ALNO AG

Date
14.10.2010
Vara Research GmbH
Schweizer Straße 13
D-60594 Frankfurt am Main
www.vararesearch.de
ALNO AG
New brooms sweep better
Recommendation: Buy
Target price: € 7.50
The new management has realised that the company has been
through numerous, yet unsuccessful, restructuring efforts in the past
years and a sustainable turnaround is only possible to achieve with a
fundamental change to the structure of the company, which has a
long tradition. For this, the management has set up a restructuring
programme, which aims to improve the balance sheet structure, induce cost reductions in the administrative division and reduce excess
production capacities. These efforts are being accompanied by reorganisation of Sales in connection with the reorientation of the brand
and sales strategy. With these measures, ALNO is anticipated to
reach the standard industry pre-tax margin of 5 % by the end of
2013. On the basis of the steps taken to date within the context of
the future concept “ALNO 2013”, we see good chances of a successful
restructuring, which in our view justifies a target price of € 7.50.
Investment Highlights
ALNO AG
ISIN:
DE0007788408
Price (10.13.10):
€ 4.20
Market capitalization
€ 70.5m
Free float
8.77%
Financial calendar
11.19.2010
Q3 Report
Shareholder structure
Küchenholding GmbH
IRE Bet. GmbH
ABAG
Share performance
62.90 %
18.64%
9.69%
• With 18 % share in the German kitchen market and 4 % in the
European, the ALNO Group has a strong market position in a market that is consolidating further. All together, the annual production
volume of this German kitchen manufacturer is in a range from €
3.5 billion to € 4.0 billion, depending on the market conditions, and
is characterised by high barriers to market entry and low technology risks.
• Parts of the future concept have already been implemented, so that
initial successes are becoming apparent. In spite of the real estate
crisis, the ALNO Group has improved its result significantly (adjusted for one-off effects). Through the further planned measures
of “ALNO 2013” Group-wide synergy potential is intended to increase with structural changes.
• Through the reorientation of brand and sales strategy, the potentials of the Group brands can be better utilised. The ALNO, WELLMANN, IMPULS and PINO brands are clearly distinguished from one
another in the distribution channels. Margin improvements are expected from this in the medium term.
• The administratively oriented foreign subsidiaries of the company
will be restructured into sales units. In collaboration with German
purchasing associations and through the concentration of sales
units on the worldwide project business, the management aims to
increase s its share of sales from exports significantly.
•
Dragan Lukjanovic
+49 (0)69 – 61 99 33 30
[email protected]
Martin Pahn
+49 (0)69 – 66 36 80 72
[email protected]
With the capital increase envisaged in the reorganization agreement, an important component for the reorganization of the balance sheet would be completed and the financial requirement for
the implementation of restructuring measures would be ensured.
Key figures
Sales
2009
2010e
2011e
2012e
2013e
493
493
510
527
545
Net
result
-16,7
-6,9
4,5
12,1
20,3
Adj.
EPS
-1,05
-0,35
0,17
0,46
0,78
Adj.
P/E
n.m.
n.m.
24,4
9,1
5,4
EV/
Sales
0,32
0,39
0,38
0,37
0,36
EV/
EBITDA
10,0
8,7
5,8
4,3
3,4
EBIT
margin
0,0%
1,2%
3,3%
5,2%
7,2%
ROCE
9,1%
12,1%
16,7%
22,5%
28,6%
Source: ALNO AG / Vara Research GmbH
*
Profit and loss statement
Company profile
ALNO AG, with its headquarter in
Düsseldorf, has been producing and
distributing kitchen furniture, electrical
appliances and accessories for more
than 80 years and is one of the
companies in its industry that has a
long-established tradition. With just
under 1,900 employees and its four
internationally
well-known
Group
brands that are tailored to different
price segments, ALNO, WELLMANN,
IMPULS and PINO, the ALNO Group is
one of the largest kitchen furniture
manufacturers
in
the
world.
In
Germany, the ALNO Group is the
second-largest
kitchen
furniture
vendor, while in Europe, it is the fifth
largest. In 2009, ALNO AG generated
annual sales revenue of €493 million.
(in €m)
2009
2010e
2011e
2012e
2013e
Sales
493,4
493,4
510,0
527,0
544,6
Gross profit
220,1
222,1
231,1
240,4
251,2
17,3
22,1
33,4
44,6
56,9
-22,9
4,7
16,7
27,5
39,2
Pre tax result
-39,2
-7,4
6,0
16,8
28,6
Net result
-39,0
-8,1
-2,5
5,1
13,3
EBITDA
EBIT
Adjusted net result
-16,7
-6,9
4,5
12,1
20,3
EPS (in €)
-2,46
-0,41
-0,10
0,19
0,51
Adjusted EPS (in €)
-1,05
-0,35
0,17
0,46
0,78
0,00
0,00
0,00
0,00
0,00
DPS (in €)
Source: ALNO AG / Vara Research GmbH
Balance sheet
(in €m)
Corporate Information
Year established
IPO
Listing segment
Index category
Financial year
Reporting
Share buybacks
Shareholder structure
IR contact
Executive Board
CEO contract term
Supervisory Board
1927
1995
General
Standard
none
01.01.- 12.31.
quarterly
no
Küchen
Holding
GmbH 62.9%;
IRE
Beteiligungs
GmbH
18.64%;
ABAG 9.69%;
other 8.77%
Andrea Wolf
Jörg Deisel,
Jörg Artmann
Michael
Paterka,
2015
Henning
Giesecke,
Rudolf
Wisser, Anton
Walther,
Armin
Weiland,
Christoph
Maaß, Dr.
Jürgen
Diegruber,
Jörg Kespohl,
Werner
Devinck,
Gerhard
Meyer
2009
2010e
2011e
2012e
2013e
5,5
5,5
5,5
5,5
5,5
76,9
76,9
79,3
81,7
84,3
2,9
8,0
5,5
10,6
23,9
Total assets
165,0
173,0
174,7
184,2
202,0
Equity
-71,1
-31,6
-34,1
-29,0
-15,7
Intangible assets
Receivables and inventories
Cash and securities
Provisions
Interest bearing liabilities
Non interest bearing
liabilities
Total equity and liabilities
25,7
26,5
27,3
28,1
29,0
107,3
74,9
74,9
74,9
74,9
0,2
0,2
0,2
0,2
0,2
165,0
173,0
174,7
184,2
202,0
Source: ALNO AG / Vara Research GmbH
Kennzahlen
EV/sales
2009
2010e
2011e
2012e
2013e
0,32
0,39
0,38
0,37
0,36
EV/EBITDA
10,0
8,7
5,8
4,3
3,4
EV/EBIT
n.m.
31,5
11,6
7,0
4,9
Adjusted P/E
n.m.
n.m.
24,4
9,1
5,4
PCPS
n.m.
7,9
7,3
4,7
3,4
Price/Book
n.m.
n.m.
n.m.
n.m.
n.m.
Gross margin (in %)
44,1
45,0
45,3
45,6
46,1
3,2
4,5
6,5
8,5
10,4
EBITDA margin (in %)
EBIT margin (in %)
0,0
1,2
3,3
5,2
7,2
-3,4
-1,3
0,9
2,3
3,7
ROCE (in %)
9,1
12,1
16,7
22,5
28,6
Sales/employees (in €‘000)
262
274
295
313
330
Equity ratio (in %)
-43,1
-18,2
-19,5
-15,7
-7,8
Net debt (in € Mio.)
120,6
83,8
87,1
82,9
70,5
Net margin (in %)
WC/sales (in %)
FCF per share (in €)
-2,2
-6,3
-6,3
-6,3
-6,3
-1,95
-1,16
-0,50
-0,14
0,15
Source: ALNO AG / Vara Research GmbH
2
Valuation
Profit and loss statement
ALNO AG applies IFRS
accounting standards;
listed in General Standard
The cost of materials
ratio is determined by
the pricing policy, as
well as price
development of wood
and electrical appliances
Reduction of the number
of employees by a good
200 leads to a falling
personnel expense ratio,...
…and cause one-off costs
of approx. € 7.0 million p.a.
Other operating expenses
are only expected to rise
slightly during the coming
years
ALNO AG renders accounts on the basis of the regulations of the
“International Financial Reporting Standards” (IFRS) and reports
on a semi-annual basis, as a General Standard listed company.
The profit and loss statement is prepared according to the total
cost method. The financial year ends on 31 December.
As a production company, the development of the cost of
materials ratio plays a significant role at the ALNO Group, which
is, in turn, dependent on the prices of the product group wood,
e.g. raw chipboards/directly coated boards and on prices for
electrical appliances and accessories such as metal, steel, glass
and plastic. Short-term to medium-term contracts exist with
suppliers of raw chipboards. In relation to electronic accessories,
the ALNO Group mainly purchases electrical appliances from its
major shareholder, Whirlpool. However, contracts also exist with
other suppliers for electrical appliances, so that the ALNO Group
has a sourcing alternative. To a significant extent, the
development of the cost of materials ratio is determined by the
price development of the product group wood. Excess capacities
on the supplier side and repositioning of the ALNO and WELLMANN
brands, which are aimed at a shift in sales revenue, form the
foundation for increasing the gross profit ratio in the direction of
50 % (2009: 44.1 %).In medium to long term, the pricing policy
occasionally has greater influence on the gross profit margin. In
our model, we anticipate moderate and standard industry price
rises (1.5% per year).
The personnel expense ratio was 20% in 2009. The “ALNO 2013”
restructuring programme envisages extensive staff reductions by
2013. In 2009, an average of 1,885 staff was employed by the
company. This implies an average personnel expense of approx.
€52,000 per employee. The restructuring programme envisages a
reduction of approx. 500 employees by 2013. At the end of the
restructuring programme, in 2013, the Group intends to still
employ approx. 1,500 employees. The majority of the staff
reductions will take place in the Administration and Production
divisions. By 2013, we anticipate a moderate, but continuous, rise
in the average personnel expense per employee, with the total
personnel expense ratio falling to 16.5%. The initial effects of the
introduced cost reduction programme will become evident from
2011.
In relation to the planned and to some extent already
implemented staff reductions, an employment and qualification
company has been established, in which the laid-off employees
shall be taken over for a maximum of up to one year. The position
can be found in the profit and loss statement under the
restructuring result. The severance payments to employees and
consulting costs for placement with new employers flow into this
item. For the next three years (2011 to 2013), we anticipate oneoff costs for a maximum amount of €7.0 million p.a.
Other operating expenses accounted for approx. 20.9% share of
sales revenue in 2009. The largest individual item is comprised of
sales expenses, which account for approx. half of total other
operating expenses. The sales expenses include commission
expenses for external sales staff, as well as transport costs. ALNO
does not have its own vehicle fleet; it cooperates with an external
3
logistics company. In our model, we anticipate that the absolute
amount of other operating expenses will consistently rise slightly,
so that the ratio will decline to 19.2 % by 2013.
Depreciation and The scheduled depreciation amounted to €16.2 million in 2009.The
investment ratio were at depreciation ratio was at 3.3 %, similar to the investment ratio.
The majority of depreciation was related to tangible fixed assets.
3.3 % in 2009 Costs for the installation of model kitchens (approx. €10.0 million)
are capitalised and subject to scheduled depreciation. We expect
the scheduled depreciations approximately in the amount of the
envisaged investments.. We assume that the investment ratio will
amount to 3.6 % of sales revenue by 2013.
Unscheduled depreciation
of €23.9 million burdens
the 2009 result
Financial expense should
reduce significantly due to
waived creditor claims and
capital increase
ALNO has high losses
carried forward
In the context of an impairment test, significant value adjustments
were carried out in 2009. In total €23.9 million were depreciated.
The depreciation mainly related to land and buildings (€9.2
million), technical equipments and machinery (€6.3 million) and
office furnitures and equipments (€5.0 million).The unscheduled
depreciation was related to the Pfullendorf site. It is planned to
reduce the current number of plants, which accounts to four, at
this site. On the basis of the repositioning steps already initiated
and further planned, the properties and machinery of the relevant
cash-generating unit that were no longer required were
depreciated. Additional write-downs are not anticipated in this
regard.
The 2009 financial result reflects the Group’s high indebtedness
and amounted to €16.3 million. Financial and interest costs are
related to the loans and shareholder loans in the amount of €12.8
million and the costs for derivative financial instruments (€1.02
million). Furthermore, interest expenses are included in this item
for pension provisions and from finance leasing. €1.6 million was
posted as consulting costs for the capital increase that was
cancelled in 2009. Through further/already carried out capital
increases during the first half of 2010 and on the basis of the
haircuts agreed in the context of the reorganisation agreement,
we expect a significant reduction in the interest charge. For the
years until 2013, we anticipate a negative financial result of
approx. €10.0 million.
ALNO is currently subject to minimum taxation. Due to high
losses carried forward, which exist at ALNO and WELLMANN, the
majority of the tax expense will relate to deferred tax accruals in
the future. For the coming years, we anticipate a tax rate of 30 %.
Low exchange rate risks
As the ALNO Group mainly operates in the euro zone, exchange
rate shifts only play a subordinate role in the result development.
The possible effects are limited to the translation risk of Swiss
francs and the British pound. In 2009, the share of sales revenue
in Switzerland amounted to approx. 5 %. In Great Britain, the
share of sales revenue was approx. 7 %.
In addition to the
successful implementation
of the planned cost
reduction measures, the
EBIT margin depends on
the increase in average
prices with the ALNO and
WELLMANN brands
Sales revenue of ALNO Group was €493.4 million in 2009. Of this,
the sales revenue of the brand ALNO reached €134.4 million,
WELLMANN €136.5 million, IMPULS €109.7 million and PINO €90.6
million. altogether, a balanced distribution of sales revenue can be
spoken of. For the next two years, sales for the ALNO brand are
anticipated at the 2009 level. At WELLMANN, growth rates are
anticipated in the double-digit range for the coming years. The
reason for this is the already initiated repositioning of the brands.
For the first time in the company’s history, these are being clearly
distinguished from one another in terms of price and are placed in
the kitchen specialist and furniture store channels. With IMPULS
and PINO, a slight rise in sales revenue is anticipated for the next
two years. The IMPULS brand should gain significant market
4
shares. The background to this is the service innovation “quickdelivery kitchen”: Within ten days, the consumer receives his/her
freely planned kitchen.
Under consideration of the sales revenue shift between the ALNO
and WELLMANN brands and the further targeted waiver of sales
revenue with low contribution margins, we anticipate slight sales
revenue growth of approx. 2.5 % for the Group by 2013. If the
ALNO Group should succeed in implementing the reorientation of
the brand and sales strategy, it would be necessary to adjust our
sales revenue and result estimates.
We estimate the EBIT
margin at 7.2 % in 2013
For 2013 (end of the restructuring programme), we expect an
adjusted EBIT margin of 7.2 %. In spite of the real estate crisis
(strong decline in foreign sales revenue), the Group has already
achieved an adjusted EBIT margin of 1.2 % in the first half of
2010. With an improvement in the economic situation, rising
demand for exports and the effects on the result from the
currently initiated cost reduction measures, we expect the EBIT
margin to exceed the current industry average of approx. 5 % to
about 2 percentage points by 2013.
Balance sheet structure
The ALNO Group still The equity ratio of the ALNO Group is currently negative (at € 71.1 million at the end of 2009).Due to two capital increases in
reports negative equity on
the first half of 2010 and the partial waiver of claims by the
the basis of IFRS shareholders, the negative amount fell to approx. €60 million by
the end of June 2010. According to the reorganisation agreement,
a further capital increase is intended. In the long term, we
anticipate that the equity ratio will recover in the range of 30 %.
Long-term and short-term financial liabilities currently amount to
approx. €95 million. The loan agreements were extended until the
end of 2011 under the condition that a further capital increase
would take place in the second half of 2010. The majority of the
claims therefore mature in 2011. While the agreed waiver of claim
reduced the financial liabilities by approx. €10 million, this is seen
alongside a debtor warrant that results in a maximum payment of
€10 million to the creditors as of 1 July 2014, if the EBITDA for
2013 has reached a defined target amount.
Net indebtedness incl.
pension provisions: €110
million
ALNO has pension provisions of approx. €18 million in the balance
sheet. The net indebtedness (incl. pension provisions) amounted
to €110.1 million at the end of June; the liquid funds amounted to
approx. €3 million. Under consideration of a possible upcoming
capital increase, a waiver of claims by the banks in the amount of
€20 million (waiver of claim for €10 million has already taken
place, additional €10 million shall follow after a successful capital
increase) and the net present value of the debtor warrant (€7.7
million) we estimate net indebtedness of €77.8 million for the end
of 2010.
After the unscheduled depreciation in 2009, fixed assets account
for approx. 43.5 % of total assets. Of this, land accounts for the
largest item, at 69 %. Machinery currently accounts for approx. 14
% of fixed assets. While buildings are subject to scheduled
depreciation over 25 to 60 years, the depreciation period for
machinery, office furniture and equipments amounts to two to 25
years. Goodwill was at €1.5 million within the intangible assets.
Working capital low, net
working capital even
negative
Receivables were at €41.2 million at the end of 2010 and therefore
had a 25.4 % share of total assets. The lion's share is attributable
to solvent trade associations, which assume the payment
processing for the member traders. We regard the receivables as
5
recoverable. In the past, there have been virtually no bad debts at
ALNO.
Inventory amounted to €25.3 million / 15.6 % of total assets in
June 2010. The working capital (accounts receivable and
inventories) amounted to 41 % of sales revenue. With a
receivables portfolio of €40 million, the “Days Sales Outstanding
(DSO)” amounted to approx. 34 days. The net working capital
(accounts receivable and inventories less accounts payable)
amounted to €-30.8 million at the end of 2009.
Valuation
It is our view, that the realisation of the planned “ALNO 2013”
restructuring programme would not be possible, without the
income from a necessary capital increase, and therefore we have
also considered this in our model. On doing so, we have assumed
that the approved capital in the amount of €22.6 million (approx.
8.7 million shares) will be fully utilised. Under the conservative
supposition, we assume that the share will be placed at a price of
€3.50. Gross income would amount to €30.5 million. The intended
capital increase would represent the final step of financial
restructuring measures.
With the assessment as per the discounted cash flow method, we
have assumed a beta of 3.0, since ALNO is a turnaround candidate
with negative equity according to IFRS. Furthermore, share
trading only shows low liquidity. The risk premium is at 5 %.
Under consideration of the target capital structure (equity ratio 30
%), a WACC of 8.5 is calculated. We have estimated the perpetual
growth (from 2010) at 1 %.
We estimate the annual investment ratio (including the investment
in model kitchens of approx. €10.9 million) at approx. 3.6% of
sales revenue, the annual depreciation rate at 3.2 % and the
normalised tax rate at 30 %. After adjustments, we estimate the
net working capital conservatively at 5 %, in spite of currently
negative net working capital.
Fair value according to the
DCF-method: € 8.77
The assessment of the ALNO Group according to the discounted
cash flow method leads to a fair value of €8.77 per share. We
estimate the net present value of the cash outflow anticipated with
the implementation of the restructuring programme at €17.4
million. In our model, the net present value of the losses carried
forward remains disregarded.
6
Table 1: DCF-valuation
(in €m )
Sales
EBITDA
EBITDA margin
EBIT (clean)
EBIT margin (clean)
Tax
+ Depreciation (clean)
- Capex
- Change in WC
Operating cash flows
Discountfactor
Value of operating CF
today
Cum. Value of oper. CF
Present Value of
Terminal Value
Enterprise Value
- Net debt
- Minorities
- Restruct. expenses
Market value
Fair Value per share in
€
Upside/downside
potential in %.
WACC
Long term growth rate
2010e
2011e
2012e
2013e
2014e
2015e
2016e
2017e
2018e
2019e
493,4
510,0
527,0
544,6
562,7
581,4
600,6
620,4
640,8
661,8
22,4
33,4
44,6
56,9
61,7
63,7
65,7
67,7
69,8
72,0
0,0
0,1
0,1
0,1
0,1
0,1
0,1
0,1
0,1
0,1
6,2
16,7
27,5
39,2
43,5
44,9
46,3
47,8
49,3
50,9
0,0
0,0
0,1
0,1
0,1
0,1
0,1
0,1
0,1
0,1
1,8
5,0
8,2
11,7
13,1
13,5
13,9
14,3
14,8
15,3
16,2
16,7
17,2
17,7
18,2
18,8
19,3
19,9
20,5
21,1
20,2
18,6
19,1
19,7
20,3
20,9
21,6
22,4
23,1
23,8
0,0
0,5
0,5
0,5
0,5
0,6
0,6
0,6
0,6
0,6
0,3
9,3
16,8
24,9
27,9
28,7
29,5
30,4
31,3
32,3
0,9
0,9
0,8
0,7
0,7
0,6
0,6
0,5
0,5
0,4
0,2
7,9
13,2
18,0
18,6
17,6
16,7
15,9
15,1
14,3
137,6
192,5
330,0
83,8
0,0
-17,4
228,8
8,77
108,8%
8,5%
1,0%
Source: Vara Research GmbH
7
Peer group valuation
For the peer group assessment of the ALNO Group, we have drawn
upon listed kitchen manufacturers, suppliers to the furniture
industry and manufacturers of products for household use. The
listed furniture manufacturers that have a virtually identical
business model can be compared particularly well with ALNO.
These include Nobia, AFG (Arbonia-Forster Holding) and Galiform.
However, their market capitalisations are higher than ALNO. We
have also included subcontracting suppliers for the kitchen
industry, as a majority of the sales revenue is generated from
furniture manufacturers. We have concentrated on German
equities. This involves Pfleiderer, as a supplier of chipboards,
Ehlebracht, as a supplier of lamps for kitchens and Surteco, as a
supplier of films for kitchen fronts and work surfaces.
Finally, we also included companies that manufacture products for
household use. These included WMF, Einhell Germany and A.S.
Création. In our opinion, these business models have a similar
economic cycle to ALNO.
Table 2: Peer Group Analysis, Valuation
Ehlebracht
Market
Cap
(in €m)
40,0
12,6
EV/
sales
(11e)
0,65
Nobia
916,7
14,5
0,71
8,1
12,6
AFG
313,9
9,2
0,51
5,2
10,3
Galiform
553,6
7,9
0,79
5,9
7,0
Surteco
203,9
8,5
0,86
5,3
7,7
AS Création
28,3
8,0
0,41
3,2
5,0
WMF
246,1
10,6
0,31
4,3
5,4
Pfleiderer
228,4
n.m.
0,75
6,3
16,2
Einhell
77,9
11,5
0,31
4,2
4,6
Average
289,9
10,3
0,59
5,4
8,6
KGV
(11e)
EV/
EBITDA
(11e)
5,8
EV/
EBIT
(11e)
8,8
Source: Factset / ALNO AG / Vara Research GmbH
8
Table 3: Peer Group Analysis, Key figures
Ehlebracht
EBITDA
margin
2011e
11,0
EBIT
margin
2011e
7,3
4,1
Capital
turnover
2009
1,1
Sales/
employees
2009
89,9
Nobia
8,8
5,6
4,0
1,5
209,8
AFG
10,0
Galiform
13,4
5,0
3,2
1,0
182,5
11,2
7,3
2,1
156,8
Surteco
16,2
AS Création
13,0
11,2
6,2
0,7
173,1
8,2
1,8
2,6
235,8
WMF
7,2
Pfleiderer
11,9
5,7
2,5
1,6
134,1
4,6
-0,2
0,7
247,6
Einhell
7,5
6,8
2,1
1,4
321,5
Average
11,0
7,3
3,4
1,4
194,6
ALNO
6,5
3,3
-0,5
3,0
261,7
Discount/Premium
-40,5%
-55,2%
n.m.
111,6%
34,5%
Net margin
2011e
Source: Factset / Vara Research GmbH
As the ALNO Group finds itself in a turnaround situation, an
assessment with the peer group multipliers for 2010 or 2011 is
pointless on the basis of their results, which are still low.
Therefore, we have drawn upon the 2013 figures for the ALNO
Group. In our opinion, the year 2013 should be a fair reflection of
the sustainable profitability of the ALNO Group. We then multiplied
the 2013 figures with the 2011 EV/sales revenue and EV/EBITDA
multipliers of the peer group companies and discounted the 2013
enterprise value to the present day, in order to derive the fair
share price.
Table 4: Fair Value by Peer Group Analysis
2010e
2011e
2012e
2013e
261,0
283,1
307,0
273,2
296,3
321,3
5,40
EV/EBITDA
EV in €m
240,7
Market Cap in €m
156,9
Fair Value in €
6,01
0,59
EV/sales
EV in €m
251,9
Market Cap in €m
168,1
Fair Value in €
6,44
Source: Factset / ALNO AG / Vara Research GmbH
Fair value according to the
peer group method: € 6.23
According to our estimates, the ALNO group reaches an EBITDA
margin of 10.4 % in 2013, i.e. a similar margin to the peer group
companies. Based on the 2011 estimates, the capital market
currently assesses this, on average, with a 0.59 EV/EBITDA
multiplier and a 5.4 EV/EBITDA multiplier. According to the peer
group analysis, we receive a fair value of €6.01 and €6.44 per
share. With an equal weighting of both approaches, we receive a
fair value of €6.23.
9
Fair value with equal The discounted cash flow method provides a fair value of €8.77
and the peer group analysis provides a fair value of €6.23.With an
weighting of the DCF and
equal weighting of both approaches, we receive a fair value of
peer group method: € 7.50 €7.50.
10
SWOT analysis
Strengths
Weaknesses
Opportunities
♦
With a share of 18% in the kitchen market, the ALNO Group is
number two in Germany and number five in Europe.
♦
The ALNO Group has a strong sales team.
♦
The brand ALNO has a high level of awareness.
♦
Due to the introduction of a grid system, the ALNO Group
kitchens are easier for the retailers to plan.
♦
With IRE Beteiligungs GmbH (Whirlpool) and Küchen Holding,
ALNO AG has two major shareholders that are long term
oriented.
♦
Both suppliers and customers of the ALNO Group have a
significant interest in strengthening the company’s market
position as a counterweight to nobilia, thereby supporting the
restructuring measures.
♦
Both major shareholders and syndicate banks support the future
project “ALNO 2013” with an extensive financing agreement.
♦
The ALNO Group is represented in all price segments with its
brands and covers the significant sales channels in the market.
♦
On the basis of its history, ALNO produces at four locations.
With this, extensive customer service and shorter delivery
periods are possible, particularly for the IMPULS and PINO
brands.
♦
High barriers to market entry hinder new entrants, which can
cause pressure on the prices for kitchens.
♦
Fairly stable consumer demand (depending on the economic
situation, the demand ranges between €3.5 billion and €4.0
billion).
♦
ALNO has a high level of capital efficiency, see peer group.
♦
The results are barely influenced by exchange rate fluctuations.
♦
Significant parts of the restructuring measures (e.g. for staff
adjustments) have already been implemented in 2009 or during
the current year.
♦
ALNO does not have its own vehicle fleet. This impairs the
perceived delivery quality. However, only few kitchen producers
have their own vehicle fleet.
♦
Germany (sales revenue share approx. 70 %) is a saturated
market.
♦
The retailers are organised in purchasing associations.
♦
Suppliers for raw chipboards are also highly concentrated.
♦
The purchase of a new kitchen can be easily postponed.
♦
Still low liquidity of the share. In the case of another capital
increase, the free float should rise.
♦
The highest improvement potential through more efficient
production lies with the ALNO and WELLMANN brands.
♦
Until now, a clear price distinction has not been apparent
between the brands. Through higher average income at ALNO, a
better operating margin should be generated.
♦
The capacities are being reduced. In the remaining plants,
higher capacity utilisation is intended to be achieved.
11
Risks
♦
After successful reorganisation, a pre-tax margin of 5 % is
aimed.
♦
The strongest competitor, nobilia, achieves a double-digit
operating margin. This shows that ALNO has profit potential.
♦
On the basis of the excess capacities, the increases in price
should be moderate for raw chipboards in the coming years.
♦
The majority of the unscheduled depreciation was already
posted in 2009. As a result, the P&L and the balance sheet are
relieved for the subsequent years.
♦
The delivery periods should be reduced as an important sales
argument. The ten-day kitchen by IMPULS is being very well
accepted by the market.
♦
The kitchen market in Germany continues to be in a
consolidation phase. Small companies will continuously lose
market shares to the large furniture manufacturers.
♦
Through the expansion of the purchasing associations into other
European countries, the foreign market share will increase
significantly over the long term. Higher margins can be pushed
through in foreign countries.
♦
The equity ratio could increase to approx. 30 % in the long
term, after a successful capital increase. This provides more
confidence for suppliers, retailers and creditors.
♦
The number of private households will continue to rise and
therefore supports the demand for kitchen furniture.
♦
The company’s financing depends on the equity contribution. If
the capital increase does not proceed successfully, all
reorganisation measures are subject of negotiation.
♦
The reorganisation concept could not provide the anticipated
reduction of costs and efficiency gains in Administration and
Production.
♦
The reorientation of the ALNO and WELLMANN brands could not
be implemented simultaneously and in the required amount.
12
Company profile
With annual sales revenue
of approx. €500 million,
ALNO AG is the secondlargest producer of kitchen
furniture in Germany…
With its new headquarters in Düsseldorf, ALNO AG is an
established German company in the kitchen furniture industry.
With the four internationally well-known Group brands, ALNO,
WELLMANN, IMPULS and PINO, the ALNO Group develops,
produces and distributes kitchen furniture for all price segments.
In Germany, the ALNO Group is the second-largest kitchen
manufacturer, with a market share of approx. 18 % and is number
five in Europe. In addition to its four production sites in Germany,
the company has an another production site in Dubai since 2005,
which has been run as a joint venture with Al Khayyat
Investments (Dubai) since mid-2008.
…and is currently in a In 2009, the Group’s consolidated sales reached €493 million. The
operating profit (EBIT), before unscheduled depreciation of €24.0
turnaround situation
million and before consideration of the positive restructuring result
of €1.3 million, was at €-0.2 million. The release of provisions and
the value recovery of inventories led to a positive restructuring
result. Compared to the previous year, sales revenue fell by 3.5 %
for crisis and restructuring reasons. In 2009, the EBITDA margin
was just below the previous year’s level, at 3.5 %. The number of
employees as of 31 December 2009 was 1,900 (previous year:
1,853). However, with the initiated restructuring measures, the
number of employees fell to 1,874 as of 30 June 2010, while the
EBITDA margin increased to 3.2 % (previous year’s period: 2.4
%). With an EBIT prior to special influences in the first half of
2010 of €2.8 million, the company is well on the way to achieve
sustainable profitability again.
Strengthening through
bundling of competences
at the holding company in
Düsseldorf
As the Group parent company, ALNO AG encompassed the
holding, the central administration, the Pfullendorf production site
and the Export division. With the relocation of the Group
headquarters to Düsseldorf, the holding functions and
disengagement of administration from the production sites is
intended to take place. In addition to this, due to the transport
connections, the new headquarters provides better opportunities
to successfully advance the internationalisation strategy. The eight
foreign sales companies were previously combined in ALNO
International GmbH. These shall be liquidated/restructured into
pure sales companies. The domestic subsidiaries, Impuls Küchen
GmbH and Pino Küchen GmbH, are combined in the secondary
brand holding company, Impuls Pino GmbH. In addition to this,
ALNO AG holds more than 100% of the shares in Gustav
Wellmann GmbH & Co. KG. No strategic minority holdings exist.
13
Figure 1: Organigram (as of 12.31.2009)*
Source: ALNO AG
* The subsidiary, ALNO Austria, was liquidated on 28 July 2010.
Liquidity proceedings have been initiated at ALNO Belge, ALNO
Italia, ALNO Nederland and ALNO Iberica.
14
In 1927, the company founder and eponym, Albert Nothdurft, laid
the foundation for the creation of ALNO with a small carpentry
workshop in Wangen near Göppingen. The quick rise and
expansion of the company led to relocation of the production plant
from Wangen to Pfullendorf in 1957, where ALNO Möbelwerke
GmbH + Co. KG emerged one year later from the carpentry
workshop.
Mirroring the expansion of the German economy, the ALNO
Möbelwerke also developed in leaps and bounds. In 1995, the
conversion took place from a partnership into a joint-stock
company, with its shares being traded on the stock exchanges in
Stuttgart and Frankfurt.
An important historical milestone was the merger with the
Casawell Group in 2003, a globally active group of companies for
built-in and flat-packed kitchens, as well as kitchen technology. In
recent years, the ALNO Group has been characterised by frequent
management changes. From 2007, the major restructuring phase
began in the company, after previous attempts had failed.
Table 5: Company history
Year
1927
1957
1958
1970
1990
1994
1995
1999
2003
2004
2005
2007
2009
2010
Event
A carpentry workshop is established by Albert
Nothdurft in Wangen near Göppingen
Relocation of production site from Wangen to
Pfullendorf
Evolvement of ALNO Möbelwerke GmbH + Co.
KG from a carpentry workshop
AEG Group acquires 51 % of shares
Establishment of Impuls Küchen GmbH in
Brilon (North Rhine-Westphalia)
Establishment of Pino Küchen GmbH in Klieken
(Saxony-Anhalt)
IPO opens up the company to capital markets
Turnover milestone of half a billion euro
exceeded
Merger with the Casawell Service Group
(Wellmann, Geba, Wellpac);
Acquisition of Gustav Wellmann KG;
Concentration on core business
Realignment of the Casawell Group;
Positive Group results for the first time in
seven years
Establishment of ALNO Middle East and
opening of new production facility in Dubai
Dr. Georg Kellinghusen becomes Chief Executive
Officer at ALNO AG;
Küchen Holding GmbH joins as a major
shareholder (already in the end of 2006);
Commencement of restructuring
Jörg Deisel becomes Chief Executive Officer at
ALNO AG;
Holding moves from Pfullendorf to Düsseldorf;
Award as one of Germany’s “Superbrands
2009/2010”
Commencement of “ALNO 2013” future
concept
Source: ALNO AG
15
Sales revenue still highly With a domestic sales revenue share of 70 % in 2009, the
company is still highly dependent on the German market. 27 % of
dependent on the German
the generated sales revenue has been generated through the eight
market sales companies in European countries outside of Germany, while
the remaining 3 % has been generated in other foreign countries
(Middle East and Asia).
Figure 2: Sales by regions (2009)
3%
27%
Germany
Rest of Europe
Rest of World
70%
Source: ALNO AG
ALNO is the only kitchen
manufacturer in the market
that covers all price
segments
The ALNO Group produces and sells its kitchens on the domestic
and foreign market under four brands. All price segments and all
significant sales channels are served. The ALNO Group is the only
manufacturer on the market that offers kitchens in the premium
sector, as well as in the middle and lower price segment. The
WELLMANN brand had the largest share of sales revenue in 2009,
at 29 %, which can be seen in Figure 3. The shares are related to
the domestic market. Part of the foreign sales revenue is
generated through the foreign subsidiaries (ATG).Their share for
all four brands was at 16 % in 2009.
Figure 3: Share of sales revenue by brands (2009)
20%
27%
ALNO
WELLMANN
IMPULS
24%
PINO
29%
Source: ALNO AG
From Figure 4 regarding profitability, it is evident that the
segment ALNO was heavily in deficit in 2009. On the other hand,
16
the other segments generated stable contributions to EBIT. The
strongly negative development in the ALNO segment was caused
by high value adjustments, which were necessary at the
Pfullendorf site. This mainly involves depreciation on buildings and
machinery. However, there was no unscheduled depreciation with
the other brands. When analysing the profit before tax on the
basis of EBITDA, the ALNO segment reached an EBITDA margin of
2 % in relation to total sales revenue. Therefore, profitability was
significantly lower than the other brands, whose EBITDA margin
was between 8 % and 9 %.
Figure 4: EBT by segments in €m (2009)
ALNO
WELLMANN
10,0
5,0
0,6
IMPULS
PINO
5,5
6,4
ATG
1,5
0,0
-5,0
-10,0
-15,0
-20,0
-25,0
-30,0
-35,0
-40,0
-37,8
Source: ALNO AG
The restructuring is
focussed on the ALNO and
WELLMANN brands
The ALNO segment covers the branded kitchens in the upper price
segment, which are produced at the production site in Pfullendorf.
ALNO kitchens stand for made-to-measure in all areas. The brand
offers a wide range of different designs and front colours in six
different price categories. The average price is €8,500. Among the
kitchen brands, ALNO is significantly better known than other
premium brands, such as SieMatic or Poggenpohl. With a negative
EBIT margin of just under 15 % (including ATG) in 2009, ALNO
was the only brand with a deficit, which is why the restructuring is
focussed on this.
Due to its flexibility and production variance, the WELLMANN
segment offers requirement-oriented, low-priced kitchens for all
target groups in the middle price segment. The sales team aims at
specialist retailers. With a share of 29 %, this brand has the
highest share of Group sales revenue.
IMPULS kitchens are positioned in the lower middle price segment.
The design of the kitchens for this brand is minimalistic and clearly
laid out. Since 2010, IMPULS kitchens have been delivered within
ten days. In the first half of 2010, the IMPULS brand showed the
highest growth rate in the Group, at 20%, inter alia, due to this
service innovation.
The PINO brand is positioned in the entry price segment. PINO
offers modern kitchens for the younger customer groups. The
brand was established in Klieken in 1994, where the production
site is still situated today.
17
Table 6: Brands of ALNO AG (2009)
ALNO
WELLMANN
IMPULS
PINO
Price segment
Premium price
segment
Mid-range
price segment
Lower to
mid-range
price
segment
Median price
8,500 €
4,500 €
3,300 €
2,250 €
Share of sales
27 %
29 %
24 %
20 %
Gross yield
margin
49.7 %
42.1 %
35.7 %
32.3 %
EBIT-margin
-14.8 %
5.4 %
5.5 %
6.9 %
Order backlog
19.4 m €
13.6 m €
12.1 m €
8.1 m €
Location
Pfullend./Enger
Enger
Brilon
Klieken
Future
strategies/
perspectives
Positioning of
the brand in a
high priced
segment with a
median price of
10,000 €; serial
production in
Enger; clear
focus on piece
production in
Pfullendorf
To raise the
price level to
high priced
segment
To establish
“kitchen in 10
days”concept
in sales
To continue as
entry-level
brand in the
lower price
segment
Customer
segment
furniture
stores, kitchen
specialists,
project
developers
furniture store,
kitchen
specialists,
project
developers
discount
stores,
homeimprovemen
t stores,
furniture
stores
discount
stores, homeimprovement
stores,
furniture
stores
Entry level
segment
Source: ALNO AG
The Figure below clarifies the positioning of the brands by price
and sales channel. The PINO and IMPULS brands are positioned in
the entry price segment. They are mainly sold by discounters and
furniture stores. In contrast, the WELLMANN brand is positioned
higher and is mainly sold through furniture stores. ALNO kitchens
are positioned in the upper price segment.
Figure 5: Market participants by market positioning
P
r
i
c
e
r
a
n
g
e
Premium
27%
Upper
Segment
29%
Lower
Segment
24%
Entry
20%
Discounters
Furniture stores
Kitchen specialists Business project
Distribution channel
Source: ALNO AG
18
Kitchen production is a
combination of capitalintensive series production
and wage-intensive
installation work
More than three-quarters
of the cost of materials are
comprised of electrical
appliances
The business model of the ALNO Group is comprised of the
development and production of kitchen furniture. The required
electrical appliances are supplied with the kitchens, depending on
the brand. ALNO adds a margin that is standard in the industry to
sold electrical appliances. In addition to the efficient production
process, the purchasing of production materials and a slim
administrative organisation are essential for the company’s
profitability. The production of the kitchen furniture is divided into
capital-intensive, automated series production and wageintensive, manual individual production for customised kitchens.
The aim of the restructuring efforts is to automate the production
products at as many sites as possible, in spite of mainly individual
production and to centralise the organisation of the locations.
The ALNO Group purchases production materials (40 % of cost of
materials), electrical appliances (36 %) and other material, e.g.
metal fittings (24 %). The production of the kitchens takes place
at four locations in Germany. Until now, one kitchen brand has
been produced at each location. The chipboards are sawn, drilled,
painted and finished during the production process. After this, the
individual parts are assembled into cabinets. On an average, the
complete kitchen is comprised of approx. ten cabinets, one work
surface and various electrical appliances.
It involves contract It mainly involves contract manufacturing, due to which inventory
of finished goods is virtually non-existent. The completed kitchens
manufacturing with low
are delivered directly to the furniture retailers. With this, the retail
inventory is divided into flat-packed and self-service brands, furniture stores
and kitchen specialists. The retailers are organised in purchasing
associations. They negotiate the buying conditions for their
members and are responsible for payment processing. Due to the
solidity of the purchasing organisations, the receivables are
principally recoverable. The organisation of the retailers in the
purchasing associations leads to relatively quick settlement of the
receivables, averaging approx. 34 days.
Approx. 90% of sales
revenue is generated
through purchasing
associations
The aim is to inspire the
retailers to resell
Approx. 90 % of the domestic sales occur through purchasing
associations to kitchen specialists, furniture stores and DIY stores.
The selling of kitchens starts with the sale of model kitchens to the
reseller. The number of model kitchens sold is an important
indicator for sales development of the next twelve to 18 months.
For the establishment of contacts, national and international
kitchen trade fairs are important. Important dates are the leading
world trade fair for kitchen furniture, Eurocucina, in Milan in the
spring and the Home trade fair in September.
In addition to good conditions, the retailers would particularly like
to receive faultless service regarding the delivery period quality.
Only a high level of customer satisfaction, which is reflected in a
low rate of complaints, guarantees a follow-up order. The rate of
complaints is quite high for the industry and is not only
determined by the quality of production, but also significantly by
the quality of the transport and professionalism of the craftsmen,
who are generally provided by the retailer. In contrast, the brand
and design are regarded as being subordinate sales arguments in
the lower price segments. Advertising for kitchen furniture is
mainly paid for by retailers.
19
Figure 6: Structure of the German kitchen market
Suppliers
Wood: particle
board c. 10-15
(e.g. Pfleiderer,
Sonae)
Kitchen
manufacturers
c. 50-60 (e.g.
ALNO, Nobilia,
Nolte)
Purchasing
organisations
c. 10-15 (e.g.
Degros, Union,
MHK)
Customers
(c. 4.000-5.000)
Furniture stores
(e.g. Man Mobilia
XXL, Segm üller)
Electrical
appliances (e.g.
Whirlpool, Miele)
Kitchen
specialists
Other m aterials,
e.g. m etals,
glass, plastics
(e.g. Surteco)
Mass m arket/
Discounter
Object business
Source: Vara Research
Board members
with experience in
the area of
restructuring and
cost optimisation
The Board of the ALNO Group is headed by Jörg Deisel who, as the
President of the Board, is responsible for the areas Distribution,
Marketing and Development. The areas Finances, Human
Resources and IT are looked after by the Director Central
Departments, Jörg Artmann. Michael Paterka, Director Works, is
responsible for the areas Production, Purchasing, Logistics and
Quality.
Mr Deisel has a degree as Diplom-Ingenieur (graduated engineer)
and, after decades of experience in international management
with listed companies, he joined ALNO’s Board of Directors in
October 2008. From 1st June 2009, he has been the President of
the Board of the ALNO AG. Before Mr Deisel joined the ALNO AG,
he was, among others, the COO of Gagfah SA, the CEO of Dynamit
Nobel AG and CERAMTEC AG, as well as the COO of Pilkington
Europe PLC.
Mr Artmann joined the company as CFO in June 2009. Before that,
he had been working as Director in the area of Finance &
Administration with the company Bauknecht Hausgeräte GmbH
(Whirlpool Corp.). Between 1992 and 2003, he held various
positions in the finance area of the Mars GmbH. He was, among
others, the CFO Iberia and CFO Scandinavia, which enabled him to
gather comprehensive experience abroad. Mr Artmann is a skilled
bank merchant and has a degree as Diplom-Kaufmann (business
degree) of the University of Technology in Berlin.
Mr Paterka has worked as COO for ALNO and has been a member
of the Board since November 2007. In January 2007, he had been
assisting, as an external consultant, with the implementation of
lean management activities within ALNO. Between 1998 and 2007,
Mr Paterka worked as manager for the Porsche Consulting GmbH
and was responsible for the area Management of External ValueAdding Activities and Cost Saving Programmes. Before that, he
worked with Adam Opel AG in the area of Purchase Organisation
and Supplier Development. He is a Diplom-Ingenieur (FH)
20
(graduated engineer) for Industrial Engineering with focus on
Production Technology.
The Supervisory
Board was newly
formed in June
2010
Concentrated
shareholder
structure,
characterised by
institutional
investors and a
still low free float
Since the ALNO Group again employs less than 2,000 employees,
a new Supervisory Board was formed. The Supervisory Board is no
longer provided with equal representation. On 23rd June 2010, Mr
Henning Giesecke was newly included into the nine-person
Supervisory Board of ALNO, and appointed President. Mr Giesecke
is General Director of GSW Capital Management of Munich and
previous Director Risk of the HypoVereinsbank. Mr Rudolf Wisser,
as the workers representative, was confirmed Vice-President for a
second term. The Supervisory Board consists of two thirds of
shareholders representatives and to one third of workers
representatives.
After two capital increases in the amount of €5 million each in
2010, on 30/06/2010 more than 90 % of the ALNO shares were in
the possession of institutional investors. The largest individual
shareholder with a share of 62.9 % is the Küchen Holding GmbH
which is controlled by the Munich financial investor GermanCapital
GmbH. The Küchen Holding invested in ALNO first time in 2006,
after it had taken over the 24.96 % share of the Commerzbank as
well as the shares of the family Hellwig. The second largest
shareholder, the IRE Beteiligungs GmbH, which has increased its
share in the course of the recent capital increases from 12.4 % to
18.6 %, belong via the Bauknecht Hausgeräte GmbH to the US
Group Whirlpool and had been holding, as a strategic investor,
shares of the ALNO AG for quite some time. However, we do not
expect any further increases of capital stock. With the voting
agreement of December 2006 between the two large
shareholders, the voting rights of the IRE were transferred to the
Küchen Holding, which now holds nearly 80 % of the voting rights.
The already performed capital increases that had been completely
subscribed by major shareholders have shown that the major
shareholders stand fully behind the Board and the chosen
reorganisation concept. The participation of ABAG, which to 75 %
belongs to the Erste Private Investmentclub Börsebius Zentral,
must be seen as a financial investment. Since 2008, ABAG has
gradually increased its share in ALNO. At this point of time, the
Free Float is low with 8.77 %. Provided that another capital
increase is performed in the second half of 2010 we expect an
increase of Free Float.
Less than 1 % of the shares are currently in the possession of the
ALNO directors representing the Board of Directors and the
Supervisory Board. On the balance date of 31/12/2009, the
members of the Board of Directors were holding 55,643 non-par
value shares. These shares were held only by Mr Deisel and Mr
Paterka. The Director Finance, Mr Artmann, has not obtained any
company shares yet.
21
Figure 7: Shareholders structure of the ALNO AG (as of
30/06/2010)
9,60%
Küchen Holding GmbH
10,70%
IRE Beteiligungs GmbH
12,40%
ABAG Aktienmarkt
Beteiligungs AG
67,30%
Free Float
Source: ALNO AG
22
Strategy
“ALNO 2013” Restructuring
concept without
taboos…
… to the benefit of
the entire Group,
not just the
individual brands
With the
restoration of the
balance, ALNO is
regaining the trust
of customers
In the last ten years, the ALNO Group has lost its balance which
was partly due to an unprofitable, inorganic expansion strategy,
and partly due to high prices for materials and continuous
predatory competition in the kitchen industry. There were several
changes in the composition of the Board, and several restructuring
programmes which, however, did not yield the desired results.
Last year, under new management, a thorough and radical
restructuring programme was established (“ALNO 2013”). The
current management aims with the future-orientated concept
“ALNO 2013” to eliminate the weak points of the company and to
significantly reduce the costs. The agreed restructuring concept is
fully supported by the creditors as well as the large shareholders.
In addition to that, also the customers as well as the suppliers are
strongly interested in a successful restructuring, as the ALNO AG
holds a strong strategic position in the market.
By now, the ALNO Group has focused on brands, of which each
was represented by a particular location. Each location was
managed in a de-centralised manner. This resulted in conflicts of
interest between the individual brands and/or manufacturing
plants. Opposed to that, the new management places value on the
profitability of the entire Group. The company and its balance shall
be restored at the same time. Up to now, the operational business
had been suffering from insecurity.
The financial restructuring activities include the following
measures and shall be completed with another capital increase in
the second half of the year 2010:
1) Waiver of the repayment of the Mezzanine loan and interest in
the amount of € 4.9 million to the shareholders; the remaining
interest shall be deferred interest-free up to 31/12/2011.
2) Two capital increases of € 5.0 million each without option rights
were performed in April and May 2010.
3) Waiver of loan claims of the consortium banks in the amount of
€ 20 million, in two phases of € 10 million each; the loan
agreements will be extended to 31/12/2011, a declaration of
intent to possibly extend them further has been signed. An
arrangement for a debtor warrant over € 10 million was made.
The debtor warrant shall not become payable until 01/07/2014.
Should the company fail to meet the agreed figures, which refers
to the EBITDA before the restructuring and the unscheduled
deductions, by more than 20 %, the consortium banks will not
receive any payments. If the figures aimed at are met or
exceeded, the entire amount of € 10 million will become payable.
4) Possible capital increase with option right (authorised capital €
22.6 million and/or 8.7 million shares) under the assumption that
the authorised capital is fully subscribed.
23
Figure 7: Financial business restructuring programme
New Management team starts a financial restructuring
programm
"ALNO 2013" - Financial restructuring programm
Start: June 2009
March 2010
Nov. 2009
Dec. 2009
Jan.2010
Mar. 2010
Mar. 2010
Development
of Business
Plan
First
Mezzanine
waiver
Approval of
supervisory
board for
"ALNO 2013 "
PwC's
confirm s
positive
continuation
of ALNO
Factoring
financing (€
15m )
Juni 2010
Apr. 2010
Apr. 2010
Apr. 2010
May 2010
May 2010
Capital
increase
(€5m )
Agreem ent
with m ain
banks and
m ajor
stakeholders
Approval of
the annual
report 2009
Second
Mezzanine
waiver
Capital
increase
(€5m )
Source: ALNO AG, Vara Research
PwC provides a
positive expert
opinion on the
reorganisation
Beside the
restoration of the
balance, also
measures were
implemented to
reduce the costs in
the production
The auditing firm PricewaterhouseCoopers has prepared an expert
opinion on the reorganisation which comes to the conclusion that
there is a very high probability that the Group will be able to fully
restore
its
competitiveness
and
profitability
with
the
implementation of the restructuring programme. The auditing firm
certifies that the Group has a positive continuation prognosis, as
long as the financing is secured and the planned measures are
implemented according to the set schedule.
The financial measures form the basis for any further operational
measures within the future-orientated concept “ALNO 2013”.
Rivalries within the Group, between the distribution teams for the
brands ALNO and WELLMANN, IMPULS and PINO, have been
already eliminated. In the next step, excess capacities are to be
overcome at the locations Pfullendorf and Enger. For this purpose,
a uniform product platform has been designed for the brands
ALNO and WELLMANN, the brand ALNO has been realigned, and
the brand WELLMANN revalued. The aim is to re-orientate the
respective production sites according to their strengths. The
production site Enger is to be developed as a competence centre
for serial production, and the production site Pfullendorf is to be
refurbished into a manufacturing plant. The manufacture of
components for the brands IMPULS and PINO has already been
transferred from Pfullendorf to Enger.
The fixed costs of the production shall be significantly reduced.
Within the scope of the future-orientated concept “ALNO 2013”,
about 500 jobs will be cut by 2013. In Pfullendorf, the number of
production plants will be reduced, too. We estimate that the
personnel costs within the Group will be reduced by a total of
24
approximately 7 % by 2013. Besides the reduction of the number
of employees in the production, also the administration cost will be
reduced. In the past, each location had its own accounting
department. Now, the administration has been moved to
Düsseldorf. The introduction of IT will form the basis for the job
cutting measures in the administration area. With the planned
reduction of fixed costs, a significantly better competitiveness can
be achieved.
Higher positioning
of the brands
ALNO…
…and WELLMANN
A significant part of the restructuring concept is the higher
positioning of the brand ALNO. According to our opinion, the sale
price will increase by an average of 4 % to 5 % in the year 2010.
In the long term, we expect the brand ALNO to develop
considerably above the € 10,000 retail price. At the moment, the
average price in trade is about € 8,500 per ALNO kitchen. In the
past, however, price concessions were made to the trade
associations which resulted in many ALNO kitchens being sold at a
very low price, and so, they were directly competing with the
brands WELLMANN or even IMPULS. This resulted in a kind of
cannibalisation effect among the three brands. There were no
clear price categories within the brand world of the company, so
that quality kitchens were often sold at very low price.
With WELLMANN, we assume an annual price increase of about
3%. The average price shall be at about € 6,000 in the future.
Currently, the average price is at about € 4,500. In future, the
entire production of the corpus and front parts for the plants in
Enger, Brilon and Klieken will take place at WELLMANN in Enger.
The completion and assembly will then be performed at the
respective locations. From mid October 2010, the brand
WELLMANN will be manufactured on the construction platform of
the brand ALNO.
25
Figure 8: New positioning of the brands
P
r
i
c
e
r
a
n
g
e
Premium
27%
Upper
Segment
29%
Low er
Segment
24%
Entry
20%
Discounters
Furniture stores
U
m
s
a
t
z
a
n
t
e
i
l
Kitchen specialists Business project
Distribution channel
Source: ALNO AG
Quality
management
increases in value
Delivery times
shall be reduced
by new concepts
Distribution will be
structured after
the brands
Service and distribution shall be realigned and the complaints rate
is to be lowered. Quality management shall be regarded higher in
future than it is usually done in the industry. The quality
management of the ALNO Group works hand in hand with its
customers, the retailers. In this way ALNO wants to send a signal
to its retailer that it will not leave him alone in case of any
problem. Therefore, the logistics process from the manufacturer to
the retailer as well as from the retailer to the consumer shall be
optimised. Since, statistically, there is a customer complain for
every second kitchen in Germany, quality management is
particularly important. In this respect, ALNO has achieved
significant progress in the last few years, and was able to reduce
the cost of complaints. The complaint rate now lies within the
market average.
The presentation of display kitchens shall be promoted by offering
stronger incentives to the retailers. As the retailer has to pay the
kitchen manufacturer for the sample kitchen and the exhibition
objects, he has the incentive to generate as much revenue as
possible with the display kitchen. . For financing the project, ALNO
offers attractive payment terms to the retailers. In order to
maximise the inventory-to-sales ratio of the kitchens, ALNO aims
at achieving the shortest possible delivery times in the industry.
The faster the kitchen manufacturer can deliver, the more kitchens
can be manufactured every year. In addition to the goal of
improving the complaint rate, ALNO has introduced the ’10-day
kitchen’ within the brand IMPULS. It guarantees the delivery of
any IMPULS kitchen within ten days of purchase order. Also for the
other brands, the delivery time shall be reduced considerably. For
the ALNO brand, the delivery time is currently three to five weeks.
In future, distribution partners shall no longer be allocated to the
individual brands, but to the distribution channels Furniture Retail,
DIY stores, or Kitchen Specialists. This will ensure a broader
display and/or distribution of the kitchens within the distribution
channels. For example, in future, ALNO kitchens shall be
increasingly displayed in kitchen specialist stores. This would
contribute to a better awareness of ALNO offering premium
kitchens. According to the semi-annual financial report, the initial
success of the restructuring measures is already evident in the
operative margin.
26
With growing the
project business
and by
accompanying the
buyers’
associations going
abroad, the nondomestic portion
of 30 % will
significantly
increase
In the long term ALNO group aims to increase its share of sales
significantly in foreign countries (currently 30 %). Traditionally,
the prices for kitchens in foreign countries are higher than in
Germany. Therefore, a higher profit margin can be achieved
without any change in the cost of materials. The brand ALNO is
already established in this country, and it stands for quality. Due
to the necessary investments for display kitchens, the
international expansion via furniture warehouses, DIY markets or
kitchen specialist stores is connected with high capital lockup. The
expansion to other countries should not be done by their own
means only. We hope, in particular, that the German purchasing
associations will benefit from the planned expansion to other
countries. This development has started in the last few years, and,
according to our opinion, it will grow stronger in the years to
come. By now, many European countries still believe in the
paradigm that kitchen furniture is manufactured by small
carpentries who deliver directly to the customer. Of course, such
carpentries still exist and offer high quality, however, they have
long delivery times and they do not offer a broad range at
competitive rates.
The international business will get additional drive thanks to
project activities. In this respect, the ALNO Group co-operates
mainly with project developers and architects. If a government
tender is won, then the result can well be that an entire apartment
complex is equipped with kitchens. These are major contracts, and
they are for standard kitchens. The location Dubai is supposed to
serve the markets in the Middle East and in Asia. Although their
sales share is still less than 3%, we expect significant growth in
the long run, particularly thanks to the development of the project
business and the high investments into construction projects in
the emerging markets of Dubai, China and South Korea. ALNO’s
distribution to foreign markets will be organised from Düsseldorf in
future; the international subsidiaries will be closed down or
restructured to mere distribution representatives.
Production
efficiency shall be
increased
The strategic measures aim mainly on increasing the production
output, in order to become competitive again. For a manufacturer
of kitchen furniture in a very competitive market environment, an
efficient production structure is absolutely essential, as
competition is most often regulated via the prices. Further, it is
important to strengthen the position of being (at least) number
Two on the market and, if possible, expand this position. Only
large kitchen manufacturers can survive on the long run, with
their orientation towards the customers as well as the suppliers.
Acquisitions are excluded and do not play any role for the growth
strategy. However, close contacts to the purchasers’ associations
are necessary, because according to corporate information about
75 % of the domestic sales are generated via the ten major
purchasers’ associations in Germany.
The logistics and the transport of the kitchens to the furniture
warehouses constitute important elements in the value added
chain. These elements have a significant impact on the complaint
rate, which is so important for this industry. However, having own
delivery trucks is, at this moment, not an option for the ALNO
Group. The high portion of empty runs (return trips) makes it
27
difficult to run a profitable transport fleet. On the other hand, the
market leader nobilia does maintain its own transport fleet.
28
Kitchen Furniture Market
The European
market for kitchen
furniture is with
about € 12.3
billion p.a. and
growths basically
with the gross
domestic product
The domestic
market is
stagnant; growth
via increase of
exports
The cyclical low
point has been
already passed
Slight recovery in
the first half of
2010 was noticed
In 2009, the market volume of the European kitchen furniture
market was about € 12.3 billion. In this respect, Germany is the
most important regional market, with a consummation volume of
€ 2.7 billion, and with a share of about 22 %, it is the largest
single market in Europe. The industrial production (serial
production) of kitchen furniture is predominantly a German
domain. According to data supplied by the Centre for Industrial
Studies (CSIL), the other important markets in this industry are
Italy, with a market volume of € 2.2 billion, Great Britain with €
1.7 billion, and France with € 1.5 billion; which needs to be
entered together with the German buyers’ associations. The
European kitchen furniture industry has reached a high level of
maturity, and has registered an average annual growth rate
(CAGR) of 2.4 % from 1999 to 2009. The average sales
development of ALNO, however, has been almost zero throughout
this period of time.
For years, the kitchen market in Germany has been slightly
regressive and the production volumes of € 3.5 billion to € 4.0
billion per year could only be maintained due to increasing export
rates. In 2009, the kitchen market with a consumption volume of
about € 2.7 billion constitutes about 28 % of the entire furniture
industry in Germany. According to these figures, the German
export is worth between € 0.8 billion and € 1.3 billion. According
to the information from the ‘Verband der Deutschen
Küchenmöbelindustrie (VdDK)’ (Association of the German Kitchen
Furniture Industry), the German manufacturers have produced
kitchens worth € 3.67 billion in 2009, which represents a decline
of 9.2 % compared to the previous year. This was a stronger
decline than in the year 2002 which was impacted by recession
and the market volume sank by 7.7 %. As the purchase of a
kitchen is, in the most cases, an investment that can be
postponed, the industry could not elude itself from the economic
crisis. The market research institute Centre for Industrial Studies
(CSIL) predicts a growth rate close to Zero for the German market
for 2010, and a growth rate of about 2 % for 2011. ALNO itself
expects sales close to the previous years’ level for 2010.
In the first half of the year 2010, the market became more stable
again and showed an increase in the production volume of 0.4 %
in comparison to the previous year. In foreign countries, the low
point has been already passed, with an increase in the production
volume by 2.0 %.
As the figure below shows, the export rate has continuously grown
with a relatively constant total production volume. The German
market is stagnant to slightly declining. In the last years, the weak
demand in the domestic market has resulted in excess capacities,
which resulted in numerous bankruptcies. The number of
businesses with more than 50 employees have reduced to half
within the last ten years. At the same time, the kitchen furniture
manufacturers benefitted from the real estate boom in the foreign
countries, which, however, will probably be much weaker as a
driving force in the years to come.
29
Figure 9: Volume in €bn and export share in %
4,5
4,0
3,5
40%
3,89
3,77
3,48
3,36
3,50
3,94
4,04
3,67
3,67
3,75
35%
3,50
30%
3,0
25%
2,5
20%
2,0
15%
1,5
10%
1,0
5%
0,5
0%
0,0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e 2011e
Kitchen furniture m arket
Export share
Source: ALNO AG
Kitchen trade fairs
determine the
sales planning for
the next year
The German kitchen
furniture market
features highly
intensive
competition but,
meanwhile, also a
high degree of
saturation. Large
companies take the
market shares of
the small ones.
For the sales planning of the kitchen furniture manufacturers, the
spring and the autumn seasons are decisive. Every second year, in
spring, the most important international kitchen trade fair takes
place, the Eurocucina, which is useful to build contacts. Here, the
course is set for future contracts with foreign customers. In
September, the national home trade fairs take place, which
determines the sales tendency of the domestic market for the next
few months. So, it is clear already by the end of September, which
new display kitchens shall be shown in the shops in the year after.
The impact of the seasons is quite low throughout the individual
quarters.
The German market for kitchen furniture is characterised by tough
competition. The fight in the lower and medium price classes can
be often won by pricing only. This makes a competitive price
structure indispensable. However, such pricing can be achieved,
especially in the production, only by economies of scale. ,. In
consequence thereof, numerous smaller companies have gone
bankrupt in the last years. Compared to the furniture industry, the
kitchen market has concentrated due to the recent consolidations.
Currently, there are about 60 manufacturing plants with more
than 50 employees. These 60 manufacturers face about 10 to 15
buyers associations, which again represent about 4,000 to 5,000
distributors. The five largest kitchen manufacturers together have
a market share of about 75 %. We expect that the larger
manufacturers shall also in the future gain the market shares of
the small ones, and that they will gradually sweep them off the
market. Figure 10 shows the eleven largest competitors in the
German market.
30
Figure 10: Competitors in Germany by sales in €m
743
493
295
290
235
130
125
105
73
66
54
Source: ALNO AG
ALNO ranks No. 2
in the German
market
In terms of sales, the most important competitors in Germany are
nobilia (No. 1), Nolte (No. 3) and Schüller (No. 4). With sales
amounting to approx. € 500 million in 2009, the ALNO Group
ranks No. 2 in Germany with a market share of approx. 18 %.
Figure 11: Share in the market in terms of sales in percent (2009)
27,3%
17,6%
13,1%
9,9%
nobilia
ALNO Gruppe
Nolte
Schüller
Source: ALNO AG
I
In terms of cupboards sold the ALNO Group ranks No. 2 in
Germany with its market share of 25% and thus has a good
chance of emerging as the winner from the consolidation process,
which is currently taking place. The market leader, nobilia,
produces a mere 14 % more cupboards per annum, the chances
are therefore good for the ALNO Group to achieve the
corresponding economies of scale.
31
Figure 12: Share in the market in terms cabinets sold in
Germany (2009)
28,6%
25,0%
9,6%
nobilia
ALNO Gruppe
Nolte
8,0%
Bau-f or-mat
Source: ALNO AG
The figures make it clear, that the focus of the ALNO Group still
strongly remains on the lower price segment (PINO and IMPULS),
and that by a higher ranking of the brands ALNO and WELLMANN
the value based market share can be considerably increased.
With a market share of approx. 4.0% the ALNO Group ranks No. 5
in Europe. Häcker, with ranks 6, has half the amount of market
share as compared to ALNO. The Swedish Group Nobia holds the
largest market share with 11.1% followed by Ikea/Swedwood with
a market share of 8.1 %. Smaller German kitchen manufacturers
such as Nolte, Schüller, Bulthaup or SieMatic, as well as
international kitchen manufacturers such as SALM, Snaidero or
Scavolini are further competitors of the ALNO Group.
Figure 13: Share in the market in terms of sales in Europe in
percent (2008)
11,1%
8,1%
5,2%
4,5%
2,2% 2,2% 2,2% 1,9%
1,8% 1,6% 1,6% 1,6%
1,3%
Source: ALNO AG
32
In the following, the European market leaders and the listed
companies, which can be compared with ALNO are briefly
presented.
Nobia: The kitchen group from Sweden includes a number of
brands (among others Magnet, HTH, Hygena and Poggenpohl) and
is active in the regions of Scandinavia, Great Britain and Continent
Europe. The brands are regionally oriented. In 2009 the group
sales amounted to SEK 15.5 thousand million, this corresponds to
about €1.6 to € 1.7 thousand million. The sales declined by 3.6%
compared to previous year. The operating margin was 0.2%. The
number of employees in 2009 counted 7,930. Nobia is listed in
Stockholm. Currently the market capitalisation amounts to approx.
SEK 8.5 billion. (aprox. € 916 million).
Ikea/Swedwood: Swedwood is the production unit of the Ikea
Group and currently has approx. 15,000 employees on its payroll.
However, it does not only manufacture kitchen furniture, but also
other kinds of furniture. Swedwood has a total of 46 production
plants. The sales of Swedwood should be approx. € 1.4 to € 1.5
billion.
nobilia: The group has two production sites, in Verl-Sürenheide
and Verl-Kaunitz. The sales of nobilia in 2009 amounted to € 743
million, and thus increased by 5.2% compared to the previous
year. In the important domestic business nobilia generated
€ 482.4 million. (+4.8 %). The share in the market in the terms of
kitchens sold in Germany increased from 27.1 % to 28.6 %. This
proves that nobilia clearly ranks No. 1 in Germany. The operating
margin is likely to be over 20%, which may be defined a
benchmark in the kitchen industry. Kitchens are marketed via
home centres, kitchen specialist retailers and DIYs under the
brands nobilia and NOBLESSA. Nobilia holds the major share in the
market
with
its
46.4%
in
the
price
category
of
€ 4,000 to € 6.000, followed by kitchens in the range of € 3,000 to
€ 4,000 (37 %). In foreign countries, the group also operates
directly in the retail trade and has its own kitchen stores. The
payroll of the group totalled 1,959 in 2009.
Galiform: The Galiform group, listed in Great Britain, produces
and distributes kitchens and bathroom furniture and doors at two
locations through its subsidiary Howdens Joinery & Co. Markets.
The distribution is primarily in Great Britain. A minor share of sales
revenue is generated in France. The sales in 2009 amounted to
GBP 805.7 million. The decline in business compared to the
previous year amounted to 4.5%. The operating margin was
10.3 %. The number of employees in 2009 amounted to approx.
5,500. The market capitalisation at 483 million corresponds to
approx. € 554 million.
AFG Arbonia-Forster-Holding AG is an industrial holding from
Switzerland. It concentrates on heating technology and sanitary
fittings, kitchens and refrigeration, windows and doors, steel
technology and surface technology. The brands Forster Küchen,
Warendorfer Küchen ("Miele Die Küche") and Piatti kitchens
represent the holding in the kitchen market. The three brands
cover different price segments. The kitchens are manufactured at
three production sites in Germany and in Switzerland. The sales in
2009 in the sector kitchens and refrigeration amounted to
CHF 269.4 million (approx. € 200 million), which meant a decline
compared to the previous year by 7.3%. The operating margin
was 1.0%. AFG Arbonia-Forster-Holding AG is listed in
Switzerland. Market capitalisation currently amounts to approx.
CHF 420 million (approx. € 314 Mio.). In 2009, the average
number of employees amounted to 900.
33
The industry is
characterised by
high market entry
barriers
An essential factor for the success is the provision of the most
important sales channels with own model kitchens. This involves
considerable investments. The annual investment volume of the
ALNO Group in model kitchens amounts to some € 10 million or,
to be precise, 2% of the total sales. A similar investment in model
kitchens would account for 7.7% of the sales for the fifth largest
German kitchen furniture manufacturer – Bulthaup - with its
annual sales amounting to € 130 million. Therefore, only the
absolute market leaders can provide a nationwide representation
with model kitchens. Efficient production is only possible with
corresponding economies of scale; therefore new launches on the
market can hardly be expected.
The required production know-how makes the market entry
barriers higher. Many special productions require years of
experience in the production of kitchen furniture to reduce the
share of failures. The great challenge in production of kitchen
furniture is found in the high production complexity and in the
degree of individualisation in an efficient production in series.
It is not economically sensible to transport kitchens meant for
retail over long distances. Furthermore, competitive delivery times
cannot be guaranteed and the share of complaints would be too
high. As the transport costs cannot be ignored, the European
producers are relatively well protected against possible cheap
competitors from Far East.
Gross earnings
margins of 32.7 %
to 49.7 %
depending on
brand
Cost of materials
includes the
purchase of
production
material (40%),
electric devices
(36%) and
miscellaneous
(24%)
The price
fluctuations of the
cardboard chip
panels have an
anti-cyclical effect
on the gross profit
margin
The cost of materials is the highest expense item for ALNO as a
company of the manufacturing industry. The share for material
expenses was 57.2 % in 2009, i.e. the gross earning margin was
42.8 %. The amount of the gross earning varies in some cases
considerably in the individual segments. The two brands ALNO
(49.7 %) and WELLMANN (42.1 %) which rank higher reveal a
high degree of individualisation. They therefore achieve greater
gross earning margins in comparison to the brands IMPULS
(35.7 %) and PINO (32.2 %), which have a greater degree of
standardisation in production.
The cost of materials is particularly made up of three components
– chipboard panels, directly coated panels respectively, electric
devices (cooker, oven, dishwasher) and accessories of metal,
steel, glass and plastic for sinks, handles, drawers, lamps. The
acquisition costs of the electrical devices amount to approx. 36%
of the material expenses. The prices for the electric devices are
quite steady when compared with the raw material prices. The
mark-up on purchase price may be considered very low. 24% of
the material costs are assigned to metals, steel, glass and plastics.
Where electric devices are concerned, ALNO has a bulk purchase
contract with the major shareholder Whirlpool. However, electric
devices are also acquired from other manufacturers. The prices for
metals are fixed right up to the first quarter 2011. The purchase
prices are passed on successively in trade with price adjustment
clauses.
With 40% of the material costs, the largest cost pool is
apportionable to the raw material group wood. In the period
between 2007 (economic peak) to 2009 (economic trough) the
chipboard panel prices dropped at the highest point by 23% and
on average by about 14 %. The gross profit margin of ALNO
increased from 39.2% to 42.8% in the period between 2007 and
2009. Price changes for chipboard panels can have a considerable
influence on the development of margins as prices for cardboard
chip panels fluctuate more than the sales prices for furniture sold
to the retail trade. In the following table, the gross profit margins
34
of ALNO in the period 2001 to 2009 are shown. It is clear that the
gross profit margins are highest during the economic trough. This
is because the capacity utilisation of the supplier is quite low
during this period and the suppliers are willing to make price
concessions towards their major consumer group, the furniture
manufacturers. As the contracts with the chipboard suppliers are
adjusted about every three to six months, the price changes are
quite quickly passed on to the consumer. Stockpiling of chipboard
panels is very low as the warehouse capacities and capital are
binding and the manufacture is usually bound to orders. Chipboard
panels are a relatively homogenous item, the reason for which
ALNO can choose its source of supply exclusively according to cost
factors. As the contract terms with suppliers are short, such
suppliers can be swapped relative quickly. High transportation
costs make the purchase from foreign countries unprofitable.
Figure 14: Development of the gross profit margin in the cycle
44%
43%
42%
41%
40%
39%
38%
37%
2001
2002 2003
2004 2005 2006
2007 2008
2009
Source: Vara Research GmbH
Supplier market
for chipboard
panels is
structured oligopolitically, suffers
from overcapacities
The prices for
chipboard panels
have passed rockbottom point,
however only
moderate price
increased can be
expected
The supplier market for chipboard is of oligopolistic structure with
high market entry barriers as the business is capital intensive and
only very high business volumes can achieve profitability. In the
past years considerable capacities were developed, particularly in
East Europe, which have only been reduced step-by-step so far,
after the demand declined. The Kronospan Group, Pfleiderer,
Sonae, the Austrian Egger Group and Krono Swiss count among
the major manufacturers of chipboard. These five suppliers hold a
market share for chipboard panels amounting to approx. 75 %.
The furniture industry is the main consumer of chipboard panels
with approx. 50 %. This allows the industry to develop a certain
pricing power. In 2009, the market for chipboard panels
experienced a clear decline of sales, which was caused by the
economic downturn. In addition, this situation was aggravated by
the introduction of the car-scrap bonus in Germany, which led to
the demand for furniture declining considerably. The consumer
behaviour was thus distorted in favour of the automobil industry.
As a result the cosumption of furniture declined by 11.5% in 2009.
The manufacturers of chipboard panels absorbed this decline in
demand by high price reductions. As a result, the prices dropped
by approx. 23% to the level of 2005 in the second half 2008 and
the second half 2009. The price thus just covered the variable
costs of the most efficient companies in the industry. This subcapacity situation led to one tenth of the Germany-wide
production capacities of chipboard panels to ultimately close down
35
in 2009. Similar dramatic price collapses are not expected in the
future - these plants having been shut down.
Figure 15: Development of chipboard panel prices in Germany
135
2005 = 100
130
125
120
115
110
105
100
Mai 10
Jan 10
Mrz 10
Sep 09
Nov 09
Jul 09
Mai 09
Jan 09
Mrz 09
Nov 08
Jul 08
Sep 08
Mai 08
Jan 08
Mrz 08
Nov 07
Jul 07
Sep 07
Mai 07
Mrz 07
Jan 07
95
Source: Destatis, Pfleiderer
After the price collapse in 2009, the prices for chipboard panels
stabilised again as from the 3rd quarter 2009 and have currently
recovered from their absolute lower point by approx. 10%. This
development can be explained by the catch-up effect in the
furniture industry in Germany and the number of apartment
renovations, which has stabilised in the meantime – promoted by
the economic business plan. A moderate price development in the
sector of chipboard panels is expected for the coming months.
36
Sales channels
The purchasing
associations are by
far the most
important sales
channel for ALNO
Furniture stores
sell most of the
kitchens to final
consumers
Four different consumers are distinguished according to Point-ofSale: (1) Retailers from the segments cash-and carry and selfservice markets, (2) furniture stores, (3) kitchen specialists and
(4) real estate developers. There are three different sales
channels. These are the purchasing associations, free retailers and
project developers. By far the most important sales channel is
through the purchasing associations. They sell 75% of the
kitchens. In Germany 95 % of the furniture retailers are organised
in such associations. The furniture purchasing associations are a
German feature. BEGROS for instance is Germany's major and
most powerful furniture purchasing association and represents,
among others Porta! and XXXLutz. Further important purchasing
associations are Union, Atlas, VME and MHK. The reason and
purpose of purchasing associations is the pooling of interests
towards suppliers. The tasks of the associations include central
purchasing for its members, marketing and handling payments to
suppliers and furniture manufacturers. Apart from the purchasing
associations, a small amount is sold directly through free retailers.
ALNO kitchens are sold particularly sold through project
developers in foreign countries.
The furniture stores are the most important sales channel for the
consumers. They contribute to almost l fifty percent of the
kitchens sold in Germany (2009: approx. € 1.4 billion), followed
by the kitchen specialists with a market share of about twenty-five
percent (2009: approx. € 650 million). The cash and carry and
self-service markets for their part account for approximately
twenty percent of the sold volumes (2009: approx. € 500 million)
in Germany. No great shifts and changes have been experienced
in the past years between the share in the markets and the
individual sales channels. Internet as sales channel is not an
important sales channel for the kitchen manufacturers yet, and
neither will it become one in the coming years. As all the three
sales channels hold great market shares, it is important to be
represented in all the channels.
The sales channel via property project developers makes it
possible to sell large numbers of kitchens quickly. The brands
ALNO, WELLMANN and IMPULS are sold via this channel, the highquality kitchen account for the major share. This sales channel
reacts strongly with the construction of new buildings abroad and
has declined considerable due to the real estate crisis.
Customer
structure could be
further diversified
via project
developers
The ALNO Group profits from the popularity of its kitchen brands
and from the wide representation. In 2009 the group achieved
over 64% of its sales with the six major purchasing associations.
The high-value kitchens of the brands ALNO and WELLMANN make
it possible for the ALNO Group to push the sales channel through
project developers and thus to further diversify the final consumer
structure.
37
Figure 16: Client structure in Germany (2009)
Client A 16%
Others 23%
Client J 2%
Client B 14%
Client I 2%
Client H 3%
Client G 6%
Client C 9%
Client F 8%
Client E 7%
Client D 10%
Source: ALNO AG
38
The trends in the kitchen market
The following macro-economic factors are most significant for the
demand for kitchen furniture
Table 7: Factors which determine the demand for kitchen
furniture
1. Available income of private households
2. Attractiveness of alternative investments, for instance cars, living
room or bathroom furniture, housing energy redevelopment
3. Development of the number of private households and new housing
construction
4. Number of moves (mobility of the households)
5. Development of the interest level for consumer loans
Source: Vara Research GmbH
Development of
available income
my supply few
impulses for the
kitchen furniture
demand
The inclination to buy is directly coupled to the available income of
private households. Kitchen furniture is durable and long-lasting
and is thus in direct competition with other purchases such as
living room, bathroom and other household modernisation
measures or the purchase of a car. According to the Institut für
Weltwirtschaft (institute for global economy) in Kiel, the available
income of the German private households will increase by 1.1% in
2010 and by a further 1.6% in 2011 after the critical decline of
4.2% in 2009. Considering the fact that the public budgets have to
be refurbished again in the coming years, we do not expect either
tax or rate relief from legislation on the medium term. We
therefore cannot see great support in the short term in connection
with the income available for kitchen furniture.
Figure 17: Development and forecast for the available income in
Germany in percent compared to the previous year
6,0
5,2
4,3
4,0
2,0
4,1
2,3
1,7
1,5
1,8
1,1
1,6
0,9
0,0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e2011e
-2,0
-4,0
-4,2
-6,0
Source: Destatis, IfW Kiel
39
Constantly
increasing number
of households
supports the
demand for
kitchen furniture
The demand for kitchen furniture increases hand in hand with the
increasing number of households. According to the Statistisches
Bundesamt (Federal Statistical Office) the number of households
have increased continuously to 40.2 million (2009) in the past
years. This is an increase by approx. 4.9 million since April 1991.
Due to the socio-economic changes (later marriage/to move in
together, change of professional location, children moving out
early) the rise in private households may continue to increase a
little in the coming years. The development of the private
households will revive the demand for kitchen furniture.
Figure 18: Development of private households in Germany in
millions
42
41
40
39
38
37
36
35
34
33
1991
1995
1999
2003
2007
2011
2015
2019
2023
Source: Destatis
Few impulses to
be expected from
home building
The development of housing construction is relevant for the
demand for kitchen furniture as with the newly constructed flat,
the purchase of a new kitchen becomes relevant. The construction
activities in Germany and abroad continue to remain at a low level
according to experts, due to the global recession. According to an
analysis of Datamonitor Homebuilding in Germany dated April
2010, the newly constructed home units will increase at a rate of
approx. 1.7% in the period 2009 to 2013. A slight increase is
expected at a European level as from 2010 after the number of
new housing construction had decreased dramatically in 2009.
Figure 19: development of housing units in percent in Germany
169
in '000 new buildings
165
162
159
157
2009
2010e
2011e
2012e
2013e
Source: ALNO AG
40
The decision to buy a kitchen often depends on the availability of
alternative investments. The collapse in the kitchen market in
2009 can essentially be connected to the car-scrap bonus. This
resulted in a cutthroat competition and preferences were
influenced in favour of buying a car. Energy saving by renovating
houses is a further alternative investment. The German economic
stimulus program expressly calls for these measures.
The German
kitchen market is
particularly
determine by the
replacement
market
Share of
household moves
very stable over
the years
The low interest
rate may support
demand
The volume of the kitchen market is particularly determined by the
kitchen renovation market. There are different analyses dealing
with the period after which a kitchen is replaced on an average.
Estimates range from 15 to 25 years. Depending on the
expectations, the number of kitchens to be replaced annually
fluctuates considerably. Assuming that the kitchens in Germany
are replaced every 20 years, the market would account for
approx. € 2 billion p.a. We estimate that the relation between
purchase of a kitchen for a newly constructed flat and the
purchase of a kitchen for reasons of replacement/modernisation is
at a ratio of approx. one to ten.
A further factor for the demand for kitchens is the move into a
new property. According to the surveys of Techem, which can
monitor the moving behaviour through heat cost billing after a
change of domicile, the share of movers in Germany was between
10.8 % and 12.7 % and thus fairly constant.
The purchase of a kitchen is considered a major investment which
is partly financed through loans. The interest rates for consumer
loans are currently at a very low level. Due to the high public
debt, the interest may remain at a low level on the medium term.
This, in our opinion, will have a stabilising effect on the demand
for kitchens.
41
The development of the individual price segment
The price
categories € 4,000
to € 8,000 are
gaining shares in
the market,…
…while the
absolute premium
segment and the
entry categories
are even
registering
declining sales
The kitchen market is divided into seven price categories. Approx.
75 % of the kitchens sold are in the middle five price categories
from € 2,000 to € 10,000. With a share of approx. 22.7% the
major share was assumed by the price category between € 4,000
and € 6,000 in 2009. This was followed by the price categories
€ 2,000 to € 3,000 and € 6,000 to € 8,000 with a share of 15.7 %
and 14.9 %.
In the past years the trend could be detected, that higher price
categories were able to gain shares in the market, while price
groups in the lower range are losing shares in the market. The
price category € 6,000 to € 8,000 even revealed two digit growth
rates in 2009, while the price category € 4,000 to € 6,000
increased by some 8%. The price categories € 3,000 to € 4,000
and € 8,000 to € 10,000 registered only low, one digit growth
rates. However, the price categories € 250 to € 3,000 dropped by
two digits. The absolute premium segment of over € 10,000
declined by about 4 %. The trend is towards high-quality kitchens,
even in times of crises (excluding the absolute premium segment)
as was revealed in 2009.
Figure 20: Market share by price category and sold kitchens in
percent
25
22,7
21,1
20
17,1
16,3
15,7
14,9
14,2
15
13,2
13,5
13,2
11,5
11,0
10
7,6
8,0
2008
2009
5
0
2008
2009
2008
2009
2008
2009
2008
2009
2008
2009
250<2000€ 2000<3000€ 3000<4000€ 4000<6000€ 6000<8000€ 8000<10000€
2008
2009
>10000€
Source: GfK
Only the top players can be represented in all categories and
therefore distinguishing themselves from their competitors in the
market. They can thus make package offers for the purchase
associations. As the furniture stores often have several price
categories in their range, package offers in this segment may be
of interest. For kitchen specialists and cash and carry and self
service markets however, package offers may not be of
importance.
42
Figure 21: A comparison of competitor EBIT margin
EBIT
margin in >20
%
~3
5-10 5-10
n.a.
10
n.a.
n.a.
-3,5
-3,0
0,2
ALNO Gruppe
segments
Rational
filled these price
Bau-for-mat
however, already
Leicht
competitor,
nobilia, has,
Poggenpohl
powerful
In our opinion, the manufacturers in the price categories € 4,000
to € 8,000 should distinguish themselves at most in the market.
Here it is all about the not trivial optimisation of series and
customised manufacture. On the other hand, in the upper price
category, it is primarily all about customised manufacture a
scaling or production is therefore hardly possible. In the lower
price categories, it is primarily all about standardised manufacture
in series. Due to the optimisation of customised and series
manufacture with numerous possibilities of combination in the
medium price categories, a company with the corresponding
know-how can gain a significant competitive advantage in the
form of cost leadership. As the gross profit margin is almost at the
level of customised manufacture in this segment, the
manufacturer can generate two-digit operating margins by highly
efficient production.
SieMatic
….the most
Bulthaup
8,000,…
Schüller
€ 4,000 to €
Nolte
the fast-growing
market segments
Häcker
WELLMANN is to
be ranked better in
In the price categories € 4,000 to € 6,000 and € 6,000 to € 8,000,
which are growing at above average speed, the ranking of the
brand WELLMANN is to be enhanced. These market segments are,
however, currently dominated by nobilia with their market share
of 42.1%, thus a penetration of the market segment goes hand in
hand with stiff competition. nobilia for its part ranks considerably
lower in the lower and uppermost price segments. The gaining of
market shares should be easier in these market segments,
particularly as it is not a strategy of nobilia to enhance penetration
into these market segments. Here it is all about edging away
smaller players by the use of sub-optimal size.
nobilia
The brand
∅ ~ 5%
Source: Own Research, ALNO AG
The ALNO Group currently ranks highest in the stagnating or in
declining price segments. Growing segments should be
concentrated on. The kitchens in the growth segments € 4,000 to
€ 8,000 are particularly sold by furniture stores where the price
category € 4,000 to € 6,000 is by far the largest segment. Only
through a strong position in this segment, the manufacturer can
guarantee for the necessary economies of scale. It is regarded to
penetrate into this segment better with the. At the same time the
brand WELLMANN. ALNO must be ranked higher to avoid
cannibalisation effects. The ranking of the brands IMPULS and
PINO seems to be correct now. Both brands were able to increase
their sales in 2009 while the overall market for kitchens was on
the decline in the low price segment.
43
Profit and Loss Statement
(in €m)
Sales
Change in finished goods and work in
progress
Other own cost capitalized
Other operating income
2008
2009
2010e
2011e
2012e
2013e
511,204
493,373
493,373
509,954
527,033
544,625
0,113
-3,724
1,179
1,225
1,271
1,319
0,000
0,000
0,000
0,000
0,000
0,000
15,744
9,085
6,234
6,414
6,600
6,791
527,061
498,734
500,786
517,593
534,904
552,735
-289,441
-278,654
-278,654
-286,456
-294,477
-301,545
237,620
220,080
222,132
231,137
240,427
251,190
Personnel expenses
-103,792
-98,925
-97,417
-94,285
-91,833
-89,925
Other operating expenses/income
-114,562
-103,883
-102,603
-103,493
-103,950
-104,412
19,266
17,272
22,112
33,359
44,645
56,854
-20,187
-40,186
-17,449
-16,685
-17,183
-17,696
-0,921
-22,914
4,663
16,674
27,462
39,158
-14,043
-16,287
-12,044
-10,676
-10,663
-10,564
0,000
0,000
0,000
0,000
0,000
0,000
-14,964
-39,201
-7,381
5,998
16,799
28,594
0,000
0,407
0,000
-7,000
-7,000
-7,000
-7,674
-0,170
-0,711
-1,499
-4,740
-8,278
0,000
0,000
0,000
0,000
0,000
0,000
-22,638
-38,964
-8,092
-2,501
5,059
13,316
Total performance
Cost of materials
Gross profit
EBITDA
Depreciation/Amortisation
EBIT
Financial result
Non operating result before taxes
Pre tax result
Non operating result after taxes
Taxes
Minority interest
Net result
Adjustments
2,200
22,279
1,217
7,000
7,000
7,000
-20,438
-16,685
-6,875
4,499
12,059
20,316
Average number of shares
15,77
15,82
19,57
26,10
26,10
26,10
EPS (in €)
-1,44
-2,46
-0,41
-0,10
0,19
0,51
Adjusted EPS (in €)
-1,30
-1,05
-0,35
0,17
0,46
0,78
0,00
0,00
0,00
0,00
0,00
0,00
Adjusted net result
DPS (in €)
* The reported restructuring result is divided between the individual expenses items.
Source: ALNO AG / Expectations: Vara Research GmbH
44
Balance sheet
(in €m)
Long term assets
Intangible assets
Tangible assets
Financial assets
2008
2009
2010e
2011e
2012e
2013e
108,456
84,999
87,795
89,663
91,592
93,581
9,876
5,477
5,477
5,477
5,477
5,477
90,331
69,984
72,780
74,648
76,577
78,566
8,249
9,538
9,538
9,538
9,538
9,538
Current assets
88,322
79,731
84,891
84,770
92,293
108,158
Inventories
31,160
24,724
24,724
25,555
26,411
27,292
Trade receivables
47,239
46,548
46,548
48,112
49,724
51,383
Other receivables
6,749
5,602
5,602
5,602
5,602
5,602
Cash and securities
3,174
2,857
8,017
5,501
10,557
23,880
Other assets
1,465
0,296
0,296
0,296
0,296
0,296
Total assets
198,243
165,026
172,982
174,730
184,181
202,036
Equity
-36,964
-71,132
-31,554
-34,056
-28,996
-15,681
Reserves
-36,964
-71,132
-31,554
-34,056
-28,996
-15,681
0,000
0,000
0,000
0,000
0,000
0,000
Minorities
Provisions
29,050
25,679
26,457
27,272
28,126
29,021
Liabilities
204,207
209,620
177,220
180,655
184,193
187,836
Interest bearing liabilities
114,677
107,251
74,851
74,851
74,851
74,851
89,514
102,196
102,196
105,631
109,168
112,812
0,016
0,173
0,173
0,173
0,173
0,173
Trade payables
Non interest bearing liabilities
Other liabilities
Total equity and liabilities
1,950
0,859
0,859
0,859
0,859
0,859
198,243
165,026
172,982
174,730
184,181
202,036
Source: ALNO AG / Expectations: Vara Research GmbH
Cash Flow Statement
(in €m)
Net cash provided by operating
activities
Net cash used in investing
activities
Net cash provided by financing
activities
Change in cash and securities
Cash and securities at the end of
the period
2008
2009
2010e
2011e
2012e
2013e
-17,108
21,210
10,405
16,037
24,167
33,009
-10,581
-15,967
-20,245
-18,553
-19,111
-19,686
27,003
-5,303
15,000
0,000
0,000
0,000
-0,682
-0,061
5,160
-2,516
5,056
13,324
3,174
2,857
8,017
5,501
10,557
23,880
Source: ALNO AG / Expectations: Vara Research GmbH
45
Key figures
2008
2009
2010e
2011e
2012e
2013e
Valuation ratios
EV/sales
0,36
0,32
0,39
0,38
0,37
0,36
EV/EBITDA
8,97
10,03
8,65
5,80
4,33
3,40
EV/EBIT
143,09
n.m.
31,45
11,60
7,04
4,94
Reported P/E
n.m.
n.m.
n.m.
n.m.
21,67
8,23
Adjusted P/E
n.m.
n.m.
n.m.
24,37
9,09
5,40
PCPS
n.m.
n.m.
7,90
7,31
4,75
3,44
Price/Book
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
46,0%
44,1%
45,0%
45,3%
45,6%
46,1%
EBITDA margin
4,0%
3,2%
4,5%
6,5%
8,5%
10,4%
EBIT margin
0,3%
0,0%
1,2%
3,3%
5,2%
7,2%
Pre-tax margin
-2,5%
-3,3%
-1,2%
1,2%
3,2%
5,3%
Net margin
-4,0%
-3,4%
-1,3%
0,9%
2,3%
3,7%
Profitability ratios in %
Gross margin
ROE
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
7,4%
9,1%
12,1%
16,7%
22,5%
28,6%
Sales/employees (in € ‘000)
254,3
261,7
274,1
294,8
312,8
330,1
Net result/employees (in € ‘000)
-10,2
-8,9
-3,7
2,6
7,2
12,3
Number of employees (in average)
2.010
1.885
1.800
1.730
1.685
1.650
-18,6%
-43,1%
-18,2%
-19,5%
-15,7%
-7,8%
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
Net debt (in €m)
127,8
120,6
83,8
87,1
82,9
70,5
Dividend yield
0,0%
0,0%
0,0%
0,0%
0,0%
0,0%
Cash flow per share
-1,28
-0,20
0,53
0,57
0,88
1,22
Free cash flow per share
-3,10
-1,95
-1,16
-0,50
-0,14
0,15
3,8%
3,9%
8,1%
3,5%
3,3%
3,3%
ROCE
Productivity ratios
Financial ratios
Equity ratio
Gearing
Cash flow ratio
Other ratios
Depreciation/sales
Capex/sales
Working capital/sales
Tax rate
3,1%
2,5%
3,3%
4,1%
3,6%
3,6%
-2,8%
-2,2%
-6,3%
-6,3%
-6,3%
-6,3%
1,5%
-51,3%
-0,4%
-10,0%
25,0%
28,2%
Source: ALNO AG / Expectations: Vara Research GmbH
46
A. Disclosures in accordance with § 34 b WpHG (German Securities Trading Act),
Finanzanalyseverordnung (FinAnV) (Ordinance on the Analysis of Financial
Instruments):
I. Disclosures on authorship, responsible company, regulatory authority:
Company responsible for the publication: Vara Research GmbH
Authors of this financial analysis: Dragan Lukjanovic, Analyst and Martin
Pahn, Analyst
Vara Research GmbH is subject to regulation through the Federal Financial
Supervisory Authority (BaFin).
Previous financial analyses:
Company
Date
Rating Target price
II. Additional disclosures:
1.
Information sources:
Material sources of information for preparing this document 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 company study. The analysis was provided to the issuer prior to
going to press; no changes were made afterwards, however.
2.
Summary of the valuation principles and methods used in preparation of
the analysis:
Vara Research GmbH uses a 3-level absolute share rating system. The ratings
pertain to a time horizon of up to 12 months.
BUY: the expected price trend of the share amounts to at least +15%. NEUTRAL:
The expected price trend lies between -15% and +15%. SELL: The expected price
trend amounts to more than -15%.
The following valuation methods are used when valuing companies: Multiplier
models (price/earnings, price/cash flow, price/book value, EV/revenues, 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.
Furthermore, the approaches are based on expectations that can change quickly
and without warning, according to industry-specific developments. As a result, the
results of the valuation and target prices derived from the models can change
correspondingly. The results of the valuation are based on a period of 12 months.
They are, however, subject to market conditions and represent a snapshot. They
can be reached more quickly or more slowly or be revised upwards or downwards.
3.
Date of initial publication of the financial analysis:
4.
Date and time of the prices of financial instruments disclosed
therein:
(10/14/2010)
(Price on 10/13/2010)
5.
Updates:
We have currently not yet set a fixed date to provide a precise update of this
analysis. Vara Research GmbH reserves the right to update the analysis
unannounced.
III. Disclosures on possible conflicts-of-interest:
An agreement exists between Vara Research GmbH and ICF Kursmakler
AG on the preparation of this publication. Vara Research GmbH receives
consideration to that extent.
The success of Vara Research GmbH is based on direct and/or indirect payments
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which affect the issuer and his securities.
Vara Research GmbH (and affiliated companies), the authors as well as
other persons and companies who participated in the preparation of the
financial analysis
47
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Do not hold any material investments in the issuer.
Serve neither the issuer (by placing buy or sell orders in a market)
nor financial instruments that are the subject of this financial analysis,
Were (within the last 12 months) not a participant in the
management of a consortium for the issuance of financial instruments,
which themselves or their issuer is the subject of this financial analysis,
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4.
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