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Össur

Össur

Reykjavik, Iceland based Ossur is a leading innovator, developer and manufacturer of non-invasive orthopaedic products such as prosthetics and braces. Ossur’s core competency lies within working with silicones, carbon composites, textiles and mechatronics to help patients live according to its motto “Life without Limitations”. Best known for its world leading lower limb prosthetics, Ossur is at the forefront in incorporating electronics into prosthetics and thereby creating products that more naturally mimic normal gait, increasing amputees' quality of life.

Underappreciated aspects of Össur’s business include: 1) the company is driving product innovation within high-tech, high margin bionics and thereby higher profitability (currently bionics accounts for ~23% of prosthetics revenue but only ~2% of volume), 2) a further-improved product mix, with the acquisition of less technologically advanced, lower-priced prosthetics which are optimal for high growth, emerging markets and 3) improving efficiencies in the organisation, which is running at structurally excessive cost levels e.g. G&A-to-sales ratio above 10% vs. best of breed at 3-4%.

Primary risks include: 1) competitive product launches, with segments operating in highly competitive industries, 2) the growth in Prosthetics is currently driven primarily by increased units prices as consumers trade up, while the volume growth is minimal. Failure by Össur to prove its products’ value to payors and patients and thereby accept higher prices for innovation leaves Össur vulnerable to growth disappointments. 3) Össur is facing a balancing act, to improve efficiencies in its operations while not disrupting its product quality, and 4) high dependency on reimbursement changes (government and insurance) can trigger reduced spending and change product choices.

USDm 2019 2020e 2021e
Sales 686 622 685
Sales growth (%) 12 -9,3 10
EBITDA 141 101 156
EBITDA margin (%) 20,6 16,2 22,7
EBIT adj 98 43 111
EBIT adj margin (%) 14,2 7 16,2
Pretax profit 90 26 106
EPS rep 0,16 0,05 0,19
EPS growth (%) -13,6 -71,4 318,3
EPS adj 0,16 0,06 0,19
DPS 0,02 0,03 0,03
EV/EBITDA (x) 25,6 34,3 21,7
EV/EBIT adj (x) 36,9 79,5 30,4
P/E (x) 48,4 159,8 38,2
P/E adj (x) 48,4 129,6 38,2
EV/sales (x) 5,3 5,5 4,9
FCF yield (%) 1,9 3 3,8
Dividend yield (%) 0,3 0,4 0,4
Net IB debt/EBITDA 2 3,1 1,7
N/A N/A N/A
USDm 2019 2020e 2021e
Sales 686 622 685
COGS -248 -240 -242
Gross profit 439 383 442
Other operating items -297 -282 -287
EBITDA 141 101 156
Depreciation on tangibles -17 -18 -18
Depreciation on intangibles -9 -21 -9
EBITA 98 43 111
Goodwill impairment charges 0 -5 0
Other impairment and amortisation 0 0 0
EBIT 98 39 111
Other financial items 0 0 0
Net financial items -8 -14 -7
Associated income 0 0 2
Other EO items 0 0 0
Pretax profit 90 26 106
Tax -21 -6 -24
Net profit 69 20 82
Minority interest 0 0 0
Net profit discontinued 0 0 0
Net profit to shareholders 69 20 82
EPS 0,16 0,05 0,19
EPS Adj 0,16 0,06 0,19
Total extraordinary items after tax 0 0 0
Tax rate (%) -23,7 -23 -22,5
Gross margin (%) 63,9 61,5 64,6
EBITDA margin (%) 20,6 16,2 22,7
EBITA margin (%) 14,2 7 16,2
EBIT margin (%) 14,2 6,2 16,2
Pretax margin (%) 13,1 4,1 15,2
Net margin (%) 10 3,1 11,7
Growth rates Y/Y 2019 2020 2021
Sales growth (%) 12 -9,3 10
EBITDA growth (%) 31,7 -28,8 54,9
EBIT growth (%) 23,8 -60,3 187
Net profit growth (%) -13,7 -71,5 317,3
EPS growth (%) -13,6 -71,4 318,3
Profitability 2019 2020 2021
ROE (%) 12,4 3,6 15,3
ROE Adj (%) 12,4 4,5 15,3
ROCE (%) 11,6 4,1 11,3
ROCE Adj(%) 11,6 4,6 11,3
ROIC (%) 9 3,4 10
ROIC Adj (%) 9 3,8 10
Adj earnings numbers 2019 2020 2021
EBITDA Adj 141 101 156
EBITDA Adj margin (%) 20,6 16,2 22,7
EBITA Adj 98 43 111
EBITA Adj margin (%) 14,2 7 16,2
EBIT Adj 98 43 111
EBIT Adj margin (%) 14,2 7 16,2
Pretax profit Adj 90 30 106
Net profit Adj 69 24 82
Net profit to shareholders Adj 69 24 82
Net Adj margin (%) 10 3,9 11,7
N/A N/A N/A
USDm 2019 2020e 2021e
EBITDA 141 101 156
Net financial items -8 -14 -7
Paid tax -16 0 0
Non-cash items 0 0 0
Cash flow before change in WC 117 87 149
Change in WC -22 34 -4
Operating cash flow 95 121 145
CAPEX tangible fixed assets -32 -27 -27
CAPEX intangible fixed assets 1 0 0
Acquisitions and disposals 0 0 0
Free cash flow 64 94 118
Dividend paid -9 -9 -11
Share issues and buybacks -29 -15 -29
Other non cash items -165 -115 -24
Decrease in net IB debt -106 -30 53
Balance Sheet (USDm) 2019 2020 2021
Goodwill 521 541 541
Indefinite intangible assets 0 0 0
Definite intangible assets 63 56 47
Tangible fixed assets 65 64 74
Other fixed assets 36 36 38
Fixed assets 783 778 763
Inventories 112 94 103
Receivables 107 82 90
Other current assets 30 54 54
Cash and liquid assets 59 146 200
Total assets 1091 1154 1210
Shareholders equity 569 514 555
Minority 0 0 0
Total equity 569 514 555
Long-term debt 244 360 360
Pension debt 0 0 0
Convertible debt 0 0 0
Deferred tax 30 25 25
Other long-term liabilities 14 14 14
Short-term debt 7 7 7
Accounts payable 27 18 31
Other current liabilities 107 122 122
Total liabilities and equity 1091 1154 1210
Net IB debt 286 315 262
Net IB debt excl. pension debt 286 315 262
Capital invested 898 868 856
Working capital 115 90 94
EV breakdown 2019 2020 2021
Market cap. diluted (m) 3333 3138 3131
Net IB debt Adj 286 315 262
Market value of minority 0 0 0
Reversal of shares and participations -9 -9 -11
Reversal of conv. debt assumed equity 0 0 0
EV 3610 3444 3382
Capital efficiency (%) 2019 2020 2021
Total assets turnover (%) 68,5 55,5 58
Capital invested turnover (%) 83,1 70,5 79,4
Capital employed turnover (%) 81,4 65,9 68,8
Inventories / sales (%) 15,1 16,5 14,4
Customer advances / sales (%) 0 0 0
Payables / sales (%) 4 3,6 3,6
Working capital / sales (%) 16,7 16,5 13,4
Financial risk and debt service 2019 2020 2021
Net debt / equity (%) 50,2 61,4 47,2
Net debt / market cap (%) 10,8 10 8,4
Equity ratio (%) 52,2 44,5 45,9
Net IB debt adj. / equity (%) 50,2 61,4 47,2
Current ratio (%) 217,9 255,8 277,9
EBITDA / net interest (%) 1831,7 744,7 2224,8
Net IB debt / EBITDA (%) 202,1 313,6 168,2
Interest cover (%) 1267 321 1589,1
N/A N/A N/A
USDm 2019 2020e 2021e
Shares outstanding adj. 425 423 422
Fully diluted shares Adj 425 423 422
EPS 0,16 0,05 0,19
Dividend per share Adj 0 0 0
EPS Adj 0,16 0,06 0,19
BVPS 1,34 1,21 1,32
BVPS Adj -0,03 -0,2 -0,08
Net IB debt / share 0,7 0,7 0,6
Share price 6,19 7,42 7,42
Market cap. (m) 2632 3138 3131
Valuation 2019 2020 2021
P/E 48,4 159,8 38,2
EV/sales 5,26 5,53 4,94
EV/EBITDA 25,6 34,3 21,7
EV/EBITA 36,9 79,5 30,4
EV/EBIT 36,9 88,8 30,4
Dividend yield (%) 0,3 0,4 0,4
FCF yield (%) 1,9 3 3,8
P/BVPS 5,86 6,11 5,64
P/BVPS Adj -226,03 -37,61 -93,68
P/E Adj 48,4 129,6 38,2
EV/EBITDA Adj 25,6 34,3 21,7
EV/EBITA Adj 36,9 79,5 30,4
EV/EBIT Adj 36,9 79,5 30,4
EV/cap. employed 4 3,5 3,3
Investment ratios 2019 2020 2021
Capex / sales 4,5 4,4 4
Capex / depreciation 114,6 69,9 103,4
Capex tangibles / tangible fixed assets 48,9 42,5 37,1
Capex intangibles / definite intangibles -1,6 0 0
Depreciation on intangibles / definite intangibles 15,1 38 18,1
Depreciation on tangibles / tangibles 26,8 28,1 24,4
N/A N/A N/A

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Main shareholders - Össur

Main shareholders Share capital % Voting shares % Verified
William Demant Invest A/S 51.6 % 51.6 % 31 Dec 2019
The Pension Fund of Commerce 7.5 % 7.5 % 31 Dec 2019
The Pension Fund for State Employees 5.0 % 5.0 % 21 Aug 2020
Gildi 4.6 % 4.6 % 31 Dec 2019
Invesco 4.6 % 4.6 % 18 Aug 2020
SEB Fonder 2.6 % 2.6 % 31 Oct 2020
Lannebo Fonder 2.2 % 2.2 % 30 Sep 2020
ODIN Fonder 1.2 % 1.2 % 31 Oct 2020
Handelsbanken Fonder 0.9 % 0.9 % 31 Oct 2020
Artisan Partners 0.9 % 0.9 % 30 Sep 2020
Source: Holdings by Modular Finance AB