Allgeier SE — Earnings Release 2014

Jul 30, 2014

Allgeier SE

Recommendation: BUY (BUY)

Risk: MEDIUM (MEDIUM) Price target: EUR 20.00 (23.00)

1H figures affected by difficult market environment

▪ Allgeier has issued preliminary figures for 1H 2014 (see table below). We also derived 2Q figures which are shown on page 2 of this document.

			Continued and discontinued operations (DIDAS is still normally consolidated)			Only continued operations (DIDAS is included in result from discontinued operations)
	EURm		1H 2014 1H 2013	+/-		1H 2014 1H 2013	+/-
Sales		226.6	227.3	-0.3%	202.4	202.9	-0.2%
EBITDA as % of sales		11.5 5.1%	12.3 5.4%	-6.7%	10.7 5.3%	11.8 5.8%	-9.4%
EBIT as % of sales		5.0 2.2%	6.2 2.7%	-19.9%	n/a n/a	n/a n/a	n/a
Net income		1.8	2.1	-15.1%	n/a	n/a	n/a

• Recent political discussions, in particular on the maximum duration of temporary employment, have resulted in significant uncertainties and material effects on Allgeier's Experts division. We assume that this was the main reason for the group's weak 1H figures. In 2Q, sales from continued operations (excluding DIDAS) declined by more than 2%, and EBITDA from continued operations dropped by 16% to about EUR 5.9m (2Q 2013: EUR 7.1m), according to preliminary figures. We also assume that the difficulties of the subsidiaries in Switzerland and Turkey, which both posted negative earnings in FY 2013, still continued in 1H 2014, but will no longer affect earnings in 2H 2014.
• We reduced our sales and earnings estimates for FY ²⁰¹⁴ as shown on page 2. As before, we treated Didas as discontinued operations in our estimates. Allgeier announced that Didas will be deconsolidated in July 2014, and that the income from the sale will amount to ~EUR 1m. For the following years, we assume that Allgeier will be able to adjust its services in the Experts division to the expected amendment of Germany's Commercial Leasing of Employees Act (AÜG) and will return to stronger growth again. Due to the reduced basis in 2014E, however, we also expect lower sales and earnings for 2015E and 2016E than before.
• A valuation update yields a fair value per share of EUR 21.73. In view of the current political uncertainties, we set our price target at a lower level of EUR 20.00. We confirm our BUY recommendation.

Y/E Dec 31, EUR m	2012	2013E	2014E	2015E	2016E
Sales	374.8	421.3	438.0	468.6	499.1
EBITDA	23.3	28.0	30.6	33.1	36.2
EBIT	10.6	14.5	18.4	23.1	26.9
Net result	8.8	3.5	10.1	12.8	15.7
EPS (incl. discontinued op.)	1.05	0.42	1.15	1.44	1.78
EPS (from continuing op.)	0.53	0.38	1.04	1.44	1.78
DPS	0.50	0.50	0.50	0.50	0.50
EBITDA margin	6.2%	6.6%	7.0%	7.1%	7.2%
EBIT margin	2.8%	3.4%	4.2%	4.9%	5.4%
EV/EBITDA	9.3	7.7	7.1	6.6	6.0
EV/EBIT	20.5	15.0	11.8	9.4	8.0
Source: CBS Research AG, Allgeier SE

30 July 2014

Short company profile:

Munich-based Allgeier SE is one of the leading IT companies for Business Performance in the Germanspeaking region. With more than 4,600 employees and over 1,300 freelance IT experts, Allgeier offers its customers a complete service approach spanning design, implementation, and through to the operation of IT landscapes. Six operating divisions, each with their individual specialist or sector-related focal points, work together for more than 2,000 customers from almost all sectors.

Share data:
Share price (EUR):		15.50
Shares outstanding (m):		8.8
Market capitalisation (EUR m):		136.8
Enterprise value (EUR m):		216.7
Ø daily trading volume (3 m., no. of shares):		8,235
Performance data:
High 52 weeks (EUR):		19.88
Low 52 weeks (EUR):		13.62
Absolute performance (12 months):		9.1%
Relative performance vs. CDAX:
1 month		-6.1%
3 months		-11.9%
6 months		-6.1%
12 months		-13.2%
Shareholders: Supervisory Board & Management Board:		42%
Own shares:		3%
Institutional investors:		3%
Other free float:		52%
Financial calendar:
2Q report:		14 August 2014
3Q report:		14 November 2014
Author:	Martin Decot (Analyst)
Close Brothers Seydler Research AG
Phone:	+49 (0) 69-977 84 56 0
Email:	research@cbseydlerresearch.ag

Please notice the information on the preparation of this document, the disclaimer, the advice regarding possible conflicts of interests, and the mandatory information required by § 34b WpHG (Securities Trading Law) at the end of this document. This financial analysis in accordance with § 34b WpHG is exclusively intended for distribution to individuals that buy or sell financial instruments at their own account or at the account of others in connection with their trading activities, occupation, or employment.

Key data 2Q 2014 (rounding differences are possible)

IFRS		Continued and discontinued operations (DIDAS is still normally consolidated)		Only continued operations (DIDAS is included in result from discontinued operations)
EURm		2Q 2014 2Q 2013	+/-		2Q 2014 2Q 2013	+/-
Sales	115.6	117.1	-1.2%	102.0	104.3	-2.2%
EBITDA as % of sales	6.4 5.5%	7.5 6.4%	-15.3%	5.9 5.8%	7.1 6.8%	-16.4%
EBIT as % of sales	3.0 2.6%	4.5 3.8%	-33.5%	n/a n/a	n/a n/a	n/a
Net income of the group	1.8	1.7	7.8%	n/a	n/a	n/a

Source: CBS Research AG (based on 1Q and 1H figures issued by Allgeier SE)

Change in sales and earnings estimates

	2014E		2015E		2016E
EURm (except for EPS)	new	old	new	old	new	old
Sales	438.0	463.9	468.6	498.7	499.1	534.6
EBITDA	30.6	32.3	33.1	35.4	36.2	38.9
EBIT	18.4	20.1	23.1	25.5	26.9	29.7
Net result after minorities	11.6	12.7	12.8	14.3	15.7	17.5
EPS (EUR)	1.31	1.44	1.44	1.62	1.78	1.99

Source: CBS Research AG

Profit and loss account

IFRS	2011	2012	2013	2012	2013	2014E	2015E	2016E
						DIDAS included in discontinued operations
Sales	378.8	422.8	477.6	374.8	421.3	438.0	468.6	499.1
YoY grow th	22.7%	11.6%	13.0%	n.m.	12.4%	4.0%	7.0%	6.5%
Inventory changes (finished goods,	0.3	0.6	0.5	0.6	0.6	0.5	0.5	0.6
Other own work capitalised	0.1	0.0	0.1	0.0	0.0	0.0	0.0	0.0
Total output	379.1	423.5	478.2	375.4	422.0	438.5	469.1	499.7
Cost of materials as % of total output	-220.2 -58.1%	-218.8 -51.7%	-225.1 -47.1%	-191.9 -51.1%	-190.3 -45.1%	-182.8 -41.7%	-206.4 -44.0%	-227.4 -45.5%
Gross profit as % of total output	158.9 41.9%	204.7 48.3%	253.1 52.9%	183.5 48.9%	231.6 54.9%	255.6 58.3%	262.7 56.0%	272.3 54.5%
Personnel expenses as % of total output	-109.0 -28.7%	-148.4 -35.1%	-185.7 -38.8%	-132.2 -35.2%	-169.7 -40.2%	-185.6 -42.3%	-189.5 -40.4%	-194.9 -39.0%
Other operating income as % of total output	6.6 1.7%	7.3 1.7%	9.2 1.9%	6.6 1.8%	8.1 1.9%	5.7 1.3%	6.1 1.3%	6.2 1.2%
Other operating expenses as % of total output	-34.2 -9.0%	-40.0 -9.4%	-46.5 -9.7%	-34.6 -9.2%	-42.1 -10.0%	-45.2 -10.3%	-46.2 -9.9%	-47.5 -9.5%
EBITDA as % of total output	22.3 5.9%	23.5 5.6%	30.1 6.3%	23.3 6.2%	28.0 6.6%	30.6 7.0%	33.1 7.1%	36.2 7.2%
Depreciation and amortization, excl. goodwill impairments as % of total output	-10.3 -2.7%	-13.8 -3.3%	-14.5 -3.0%	-12.8 -3.4%	-13.5 -3.2%	-12.1 -2.8%	-9.9 -2.1%	-9.2 -1.9%
Goodwill impairments as % of total output	0.0 0.0%	0.0 0.0%	0.0 0.0%	0.0 0.0%	0.0 0.0%	0.0 0.0%	0.0 0.0%	0.0 0.0%
EBIT as % of total output	12.0 3.2%	9.7 2.3%	15.6 3.3%	10.6 2.8%	14.5 3.4%	18.4 4.2%	23.1 4.9%	26.9 5.4%
Result from at-equity consolidated investments	0.0	0.0	0.2	0.0	0.2	0.2	0.3	0.3
Interest and other financial income	0.4	0.6	0.5	0.5	0.5	0.5	0.5	0.5
Interest expenses	-2.9	-3.5	-5.0	-3.5	-4.9	-4.8	-4.0	-3.2
EBT (Earnings before income taxes) as % of total output	9.5 2.5%	6.7 1.6%	11.4 2.4%	7.7 2.0%	10.4 2.5%	14.3 3.3%	19.8 4.2%	24.5 4.9%
Taxes on income as % of EBT	-4.2 -44.1%	-2.6 -38.0%	-7.4 -65.0%	-2.8 -36.8%	-7.1 -68.3%	-5.0 -35.0%	-6.9 -35.0%	-8.6 -35.0%
Income from continuing operations	5.3	4.2	4.0	4.8	3.3	9.3	12.9	15.9
Income from discontinued operations/ disposals, net of taxes	-	5.1	-0.3	4.4	0.4	0.9	-	-
Net income of the group as % of total output	5.3 1.4%	9.2 2.2%	3.7 0.8%	9.2 2.5%	3.7 0.9%	10.2 2.3%	12.9 2.7%	15.9 3.2%
Minority interests	-0.9	-0.4	-0.1	-0.4	-0.1	-0.1	-0.1	-0.2
Net income attributable to shareholders	4.4	8.8	3.5	8.8	3.5	10.1	12.8	15.7
Total basic EPS (EUR)	0.52	1.05	0.42	1.05	0.42	1.15	1.44	1.78
EPS from continuing operations	0.52	0.45	0.46	0.53	0.38	1.04	1.44	1.78
Adjusted earnings per share (EUR)*	1.27	1.91	1.63	n/a	n/a	1.64	1.87	2.17

* Adjusted EPS = Adjusted net income divided by weighted average of shares outstanding;

Adjusted net income = Operating EBITA minus financial result minus assumed taxes (30% tax rate) minus minority interests. Source: CBS Research AG, Allgeier SE

Balance sheet

IFRS EURm	2012	2013	2014E	2015E	2016E
Assets
Noncurrent assets as % of total assets	145.7 50.3%	130.9 45.2%	134.1 49.5%	130.1 52.5%	126.5 48.8%
Intangible assets	128.4	117.9	111.4	106.6	101.3
Property, plant and equipment	10.7	10.8	11.6	12.6	14.0
Investments in companies consolidated at equity	0.0	0.1	9.8	10.1	10.3
Deferred taxes	2.0	1.4	0.5	0.0	0.0
Other long-term receivables and assets	4.6	0.7	0.8	0.8	0.8
Current assets as % of total assets	143.9 49.7%	158.4 54.8%	136.7 50.5%	117.9 47.5%	132.7 51.2%
Inventories	4.9	3.1	3.2	3.4	3.6
Trade receivables	76.4	73.3	74.4	79.6	84.8
Other assets and receivables	23.6	16.8	17.3	18.0	18.6
Cash and cash equivalents	38.9	46.7	41.9	16.9	25.7
Assets held for sale	0.0	18.6	0.0	0.0	0.0
Total assets	289.6	289.3	270.8	248.1	259.2
Shareholders' equity and liabilities
Shareholders' equity as % of total equity and liabilities	93.4 32.3%	94.7 32.7%	100.8 37.2%	109.5 44.2%	121.2 46.8%
Subscribed capital	9.1	9.1	9.1	9.1	9.1
Capital reserve	13.3	16.9	16.9	16.9	16.9
Retained earnings	0.1	0.1	0.1	0.1	0.1
Own shares at acquisition cost	-5.5	-2.0	-2.0	-2.0	-2.0
Profit carried forward	62.0	66.6	65.9	71.9	80.4
Net income for the year	8.8	3.5	10.1	12.8	15.7
Changes in equity recognised directly in equity	1.1	-1.9	-1.9	-1.9	-1.9
Minority interests	4.5	2.4	2.6	2.7	2.9
Noncurrent liabilities and deferred income	106.7	92.7	83.4	48.9	48.0
as % of total equity and liabilities	36.9%	32.0%	30.8%	19.7%	18.5%
Noncurrent profit-participation liabilities (PREPS)	0.0	0.0	0.0	0.0	0.0
Noncurrent financial liabilities incl. promissory notes	72.0	70.8	71.1	42.0	42.0
Noncurrent provisions	2.9	2.0	2.2	2.3	2.4
Other noncurrent liabilities (mainly earnout
components from company acquisitions)	22.1	12.1	4.1	1.7	1.7
Deferred tax liabilities	9.7	7.7	5.9	2.9	1.9
Current liabilities as % of total equity and liabilities	89.5 30.9%	101.9 35.2%	86.6 32.0%	89.6 36.1%	90.0 34.7%
Current profit-participation liabilities (PREPS)	0.0	0.0	0.0	0.0	0.0
Current financial liabilities	1.8	4.7	2.0	2.0	2.0
Current provisions	16.5	11.4	11.8	15.1	17.1
Trade accounts payable	33.3	29.4	27.0	30.5	33.6
Other liabilities incl. earnout
components from company acquisitions	37.9	45.2	45.8	42.0	37.3
Liabilities relating to assets held for sale	0.0	11.2	0.0	0.0	0.0
Total equity and liabilities	289.6	289.3	270.8	248.1	259.2

Source: CBS Research AG, Allgeier SE

Cash flow statement

IFRS EURm	2012	2013	2014E	2015E	2016E
EBIT	10.6	14.5	18.4	23.1	26.9
Depreciation and amortisation	12.8	13.5	12.1	9.9	9.2
Other non-cash income and expenses incl. expenses from additions to provisions	8.3	5.4	8.8	8.7	9.0
Change in non-current provisions	0.2	0.0	0.2	0.1	0.1
Cash taxes paid/received	-4.8	-8.1	-6.1	-7.0	-8.4
Cash flow from changes in working capital	-12.2	-11.7	-11.6	-9.1	-10.7
Cash flow from operating activities	14.8	13.6	22.0	25.8	26.1
Net cash outflows from the purchase and retirement of PP&E and intangible assets	-3.5	-4.3	-6.4	-6.2	-5.3
Payments for the purchase of subsidiaries and for the acquisition of assets and rights	-30.7	-2.3	0.0	0.0	0.0
Purchase price components paid for companies acquired in other periods	-4.2	-3.1	-7.9	-7.7	-5.1
Investments valued at equity (incl. disposals)	0.0	-3.9	-1.5	0.0	0.0
Payment balance from the sale of subsidiaries	0.0	4.7	0.0	0.0	0.0
Purchase/sale of bank bonds	-5.0	5.0	0.0	0.0
Cash flow from investing activities	-43.4	-3.9	-15.8	-13.9	-10.4
Payments for own shares	-0.8	7.1	0.0	0.0	0.0
Net borrowings/retirements of loans and cash flow from promissory notes	50.3	0.8	-2.5	-29.1	0.0
Net cash inflow from ABS programme (assignment of trade receivables)	0.8	0.0	0.0	0.0	0.0
Repayment of profit-participation liabilities	-6.0	0.0	0.0	0.0	0.0
Interests paid and received, net	-2.6	-2.7	-4.3	-3.5	-2.7
Dividends paid	-4.2	-4.2	-4.2	-4.2	-4.2
Purchases of non-controlling interests	-0.8	-2.1	0.0	0.0	0.0
Payments to/from shareholders with non-controlling interests	-0.2	0.0	0.0	0.0	0.0
Cash flow from financing activities	36.6	-1.1	-11.0	-36.8	-6.9
Total change in cash and cash equivalents	8.0	8.6	-4.8	-25.0	8.8
Currency-induced changes in cash and cash	0.0	-0.7	0.0	0.0	0.0
Cash and cash equivalents at the start of the period	30.1	38.0	45.9	41.1	16.2
Cash and cash equivalents at the end of the period	38.0	45.9	41.1	16.2	24.9
Bank overdraft	0.9	0.7	0.7	0.7	0.7
Cash and cash equivalents in the balance sheet	38.9	46.7	41.9	16.9	25.7

Source: CBS Research AG, Allgeier SE

Valuation summary

	Weighting factor	Fair value per share (EUR)
DCF valuation	50.0%	22.44
Peer group valuation	50.0%	21.01
Fair value per share (EUR)		21.73

Source: CBS Research AG

Discounted Cash Flow Model

		PHASE 1					PHASE 2				PHASE 3
EURm	2014E	2015E	2016E	2017E	2018E	2019E	2020E	2021E	2022E	2023E	8
Sales revenues Y-o-Y grow th	438.0 4.0%	468.6 7.0%	499.1 6.5%	524.0 5.0%	550.2 5.0%	577.7 5.0%	606.6 5.0%	637.0 5.0%	668.8 5.0%	678.8 1.5%
EBIT	18.4	23.1	26.9	30.4	31.9	33.5	35.2	36.9	38.8	39.4
EBIT margin as % of sales	4.2%	4.9%	5.4%	5.8%	5.8%	5.8%	5.8%	5.8%	5.8%	5.8%
Income tax on EBIT (cash tax rate)	-7.8	-8.2	-9.3	-10.0	-10.2	-10.4	-10.6	-11.1	-11.6	-11.8
Depreciation and amortisation	12.1	9.9	9.2	5.6	5.3	6.0	5.7	5.7	5.6	5.7
Change in net working capital and
non-cash income and expenses*	-6.2	-5.4	-5.4	-2.0	-8.5	-8.9	-9.4	-9.9	-10.4	-0.9
Net capital expenditure incl. earnouts	-15.8	-13.9	-5.3	-4.5	-5.4	-6.6	-6.3	-5.7	-5.1	-5.7
Free cash flow	0.8	5.6	16.1	19.5	13.0	13.6	14.6	15.9	17.2	26.6
Present values	0.7	4.9	12.9	14.2	8.7	8.2	8.0	8.0	7.9	11.1	146.0
Present value Phase 1	18.5	8 %			Risk free rate		3.50%		Target equity ratio		80.0%
Present value Phase 2	66.2	29%			Equity risk premium		6.00%		Beta		1.20
Present value Phase 3	146.0	63%			Debt risk premium		1.40%		WACC		9.25%
Total present value	230.7	100%			Tax shield (Phase 3)		30.0%		Terminal growth		1.50%
+ Liquid funds	35.0	Latest report 0.0	31/12/10 61.3					Sensitivity analysis
+ Securities**	12.2	-79.2	-32.5						Terminal growth (Phase 3)
- Financial debt and minority interests***	-79.9						0.5%	1.0%	1.5%	2.0%	2.5%
Fair value of equity	198.0					8.25%	24.42	25.76	27.29	29.08	31.17
						8.75%	22.28	23.41	24.69	26.16	27.87
Number of shares outstanding (m)	8.8				WACC	9.25%	20.40	21.36	22.44	23.66	25.07
						9.75%	18.73	19.55	20.46	21.50	22.68
Fair value per share (EUR)	22.44					10.25%	17.24	17.95	18.73	19.61	20.60

*Other non-cash income and expenses comprise mainly expenses from additions to provisions

**Including the assumed value of Cancom shares to be received for the sale of Didas

***Financial debt including pension provisions

Source: CBS Research AG

Multiple-based valuation

Company name				P / E		EV / EBIT				EV / EBITDA
			2014E	2015E	2016E	2014E	2015E	2016E	2014E	2015E	2016E
European IT service/consulting companies (market cap below EUR 1bn):
ASSYSTEM			11.4	11.5	11.5	6.4	6.1	n.m.	5.5	5.2	5.0
CENIT AG			16.1	15.0	12.6	7.2	6.6	5.7	5.7	5.4	4.9
COR&FJA AG			6.4	10.9	9.9	5.3	7.5	5.7	4.9	5.0	3.9
DATAGROUP AG			21.3	13.4	12.0	18.0	11.1	10.1	9.9	6.8	6.3
DEVOTEAM SA			19.2	13.6	11.4	5.6	5.1	4.7	4.9	4.0	3.6
ECONOCOM GROUP			12.8	11.2	10.2	8.1	7.1	6.6	7.4	6.6	6.2
GFI INFORMATIQUE			16.7	14.2	12.6	8.0	7.4	7.1	7.5	6.6	6.3
GFT TECHNOLOGIES AG			14.5	11.5	10.6	9.0	7.2	6.7	7.5	6.2	5.6
ORDINA NV			14.5	13.1	7.2	11.4	8.2	5.7	8.0	6.3	4.7
PHOENIX IT GROUP LTD			8.8	6.5	n.m.	8.4	n.m.	n.m.	4.9	4.3	n.m.
SOLUCOM			14.7	13.5	n.m.	8.3	7.6	n.m.	7.8	7.2	n.m.
SOPRA GROUP			12.1	10.7	10.0	9.0	8.1	7.5	7.8	7.0	6.5
TIETO OYJ			13.0	12.2	11.8	10.7	9.7	9.4	7.5	6.7	6.6
REALTECH AG			n.m.	19.1	17.5	n.m.	9.9	9.0	n.m.	5.6	4.3
SEVEN PRINCIPLES AG			17.1	8.3	n.m.	12.5	6.6	n.m.	5.9	4.3	n.m.
S&T AG			9.3	7.2	6.5	8.3	6.9	6.3	5.8	4.9	4.6
Average			13.9	12.0	11.0	9.1	7.7	7.0	6.7	5.8	5.3
Median	Weight:	50.0%	14.5	11.8	11.4	8.3	7.4	6.7	7.4	5.9	5.0
Major players with market cap above EUR 1bn: ATOS			13.5	12.5	11.5	7.7	7.4	6.8	5.4	4.9	4.6
CAP GEMINI			15.3	13.7	12.3	9.0	8.2	7.4	7.2	6.7	6.1
INDRA SISTEMAS SA			14.7	12.7	11.5	11.3	10.2	9.4	9.2	8.3	7.7
Average			14.5	13.0	11.8	9.3	8.6	7.9	7.3	6.6	6.2
Median	Weight:	25.0%	14.7	12.7	11.5	9.0	8.2	7.4	7.2	6.7	6.1
Indian IT service companies:
INFOSYS LTD			16.1	14.4	12.9	12.3	11.0	9.8	11.3	10.1	9.0
TATA CONSULTANCY SVCS LTD			23.1	20.2	17.6	18.1	15.7	14.0	17.1	14.8	13.1
WIPRO LTD			15.6	13.9	12.5	12.5	11.1	10.0	11.2	10.1	9.0
Average	Weight:	25.0%	18.3	16.2	14.3	14.3	12.6	11.3	13.2	11.7	10.4
Median			16.1	14.4	12.9	12.5	11.1	10.0	11.3	10.1	9.0
Weighted average of peer groups			15.5	13.2	12.1	10.0	8.9	8.0	8.8	7.5	6.6

EURm, except EPS (EUR)			EPS			EBIT			EBITDA
		2014E	2015E	2016E	2014E	2015E	2016E	2014E	2015E	2016E
Allgeier SE (estimates by CBSR)		1.04	1.44	1.78	18.4	23.1	26.9	30.6	33.1	36.2
Applied multiples (peer group - weighted average)		15.5	13.2	12.1	10.0	8.9	8.0	8.8	7.5	6.6
Fair Enterprise Value		-	-	-	183.9	206.2	215.1	270.1	249.3	239.1
+ Liquid funds	35.0
+ Securities	12.2
- Financial debt incl. pension provisions	-79.2
- Minority interests	-0.7
Fair value of equity from each multiple		142.4	167.7	190.9	151.2	173.6	182.4	237.4	216.6	206.4
Average of derived fair values	185.4
Premium (discount) vs. peer group companies	0%
Fair value of equity	185.4
Number of shares outstanding (m)	8.8
Fair value per share (EUR)	21.01

Source: CBS Research AG

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Disclaimer and statement according to § 34b German Securities Trading Act ("Wertpapierhandelsgesetz") in combination with the provisions on financial analysis ("Finanzanalyseverordnung" FinAnV)

This report has been prepared independently of the company analysed by Close Brothers Seydler Research AG and/ or its cooperation partners and the analyst(s) mentioned on the front page (hereafter all are jointly and/or individually called the 'author'). None of Close Brothers Seydler Research AG, Close Brothers Seydler Bank AG or its cooperation partners, the Company or its shareholders has independently verified any of the information given in this document.

Section 34b of the German Securities Trading Act in combination with the FinAnV requires an enterprise preparing a security analysis to point out possible conflicts of interest with respect to the company that is the subject of the analysis.

Close Brothers Seydler Research AG is a majority owned subsidiary of Close Brothers Seydler Bank AG (hereafter ´CBS´). However, Close Brothers Seydler Research AG (hereafter ´CBSR´) provides its research work independent from CBS. CBS is offering a wide range of Services not only including investment banking services and liquidity providing services (designated sponsoring). CBS or CBSR may possess relations to the covered companies as follows (additional information and disclosures will be made available upon request):

• a. CBS holds more than 5% interest in the capital stock of the company that is subject of the analysis.
• b. CBS was a participant in the management of a (co)consortium in a selling agent function for the issuance of financial instruments, which themselves or their issuer is the subject of this financial analysis within the last twelve months.
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• g. CBS has a significant financial interest in relation to the company that is subject of this analysis.

In this report, the following conflicts of interests are given at the time, when the report has been published: d, f

CBS and/or its employees or clients may take positions in, and may make purchases and/ or sales as principal or agent in the securities or related financial instruments discussed in this analysis. CBS may provide investment banking, consulting, and/ or other services to and/ or serve as directors of the companies referred to in this analysis. No part of the authors compensation was, is or will be directly or indirectly related to the recommendations or views expressed.

Recommendation System:

CBSR uses a 3-level absolute share rating system. The ratings pertain to a time horizon of up to 12 months:

BUY: The expected performance of the share price is above +10%. HOLD: The expected performance of the share price is between 0% and +10%. SELL: The expected performance of the share price is below 0%.

This rating system is only a guideline. Therefore, deviations from this system may apply.

Recommendation history over the last 12 months for the company analysed in this report:

Date	Recommendation	Price at change date	Price target
30 July 2014	BUY	EUR 15.50	EUR 20.00
15 May 2014	BUY	EUR 17.53	EUR 23.00
13 May 2014	BUY	EUR 17.40	EUR 23.00
19 March 2014	BUY	EUR 17.895	EUR 23.00
28 January 2014	BUY	EUR 15.74	EUR 23.00

15 November 2013	BUY	EUR 16.55	EUR 20.00
15 August 2013	BUY	EUR 14.75	EUR 17.00

Risk-scaling System:

CBSR uses a 3-level risk-scaling system. The ratings pertain to a time horizon of up to 12 months:

LOW: The volatility is expected to be lower than the volatility of the benchmark MEDIUM: The volatility is expected to be equal to the volatility of the benchmark HIGH: The volatility is expected to be higher than the volatility of the benchmark

The following valuation methods are used when valuing companies: Multiplier models (price/earnings, price/cash flow, price/book value, EV/Sales, EV/EBIT, EV/EBITA, EV/EBITDA), peer group comparisons, historical valuation approaches, discounting models (DCF, DDM), break-up value approaches or asset valuation approaches. The valuation models are dependent upon macroeconomic measures such as interest, currencies, raw materials and assumptions concerning the economy. In addition, market moods influence the valuation of companies. The figures taken from the income statement, the cash flow statement and the balance sheet upon which the evaluation of companies is based are estimates referring to given dates and therefore subject to risks. These may change at any time without prior notice.

The opinions and forecasts contained in this report are those of the author alone. Material sources of information for preparing this report are publications in domestic and foreign media such as information services (including but not limited to Reuters, VWD, Bloomberg, DPA-AFX), business press (including but not limited to Börsenzeitung, Handelsblatt, Frankfurter Allgemeine Zeitung, Financial Times), professional publications, published statistics, rating agencies as well as publications of the analysed issuers. Furthermore, discussions were held with the management for the purpose of preparing the analysis. Potentially parts of the analysis have been provided to the issuer prior to going to press; no significant changes were made afterwards, however. Any information in this report is based on data considered to be reliable, but no representations or guarantees are made by the author with regard to the accuracy or completeness of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Possible errors or incompleteness of the information do not constitute grounds for liability, neither with regard to indirect nor to direct or consequential damages. The views presented on the covered company accurately reflect the personal views of the author. All employees of the author's company who are involved with the preparation and/or the offering of financial analyzes are subject to internal compliance regulations.

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