MATELAN Research - ISRA VISION AG

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ISRA VISION In-Depth Report Mid-term growth targets reiterated Higher estimates but not less conservative Acquisitions still in the pipeline Free cash flow expected to turn positive by yearend - 36 - For the mid-term, mgmt reiterated its target of achieving a net sales level of ‘+EUR100m in the next years’. The main elements of its growth strategy remain (1) the expansion of its market share in its current markets, (2) the sale of its products into new regions and sales channels as well as (3) the innovation of new products for existing customers. The next table illustrates that following good Q3 figures we have become more optimistic with regard to ISRA’s financials in the coming years, without leaving the conservative nature of our model behind and accounting for a potential economic slowdown. Changes in our model FY 10/11e Change FY 11/12e Change FY 12/13e Change € m new old % new old % new old % Net sales 74.9 71.4 4.9% 82.4 75.5 9.1% 87.3 80.1 8.9% Capitalized items 8.0 9.3 -13.8% 9.1 9.3 -1.6% 8.7 9.9 -11.3% Total Output 82.9 80.7 2.7% 91.5 84.8 8.0% 96.1 90.0 6.7% Gross profit 49.3 47.8 3.0% 54.2 50.0 8.3% 56.9 53.3 6.7% Gross margin 59.4% 59.3% 59.2% 59.0% 59.2% 59.2% EBITDA 20.8 21.1 -1.5% 23.7 22.6 5.0% 25.4 24.1 5.1% EBITDA margin 25.1% 26.2% 25.9% 26.6% 26.4% 26.8% EBIT 13.8 14.2 -2.7% 16.4 15.3 7.2% 17.8 16.4 8.5% EBIT margin 16.7% 17.6% 17.9% 18.0% 18.5% 18.2% EBT 13.0 13.2 -1.6% 15.5 14.3 8.2% 16.9 15.5 9.3% EBT margin 15.7% 16.4% 17.0% 16.9% 17.6% 17.2% Net income 9.0 9.1 -1.6% 10.7 9.9 8.2% 11.7 10.7 9.3% Net margin 10.8% 11.3% 11.7% 11.7% 12.2% 11.9% EPS 2.06 2.09 -1.6% 2.46 2.27 8.2% 2.68 2.45 9.3% Source: MATELAN Research, in EURm In addition to this organic growth strategy, mgmt continues to work on a couple of acquisition projects in order to gain access to further markets and/or to add further technologies to its product portfolio. Management made it clear that it expects one more acquisition to take place in the current calender year. Cash flow for the nine-month period was not as strong as in the first half. As the graph below shows, gross operating cash flow (ex. changes in NWC) increased by 12% from EUR12.4m in 9M 09/10 to EUR14.0m in 9m 10/11) mainly driven by the increase in earnings. However, cash requirements for net working capital increased over-proportionately (from EUR-8.4m to EUR- 9.9m/18%) due to the strong business expansion. Operating cash flow was thus almost stable at EUR4m. Capex was just marginally below last year’s level. Consequently, free cash flow showed a slight improvement from EUR- 3.0m to EUR-2.3m but remained negative. For the full year, free cash flow should be positive. Cash flow development 20.000 15.000 10.000 5.000 0.000 -5.000 -10.000 -15.000 -20.000 Source: ISRA VISION, in EURm 9M 09/10 9M 10/11 CAPEX Change in NWC Gross operating cash flow FCF
ISRA VISION In-Depth Report Sales and EBIT-margin Adj. EPS and DPS 120 100 80 60 40 20 Source: MATELAN Research, EURm Source: MATELAN Research, EUR Operating cash flow and free cash flow Capital expenditure and depreciation Source: MATELAN Research, EURm Source: MATELAN Research, EURm Equity and net debt RoCE and RoE Source: MATELAN Research, EURm Source: MATELAN Research - 37 - 0 25 20 15 10 5 0 -5 -10 -15 -20 160.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 2008 2008 2009 2010 2011e 2012e 2013e 2014e 2015e Sales (l.s.) EBIT-margin (r.s.) 2009 2010 2011e 2012e 2013e 2014e Opearting cash flow Free cash flow 2008 2009 2010 2011e 2012e 2013e Equity Net debt 2014e 2015e 25% 20% 15% 10% 5% 0% 2015e 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 12 10 8 6 4 2 0 12% 10% 8% 6% 4% 2% 0% 2008 2008 2008 2009 2009 2010 2011e 2012e 2013e Adj. EPS DPS 2010 2011e 2012e 2013e 2014e Capex Depreciation 2009 2010 2011e 2012e 2013e 2014e 2014e RoCE RoE 2015e 2015e 2015e
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