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Evotec SE — Earnings Release 2010
Mar 26, 2011
151_rns_2011-03-26_1bbd5fca-bc3c-42a4-829e-f947dc198a30.pdf
Earnings Release
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Evotec AG Evotec AG
- Recommendation: BUY(BUY)
Risk: Medium (Medium)
Price Target: EUR 3.70 (3.70)
FY 2010 results: First ever profitable year
- On 24 March, Evotec published strong financial results that were above the company's guidance and our estimates both on top line and on the operating level. Revenues amounted to EUR 55.3m, above last year's level (PY: EUR 42.7m; yoy +29%) (CBSR Estimate: EUR 54.0m). The top three alliances Boehringer Ingelheim, CHDI and Roche account for the bulk of revenues and generated EUR 13.8m (EUR 8m; yoy +72%), EUR 9.2m (EUR 9.1m; yoy +1%) and EUR 6.2m (EUR 5.6m; yoy +11%) respectively.
- R&D expenses amounted to EUR 6.1m (PY: EUR 20.9m; yoy: -71%). SG&A expenses also slightly decreased to EUR 16m (PY: EUR 16.7m; yoy: -4%). All in all strong revenue growth coupled with substantial decrease of operating expenses has led Evotec to the first ever full year operating profit of EUR 1.7m (PY: Operating loss: EUR 42.3m: yoy +104%) (CBSR 2010 Estimate: EUR 0.4m). Net result at EUR 3m (PY: EUR -45.5m) was much better than we expected due to foreign currency exchange gain.
- Given the strong order book of EUR 40m as of March 2011 (2010: EUR 28m; yoy +43%), for FY 2011E company's management expects revenues to increase by >15% to EUR 64-66m. R&D expenses are expected to increase to ~EUR 10m in 2011. For 2011 Evotec also adopted an upgrading and expansion investment program. The company expects liquidity to be at EUR 65m by the end of 2011.
- We have increased our revenue estimates to EUR 66m (prev. estimate: EUR 64m) for FY 2011E and EUR 75.9m (prev. estimate: EUR 73.2m) for FY 2012E. We reiterate our BUY recommendation with 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 | 5.0 | 6.0 |
| EBIT | -73.2 | -42.3 | 1.7 | 2.2 | 2.9 |
| Net income/loss | -78.3 | -45.5 | 3.0 | 1.9 | 3.0 |
| EPS | -0.82 | -0.43 | 0.03 | 0.02 | 0.03 |
| CPS | -0.43 | -0.20 | 0.00 | 0.07 | 0.05 |
| Gross margin | 44.5% | 43.2% | 44.1% | 47.5% | 49.0% |
| EBITDA margin | -172.7% | -89.6% | 11.7% | 7.6% | 7.9% |
| EBIT margin | -184.8% | -99.1% | 3.1% | 3.4% | 3.8% |
Source: Evotec AG; CBS Research AG;
www.cbseydlerresearch.ag
24 March 2011
| Share price (dark) vs. TecDAX | ||||||
|---|---|---|---|---|---|---|
| Source: CBS Research AG, Bloomberg | ||||||
| Change | 2010 | 2011E | 2012E | |||
| Revenue EBIT EPS Internet: www.evotec.com Sector: Biotechnology |
new - - - |
old 55.3 1.7 0.03 |
new 66.0 2.2 0.02 |
old 64.0 0.9 0.01 |
new 75.9 2.9 0.03 |
old 73.2 2.4 0.02 |
| WKN: 566480 Reuters: EVTG.DE |
ISIN: DE0005664809 Bloomberg: EVT GY |
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| Short company profile Evotec AG is a drug discovery and development company headquartered in Hamburg with operating subsidiaries in India and Singapore. |
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| Share data: 2.94 Share price (last closing price, EUR): Shares outstanding (m): 115.60 339.86 Market capitalisation (EURm): 284.70 Enterprise value (EURm): Ø daily trading volume (3 m., no. of shares): 560,673 |
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| Performance data: | ||||||
| High 52 weeks (EUR): Low 52 weeks (EUR): Absolute performance (12 months): |
3.48 1.82 57.4% |
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| Relative performance: (vs. TecDAX) 1 month 0.2% 3 months 1.8% 6 months 13.2% 12 months 44.7% |
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| Shareholders: 13.5% Roland Oetker/ROI 10.5% TVM V Life Science Ventures 76.0% Free float |
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| Financial calendar: 12 May 2011 1Q/2011 results |
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| Author | Igor Kim (Analyst) | |||||
| Close Brothers Seydler Research AG Phone: +49 (0) 69-977 84 56 0 Email: [email protected] |
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| www.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.
Overview 2010
On 24 March, Evotec published strong financial results that were above the company's guidance and our estimates both on top line and on the operating level. The implementation of "Evotec 2012 - Action Plan to Focus and Grow" resulted in visible improvement in FY 2010.
Revenues amounted to EUR 55.3m, above last year's level (PY: EUR 42.7m; yoy +29%) (CBSR Estimate: EUR 54.0m). The top line was driven by a strong performance of the Company's discovery alliances, significant milestone achievements, stable license and upfront income, and additional revenues from the acquisition of DeveloGen (EUR 0.8m). The top three alliances Boehringer Ingelheim, CHDI and Roche account for the bulk of revenues and generated EUR 13.8m (EUR 8m; yoy +72%), EUR 9.2m (EUR 9.1m; yoy +1%) and EUR 6.2m (EUR 5.6m; yoy +11%) respectively.
| FY 2010 figures: Actual vs estimates | ||||||
|---|---|---|---|---|---|---|
| Revenue | 55.3 | 54.0 | ||||
| EBIT | 1.7 | 0.4 | ||||
| Net income | 3.0 | 0.1 | ||||
| EPS | 0.0 | 0.0 |
Source: Evotec; CBS Research
R&D expenses amounted to EUR 6.1m (PY: EUR 20.9m; yoy: -71%). SG&A expenses also slightly decreased to EUR 16m (PY: EUR 16.7m; yoy: -4%). All in all strong revenue growth coupled with substantial decrease of operating expenses has led Evotec to the first ever full year operating profit of EUR 1.7m (PY: Operating loss: EUR 42.3m: yoy +104%) (CBSR Estimate: EUR 0.4m). Net result at EUR 3m (PY: EUR -45.5m) was much better than we expected due to foreign currency exchange gain. Despite successful acquisition processes Evotec ended 2010 with a liquidity of EUR 70.4m (PY: EUR 70.6m) and thereby well above its liquidity target of >EUR 64m. reiterate our BUY recommendation with price target EUR 3.70 per share. Reported CBSR Estimates
Guidance 2011
Given the strong order book of EUR 40m as of March 2011 (2010: EUR 28m; yoy +43%), for FY 2011E company's management expects revenues to increase by >15% to EUR 64-66m. R&D expenses are expected to increase to ~EUR 10m in 2011. The Company will focus on key programmes and targets to invest especially in the fields of innovation in metabolic diseases and regenerative medicine. Regarding operating result Evotec expects to improve over 2010.
One of the components of the investment program adopted in 2011, will include move into a new high-tech facility in Hamburg "Manfred-Eigen-Campus", which will be the center for Evotec's screening and early biology work. The company also intends to expand on all sites and add Evotec Munich. The planned CAPEX for FY2011E of >EUR 8m will be used to enhance facility and expand capacity. As a result of higher investments into the upgrading of its capacities and capabilities, Evotec expects the liquidity to be at EUR ~65m to end 2011 excluding potential cash outflow for M&A or similar transactions.
We have increased our revenue estimates to EUR 66m (prev. estimate: EUR 64m) for FY 2011E and EUR 75.9m (prev. estimate: EUR 73.2m) for FY 2012E. We
Strong FY 2010 figures
Sales rose by 29% in 2011
Reduced operating expenses led to profitability
Sales guidance for 2011: EUR 64-66m
2011: Intensive investment program
BUY recommendation; PT: EUR 3.70 per share
FY 2010 figurers: Quarterly breakdown
| IFRS | EUR 1,000 1Q 2010 | 2Q 2010 | 1H 2010 | 3Q 2010 | 9M 2010 | 4Q 2010 | 2H 2010 | FY 2010 | |
|---|---|---|---|---|---|---|---|---|---|
| Revenues | 9,841.0 | 15,127.0 | 24,968.0 | 13,872.0 | 38,840.0 | 16,422.0 | 30,294.0 | 55,262.0 | |
| Gross profit | 3,729.0 | 7,525.0 | 11,254.0 | 5,827.0 | 17,081.0 | 7,265.0 | 13,092.0 | 24,346.0 | |
| as % of revenue | 37.9% | 49.7% | 45.1% | 42.0% | 44.0% | 44.2% | 43.2% | 44.1% | |
| EBIT | -1,474.0 | 1,816.0 | 342.0 | 672.0 | 1,014.0 | 701.0 | 1,373.0 | 1,715.0 | |
| as % of revenue | -15.0% | 12.0% | 1.4% | 4.8% | 2.6% | 4.3% | 4.5% | 3.1% | |
| EBT | -1,358.0 | 1,869.0 | 511.0 | 860.0 | 1,371.0 | -2,496.0 | 3,356.0 | 3,867.0 | |
| as % of revenue | -13.8% | 12.4% | 2.0% | 6.2% | 3.5% | -15.2% | 11.1% | 7.0% | |
| Net result | -1,247.0 | 1,342.0 | 95.0 | 647.0 | 742.0 | 2,243.0 | 2,890.0 | 2,985.0 | |
| as % of revenue | -12.7% | 8.9% | 0.4% | 4.7% | 1.9% | 13.7% | 9.5% | 5.4% |
Source: Evotec; CBS Research
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 | 5,022 | 6,005 |
| as % of sales | -172.7% | -89.6% | 11.7% | 7.6% | 7.9% |
| Depreciation and amortisation | -4,806 | -4,065 | -4,765 | -2,779 | -3,100 |
| as % of sales | -12.1% | -9.5% | -8.6% | -4.2% | -4.1% |
| 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 | 339 | 437 |
| EBT (Earnings before income taxes) | -75,970 | -44,819 | 3,867 | 2,582 | 3,341 |
| as % of sales | -191.8% | -105.0% | 7.0% | 3.9% | 4.4% |
| Income taxes | -2,317 | -678 | -882 | -645 | -334 |
| as % of EBT | 3.0% | 1.5% | -22.8% | -25.0% | -10.0% |
| Net income/loss | -78,287 | -45,497 | 2,985 | 1,936 | 3,007 |
| as % of sales | -197.6% | -106.6% | 5.4% | 2.9% | 4.0% |
| Shares outstanding (in tsd.) | 95,199 | 106,846 | 109,013 | 117,451 | 118,200 |
| Basic earnings per share (EUR) | -0.82 | -0.43 | 0.03 | 0.02 | 0.03 |
Evotec; CBS Research
Research
Schillerstrasse 27 - 29 60313 Frankfurt am Main
Phone: +49 (0)69 – 977 8456-0
| 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 | Igor Kim | +49 (0)69 -977 8456- 15 |
| [email protected] | [email protected] | ||
| Ralf Marinoni | +49 (0)69 -977 8456- 17 | Manuel Martin | +49 (0)69 -977 8456- 16 |
| [email protected] | [email protected] | ||
| Enid Omerovic | +49 (0)69 -977 8456- 19 | Marcus Silbe | +49 (0)69 -977 8456- 14 |
| [email protected] | [email protected] | ||
| Veysel Taze | +49 (0)69 -977 8456- 18 | ||
| [email protected] |
Institutional Sales
Schillerstrasse 27 – 29 25 Dowgate Hill 60313 Frankfurt am Main London EC4R 2GA
Phone: +49 (0)69 – 9 20 54-400
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(Germany) [email protected] (Germany, Switzerland) [email protected]
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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.
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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 |
| Close Brothers Seydler | |
|---|---|
| Research AG |
| 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 |
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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