(c) Hannoversche Allgemeine Zeitung, Niedersachsen Der Norden, Dienstag, 27. Dezember 2022, Von Katharina Kutsche
Prosthetics company from Duderstadt sees the path to the stock market as an option, but it must be able to tell a growth story. Now an investor is also examining their exit.
Hanover
Anyone who has ever had the opportunity to visit the workshops of prosthetics manufacturer Ottobock can have no doubt about the motivation of the staff. At the company’s headquarters in Duderstadt, people regain as much of their mobility as possible after a war injury, an accident, or a severe illness. As a business purpose, this is a very worthwhile goal. “We empower people” is the fitting company motto. But how strong is the company behind it? It is just under seven months since Ottobock made headlines several times in just a few days. First, three top managers left, then the planned IPO was canceled. Both came as a surprise to outsiders. Since last Thursday, it is now known that investor EQT, which holds 20 percent of Ottobock’s shares, is examining its exit.
80 percent with founding family
Just before Christmas, the next twist. The Swedish private equity firm joined Ottobock in 2017 with a minority stake. The remaining 80 percent is held by the founding family of Hans Georg Näder. His Näder Holding serves as the parent company behind Ottobock SE & Co. KGaA, both headquartered in Eichsfeld. Grandson of the founder, Näder had previously wanted to take the company public, but instead, it entered into cooperation with EQT. Since then, the plan, as communicated by Ottobock, has been to be ready for the stock market in 2022. The preparations alone cost the subsidiary 11.4 million euros last year. However, private equity firms often stay only for several years before divesting their holdings. And with the cancellation of the IPO in May, the joint goal was no longer valid.
Over 9,000 employees
The company attributes the failure to go public to the fact that it is “not desirable until further notice due to the current geopolitical situation and the capital market environment influenced by it.” In fact, only the car manufacturer Porsche made its stock market debut in 2022. But experts say that a good company can be brought to the stock market even in difficult times. However, a growth story should be told. That is where the problem might lie. Ottobock describes itself as a market leader in prosthetics. The company is undoubtedly a “big player”: more than 9,000 employees at nearly 60 locations worldwide, plus more than 390 supply centers and decades of commitment to the Paralympics, where the Duderstadt-based company operates workshops for athletes. And even if it may sound cynical: wars and their resulting casualties have been around even before Russia’s attack on Ukraine. In addition, in the affluent Western countries, people are getting older and diseases such as diabetes are becoming more common. According to experts, not accidents but arterial occlusive diseases, such as diabetes mellitus, are the most common cause of leg amputation in Germany. The number of actual and potential users of prostheses has certainly not decreased. Competitor Össur, for example, an orthopedic company from Reykjavík with around 4,000 employees, is also active in more than 30 countries worldwide. Between 2017 and 2021, the Icelanders recorded sales growth of 26 percent and profits of an average of around 56 million dollars per year. With Ottobock, however, it depends on which annual report you look at.
More Revenue, More Loss
Although Ottobock SE & Co. KGaA increased its revenue by 16 percent between 2017 and 2021, it recorded a loss of 36.4 million euros during the same period. In addition, the company’s debt to credit institutions rose by 40 percent to 757.5 million euros between 2017 and 2021. Meanwhile, the equity ratio has fallen to just 10 percent. The higher the ratio, the more stable the company; the lower the ratio, the riskier the business. According to a study by the development bank KfW, the average equity ratio for German medium-sized companies was 31.4 percent in 2021. Ottobock refers to its corporate structure, stating that the individual financial statements of Ottobock SE & Co. KGaA are not meaningful in this context, as the financial statements of the Ottobock Group are decisive. However, these are reported in the consolidated financial statements of Näder Holding, which have not yet been published for 2021. Ottobock SE & Co. KGaA is the company that was supposed to go public. In 2020, Näder Holding’s equity ratio was only 22 percent, with a downward trend. Over three years, nearly 120 million euros in losses have been accumulated. The revenue growth over five years was cumulatively less than 3 percent. The fact is, Ottobock’s business accounted for 94 percent of Näder Holding’s revenue. How strong can the parent company be if the subsidiary is struggling, and vice versa? The individual financial statements of Ottobock SE & Co. KGaA for the 2021 financial year are dated April 12, 2022. The IPO was canceled a month later.
Business with Intermediaries
Another aspect of the 2021 financial statements is puzzling. According to the statements, Ottobock SE & Co. KGaA is using a so-called reverse factoring program for the first time. In simple terms, Ottobock purchases goods, the intermediary covers the purchase amount, and the company repays it later. As of December 31, 2021, Ottobock owed the payment service provider 52.7 million euros. To clarify, neither the accounting method nor reverse factoring is disreputable. The German Federal Financial Supervisory Authority stated in November 2021 that this type of corporate financing is becoming increasingly popular. So much so that the authority declared reverse factoring a key area of focus for 2021 group financial statements. Ottobock explains that reverse factoring is “a component of our overall financing concept” and that the company uses this instrument primarily to ensure better financial resource planning due to the large number of suppliers, subcontractors, and customers.
Strong Competitor
It remains exciting to see how the family-owned company, founded in 1919, will present itself in the coming year. In the battle for skilled workers, Ottobock faces strong competition from biotech company Sartorius in Göttingen. Sartorius is bound by collective agreements, Ottobock is not. Therefore, IG Metall has been in talks with the prosthetics manufacturer’s workforce for quite some time. In these discussions, “we perceive a certain uncertainty among colleagues due to the many disruptions recently,” says André Sander, the first authorized representative of IG Metall Süd-Niedersachsen-Harz. Interest in joining the union has also increased. The IPO, at any rate, remains an option, according to sources in Duderstadt. Oliver Jakobi has been managing the operational business since May, initially on a temporary basis, and as of the recent board meeting on December 15th, he has been appointed as the new CEO. Jakobi is expected to lead the prosthetics manufacturer “into the next phase of corporate development,” said Hans Georg Näder following the decision. Together with the executive team, Jakobi will “successfully continue our growth strategy.”