SFC Energy AG — Earnings Release 2012

Oct 31, 2012

SFC Energy AG

Recommendation: BUY(BUY)

Risk: HIGH (HIGH) Price Target: EUR 7.50 (7.50)

Management now expects positive EBITDA in FY 2012, not only in 2H 2012

FY 2012 sales guidance increased by EUR 1m – we expect breakeven on EBIT level in 4Q due to Bundeswehr order

• 3Q 2012 was overall in line with our expectations. Consumer segment sales showed the usual seasonality but still increased 2.0% YOY, after 1H sales had declined by almost 20%. We expect still weakening demand from France and Italy next year while it is too early to assess the development in Germany.
• In the Industry segment, SFC's fuel cell business (excluding PBF) grew by 40.9% to EUR 1.4m (PY: 1.0m). Together with PBF's Industry business (consolidated as of 1 December 2011), sales in this segment grew by the factor 4.6 and reached EUR 4.5m in 3Q, and this despite the usual vacation shutdowns of PBF's customers in 3Q. We expect further strong growth in this segment in 2013E which should compensate for presumably lower sales in the Defense segment, after an extraordinarily strong year 2012 in the Defense segment.
• In the Defense segment, sales and earnings will be boosted in 4Q ²⁰¹² by the execution of major order placed by Deutsche Bundeswehr for so-called ELENA energy networks (sales volume: approx. EUR 5m). This order had entailed significant front-loaded costs in 9M 2012. Even though the Group's gross margin was somewhat diluted by the PBF acquisition, we expect it to grow from 34.8% in FY 2011 to slightly more than 41% in FY 2012.
• SFC's management increased the sales guidance for FY 2012 from EUR 30m to EUR 31m and now expects a positive EBITDA figure not only in 2H 2012 (previous guidance) but also in the full year 2012. We had anticipated positive EBITDA already in our previous estimates. Apart from an increase in our FY 2012 sales estimate by EUR 1m, we leave all our estimates unchanged for the time being.
• We leave our price target for SFC Energy unchanged at EUR 7.50. BUY.

Y/E 31 Dec, EUR m	2009	2010	2011	2012E	2013E	2014E
Sales revenues	11.7	13.3	15.4	31.0	33.8	38.5
Gross profit	3.2	4.0	5.4	12.7	14.1	16.4
EBITDA	-3.6	-3.5	-4.6	0.4	2.0	3.4
EBITA	-4.0	-3.9	-5.2	0.1	1.7	3.0
EBIT	-4.5	-4.5	-6.6	-0.9	0.0	1.5
Net income/loss	-3.8	-4.1	-6.2	-0.8	-0.1	1.2
EPS	-0.53	-0.58	-0.87	-0.11	-0.01	0.17
CPS	-0.51	-0.65	-0.60	-0.21	0.14	0.24
EBITDA margin	-30.6%	-26.2%	-30.1%	1.2%	5.8%	8.7%
EBIT margin	-38.6%	-33.8%	-42.9%	-2.8%	0.1%	3.8%
EV/Sales	2.3	2.0	1.7	0.9	0.8	0.7
EV/EBITDA	neg.	neg.	neg.	72.0	13.7	8.0
Source: SFC Energy AG; CBS Research AG

31 October 2012

	new	old	new	old	new	old
Sales	31.0	30.0	-	33.8	-	38.5
EBITDA	-	0.4	-	2.0	-	3.4
EPS		- -0.11	-	-0.01	-	0.17
Internet: www.sfc.com				Sector: Alternative energy
WKN: 756857			ISIN: DE0007568578
Reuters: F3CG.DE			Bloomberg: F3C GY

Short company profile:

SFC Energy AG is a market leader for off grid and stationary power generation and distribution. The Company has established fully commercialized fuel cells in the Consumer, Industry, and Defense & Security sectors and furthermore develops, produces and globally distributes higher level power management components. The products increasingly are delivered as customised power supply system solutions.

Share data:
Share price (EUR, latest closing price):		6.163
Shares outstanding (m):		7.5
Market capitalisation (EUR m):		46.2
Enterprise value (EUR m):		26.9
Ø daily trading volume (6 m., no. of shares):		5,846
Performance data:
High 52 weeks (EUR):		7.20
Low 52 weeks (EUR):		3.49
Absolute performance (12 months):		49.6%
Relative performance vs. CDAX:
1 month		-0.6%
3 months		-15.5%
6 months		14.8%
12 months		25.7%
Shareholders:
HPE		25.70%
Conduit Ventures		10.15%
Havensight		10.22%
Previous owners of PBF (lock-up agreement)		4.66%
Management and Supervisory Board		2.14%
DWS		4.92%
Other free float		42.21%
Financial calendar:
DVFA Analysts' Conference:	13 November 2012
Author:	Martin Decot (Analyst)
Close Brothers Seydler Research AG
Phone:	+49 (0) 69-977 84 56 0
Email:	research@cbseydlerresearch.ag
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.

Quarterly figures with YOY comparison

IFRS EURm	3Q 2012	3Q 2011		9M 2012 9M 2011
Total sales YOY grow th	6.21 127.5%	2.73 19.3%	21.17 101.6%	10.50 18.5%
Industry	4.52	0.99	14.18	2.87
as % of total sales	72.9%	36.2%	67.0%	27.3%
Defense & Security	1.01	1.08	3.35	3.28
as % of total sales	16.2%	39.5%	15.8%	31.2%
Consumer	0.68	0.66	3.64	4.36
as % of total sales	10.9%	24.3%	17.2%	41.5%
Gross profit	2.41	1.08	8.56	3.52
as % of sales	38.9%	39.7%	40.4%	33.5%
Gross profit - Industry	1.70	0.41	5.44	1.19
as % of segment sales	37.5%	41.2%	38.3%	41.5%
Gross profit - Defense & Security	0.49	0.47	1.77	1.28
as % of segment sales	48.2%	43.3%	52.9%	39.2%
Gross profit - Consumer	0.23	0.21	1.35	1.05
as % of segment sales	34.4%	31.7%	37.1%	24.1%
EBITDA	-0.64	-1.45	-0.16	-3.03
as % of sales	-10.3%	-53.2%	-0.8%	-28.8%
EBITDA - Industry	0.01	-0.71	0.50	-1.32
as % of segment sales	0.3%	-72.2%	3.5%	-46.0%
EBITDA - Defense & Security	-0.36	-0.19	-0.49	-0.69
as % of segment sales	-35.3%	-17.2%	-14.6%	-21.0%
EBITDA - Consumer	-0.30	-0.55	-0.17	-1.02
as % of segment sales	-44.1%	-83.4%	-4.6%	-23.4%
Adjusted EBITDA	-0.61	-1.45	-0.10	-2.50
as % of sales	-9.8%	-53.2%	-0.5%	-23.8%
EBIT	-1.11	-1.81	-0.95	-4.01
as % of sales	-17.9%	-66.4%	-4.5%	-38.2%
Adjusted EBIT	-1.08	-1.28	-1.42	-3.48
as % of sales	-17.4%	-46.9%	-6.7%	-33.2%
Net income after minorities	-1.11	-1.71	-0.92	-3.72
as % of sales	-17.9%	-62.7%	-4.3%	-35.5%
Basic earnings per share (EUR)	-0.15	-0.24	-0.12	-0.52
Cash flow from operating activities	-0.04	-0.14	-2.22	-4.75
Free cash flow (incl. interest received)	-0.21	-0.22	-2.64	-5.39

Source: SFC Energy AG, CBS Research AG

Profit and loss account

IFRS EURm	2009	2010	2011	2012E	2013E	2014E
Sales YoY grow th	11.69 -19.7%	13.33 14.1%	15.43 15.7%	31.00 101.0%	33.78 9.0%	38.54 14.1%
Cost of sales	-8.49	-9.29	-10.06	-18.28	-19.65	-22.10
as % of sales	-72.7%	-69.7%	-65.2%	-59.0%	-58.2%	-57.4%
Gross profit	3.19	4.04	5.37	12.72	14.13	16.43
as % of sales	27.3%	30.3%	34.8%	41.0%	41.8%	42.6%
Research and development expenses	-1.51	-1.89	-2.54	-4.25	-4.15	-4.24
as % of sales	-12.9%	-14.2%	-16.4%	-13.7%	-12.3%	-11.0%
Selling expenses	-4.45	-4.75	-4.90	-5.86	-5.84	-6.36
as % of sales	-38.0%	-35.6%	-31.7%	-18.9%	-17.3%	-16.5%
General and administrative expenses	-2.13	-2.05	-2.68	-3.89	-3.90	-4.16
as % of sales	-18.2%	-15.4%	-17.4%	-12.6%	-11.6%	-10.8%
Other operating income	0.42	0.23	0.20	1.05	0.52	0.59
as % of sales	3.6%	1.7%	1.3%	3.4%	1.5%	1.5%
Other operating expenses	-0.04	-0.09	-1.60	-0.64	-0.71	-0.81
as % of sales	-0.3%	-0.6%	-10.4%	-2.1%	-2.1%	-2.1%
EBIT before restructuring expenses	-4.51	-4.51	-6.14	-0.86	0.04	1.46
as % of sales	-38.6%	-33.8%	-39.8%	-2.8%	0.1%	3.8%
Restructuring expenses	0.0	0.0	-0.47	0.0	0.0	0.0
as % of sales	0.0%	0.0%	-3.1%	0.0%	0.0%	0.0%
EBIT	-4.51	-4.51	-6.61	-0.86	0.04	1.46
as % of sales	-38.6%	-33.8%	-42.9%	-2.8%	0.1%	3.8%
Net financial result	0.72	0.39	0.39	0.13	0.20	0.20
EBT (Earnings before income taxes)	-3.78	-4.12	-6.22	-0.73	0.24	1.66
as % of sales	-32.4%	-30.9%	-40.4%	-2.4%	0.7%	4.3%
Income taxes	0.00	0.00	0.01	-0.10	-0.30	-0.41
as % of EBT	0.0%	0.0%	-0.1%	14.1%	-123.3%	-24.8%
Income from continuing operations	-3.78	-4.12	-6.22	-0.83	-0.06	1.25
Income from discontinued operations, net of taxes	0.00	0.00	0.00	0.00	0.00	0.00
Group net income including minorities	-3.78	-4.12	-6.22	-0.83	-0.06	1.25
as % of sales	-32.4%	-30.9%	-40.3%	-2.7%	-0.2%	3.2%
Minority interests	0.00	0.00	0.00	0.00	0.00	0.00
Net income attributable to shareholders	-3.78	-4.12	-6.22	-0.83	-0.06	1.25
Shares outstanding (m)	7.15	7.15	7.16	7.50	7.50	7.50
Basic earnings per share (EUR)	-0.53	-0.58	-0.87	-0.11	-0.01	0.17
EBITDA	-3.58	-3.49	-4.64	0.37	1.97	3.37
EBITA	-4.02	-3.89	-5.15	0.15	1.67	2.97

Source: CBS Research AG, SFC Energy AG

Balance sheet

IFRS EURm	2009	2010	2011	2012E	2013E	2014E
Assets
Current assets as % of total assets	45.60 90.4%	40.17 86.7%	33.47 68.6%	35.45 70.1%	36.95 72.2%	40.10 74.9%
Inventories and prepayments	1.33	1.94	4.91	5.55	5.88	6.63
Trade accounts receivable	2.20	2.71	4.47	7.64	8.33	10.03
Other assets incl. tax and PoC receivables	1.48	1.39	1.36	1.80	2.69	3.14
Cash and cash equivalents	40.54	33.56	22.44	20.35	19.96	20.20
Cash and cash equival. with limitation on disposal	0.05	0.57	0.29	0.10	0.10	0.10
Noncurrent assets as % of total assets	4.85 9.6%	6.15 13.3%	15.31 31.4%	15.13 29.9%	14.21 27.8%	13.42 25.1%
Intangible assets excl. goodwill	2.41	2.95	4.89	4.42	3.33	2.37
Goodwill	0.00	0.00	6.02	6.02	6.02	6.02
Property, plant and equipment	1.68	2.34	2.75	2.97	3.12	3.28
Other non-current assets	0.06	0.07	0.05	0.13	0.14	0.16
Deferred taxes	0.69	0.80	1.59	1.59	1.59	1.59
Total assets	50.44	46.31	48.78	50.58	51.17	53.52
Shareholders´ equity and liabilities
Current liabilities as % of total equity and liabilities	3.44 6.8%	3.18 6.9%	6.78 13.9%	9.32 18.4%	9.75 19.1%	10.66 19.9%
Provisions	0.57	0.55	0.87	1.77	1.89	2.08
Advance payments received	0.02	0.00	0.20	0.25	0.25	0.25
Trade accounts payable	1.96	1.38	3.17	3.51	3.64	4.04
Liabilities from finance leases	0.00	0.00	0.56	0.70	0.73	0.76
Other liabilities	0.90	1.24	1.98	3.09	3.24	3.52
Noncurrent liabilities	1.14	1.41	5.22	5.31	5.52	5.72
as % of total equity and liabilities	2.3%	3.1%	10.7%	10.5%	10.8%	10.7%
Other noncurrent provisions	0.26	0.50	1.41	1.47	1.53	1.59
Other noncurrent liabilities	0.18	0.12	1.46	1.50	1.64	1.78
Deferred tax liabilities	0.69	0.80	2.15	2.15	2.15	2.15
Shareholders´ equity as % of total equity and liabilities	45.86 90.9%	41.72 90.1%	36.79 75.4%	35.95 71.1%	35.90 70.2%	37.14 69.4%
Subscribed capital	7.15	7.15	7.50	7.50	7.50	7.50
Capital reserve	66.88	66.88	67.88	67.88	67.88	67.88
Other changes in equity not effecting profit or loss	0.01	0.00	-0.07	-0.07	-0.07	-0.07
Accumulated loss brought forward	-24.40	-28.18	-32.31	-38.53	-39.36	-39.42
Net result of the year	-3.78	-4.12	-6.22	-0.83	-0.06	1.25
Total equity and liabilities	50.44	46.31	48.78	50.58	51.17	53.52

Source: CBS Research AG, SFC Energy AG

Cash flow statement

IFRS EURm	2009	2010	2011	2012E	2013E	2014E
Income/loss before interest and taxes	-4.51	-4.51	-6.61	-0.86	0.04	1.46
Depreciation of PP&E	0.49	0.62	1.46	1.01	1.63	1.51
Amortisation of intangible assets incl. assets from PPA	0.44	0.40	0.51	0.23	0.30	0.40
Other expenses / income with no effect on liquidity	-0.12	-0.11	0.25	-0.53	-0.26	-0.30
Increase/decrease in inventories, trade receivables, and other assets	-0.07	-1.01	-0.99	-3.80	-1.65	-2.63
Increase/decrease in trade accounts payable and other liabilities	-0.41	-0.13	1.10	2.49	1.29	1.76
Cash taxes paid	0.51	0.11	-0.03	-0.10	-0.30	-0.41
Cash flow from operating activities	-3.68	-4.64	-4.32	-1.57	1.05	1.79
Net cash outflows from the purchase and
retirement of noncurrent assets	-2.05	-2.22	-1.13	-0.98	-1.00	-1.10
Bank balances released/pledged	0.00	-0.52	0.29	0.19	0.00	0.00
Interests received	0.82	0.39	0.43	0.30	0.30	0.30
Purchase of consolidated companies	0.00	0.00	-6.00	0.00	-0.68	-0.68
Cash flow from investing activities	-1.23	-2.35	-6.42	-0.50	-1.38	-1.48
Net cash inflow from capital stock increases
deducting expenses	0.00	0.00	-0.05	0.00	0.00	0.00
Net cash flow from financial debt incl. leasing	-0.12	0.00	-0.35	0.14	0.03	0.03
Interests paid	0.00	0.00	0.00	-0.17	-0.10	-0.10
Cash flow from financing activities	-0.12	0.00	-0.40	-0.03	-0.07	-0.07
Total change in cash and cash equivalents	-5.02	-6.98	-11.14	-2.09	-0.39	0.24
Currency effects on cash and cash equivalents	0.00	0.00	0.01	0.00	0.00	0.00
Cash and cash equiv. at the start of the period	45.57	40.54	33.56	22.44	20.35	19.96
Cash and cash equiv. at the end of the period	40.54	33.56	22.44	20.35	19.96	20.20

Source: CBS Research AG, SFC Energy AG

Research

Schillerstrasse 27 - 29 60313 Frankfurt am Main

Phone: +49 (0)69 – 977 8456-0

Roger Peeters Member of the Board	+49 (0)69 -977 8456- 12 Roger.Peeters@cbseydlerresearch.ag
Martin Decot	+49 (0)69 -977 8456- 13 Martin.Decot@cbseydlerresearch.ag	Igor Kim	+49 (0)69 -977 8456- 15 Igor.Kim@cbseydlerresearch.ag
Anna von Klopmann	+49 (0)69 -977 8456- 10 Anna.Klopmann@cbseydlerresearch.ag	Gennadij Kremer	+49 (0)69 – 977 8456- 23 Gennadij.Kremer@cbseydlerresearch.ag
Daniel Kukalj	+49 (0)69 – 977 8456- 21 Daniel.Kukalj@cbseydlerresearch.ag	Ralf Marinoni	+49 (0)69 -977 8456- 17 Ralf.Marinoni@cbseydlerresearch.ag
Manuel Martin	+49 (0)69 -977 8456- 16 Manuel.Martin@cbseydlerresearch.ag	Felix Parmantier	+49 (0)69 -977 8456- 22 Felix.Parmantier@cbseydlerresearch.ag
Marcus Silbe	+49 (0)69 -977 8456- 14 Marcus.Silbe@cbseydlerresearch.ag	Veysel Taze	+49 (0)69 -977 8456- 18 Veysel.Taze@cbseydlerresearch.ag
Ivo Višić	+49 (0)69 -977 8456- 19 Ivo.Visic@cbseydlerresearch.ag

Institutional Sales

Schillerstrasse 27 – 29 60313 Frankfurt am Main

Phone: +49 (0)69 – 9 20 54-400

Raimar Bock Head of Sales	+49 (0)69 -9 20 54-115 Raimar.Bock@cbseydler.com
Rüdiger Eich	+49 (0)69 -9 20 54-119	Sule Erkan	+49 (0)69 -9 20 54-107
(Germany, Switzerland)	Ruediger.Eich@cbseydler.com	(Sales-Support)	Sule.Erkan@cbseydler.com
Dr. James Jackson	+49 (0)69 -9 20 54-113	Klaus Korzilius	+49 (0)69 -9 20 54-114
(UK)	James.Jackson@cbseydler.com	(Benelux, Germany)	Klaus.Korzilius@cbseydler.com
Stefan Krewinkel	+49 (0)69 -9 20 54-118	Markus Laifle	+49 (0)69 -9 20 54-120
(Execution, UK)	Stefan.Krewinkel@cbseydler.com	(Execution)	Markus.Laifle@cbseydler.com
Michael Laufenberg	+49 (0)69 -9 20 54-112	Bruno de Lencquesaing	+49 (0)69 -9 20 54-116
(Germany)	Michael.Laufenberg@cbseydler.com	(Benelux, France)	Bruno.deLencquesaing@cbseydler.com
Angela Leser	+49 (0)69 -9 20 54-111	Carsten Pfersdorf	+49 (0)69 -9 20 54-168
(Fixed Income)	Angela.Leser@cbseydler.com	(Sales Trading)	Carsten.Pfersdorf@cbseydler.com
Christopher Seedorf	+49 (0)69 -9 20 54-110	Janine Theobald	+49 (0)69 -9 20 54-106
(Sales-Support)	Christopher.Seedorf@cbseydler.com	(Austria, Germany)	Janine.Theobald@cbseydler.com
Bas-Jan Walhof	+49 (0)69 -9 20 54-105
(Benelux)	Bas-Jan.Walhof@cbseydler.com

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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 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%.

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

Date	Recommendation	Price at change date	Price Target
02 November 2011	BUY	EUR 4.10	EUR 5.50
26 January 2012	BUY	EUR 4.00	EUR 5.50
30 March 2012	BUY	EUR 3.95	EUR 5.50
11 April 2012	BUY	EUR 4.74	EUR 5.50
4 May 2012	HOLD	EUR 5.55	EUR 6.00
1 August 2012	BUY	EUR 6.78	EUR 7.50
31 October 2012	BUY	EUR 6.163	EUR 7.50

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 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.

The report is for information purposes, it is not intended to be and should not be construed as a recommendation, offer or solicitation to acquire, or dispose of, any of the securities mentioned in this report. Any reference to past performance should not be taken as indication of future performance. The author does not accept any liability whatsoever for any direct or consequential loss arising from any use of material contained in this report. The report is confidential and it is submitted to selected recipients only. The report is prepared for professional investors only and it is not intended for private investors. Consequently, it should not be distributed to any such persons. Also, the report may be communicated electronically before physical copies are available. It may not be reproduced (in whole or in part) to any other investment firm or any other individual person without the prior written approval from the author. The author is not registered in the United Kingdom nor with any U.S. regulatory body.

It has not been determined in advance whether and in what intervals this report will be updated. Unless otherwise stated current prices refer to the closing price of the previous trading day. Any reference to past performance should not be taken as indication of future performance. The author maintains the right to change his opinions without notice, i.e. the opinions given reflect the author's judgment on the date of this report.

This analysis is intended to provide information to assist institutional investors in making their own investment decisions, not to provide investment advice to any specific investor.

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