INDUS released FY22 prelims and classified 44 portfolio companies as ‘continued operations’. Three loss-making Automotive companies were classified as ‘discontinued operations’. Mind you, the intention to sell two (Selzer and Schäfer) was already announced before the end of last year. While ‘discontinued operations’ clouded the overall picture, ‘continued operations’ showed solid operating performance.

FY22 sales in-line with guidance. Sales from ‘continued operations’, comprising the three newly reclassified segments Engineering, Infrastructure and Materials, increased to € 1.8bn (10.4% yoy growth). At € 109m, sales from ‘discontinued operations’ remained flat yoy (FY21: € 108m). Group sales of € 1.91bn met the lower end of FY22 sales guidance (€ 1.9 to 2.0bn).

FY22 EBIT coping with macro-constraints. The adjusted EBIT from ‘continued operations’ increased 5% yoy to € 176.5m (FY 2021: € 168.1m) implying an EBIT margin of 9.8% (FY 2021: 10.3%). The less proportionate growth can be attributed to 1) regulatory expenses and little scope to pass on costs to customers in the Medical Engineering/Life Science segment, 2) the shortage of electronics, effects of the Russian-Ukrainian war and delays in the ramp-up of mass-production in the Automotive segment. 

Impairments weighing on reported figures. The reported EBIT from ‘continued operations’ decreased 19% yoy to € 133.7m (FY21: € 165.6m) due to impairments on goodwill, intangibles, and fixed assets. These losses arise from 1) increased cost of capital and 2) reduced prospects of units affected by impairments. The ‘discontinued operations’ reported a net income of € -123.9m. Group net income was € -51m (FY21: € 47.6m, eNuW FY22: € -36.1m), implying a net income of € 72.9m from ‘continued operations’.

Cautiously optimistic for 2023: With improved availability of electronic components and inorganic sales growth from the newly acquired H+S and HELD, the Engineering segment should see strong sales growth in FY23 (+9% yoy, eNuW). The Construction segment, the original cash cow for INDUS, looks troubled by decreased order intake in the construction industry. However, portfolio companies active in the renovation business should perform well, allowing for a slight increase in segment sales (FY 23 sales: +4.5%, eNuW). While the Materials segment should be pressured by rising energy and material costs, the intensive disposal activities for Schäfer and Selzer should soon bear fruits for INDUS. Reiterate HOLD, with an unchanged PT of € 24 (based of FCFY 2023E).