Indra Sistemas SA Software & IT Services IT Services. Still more to do, but execution on track. 6 November 2015 BUY EUR EUR 12.

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1 Still more to do, but execution on track Indra s 9M 2015 results were broadly in line with the market s expectations, with the key highlights including the encouraging Q top-line recovery (+12% in local currency terms) and margin (recurrent) improvement. Profitability: The Q margin recovery (+3.5%) was largely due to: 1) the improved contract mix; 2) previously booked provisions for lossmaking contracts; and 3) overhead reduction, as part of the company s cost-cutting initiatives. Recent margin recovery, along with management s expectation for further profitability improvement in Q4 2015, reinforce our investment thesis around the company s underlying steady-state margin level, which we have conservatively estimated at c4.2% (see Offloading non-performing assets, dated 4 August 2015). We note that conservatively assuming a 4.2% underlying profitability level and a 2.5% four-year revenue CAGR (versus management s targeted four-year to FY 2018 revenue CAGR of %), the resulting FY 2018 margin is in excess of 9% and this is excluding the impact from a favourable sales mix evolution. One-offs: The company fully provided for the one-off costs of EUR160m associated with the restructuring plan. Moreover, management indicated that it has commissioned a process for reviewing outstanding contracts in Brazil, with the purpose of assessing the level of additional provisions required, as part of the ongoing execution problems, mainly due to subcontractor delays in the region. However, no indication was given on the estimated one-off costs associated with these provisions. As we have consistently argued in our recent notes, we welcome management s focus on balance sheet clean-off. Order intake: The company reported a 5% yoy order intake (OI) decline, mainly attributed to the continued adverse macroeconomic conditions in Brazil, which are a headwind for new contract wins, as well as high dependence on oil prices in countries in the Asia, Middle East and Africa region. In our view, lower OI is likely to apply top-line pressure in the coming quarters, but note that management expects a Q OI recovery from the higher-margin security and defence vertical. We believe that OI contraction is also attributed to the company s more selective commercial strategy. Valuation: We value the stock on an FY 2018E FCF yield of 6.5%, which is broadly in line with the sector, assuming a WACC of 8%. In our estimates to FY 2018, we expect pressure to persist throughout FY November 2015 BUY Current price Price target EUR EUR /11/2015 Madrid Close Market cap (EUR m) 1,887 Reuters IDR.MC Bloomberg IDR SM Changes made in this note Rating: Buy (no change) Price target: EUR (no change) Estimates changes 2015E 2016E 2017E old % old % old % Sales 2, , , EBIT EPS Source: Berenberg estimates Share data Shares outstanding (m) 181 Enterprise value (EUR m) 2,988 Daily trading volume 1 Key data Price/book value 4.5 Net gearing 58.3% CAGR sales % CAGR EPS % Y/E 31/12., EUR m E 2016E 2017E Sales EBITDA 2, , , , , EBIT Net profit Y/E net debt (net cash) , EPS (reported) EPS (adjusted) CPS DPS EBITDA margin 9.5% 9.1% 4.3% 9.8% 11.3% EBIT margin 7.8% 6.9% 1.5% 6.8% 8.3% Dividend yield 3.0% 3.0% 0.0% 0.0% 0.0% EV/sales EV/EBITDA EV/EBIT P/E Free Cash Flow yield (unl.) 3.5% 3.0% -15.2% 5.1% 7.0% Source: Company data, Berenberg Georgios Kertsos Analyst georgios.kertsos@berenberg.com Gal Munda, CFA Analyst gal.munda@berenberg.com

2 BUY Investment thesis 6 November 2015 The strategic plan to focus on higher-margin offerings, while divesting non-core (lower-margin) assets, will benefit the company Current price Price target EUR EUR Market cap (EUR m) 1,887 04/11/2015 Madrid Close EV (EUR m) 2,988 Non-institutional shareholders Sociedad Estatal De Participaciones Industriales (SEPI), Telefónica SA Business description Indra is an IT services company operating in the transport/traffic, energy/industry, public healthcare, financial services, security/ defence and telecoms/media verticals. The company operates in Europe, Latin America, AMEA and North America. Trading volume 1 Free float 65.0% Share performance High 52 weeks EUR Low 52 weeks EUR 7.57 Performance relative to SXXP IBEX 35 1mth -0.9% 1.9% 3mth 3.9% 4.6% 12mth 17.2% 26.5% due to an enhanced competitive advantage, associated with the higher specialisation. The planned investment in new digital offerings will significantly enhance the company s product portfolio by effectively allowing the company to provide end-to-end offerings (a one-stop shop) to clients. Revised management KPIs place increased focus on profitability and cash flow and ensure the alignment of the company s financial targets with the different line of business and project execution teams. This provides a significant incentive for more thorough project management, which in our view will result in tighter project monitoring and reduced project overruns. Our price target is based on an FY 2018E free cash flow yield of 6.5%, which is in line with the sector, discounted at a WACC of 8%. Profit and loss summary EURm E 2016E 2017E Revenues 2,914 2,938 2,932 3,039 3,146 EBITDA EBITA EBIT Associates contribution Net interest Tax Minorities Net income adj EPS reported EPS adjusted Year end shares Average shares DPS Growth and margins E 2016E 2017E Revenue growth -0.9% 0.8% -0.2% 3.6% 3.5% EBITDA growth -7.3% -3.5% -52.8% 136.2% 18.8% EBIT growth -9.1% -9.8% -78.1% 365.3% 25.5% EPS adj growth -14.4% -17.0% % % 36.6% FCF growth 42.7% -13.4% % % 49.5% EBITDA margin 9.5% 9.1% 4.3% 9.8% 11.3% EBIT margin 7.8% 6.9% 1.5% 6.8% 8.3% Net income margin 4.0% -3.1% -18.1% 3.7% 5.0% FCF margin 3.3% 2.8% -14.4% 5.0% 7.2% Valuation metrics E 2016E 2017E P / adjusted EPS P / book value FCF yield 3.5% 3.0% -15.2% 5.1% 7.0% Dividend yield 3.0% 3.0% 0.0% 0.0% 0.0% EV / sales EV / EBITDA EV / EBIT EV / FCF EV / cap. employed Cash flow summary EURm E 2016E 2017E Net income Depreciation Working capital changes Other non-cash items Operating cash flow Capex FCFE Acquisitions, disposals Other investment CF Dividends paid Buybacks, issuance Change in net debt Net debt , FCF per share Key ratios E 2016E 2017E Net debt / equity 33.0% 35.1% 58.3% 52.7% 42.8% Net debt / EBITDA Avg cost of debt 0.0% 0.0% 0.0% 0.0% 0.0% Tax rate 20.5% 6.8% 6.8% 22.0% 22.0% Interest cover Payout ratio 48.2% -60.8% 0.0% 0.0% 0.0% ROCE 8.3% 8.5% 2.1% 9.8% 11.2% Capex / sales 1.9% 1.9% 1.5% 1.8% 1.8% Capex / depreciation 108.3% 88.3% 53.7% 60.0% 60.0% Key risks to our investment thesis Positive risk: Improvement in the macroeconomic conditions will positively affect the company s growth prospects. Positive risk: Potential acquisitions and divestments can significantly enhance the execution of the company s strategic plan. Negative risk: Risk associated with the timely implementation of the restructuring plan could add pressure to the stock. Negative risk: The already signed, lower-margin, backlog can adversely affect the company s plan to discontinue its non-core assets. Georgios Kertsos Analyst georgios.kertsos@berenberg.com Gal Munda, CFA Analyst gal.munda@berenberg.com

3 Investment case overview The company s new strategic plan prioritises margin expansion over top-line growth by focusing on higher-margin proprietary offerings, while investing in new, less labourintensive, digital solutions and industrialisation initiatives, aiming to maximise economies of scale. The company s strategic plan includes the reorganisation of the existing product portfolio by discontinuing and potentially divesting lower value-adding, non-core, offerings. The bull case We believe that prioritising margin expansion over top-line growth, along with realigning of the sales force based on vertical expertise, is the right long-term strategy, as it will prevent commoditisation of the company s offerings and ultimately result in total addressable market (TAM) expansion due to enhanced vertical expertise. Discontinuing sales of lower value-adding services and potentially divesting non-core assets will adversely affect top-line evolution, but will be largely FCF- and marginaccretive. We would welcome any such inorganic initiatives. Management s new remuneration structure is aligned with the group s margin, FCF and strategic targets. We expect the realignment of management s key salary and bonus performance criteria to provide a strong incentive to execute on the recently announced restructuring plan. We note that 40% of senior management s remuneration is deferred for three years and is based on relative share price performance against peers, with an additional 10% deferred for three years, dependent on financial and operating metrics, including FCF and EBIT margin. The remaining 50% is equally split between fixed and variable remuneration, with the variable component dependent on annual FCF and EBIT margin. Senior management has realigned middle level management s remuneration KPIs, so that these are also aligned with the group s financial and operating targets. We expect this to result in tighter project management and to ultimately boost margin and FCF. Key elements of senior management s remuneration structure Key elements of remuneration structure New Comments Fixed 25% Variable A 25% Variable - Deferred A 10% Deferred for 3-years (all shares) Variable - Deferred B 40% Deferred for 3-years (all shares) Total 100% Old Fixed 25% 70% Variable 75% C 30% Total 100% 100% A - Dependent on FCF (50%), EBIT margin (10%), Order Intake (10%) and strategic targets (30%) B - Based on share price performance against peers C - Based on a blended target of Revenues, Profitability & FCF Source: Company, Berenberg The new chairman, Fernando Abril-Martorell, has a good track record from several senior management roles, including serving as CEO of Credit Suisse Spain and Portugal, Telefónica and Prisa, a media company. During his tenure at Prisa, he was responsible for the financial strategy, corporate development and optimisation of the group s cost structure and successfully negotiated the company s refinancing in

4 Key risks for our investment thesis Macroeconomic outlook: With c45% of sales from the domestic market (Spain) and c34% from cyclical sectors, security and defence and public administration, deterioration of the macroeconomic environment will adversely affect the company s performance. Full monetisation of the targeted cost savings of EUR180m-200m: Given the successful resolution of negotiations with relevant employee unions, we believe that the risk associated with the above cost cuttings is fairly contained, as from the total targeted cost savings, c66% (EUR120m) relates to personnel cost cuts. In our view, the main risk about the targeted cost cuttings mainly relates to the actual timings of the targeted run-rate cost savings, which the company expects to be fully incurred from FY 2017 onwards. We note that the associated one-off costs of EUR160m have been fully provided by management in Q Lower-margin legacy backlog: The company s lower-margin legacy backlog poses a real risk for the timely execution of its medium-term strategic plan. In our view, the company can either execute the signed backlog or consider disposing it along with non-core assets. We would welcome such inorganic initiatives, as we expect these will largely be margin- and FCF-accretive and strengthen the company s balance sheet. In our estimates, we assume the process of clearing the lower-quality backlog to take approximately two years. We note the recent order intake evolution, which indicates a shift from (lower-margin) services to solution offerings. This is in line with the company s strategy to focus on higher-margin offerings. The bear case Recent profitability implies a significantly worse margin profile for the business compared to FY 2014 (+6.9%), which is the base year for the targeted 10-11% FY 2018 margin as part of the four-year restructuring plan. Working capital evolution (adjusted for write-offs) suggests continued pressure on collection of receivables. A significantly deteriorating net debt/ebitda ratio poses a risk for the ability to service the company s debt. There is risk of a rights issue to support the company s funding requirements. The risk for further contract provisioning. Responses to bear-case arguments Recently reported profitability as of 9M15 (-0.1%) is, in our view, not reflective of the underlying margin profile of the business, which we estimate at c4.2%. Conservatively assuming a recurrent EBIT margin in excess of 4% and a 2.5% four-year revenue CAGR, the resulting FY 2018 margin is in excess of 9%, excluding the impact from a favourable sales mix evolution. We also note the encouraging Q margin recovery (+3.5%), which is largely due to: 1) an improved contract mix; 2) the previously booked provisions for loss-making contracts; and 3) slight overhead reduction as part of the company s cost-cutting initiatives. These factors reinforce our thesis around the company s underlying profitability level. We expect the recent asset write-offs (c20% of which relates to receivable write-offs) to have largely addressed the risks associated with the recoverability of the company s receivables and note the improvement in the level of working capital to c61 days versus c64 and c81 days, in H and FY 2014 respectively. Management confirmed there are no clauses in the company s financing agreements that link the cost of debt to the company s financial and operating performance. This suggests a fixed average cost of debt throughout the debt maturity period. Furthermore, we see limited risk for servicing the company s short-term debt obligations due to: 1) the vast majority of the outstanding debt maturing after FY 2016; and 2) management confirming that there are available credit facilities to finance the company s operations. We also note that the recently reported 10bp reduction in the cost of debt (4.4% versus 4.5% in FY 2014), which given the significantly higher net debt/ebitda level (c6.6x), indeed suggests that there are no closes linking the cost of debt to financial metrics. 4

5 The new chairman confirmed that there will be no rights issue. As we have consistently argued in our recent notes, we believe that offloading nonperforming assets as part of the company s targeted restructuring plan is a necessary step. We therefore welcome management s focus on assessing the recoverability of capitalised assets and profitability level of ongoing contracts. We note that following the Q earnings call, management confirmed that it has commissioned a process of reviewing outstanding contracts in Brazil, with the purpose of assessing the level of the necessary additional provisions required. Results summary EUR M Source: Berenberg, company reports Reported 9M14 Consensus 9M15 Reported 9M15 YoY vs Cons Net sales 2,087 2,028 2,069 (0.8%) 2.1% EBIT (recurrent) (101.0%) (0.0%) EBIT margin (recurrent) 7.5% -0.1% -0.1% (7.6%) 0.0% EBIT (post extraordinaries) (497.0%) 6.0% EBIT margin (post extraordinaries) 6.7% -26.0% -27.0% (33.7%) (1.0%) Net profit (reported) (806.4%) 3.6% Source: Berenberg, company reports Comments YoY (cc) growth mainly supported by top line recovery in Spain (+11%), with AMEA the main drag (-25%), due to the completion of the Iraq election contract Q315 EBIT margin (recurrent) recovery (+3.5%) due to a) improved contract mix, b) previous provisioning on lossmaking contracts, and c) overhead reduction, as part of the restructuring plan Q315 one-off charges mainly relate to the full provisioning (EUR160m) of the costs associated with the announced restructuring plan 5

6 FY 2018 financial targets Source: Company Summary of targeted cost cuttings to FY 2018 Source: Company reports 6

7 Dashboard Revenue breakdown by market Q % Revenue breakdown by market Q % 31.8% 36.3% 28.5% 40.4% 21.6% Domestic Europe LatAm Africa/Asia/Australia 19.1% Domestic Europe LatAm Africa/Asia/Australia Revenue breakdown by vertical Q3 14 Revenue breakdown by vertical Q % 22.7% 18.2% 22.4% 17.3% 11.8% 15.0% 9.2% 15.4% 17.7% 17.9% 17.3% Transport and Traffic Telecom & Media Financial Services Public Admin & Healthcare Energy & Industry Security & Defence Transport and Traffic Telecom & Media Financial Services Public Admin & Healthcare Energy & Industry Security & Defence Revenue breakdown by segment Q3 14 Revenue breakdown by segment Q % 35.0% 59.8% 65.0% Solutions Services Solutions Services 120% 100% Revenue split by segment and total revenue evolution Revenue split 80% 60% 40% 20% 35% 65% 41% 37% 59% 63% 31% 69% 37% 39% 34% 30% 63% 61% 66% 70% 36% 35% 40% 64% 65% 60% 33% 38% 38% 35% 67% 62% 62% 65% -% FY12 Q-1 FY12 Q-2 FY12 Q-3 FY12 Q-4 FY13 Q-1 FY13 Q-2 FY13 Q-3 FY13 Q-4 FY14 Q-1 FY14 Q-2 FY14 Q-3 FY14 Q-4 FY15 Q-1 FY15 Q-2 FY15 Q-3 Solutions Services Total revenue Source: Company reports, Berenberg 7

8 Dashboard (cont.) 10% 8% 6% 4% 8.4% 8.4% 8.6% 8.5% Revenue and EBIT margin (recurrent) 7.9% 7.9% 7.8% 7.5% 7.7% 7.7% 7.1% 5.6% 3.5% EBIT-% 2% -% 0.5% (2%) (4%) (6%) (4.0%) FY12 Q-1 FY12 Q-2 FY12 Q-3 FY12 Q-4 FY13 Q-1 FY13 Q-2 FY13 Q-3 FY13 Q-4 FY14 Q-1 FY14 Q-2 FY14 Q-3 FY14 Q-4 FY15 Q-1 FY15 Q-2 FY15 Q-3 Revenue EBIT margin (recurrent) DSO x 5.9x 2.3x 2.4x 2.6x 1.8x 2.0x 2.1x 2.1x 2.2x 2.2x 2.2x 2.3x 2.5x 3.2x FY12 Q-1 FY12 Q-2 FY12 Q-3 FY12 Q-4 FY13 Q-1 FY13 Q-2 FY13 Q-3 FY13 Q-4 FY14 Q-1 FY14 Q-2 FY14 Q-3 FY14 Q-4 FY15 Q-1 FY15 Q-2 FY15 Q-3 Days sales outstanding Net debt to EBITDA 7x 6x 5x 4x 3x 2x 1x -x Net Debt to EBITDA Contribution margin 18% 16% 14% 12% 10% 8% 6% 4% 2% -% Analysis based on LTM numbers 7.3% 7.7% 7.5% 7.4% 7.5% 7.5% 7.5% 7.2% 7.1% 7.1% 7.1% 7.4% 7.7% 7.9% 7.7% 15.5% 16.1% 16.1% 15.9% 15.4% 15.4% 15.3% 15.0% 15.0% 14.8% 13.7% 12.9% 9.0% 4.2% 10.1% FY12 Q-1 FY12 Q-2 FY12 Q-3 FY12 Q-4 FY13 Q-1 FY13 Q-2 FY13 Q-3 FY13 Q-4 FY14 Q-1 FY14 Q-2 FY14 Q-3 FY14 Q-4 FY15 Q-1 FY15 Q-2 FY15 Q-3 Contribution margin Overheads (% of LTM sales) Source: Company reports, Berenberg 8

9 Financials Summary Financials Indra Sistemas SA ( m) E 2016E 2017E 2018E Revenue 2,914 2,938 2,932 3,039 3,146 3,247 Growth -0.9% 0.8% -0.2% 3.6% 3.5% 3.2% Operating profit (recurrent) % 7.8% 6.9% 1.5% 6.8% 8.3% 9.4% Net operating profit (reported) 198 (42) (514) % 6.8% -1.4% -17.5% 6.2% 7.7% 9.4% Net financial Expense (64) (54) (51) (46) (40) (40) PBT (Reported) 147 (97) (570) % 5.0% -3.3% -19.4% 4.7% 6.5% 8.2% Income Tax (30) 7 39 (32) (45) (59) Profit for the period 117 (90) (532) Fully diluted EPS (Adj.) (0.12) Cash flow Cash flow before changes in working capital (115) Working capital (63) (28) (236) (44) (9) (61) Tax paid (35) (53) (28) (32) (45) (59) Net operating cash flow (379) Net Capex (56) (57) (44) (55) (57) (58) FCF (423) Dividends (56) (56) (0) Other 257 (98) 147 (46) (40) (40) Change in cash 297 (71) (277) FCF (company definition) (451) Balance sheet Net Debt/(Cash) , Total fixed Assets 1,290 1,206 1,139 1,105 1,069 1,032 Total working capital (net) Net Assets 1, Valuation EV/sales 0.9x 0.9x 1.0x 0.9x 0.9x 0.8x EV/EBITDA 9.0x 9.5x 23.6x 9.6x 7.6x 6.2x EV/EBIT 11.1x 12.5x 66.8x 13.9x 10.3x 8.2x P/E 13.8x n/m (84.8x) 15.0x 11.0x 9.1x Free cash flow yield 3.5% 3.0% -15.2% 5.1% 7.0% 6.5% Source: Berenberg estimates, Company data 9

10 Please note that the use of this research report is subject to the conditions and restrictions set forth in the General investment stment-related disclosures and the Legal disclaimer at the end of this document. For analyst certification and remarks regarding g foreign investors and country-specific disclosures, please refer to the respective paragraph at the end of this document. Disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz WpHG) Company Indra Sistemas SA Disclosures no disclosures (1) Joh. Berenberg, Gossler & Co. KG (hereinafter referred to as the Bank ) and/or its affiliate(s) was Lead Manager or Co- Lead Manager over the previous 12 months of a public offering of this company. (2) The Bank acts as Designated Sponsor for this company. (3) Over the previous 12 months, the Bank and/or its affiliate(s) has effected an agreement with this company for investment banking services or received compensation or a promise to pay from this company for investment banking services. (4) The Bank and/or its affiliate(s) holds 5% or more of the share capital of this company. (5) The Bank holds a trading position in shares of this company. Historical price target and rating changes for Indra Sistemas SA in the last 12 months Date Price target - EUR Rating Initiation of coverage 19 November Hold 17 June July Buy Berenberg Equity Research ratings distribution and in proportion to investment banking services, as of 1 October 2015 in respect of section 5 paragraph 4 of the German Financial Analysis Regulation (Finanzanalyseverordnung FinAnV) Buy % % Sell % 0.00 % Hold % % Valuation basis/rating key The recommendations for companies analysed by Berenberg s Equity Research department are made on an absolute basis for which the following three-step rating key is applicable: Buy: Sustainable upside potential of more than 15% to the current share price within 12 months; Sell: Sustainable downside potential of more than 15% to the current share price within 12 months; Hold: Upside/downside potential regarding the current share price limited; no immediate catalyst visible. NB: During periods of high market, sector, or stock volatility, or in special situations, the recommendation system criteria may be breached temporarily. Competent supervisory authority Bundesanstalt für Finanzdienstleistungsaufsicht -BaFin- (Federal Financial Supervisory Authority), Graurheindorfer Straße 108, Bonn and Marie-Curie-Str , Frankfurt am Main, Germany. General investment- related disclosures Joh. Berenberg, Gossler & Co. KG (hereinafter referred to as the Bank ) has made every effort to carefully research all information contained in this financial analysis. The information on which the financial analysis is based has been obtained from sources which we believe to be reliable such as, for example, Thomson Reuters, Bloomberg and the relevant specialised press as well as the company which is the subject of this financial analysis. Only that part of the research note is made available to the issuer (who is the subject of this analysis) which is necessary to properly reconcile with the facts. Should this result in considerable changes a reference is made in the research note. 10

11 Opinions expressed in this financial analysis are our current opinions as of the issuing date indicated on this document. The companies covered by Berenberg are continuously followed by the analyst. Based on developments with the relevant company, the sector or the market which may have a material impact on the research views, research reports will be updated as it deems appropriate. The functional job title of the person/s responsible for the recommendations contained in this report is Equity Research Analyst unless otherwise stated on the cover. The following internet link provides further remarks on our financial analyses: Legal disclaimer This document has been prepared by Joh. Berenberg, Gossler & Co. KG (hereinafter referred to as the Bank ). This document does not claim completeness regarding all the information on the stocks, stock markets or developments referred to in it. On no account should the document be regarded as a substitute for the recipient procuring information for himself/herself or exercising his/her own judgements. The document has been produced for information purposes for institutional clients or market professionals. Private customers, into whose possession this document comes, should discuss possible investment decisions with their customer service officer as differing views and opinions may exist with regard to the stocks referred to in this document. This document is not a solicitation or an offer to buy or sell the mentioned stock. The document may include certain descriptions, statements, estimates, and conclusions underlining potential market and company development. These reflect assumptions, which may turn out to be incorrect. The Bank and/or its employees accept no liability whatsoever for any direct or consequential loss or damages of any kind arising out of the use of this document or any part of its content. The Bank and/or its employees may hold, buy or sell positions in any securities mentioned in this document, derivatives thereon or related financial products. The Bank and/or its employees may underwrite issues for any securities mentioned in this document, derivatives thereon or related financial products or seek to perform capital market or underwriting services. Analyst certification I, Georgios Kertsos, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by the Bank or its affiliates. I, Gal Munda, hereby certify that all of the views expressed in this report accurately reflect my personal views about any and all of the subject securities or issuers discussed herein. In addition, I hereby certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this research report, nor is it tied to any specific investment banking transaction performed by the Bank or its affiliates. Remarks regarding foreign investors The preparation of this document is subject to regulation by German law. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. United Kingdom This document is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers. United States of America This document has been prepared exclusively by the Bank. Although Berenberg Capital Markets LLC, an affiliate of the Bank and registered US broker-dealer, distributes this document to certain customers, Berenberg Capital Markets LLC does not provide input into its contents, nor does this document constitute research of Berenberg Capital Markets LLC. In addition, this document is meant exclusively for institutional investors and market professionals, but not for private customers. It is not for distribution to or the use of private investors or private customers. This document is classified as objective for the purposes of FINRA rules. Please contact Berenberg Capital Markets LLC ( ) if you require additional information. 11

12 Third-party research disclosures Company Indra Sistemas SA Disclosures no disclosures (1) Berenberg Capital Markets LLC owned 1% or more of the outstanding shares of any class of the subject company by the end of the prior month.* (2) Over the previous 12 months, Berenberg Capital Markets LLC has managed or co-managed any public offering for the subject company.* (3) Berenberg Capital Markets LLC is making a market in the subject securities at the time of the report. (4) Berenberg Capital Markets LLC received compensation for investment banking services in the past 12 months, or expects to receive such compensation in the next 3 months.* (5) There is another potential conflict of interest of the analyst or Berenberg Capital Markets LLC, of which the analyst knows or has reason to know at the time of publication of this research report. * For disclosures regarding affiliates of Berenberg Capital Markets LLC please refer to the Disclosures in respect of section 34b of the German Securities Trading Act (Wertpapierhandelsgesetz WpHG) section above. Copyright The Bank reserves all the rights in this document. No part of the document or its content may be rewritten, copied, photocopied or duplicated in any form by any means or redistributed without the Bank s prior written consent. September 2015 Joh. Berenberg, Gossler & Co. KG 12

13 Contacts Investment Banking / US: EQUITY RESEARCH Internet RESEARCH AEROSPACE & DEFENCE CAPITAL GOODS INSURANCE TECHNOLOGY Andrew Gollan Sebastian Kuenne Iain Pearce Adnaan Ahmad Charlotte Keyworth Philippe Lorrain Sami Taipalus Jean Beaubois Rizk Maidi Georgios Kertsos AUTOMOTIVES Horace Tam LUXURY GOODS Daud Khan Adam Hull Simon Toennessen Zuzanna Pusz Gal Munda Paul Kratz Tammy Qiu CHEMICALS MEDIA BANKS Sebastian Bray Robert Berg TELECOMMUNICATIONS Nick Anderson John Klein Laura Janssens Wassil El Hebil Adam Barrass Evgenia Molotova Sarah Simon Usman Ghazi James Burbridge Siyi He James Chappell CONSTRUCTION METALS & MINING Laura Janssens Andrew Lowe Lush Mahendrarajah Alessandro Abate Paul Marsch Eoin Mullany Robert Muir Peter Richardson Michael Watts THEMATIC RESEARCH Jonathan Sharpe MID CAP GENERAL Asad Farid FOOD MANUFACTURING AND H&PC Robert Chantry BEVERAGES Fintan Ryan Gunnar Cohrs UTILITIES Javier Gonzalez Lastra James Targett Sam England Robin Abrams Adam Mizrahi Ned Hammond Andrew Fisher GENERAL RETAIL Benjamin May Mehul Mahatma BUSINESS SERVICES, LEISURE & TRANSPORT Conrad Bartos Virginia Nordback Lawson Steele Najet El Kassir Michelle Wilson Anna Patrice Stuart Gordon Philip Saliba Simon Mezzanotte HEALTHCARE Simona Sarli ECONOMICS Matthew O'Keeffe Scott Bardo Kallum Pickering Josh Puddle Alistair Campbell REAL ESTATE Holger Schmieding Alastair Reid Graham Doyle Kai Klose Klara Fernandes Tina Munda Tom Jones Louise Pearson Laura Sutcliffe EQUITY SALES SPECIALIST SALES SALES (cont.) SALES (cont.) FIXED INCOME BANKS & DIVERSIFIED FINANCIALS UK SCANDINAVIA James Ankerson Iro Papadopoulou Frederik Angel Marco Weiss CONSUMER STAPLES John von Berenberg- ELECTRONIC TRADING Rupert Trotter Consbruch SWITZERLAND, AUSTRIA & ITALY Daniel Eichhorn CONSUMER DISCRETIONARY Matthew Chawner Andrea Ferrari Matthias Führer Victoria Maigrot Alexandra Clément Stephan Hofer HEALTHCARE Fabian De Smet Carsten Kinder CRM Frazer Hall Toby Flaux Gianni Lavigna Edwina Lucas INDUSTRIALS Karl Hancock Jamie Nettleton Greg Swallow Chris Armstrong Sean Heath Benjamin Stillfried INSURANCE David Hogg CORPORATE ACCESS Trevor Moss Peter Kaineder SALES TRADING Lindsay Arnold MEDIA & TELECOMMUNICATIONS Christoph Kleinasser HAMBURG Jennie Jiricny Julia Thannheiser James Matthews Alexander Heinz Stella Siggins MATERIALS David Mortlock Gregor Labahn Jina Zachrisson Eleni Papoula Marvin Schweden EVENTS Richard Payman Tim Storm Omi Adjekukor SALES George Smibert Philipp Wiechmann Charlotte Kilby BENELUX Anita Surana Christoffer Winter Natalie Meech Miel Bakker Paul Walker Ellen Parker Martin de Laet LONDON Sarah Weyman Alexander Wace FRANCE Mike Berry Lisa Winterton Thibault Bourgeat Stewart Cook GERMANY Alexandre Chevassus Chris McKeand Michael Brauburger Dalila Farigoule Simon Messman Nina Buechs Clémence Peyraud AJ Pulleyn André Grosskurth Benjamin Voisin Paul Somers Joerg Wenzel US SALES firstname.lastname@berenberg-us.com BERENBERG CAPITAL MARKETS LLC SALES SALES TRADING CRM Member FINRA & SIPC Kelleigh Faldi Scott Duxbury Laura Cooper Shawna Giust Tristan Hedley Zubin Hubner Christopher Kanian CORPORATE ACCESS Jessica London Lars Schwartau Olivia Lee Ryan McDonnell Bob Spillane Emily Mouret ECONOMICS Peter Nichols Mickey Levy Kieran O'Sullivan Jonathan Saxon