to EUR 10.1m, Engineering +88.4% to 1.6m, Communication -14.4% to 2.4m, Holding EUR 0.4m vs. -2.5m in FY 2011) are not usefully comparable with the prior year’s numbers, as a change in the accounting for group charges was made in FY 2011.
Net income development 2012: Net income before minorities decreased by EUR 1.2m to EUR 10.7m in FY 2012. This was mainly related to the lower EBIT, a slightly weaker financial result and a touch higher tax rate.
Expected revenue development: We expect an exceptionally strong demand for trucks in Q4 2013, which should in our view compensate a relatively weak truck market development in the first nine months. Overall, revenue should thus be largely unchanged in FY 2013. In the next years, revenues should benefit from a cyclical recovery of the European truck market. We thus expect revenue to increase by 6% in FY 2014e and by 2% yoy in FY 2015.
Expected EBIT development: We expect the adjusted EBIT margin to improve by 40bp to 3.7% in FY 2013, mainly driven by further cost improvements. In the next years, EBIT should improve more than proportionately to the sales development, mainly driven by a positive operational leverage. The EBIT margin should improve to 4.7% until FY 2016, according to our estimates.
Expected net profit development before minorities: Net profit before minorities should improve by EUR 1.7m in FY 2013e to 12.4m, with further growth expected in the next year’s. Please note that in our assumptions the financial result is burdened by expected higher interest expenses related to the planned bond. We have assumed that up to EUR 40m are available for acquisitions, which are however not included in our forecasts. This money is thus generating very limited interest income in our forecasts, while we have assumed interest costs of 6.5% for the bond proceeds.
Profit development EUR m Revenue
2011 446.2
Growth EBITDA % of sales EBIT % of sales Net Profit before m inorities % of sales * CA GR 2011- 2016e
2012
2013e
2014e
2015e
2016e
431.3
431.3
457.1
466.3
471.9 1.2%
-3.3%
0.0%
6.0%
2.0%
19.6
19.1
20.1
24.9
26.8
27.8
4.4%
4.4%
4.7%
5.4%
5.8%
5.9%
15.3
14.4
16.0
19.9
21.3
22.1
3.4%
3.3%
3.7%
4.3%
4.6%
4.7%
11.9
10.7
12.4
13.2
14.6
15.4
2.7%
2.5%
2.9%
2.9%
3.1%
3.3%
CAGR* 1.1% 7.2% 7.6% 5.3%
So urces: Co mpany data, equinet Research
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Page 12
Hörmann Finance GmbH
Cash flow
Operating Cash Flow before Net Working Capital changes: Operating cash flow excluding changes in net working capital should increase by roughly 50% in FY 2013e to EUR 16m. This is based on the assumption that deferred taxes and paid taxes will converge and that no unusual development in the positions of other assets and liabilities will occur.
Net Working Capital: Due to the expected stable revenue development in FY 2013, we expect Net Working Capital to remain also unchanged at EUR 43m, which implies a ratio of NWC to sales of 10.0%. As we have only limited history of two historical years available, it is difficult to judge what a reasonable estimate is for NWC/Sales in the future. Given that a peer group of 4 German auto and truck suppliers showed an average NWC / Sales ratio of 9.7% in FY 2012, we have assumed that Hörmann will be able to keep it ratio stable at the 10% level reached in FY 2012. Net Working Capital
EUR m 60
15%
50
13%
40
30
11%
20
9%
10 7%
0
-10
5% 2011
2012
2013e
Net Working Capital
2014e
2015e
2016e
NWC/Sales (rhs) Sources: Company data, equinet Research
Operating Cash Flow after Net Working Capital changes: FY 2012 had benefitted from a strong improvement in Net Working Capital. In FY 2013, we expect a neutral effect from a change in NWC. Operating cash flow after Net Working Capital change should thus decrease by 43% yoy to EUR 16m in FY 2013.
Capex: Capex should remain almost unchanged in FY 2013. We expect a temporary pick up in capex in FY 2014 to pay with capex likely to return to a level around D&A in FY 2015.
Free Cash Flow: In sum, we estimate the free cash flow to be reduced to EUR 10.3m in FY 2013 and to EUR 3.5m in FY 2014, before starting to improve again in FY 2015e. EUR m
Cash Flow development
30 20 10 0 -10 -20 2011
2012
2013e
Operating Cash Flow
2014e Operating FCF
2015e
2016e FCF
Sources: Company data, equinet Research
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Page 13
Hörmann Finance GmbH
Balance sheet
Equity ratio: Hörmann’s shareholders’ equity ratio stood at 44% at the end of FY 2012. From our point of view this is a very comfortable ratio. However, two specific items should be considered here:
Sale & Lease back: Hörmann operates a machinery-intensive business with an asset-light business model. This is mainly related to a sale & lease back policy, which is treated as operating leases and which are shown off-balance according to German-GAAP. This results in a balance sheet contraction, which in return leads to an improved equity ratio. At the end of FY 2012, Hörmann had commitments for future rent and lease payments etc. in the amount of 43.3m outstanding, of which EUR 11.6m had a term of less than one year. If one would take 80% of the commitments of future rent and lease payments as an assumed net present value on balance without assuming any impact on the equity, this would result in a reduced equity ratio of 36%, which is in our view still very sound.
Receivables from shareholders: Additionally, at the end of FY 2012 Hörmann Finance GmbH reported receivables from shareholders in the amount of EUR 19.1m. This is partially compensated in an amount of EUR 2.4m by liabilities against shareholders and affiliates. We believe that of the net number of EUR 16.7m at the end of FY 2012 a certain portion is related to normal business activity in the Hörmann group, which should be considered as working capital. However, a certain part of the receivables from shareholders is also related to shareholder loans, which could also be seen as an early payment on dividend payment to be made later. If the full amount of EUR 16.7m would be paid out to shareholders (which is in our view too conservative), the equity ratio would decrease to 37%, which is in our view still a very solid number.
In FY 2013 the positive effect from the net result on the equity should be more than compensated by the balance sheet expansion related to the planned bond offering. As we forecast a constantly positive net income and no further significant balance sheet expansion, the equity ratio should improve in due cause to 42% by FY 2016e. We have assumed a dividend pay-out ratio of 40% during this time frame. Equity Ratio 50% 40% 30% 20% 10%
0% 2011
2012
2013e
2014e
2015e
2016e
Sources: Company data, equinet Research
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Page 14
Hörmann Finance GmbH
9m 2013 results
Revenue development: Revenues decreased by 5.8% yoy to EUR 303m. This was in our view mainly related to the weak truck market in Europe.
EBIT development: Against the negative revenue development, EBIT improved by 21% to EUR 10.8m. Excluding an extraordinary result of EUR 1.3m in 2013, adjusted EBIT increased by 6.8% in the first nine months of FY 2013 to EUR 9.5m, with the adj. EBIT margin up 30bp to 3.1%.
EBT and Net profit: EBT increased roughly by 15% to EUR 10.1m. Net profit before minorities increased by 25.5% to EUR 8.5m.
Equity ratio: The equity ratio remained unchanged at 44%.
Cash Flow: The operating FCF weakened by EUR 14m yoy, mainly related to a built up of working capital. This is in our view related to an expected very strong business in Q4 2013 and should normalise again thereafter.
Net debt: Net debt increased by EUR 14.3m to EUR 16.1m. 9m 2013 - Key Financials EUR m
9m 2012
9m 2013
% yoy
Revenue
321.2
302.7
-5.8%
EBITDA % of sales
11.7 3.7%
13.8 4.6%
17.3%
EBIT % of sales
8.9 2.8%
10.8 3.6%
21.4%
Adjusted EBIT % of sales
8.9 2.8%
9.5 3.1%
6.8%
Pretax Profit % of sales
8.8 2.7%
10.1 3.3%
14.9%
Net Profit before m inorities % of sales
6.8 2.1%
8.5 2.8%
25.5%
31.12.12
30.9.13
% yoy
170.5 53% 43.3 13% 1.8 2% 74.4 44%
175.2 58% 67.8 22% 16.1 21% 77.5 44%
2.7%
9m 2012
9m 2013
2015e
7.6 2%
-6.9 -2%
-190.2%
-4.6 -1%
-4.3 -1%
-6.8%
Operating FCF % of sales
3.0 1%
-11.2 -4%
-478.8%
Acquisitions and others % of sales
3.6 1%
-0.6 0%
-117.8%
FCF % of sales
6.6 2%
-11.8 -4%
-280.0%
Balance Sheet Total assets / liabilities % of sales Net Working Capital % of sales Net debt Gearing Equity Equity ratio Cash Flow Operating Cash Flow % of sales Capex % of sales
56.6% n.a. 4.1%
So urce: Co mpany data, equinet Research
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Page 15
Hörmann Finance GmbH
Debt related ratios
Risk Bearing Capital Ratio: The Risk Bearing Capital Ratio stood at 35% at the end of FY 2012. Please note that we have considered the liabilities against associated companies as subordinate and thus included them in the calculation of risk bearing capital. Due to the planned bond offering, we expect this ratio to weaken to 30% in FY 2013 and to improve again in the subsequent years. Risk Bearing Capital Ratio 40% 36% 32% 28% 24%
20% 2011
2012
2013e
2014e
2015e
2016e
Sources: Company data, equinet Research
Total Debt/Capital: The Total Debt/Capital ratio stood at 40% at the end of FY 2012, which is in our view a very solid ratio at investment grade level. This ratio should deteriorate in FY 2013 to 56% due to the planned bond offering and should improve again in the following years.
Total Debt / Capital 60% 50% 40% 30% 20%
10% 2011
2012
2013e
2014e
2015e
2016e
Sources: Company data, equinet Research
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Page 16
Hörmann Finance GmbH
EBIT Interest Coverage: The EBIT Interest Coverage Ratio stood at 5.8x at the end of FY 2012. This is in our view a very good ratio, which would have been even better if the interest expenses had not been burdened by the decrease in interest rates, which led to a negative impact on the interest expenses from the discounting of provisioning. In 2013 this ratio should improve further, with the ratio weakening in FY 2014 after the planned bond offering at the end of FY 2013. Nonetheless, the ratio will in our view continue to remain in a solid area. EBIT Interest Coverage 15 12 9 6 3
0 2011
2012
2013e
2014e
2015e
2016e
Sources: Company data, equinet Research
EBITDA Interest Coverage: The Adjusted EBITDA Interest Coverage ratio amounted to 7.7x in FY 2012. This is a good ratio in our view, though not as good as the ratio seen at EBIT Interest Coverage level. The reason is in our view the relatively limited number of depreciation and amortization Hörmann Finance GmbH is showing. This is related to the mentioned policy to work intensively with sale and lease back deals.
EBITDA Interest Coverage 20 16 12 8 4
0 2011
2012
2013e
2014e
2015e
2016e
Sources: Company data, equinet Research
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Page 17
Hörmann Finance GmbH
Net Debt / EBITDA: The Net Debt / EBITDA ratio amounted to 0.1x at the end of FY 2012, which is a very good ratio. This number is hardly impacted by the bond offering in our calculations, as up to 80% of the planned amount of EUR 50m are planned to be used for acquisitions, which we have not included in our calculations. The amount of net cash is thus affected only by a lower net result, as higher interest expenses will burden the result in our calculation. Net Debt / EBITDA 2.0 1.0 0.0 -1.0 -2.0
-3.0 2011
2012
2013e
2014e
2015e
2016e
Sources: Company data, equinet Research
Total debt / EBITDA: The Total Debt / EBITDA ratio amounted to 1.8x at the end of FY 2012. This is a solid level in our view. Due to the planned bond offering this ratio is likely to weaken to 3.7x at the end of FY 2013, which would be a non-investment grade level in our view. However, as mentioned before, we have not included any return from investments, which the proceeds from the planned bond offering are likely to be used for. Assuming that the company will be able to find a profitable use for the bond proceeds (which is in our view a likely scenario), this ratio would improve again. But even assuming that Hörmann Finance GmbH will keep the bond proceeds in its bank accounts, it is in our view likely that this ratio is going to improve again in FY 2014ff to a level below 3.0x.
Total Debt / EBITDA 5.0 4.0 3.0 2.0 1.0
0.0 2011
2012
2013e
2014e
2015e
2016e
Sources: Company data, equinet Research
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Page 18
Hörmann Finance GmbH
Financing structure At the moment, Hörmann Finance GmbH is financed by a very limited amount of financial debt. Most of this is likely to be repaid from the proceeds of the planned bond offering.
Bank loans: Bank loans amounted to EUR 7.7m at the end of FY 2012. EUR 1.2m of this amount had a remaining maturity of less than 1 year, with the remainder of EUR 6.5m maturing in 1 to 5 years. Hörmann Finance GmbH has pledged the manufacturing equipment, which were financed by these loans as security to the banks.
Liabilities to associated companies: Liabilities to associated companies amounted to EUR 2.4m at the end of FY 2012. All of these had a maturity of less than 1 year.
Pension provisions: Pension provisions amounted to EUR 22.8m at the end of FY 2012. Additionally, an amount of EUR 2.1m of unfunded pension liabilities has not yet been recognized in the balance sheet. This amount will be recognized through the P&L over the next 12 years by an annual amount of EUR 0.177m.
Financial debt and maturity profile Maturity EUR m
Up to 1 year
1- 5 years
>5 years
Total
Bank loans
1.157
6.542
0.000
7.699
Liabilities to associated companies
2.420
0.000
0.000
Pension provisions
2.420 22.799
Unfunded pension liabilities not recognized on the balance sheet
2.129
Total Debt
35.047 So urce: Co mpany data, equinet Research
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Page 19
Hörmann Finance GmbH
Main Risks Business risks
Cyclicality of the business: The market for commercial vehicles is highly cyclical and dependant on the overall economic environment. Given that the truck market in Europe is currently near its cyclical trough, we believe that downside risks are rather limited at the moment.
Dependence from one major client: In FY 2012, Hörmann Finance has generated 63% of its revenue with only one customer, namely MAN SE. If MAN would lose market share, broaden its supplier base or stop doing business with MAN, this would have a materially negative impact on Hörmann Finance GmbH.
Risks related to a regional expansion: Hörmann Finance GmbH considers to expand its regional presence to growth regions such as Russia. While this offers opportunities on the one hand side, expansion into new markets also always involves additional risks.
Financial risks
Guarantees for mother company: Hörmann Finance GmbH has granted guarantees for three loans taken by the Hörmann Holding GmbH & Co. KG in the magnitude of EUR 11m.
Other risks
Limited financial history: Hörmann Finance GmbH was incorporated as the mother company of a sub-group of the Hörmann Group in 2011. Historical financial data is thus available for the years 2011 & 2012 only. This is a rather limited period, which makes it more difficult than to assess the risks involved in Hörmann Finance’s business model. However, this is only a question of visibility, as the operating companies are much older and do belong to the Hörmann Group also for a longer period than the reported two years.
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Page 20
Hörmann Finance GmbH
SWOT Analysis STRENGTHS
WEAKNESSES
Strong relationships to customers
Little exposure to international markets
High production expertise
Limited availability of historical results
Experienced management team Solid balance sheet
OPPORTUNITIES
THREATS
Expected growth of the truck industry
High cyclicality of the truck industry
Potential for market share gains
Guarantees granted for loans raised by the mother company
Cost savings potential from the use of intra group synergies Growth potential in international markets
Availability of high profile personnel High dependence customers
to
individual
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Page 21
Hörmann Finance GmbH
Key Financials EUR m
2011
2012
2013e
2014e
2015e
2016e
Revenue % yoy
446.2
431.3 -3.3%
431.3
457.1 6.0%
466.3 2.0%
471.9 1.2%
EBITDA % of sales
19.6 4.4%
19.1 4.4%
4.7%
24.9 5.4%
26.8 5.8%
27.8 5.9%
EBIT % of sales
15.3 3.4%
14.4 3.3%
3.7%
19.9 4.3%
21.3 4.6%
22.1 4.7%
Pretax Profit % of sales
14.1 3.2%
13.1 3.0%
3.4%
15.8 3.5%
17.6 3.8%
18.5 3.9%
Net Profit before m inorities % of sales
11.9 2.7%
10.7 2.5%
2.9%
13.2 2.9%
14.6 3.1%
15.4 3.3%
Net Profit % of sales
14.6 3.3%
9.6 2.2%
2.6%
11.8 2.6%
13.3 2.9%
14.1 3.0%
Balance Sheet
2011
2012
2013e
2014e
2014e
2015e
Total assets / liabilities % of sales Capital em ployed % of sales Net Working Capital % of sales Net debt Gearing Equity Equity ratio
163.6 37% 80.1 18% 59.2 13% 23.1 30% 63.8 39%
205.4 48% 64.0 15% 43.3 10% 1.8 -4% 74.4 36%
253.8 58.8% 65.9 15.3% 43.3 10.0% -4.8 -11.3% 81.6 32.2%
269.5 59% 75.4 16% 45.9 10% -4.1 -9% 89.0 33%
280.1 60% 75.4 16% 46.8 10% -14.0 -18% 97.6 35%
290.5 62% 76.4 16% 47.4 10% -23.1 -25% 106.4 37%
Cash Flow
2011
2012
2013e
2014e
2014e
2015e
Operating Cash Flow % of sales
-6.5 -1%
28.4 7%
16.3 3.8%
15.4 3%
19.1 4%
20.3 4%
Capex % of sales
-9.7 2%
-5.5 1%
1.4%
-11.9 3%
-4.7 1%
-6.1 1%
-16.2 -4%
22.9 5%
2.4%
3.5 1%
14.5 3%
14.2 3%
0.0 0%
3.3 1%
0.0%
0.0 0%
0.0 0%
0.0 0%
FCF % of sales
-16.2 -4%
26.2 6%
2.4%
3.5 1%
14.5 3%
14.2 3%
Debt ratios
2011
2012
2013e
2014e
2015e
2016e
Risk Bearing Capital Ratio
27%
28%
25.1%
27%
29%
31%
Total Debt/Capital
49%
40%
56.0%
53%
50%
47%
Net debt / EBITDA
1.2
0.1
-0.2
-0.2
-0.5
-0.8
Total debt / EBITDA
1.9
1.8
3.7
3.0
2.8
2.7
EBIT Interest Coverage
10.8
5.8
8.8
4.2
4.8
5.0
EBITDA Interest Coverage
13.9
7.7
11.0
5.2
6.0
6.2
Equity Ratio
39%
36%
32.2%
33%
35%
37%
Cashflow ratio
4%
4%
4.4%
5%
5%
5%
Debt repaym ent tim e
-0.2 7%
-1.5 4%
-1.7 18.8%
-1.5 18%
-1.8 17%
-2.1 16%
-55%
369%
34.2%
32%
40%
43%
30%
-4%
-11.3%
-9%
-18%
-25%
Operating FCF % of sales Acquisitions and others % of sales
Financial debt ratio Op. Cashflow / Financial debt Gearing
0.0% 20.1 16.0 14.9 12.4 11.1
-6.0 10.3 0.0 10.3
So urce: Co mpany data, equinet Research
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Hörmann Finance GmbH
Appendix – Definitions Profit & Loss and Cash Flow Statement
EBIT: Sales revenue +/- Increase (decrease) in inventory of finished and unfinished products and work in progress + Other own work capitalised + Other operational income - Cost of material - Personnel expenses - Depreciation and amortization - Other operating expenses +/- Income from equity interests - Other taxes +/- Extraordinary result = EBIT
EBITDA: EBIT + Depreciation and amortization = EBITDA
Interest result Interest income - Interest expenses - Impairment losses on investments = Interest result
Pre-tax profit EBIT +/- Interest result = Pre-tax profit
Operating Free Cash Flow Operating Cash Flow - Capital Expenditure = Operating Free Cash Flow
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Page 23
Hörmann Finance GmbH
Balance Sheet
Total Debt: Liabilities to financial institutions + Bonds, Commercial Papers, Medium Term Notes + Pension provisions + Mezzanine Capital + Subordinated loans + Unfunded pension liabilities without provisions + Liabilities to affiliated companies (if financial liabilities) + Liabilities to companies with shareholding (if financial liabilities) + Other interestpaying liabilities = Total debt
Net debt Total debt - Cash and cash equivalents = Net debt
Equity Shareholders’ equity + Minority interest = Equity
Risk Bearing Capital Equity + Liabilities to shareholders and associated companies (if subordinated) + Mezzanine Capital - Own shares - Receivables from shareholders - Subscribed capital unpaid - Unfunded pension liabilities without provision - deferred tax assets = Risk Bearing Capital
Modified Balance Sheet Total Balance sheet total - Own shares - Receivables from shareholders - Subscribed capital unpaid = Modified Balance Sheet Total
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Hörmann Finance GmbH
Ratios
EBIT Interest Coverage EBIT divided by Interest result = EBIT Interest Coverage
EBITDA Interest Coverage EBITDA divided by Interest result = EBITDA Interest Coverage
Risk Bearing Capital Ratio Risk Bearing Capital divided by Modified Balance Sheet Total = Risk Bearing Capital Ratio
Total debt / Capital Ratio Total debt Divided by (Total debt + Risk Bearing Capital) = Total debt / Capital Ratio
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Hörmann Finance GmbH
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Hörmann Finance GmbH
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Members of ESN (European Securities Network LLP)
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