Mutares (DE:MUXG) continued to add new investments to its portfolio in H117, in particular enlarging the STS Group through add-on acquisitions. H117 earnings were supported by the disposals of EUPEC Germany and Fertigungstechnik Weissenfels (FTW). Consequently, portfolio NAV went up by 3.7% ytd to €319.4m as at end-June. Despite the positive FY17 outlook for key holdings and upward potential associated with ongoing restructuring projects, Mutares’s shares trade at a 36% discount to NAV.
Significant top-line contribution from M&A deals
Mutares reported an EBITDA increase to €15.5m in H117 from €4.0m a year ago and 37.8% y-o-y growth in group sales to €428.1m, with several of last year’s acquisitions (Balcke-Dürr, STS Plastics, Cogemag and Cenpa) adding c €126.7m of incremental sales in H117 (excluding acquisitions made by Artmadis). The company’s M&A activity so far this year was also high, with two add-on acquisitions for the STS Group and the takeover of Aperam Stainless Services & Solutions Tubes (renamed La Meusienne). The bottom line was assisted by €17.1m of deconsolidation proceeds in H117 related to the disposals of EUPEC Germany (consideration of €19.5m plus potential earnouts of up to €12.5m) and FTW.
Positive outlook despite some pockets of weakness
Management reiterated the positive outlook highlighted in the FY16 report and continues to target significant y-o-y growth in sales and clearly positive EBITDA, as well as a higher operating cash flow within the existing portfolio compared to FY16. There were some downward revisions in expectations for selected portfolio holdings (Norsilk, Cenpa, BSL Pipes & Fittings), but Mutares’s largest (in terms of revenues post recent M&A) segment, Automotive, is performing well, with both STS Group and Elastomer Solutions expected to double their operating profits in FY17. Mutares continues the negotiations related to the outstanding litigation with Diehl.
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