STRATEC Berenberg Diagnostics Conference 20190514ir.stratec.com/stratec/pdf/pdf_id/510541.pdf · STRATEC provides instrumentation, consumables, software and automation solutions OEM

BERENBERG DIAGNOSTICS CONFERENCE

London, May 14, 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.

LONDON – MAY 14, 2019 2

AGENDA

3LONDON – MAY 14, 2019

1. OVERVIEW AND BUSINESS MODEL2. THE IVD MARKET3. FINANCIALS4. OUTLOOK AND STRATEGY


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


SELECTED PRODUCTS


UNIQUE MARKET POSITION STRATEC IN THE IVD VALUE CHAIN

LONDON – MAY 14, 2019 6

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


BUSINESS MODEL

LONDON – MAY 14, 2019 7

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


LONDON – MAY 14, 2019

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


THE IVD MARKET

IVD MARKET SEGMENTS / IVD MARKET: ~ 68 BILLION USD IN 2018

LONDON – MAY 14, 2019 10

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

LONDON – MAY 14, 2019 11

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

LONDON – MAY 14, 2019 12

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

13LONDON – MAY 14, 2019

FINANCIALS

FINANCIALS

14LONDON – MAY 14, 2019

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

15LONDON – MAY 14, 2019

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

FINANCIALS

16LONDON – MAY 14, 2019

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


• 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


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


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


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

21LONDON – MAY 14, 2019

• Postponements and delays

• Signing of new development agreements

• High number of market launches expected in 2019

• Higher development and software licensing sales

FINANCIALS


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%

23LONDON – MAY 14, 2019

OUTLOOK AND STRATEGY



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


LONDON – MAY 14, 2019 25

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)


LONDON – MAY 14, 2019 26

STRATEGIC PRIORITIES

27

APPENDIX


APPENDIX

28

KEY FIGURES AT A GLANCE1


2 From continuing operations3 Subject to approval by AGM


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


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)

30LONDON – MAY 14, 2019

FINANCIAL CALENDAR

APPENDIX

31LONDON – MAY 14, 2019

SHAREHOLDER STRUCTURE(AS OF: DEC 2018)

SHARE

IPO Aug. 1998Number of shares 11,969,245Share price (04/30/2019) € 62.70Market capitalization € 750 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]

32LONDON – MAY 14, 2019

Documents

STRATEC Berenberg Diagnostics Conference 20190514ir.stratec.com/stratec/pdf/pdf_id/510541.pdf · STRATEC provides instrumentation, consumables, software and automation solutions OEM