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Evotec SE — Earnings Release 2011
May 13, 2011
151_rns_2011-05-13_12b8fc4b-4671-4821-b910-9f257021c3d9.pdf
Earnings Release
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Evotec AG Evotec AG
- Recommendation: BUY(BUY)
Risk: Medium (Medium)
Price Target: EUR 3.70 (3.70)
1Q/2011 results
- On 12 May, Evotec published 1Q/2011 results with considerable increase in the top line and slight net losses. Total Group revenues increased to EUR 15.1m (PY: EUR 9.8m; yoy: +54%). R&D expenses rose to EUR 2.3m (PY: EUR 1.7m; yoy +33%). SG&A expenses came in at EUR 3.8m (PY: EUR 3.4m; yoy +13%). The overall operating result improved by 45% to EUR -0.8m (PY: EUR -1.5m). Liquidity which includes cash, cash equivalents, investments and long-term financial investments at the end of March remained strong at EUR 68.7m.
- Management has confirmed its outlook for FY 2011E with revenues expected to grow by >15% to EUR 64 - EUR 66m (CBSR Estimate: EUR 66m). The outlook seems somewhat conservative, given the strong order book (includes only achieved milestones) of EUR 47m in April 2011 (PY: EUR 30m; +57%). R&D expenses are expected to increase to ~EUR 10m. Even on this basis, Evotec's Group operating result before impairment, if any, is expected to be profitable and improved over 2010 (CBSR Estimate: EUR 2.2m).
- The company also plans to significantly increase in CAPEX to ~EUR 8m for the long-term upgrading of the Evotec capacities and capabilities. At constant year-end 2010 currencies, the Company therefore expects to end 2011E with a liquidity of ~EUR 65m (CBSR Estimate ~EUR 67m), excl. any potential cash outflow or M&A or similar transactions.
- We reiterate our BUY recommendation with a price target of EUR 3.70 per share.
| Key data | |||||
|---|---|---|---|---|---|
| Y/E 31.12., EUR m | 2008 | 2009 | 2010 | 2011E | 2012E |
| Revenues | 39.6 | 42.7 | 55.3 | 66.0 | 75.9 |
| Gross profit | 17.6 | 18.4 | 24.3 | 31.4 | 37.2 |
| EBITDA | -68.4 | -38.2 | 6.5 | 6.9 | 7.1 |
| EBIT | -73.2 | -42.3 | 1.7 | 2.2 | 2.9 |
| Net income/loss | -78.3 | -45.5 | 3.0 | 2.5 | 2.9 |
| EPS | -0.82 | -0.43 | 0.03 | 0.02 | 0.03 |
| CPS | -0.43 | -0.20 | 0.00 | 0.05 | 0.05 |
| Gross margin | 44.5% | 43.2% | 44.1% | 47.5% | 49.0% |
| EBITDA margin | -172.7% | -89.6% | 11.7% | 10.4% | 9.4% |
| EBIT margin | -184.8% | -99.1% | 3.1% | 3.4% | 3.8% |
| Source: Evotec AG; CBS Research AG; |
www.cbseydlerresearch.ag
13 May 2011
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.
Overview 2010
Evotec started the year with significant top-line growth. Total Group revenues increased to EUR 15.1m (PY: EUR 9.8m; yoyo: +54%). Top-line growth was mainly propelled by a strong performance within the core business drug discovery alliances, including a milestone achieved in Evotec's collaboration with Boehringer Ingelheim (EUR 2.0m). In addition, the partial recognition of the MedImmune upfront payment and additional revenue from the acquired DeveloGen also contributed to first quarter revenues. Without the revenues from DeveloGen, Evotec's revenues for 1Q/2011 would have increased by 39% over the same period of the previous year.
In terms of geographical breakdown the bulk of revenues came from customers in Europe (47%; PY: 38%), followed by 39% in the US (PY 39%), and 14% in Japan and ROW (PY: 23%). Thus mainly due to the Boehringer Ingelheim milestone payment and the DeveloGen contributions the regional structure of revenues generated shifted towards Europe compared to the prior year.
1Q/2011: Strong growth in top-line
Bulk of revenues generated in Europe
1Q/2011 figures overview
| IFRS EUR k | 1Q 2011 | 1Q 2010 | yoy change |
|---|---|---|---|
| Revenues | 15,106.0 | 9,841.0 | 54% |
| Gross profit | 5,951.0 | 3,729.0 | 60% |
| as % of revenue | 39.4% | 37.9% | |
| R&D expenses | -2,314.0 | -1,734.0 | 33% |
| as % of revenue | -15.3% | -17.6% | |
| S,G&A expenses | -3,789.0 | -3,350.0 | 13% |
| as % of revenue | -25.1% | -34.0% | |
| Other operating expenses | -658.0 | -119.0 | 453% |
| as % of revenue | -4.4% | -1.2% | |
| EBIT | -810.0 | -1,474.0 | 45% |
| as % of revenue | -5.4% | -15.0% | |
| EBT | -254.0 | -1,358.0 | 81% |
| as % of revenue | -1.7% | -13.8% | |
| Net result | -388.0 | -1,247.0 | 69% |
| as % of revenue | -2.6% | -12.7% |
Source Evotec; CBS Research
R&D expenses rose to EUR 2.3m (PY: EUR 1.7m; yoy +33%) mainly due to the inclusion of DeveloGen R&D expenses and the manufacturing of EVT 501.
SG&A expenses came in at EUR 3.8m (PY: EUR 3.4m; yoy +13%) mainly due to transaction costs and the impact of DeveloGen.
The overall operating result improved by 45% to EUR -0.8m (PY: EUR -1.5m). On this basis, liquidity which includes cash, cash equivalents, investments and longterm financial investments at the end of March remained strong at EUR 68.7m.
Balance sheet
As of 31 March 2011, current assets decreased to EUR 82.9m (31 Dec. 2010: EUR 86.7m) mainly due to trade accounts receivables from MedImmune decreasing to EUR 7.6m.
Operating result: Improved compared to prior year level
Balance sheet EUR k 31 March 2011 31 Dec. 2010 Total non-current assets 103,400.0 105,167.0 Cash and cash equivalents and investments 65,680.0 67,394.0 Other current assets 17,230.0 19,298.0 Total Assets 186,310.0 191,859.0 Shareholder's equity 129,841.0 132,637.0 Total current liabilities 31,130.0 32,802.0 Total non-current liabilities 25,339.0 26,420.0
| Common size balance sheet | 31 March 2011 | 31 Dec. 2010 |
|---|---|---|
| Total non-current assets | 55.5% | 54.8% |
| Cash and cash equivalents and investments | 35.3% | 35.1% |
| Other current assets 0 |
9.2% 0.0% | 10.1% 0.0% |
| Shareholder's equity | 69.7% | 69.1% |
| Total current liabilities | 16.7% | 17.1% |
| Total non-current liabilities | 13.6% | 13.8% |
Total equity and liabilities 186,310.0 191,859.0
Source: Evotec; CBS Research
Current provisions decreased to EUR 4.3m mainly due to the payment of the shortterm portion of the DeveloGen earn-out component and as a consequence of annual bonuses paid in March 2011. Current and noncurrent deferred revenues decreased to EUR 9.7m mainly due to recognition of a revenue portion of the MedImmune upfront payment and the Roche upfront payment for the EVT 100 collaboration.
Evotec's capital structure remained unchanged with a high equity ratio at 69.7% as of 31 March 2011 (31 December 2010: 69.1%). Liquidity, which includes cash and cash equivalents (EUR 39.8m), investments (EUR 25.9m) and long-term financial investments (EUR 3.0m) at the end of March 2011 amounted to EUR 68.7m (31 December 2010: EUR 70.4m).
Guidance 2011
Management has confirmed its outlook for FY 2011E with revenues expected to grow by >15% to EUR 64 - EUR 66m. This assumption is supported by the strong April 2011 order book (includes only achieved milestones) of EUR 47m (PY: EUR 30m; +57%), expected new contracts and contract extensions as well as the achievement of certain milestones. Focusing on key programmes especially in the fields of metabolic diseases and regenerative medicine, Evotec expects R&D expenses to increase to ~EUR 10m. Even on this basis, Evotec's Group operating result before impairment, if any, is expected to be profitable and improved over 2010.
Evotec plans to significantly increase in CAPEX to ~EUR 8m for the long-term upgrading of the Evotec capacities and capabilities. These planned investments will increase cash requirements over 2010, although top-line growth in operating activities is expected to significantly reduce the cash requirements compared to FY 2010. At constant year-end 2010 currencies, the Company therefore expects to end 2011 with a liquidity of ~EUR 65m (CBSR Estimate ~EUR 67m), excl. any potential cash outflow or M&A or similar transactions.
High unchanged equity ratio
Confirmed guidance for
Planned CAPEX ~EUR
8m
FY 2011E
Appendix
Profit and loss account
| IFRS EUR 1,000 | 2008 | 2009 | 2010 | 2011E | 2012E |
|---|---|---|---|---|---|
| Total revenues YoY grow th |
39,613 -27.2% |
42,683 7.7% |
55,262 29.5% |
66,024 19.5% |
75,855 14.9% |
| Cost of revenue | -21,977 | -24,262 | -30,916 | -34,662 | -38,686 |
| as % of sales | -55.5% | -56.8% | -55.9% | -52.5% | -51.0% |
| Gross profit | 17,636 | 18,421 | 24,346 | 31,361 | 37,169 |
| as % of sales | 44.5% | 43.2% | 44.1% | 47.5% | 49.0% |
| Research and development expenses | -42,537 | -20,947 | -6,116 | -10,000 | -13,123 |
| as % of sales | -107.4% | -49.1% | -11.1% | -15.1% | -17.3% |
| Selling, general and administrative (S,G&A) | -19,950 | -16,695 | -15,956 | -18,487 | -20,481 |
| as % of sales | -50.4% | -39.1% | -28.9% | -28.0% | -27.0% |
| Other operating expenses | -28,359 | -23,078 | -559 | -632 | -661 |
| as % of sales | -71.6% | -54.1% | -1.0% | -1.0% | -0.9% |
| EBITDA | -68,404 | -38,234 | 6,480 | 6,899 | 7,133 |
| as % of sales | -172.7% | -89.6% | 11.7% | 10.4% | 9.4% |
| Depreciation and amortisation | -4,806 | -4,065 | -4,765 | -4,656 | -4,229 |
| as % of sales | -12.1% | -9.5% | -8.6% | -7.1% | -5.6% |
| EBIT | -73,210 | -42,299 | 1,715 | 2,243 | 2,904 |
| as % of sales | -184.8% | -99.1% | 3.1% | 3.4% | 3.8% |
| Net financial results | -2,760 | -2,520 | 2,152 | 1,102 | 322 |
| EBT (Earnings before income taxes) | -75,970 | -44,819 | 3,867 | 3,345 | 3,226 |
| as % of sales | -191.8% | -105.0% | 7.0% | 5.1% | 4.3% |
| Income taxes | -2,317 | -678 | -882 | -836 | -323 |
| as % of EBT | 3.0% | 1.5% | -22.8% | -25.0% | -10.0% |
| Net income/loss | -78,287 | -45,497 | 2,985 | 2,509 | 2,904 |
| as % of sales | -197.6% | -106.6% | 5.4% | 3.8% | 3.8% |
| Basic earnings per share (EUR) | -0.82 | -0.43 | 0.03 | 0.02 | 0.03 |
Source: Evotec; CBS Research
Balance Sheets
| IFRS EUR 1,000 | 2008 | 2009 | 2010 | 2011E | 2012E |
|---|---|---|---|---|---|
| Assets | |||||
| Noncurrent assets as % of total equity and liabilities |
89,822 49.1% |
77,642 53.0% |
105,167 54.8% |
108,500 56.9% |
107,283 55.3% |
| Property, plant and equipment | 18,468 | 19,162 | 18,487 | 22,462 | 21,883 |
| Total intangible assets | 60,455 | 45,567 | 83,594 | 82,962 | 82,302 |
| Other assets | 10,899 | 12,913 | 3,086 | 3,075 | 3,099 |
| Current assets as % of total equity and liabilities |
93,078 50.9% |
68,957 47.0% |
86,692 45.2% |
82,325 43.1% |
86,759 44.7% |
| Cash and cash equivalents | 55,064 | 32,926 | 21,091 | 40,411 | 43,520 |
| Investments | 29,034 | 25,432 | 46,303 | 25,882 | 25,882 |
| Accounts receivables due from related parties | 0 | 0 | 28 | 11 | 0 |
| Trade accounts receivables | 2,531 | 4,510 | 11,841 | 5,788 | 6,796 |
| Inventories | 2,139 | 2,425 | 2,819 | 3,376 | 3,694 |
| Current tax receivables | 1,373 | 347 | 569 | 569 | 569 |
| Other current financial assets | 951 | 1,428 | 1,142 | 3,400 | 3,400 |
| Prepaid expenses and other current assets | 1,986 | 1,889 | 2,899 | 2,899 | 2,899 |
| Total assets | 182,900 | 146,599 | 191,859 | 190,825 | 194,043 |
| Shareholders´ equity and liabilities | |||||
| Shareholders´ equity as % of total equity and liabilities |
149,859 81.9% |
111,487 76.0% |
132,637 69.1% |
134,608 70.5% |
137,511 70.9% |
| Share capital | 108,839 | 108,839 | 115,596 | 115,596 | 115,596 |
| Additional paid-in capital | 647,163 | 648,417 | 658,888 | 658,888 | 658,888 |
| Accumulated other comprehensive income | -32,762 | -27,478 | -26,679 | -27,217 | -27,217 |
| Accumulated deficit | -573,381 | -618,904 | -615,644 | -613,135 | -610,232 |
| Equity attributable ro shareholders of Evotec | 149,859 | 110,874 | 132,161 | 134,132 | 137,035 |
| Minority interests | 0 | 613 | 476 | 476 | 476 |
| Current liabilities as % of total equity and liabilities |
21,826 11.9% |
26,445 18.0% |
32,802 17.1% |
30,125 15.8% |
30,439 15.7% |
| Current maturities of long-term loans | 2,579 | 9,087 | 8,356 | 9,500 | 9,500 |
| Current portion of finance lease obligations | 356 | 229 | 109 | 100 | 189 |
| Trade accounts payable | 6,371 | 4,398 | 6,980 | 7,300 | 7,525 |
| Accounts payable to related parties | 820 | 837 | 0 | 0 | 0 |
| Advanced payments received | 275 | 129 | 1,421 | 1,100 | 1,100 |
| Provisions | 6,859 | 4,858 | 6,656 | 4,400 | 4,400 |
| Deferred revenue | 1,238 | 5,483 | 7,675 | 6,000 | 6,000 |
| Current income tax payable | 1,719 | 244 | 773 | 1,000 | 1,000 |
| Other current financial liabilities | 609 | 485 | 225 | 225 | 225 |
| Other current liabilities | 1,000 | 695 | 607 | 500 | 500 |
| Noncurrent liabilities as % of total equity and liabilities |
11,215 6.1% |
8,667 5.9% |
26,420 13.8% |
26,092 13.7% |
26,092 13.4% |
| Long-term loans | 8,047 | 3,757 | 3,500 | 3,500 | 3,500 |
| Long-term finance lease obligations | 346 | 132 | 32 | 32 | 32 |
| Deferred tax liabilities | 1,463 | 1,977 | 6,660 | 6,660 | 6,660 |
| Deferred revenue | 580 | 1,969 | 3,506 | 3,000 | 3,000 |
| Provisions | 779 | 832 | 12,722 | 12,900 | 12,900 |
| Total equity and liabilities | 182,900 | 146,599 | 191,859 | 190,825 | 194,043 |
Source: Evotec; CBS Research
Research
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| Roger Peeters | +49 (0)69 -977 8456- 12 | ||
|---|---|---|---|
| Member of the Board | [email protected] | ||
| Martin Decot | +49 (0)69 -977 8456- 13 [email protected] |
Kristina Kardum | +49 (0)69 -977 8456- 21 [email protected] |
| Rabeya Khan | +49 (0)69 -977 8456- 10 [email protected] |
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Veysel Taze | +49 (0)69 -977 8456- 18 [email protected] |
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(Germany) [email protected] (Benelux) [email protected]
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.
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In this report, the following conflicts of interests are given at the time, when the report has been published: d, f
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Recommendation System:
Close Brothers Seydler Research AG uses a 3-level absolute share rating system. The ratings pertain to a time horizon of up to 6 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%.
Recommendation history over the last 12 months for the company analysed in this report:
| Date | Recommendation | Price at change date | Price target |
|---|---|---|---|
| 30 July 2010 | BUY (Initiating Coverage) | EUR 2.00 | EUR 2.80 |
| 12 August 2010 | BUY (Company Update) | EUR 2.26 | EUR 2.90 |
| 05 October 2010 | BUY (Company Update) | EUR 2.22 | EUR 2.90 |
| 28 October 2010 | BUY (Company Update) | EUR 2.30 | EUR 3.00 |
| 11 November 2010 | BUY (Company Update) | EUR 2.49 | EUR 3.00 |
| 15 December 2010 | BUY (Company Update) | EUR 2.85 | EUR 3.20 |
|---|---|---|---|
| 17 January 2011 | BUY (Company Update) | EUR 3.33 | EUR 3.70 |
| 11 February 2011 | BUY (Company Update) | EUR 3.25 | EUR 3.70 |
| 10 March 2011 | BUY (Company Update) | EUR 3.00 | EUR 3.70 |
| 24 March 2011 | BUY (Company Update) | EUR 2.94 | EUR 3.70 |
| 13 May 2011 | BUY (Company Update) | EUR 3.00 | EUR 3.70 |
Risk-scaling System:
Close Brothers Seydler Research AG uses a 3-level risk-scaling system. The ratings pertain to a time horizon of up to 6 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
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