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OCTOBER 2, 2015
KT&Partners Srl Via della Posta, 10 - Piazza Affari, 20123 Milan - Italy Tel: +39.02.83424007 Fax: +39.02.83424011 [email protected]
Bomi Group is a leading multinational group that provides a wide range of
strategic logistic services to the Medical Device Industry. Bomi has built a
strong reputation based on 30 years of relations with both the most important
multinationals in the healthcare sector and the international SMEs active in
the biomedical, diagnostic and biotech. The company has a market leadership
in Italy, with a 9.9% market share, and Brazil with 32.2% market share, and a
co-leadership in Colombia with a unique network to serve the Latin American
Region.
The Medical Device Market is expected to reach $434 bln in 2018 from $340
bln in 2014 with a 2014-2018 CAGR rate of 6.3%. Improving the supply chain
performance will be crucial for healthcare companies over the coming years
because of the operating inefficiencies such as a higher level of inventory
days or a higher incidence of obsolescence that characterize this sector. For
these reasons healthcare companies are expected to increase their
outsourcing activities with the aim to handle this complexity in a cost-savings
environment. In this context, logistics service providers will play an important
role, in particular specialized players like Bomi that provides a higher level
of customization in accordance with client specific business models and
sector regulations.
Founded in 1985, the Group is headquartered in Vaprio D’Adda (Milan) and as
of December 31, 2014 counted 818 employees, direct subsidiaries in 8 nations
(Brazil, Chile, Peru, Columbia, Netherlands, France, Turkey, Russia and USA)
and franchisee in 4 nations (Portugal, Argentina, Mexico and China).
During the last two years, the company carried out important M&A activities
with four acquisitions closed. To boost the growth and consolidate its position
in Italy and abroad Bomi raised € 11 mn through IPO and € 5.4 mn with a
convertible bond issue. The IPO proceeds will be used to increase scale and
market share in strategic markets.
We consider the IPO as a fundamental step in the BOMI story; the listing status
has already increased the BOMI brand value and had a crucial role in acquiring
new clients or expanding commercial agreements. For instance, Roche, which
already collaborates with Bomi signed a 5-year agreement in Peru recognizing
the value of the company.
We expect the Group to grow its top-line from € 72.1 mn Pro Forma in 2014
to € 73.9 mn in 2015 and € 94.2 mn in 2017, and to reach a 4.2% net margin
in 2016 with a Net Profit of € 4.0 mn.
We consider BOMI Italia stocks undervalued by 26% on our multiple analysis
valuation and we see a great potential upside related to the possible Brazilian
minorities integration.
€ Million Revenues EBITDA EBITDA Margin % EBIT EBIT
Margin % Net profit Net Margin %
2014A 67.00 7.97 11.9% 5.91 8.8% 1.66 2.5%
2014A pro-forma 72.14 8.46 11.7% 6.40 8.9% 1.85 2.6%
2015E 73.89 8.35 11.3% 5.99 8.1% 2.16 2.9%
2016E 86.46 10.37 12.0% 7.72 8.9% 3.10 3.6%
2017E 94.20 11.30 12.0% 8.80 9.3% 3.95 4.2%
Source: Company data, KT&P Estimates
Market Data:
Close Price (€) 2.59
Market Cap (€/mn) 39.5
Free Float 46.1%
52 Wk. High / Low (€) 3.26 / 2.32
Avg. Daily Trading Volume 90 days
45,072
Price Change: 1 w -0.5%
Price Change: 1 m 0.9%
Share out. (mn) 13.9
INITIATING COVERAGE
Kevin TEMPESTINI +39.02.83424007 [email protected] Patrizia MANTOAN +39.02.83424008 [email protected] Giancarlo DI VONA +39.02.83424008 [email protected] Fabio COZZI +39.02.83424008 [email protected]
Target Price: € 3.26
Jul Aug Sep
-0.15
-0.1
-0.05
0
0.05
0.1
-0.09
-0.06
BOMI-IT FTSE AIM
BOMI Relative Performance Chart
BOMI Italia S.p.A.
Oct 2, 2015 ● 2
Content:
Bomi Italia SpA 1
Investment Thesis 3
Company and Business Model 5
Bomi’s Business Model 6
Core Business 6
Added Value Services 7
Group's Presece & Structure 9
Operating Process 11
Clients 12
Shareholders and Management 13
Industry Overview 16
Global Health care market 16
Medical Device market 17
Health care Supply Chain 17
Why outsourcing 19
Healthcare Logistics outsourcing competitive arena 21
Healthcare logistics sector outlook 23
Financials 25
2014 Financial results 26
1H 2015 Financial Results 32
2015-2019 Estimates 34
Valuation 37
Multiples Valuation 37
DCF Valuation 38
APPENDIX 39
DISCLAIMER 41
BOMI Italia S.p.A.
Oct 2, 2015 ● 3
Investment Thesis
Global health care spending growth has been rising over the past
decades and is expected to accelerate. The health care spending
growth’s main drivers are the following: a) growing and ageing
populations, which implies the rising prevalence of chronic diseases, b)
emerging-market wealth expansion and c) technology advances.
Over the coming years it will, therefore be crucial to expand the
healthcare coverage to a higher population level, mainly in emerging
countries and at the same time reduce the healthcare spending burden
on society. In the developed world, public and private payers are
setting themselves in a cost-saving mode while the healthcare
production process, mainly for the medical device sector, is becoming
more complex. Improving the supply chain performance will be
crucial for healthcare companies and overall for society over the
coming years.
Historically healthcare companies have enjoyed a favourable
environment characterized by low competitive pressure, high growth
and low margin pressure. The high margin environment of the previous
decades fostered various operation inefficiencies in the healthcare
industry. Comparing the healthcare sector operating metrics to more
competitive sector as for example the Fast-moving Consumer Goods
(FMCG), the healthcare sector high cost saving potential is evident. The
Fast-moving Consumer Goods (FMCG) industry in terms of operating
efficiency is visibly a couple of decades ahead.
According to a McKinsey analysis, improving the healthcare supply
chain may result in $ 130 billion margin improvements. Healthcare
companies are, therefore, driven to outsource and have accepted this
reality to protect their eroding margin, preserve precious cash, and
focus on their core competences.
Regulations and reimbursement procedures are crucial in healthcare
logistics and the absence of a global standard in product code and
legislation is one of the key reasons behind Bomi Group’s existence and
strategic advantage respect to generalist logistic players. The sector
has been characterized by a strong M&A activities over the past years
and we expect a lot of consolidations in the coming years.
Bomi Group is a leading multinational group that provides a wide range
of strategic logistic services to the Medical Device Industry. Bomi has
built a strong reputation based on 30 years of relations with both the
most important multinationals in the healthcare sector and the
international SMEs active in biomedical, diagnostic and biotech. The
company has a market leadership in Italy and in Brazil and a co-
leadership in Colombia with a unique network to serve the Latin
American Region.
During the last two years the company carried out important M&A
activities with four acquisitions closed. To boost the growth and
consolidate its position in Italy and abroad Bomi raised € 11 mn through
Global health market to increase by 5.2% CAGR 2014-2018
BOMI Italia S.p.A.
Oct 2, 2015 ● 4
IPO and € 5.4 mn with a convertible bond issue. The IPO proceeds will
be used to increase scale and market share in strategic markets.
We consider the IPO as a fundamental step in the BOMI story; the listing
status has already increased the BOMI brand value and had a crucial
role in acquiring the Peruvian logistic business from Roche.
MAIN RISKS AND THREATS:
Exchange rate volatility
Integration of acquired companies
Key People retention
We consider the IPO as a fundamental step in BOMI story…
BOMI Italia S.p.A.
Oct 2, 2015 ● 5
Company and Business Model
Bomi is a leading multinational group, which provides a wide range
of strategic logistic services dedicated to medical devices
manufactures, whose products are delivered to hospitals, clinics,
labs and home patients.
The Group was founded by the Catalano family in 1985 through the
constitution of Bomi srl, of which Giorgio Ruini, the actual Chairman
of the Group, was appointed CEO. In 1992 Schroeder’s private equity
bought 60% and Giorgio Ruini became a minority shareholder with a
20% share in the Company. In 1998 Giorgio Ruini carried out a MBO,
and became the controlling shareholder with 100%. In June 2015 BOMI
went public listing its shares in the AIM Italia market.
Today the Ruini family owns 51.53% and Quaestio Capital
Management SGR S.p.A. owns 7.26%, the market and other
shareholders own the rest.
Table 1: Bomi’s Key Milestones
Year Key Milestones
1985 Bomi Srl is founded. Giorgio Ruini appointed as CEO
1989-92 First internalization round: openings in Spain, France, Germany, UK, Benelux. Schroeder’s Private Equity buys 60%; Giorgio Ruini becomes a shareholder with 20% of the group
1997 Bomi Group starts its 55% JV in Brasil with a local partner (JV still in place)
1998 MBO conducted by Giorgio Ruini and other managers on 100%
2004 Main focus is logistic for Healthcare in Italy and Latin America: Bomi sells its operations in France, Benelux, Germany and UK
2006
Bomi launches the new service in Consignment Stock Management (GeCoS)
2008-09 Second internalization round: Bomi Group opens new activities in Turkey and JV in Chile and Colombia
2013 First acquisition in Italy
2014 Issue of a PRE-IPO bond of € 1.5mn Third internalization round: Bomi Group opens new activities
in France, Russia, Netherlands, Peru, USA and a franchising in
China. Bomi buys Farma Distribution Segrate for € 2.5 mn
2015 Bomi buys 80% of G. Carrai for € 1.44 mn AIM Italia IPO and convertible issue
Source: Company Data
A 30 year long history…
BOMI Italia S.p.A.
Oct 2, 2015 ● 6
Bomi’s Business Model
The Bomi Group activities can be divided into two business lines:
“core businesses” and “added value service” businesses.
Core Business
The most important activities carried out by the Group consist in the
products "storage" and "transport management”: these business
units are the Group's core business and the areas in which it
generates most of its consolidated revenues.
The storage activity consists in the management and storage in
warehouses of the Group, on the behalf of clients, of different types
of healthcare products such as medical devices and diagnostics,
diagnostic tools and spare parts in the medical field, pharmaceutical
products and biotechnology. The Group has licensed warehouses
where they meet the necessary storage conditions of the product,
through authorized, safe and controlled spaces, and through
compliance with the regulations and industry’s best practices.
The storage service is executed at a controlled temperature, from +2
to -70 degrees (+15C°/+25C°; +2/+8C°; -20C°/-70C°) or at room
temperature, depending on the type of product. The activity of
handling the products is managed in accordance with specific
internal procedures, in order to ensure the highest quality service,
accurate inventory management, consistency and transparency
towards customers of the stocks held.
In this activity the Group’s proprietary computer system, designed
and developed specifically for the management of medical devices,
plays a key role, because it is constructed in order to ensure full
visibility to the customer of the stock level and temperature at which
the product is stored and a real time tracking of the status to the
customer.
The activity of "transport management" consists in the organization
and management of shipping services for the healthcare sector,
including the transportation at room temperature or controlled
temperature for medical and diagnostic products, equipment and
technological equipment, dangerous products, in vitro diagnostic
reagents: this activity is carried out both domestically and
internationally, by air, sea and road to customers at hospitals,
laboratories and clinics. All services are covered by order tracking
via web through the Group’s online track & tracing system.
The third area of Bomi’s core business is represented by the Home
Care service: the capacity of the delivery of the right treatment to
any in-home chronically ill patient. Bomi offers not only a complete
training to drivers to fulfill this service but also an on-site training
for clinical aid. Bomi can offer a pre-scheduled service, but at the
IT proprietary system represents
a key barrier to entry…..
BOMI Italia S.p.A.
Oct 2, 2015 ● 7
same time an on-site merchandising and inventory count to grant
stock adequacy.
Chart 1: Bomi Group’s Business Divisions
Source: KT&P illustration, Company Data
Added Value Services
This group of activities represents the area where Bomi has a higher
profitability margins: "Consignment stock logistic", "kitting &
labeling" and "virtual branch".
The activity of "consignment stock management" consists in the
physical count and management of material on consignment (mainly
orthopedic, spine and trauma products, implantable products for
Core business- 95% of FY2014 revenues; 89% EBITDA
1. WAREHOUSING AND DISTRIBUTION
2. TRANSPORT MANAGEMENT
3. HOME CARE
Storage and delivery of Biomedical finished goods on behalf of manufacturers, under different conditions & procedures Own Truck fleet for critical deliveries, (special and cold chain deliveries) Specialized in owned network for Home Care patients
Added value service- 5% of FY2014 revenues; 11% EBITDA
4. KITTING AND LABELLING
5. CONSIGNMENT STOCK & LOGISTIC
6. VIRTUAL BRANCH
Assembling and Packing of Medical Devices, Diagnostic Kits and Surgical Kits according to local regulations on behalf of the clients Management of inventories in the Hospital environment, both to Manufactures and Clinics
“Plug & Play” solutions to Bomi’ clients, leveraging on its local know-how and structure
BOMI Italia S.p.A.
Oct 2, 2015 ● 8
cardiology, implants and ophthalmic products and general surgery)
at the hospitals and clinics in which Bomi’s customers (mainly
manufacturers of devices and implantable prostheses and
pharmaceutical companies) have "Consignment stock" contracts.
This kind of service, provided using Bomi’s Gecos, the web-based
proprietary SW Platform that enables two way access to hospitals and
suppliers data for ordinary replenishment and consignment stock
movements, allows end user to have immediate access to the medical
products it needs, to pick them up as needed, and to later receive
billing; on the other side Medical tools suppliers are able to manage
the stocks held by the place of end use, allowing for better billing
performance and a proper product rotation of unordered or expired
products.
The service "field consignment stock inventory" also allows the
customers to conduct an audit of the inventory at the deposit
account in order to know in real time the situation of the goods lying
and its reconciliation. This service is also provided with a
predetermined periodic frequency in hospitals of most interest to the
customer, in order to improve the rotation, and reduce product
maturity and the “lead time” of reorganization of medical products.
In addition, the Group's services include the deposit at its warehouses
and the subsequent transport to the hospitals and clinics of the stock
of products required for doctors and surgeons use, 24/24, thus
allowing continued availability of a full range of products (such as
implantable prostheses).
The Group, leveraging on market knowledge of the market and on its
global presence, also deals with the labeling service of medical
products, including the relevant technical characteristics, the
destination, origin and sorting and the re-labeling with the inclusion
of any additional information needed such as the technical and
functional characteristics in relation to the language and the local
market of destination or by matching barcodes to international
standards.
Another service offered by the Group is the assembly of specific kits
for commercial or regulators needs through the creation of new
products starting from components that could be sold individually or
by aggregation of products according to the reference market or end
users, while maintaining the qualitative properties of the device.
The third added value service is the "Virtual branch" which allows
Bomi’s customers to leverage on the group’s local know-how and
structure in order to get a “plug & play” solution for a new market,
providing tax and local regulation consultancy. In turn, this shortens
the market access process as well as consulting support to obtain all
the necessary authorizations to market.
In addition to services related to the core business and value added
services, the Group is also involved in (a) the provision of special Other business include 24/7
special logistics
BOMI Italia S.p.A.
Oct 2, 2015 ● 9
services of logistics for urgent and emergency deliveries 24 hours a
day and 7 days a week in order to optimize the stocks of products in
the warehouse, therefore significantly reducing the investments and
ensuring the continued availability of the product to the end-
customers; this is very important especially for devices that have a
short-term maturity use and for life-saving devices; (b) the provision
to customers of spaces for technical services of their products at the
warehouses of the Group; (c) "management surgical kits", consisting
in the withdrawal of the surgical-kits at hospitals in relation to the
planning of interventions, in the decontamination, cleaning and
sterilization of the equipment, and the monitoring and
replenishment of the kits.
Group Presence and Structure
The Group today counts on 818 employees and is present in 14
countries (of which 6 started-up during the last year): with its
headquarter in Vaprio D’adda (Milan), Italy and with direct
subsidiaries in 8 other nations (Brazil, Chile, Peru, Colombia,
Netherlands, France, Turkey, Russia and USA) and franchises - not
included in consolidated financials - in 4 nations (Portugal,
Argentina, Mexico and China), with a total of 28 warehouses, it serves
more than 100 clients.
Chart 2: Bomi Group’s Global Precence
Note: * Not included into the Consolidated statements
From the trade policy point of view, the Bomi Group operates
internationally through a vertical value chain composed by a) direct
subsidiaries and b) partnerships with local franchises, to whom Bomi
A true multinational player
approaching 1000 employees….
BOMI Italia S.p.A.
Oct 2, 2015 ● 10
provides the license to use the brand, the computer system and
quality manuals.
Chart 3: Bomi Group’s Structure
Table 2: Bomi Group’s Structure
Company % controlled
by Bomi Italia
Country Main activity 2014
Revenues (€000)
2014 Equity (€000)
2014 Net
Result (€000)
Bomi Italia SpA. n.m. Italy Holding/Logistic 21,105 16,953 1,038
Biomedical & Cosmetics Int.Distrib.Srl. 100% Italy Holding 0 5,250 721
Bodi Srl 100% Italy Logistic 385 42 (5)
Chasqui Srl 51% Italy Transp./distrib. 1,258 120 31
Farma Distrib.Segrate Srl * 100% Italy Logistic 5,140 64.88 190
Lodi Healthcare and Diagnostic Exp. Service Ltd 100% Turkey Logistic 1,063 147 40
Biomedical Distr. Mercosur Ltda 55% Brasil Logistic 48,000 2,989 1,867
Biomedical Distr. Colombia S.L. Ltda 80% Colombia Logistic 2,841 380 174
Bomi de Chile SpA 51% Chile Logistic 601 1,375 63
Biomedical Logistics S.A.C.** 51% Peru Logistic Constituted in 2014
Biomedical Distr. North Europe B.V.** 56% Netherlands Logistic Constituted in 2014
Biomedical Distr. France Sas** 100% France Logistic Constituted in 2014
Biomedical Distr. Eurasia LCC** 51% Russia Logistic Constituted in 2014
G. Carrai Srl* 80% Italy Logistic 5,200 n.a.
Biocarrier Colombia Sas 51% Colombia Logistic n.a.
Biomedical North America LCC 100% US Logistic Constituted in 2014
Klinical SA 10% Argentina Logistic n.a.
Bomi Portugal Lda** 12% Portugal Logistic Constituted in 2014
Note: * newly acquired ** newly constituted
BOMI Italia S.p.A.
Oct 2, 2015 ● 11
Operating Process
The management of goods and inventories of medical products and
diagnostics is a “tailor-made” process, very different therefore from
the one provided by a logistics generalist.
Bomi Group can leverage on some key elements in the delivery
services like:
a) the constant monitoring of the compliance process also
through statistical techniques, which would safeguard the
integrity of products and measure the quality of services
through the provision of customer reports;
b) a proprietary software system represented by an advanced
platform able to connect the customers’ computer systems
and offer information in real time through the web, in order
to simplify procedures and processes, reduce costs and
improve productivity, efficiency and monitoring;
c) a Dedicated Customer Service (defined account, internal
telephone number, e-mail address), the track and tracing
system made in real time;
d) a system that assigns to every shipment the best courier,
counting not only on Bomi’s own truck fleet, made by specific
insulated and refrigerated vehicles for special and cold chain
deliveries (critical deliveries), but also on a consolidated
global network formed by its own selection of carriers
operating, for the most part, exclusively with the Group.
e) a quality control system certified by the BSI (British
Standards Institution) for “storage, administration and
distribution of medical devices and in-vitro diagnostics with
the logistical support to the customer’s requirements,
including labeling and assembly of the kits”.
The logistic service provided on the behalf of third parties starts with
the receiving of the incoming goods in the warehouse and the
matching verification with the Delivery Note. Next, the item data is
inserted into the warehouse system and Bomi’s customer service
verifies with the client the correspondence of the data. At this point
the system assigns a location and records it.
The second stage starts with the management of the batch and the
expiration date of each item, which is stored in a dedicated room for
each customer at a controlled temperature.
At this point there is the assembly of the kits (diagnostic, medical
devices or surgical), if need be, with two different steps of control.
During all these stages, strict schedules and procedures are defined
and followed. The result is more than 99% of internal quality
standard.
A “tailor-made” process….
BOMI Italia S.p.A.
Oct 2, 2015 ● 12
Chart 4: Bomi Group’s operating flow
Source: KT&P illustration, Company Data
Clients Bomi Group has an outstanding customer’s portfolio with a long-term
contract relationship base.
The portfolio not only includes clients among the major international
players in the healthcare sector (i.e. the major pharmaceutical
companies and manufacturers of medical devices) but also small and
medium-sized international enterprises active in biomedical,
diagnostic and biotech.
Chart 5: Bomi Group’s main customers
Long term relations with key clients is one of Bomi’s main
asset….
BOMI Italia S.p.A.
Oct 2, 2015 ● 13
Bomi usually charges its service fees based on specific operational variable indicators or matrix, based on exclusivity most of the time with minimum floor fees.
Shareholders and Management
Today the Ruini family owns 51.53% and Quaestio Capital
Management SGR S.p.A. owns 7.26% while the market and other
shareholders own the rest.
Chart 6: Ownership Structure- Bomi Italia
(1) Under different share composition: personal shares and/or legal entities owned by the Ruini family
The parent company of the Group plays, in addition to logistics, the
management and coordination of the other’s Group companies.
The management and coordination has taken place mainly in the past
- and will continue to be – through centralized management of the
Issuer at the level of certain services of an accountant, lawyer etc.,
the licensing of its brand and infrastructure as well as the provision
of certain shareholder loans to the subsidiaries and other commercial
and financial operations.
The Holding Staff supervises and controls the strategic activities of
the Group whilst main customers are directly managed at
Headquarters’ level.
Franchises pay specific fees for Trademark License, SW License and
operational support, providing them with access to Bomi’s business
model and allowing them to take advantage of Bomi Group’s
customer portfolios, having limited profiled access to the CRM.
BOMI Italia S.p.A.
Oct 2, 2015 ● 14
Chart 7: Organizational Structure
The Board of Directors is made up of nine Directors, four of which
are also manager of the company and two independent (Alfredo
Scotti e Giovanni Battista Donati).
Chart 8: Bomi Board of Directors
Note: * Renzo Torchiani e Alessandro Podesta are also Directors.
Source: Company Data
Giorgio Ruini Marco Ruini Stefano Camurri Giuseppe Ferrario Carlo Mambretti Giovanni Battista Donati
CHAIRMAN VP CFO & LATAM VP EMEA BOARD MEMBER BOARD MEMBER INDEPENDENT(*)
- Economy degree from Modena University
- Head of Marketing and Operations at Mars Group
- Operation manager at Hospal Dasco (Gambro)
- Co-founder at Bomi Group. CEO since 1985. Board Member at Assobiomedica
- Economy degree from Bergamo University
- Banker at Banca Popolare di Sondrio; Marketing consultant at RDS Consulting Srl
- Joins Bomi in 2005 as Controller. CFO from 2008. Supervises LATAM since 2011
- President of Young Enterpreneurs at Assobiomedica
- Chemical Engineer Degree from Politecnico di Milano
- MBA Master Degree at SDA Bocconi
- Joins Bomi in 1996
- Appointed GM Italy in 2006. VP EMEA since 2008.
- Economy diploma, ICT diploma
- Accounting and IT manager in Chemical Industry for 20 years
- CFO at Bomi Group from 1988 to 2007
- Board member at Bomi Group
- Nuclear Engineer Degree from Politecnico di Milano
- Head of Bio-Engineering at Amplifon
- GM at trade association Assobiomedica for 22 years
- Board member at Bomi Group since 2010
- Degree in Law, Attorney and Lawyer
- Honorary Vice Magistrate at Crema
- Notary and President of the Notarial committee of Crema and Cremona Districts and President of the Notarial Regional Committee of Lombardy
BOMI Italia S.p.A.
Oct 2, 2015 ● 15
Supply chain in the medical device market can be designed according
to two schemes, depending on the manufacturer’s decision to a)
directly reach its final client or b) indirectly through a dealer.
Medical device manufactures prefer the direct case since they can
retain most of their direct margin and preserve the clients
relationship. In order to efficiently serve their final clients they use
a service provider like Bomi. The direct case is even more important
for home care services.
The indirect case has the advantage of reducing the producer
investments, fixed costs and break-even point but at the same time,
implies a weaker client relationship, a low marketing and commercial
leverage and lower margins. The dealer usually retains 25-40% of the
OEM direct margin. Since the dealer has direct contact with the final
client, he is also responsible for their final mile logistics.
Chart 9: Medical Device Supply Chain
Source: Company Data, KT&Partners illustration
BOMI Italia S.p.A.
Oct 2, 2015 ● 16
Industry Overview
Global Health Care Market
Global health care spending growth has been rising over the past
decades and is expected to accelerate. The health care spending
growth’s main drivers are the following: a) growing and ageing
populations, which implies the rising prevalence of chronic diseases,
b) emerging-market wealth expansion and c) technology advances.
Life expectancy, thanks to treatment advances in cancer and
cardiovascular diseases, is projected to increase from an estimated
72.7 years in 2013 to 73.7 years in 2018, bringing the number of
people over 65 years to around 580 mn worldwide or more than 10%
of the global population. In Japan and Western Europe this ratio is
among the highest worldwide at 28% and 20%.
Emerging market rising wealth is another important force behind
the healthcare spending growth. By 2018, the number of households
with more than $ 25,000 annual incomes will rise globally by 30% to
nearly 570 mn. Rising wealth and urbanization are causing an
increase in lifestyle-related chronic diseases in the developing
market. The incidence of obesity levels, changes in diet, and tobacco
products consumption are fostering cancer and heart disease, which
are becoming the main causes of death.
In 2013 healthcare spending is estimated to have increased by 2.8%
to $ 7.2 trillion or 10.6% of global GDP1; from 2014-2018 the expected
growth is 5.2% to $ 9.3 trillion. The highest growth rate over the
coming years is expected in emerging markets, where a rise in
disposable income and an increase in public spending in healthcare
are among the main drivers of the growth in coming years. In
emerging markets the spending growth is accompanied by a low
margin pressure due to a low competition level and a low healthcare
spending incidence on GDP. The developed world is expected to have
a lower growth due to an already high incidence of healthcare
spending on GDP. In Europe budgets are the tightest among the
countries most affected by the European debt crisis, mainly: Greece,
Portugal, Spain and Italy. In the US, on the other hand, the
healthcare spending on GDP is the highest in the world at 17.3%.
Governments in developed countries are reforming their healthcare
system aiming to contain their spending and increase the competition
in the sector.
Rising demand and cost savings are the two main counterweighting
forces prospectively in action in the developed world.
1 World Industry outlook: Healthcare and pharmaceuticals, The Economist Intelligence Unit, May 2014. Total Spending is for the 60
market that EIU covers.
Global healthcare market estimated to increase by 5.2%
CAGR 2014-2018
BOMI Italia S.p.A.
Oct 2, 2015 ● 17
Chart 10: % Healthcare Expenses on GDP (2014) Chart 11: % Healthcare Spending Expected
Growth Rate 2014-2018
Source: Company presentation, Espicom (2014), World Bank (2014) Source: Deloitte, 2015 Global health care outlook,
KT&Partners elaboriation
The Medical Device Market
In 2014 the medical device market increased by 4.9% reaching a
global value of $ 340 bln, representing 10% of global health care
spending. From a geographical perspective, over 70% of the medical
device market is in the Americas and Western Europe. In terms of
product breakdown, the diagnostic imaging is 25.2%, consumables
15.5%, orthopedics & prosthetics 11.8%, dental products 6.9%.
Chart 12: Geographic Breakdown (2014) Chart 13: Product Breakdown (2014)
Source: Company presentation, Espicom data (2014) Source: Company presentation, Espicom data (2014)
The market is expected to reach $ 434 bln in 2018 with a 2014-2018 CAGR rate of 6.3%.
Healthcare Supply Chain
Over the coming years it will therefore be crucial to expand the
healthcare coverage to a higher population level, mainly in emerging
countries and at the same time reduce the healthcare spending
burden on society. In the developed world, public and private payers
Medical device market to grow
6.3% CAGR in the next 3 years
The need to improve the supply
chain performance…
BOMI Italia S.p.A.
Oct 2, 2015 ● 18
are setting themselves in a cost-saving mode while the healthcare
production process, mainly for the medical devices sector, is
becoming more complex due to:
widening product portfolio – this issue is even more relevant
for the medical device sector with respect to pharma which
has a 1000:1 estimated wider product portfolio;
increasing compliance/regulatory pressure;
shortening product life cycle (1.5 – 5 years).
Improving the supply chain performance will be crucial for
healthcare companies and overall for society over the coming
years. Historically, healthcare companies have enjoyed a favourable
environment characterized by low competitive pressure, high growth
and low margin pressure. The high margin environment of the
previous decades fostered various operating inefficiencies in the
healthcare industry. Comparing the healthcare sector operating
metrics to more competitive sectors as for example the Fast-moving
Consumer Goods (FMCG), the healthcare sector high cost saving
potential is evident. The Fast-moving Consumer Goods (FMCG)
industry, in terms of operating efficiency, is visibly a couple of
decades ahead. According to McKinsey in its Jan 2013 Building New
Strengths in the Healthcare Supply Chain report, Pharma and
Medical Devices have 4 and 2 times higher level of inventory days
compared to FMCG and an incidence of obsolescence on sales that
is six times higher than FMCG. The manufacturing lead time, the
period between order acceptance and product delivery, is also 15-50
times higher than the FMCG industry.
Chart 13: Operational Metrics
Source: McKinsey&Co, Building New Strengths in the Healthcare Supply Chain, January
2013
According to McKinsey, improving the supply chain performance to
FMCG standards will have a significant impact on Healthcare value
BOMI Italia S.p.A.
Oct 2, 2015 ● 19
chain operator margins. Medical device producers would increase
their profit by 20% and suppliers by 21%; hospitals would be the most
favoured among healthcare providers with a 21% profit potential
increase. Better supply chain performance will allow to:
reduce costs by shortening manufacturing lead time;
slash inventory levels across the value chain;
cut product obsolescence;
reduce drug and medical device shortage;
reduce the risk of counterfeit products entering into the
supply chain;
Chart 14: Impact on Profit %
Source: McKinsey & Co, Building New Strengths in the Healthcare Supply Chain,
January 2013
McKinsey expects supply chain expenses to be nearly 25% of pharma
costs and more than 40% of medical device costs or about $230 billion
in pharma and $122 billion in medical devices. According to the
McKinsey analysis, improving the healthcare supply chain may result
in $ 130 billion margin improvements. Moreover, global society could
save billions introducing a single set of global standards that supports
data interchange. For example the grocery industry has
demonstrated the value of adopting a global standards alignment
with its adoption of GS1® standard barcodes which created billion of
dollars in value.
Why Outsourcing
The healthcare industry future will be characterized by a more
complex and differentiated supply chain. In order to handle this
complexity in a cost-savings environment, healthcare companies are
expected to increase their outsourcing activities: R&D - the highest
capital intensive phase in the value chain - manufacturing and
distribution.
Healthcare companies are expected to increase their
outsourcing activities…
BOMI Italia S.p.A.
Oct 2, 2015 ● 20
Chart 15: Value Chain
Source: KT&Partners
R&D development expenses are nowadays outsourced to Contract
Research Organizations (CROs) and the outsourcing is expected to
increase due to increasing discoveries and development cost.
Manufacturing phase expenses are outsourced to Contract
Manufacturing Organizations (CMOs) which handle the following
phases:
Primary packaging;
Secondary packaging;
Formulation;
API manufacturing;
Labelling;
Clinical supplies;
Sterilization;
Chemical Intermediates manufacturing;
Stability packaging
Logistic service providers support healthcare companies with
services across the whole supply chain. Specialized providers like
Bomi offer almost all value-added phases among the healthcare value
chain (e.g. labelling, cold-chain or RFID track). Moreover they are
crucial in interacting and in being compliant with the regulatory and
public environment in order to ensure product consignment and
reimbursement. At the same time logistic operators are offering
services closer to manufactures, going beyond logistics and
expanding along the value chain.
Healthcare companies are driven to outsource and have accepted this
reality to protect their eroding margin, preserve precious cash, and
focus on their core competencies.
R&D and Registration
ManufacturingSupply & Logistics
Marketing & Sales
Sales data provision
BOMI Italia S.p.A.
Oct 2, 2015 ● 21
Healthcare Logistics Outsourcing Competitive Arena
The healthcare logistics competitive arena is characterized by
generalist and specialized players with local or international
presence.
Generalists are logistic companies that are serving a broad range of
industries such as: automotive, retail/consumer,
pharma/healthcare, high tech, industrial, and chemicals. Local
Generalists are niche players that serve local clients. International
Generalists are the logistic big players such as DHL, the market
leader in contract logistics with a 7.7% market share in 20132, and
Kuehne + Nagel and CEVA with a 2.1% market share. International
Generalists are specializing their offering to develop their own
verticals through M&As. The Pharma/Healthcare logistic is one of the
most interesting verticals and we great deal of M&A coming from
International Generalist player. Concerning the Italian market for
example, in order to expand its Italian pharma/healthcare logistics
offer, DHL bought Eurodifarm in 2011.
Specialized players, in this case, are companies with a high degree
of healthcare client orientation and a high level of customization, in
accordance with client specific business models and sector
regulations. Specialized providers offer almost all value adding
steps along the healthcare supply chain, from finishing
manufacturing steps (e.g. labelling) to highly sophisticated logistic
services (e.g. cold-chain or RFID track). Regulations and
reimbursement procedures are crucial in healthcare logistics and the
absence of a global standard in product code and legislation is one
of the key reasons behind local specialized player existence. Among
the local specialized players the main Italian players are Silvano
Chiapparoli Logistica and EDF Eurodifarm (a DHL company).
Bomi belongs to the international specialized player together with
companies such as Movianto and Arvato that bought the former Bomi
North European logistic operations.
2 Transport Intelligence Contract Logistics 2013 report, Roland Berger and Barclays Global Logistics Markets August 2014
Generalist vs specialized
players…
BOMI Italia S.p.A.
Oct 2, 2015 ● 22
Chart 16: Competitive Arena in Italy and Worldwide
Table 3: 2014 Comparative Financial Analysis (data in € million)
Company Turnover
2014
∆Turnover
2014-2013
EBITDA/
Turnover
2014
EBITDA
2014
Net
Income
2014
Capex/
Turnover
Personnel
Cost/
Turnover
Service
Cost/
Turnover
NWC/
Turnover
Silvano Chiapparoli Logistica S.p.A.*
50.63 -9.4% 6.5% 3.29 1.20 1.6% 13.8% n.a. 9.0%
Eurodifarm Srl* 67.5 12.0% 8.8% 5.95 2.56 0.4% 4.9% n.a. 0.1%
Mitsafetrans Srl* 29.0 5.6% 3.4% 0.97 0.62 2.2% 15.1% n.a. 17.9%
Due Torri S.p.A* 15.6 19.2% 8.7% 1.36 0.77 9.0% 10.1% n.a. 12.6%
Fercam S.p.A.* 369.8 -5.2% 2.7% 9.95 -3.92 3.2% 13.1% n.a. 5.3%
Logista SA* n.a. -2.7% 3.5% 0.91 -0.21 4.4% 41.0% n.a. 23.6%
Arvato Services Healthcare france SAS*
40.0 15.4% n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Open Market LTDA*
38.2 -
24.7% n.a. n.a. 3.03 n.a. n.a. 74.4% n.a.
Andreani 132.6 21.0% n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Owens & Minor Inc.
7,775.5 18,2% 2.8% 218.88 54.78 4.3% n.a. 87.5% 9.4%
Ceva Group PLC*
6,388.8 -8.8% 2.9% 164.91 -161.93 0.2% 29.6% n.a. 3.0%
UPS* 43,832.9 5.0% 11.8% 5,187.05 2,282.27 9.4% 55.0% n.a. 7.3%
DHL 58,646.0 3.1% 7.4% 4,346.00 2,177.00 4.0% 31.0% n.a. 2.1%
TNT* 6,693.0 -4.7% 7.2% 481.00 -122.00 1.7% 32.5% n.a. 7.7%
AVERAGE - 3.1% 5.9% - - 3.7% 24.6% 81.0% 8.9%
BOMI 67.0 3.1% 11.9% 7.97 1.66 10.4% 21.3% 54.3% 7.4%
* Data 2013 and ∆ Turnover 2013-2012; Source: Company, KT&Partners elaborations
Local International
Spec
ializ
edG
ener
alis
tAlmacenar
BOMI Italia S.p.A.
Oct 2, 2015 ● 23
Bomi holds a market leadership position in Italy and Brazil according
to the company and Madison Corporate Finance estimates. In Italy,
Bomi has a 9.9% market share preceding DHL with 8.8% and
Chiapparoli Logistica with 3.77%. In Brazil, Bomi has a market share
of 32% preceding DHL and in Colombia Bomi has a market share of
10.1%.
Healthcare Logistics Sector Outlook
According to the Roland Berger and Barclays Global Logistic Markets
August 2014 report, the global Contract Logistics is a very
fragmented market. DHL Supply Chain is the market leader with a
2013 turnover of around € 13 bln and a market share of 7.7%. The top
10 players account for 20.6% of market share. Over the coming years
it makes sense to expect a consolidation in the broad industry.
In the healthcare logistic vertical the fragmentation is even higher
due to the absence of a global standard in healthcare product
regulation, codes and operating process. The different degree of
complexity existing between pharma and medical devices logistics is
another element characterizing the healthcare logistics as a highly
fragmented sector.
The generalist players developed their healthcare logistic business
line through an intense M&A activity:
DHL acquired Exel in 2006, which was previously formed out
of a merger between NFC/Ocean Group/MSAS and Tibbett &
Britten. Through this acquisition DHL obtained Exel
healthcare logistic operations and a portfolio of leading-
healthcare costumers.
UPS Supply Chain Solutions acquired Menlo Forwarding, Fritz
Logistics and many other smaller players.
Kuehne + Nagel acquired USCO and ACR Logistics expanding
its healthcare offering and geographical presence.
Wholesalers and distributors on the other hand can become another
important player in future M&A activities. The cost reducing pressure
on the healthcare sector is pushing toward disintermediation and
consequently lowers margins. This can result in a new business model
for wholesalers and distributors targeting some or all logistic aspects
of the supply chain. Movianto, for example, one of the main European
medical devices and health care logistic operators, has been bought
by Owens & Minor, Inc., one of the biggest American distributors and
formerly was owned by Celesio, one of the biggest European
wholesalers.
Distributors on the other hand are also shifting towards integrating
vertically and buying OEMs. For example, Cardinal Health, the largest
A very fragmented market…
BOMI Italia S.p.A.
Oct 2, 2015 ● 24
US generic drugs distributor, has recently bought Johnson &
Johnson’s Cordis business for $1.94 billion in cash, adding a global
manufacturer of cardiology and endovascular devices. In May 2014
Cardinal bought Access Closure, a manufacturer and distributor of
extravascular closure devices, which expanded the Cardinal Medical
segment's portfolio of self-manufactured products.
BOMI Italia S.p.A.
Oct 2, 2015 ● 25
Financials
During the last 10 years Bomi Group enjoyed a steady organic growth,
11% CAGR, despite a 33% devaluation in Brazilian Real $ over the last
three years. The company growth is the result of a solid and stable
clients relationship; for most of them Bomi is a strategic partner and
a key element in their supply chain and business model. This gives
Bomi a strong visibility on its future results and the possibility to
focalize on up-selling and cross-selling on the current client base.
The steady growth is the result of both a macro and micro trend. On
the macro level the healthcare sector grew steadily and has not
experienced any hardships related to the 2007-2008 global recession.
On the micro level, the healthcare and medical devices OEMs are
outsourcing their logistics operations and Bomi capitalized its
leadership positions in Italy and Brazil.
Chart 17: Bomi’s revenues evolution
Source: KT&P illustration, Company Data
The current group perimeter is composed by the Italian, Brazilian,
Colombian and Turkish operations.
Chart 18: Bomi’s Revenue and EBITDA Break-down
Source: KT&P illustration, Company Data
0
0.5
1
1.5
2
2.5
3
3.5
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Bomi Group Historical Turnover Bomi Today's Perimether Turnover
Average Exchange Rate: Real/EUR Linear (Bomi Today's Perimether Turnover)
Strong top-line growth since the
very beginning…
BOMI Italia S.p.A.
Oct 2, 2015 ● 26
Italy has a low EBITDA contribution in comparison to the other
companies due to the fact that Bomi Italia SpA, the holding company
at which the Italian operations are referred, is responsible for: all
the commercial and business development cost, new venture
investments and software investments and mainly for the holding
activities costs which are € 1.5 mn yearly. The holding company has
the role to finance and assist the start-up of the new ventures,
providing them with financial resources, a strong reputation among
medical device OEMs, the IT infrastructure, the business practice and
procedures.
Colombia for example, one of the recent and most successful new
ventures, can best explain the Bomi geographical expansion model.
Bomi Colombia operations were opened in 2009 after two years of
studying the Colombian market and the closing of the first contract
with an anchor customer, Convatec. The start-up phase was entirely
financed by the Italian holding company. Bomi Colombia, after two
years of start-up, reached its break-even point and now is the group’s
fastest growing company.
Chart 19: Colombia Business Case
Source: Company Data
2014 Financial Results
Brazilian operations are the main determinant of the company
results. In 2014 the Brazilian business grew by 6% in local currency (-
3% in euro), accounting for 63% of the company revenues and 68% of
the company EBITDA. Italy on the other hand, represents only 31% of
the revenues, grew by 8% during 2014, and 22% of the EBITDA.
Colombia and Turkey have a high growth rate and in 2014 the growth
rate was respectively 65% and 30% in local currency. At the moment,
however, they represent only 6% of the company revenues.
Bomi Group closed 2014 with total revenues of € 67.0 mn, increasing
by 3% in euro from 2013 results. Company results were impacted by
-5%
0%
5%
10%
15%
20%
25%
0
1,000,000
2,000,000
3,000,000
2009 2010 2011 2012 2013 2014
Revenue and Ebitda margin
Revenues EBITDA
BOMI Italia S.p.A.
Oct 2, 2015 ● 27
the Real devaluation; in local currency the growth would have been
a 9% growth and total revenues of € 70.9 mn. During 2014 EBITDA
margin improved by 2.3% thanks to the company optimization in its
transportation costs.
Chart 20: Bomi’s Trasportation and Porterage Costs Incidence on Sales
Source: KT&Partners Elaborations, Company Data
In 2014 labor costs increased by 2% at €13.94 mn from € 13.64 mn in
2013, notwithstanding that its incidence on total revenues decreased
by 0.3%.
Bomi Group consistently invested on its work-force: in 2014, total
employees increased by 6% to 818 from 775 in 2013, and over the last
4 years, by 32%. The increase of employees was due to the
internalization of some transportation activities and the start-up of
new international operations. The group should enjoy the return from
the work-force investments over the coming years when the
international activities and the transportation activities will end their
start-up phase.
BOMI Italia S.p.A.
Oct 2, 2015 ● 28
Chart 21: Bomi’s Work-force Evolutions
Source: KT&Partners Elaborations, Company Data
In 2014, the new debt – which financed the 2014 investments -
increased financial costs to € 1.3 mn (+28%) compared to € 1.02 mn
in 2013.
Table 4: Bomi’s 2014 Main Investments
New Investments (€ million), 2014
Purchase of Farma Distribution Segrate 2.55
Property and Plants investments 0.93
Industrial and Commercial Equipments 0.30
Other goods 1.51
Software and IT developments 0.45
New international ventures development costs 1.54
Total investments 7.28
Source: Company Data, KT&P elaboration
2014 extraordinary components affected 2014 results by € 1.51 mn,
extraordinary expenses were € 0.61 mn, employees resignation
incentive were € 0.35 mn, - € 0.17 mn for Italian employees and €
0.18 mn for Brazilian, - and extraordinary costs related to Brazilian
operations were € 0.55 mn.
2014 Net profit was € 1.66 mn in line with 2013 results while Net
profit margin decreased by 0.2% due to the Group investments
expansion, operations optimization and development of new
international activities and IT infrastructures. Third party earning,
mainly the Brazilian minorities, was € 0.92 mn while controlling
shareholders earning was € 0.74 mn.
BOMI Italia S.p.A.
Oct 2, 2015 ● 29
Table 5: Bomis’s 2013 and 2014 Income Statement
Income Statement (€ million) FY 2013 FY 2014
Revenues 64.53 66.23
Other revenues 0.24 0.77
Total revenues 64.76 67.00
Growth % 2.9% 3.5%
Operating costs -45.00 -45.10
Value added 19.81 21.91
Cost of labour -13.64 -13.94
EBITDA 6.19 7.97
EBITDA margin 9.6% 11.9%
Amortisation/depreciation -1.69 -2.06
EBIT 4.50 5.91
EBIT margin 7.0% 8.8%
Financial income and expenses -1.02 -1.31
Extraordinary income and expenses -0.30 -1.51
Profit Before taxes 3.19 3.09
PBT margin 4.9% 4.6%
Income taxes -1.46 -1.43
Net profit 1.73 1.66
Net profit margin 2.7% 2.5%
Third parties Earnings 1.43 0.92
Net earnings Bomi Group 0.30 0.74
Source: Company Data, KT&P elaboration
In December 2014 Bomi acquired Farma Distribuzione Segrate (FDS)
for a total of € 2.55 mn. The acquisition payment was composed of
60% by vendor loan and the remainder by two 20% Earn-out based on
future 12 and 24-month results. FDS acquisition has a two-sided
rational: 1) expanding Bomi Group core activities also to pharma
clients and 2) expanding its client base. FDS had 4 clients, one of
which was a market leader in Medical Nutrition.
Considering the FDS acquisition, in 2014 Bomi group had a Pro forma
total revenues of € 72.14 mn and an EBITDA of € 8.46 mn, with Net
Profit at € 1.85 mn. From FDS Bomi is likely to exploit many
commercial and operating synergies; the first indication of the
impact of this acquisition are promising: during 1Q 2015 FDS had a
significant EBITDA improvement, March results are 3-times January
results.
BOMI Italia S.p.A.
Oct 2, 2015 ● 30
Table 6: Bomis’s 2014 Pro Forma Results with FDS Integration
Income Statement (€ million) FY 2014 FY 2014
Pro forma
Total revenues 67.00 72.14
EBITDA 7.97 8.46
EBITDA margin 11.9% 11.7%
EBIT 5.91 6.40
EBIT margin 8.8% 8.9%
Profit Before taxes 3.09 3.35
PBT margin 4.6% 4.6%
Net profit 1.66 1.85
Net profit margin 2.5% 2.6%
Third parties Earnings 0.92 0.92
Net earnings Bomi Group 0.74 0.93
Source: Company Data, KT&P elaboration
Bomi is able to generate a high level of free cash flow, since its
ordinary business operates with a low level of Capex investment and
low Working Capital absorption. In 2014 the ordinary EBITDA cash
conversion ratio was 61% and the cash flow generated by ordinary
activities was €4.84 mn. The ordinary FCFO does not consider € 2.3
mn investments in international expansion and the € 3.7 mn working
capital absorption from an increase in DSO terms accorded to majors
Italian and Brazilian clients in the new contractual renewal terms.
Graph 22: Bomis’s 2014 FCFO Generation
Source: Company Data, KT&P elaboration
Bomi Net Financial Position at the end of 2014 was € 14.32 mn, an
increase from the € 6.6 mn 2013 level. The increase was mainly due
to the aforementioned €3.7 mn working capital absorption related to
the DSO increase and € 3.8 mn international expansion and IT
BOMI Italia S.p.A.
Oct 2, 2015 ● 31
development investments. FDS M&A and other capital increase
amounted to € 2.9 mn.
Graph 23: Bomis’s 2014 Net Financial Position
Source: Company Data, KT&P elaboration
Table 7: Bomi’s 2013 and 2014 Balance Sheet
Source: Company Data, KT&P elaboriation
Balance Sheet (€ million) FY 2013 FY 2014
Intangible fixed assets 6.29 7.13
Tangible fixed assets 6.61 7.82
Long-term investments 0.09 2.98
Other long-term assets 1.10 1.57
Total fixed assets 12.99 19.50
Inventories 0.10 0.17
Trade receivables 12.57 17.18
Trade payables -9.55 -10.05
Other assets and liabilities -1.79 -3.05
Net Working Capital 1.33 4.25
Total provisions -1.79 -3.05
Funding 14.44 21.53
Controlling Shareholders’ equity 4.64 5.02
Minorities equity 1.76 2.15
Equity 6.40 7.17
Short-term bank borrowings 6.12 13.03
Long-term bank borrowings 5.91 5.85
Financial assets -0.28 -0.24
Cash & Equivalents -3.69 -4.32
Net Financial Position 8.15 14.32
Sources 14.44 21.53
BOMI Italia S.p.A.
Oct 2, 2015 ● 32
1H 2015 Financial Results
The first half of 2015 was impacted by the G. CARRAI acquisition and
the company IPO. In fact, In May 2015 Bomi closed an important M&A
deal acquiring G. CARRAI and becoming the Italian leader in dialysis
and home care logistics. In June 2015 Bomi went public on the AIM Italia
market.
Bomi had a strong 2015 first half with revenues increasing by 20.3% yoy
and 27% considering the G. CARRAI acquisition for the entire period.
Total first half revenues reached € 37.78 mn or € 39.89 mn considering
CARRAI. The first half EBITDA margin increased by 0.7% or 1% on Pro
Forma basis showing both M&A synergies and a better fixed costs
absorption. The Company Net Profit was € 0.50 mn in line with last
year.
It is worth noting that Bomi’s first half is usually weaker than the
second one since the company business is impacted by the Brazilian
Carnival; in 2014 1H accounted for 48% of overall Revenues and 41% of
overall EBITDA.
Table 8: Bomi’s 1H 2014 and 1H 2015 Income Statement
Income Statement (€ million) 1H 2014 1H 2015 1H 2015 PF*
Total revenues 31.41 37.78 39.89
Growth % 20.3% 27.0%
Operating costs -21.86 -25.68 -26.81
Value added 19.81 21.91
Cost of labour -6.92 -8.69 -9.34
EBITDA 2.64 3.41 3.74
EBITDA margin 8.39% 9.03% 9.38%
Amortisation/depreciation -0.94 -1.18 -1.25
EBIT 1.70 2.23 2.49
EBIT margin 5.40% 5.90% 6.24%
Financial income and expenses -0.43 -0.98 -1.02
Extraordinary income and expenses -0.05 -0.20 -0.20
Profit Before taxes 1.22 1.07 1.26
PBT margin 3.87% 2.83% 3.15%
Income taxes -0.50 -0.50 -0.55
Net profit 0.57 0.57 0.71
Net profit margin 1.81% 1.50% 1.78%
Third parties Earnings 0.44 0.28 0.31
Net earnings Bomi Group 0.44 0.29 0.40
* Pro Forma results considering G. CARRAI acquisition
Source: Company Data, KT&P Elaboration
BOMI Italia S.p.A.
Oct 2, 2015 ● 33
Bomi 1H 2015 Net Financial Position decreased to € 7.90 mn from €
14.32 mn at the end of 2014, thanks to the proceeds raised through
IPO.
Table 9: Bomi’s 2013 and 2014 Balance Sheet
Source: Company Data, KT&P elaboration
Balance Sheet (€ million) FY 2014 1H 2015
Intangible fixed assets 7.13 11.18
Tangible fixed assets 7.82 11.02
Long-term investments 2.98 0.09
Other long-term assets 1.57 1.30
Total fixed assets 19.50 23.59
Inventories 0.17 0.13
Trade receivables 17.18 21.34
Trade payables -10.05 -12.69
Other assets and liabilities -3.05 -4.83
Net Working Capital 4.25 3.23
Total provisions -3.05 -1.99
Uses 21.53 25.65
Controlling Shareholders’ equity 5.02 15.51
Minorities equity 2.15 2.24
Equity 7.17 17.75
Short-term bank borrowings 13.03 9.57
Long-term bank borrowings 5.85 16.77
Financial assets -0.24 -0.31
Cash & Equivalents -4.32 -18.13
Net Financial Position 14.32 7.90
Sources 21.53 25.65
BOMI Italia S.p.A.
Oct 2, 2015 ● 34
2015-2019 Estimates We expect Bomi Italia with FDS incorporated and Bomi Brazil to grow
their revenues by 8% annually over the next five years. We estimate
the average Euro/Real exchange rate to be 3.7 for 2015 and 4.4 for
2016 onwards. We also expect an increased top-line contribution by
the Colombian, Turkish and Chilean businesses that have strong
growth rates and that are starting to become relevant for Bomi’s
progress and contributing by 20% to Bomi top-line over the next five
years.
Our expected 8% growth rate for the Italian and Brazilian revenues is
below the 11% average experienced by Bomi over the last 10 years.
Moreover, we did not consider any commercial synergies from FDS
and CARRAI acquisitions and any contribution from the new
innovative business that Bomi has recently started.
In May 2015, Bomi closed an important M&A deal acquiring G. CARRAI
and becoming the Italian leader in dialysis and home care logistics.
We incorporate in our top line estimates a € 2.6 mn contribution for
2015 and € 5.50 mn and € 6.00 mn in 2016 and 2017. Recently Bomi
signed a LOI with RITMO holding in order to acquire the RITMO BV
healthcare logistics operations and expand its activities in Northern
Europe and UK. We expect a € 10 mn top-line contribution by RITMO
BV acquisition in 2016 and € 11 mn in 2017. Considering these two
acquisitions and the adverse currency effect we expect total
revenues of € 73.89 mn in 2015 to grow by 2.4% in respect to 2014
Pro forma results and to reach € 112.64 mn in 2019.
Table 10: Summary Consolidated top-line (2014- 2019E)
€ mn 2014 2014* 2015E 2016E 2017E 2018E 2019E
Bomi Italia Revenues 21.10 26.24 28.34 30.61 33.06 35.70 38.56
Bomi Brazil Revenues (local currency) 150.62 150.62 162.66 175.68 189.73 204.91 221.30
Bomi Brazil Revenues after tax
(local currency) 129.53 129.53 139.89 151.08 163.17 176.22 190.32
Euro-Real exchange rate 3.12 3.12 3.70 4.40 4.40 4.40 4.40
Bomi Brazil Revenues 41.50 41.50 37.81 34.34 37.08 40.5 43.26
Bomi Colombia, Turchia and others 4.41 4.41 5.14 6.01 7.06 8.32 9.82
Bomi Group Revenues 67.00 72.15 71.29 70.96 77.20 84.07 91.64
YoY Growth 3.5% 11.4% -1.2% -0.5% 9.0% 8.9% 9.8%
G CARRAI 2.60 5.50 6.00 6.50 7.00
RITMO BV 10.00 11.00 12.00 14.00
Bomi Group Revenues post M&A 67.00 72.15 73.89 86.46 94.20 102.57 112.64
YoY Growth 3.5% 11.4% 2.4% 17.0% 9.0% 8.9% 9.8%
* Pro Forma results considering FDS acquisition Source: Company Data, KT&P Estimates
BOMI Italia S.p.A.
Oct 2, 2015 ● 35
We expected 2015 EBITDA at € 8.35 mn with a slight decrease
compared to the € 8.46 mn 2014 Pro forma EBITDA, due to the impact
of Euro/Real exchange rate depreciation. By 2016 we expect an
EBITDA margin of 12% which is 0.3% higher than 2014 Pro forma
EBITDA margin due to M&A synergies and fixed costs absorption
related to a bigger company scale.
We expect company Net income to increase by 16% at € 2.16 mn in
2015 in respect to 2014 Pro forma results and related Net margin is
expected to improve by 0.4% compared to 2014 Pro forma. The Net
Profit margin improvement for the portion unexplained by the
EBITDA margin expansion is due to an expected lower impact of the
extraordinary items that affected 2014 results. We expect a 2019 Net
profit at € 6.08 mn with a Net profit margin of 5.4% and a 3.8%
expansion in respect to 2014 Pro forma results.
Finally, we expect the M&A deals and the Italian growth to reduce
the minorities share on Group Net Profit, in 2014 with the FDS
acquisition controlling shareholders stake on Net Profit increasing at
50% from 45% on Group actual results.
Table 11: Summary Consolidated P&L (2014- 2019E)
€ mn 2014 2014* 2015E 2016E 2017E 2018E 2019E
Revenues 67.00 72.14 73.89 86.46 94.20 102.57 112.64
YoY Growth 3.5% 11.4% 2.4% 17.0% 9.0% 8.9% 9.8%
EBITDA 7.97 8.46 8.35 10.37 11.30 12.31 13.52
YoY Growth 28.8% 36.7% -1.3% 24.3% 9.0% 8.9% 9.8%
EBITDA margin 11.9% 11.7% 11.7% 12.0% 12.0% 12.0% 12.0%
EBIT 5.91 6.40 5.99 7.72 8.80 9.95 11.31
YoY Growth 31.2% 42.1% -6.4% 28.8% 14.0% 13.1% 13.7%
EBIT margin 8.8% 8.9% 8.1% 8.9% 9.3% 9.7% 10.0%
Net Income 1.66 1.85 2.16 3.10 3.95 4.90 6.08
YoY Growth -3.8% 7.2% 16.6% 43.7% 27.4% 24.2% 23.9%
Net Margin 2.5% 2.6% 2.9% 3.6% 4.2% 4.8% 5.4%
Minorities Earnings 0.92 0.92 1.04 1.46 1.82 2.26 2.73
Controlling shareholders Earnings
0.74 0.93 1.12 1.64 2.13 2.65 3.34
EPS 0.05 0.06 0.07 0.11 0.14 0.17 0.22
% Controlling shareholders on Group Profit
45% 50% 52% 53% 54% 54% 55%
* Pro Forma results considering FDS acquisition
Source: Company Data, KT&P Estimates
BOMI Italia S.p.A.
Oct 2, 2015 ● 36
We expect the strong cash conversion ratio to continue in future years
and FCFO to be € 4.09 mn in 2015, € 5.12 mn in 2016 and up to € 5.99
mn in 2019.
Table 12: Summary Consolidated FCFO (2014- 2019E)
€ mn 2014 2014* 2015E 2016E 2017E 2018E 2019E
EBITDA 7.97 8.46 8.35 10.37 11.30 12.31 13.52
Taxes -1.43 -1.50* -1.76 -2.33 -2.83 -3.28 -3.72
Ordinary WC change 0.11 0* -0.58 -0.68 -0.74 -0.80 -0.88
Ordinary Investments -1.80 -1.94* -1.92 -2.25 -2.45 -2.67 -2.93
FCFO 4.84 5.02* 4.09 5.12 5.29 5.56 5.99
Cash conversion ratio 60% 59% 49% 49% 49% 47% 44%
* Pro Forma results considering FDS acquisition Source: Company Data, KT&P Estimates
BOMI Italia S.p.A.
Oct 2, 2015 ● 37
Valuation
We have carried out our valuation based on our estimates, peers
multiple and using DCF analysis as a control method. This led to a
Bomi stock target price of € 3.26 that implies a 26% discount on
current price.
DCF analysis is based on WACC of 9.1% and 1.5% perpetual growth,
which returns a value of €3.13 per share.
Peer Comparison
To value Bomi we identified a series of comparables (see Appendix).
We have chosen our peer taking into consideration the business
activity and the services provided. We believe that the best way to
provide a fair valuation of Bomi is to focus on EV/EBITDA multiple as
it better capture the company’s cash-generating ability. However,
we should note that selected companies are quite different in terms
of revenue size. For this reason, we used a 2015 EV/EBITDA multiple
of 9.58x obtained applying a 15% size discount to 2015 EV/EBITDA
peers average.
We expect minorities to generate 30% of BOMI 2015 EBITDA with a
Net Financial Position of € 1.5 mn. The minorities valuation is based
on the same EV/EBITDA multiple.
(M€)
Company Name Exchange Mrk Cap
(M€) EV/EBITDA
2015
EV/EBITDA 2016
P/E 2015 P/E 2016 EV/FCFO
2015 EV/FCFO
2016
DSV A/S OMX Copenhagen
5,740 13.47 12.60 21.17 19.38 21.92 19.79
Kuhne&Nagel Int. AG SIX Swiss 13,559 14.05 13.20 22.51 20.65 22.21 20.51
UPS Inc. Class B US Composite 60,613 9.75 9.14 14.22 13.20 19.16 17.30
Deutsche Post AG XETRA 28,687 7.75 6.90 13.92 11.96 26.13 19.10
Owens & Minor,Inc US Composite
1,828 8.56 8.04 17.41 16.01 15.88 18.12
UDG Healthcare Plc London 1,700 14.04 13.25 21.79 19.52 n.a. 29.84
Average peer group 18,688 11.27 10.52 18.50 16.79 21.06 20.77
Median peer group 9,650 11.61 10.87 19.29 17.69 21.92 19.44
Bomi Italia S.p.A. Milan 40 8.79 7.08 37.98 27.06
Source: Factset, KT&P elaborations
EV/EBITDA 2015 11.27
discount 15%
EV/EBITDA 2015 post discount 9.58
EBITDA 2015 expected 8.35
BOMI Italia S.p.A.
Oct 2, 2015 ● 38
DCF Valuation
We believe that DCF analysis is also an interesting way to highlight
the company’s positive and visible cash flow generation for the
forthcoming years and a check method for our multiples valuation.
(M€)
Cash Flow Statement
2015 2016 2017 2018 2019 Terminal
Value
FCFO 4.09 5.12 5.29 5.56 5.99 79.99
Discount Factor 0.98 0.90 0.82 0.75 0.69 0.69
Present Value 4.00 4.59 4.35 4.19 4.14 55.24
Enterprise Value 76.50
Net Financial Position 7.90
Minorities Net Financial Position
1.50
BOMI Italia NFP 6.40
Minorities Equity Value
22.49
Bomi Italia SpA Equity Value
47.61
Shares outstanding 15.23
Target Price € 3.13
Source: Factset, KT&P estimates
Enterprise Value 79.98
Net Finacial Position 1H 2015 7.90
Equity Value 72.08
Minorities EBITDA (hp:30%) 2.50
Enterprise Value minorities 23.99
Minorities Net Finacial Position 1H 2015 (expected) 1.50
Equity Value minorities 22.49
Bomi Italia SpA Equity Value 49.59
Bomi Italia SpA number of shares 15.23
Target price € 3.26
Source: Factset, KT&P estimates
Assumptions
g 1.5% WACC 9.1%
BOMI Italia S.p.A.
Oct 2, 2015 ● 39
Appendix
Peer Description
DSV A/S provides transport and logistics solutions. It operates
through the following business segments: Air and Sea, Road, and
Solutions. The Air and Sea segment specializes in the handling of air
and sea freight through a global network. The Road segment offers
road freight services including full and part loads, and temperature-
controlled transport, and other specialized services across Europe.
The Solutions segment covers specialized logistics solutions such as
freight management, customs clearance, warehousing and
distribution, information management, and e-business support. The
company was founded on July 13, 1976 and is headquartered in
Hedehusene, Denmark.
Kühne & Nagel International AG is engaged in the provision of
logistic services. It also offers strategic solutions such as hotel
logistics and emergency and relief logistics. It operates through the
following segments: Seafreight, Airfreight, Road and Rail Logistics,
Contract Logistics, Real Estate, and Insurance Brokers. The company
was founded by August Kuehne and Friedrich Nagel in 1890 and is
headquartered in Schindellegi, Switzerland.
United Parcel Service (UPS), Inc. is a logistics company, which
provides global package delivery and supply chain management
services. It offers logistics services to the global market, which
includes transportation, distribution, forwarding, ground, ocean and
air freight, brokerage and financing. The company operates its
business through three segments: U.S. Domestic Package,
International Package and Supply Chain & Freight. UPS was founded
by James E. Casey and Claude Ryan on August 28, 1907 and is
headquartered in Atlanta, GA.
Deutsche Post AG provides mail and logistics services. It operates
through the following business segments: Mail, Express, Global
Forwarding Fright and Supply Chain. The Mail segment, specialized
in dialogue marketing, nationwide press distribution services and all
the electronic services associated with mail delivery provides
domestic and international mail and parcels. The Express segment
offers courier and express services to business customers. The Global
Forwarding Freight segment handles the carriage of goods by rail,
road, air and sea. The Supply Chain segment provides warehousing,
managed transport and value-added services at every link in the
supply chain for customers in a variety of industries including life
sciences and healthcare. The Retail and Life Sciences&Healthcare
sectors accounted for the majority of the Supply Chain gains. In 2014,
Supply Chain division revenues amounted to € 14.7bn and the
BOMI Italia S.p.A.
Oct 2, 2015 ● 40
contribution of the life science and healthcare sector was about €
2.9bn (20%). The company was founded in 1995 and is headquartered
in Bonn, Germany.
Owens & Minor, Inc. is a healthcare logistics company that connects
the world of medical products to the point of care. It provides
services to the manufacturers of healthcare products, supplies and
devices in the United States and Europe. The company operates
though two segments: Domestic and International. The Domestic
segment provides all services in the United States relating to medical
supply meanwhile the logistics company serve healthcare providers
and manufacturers. The International segment, comprised of the
Movianto Group, provides third-party logistics for the
pharmaceutical, biotechnology and medical device services in the
European market. Owens & Minor was founded by Otho O. Owens and
G. Gilmer Minor in 1882 and is headquartered in Mechanicsville, VA.
UDG Healthcare Plc provides commercialization solutions to
international healthcare companies. The company operates through
three segments: Supply Chain services, Sharp Packaging services and
Ashfield Commercial and Medical services. The Supply Chain services
segment combines all of the group's healthcare logistics based
businesses. The Sharp Packaging services segment provides
outsourced commercial and clinical trial packaging services to
healthcare companies. The Ashfield Commercial and Medical services
segment provides sales and marketing services, healthcare
communications, event management, medical affairs and regulatory
services to healthcare manufacturers. The company was founded in
1948 and is headquartered in Dublin, Ireland.
BOMI Italia S.p.A.
Oct 2, 2015 ● 41
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