Softing AG — Investor Presentation 2013

May 28, 2013

(CDAX, Technology)

		Value Indicators:	EUR	Share data:		Description:
Buy		DCF:	11.40	Bloomberg:	SYT GR	Software solutions (e.g. error
		FCF-Value Potential:	10.50	Reuters:	SYTG	diagnosis) for industrial plants and
EUR 10.00				ISIN:	DE0005178008	automotive electronics
		Market Snapshot:	EUR m	Shareholders:		Risk Profile (WRe):	2013e
		Market cap:	52.4	Freefloat	68.5 %	Beta:	1.3
Price	EUR 8.54	No. of shares (m):	6.1	Trier Asset Mgmt	26.7 %	Price / Book:	2.3 x
Upside	17.1 %	EV:	40.8	Treasury Stock	4.8 %	Equity Ratio:	61 %
		Freefloat MC:	35.9			Net Fin. Debt / EBITDA:	-1.4 x
		Ø Trad. Vol. (30d):	88.24 th			Net Debt / EBITDA:	-1.2 x

Revisiting the investment case

Softing is an independent technology enabler. Its hardware and software products allow data exchange in factory automation, the processing industry and automotive electronics. The business activities comprise two segments.

• In Industrial Automation Softing's components and tools address OEMs in factory automation and the processing industry. In these plants, sensors, steering devices and actuators exchange data on the basis of defined protocols. Processing plants (e.g. a refinery) often have tens of thousands of data points which communicate with each other and/or with control centres. Such communication is enabled by Softing based on established standards like e.g. Profibus, Profinet, DeviceNet, CAN or Foundation Fieldbus. In this way, the company achieves a wide coverage of the industrial communications market.
• In Automotive Electronics the communication solutions all deal with the programming and diagnostics of electronic control units (ECUs) in passenger cars, trucks, agricultural and recreational vehicles. Mid- to upper-class passenger cars can contain 80 or even 100 ECUs and five networks (while most offices only have one). Softing's solutions cover a large part of a vehicle's life cycle including development, prototype testing, measurement, production process and after-sales. However, none of Softing's products are installed in a vehicle itself. Thus, product recall risks are avoided.

As a "standard" only sets a framework, Softing differentiates itself via the final programming of the firmware which determines e.g. data exchange performance. In contrast to its mostly smaller competitors, usually engineering firms, Softing is in full control of its intellectual property as it has developed the communication stacks itself. Large automation companies (Emerson, Siemens, Kongsberg etc.) do not enter the niche market as they are focused on selling their own automation devices instead of enabling other market participants to connect to their own or their competitors' industrial communication networks. Apart from its ROCEs, the good competitive position is reflected in the fact that Softing's solutions are used in more than 50% of the gas and oil plants worldwide. The company is also the world market leader for diagnostic devices for error recognition in factory automation and it is the European market leader for OPC servers. These facilitate e.g. the data exchange between production plants and business-related software and, ultimately, serve the need for real-time information.

Theme looks set to remain intact as the importance of industrial communication systems is growing continuously. In the process industry for example, three quarters is still dominated by analogue technology. Being an independent technology enabler, Softing participates in the analogue-to-digital conversion. Furthermore, the "design in" of Softing's solutions in customers' products leads to high customer loyalty and recurring revenues over their product life cycles of up to 10 years. The intact growth path is mirrored in the Q1 EBIT rise of 16% and the impressive order intake of EUR 16m (+14%, book-to-bill of 1.3). The order book of EUR 13m is at a record high and provides good visibility.

In the mid term, management aims to reach sales of EUR 100m and maintain its EBIT margin of c. 10%. Bolt-on acquisitions will help to achieve this target. Although the business might sometimes allow for higher margins, management prefers to invest EBIT margins in excess of 10-12% in future growth. While the peer HMS Networks trades at an EV/EBIT 2014 of 14, Softing is still undervalued. Buy, PT of EUR 10.

		FY End: 31.12.	CAGR
		in EUR m	(12-15e)	2009	2010	2011	2012	2013e	2014e	2015e
		Sales	8.6 %	23.7	31.7	41.1	49.4	54.0	58.6	63.3
		Change Sales yoy		-29.1 %	33.8 %	29.9 %	20.0 %	9.3 %	8.5 %	8.0 %
		Gross profit margin		82.5 %	80.0 %	75.6 %	76.3 %	75.1 %	74.1 %	74.0 %
		EBITDA	11.0 %	0.6	4.8	7.4	8.3	9.6	10.8	11.3
		Margin		2.5 %	15.3 %	17.9 %	16.7 %	17.8 %	18.5 %	17.9 %
		EBIT	12.7 %	-2.5	1.5	4.2	4.9	5.5	6.6	7.0
		Margin		-10.4 %	4.8 %	10.3 %	10.0 %	10.2 %	11.3 %	11.1 %
		Net income	12.5 %	-1.7	1.0	3.1	3.5	3.9	4.8	5.0
		EPS	11.1 %	-0.33	0.19	0.58	0.59	0.63	0.77	0.81
		EPS adj.	11.1 %	-0.33	0.19	0.58	0.59	0.63	0.77	0.81
		DPS	9.0 %	0.00	0.11	0.27	0.27	0.30	0.30	0.35
Rel. Performance vs CDAX:		Dividend Yield		0.0 %	4.7 %	6.9 %	4.6 %	3.5 %	3.5 %	4.1 %
		FCFPS		-0.17	0.04	0.60	0.53	0.48	0.62	0.62
1 month:	5.5 %
6 months:	-0.2 %	EV / Sales		0.3 x	0.3 x	0.4 x	0.5 x	0.8 x	0.7 x	0.6 x
Year to date:	14.1 %	EV / EBITDA		13.1 x	1.8 x	2.0 x	2.9 x	4.5 x	3.8 x	3.5 x
		EV / EBIT		n.a.	5.7 x	3.5 x	4.9 x	7.9 x	6.3 x	5.6 x
Trailing 12 months:	40.1 %	P / E P / E adj.		n.a. n.a.	12.4 x 12.4 x	6.7 x 6.7 x	9.9 x 9.9 x	13.6 x 13.6 x	11.1 x 11.1 x	10.5 x 10.5 x
		FCF Yield Potential		-16.7 %	15.3 %	20.5 %	9.0 %	8.4 %	11.3 %	11.8 %
Company events:
14.08.13	Q2	Net Debt		-3.0	-3.3	-5.8	-10.4	-11.6	-13.5	-15.5
15.11.13	Q3	ROE		-11.5 %	7.0 %	19.1 %	17.8 %	17.0 %	19.1 %	18.3 %
		ROCE (NOPAT)		-16.6 %	10.0 %	26.5 %	30.0 %	31.7 %	37.8 %	38.7 %
		Guidance:	2013: EBIT to grow 10%

A n a l y s t Andreas Wolf awolf@warburg-research.com +49 40 309537-140

Company Background

• Softing has the necessary expertise on information exchange between various devices, sensors, plant and software solutions in automated processes. The business activity comprises two segments.
• Industrial Automation: hardware and software solutions for the exchange of information in all kinds of production including montage lines, chemical plants, oil and gas extraction or refineries.
• Automotive Electronics: The solutions allow engineers and workshop mechanics to test automotive electronics in the development phase, production or repair, and to recognise errors through data evaluation.
• The solutions in the automotive segment are not for application within the vehicles and therefore do not pose a product re-call risk for the company.
• Softing focuses on established standards and reaches a coverage of ca. 70% of the market.

Competitive Quality

• World market leader in tools to recognise errors in production plant (so called field bus diagnostics)
• European market leader in the networking of various production plant elements as well as in business-related software (so-called OPC products).
• World market leader for components for the exchange of information in gas and oil plants. Some >50% of all devices registered worldwide that are used in these plants include components from Softing.
• Through participation in international committees that set standards for the exchange of information, a short time-to-market is achieved.
• The high complexity of the business activity of Softing is the single most important barrier to market entry for potential competitors.

DCF model

		Detailed forecast period						Transitional period						Term. Value
Figures in EUR m	2013e	2014e	2015e	2016e	2017e	2018e	2019e	2020e	2021e	2022e	2023e	2024e	2025e
Sales	54.0	58.6	63.3	68.3	73.0	77.2	81.0	84.4	87.4	90.0	92.3	94.3	96.2
Sales change	9.3 %	8.5 %	8.0 %	8.0 %	6.8 %	5.8 %	4.9 %	4.2 %	3.5 %	3.0 %	2.6 %	2.2 %	2.0 %	2.0 %
EBIT	5.5	6.6	7.0	7.2	7.3	7.7	8.1	8.4	8.6	8.8	9.0	9.2	9.3
EBIT-margin	10.2 %	11.3 %	11.1 %	10.5 %	10.0 %	10.0 %	10.0 %	9.9 %	9.9 %	9.8 %	9.8 %	9.7 %	9.7 %
Tax rate (EBT)	30.0 %	29.0 %	30.0 %	30.0 %	30.0 %	30.0 %	30.0 %	30.0 %	30.0 %	30.0 %	30.0 %	30.0 %	30.0 %
NOPAT	3.9	4.7	4.9	5.0	5.1	5.4	5.6	5.8	6.0	6.2	6.3	6.4	6.5
Depreciation	4.1	4.2	4.3	4.9	5.3	5.6	5.8	6.1	6.3	6.5	6.6	6.8	6.9
in % of Sales	7.6 %	7.2 %	6.8 %	7.2 %	7.2 %	7.2 %	7.2 %	7.2 %	7.2 %	7.2 %	7.2 %	7.2 %	7.2 %
Changes in provisions	0.0	0.0	0.0	-0.6	0.1	0.1	0.1	0.1	0.1	0.0	0.0	0.0	0.0
Change in Liquidity from
- Working Capital	0.8	0.9	0.9	0.9	0.9	0.8	0.8	0.7	0.6	0.5	0.5	0.4	0.4
- Capex	4.3	4.2	4.5	4.9	5.3	5.6	5.8	6.1	6.3	6.5	6.6	6.8	6.9
Capex in % of Sales	8.0 %	7.2 %	7.1 %	7.2 %	7.2 %	7.2 %	7.2 %	7.2 %	7.2 %	7.2 %	7.2 %	7.2 %	7.2 %
Other	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
Free Cash Flow (WACC Model)	2.9	3.8	3.8	3.6	4.3	4.6	4.9	5.2	5.5	5.7	5.9	6.0	6.2	6
PV of FCF	2.9	3.5	3.2	2.7	3.0	2.9	2.9	2.8	2.6	2.5	2.4	2.2	2.1	28
share of PVs		15.12 %						41.22 %						43.66 %
Model parameter							Valuation (m)
Derivation of WACC:			Derivation of Beta:					Present values 2025e			36
								Terminal Value			28
Debt ratio	0.00 %		Financial Strength			1.30		Financial liabilities			0
Cost of debt	2.8 %		Liquidity			1.40		Pension liabilities			2
Market return	8.00 %		Cyclicality			1.20	Hybrid capital				0
Risk free rate	2.50 %		Transparency			1.20		Minority interest			0
			Others			1.00		Market val. of investments			0
							Liquidity				13	No. of shares (m)		6.4
WACC	9.51 %		Beta			1.28	Equity Value				74	Value per share (EUR)		11.43

Sensitivity Value per Share (EUR)

	Terminal Growth								Delta EBIT-margin
Beta WACC	1.25 %	1.50 %	1.75 %	2.00 %	2.25 %	2.50 %	2.75 %	Beta WACC	-1.5 pp	-1.0 pp		-0.5 pp +0.0 pp	+0.5 pp	+1.0 pp	+1.5 pp
1.46 10.5 %	9.99	10.08	10.17	10.27	10.37	10.48	10.60	1.46 10.5 %	8.78	9.28	9.77	10.27	10.76	11.26	11.75
1.37 10.0 %	10.49	10.59	10.70	10.81	10.94	11.07	11.21	1.37 10.0 %	9.24	9.76	10.29	10.81	11.34	11.86	12.39
1.32 9.8 %	10.76	10.87	10.99	11.11	11.25	11.39	11.54	1.32 9.8 %	9.49	10.03	10.57	11.11	11.65	12.20	12.74
1.28 9.5 %	11.04	11.16	11.29	11.43	11.58	11.74	11.91	1.28 9.5 %	9.75	10.31	10.87	11.43	11.99	12.55	13.11
1.23 9.3 %	11.35	11.48	11.62	11.77	11.94	12.11	12.30	1.23 9.3 %	10.04	10.62	11.19	11.77	12.35	12.93	13.51
1.18 9.0 %	11.67	11.82	11.97	12.14	12.32	12.51	12.72	1.18 9.0 %	10.34	10.94	11.54	12.14	12.74	13.34	13.94
1.09 8.5 %	12.39	12.56	12.75	12.96	13.18	13.42	13.68	1.09 8.5 %	11.02	11.67	12.31	12.96	13.60	14.25	14.89

The cyclical components of the business activity and the low liquidity of the share raise the capital costs.

Our long-term margin estimates are below Softing's target of 10%.

Free Cash Flow Value Potential

Warburg Research's valuation tool "FCF Value Potential" reflects the ability of the company to generate sustainable free cash flows. It is based on the "FCF potential" - a FCF "ex growth" figure - which assumes unchanged working capital and pure maintenance capex. A value indication is derived by discounting the "FCF potential" of a given year with the weighted costs of capital. The fluctuating value indications over time add a timing element to the DCF model (our preferred valuation tool).

in EUR m		2009	2010	2011	2012	2013e	2014e	2015e
Net Income before minorities		-1.8	1.0	3.1	3.5	3.9	4.8	5.0
+ Depreciation + Amortisation		3.1	3.3	3.1	3.3	4.1	4.2	4.3
- Net Interest Income		-0.1	-0.2	0.0	0.0	0.1	0.1	0.1
- Maintenance Capex		2.6	3.2	3.1	4.6	4.3	4.2	4.5
+ Other		0.0	0.0	0.0	0.0	0.0	0.0	0.0
= Free Cash Flow Potential		-1.3	1.3	3.1	2.2	3.7	4.7	4.7
Free Cash Flow Yield Potential		-16.7 %	15.3 %	20.5 %	9.0 %	8.4 %	11.3 %	11.8 %
WACC		9.51 %	9.51 %	9.51 %	9.51 %	9.51 %	9.51 %	9.51 %
= Enterprise Value (EV)		7.9	8.7	15.0	24.2	43.4	41.5	39.5
= Fair Enterprise Value		n.a.	13.9	32.4	23.0	38.4	49.1	49.1
- Net Debt (Cash)		-12.1	-12.1	-12.1	-12.1	-13.4	-15.3	-17.2
- Pension Liabilities		1.8	1.8	1.8	1.8	1.8	1.8	1.8
- Other		0.0	0.0	0.0	0.0	0.0	0.0	0.0
- Market value of minorities		0.0	0.0	0.0	0.0	0.0	0.0	0.0
+ Market value of investments		0.0	0.0	0.0	0.0	0.0	0.0	0.0
= Fair Market Capitalisation		n.a.	24.3	42.7	33.4	50.0	62.6	64.6
No. of shares (total) (m)		6.1	6.1	6.1	6.1	6.1	6.1	6.1
= Fair value per share (EUR)		n.a.	3.96	6.96	5.44	8.15	10.21	10.53
premium (-) / discount (+) in %						-4.5 %	19.6 %	23.3 %
Sensitivity Fair value per Share (EUR)
	12.51 %	n.a.	3.42	5.70	4.54	6.65	8.29	8.61
	11.51 %	n.a.	3.57	6.05	4.79	7.06	8.82	9.14
	10.51 %	n.a.	3.74	6.46	5.08	7.55	9.45	9.77
WACC	9.51 %	n.a.	3.96	6.96	5.44	8.15	10.21	10.53
	8.51 %	n.a.	4.23	7.58	5.88	8.89	11.15	11.47
	7.51 %	n.a.	4.56	8.37	6.44	9.82	12.34	12.66
	6.51 %	n.a.	5.01	9.39	7.16	11.03	13.90	14.22

Capitalised own work is a significant element of the capex.

The earnings quality has clearly improved over the last years.

Increasing share of software revenues should have a positive effect on the FCF Value.

Valuation

	2009	2010	2011	2012	2013e	2014e	2015e
Price / Book	0.8 x	0.8 x	1.2 x	1.6 x	2.3 x	2.1 x	1.9 x
Book value per share ex intangibles	1.24	1.52	1.96	2.43	2.66	3.11	3.58
EV / Sales	0.3 x	0.3 x	0.4 x	0.5 x	0.8 x	0.7 x	0.6 x
EV / EBITDA	13.1 x	1.8 x	2.0 x	2.9 x	4.5 x	3.8 x	3.5 x
EV / EBIT	n.a.	5.7 x	3.5 x	4.9 x	7.9 x	6.3 x	5.6 x
EV / EBIT adj.*	n.a.	5.7 x	3.5 x	4.9 x	7.9 x	6.3 x	5.6 x
P / FCF	n.a.	53.0 x	6.5 x	11.0 x	17.7 x	13.7 x	13.7 x
P / E	n.a.	12.4 x	6.7 x	9.9 x	13.6 x	11.1 x	10.5 x
P / E adj.*	n.a.	12.4 x	6.7 x	9.9 x	13.6 x	11.1 x	10.5 x
Dividend Yield	0.0 %	4.7 %	6.9 %	4.6 %	3.5 %	3.5 %	4.1 %
Free Cash Flow Yield Potential	-16.7 %	15.3 %	20.5 %	9.0 %	8.4 %	11.3 %	11.8 %
*Adjustments made for: -

Company Specific Items

	2009	2010	2011	2012	2013e	2014e	2015e
order entries	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.
book-to-bill	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.
order book	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.	n.a.

Consolidated profit & loss

In EUR m	2009	2010	2011	2012	2013e	2014e	2015e
Sales	23.7	31.7	41.1	49.4	54.0	58.6	63.3
Change Sales yoy	-29.1 %	33.8 %	29.9 %	20.0 %	9.3 %	8.5 %	8.0 %
Increase / decrease in inventory	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Own work capitalised	2.2	2.7	2.0	3.2	2.9	2.7	2.9
Total Sales	25.8	34.4	43.2	52.6	56.9	61.3	66.2
Material Expenses	6.3	9.1	12.1	14.9	16.4	17.9	19.4
Gross profit	19.5	25.3	31.1	37.7	40.5	43.4	46.8
Gross profit margin	82.5 %	80.0 %	75.6 %	76.3 %	75.1 %	74.1 %	74.0 %
Personnel expenses	14.9	16.1	19.4	23.6	24.7	25.7	26.8
Other operating income	0.8	0.8	1.7	0.9	0.8	0.8	0.8
Other operating expenses	4.8	5.2	6.1	6.8	7.0	7.7	9.5
Unfrequent items	0.0	0.0	0.0	0.0	0.0	0.0	0.0
EBITDA	0.6	4.8	7.4	8.3	9.6	10.8	11.3
Margin	2.5 %	15.3 %	17.9 %	16.7 %	17.8 %	18.5 %	17.9 %
Depreciation of fixed assets	0.3	0.3	0.3	0.5	0.9	1.0	1.1
EBITA	0.3	4.6	7.1	7.8	8.7	9.8	10.2
Amortisation of intangible assets	2.4	3.0	2.8	2.9	3.2	3.2	3.2
Goodwill amortization	0.3	0.0	0.0	0.0	0.0	0.0	0.0
EBIT	-2.5	1.5	4.2	4.9	5.5	6.6	7.0
Margin	-10.4 %	4.8 %	10.3 %	10.0 %	10.2 %	11.3 %	11.1 %
EBIT adj.	-2.5	1.5	4.2	4.9	5.5	6.6	7.0
Interest income	0.1	0.1	0.3	0.3	0.1	0.1	0.1
Interest expenses	0.2	0.3	0.3	0.2	0.0	0.0	0.0
Other financial income (loss)	0.0	0.0	0.0	0.0	0.0	0.0	0.0
EBT	-2.5	1.4	4.2	4.9	5.6	6.7	7.1
Margin	-10.7 %	4.3 %	10.3 %	10.0 %	10.4 %	11.5 %	11.3 %
Total taxes	-0.7	0.4	1.2	1.4	1.7	1.9	2.1
Net income from continuing operations	-1.8	1.0	3.1	3.5	3.9	4.8	5.0
Income from discontinued operations (net of tax)	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Net income before minorities	-1.8	1.0	3.1	3.5	3.9	4.8	5.0
Minority interest	-0.2	0.0	0.0	0.0	0.0	0.0	0.0
Net income	-1.7	1.0	3.1	3.5	3.9	4.8	5.0
Margin	-7.1 %	3.1 %	7.5 %	7.1 %	7.3 %	8.1 %	7.9 %
Number of shares, average	5.1	5.1	5.3	5.9	6.2	6.2	6.2
EPS	-0.33	0.19	0.58	0.59	0.63	0.77	0.81
EPS adj.	-0.33	0.19	0.58	0.59	0.63	0.77	0.81
*Adjustments made for:

Guidance: 2013: EBIT to grow 10%

Financial Ratios

	2009	2010	2011	2012	2013e	2014e	2015e
Total Operating Costs / Sales	106.6 %	93.3 %	87.0 %	89.7 %	87.5 %	86.1 %	86.7 %
Operating Leverage	n.a.	n.a.	5.9 x	0.8 x	1.3 x	2.4 x	0.8 x
EBITDA / Interest expenses	3.6 x	16.8 x	29.1 x	33.7 x	n.a.	n.a.	n.a.
Tax rate (EBT)	27.0 %	27.2 %	28.1 %	29.0 %	30.0 %	29.0 %	30.0 %
Dividend Payout Ratio	0.0 %	57.1 %	47.1 %	45.8 %	47.3 %	39.0 %	43.4 %
Sales per Employee	104,251	141,402	159,488	166,851	168,750	172,324	180,792

Sales, EBITDA in EUR m

Source: Warburg Research

Operating Performance in %

Performance per Share

Source: Warburg Research

Consolidated balance sheet

In EUR m	2009	2010	2011	2012	2013e	2014e	2015e
Assets
Goodwill and other intangible assets	7.2	7.1	6.7	7.8	7.7	6.6	6.5
thereof other intangible assets	1.3	1.0	0.7	0.6	0.5	0.4	0.4
thereof Goodwill	2.4	2.4	2.4	2.4	2.4	2.4	2.4
Property, plant and equipment	0.7	0.6	1.1	1.4	1.4	1.4	1.4
Financial assets	1.1	1.9	0.9	0.7	0.7	0.7	0.7
Other long-term assets	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Fixed assets	9.0	9.6	8.7	9.9	9.8	8.6	8.6
Inventories	2.2	2.0	3.6	3.3	3.6	3.9	4.2
Accounts receivable	4.1	6.8	8.3	9.8	10.4	11.2	12.1
Liquid assets	4.2	6.1	8.5	12.6	13.8	15.8	17.7
Other short-term assets	2.0	1.7	1.7	2.3	2.3	2.3	2.3
Current assets	12.5	16.7	22.2	28.0	30.1	33.1	36.3
Total Assets	21.5	26.3	31.0	37.9	39.9	41.8	44.9
Liabilities and shareholders' equity
Subscribed capital	5.6	5.6	5.6	6.4	6.4	6.4	6.4
Capital reserve	1.7	1.7	1.7	4.4	4.4	4.4	4.4
Retained earnings	7.5	8.3	10.6	12.1	16.1	20.8	25.8
Other equity components	-1.3	-0.8	-0.8	-0.8	-2.7	-5.8	-8.0
Shareholder's equity	13.5	14.9	17.2	22.2	24.2	25.8	28.7
Minority interest	0.1	0.1	0.0	0.0	0.0	0.0	0.0
Total equity	13.6	15.0	17.2	22.2	24.2	25.8	28.7
Provisions	1.3	1.3	1.7	3.0	3.0	3.0	3.0
thereof provisions for pensions and similar obligations	1.0	1.1	1.0	1.8	1.8	1.8	1.8
Financial liabilites (total)	0.2	1.6	1.8	0.5	0.5	0.5	0.5
thereof short-term financial liabilities	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Accounts payable	1.6	1.7	2.9	3.0	3.0	3.2	3.5
Other liabilities	4.9	6.6	7.4	9.3	9.3	9.3	9.3
Liabilities	7.9	11.3	13.8	15.7	15.8	16.0	16.3
Total liabilities and shareholders' equity	21.5	26.3	31.0	37.9	39.9	41.8	44.9

Financial Ratios

	2009	2010	2011	2012	2013e	2014e	2015e
Efficiency of Capital Employment
Operating Assets Turnover	4.4 x	4.1 x	4.0 x	4.2 x	4.4 x	4.4 x	4.5 x
Capital Employed Turnover	2.2 x	2.7 x	3.6 x	4.2 x	4.3 x	4.8 x	4.8 x
ROA	-18.6 %	10.3 %	35.1 %	35.6 %	40.2 %	55.4 %	58.2 %
Return on Capital
ROCE (NOPAT)	-16.6 %	10.0 %	26.5 %	30.0 %	31.7 %	37.8 %	38.7 %
ROE	-11.5 %	7.0 %	19.1 %	17.8 %	17.0 %	19.1 %	18.3 %
Adj. ROE	-11.5 %	7.0 %	19.1 %	17.8 %	17.0 %	19.1 %	18.3 %
Balance sheet quality
Net Debt	-3.0	-3.3	-5.8	-10.4	-11.6	-13.5	-15.5
Net Financial Debt	-3.9	-4.5	-6.8	-12.1	-13.4	-15.3	-17.2
Net Gearing	-21.7 %	-22.4 %	-33.5 %	-46.7 %	-48.0 %	-52.5 %	-54.0 %
Net Fin. Debt / EBITDA	-654.8 %	-92.7 %	-91.9 %	-146.5 %	-138.6 %	-141.4 %	-152.3 %
Book Value / Share	2.6	2.9	3.2	3.7	3.9	4.2	4.6
Book value per share ex intangibles	1.2	1.5	2.0	2.4	2.7	3.1	3.6

Consolidated cash flow statement

In EUR m	2009	2010	2011	2012	2013e	2014e	2015e
Net income	-1.8	1.0	3.1	3.5	3.9	4.8	5.0
Depreciation of fixed assets	0.3	0.3	0.3	0.5	0.9	1.0	1.1
Amortisation of goodwill	0.3	0.0	0.0	0.0	0.0	0.0	0.0
Amortisation of intangible assets	2.4	3.0	2.8	2.9	3.2	3.2	3.2
Increase/decrease in long-term provisions	0.0	0.0	0.2	0.0	0.0	0.0	0.0
Other non-cash income and expenses	-0.7	0.3	1.1	1.4	0.0	0.0	0.0
Cash Flow	0.5	4.6	7.5	8.2	8.1	9.0	9.3
Increase / decrease in inventory	0.3	0.2	-0.8	0.3	-0.3	-0.3	-0.3
Increase / decrease in accounts receivable	1.8	-3.5	-0.2	-1.8	-0.6	-0.8	-0.9
Increase / decrease in accounts payable	0.0	0.0	-0.2	1.1	0.1	0.2	0.3
Increase / decrease in other working capital positions	-0.9	2.1	0.0	0.0	0.0	0.0	0.0
Increase / decrease in working capital (total)	1.2	-1.2	-1.2	-0.5	-0.8	-0.9	-0.9
Net cash provided by operating activities	1.7	3.4	6.3	7.8	7.3	8.1	8.4
Investments in intangible assets	-2.4	-2.9	-2.4	-3.9	-3.4	-3.2	-3.4
Investments in property, plant and equipment	-0.1	-0.2	-0.7	-0.7	-0.9	-1.0	-1.1
Payments for acquisitions	-0.3	0.0	0.0	0.0	0.0	0.0	0.0
Financial investments	0.0	-1.3	0.6	0.2	0.0	0.0	0.0
Income from asset disposals	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Net cash provided by investing activities	-2.9	-4.4	-2.5	-4.4	-4.3	-4.2	-4.5
Change in financial liabilities	0.0	1.2	0.0	-1.2	0.0	0.0	0.0
Dividends paid	0.0	0.0	-0.6	-1.4	-1.7	-1.9	-1.9
Purchase of own shares	-0.3	0.0	0.0	0.0	0.0	0.0	0.0
Capital measures	0.0	0.5	0.0	3.5	0.0	0.0	0.0
Other	0.0	0.0	-0.2	0.0	0.0	0.0	0.0
Net cash provided by financing activities	-0.3	1.7	-0.8	0.9	-1.7	-1.9	-1.9
Change in liquid funds	-1.4	0.7	3.0	4.2	1.3	1.9	1.9
Effects of exchange-rate changes on cash	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Cash and cash equivalent at end of period	4.1	4.9	7.3	11.5	12.8	14.7	16.6

Financial Ratios

	2009	2010	2011	2012	2013e	2014e	2015e
Cash Flow
Free Cash Flow	-0.9	0.2	3.2	3.1	3.0	3.9	3.9
Free Cash Flow / Sales	-3.7 %	0.7 %	7.8 %	6.4 %	5.5 %	6.6 %	6.1 %
Free Cash Flow Potential	-1.3	1.3	3.1	2.2	3.7	4.7	4.7
Free Cash Flow / Sales	-3.7 %	0.7 %	7.8 %	6.4 %	5.5 %	6.6 %	6.1 %
Free Cash Flow / Net Profit	52.3 %	23.0 %	104.4 %	89.3 %	76.1 %	81.1 %	77.5 %
Interest Received / Avg. Cash	2.0 %	2.1 %	3.5 %	2.4 %	0.8 %	0.7 %	0.6 %
Interest Paid / Avg. Debt	144.3 %	30.7 %	14.8 %	21.9 %	0.0 %	0.0 %	0.0 %
Management of Funds
Investment ratio	11.0 %	10.0 %	7.5 %	9.4 %	8.0 %	7.2 %	7.1 %
Maint. Capex / Sales	11.0 %	10.0 %	7.5 %	9.4 %	8.0 %	7.2 %	7.1 %
Capex / Dep	84.7 %	95.1 %	99.2 %	139.1 %	104.4 %	100.1 %	105.2 %
Avg. Working Capital / Sales	24.7 %	18.7 %	19.6 %	19.6 %	19.7 %	19.5 %	19.5 %
Trade Debtors / Trade Creditors	261.3 %	390.0 %	290.4 %	333.8 %	346.7 %	350.0 %	345.7 %
Inventory Turnover	2.8 x	4.5 x	3.3 x	4.5 x	4.5 x	4.6 x	4.6 x
Receivables collection period (days)	63	78	74	73	70	70	70
Payables payment period (days)	91	70	86	72	67	65	66
Cash conversion cycle (Days)	60	29	46	26	29	30	28

CAPEX and Cash Flow in EUR m

Free Cash Flow Generation

Working Capital

CO M M E N T Published 28.05.2013 8

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SOURCES

All data and consensus estimates have been obtained from FactSet except where stated otherwise.

Section 34b of the German Securities Trading Act in combination with the FinAnV requires an enterprise preparing a securities analysis to point out possible conflicts of interest with respect to the company that is the subject of the analysis. A conflict of interest is assumed, in particular, when the enterprise preparing the analysis …

-1-	… or companies affiliated with this enterprise holds 5% or more of the share capital of the analysed company
-2-	… or companies affiliated with this enterprise was a member in a consortium which acquired the shares of the analysed company within the last twelve months
-3-	… or companies affiliated with this enterprise manages the securities of the analysed company on the basis of an existing contract
-4-	… or companies affiliated with this enterprise over the previous 12 months has been providing investment banking services for the analysed company for which a compensation has been or will be paid
-5-	… effected an agreement with the analysed company for the preparation of the financial analysis
-6-	… or companies affiliated with this enterprise regularly trade in shares or derivatives of the analysed company
-7-	… or the analyst responsible for this company has other important financial interests in relation to the analysed company such as e.g. the performance of mandates for the analysed company

Company	Disclosure	Link to the historical price targets and rating changes (last 12 months)
Softing	5, 6	http://www.mmwarburg.com/disclaimer/disclaimer_en/DE0005178008.htm

INVESTMENT RECOMMENDATION

Investment recommendation: expected direction of the share price development of the financial instrument up to the given price target in the opinion of the analyst who covers this financial instrument.

-B-	Buy:	The price of the analysed financial instrument is expected to rise over the next 12 months.
-H-	Hold:	The price of the analysed financial instrument is expected to remain mostly flat over the next 12 months.
-S-	Sell:	The price of the analysed financial instrument is expected to fall over the next 12 months.
"-"	Rating suspended:	The available information currently does not permit an evaluation of the company.

WARBURG RESEARCH GMBH – RESEARCH UNIVERSE BY RATING

Rating	Number of stocks	% of Universe
Buy	107	56
Hold	69	36
Sell	13	7
Rating suspended	3	2
Total	192	100

WARBURG RESEARCH GMBH – ANALYSED RESEARCH UNIVERSE BY RATING …

… Looking only at companies for which a disclosure according to § 34b of the Germany Securities Trading Act and the FinAnV has to be made.

Rating	Number of stocks	% of Universe
Buy	95	64
Hold	49	33
Sell	3	2
Rating suspended	2	1
Total	149	100

PRICE AND RATING HISTORY SOFTING AS OF 28.05.2013

The chart has markings if Warburg Research GmbH changed its rating in the last 12 months. Every marking represents the date and closing price on the day of the rating change.

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