Vectron Systems AG

Vectron Systems AG 

Recommendation: 

BUY (Initiating Coverage) 

Key data 

Risk: 

HIGH (-) 

Fair Value: 

EUR 20.71 (-) 

Growth company with value characteristics 

After challenging FY 2009 Vectron will return to its past growth path 

▪ Vectron Systems AG, headquarted in Muenster, is a leading provider of 

intelligent POS systems for the networking of branch shops. The company 

specializes in the dual platform strategy which allows Vectron to deliver 

software and hardware from one single source. With its unique business 

focus and sophisticated product portfolio, Vectron brings almost two 

decades of experience to the development of intelligent POS systems. 

▪ In a saturated and highly fragmented market, Vectron embarked upon a 

multi-pronged strategy to expand and diversify its customer basis and to 

fully capture emerging market opportunities. Consequently, Vectron added 

significant sales and R&D resources over the last year to expand its 

business activities into new geographic markets and niche segments. 

Overall, Vectron pursues a pan European expansion strategy and intends to 

become a leading European market player in the mid-term. 

▪ In its existing markets, Vectron as a premium provider with strong 

technological expertise and sound financial background will benefit from the 

squeeze out of its small regional rivals. Furthermore, the company plans to 

monetize on the hidden potentials within its existing installation basis of 

more than 100,000 systems by means of revolutionary innovations and 

products. Along with higher revenues in its existing markets, Vectron 

expects a significant revenue contribution from its international business. 

▪ Vectron faces the current recessive market environment with a countercyclical 

business expansion strategy by streamlining its product portfolio 

and expanding its dealer network. However, we believe that the current 

recession will continue to hit company´s revenues in FY 2009, too. Despite 

the gloomy short-term growth prospects, we expect Vectron to return to its 

past growth path by FY 2010E. Overall, we forecast revenues of EUR 

20.2m and EUR 23.2m for FY 2009E and FY 2010E, respectively. 

▪ Given the mid-term growth prospects and high dividend yield, we consider 

Vectron´s equity story as attractive. On the basis of a multiple valuation and 

a DCF we derived a fair value of EUR 20.71 per share. 

▪ 

Y/E 31.12., EUR m 2007 2008 2009E 2010E 2011E 

Sales revenues 25.4 23.6 20.2 23.2 25.8 

EBITDA 6.9 5.2 1.7 3.2 4.3 

EBIT 5.6 3.8 0.3 1.9 3.0 

Net result 3.0 2.6 0.1 1.3 1.9 

EPS 6.01 1.71 0.04 0.89 1.30 

CPS 8.57 1.26 1.05 1.88 2.09 

DPS 1.60 1.40 0.00 0.71 1.04 

Gross margin 64.2% 63.2% 62.0% 61.0% 60.3% 

EBITDA margin 27.3% 22.0% 8.3% 13.9% 16.7% 

EBIT margin 22.0% 16.2% 1.5% 8.1% 11.6% 

EV/EBITDA 3.0 4.0 12.4 6.4 4.8 

EV/EBIT 3.7 5.5 66.6 11.0 6.9 

P/E 2.4 8.6 400.7 16.4 11.3 

Source: CBS Research AG, Vectron AG 

Internet: www. vectron.de 

WKN: A0KEXC 

Reuters: V3SG.DE 

14 April 2009 

Share price (dark) vs. CDAX 

Sources: CBS Research AG, Bloomberg, Vectron AG 

Share data: 

Share price (EUR, closing price): 

Shares outstanding (in thousands): 

Market capitalisation (EURm): 

Enterprise value (estimate, EURm): 

Ø daily trading volume (6 m., no. of shares): 

Performance data: 

High 52 weeks (EUR): 

Low 52 weeks (EUR): 

Absolute performance: (12 months) 

Relative performance (vs. CDAX): 

1 month 

3 months 

12 months 

Shareholders: 

Jens Reckendorf 

Thomas Stümmler 

Jochen Fischer 

Free float 

Financial calender: 

Q1/2009 results 

Sector: Technology 

ISIN: DE000 A0KEXC7 

Bloomberg: V3S GY 

Analyst: Veysel Taze 

Igor Kim 

Close Brothers Seydler Research AG 

Phone: +49 (0)69 - 977 84 56 0 

E-Mail: research@cbseydlerresearch.ag 

www.cbseydlerresearch.ag 

Please notice the information on the preparation of this document, the disclaimer, the advice regarding possible conflicts of interests, and the mandatory information required by § 34b WpHG (Securities Trading Law) at 

the end of this document. This financial analysis in accordance with § 34b WpHG is exclusively intended for distribution to individuals that buy or sell financial instruments at their own account or at the account of others 

in connection with their trading activities, occupation, or employment. 

32.9% 

32.9% 

6.0% 

28.2% 

26 April 2009 

Institutional Sales: 

Close Brothers Seydler Bank AG 

Germany: Raimar Bock 

Phone: +49 (0)69 - 920 54 115 

France: Bruno de Lencquesaing 

Phone: +49 (0)69 - 920 54 116 

Close Brothers Seydler Ltd. 

United Kingdom: Ernie Ferriday 

Phone: +44 2076 55 34 80 

14.60 

1,500 

21.9 

20.8 

2,042 

38.50 

9.60 

-47.8% 

8.5% 

21.2% 

-22.6%


Table of contents 

Investment thesis ...................................................... 3 

SWOT analysis ........................................................... 5 


Strengths .................................................................................................... 5 

Weaknesses............................................................................................... 5 

Opportunities .............................................................................................. 6 

Threats ....................................................................................................... 6 

Valuation.................................................................... 7 

Valuation summary .................................................................................... 7 

Peer group valuation ..................................................................................... 7 

Peers summary – short overview ............................................................... 8 

Multiples and derived value ........................................................................ 9 

DCF Valuation............................................................................................. 10 

Company profile ....................................................... 12 

History ...................................................................................................... 12 

Shareholders ............................................................................................ 13 

Management and founding partners ........................................................ 13 

Business model and Products..................................................................... 14 

Products ................................................................................................... 14 

Sourcing and Manufacturing .................................................................... 16 

Customers and Distribution ...................................................................... 16 

Strategy ................................................................... 17 

Product portfolio enhancement ................................................................ 17 

International business expansion ............................................................. 18 

Distribution and Marketing ....................................................................... 18 

Competition ............................................................. 20 

Market environment ................................................ 21 

German retail sales in 2009 ..................................................................... 23 

Some trends and perspectives of POS systems market .......................... 24 

Financials ................................................................ 25 

Historical development ............................................................................. 25 

Revenue forecasts and gross profits ........................................................ 26 

Development of the operating business and profits ................................. 28 

Cash flows and financial aspects ............................................................. 28 

Close Brothers Seydler Research AG | 2


Investment thesis 

Vectron Systems AG, headquarted in Muenster, is a leading provider of 

intelligent POS systems for the networking of branch shops. The company 

specializes in the dual platform strategy which allows Vectron to deliver software 

and hardware from one single source. Along with intelligent POS Systems in 

various sizes and product categories, the company´s product range comprises 

communication software as well as large variety of peripherals such as printers, 

scales and vending machines etc. With an installation basis of more than 100,000 

POS systems all over the world, Vectron belongs to the "Top 10" of the European 

manufacturers and is market leader in the German catering trade and bakery 

industry. Overall, Vectron is technology leader and brings almost two decades of 

experience to the development of intelligent POS systems. 

Business model - In our opinion Vectron has meanwhile established an 

attractive business model which is superior in many respects as it enables to 

remain highly innovative while keeping at the same time manufacturing and 

distribution expenses on a favourable level. 

The focal point in Vectron´s business model is its dual platform strategy which 

allows the company to pursue a cross-industry and a cross-system strategy instead 

of focusing on one industrial segment. Moreover, Vectron´s manufacturing process 

is based on a “built-to-order” approach which provides the company with the 

flexibility to react faster on technological shifts by keeping at the same time 

financial resources tied in inventories at a favourable level. Besides, the company 

commercialises its products by means of an indirect distribution channel which has 

the advantage of providing a broad customer access by keeping at the same time 

the costs per customer contact on a relatively low level. 

Market positioning – We expect Vectron to benefit from the ongoing squeezeout 

of the small regional operators in its underlying market. 

The market for POS systems is characterized by a high level of fragmentation and 

market saturation in developed countries. Apart from few international players, the 

underlying market is mainly dominated by a large number of small regional 

providers. However, since demand has become more sophisticated many of the 

small operators meanwhile face the problem to deliver technologically appropriate 

products to address the increasing demand. In absence of major players in its main 

customer segment of small-and medium sized enterprises (SMEs), Vectron as a 

premium manufacturer with sound financial background is in a favourable position 

to benefit from the consolidation of its underlying market. 

Strategy – Given the market saturation and fragmentation in its underlying 

market, we consider Vectron´s multi-pronged strategy as promising. 

Vectron embarked on a multi-pronged strategy to expand and diversify its customer 

base and product portfolio, fully capture international business opportunities and 

accelerate long-term growth. Vectron intends to tap with its product portfolio new 

niche segments and price categories which have been neglected by the company 

in the past. New innovations as well as technologically improved versions of its 

existing products will attract not only new customers, but also create sufficient 

incentives for existing customer to replace their “old” systems. The company has 

already added mobile and hybrid devices to its products and intends to renew its 

entire portfolio of stationary POS systems. Along with higher revenues in its 

existing markets, the company expects a significant revenue contribution from its 

international business activities. Vectron pursues a pan-European expansion 

strategy and aims to become a leading European market player in the mid-term. 


A leading provider of 

intelligent POS 

systems 

Attractive business 

model 

Vectron is in a favourable 

position to benefit 

from the squeeze-out 

of small players 

Promising strategy 



Attraction of the equity story – We consider Vectron´s equity story as 

attractive since it combines the growth prospect of a fast growing company 

with the typical characteristics of a value investment (e.g. high dividend 

yield). 

The key attraction of Vectron´s equity story is the expansion of business activities 

to new geographic markets, the untapped potentials within its existing markets as 

well as company´s sound installation basis and the traditionally high dividend yield 

(in the past pay-out ratio of approx. 80%). Although Vectrons´s existing markets 

has saturated, the company will still generate higher revenues in the future in 

course of the squeeze out of small regional operators and the diversified customer 

focus. Moreover, given an installation basis of more than 100,000 systems, Vectron 

intends to monetize on this hidden potential within its existing customer basis by 

reducing the overall product life cycle by means of new innovations and valueadding 

product improvements (e.g. Vectron ServiceCall). 

Fiscal memory chip – The company´s equity story becomes even more 

attractive by considering the tremendous growth prospects related to the 

introduction of a mandatory fiscal memory chip (Fiskalspeicher) which shall 

enables tamper-proof storage of cash turnover. Such a development represents 

great chances for Vectron since the company has already collected corresponding 

experiences in Turkey and in some Nordic countries. According to the relevant 

market participants German authorities consider to introduce this kind of systems 

by 2012. However at current stage, we did not account for such a scenario in our 

valuation approach. 

Risks related to the equity story – We see major risks related to Vectron´s 

equity story in the ongoing recessive economic environment as well as from 

deflating prices as a result of the competitive market environment. Vectron 

operates in a cyclical business in which the company generates its revenues mainly 

from the sale of POS systems that has non-recurring characteristics. However, in 

the past Vectron successfully managed to evade from a margin diluting price 

competition. 

Financials – We expect Vectron to return to its past growth path by 2010E 

and benefit from its current counter-cyclical strategy by expanding its 

product portfolio and distribution network. Prior to the current ongoing 

recession, Vectron achieved a top-line growth of CAGR 21.9% over the period 

2005 to 2007. We expect this trend to slow-down to a CAGR of 12.3% until 2012E 

as a consequence of the current recessive macroeconomic environment and the 

slowing growth pace in its underlying market. After further challenging FY 2009E 

with significant decline in the top line as well as bottom line, we expect Vectron to 

yield the fruits of its counter-cyclical business expansion strategy from 2010E on. 

We think that the current investment backlog as result of the ongoing recession will 

start to ease from the beginning of FY 2010E and forecast revenues of EUR 23.2m 

and EUR 25.8m for 2010E and 2011E, respectively. 

Valuation: By combining a multiple valuation and a Discounted Cash Flow 

(DCF) model we derived a fair value of EUR 20.71 per share. Although the 

challenging market environment will last throughout the entire FY 2009E, we think 

Vectron´s mid-term growth prospects are still intact. By considering the company´s 

attractive business model and the promising growth rate from 2010E on, we think 

that the current price level offers an attractive buying opportunity. 


Equity story: Growth 

company with valueinvestment 

characteristics 

A possible introduction 

of a mandatory fiscal 

memory chip indicates 

tremendous mid-term 

growth 

Deflating prices as 

major risk 

Despite gloomy short- 

term growth prospects 

mid-term perspective 

are still promising 

Our fair value amounts 

to EUR 20.71 



SWOT analysis 

Strengths 

� Strong technological expertise: The company´s dual platform strategy 

provides the basis to Vectron´s innovation power and enables to deliver 

software and hardware from one single source 

� Sophisticated product portfolio: The company has streamlined its 

product portfolio over the last years by introducing new innovations as well 

as value adding features (e.g. Hybrid devices, mobile devices or Service 

Call). Moreover, Vectron utilize the most up-to-date technology in its 

products 

� Profitable business model with attractive margins: Along with an 

attractive market positioning the company generates sound cash flows in 

its operating business. Moreover, the company has a strong financial 

background with high equity ratio building a sound basis for further 

business expansion 

� High market entry barriers: New market entrants have to overcome 

severe obstacles particularly in establishing appropriate distribution 

channels 

� Over the last year the product mix has moved towards higher margin 

solutions 

� Highly experienced management that are at the same time founders 

of the company 

Weaknesses 

� Volatile revenues: Vectron operates in a cyclical business where the 

company generates its revenues mainly from the sale of POS systems 

which has non-recurring characteristics 

� Low geographic business diversification: The company still generates 

the largest proportion of its revenues in German speaking countries. Due 

to the cyclical characteristic of its business Vectron is particularly exposed 

to the macroeconomic risks of these countries 

� Still low number of international distribution partners: In order to 

boost its international business, the company still has to achieve a critical 

number of distribution partners 

� High degree of market penetration and saturation: The company´s 

geographical markets show a high level of market saturation and 

fragmentation 

� High level of depreciation on intangible assets: In course of the 

Management Buy Out (MBO) the company had acquired Software- 

Sourcecodes which are subject to depreciation over the next years 

� The company´s past financial struggle still weighs on Vectron´s 

reputation within the stock market community 




Opportunities 

� International business expansion: Although the company still has to 

establish a more sophisticated international distribution network, the 

geographic expansion of its business activities will result in higher 

revenues in the future 

� Product and customer diversification: With new innovations and value 

adding product improvement Vectron intends to tap new niche and price 

segments. Moreover, the company aims put a stronger emphasis on the 

acquisition of key accounts 

� The introduction of the “Fiskalspeicher” could result in significant 

growth prospects in the mid-term 

� Growth prospects arising from market consolidation: Since demand is 

Threats 

becoming more sophisticated most of the small regional operating 

companies face serious problems to deliver appropriate product solutions. 

Vectron as a technologically and financially strong company could benefit 

from the squeeze out of these small market players 

� Exposure to macroeconomic environment: The company´s targeted 

customers have business models which are sensitive to general economic 

conditions. In times of economic downturn most of these customers hold 

back their investments 

� Risk of deflating prices: In premium and mid-range market segments the 

price development has been quite stable over the last years. However, 

given the competitive business environment and tough economic 

conditions the risk of a margin diluting price competition could become a 

realistic scenario 

� Risk associated to legal changes as well as product warranties 

� Dependency on distribution partners: Vectron commercialises its 

products via distribution partners a “bad” relationship with distributors 

would affect the company´s business activities significantly 




Valuation 

Valuation summary 

We applied a multiple valuation and a Discounted Cash Flow (DCF) model to 

derive the company´s fair value. Our multiple valuation on basis of different 

multiples for 2009 and 2010 indicates a fair value of EUR 10.77 per share. Due to 

the limited comparability of the peer group companies, the result of our multiple 

valuation is only weighted with one-third in our overall valuation approach. 

Given the long-term growth perspectives, the DCF model is, in our opinion, more 

appropriate for assessing the growth prospects in Vectron´s equity story. Our DCF 

model results in a much higher fair value of EUR 25.68 per share. By combining 

both valuation methods we derived a fair value of EUR 20.71. 

Consolidation of valuation methods 

Source: CBS Research AG 

After a drop in the top line and the bottom line in FY 2008, we think that the 

company´s growth prospects for 2009 will remain challenging as a consequence of 

the current economic recession. Nevertheless, given the company´s sound market 

positioning combined with a sophisticated product and longstanding experience, we 

think Vectron will return to its past growth path by 2010E. Despite the given market 

saturation in its underlying market, we believe Vectron will yield the fruits of its 

current counter-cyclical growth strategy and will benefit from the squeeze out of its 

small competitors. Moreover, we expect significantly higher absolute revenues from 

WENN ENDGÜTLIGER FAIR VALUE FESTSTEHT, hier mit 

its international business activities in the future. 

Inhalte einfügen den Wert in das orangene Feld 

einfügen => Zirkelbezug aufgehoben. 

Peer group valuation 

In a fragmented market, Vectron is positioned as a premium provider with main 

customer emphasis on SMEs. Apart from the various non-listed competitors, 

Vectron competes with a limited number of listed large market players which 

generate only a certain proportion of their revenues in the market of POS systems. 

Consequently, our peer group comparison is mainly dominated by international 

players that have a much broader business scope than Vectron. In our opinion, 

Micros Systems is the next comparable peers as it runs a similar business models. 

However, the company is much larger than Vectron in terms of revenues as well as 

market capitalisation. Moreover, it generates revenues in business areas which are 

not targeted by Vectron at all. We did not consider in our analysis listed competitors 

such as NCR, Sharp or Panasonic which generate only a marginal proportion of 

their revenues from the distribution of POS systems. 


Weighting Fair value 

factor per share (EUR) 

Peer group valuation 33.3% 10.77 

DCF valuation 66.7% 25.68 

Fair value per share (EUR) 20.71 

Valuation approach 

based on DCF and 

multiple valuation 

Fair value per share is 

EUR 20.71 

Underlying growth 

drivers 

Peer group comprises 

only international 

operators 



Peer group company data 

Company name Market EV 

Source: CBS Research AG, Bloomberg 

Peers summary – short overview 

Our peer group consists of three international companies that operate in similar 

business segments and geographic markets as Vectron. 

MICROS Systems, Inc is a leading worldwide designer, manufacturer, marketer 

and servicer of enterprise information solutions for the global hospitality and 

specialty retail industries. The information solutions consist of application specific 

software and hardware systems, supplemented by a wide range of services. Along 

with Hotel information systems, the company offers restaurant systems including 

full-featured POS applications, hardware, and support services. MICROS has 

traditionally strong roots in the hotel and resort industry. Compared to Vectron the 

company has a much broader business scope and a well-established international 

business and targets mainly on hotel and resort as well as retail industries. In FY 

2008 ended 30 June 2008, the company achieved sales of USD 954.2m. For the 

first half of the ongoing FY, MICROS posted an increase in revenues by 4.7% to 

USD 482.0m and achieved a net income after taxes of USD 52.0m. 

Radiant Systems Inc, headquartered in Atlanta, USA, engages in the 

development, installation, and delivery of solutions for managing site operations in 

the hospitality and retail industries. The company operates through two segments: 

Hospitality and Food Service and Petroleum and Convenience. Radiant pursues an 

international business strategy with offices all around the world. In January 4, 2008, 

Radiant acquired Quest Retail Technology, a global provider of point of sale and 

back office solutions to stadiums, arenas, convention centers, race courses, theme 

parks, restaurants, bars and clubs. For the FY 2008, the company reported an 

increase in revenues by 19% to USD 301.6m and a net income of USD 11.0m. 

Overall, the company generates revenues in business areas which are not directly 

related to Vectron´s business. 

Wincor Nixdorf AG is a Germany-based company that provides information 

technology (IT) solutions for the retail and banking sectors. The Company's 

portfolio of products and services includes hardware, software and consulting 

services. The company‟s focus is the production of Automated Teller Machines and 

POS-Terminals. The company distributes most of its products through its own sales 

organization, although it does also make use of external sales and cooperation 


cap. 2009E 2010E 2009E 2010E 2009E 2010E 2009E 2010E 

Vectron Systems AG (estimates by CBSR): EUR m 21.9 20.8 0.04 0.89 0.3 1.9 1.7 3.2 20.2 23.2 

MICROS SYSTEMS INC USD m 1,671.1 1,345.6 1.27 1.25 146.3 140.0 157.67 149.50 937.78 917.38 

RADIANT SYSTEMS INC USD m 188.5 36.0 0.55 0.70 27.6 34.6 36.10 46.60 277.67 307.00 

WINCOR NIXDORF AG EUR m 1,386.9 185.0 3.80 3.82 183.0 190.8 237.74 241.00 2,247.16 2,254.22 

Average 1,082.2 522.2 n/m n/m 119.0 121.8 143.8 145.7 1,154.2 1,159.5 

Median 1,386.9 185.0 n/m n/m 146.3 140.0 157.7 149.5 937.8 917.4 

Company name 

EPS (EUR) EBIT EBITDA 

Net margin EBIT margin EBITDA margin Sales growth 

2009E 2010E 2009E 2010E 2009E 2010E 2009E 2010E 

Vectron Systems AG (estimates by CBSR): 10.8% 0.3% 16.1% 1.5% 22.0% 8.3% -7.2% -14.5% 

MICROS SYSTEMS INC 11.0% 10.9% 15.6% 15.3% 16.8% 16.3% -1.7% -2.2% 

RADIANT SYSTEMS INC n.a. 7.8% 9.9% 11.3% 13.0% 15.2% -7.9% 10.6% 

WINCOR NIXDORF AG 5.4% 5.4% 8.1% 8.5% 10.6% 10.7% -3.1% 0.3% 

Average 8.2% 8.1% 11.2% 11.7% 13.5% 14.1% -4.2% 2.9% 

Median 8.2% 7.8% 9.9% 11.3% 13.0% 15.2% -3.1% 0.3% 

Sales 

Our peer group consists of: 

MICROS Systems 

Radiant Systems 

Wincor Nixdorf 



partners. Wincor Nixdorf possesses a high grade of internationalization, having its 

own subsidiaries in 37 countries and a market presence in around 100 countries 

around the world. In FY 2007/2008, ended in September 30, the company 

generated revenues of EUR 2.3bn and a net income of EUR 127m. Comparability 

to Vectron is only given in Wincor´s retail business where the company delivers 

POS Systems to customers with high branch concentration. Overall Wincor 

operates in this business segment as a pure manufacturer. 

Multiples and derived value 

In our peer group analysis, we considered multiples for the fiscal years 2009E and 

2010E. We applied different multiples including EV/EBITDA in order to account for 

special situation related to Vectron´s high depreciation expenses. In the course of 

the management-buy-out, Vectron had acquired softrwarecodes which the 

company has to write-off until 2012E. 

Given the current volatility at the stock markets and the fact that Vectron is rather a 

small player compared to the global operating peers, we decided to weight the peer 

group valuation with only 33.3% in our overall valuation approach. 

Peer group valuation: Multiples and derived value 

Company name 

Source: Bloomberg, CBS Research AG 

We applied these multiples to our financial forecasts for Vectron. We deducted 

Vectrons´s net financial debt from the derived enterprise values in order to get the 

fair value of equity. From our peer group valuation, we derived a market-oriented 

fair value of equity of EUR 16.2 m for the company corresponding to a fair value 

per share of EUR 10.77. 


2009E 2010E 2009E 2010E 2009E 2010E 2009E 2010E 

MICROS SYSTEMS INC 16.4 16.6 9.2 9.6 8.5 9.0 1.4 1.5 

RADIANT SYSTEMS INC 10.6 8.3 9.9 7.9 7.6 5.9 1.0 0.9 

WINCOR NIXDORF AG 11.0 11.0 8.4 8.0 6.5 6.4 0.7 0.7 

Average 12.7 12.0 9.2 8.5 7.5 7.1 1.0 1.0 

Median 11.0 11.0 9.2 8.0 7.6 6.4 1.0 0.9 

Minimum 10.6 8.3 8.4 7.9 6.5 5.9 0.7 0.7 

Maximum 16.4 16.6 9.9 9.6 8.5 9.0 1.4 1.5 

EUR m 

2009E 2010E 2009E 2010E 2009E 2010E 2009E 2010E 

Vectron Systems AG: Financial estimates by CBSR 0.04 0.89 0.3 1.9 1.7 3.2 20.2 23.2 

Applied multiples: Median of the peer group multiples 11.0 11.0 9.2 8.0 7.6 6.4 1.0 0.9 

Enterprise value (derived) - - 2.9 15.2 12.6 20.5 19.8 20.6 

+ Excess cash and marketable securities 7.6 

- Financial debt -6.5 

Market capitalization (derived) 0.6 14.7 4.0 16.3 13.8 21.6 20.9 21.7 

Average of market capitalizations 16.2 

Fair market capitalization 16.2 

Number of shares outstanding (m) 1.5 

Fair value per share (EUR) 10.77 

EPS EBIT EBITDA 

We applied multiples 

for the FY 2009E and 

2010E 

P / E EV / EBIT EV / EBITDA EV / Sales 

Sales 

Our fair value results 

in EUR 10.77 



DCF Valuation 

Our Discounted Cash Flow (DCF) model is based on the following assumptions: 

Weighted average cost of capital (WACC): On basis of the current long-term 

yields of German federal bonds, we set the risk-free rate at 3.5%. We assumed an 

equity risk premium of 6.0%, and a debt risk premium of 2.50%. Although the 

company´s stocks have been listed for a long period, we did not apply Vectron´s 

historic beta in our WACC calculation. We decided to apply a beta of 1.50 which is 

significantly above its historic value as well as the beta of most its peers. The 

reason for this adjustment was mainly due to the company´s small size as well as 

the cyclical characteristics of its underlying business with non-recurring revenues. 

We furthermore assumed a long-term target equity ratio at market values of 70%, 

which is rather a conservative assumption. These premises lead to a WACC of 

9.99% 

Phase 1 (2008-10E): We estimated the free cash flows (FCF) of phase 1 according 

to our detailed financial forecasts for this period stated in the financials section. We 

assume that 2008 and 2009 will be challenging as company´s revenues will be hit 

by the global economic slowdown. 

Phase 2 (2012-18E): For Phase 2, we made more general assumptions, 

considering the expected industry growth and Vectron´s positioning. We believe 

that Vectron will yield the fruits of its international business expansion once the 

current recessive market environment has passed. From the mid-term growth 

perspectives, we expect the company to monetise more strongly on hidden 

potentials within its existing customer basis and to take advantage of the squeezeout 

of small market players. Moreover, we assumed a stronger revenue 

contribution from its international business as Vectron has sped up its international 

expansion in 2008. Overall we allowed annual revenue growth to decrease 

successively to 2.0% in 2018E, resulting in a CAGR 2012-18E of 5.2%. We 

assumed that the company can reach an EBIT margin of 9.0%, a level which the 

company originally aimed to achieve at the end of the fiscal year 2010. 

Phase 3: For the calculation of the terminal value, we applied a long-term FCF 

growth rate of 2.0% which equals the estimated long-term inflation rate. This 

assumption theoretically corresponds to a real-term zero growth, since we use a 

nominal discount rate (WACC). 

Based on these assumptions, we calculated a fair value of the operating business 

of EUR 37.4m. By deducting the company´s debt position the resulting fair value of 

equity achieved EUR 38.5m. Overall, the fair value per share amounts to EUR 

25.68. 


Assumptions: 

WACC of 9.99% 

Phase 1: Detailed 

financial forecasts 

Phase 2: decreasing 

revenue growth 

Phase 3: 2% growth for 

terminal value 

Our DCF yield in a fair 

value per share of 

25.68 



Discounted Cash Flow Model 

PHASE 1 PHASE 2 PHASE 3 

EURm 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 

Total output 20.2 23.2 25.8 28.6 31.4 33.8 35.5 36.9 38.0 38.8 

Y-o-Y growth -14.5% 15.0% 11.0% 11.0% 10.0% 7.5% 5.0% 4.0% 3.0% 2.0% 

EBIT 0.3 1.9 3.0 4.0 4.7 5.1 5.3 5.5 5.7 5.8 

EBIT margin 1.5% 8.1% 11.6% 14.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0% 

Income tax on EBIT -0.1 -0.6 -0.9 -1.2 -1.4 -1.6 -1.6 -1.7 -1.8 -1.8 

Depreciation and amortisation 1.4 1.4 1.3 1.3 0.9 0.8 0.8 0.8 0.8 0.8 

Change in net working capital 0.3 0.1 -0.1 -0.2 -0.2 -0.2 -0.1 -0.1 -0.1 -0.1 

Net capital expenditure -1.1 -0.8 -0.8 -0.7 -0.7 -0.7 -0.7 -0.7 -0.7 -0.7 

Free cash flow 0.8 1.98 2.6 3.2 3.3 3.5 3.7 3.9 4.0 4.1 

Present values 0.7 1.7 1.9 2.2 2.1 2.0 1.9 1.8 1.7 1.6 19.9 

Present value Phase 1 4.3 Risk free rate 3.50% Target equity ratio 70.0% 

Present value Phase 2 13.2 Equity risk premium 6.00% Beta 1.50 

Present value Phase 3 19.9 Debt risk premium 2.50% WACC 9.99% 

Total present value 37.4 Tax shield (Phase 3) 30.9% Terminal growth 2.00% 

+ Excess cash/Non-operating assets 7.6 

- Financial debt -6.5 



Sensitivity analysis 

Terminal growth (Phase 3) 

1.0% 1.5% 2.0% 2.5% 3.0% 

Fair value of equity 38.5 8.99% 27.55 28.59 29.78 31.15 32.76 

9.49% 25.72 26.60 27.59 28.73 30.05 

Number of shares outstanding (m) 1.5 WACC 9.99% 24.09 24.84 25.68 26.64 27.73 

10.49% 22.64 23.28 24.00 24.80 25.72 

Fair value per share (EUR) 25.68 10.99% 21.34 21.89 22.50 23.19 23.96 

Close Brothers Seydler Research AG | 11 

8


Company profile 

Vectron Systems AG, headquarted in Muenster/Germany, is leading provider of 

intelligent POS systems and communication software for the networking of branch 

shops. Vectron manufactures and distributes state-of-the art POS systems in 

various sizes and price categories. The company´s software comprises a program 

generator enabling industry specific adjustments as well as operating on both PC 

based platform and proprietary platform. Furthermore, the company offers 

supplementary peripheral devices such as printers or scanners which Vectron 

sources from external partners. Overall, Vectron specializes in the dual platform 

strategy delivering software and hardware from one single source. 

With an installation basis of more than 100,000 POS systems all over the world, 

Vectron belongs to the "Top 10" of the European manufacturers and is market 

leader in the German catering trade and bakery trade. The company is positioned 

as a premium provider with business emphasis on small and medium sized 

companies (SMEs). Vectron‟s products are sold in 25 countries worldwide through 

a network of more than 250 retailers and distributors. 

Vectron´s business approach 

Sourcing & Manufactering 

� Sourcing of non-core 

components from external 

partners 

� Manufacturing at company s 

headquarter 


History 

The company´s history is closely tied to the vita of three founders Jens Reckendorf, 

Thomas Stümmler and Jochen Fischer. The company was founded 1990 with Mr. 

Reckendorf and Mr. Stümmler as founding partners. Originally, Vectron had its 

main business emphasis on the development of communication software enabling 

the interaction between third party POS systems. However, with the introduction of 

its first own-developed POS System in 1998, the company extended its expertise, 

by adding manufacturing excellences to its business activities. A milestone in 

company´s history was the successful listing on the Neue Markt of the Frankfurt 

stock exchange in 1999. 

Over the next years, the company came under heavy financial pressure as result of 

its fast business expansion and the long-lasting economic recession on its 

domestic market. At the end of 2002, Hansa International AG located in Zurich 

joined Vectron as investor which resulted later in a merger between Vectron and its 

German daughter Hansa Chemie AG. The new company developed under the 

name Hansa Group AG. 

In course of a management-buy-out (asset deal) led by its origin founders, Vectron 

became independent in May 2006. In March 2007, the company went public again 

and is listed on the Entry Standard of the Frankfurt stock exchange. After the 

successful turnaround Vectron strives for a profitable growth in the future. 


„Built-to- 

Order“ 

Dual platform 

Hardware Software 

strategy 

Software and hardware from one single source 

Indirect 

distribution 

Leading provider of 

intelligent POS 

systems with a dual 

platform strategy 

Customers & Markets 

� Pan-European businsss 

emphasis 

� Main customer focus on 

SMEs 

Eventful history 



Shareholders 

The company´s management team who are also the founders jointly hold a stake of 

77% in Vectron shares. The holding proportion of the management was in the past 

relatively stable which underline their loyalty to the company. 

Shareholder structure 

28.2% 

6.0% 

Source: Vectron Systems AG, CBS Research AG 

Management and founding partners 

The company´s management board comprises two members. 

Thomas Stümmler - Founding partner and member of the Executive Board 

During his studies in Law at the University of Munster, Mr. Thomas Stümmler 

became a partner and CEO in the Vectron Systems Datentechnik GmbH - the 

predecessor of Vectron Systems AG - where he also managed the company„s 

sales. Subsequently, he took the position of an Executive Board member in the 

newly formed company Hansa Group AG after the merger between Vectron and 

the German daughter Hansa International AG, where he stayed until 2006. His next 

professional step was to relaunch Vectron Systems AG as an independent 

company. As member of the executive board, Mr.Stümmler is responsible for the 

sales & marketing. Moreover, he manages the human resource department and the 

company„s accounting. 

Jens Reckendorf: Founding partner and member of the Executive Board 

After his studies in Physics at the University of Munster, Mr. Reckendorf worked 

from 1990 to 1999 as a Development Executive at Vectron Systems Datentechnik 

GmbH. From 1999 to 2006 he was a member of the Executive Board of Vectron 

Systems AG (prev.). In 2006, with the relaunch of Vectron Systems, he became a 

founding partner and a member of the Executive Board. His responsibilities at 

Vectron Systems AG include Development, Production, Supply and IT. 

Jochen Fischer: Founding partner 

His educational background is based on study of Law at the Westphalia Wilhelms 

University and since 2004 he has been working as an assistant lecturer at the 

Munster University of Applied Sciences. In 1982, he founded Fischer & Partner, an 

agency which specialized in company communications. Since 1999, Mr. Fischer 

consulted the predecessor companies of Vectron Systems AG. His current 

responsibilities as an external consultant at the company are operational marketing, 

investor and public relations. 

The company´s supervisory board currently consists of three members with 

Christian Ehlers as Chairman of the Board 

. 


32.9% 

32.9% 

Jens Reckendorf, 32.9% 

Thomas Stümmler, 32.9% 

Jochen Fischer, 6.0% 

Free float, 28.2% 

Management board 

members are the 

founders of the 

company 



Business model and Products 

In a highly fragmented market with lack of major competitors, Vectron is technology 

leader and delivers hardware and software from one single source. 

Business model 

Sourcing & Manufacturing Product strategy Distribution 


The focal point in Vectron´s business model is the dual platform strategy which 

allows the company to pursue a cross-industry and cross-system business 

approach. The modular software architecture that forms the basis for all Vectron 

POS systems is easy to adjust to the requirements of different industrial segments 

and is able to run on both PC-based systems and Vectron´s proprietary platform. 

Overall, the dual platform strategy allows the company to run one software for 

various industries and various devices by offering at the same time following 

advantages: 

� It enables to pursue a broader business scope since the company can 

monetize on growth potential in various industrial segments instead of 

focusing on industry 

� Reduction of the timeframe for new innovation as well as the integration of 

new features in existing systems 

� With the dual platform strategy Vectron can remain highly innovative and 

respond faster to new technological shifts 

� It allows customers to keep investment in POS systems at a favourable 

level since they only require one software 

On the basis of its dual platform strategy, Vectron has built up a sophisticated 

product portfolio comprising mobile as well as hybrid devices (combination of 

mobile and stationary devices) and stationary POS systems in various sizes and 

price categories. 

Products 

„Built-to-order“ 

approach“ 

Lean production process 

combined with low capital 

tied in inventories 

Along with intelligent POS Systems, the company´s product range comprises 

communication software as well as a large variety of peripherals such as printers, 

scales, vending machines etc, which Vectron exclusively sources from external 

partners. The software forms the basis for all Vectron POS systems and has not 

been designed for any particular industry. By means of an integrated “program 

generator” the software can be tailored to individual customer requirements. 


Dual platform 

Hardware Software 

strategy 

� High innovation 

power 

� Sophisticated 

product portfolio 

� Broad customer and 

business scope 

Software and hardware 

from one single source 

Indirect 

distribution 

Broader customer access 

combined with low cost per 

customer contact 

Dual platform strategy 

Product portfolio 

comprises hardware, 

software and 

peripherals 



According to the company, Vectron is the sole supplier worldwide offering software 

that runs on both the PC platform and the proprietary Vectron platform 

The company generates the main proportion of its revenues from the distribution of 

POS systems. Vectrons´s product range comprises mobile as well as hybrid and 

stationary devices. While also covering PC-based systems, Vectron offers a special 

proprietary hardware, which was exclusively designed for POS systems. This 

hardware is less expensive and less prone to manipulations while delivering the 

same performance as PC-based systems. 

Vectron´s POS systems are all equipped with the 64-bit technology and can be 

used as a network ECR, ensuring that all POS models can be networked. New 

interfaces expand the large range of connections to Vectron´s POS systems. 

Special highlight are the USB-Ports and the extensive options for back office 

connections. Currently, Vectron´s product portfolio comprises seven different 

proprietary models available in various sizes and price categories. 

Vectron´s POS Systems 

POS Mini POS MobilePro 

POS Vario 

POS ColorTouch 

POS Modular 

Source: CBS Research AG, 

Traditionally Vectron has a strong emphasis on the technological side of the 

business. In order to remain also highly innovative in the future, Vectron added 

further resources to its R&D activities by expanding the number of employees to 

currently 31. 

The company intends to reduce the usual product life cycle (approx. 4-6 years) by 

means of revolutionary innovations. Over the last years, Vectron has constantly 

upgraded its product portfolio with the new generation of POS Systems particularly 


The POS Mini was designed to the 

need of small businesses offering at 

the same time the capacity for more 

space and branch solutions 

POS Vario is the perfect all-rounder 

among Vectron-POS systems to 

cover the mid-range segment. It 

offers efficient technology, highest 

flexibility and attractive design. 

The ColorTouch, designed for the 

premium segment is characterised by 

excellent performance and innovative 

design . The large, splash-proof display 

is equipped with an interactive touchscreen 

surface, enabling rapid, intuitive 

operations. 

Vectron POS Modular offers extensive 

and flexible cash register functions in 

an individually configurable housing. Its 

range of application reaches from the 

single station to a network-integrated 

system, it can be used as print and as 

data server or even as Kitchen Video 

Controller. 

POS MobileXL 

Vectron POS SteelTouch 

POS PC 

Main revenue 

generators are POS 

systems 

This mobile device is based on the same 

powerful processor technology as the 

stationary Vectron POS systems. The lightweight 

but strong magnesium housing and 

spill-proof design ensure long life and troublefree 

use. Rapid data processing speeds up 

the ordering and cashing in processes. It can 

be utilized as a stand-alone device or in 

connection with a stationary system 

A hybrid POS system which combines the 

advantages of a mobile devices with that of 

stationary devices. In smaller restaurants, 

the POS MobileXL can be a complete, lowcost 

solution. In larger businesses, one or 

more of these units, used in conjunction with 

other Vectron models, adds mobility and 

flexibility to the system. 

The stainless steel system Vectron POS 

SteelTouch offers a 15‟‟ TFT-touch screen, 

which is infinitely variable and provides 

ample space for clear, simple operations. 

Its powerful technology and the flexible 

software make Vectron POS SteelTouch a 

real all-rounder for highest demands 

In contrast to all other Vectron POS 

systems, the POS-PC is not a proprietary 

POS system. It is a ECR software for a PC 

with Windows-operating system. The POS- 

PC offers the possibility to apply officeprograms 

like MS-Excel or MS-Word, stock 

control systems or E-mail options at the 

point of sale 

Strong R&D capacities 

New innovations in the 

area of mobile and 

hybrid devices 



in the area of mobile devices and hybrid systems. Leading Innovations over the last 

years were the Vectron POS MobilePro, Vectron POS Mobile XL or Vectron POS 

SteelTouch as well as Vectron Service Call. 

Sourcing and Manufacturing 

The company´s POS systems are developed and manufactured at the company´s 

headquarter in Muenster while the non-core components which do not require any 

special expertise (e.g. Keyboards, Screens etc) are sourced from external partners. 

The real added-value which the company delivers with its intelligent systems arises 

from the equipment of the hardware with Vectron´s software. The final assembly of 

the products is carried out at Vectron's headquarter where the company´s usually 

manufactures 12,000 to 14,000 devices per annum. 

The manufacturing process is based on a “Built-to-Order” approach which 

means that the company only starts assembling when it receives an order from a 

customer. This approach provides the company with the flexibility to react faster on 

technological shifts by keeping at the same time production expenses and financial 

resources tied in inventories at a low level. However, in order to optimise the 

manufacturing process, Vectron pre-fabricates those components which are 

universally applicable. The configuration and adaption of Vectron´s POS to the 

customers systems is usually carried out by authorized dealers. 

Customers and Distribution 

The company is positioned in the premium and mid-range segment with customer 

emphasis on small and medium-sized (SME) companies. Although Vectron has 

traditionally a strong customer focus on the catering trade and bakeries, the 

company´s “POS-Systems” can be utilized in various industries. The British cinema 

chain Odeon Cinemas with more than 100 cinemas, the German hairdresser chain 

Klier - with more than 800 branch offices as well as the bakery chains "Ihle", 

"Siebrecht", "Heberer" and "Bakers family", a discount-subsidiary of the Kamps AG 

utilizes in their branches Vectron's systems. 

As result of its traditional business emphasis on SMEs sized companies, Vectron 

distributes its products exclusively via authorized dealers and resellers which are 

spread out across Germany. This indirect distribution approach allows the company 

to gain a broad customer access by keeping at the same time the expenses per 

customer contact on an economically favourable level. Traditionally, the distribution 

partners are responsible for the installation and service of the systems as well as 

customer training. 

In order to guarantee a fast and professional assistance to its clients the distribution 

partners are supported by a service team at the company´s helpdesk in Muenster. 

In countries where the company has no sufficient number of authorized dealers 

Vectrons´s distributes its product by means of resellers. Since distribution partner 

are allowed to sale also third-party products, it is crucial to company´s success to 

build up good relationships with its distribution partners. Overall the company has 

more than 250 authorized dealers and resellers over the world. 


Final assembly at 

company´s headquarter 

Built-to-order approach 

Main customer 

emphasis is placed on 

SMEs 

Indirect distribution 

via authorized dealers 

and resellers 



Strategy 

With its unique business focus and sophisticated product portfolio, Vectron brings 

almost two decades of experience to the development of intelligent POS systems. 

Vectron offers a sophisticated product portfolio and is positioned as premium 

provider with special emphasis on SMEs. The company embarked multi-pronged 

strategy based on Vectron´s dual platform approach. 

Strategic elements 

Product portfolio 

enhancement: 

� New product 

innovations 

� Improved version of 

existing products 

� Value adding features 

and suplementary 

innovations 


Product portfolio enhancement 

The diversification of the product portfolio with new innovations as well as the 

introduction of new versions of its existing products is one of the key elements of 

Vectron´s strategy. In doing so, the company intends to tap new niche segments 

and price categories which have been neglected by Vectron in the past. With the 

expansion of its product portfolio Vectron aims to expand and diversify its customer 

basis by entering new niche segments. 

New innovations and further value adding product improvements shall not only 

attract new customer, but also increase the incentives for existing customers to 

replace their existing systems. Given an installation basis of more than 100,000 

systems, the company aims to monetise on this hidden potential within its existing 

customer basis. Therefore, a reduction of the overall product life cycle by means of 

revolutionary innovations would result in significant revenue streams in the midterm. 

Main innovations are expected to occur predominantly in following fields: 

� Internet-based applications: The integration of internet into the POS 

Systems enabling online reservation or online orders etc. 

� New hybrid and mobile devices allowing for a higher flexibility in service 

� New supplementary innovations such as Vectron Service Call – An 

innovation which allows the guests in a restaurant to call for the waitress 

by pressing the button on the battery-operated, wireless table transmitters 

suffices. Moreover, it is able to improve the communication between the 

kitchen and the service staff 

� Security and tax related product improvements (e.g. Fiscal memory chip) 



International business 

expansion: 

� Pan-European 

business expansion 

� Mid-term objective: 

Leading European 

market player 

Dual platform strategy: One software for various industries and applications 

Distribution and 

Marketing: 

� Implementation of 

an international 

disttribution network 

� Improved product 

awerness 

Three-pillar strategy 

Vectron intends to tap 

new product and 

customer niches 

Revenue potentials 

within existing 

installation basis 



On the basis of the current R&D and production capacities, Vectron intends to 

introduce one or two new product innovations per fiscal year. After the introduction 

of new mobile and hybrid devices over the last year, Vectron aims to streamline its 

entire product portfolio of stationary devices until 2010. 

Given the high degree of market saturation in its underlying markets, the expansion 

of product portfolio into new niche segments and price categories is in our opinion 

the right approach to achieve higher revenues in its existing markets. In a highly 

fragmented market, Vectron will be able to monetize on its leading technological 

position and sound financial background by squeezing out the small local 

competitors. Overall, Vectron is in a favourable position expand its market share 

over the next years. 

International business expansion 

Along with higher revenues in its existing markets, the company´s international 

business is expected to become a significant revenue pillar in the future. Currently, 

Vectron still generates the main proportion of its revenues in German speaking 

countries and the Benelux region. However, the company is forcing its 

internationalization and pursues a pan-European expansion strategy. As a first step 

Vectron intends to establish its business model in France, Spain and UK. In doing 

so, the company aims to achieve a significant market position in these countries 

before tapping new geographic market. 

Vectron intends to become a leading European market player in the mid-term. In 

pursuing this goal the main obstacle, which Vectron has to overcome, will be the 

implementation of an appropriate distribution network even though the company 

has already authorized dealers and resellers in some of its targeted markets. 

In order to realize its pan-European business ambitions, Vectron aims to expand 

the number of its international distribution partners by a large number over the next 

years. Therefore, the company has already added sales resources in order to 

acquire international distribution partners with strong selling power. Overall, 

Vectron is in a favourable position to achieve this objective since it can materialise 

on its leading technological position as well as on its longstanding experience and 

sophisticated products. 

Distribution and Marketing 

The company´s future success will depend on a high degree on its capability to 

materialise on its strong technological expertise by commercializing its 

sophisticated products in an economically effective manner. In the past, Vectron 

had a strong emphasis on the technological side of the business, but intends to 

improve its distribution and marketing activities in the future. Particularly the 

establishment of an appropriate international distribution network is crucial to 

Vectron´s future business success. Overall, the company aims to achieve better 

product awareness with its distribution and marketing activities 

As result of its past customer emphasis on SMEs, Vectron implemented an indirect 

distribution strategy via authorized dealers and resellers. In the future, the 

company intends to tighten its relationships to its distribution partners and increase 

the number of exclusive dealers distributing only Vectron`s POS Systems. 


Promising strategy in a 

saturated market 

Monetizing on 

potentials in untapped 

geographic markets 

Mid-term objective: 

Leading European player 

Expansion of the number 

of international 

distribution partners 

Goal: improved product 

awareness via... 

...improved relations to 

distribution partners,... 



Vectron´s distribution and marketing approach 

Key account 

management 


In addition to its traditional customer emphasis, the acquisition of major customers 

will be the focus of attention in the future. The company intends to put a stronger 

emphasis on the acquisition of key accounts, particularly in its domestic markets 

which achieved market saturation. Therefore, the implementation of a key account 

management in partnership with its authorized dealers is considered as a further 

approach to gain access to large sized companies. 

In order to improve the after-sales service and the relationship to its dealers and 

authorized partners, Vectron has added resources to its sales workforce at 

company´s headquarter in Munster. The company has particularly improved the 

mentoring of its international distribution partners and intends to add further 

resources in this area over the next years. 

As a premium provider of intelligent POS Systems, Vectron aims to increase the 

brand awareness for its products. Along with participations on relevant trade fairs, 

placing commercials in appropriate magazines and media is a further tool to 

increase the popularity of its products. Furthermore, the company has started a 

customer incentive program in order to increase customer loyalty 


Participation on 

relevant trade 

fairs 

Indirect 

distribution 

Via authorized 

dealers and resellers 

Commercials in 

appropriate media 

Customer 

incentive program 

...focus on key 

accounts,... 

... commercials and 

trade fairs 



Competition 

In a highly fragmented market, Vectron is positioned as premium provider with 

strong technological expertise. Apart from few international operating providers 

which are highly specialised on delivering industry specific solutions, the 

competitive landscape is mainly characterized by large number of small national 

operators. Compared to most of its competitors, Vectron pursues a cross-industry 

and cross-device strategy enabling a broader business scope. 

With MICROS Systems, Wincor Nixdorf, NCR as well as the Japanese companies 

Sharp and Casio there are essentially five big international market players 

operating within the POS market. These large operators have put their main 

business emphasis on those industries which offer a high degree of branch 

concentration. Such specialisation can be particularly found in retail sector and the 

hotel and resort industry. 

As result of their specialisation on large customers, these big market players have 

developed competitive advantages in the specific industries which they are 

specialized on. Moreover, such a clustering allows them to achieve large 

installation numbers once they have developed a customer specific solution. In 

order to gain access to customers with extensive branch networks these 

multinationals mostly follow a direct distribution approach with key account 

management. 

Compared to these few international players there are a large number of small 

providers operating in their regional markets. Most of these companies have neither 

the technological expertise, nor the financial background to expand their business 

out of their niche segments. Since the technological requirements for POS systems 

are becoming more sophisticated most of the small providers face serious 

challenges to deliver competitive product solutions. Therefore, many of the small 

players are expected to lose competitive ground over the next years. 

Vectron with its sound financial background and outstanding technological 

expertise is in favourable position to benefit from a possible squeeze out of small 

national providers. Moreover, as a premium provider with business emphasis on 

small and medium sized companies, Vectron benefits from the high level of market 

entry barriers in its business segment. New market entrants have to overcome 

significant obstacles particularly in the implementation of appropriate distribution 

network. Usually, most dealers and resellers avoid switching their manufacturers 

since it causes additional expenses e.g. training the sales workforce or portfolio 

implementation costs etc. 

Overall Vectron competitive advantage arises from its unique innovation power 

combined with a promising market positioning and longstanding expertise. In 

absence of the direct major competitors in its targeted niche segment, Vectron 

should be able to utilize on its competitive advantages to gain significant market 

share in the future. 


Vectron pursues a 

cross-industry and 

cross-device strategy 

4 major market players 

with focus on specific 

industries 

Large number of small 

providers with lack of 

technological knowhow 

and financial 

strength 

Vectron is in a 

favourable position... 

...to gain market share 



Market environment 

Despite an ongoing financial crisis and economic downturn, the market of POS 

systems is still pretty stable with slight cyclicality in sales compared to other 

industries. In fact, the macroeconomic factors weakly influence the POS system 

market. Of course in times of economic slowdown, consumers buy less goods, but 

they still making purchases, just shopping differently, shifting their buying 

preferences from expensive goods to cheaper ones. Therefore, the demand for 

POS systems changes less drastically in comparison to the demand for other 

goods. 

Advances in technology, lower prices, and a need of modernization have been 

some of the factors that have fuelled POS market till 2007 when the market had 

been increasing both in terms of value and quantity. Over the period 2005 till 2007 

the European market was on the growing path but with a declining trend 

afterwards. Thus, the overall amount of units sold (installations) in European 

market has been ranging within 890 to 1004 thousand units. However, according to 

the estimation of IC Consulting, the European market development of POS system 

will turn positive in 2009. This trend will sustain till 2011 reaching 988.7 thousand 

units at an average annual growth of 1.8%. 

The development of the European POS systems market in units (in thousands) 

1200 

1000 

800 

600 

400 

200 

0 

812,5 

Source: IC Consulting 2009; CBS Research AG 

The cyclical trend of European market is mostly attributable to fluctuations of 

Western European market (UK, Germany, France, Italy, Spain, Austria, 

Switzerland, Benelux and Nordic countries) which achieved market saturation on a 

high level. The market size in Western Europe ranges between 812.5 to 900 

thousand units over the period 2005-2011E period indicating an annual average 

growth rate of 1%. 

In comparison, the markets in Eastern European countries show a sturdy growing 

trend in the given period and will rise to 128.6 thousand units in 2011E with the 

average annual growth rate of 8.6%. In fact, the biggest retail chains are expanding 

faster in Eastern European countries than in Western Europe. Poland, Hungary, 

Slovakia, Czech Republic and Romania are widening and modernizing their retail 

markets, which includes shops automation and an increase of POS demand in 

these countries. However, the market share of Eastern European countries within 

the total European market is still small. 


852,9 

890,8 943,2 1004 

899,9 

848,1 784,9 820 860,1 

952,3 891,8 937,2 988,7 

78,3 90,3 104,1 104,2 106,9 117,2 128,6 200 

2005 2006 2007 2008 2009E 2010E 2011E 

Europe (Western and Eastern) Western Europe Eastern Europe 

POS market less prone 

to current economic 

downturn 

IC consulting expects 

for the European 

market a growth of 

1.8% in 2009 

1200 

1000 

800 

600 

400 


0 

Saturated market in 

Western Europe 

Eastern European 

markets still on a 

growth path


A similar situation can be observed with POS system sales volume development in 

Europe (graph below). The overall sales of European market slightly fluctuates over 

the period 2005-2011E. It is mostly driven by Western European markets, whereas 

the sales volumes in Eastern Europe has been permanently growing during the last 

years and are expected to grow in the following years, too. 

The development of the European POS systems market in sales volume (in EURm) 

2000 

1800 

1600 

1400 

1200 

1000 

800 

600 

400 

200 

0 

1579 

1727,2 1829,7 1949 


The growth paces in overall sales volume of the European market (CAGR) over the 

period 2005-2011E was with 0.6%, slower compared to a CAGR of 1.8% in units 

sold. This is generally explained by decreasing prices in Western European market, 

where the CAGR of sales volume over the mentioned period is -0.3%. Over the 

same period sales in Eastern Europe achieved a CAGR of 8.0%. 

Thus, summarizing this part we can conclude, that the market share of POS 

systems in such Western European countries as UK, Germany and France is very 

large in comparison to Eastern European countries, however, the POS system 

market in Eastern European countries develops substantially faster, which is not 

surprising, considering that these markets are not satiated yet (See graph below). 

Market share VS market development in % 



1659 1752,3 

1646 1487 1516,4 

1800 

1553,11600 

1841,8 1686,5 1733,1 1788,8 

400 

148,2 170,7 196,7 195,8 199,5 216,7 235,7 

200 

2005 2006 2007 2008 2009E 2010E 2011E 

Europe (Western and Eastern) Western Europe Eastern Europe 

2000 

1400 

1200 

1000 

800 

600 

The CAGR of POS 

sales in Western 

Europe fell to -0.3%, 

compared to 8% in 

Eastern Europe 


0


By analyzing the market development by product categories, it reveals that the 

market share of PC All-in-one devices has fallen from 47.4% in 2005 to 43.7% in 

2008. According to IC Consulting´s estimations the declining trend will sustain in 

the following years and will total to 42.7% in 2011E. This slump is basically 

attributable to the slowly growing market shares of POS Modular, POS All in one 

and Modular PC. However, despite that fact that the market share of PC All-in-one 

products is falling, it still takes a pretty sturdy market positions. 

The development of market shares by product groups in terms of quantity in Europe 

50 

45 

40 

35 

30 

25 

20 

15 

10 

5 

0 

26.6% 27% 27.3% 

24.4% 24.3% 24.3% 

1.6% 1.6% 1.6% 1.8% 1.9% 1.9% 1.9% 


German retail sales in 2009 

The market of POS systems depends to a large extend on retail industry. According 

to the recently published "GfK POS Turnover for the Retail Trade 2009" study from 

GfK GeoMarketing, some regions in Germany will achieve retail sales far in excess 

of the local purchasing power in 2009. 

Germany’s top 15 locations of retail sales turnover through POS in 2009 

Source: Gfk GeoMarketing; CBS Research AG 

Looking at POS turnover volumes at the level of counties and metropolitan areas, 

the major conurbations are predictably leading the field. In addition to the major 

cities, only three rural and populous counties made it into the list of the top 15 

locations, which together account for more than EUR 83.6bn or 20% of total retail 

sales in Germany. The table above shows the top 10 locations in Germany with the 

highest retail sales turnover through POS (excluding car dealerships, fuel and gas 

stations). The first three leading positions take urban areas of Berlin, Hamburg and 


47.4% 47.1% 46.8% 

43.7% 43.2% 43% 42.7% 

27.9% 28.1% 28.5% 28.8% 

26.6% 26.8% 26.7% 26.7% 

2005 2006 2007 2008 2009E 2010E 2011E 

POS Modular POS All in one Modular PC PC All in one 

Rank in 2009 County POS turnover in 2009 in EUR m 

1 Berlin (urban) 17,240 

2 Hamburg (urban) 10,461 

3 Munich (urban) 9,639 

4 Cologne (urban) 6,574 

5 Hanover (urban) 6,296 

6 Düsseldorf (urban) 4,117 

7 Stuttgart (urban) 4,060 

8 Frankfurt am Main (urban) 4,002 

9 Nuremberg (urban) 3,489 

10 Essen (urban) 3,453 

Despite the falling 

trend PC All-in-one 

products still take 

pretty sturdy market 

positions 

Top 15 locations, 

account for more than 

EUR 83.6bn or 20% of 

total retail sales in 

Germany 



Munich with respective retail sale turnover of EUR 17,240m, EUR 10,461m and 

EUR 9,639m. 

Some trends and perspectives of POS systems market 

In the following part we briefly discussed some trends on the POS market that are 

meaningful for Vectron`business. 

Fiscal memory chip 

Over the last decade the so called “Fiskalspeicher “ were statutory regulated in a lot 

of various countries in and outside Europe. The fiscal memory chip shall prevent for 

manipulative storage of cash turnover and simplify the process of tax assessment 

by relevant authorities. According to Vectron‟s judgment, other European countries 

consider to introduce this kind of systems in the near future. Such a development 

represents great chances for Vectron in the development of new markets since the 

company has already collected corresponding experiences in Turkey and some 

Nordic countries. 

Mobile system trends 

Concerning mobile systems, Vectron has a great potential in the core market of 

catering, since working with mobile devices, directly at the table makes service 

faster and more effective. Since previously exploited solutions were considered as 

relatively expensive additional components for less expensive POS systems, the 

mobile systems, gain nowadays more popularity among users. 

Remote maintenance 

The “cost of ownership”, i.e. the follow-up costs of POS systems substantially 

excess the initial purchase costs over few years, therefore these “costs of 

ownership” are as important as the purchase price for the end customer. The 

largest expenses arise from employee‟s wages and service technician costs. 

Therefore, it is more effective and cheaper to conduct remote maintenance rather 

than maintenance at a certain place. Vectron has early recognized these trends 

and currently offers a plenty of maintenance services that can be conducted 

remotely. 

Customer retention systems 

Today the mission of POS systems is not only the efficient administration of 

existing sales, but also the realization of higher sales. For instance, airline 

companies and chain stores since years have used customer retention systems. 

Nowadays, this service is also strongly demanded by small retailers which 

represent the main customer segment of Vectron. Therefore, Vectron provides 

small retailers with the same capabilities as large companies have. 

POS systems as management tool 

Aside from pure sales registering the POS systems are also equipped with 

additional functions which enable management to control all stores and run the 

business as a whole. Vectron looks forward to develop and modernize 

corresponding functions of their POS applications. 

Internet integration 

Due to the significant expansion of internet the demand for POS systems, which 

are connected per internet and not per modem or ISDN switched connection, is 

constantly rising. Connection between POS systems and internet enables a range 

of interactive functions e.g. online ticket-booking, purchasing goods per internet, 

table reservations etc. 


Perspective and 

market trends 



Financials 

Historical development 

After the merger in 2005, Vectron regained its independency in the course of the 

MBO and carried out a successful listing in March 2007. The company generates 

the main proportion of its revenues from the sale of POS systems. In FY 2008, 

Vectron experienced a decline in the top-line growth as well as the bottom-line as a 

consequence of the ongoing economic downturn. The company generated sales of 

EUR 23.6m indicating a drop of 7.2% compared to the level seen in previous fiscal 

year. Moreover, the company´s operating business suffered from delays in the 

launch of its new hybrid product Vectron POS MobileXL. In FY 2008, the overall 

customer sentiment in its underlying business was rather gloomy as many 

customers were holding back their investments. 

The revenue composition by products reveals that POS systems contributed almost 

73% to the total sales in FY 2008. With POS Mini, POS ColorTouch and POS 

Vario, the company had three products as significant sales drivers. In the future, 

mobile as well as hybrid devices are expected to contribute to a stronger extent to 

Vectron´s revenues. 

Revenue analysis 


Revenue composition by products 

6% 

21% 

73% 

POS Systems Software Peripherials 

Source: CBS Research AG, Vectron Systems AG 

Vectron still generates more than 60% of its revenues in its domestic market 

Germany, even though sales in Europe have accelerated over the last years. At 

current stage, Vectron puts strong strategic emphasis on evolving its European 

business to a significant revenue pillar in the mid-term. As a first step, the company 

aims to establish its business model in France, Spain and UK where Vectron plans 

to achieve a significant business size before tapping new geographic markets. 

The competitive market environment led to deflating prices which had significant 

margin diluting effects in the low-end segment. The drop in prices did not have the 

same far-reaching repercussions in the premium and the mid-range segment as 

margins have been deteriorating to a significantly slower rate in these segments. 

However, Vectron managed to avoid a margin-diluting price competition in its 

business which resulted in stable profit margins in the past. 

In order to introduce new product innovations and to establish a substantial 

international distribution network, Vectron added significant R&D and sales 

resource in FY 2008 which had distorting effects on the EBIT margin. Consequently 

the company´s EBIT margin dropped to 16% in FY 2008 from 22% in the year 

before. 

Revenue composition by geografic markets 

31% 

8% 

61% 

Germany Europe Other 

Recessive market 

environment and 

delays in product 

introduction hit result 

in FY 2008 

Large proportion of 

revenues are 

generated from the 

sale of POS Systems 

Strategic emphasis on 

evolving its international 

business to a 

main revenue pillar 

Stable prices helped to 

improve margins 

Expansion of R&D and 

sales resources 

resulted in declining 

EBIT margins 



Operating performance 

Source: CBS Research AG, Vectron Systems AG; * Pro-forma results, ** excluding other 

Vectron, has meanwhile, built up a sound financial background and boosted its 

equity ratio to approximately 70%. The equity improvement was driven by cash 

inflow of EUR 5.6m from the successful IPO and a strong cash flow generation in 

its operating business. The company utilized the cash inflow from the IPO to repay 

bank debts of EUR 2.2m and to expand its business. 

Given the significant drop in net income, the company´s operating cash flow 

declined from EUR 4.28m in FY 2007 to EUR 1.89m. The decline was also caused 

by a significant increase in inventories as well as by cash taxes payments of EUR 

2.66m. However, Vectron managed to slightly increase its cash and cash 

equivalents to EUR 7.64m in FY 2008 which mainly improved due to proceeds from 

a new jouissance capital of EUR 2.00m. 

Revenue forecasts and gross profits 


In EUR m 2006* 2007 2008 

Sales 20.90 25.42 23.60 

YoY Growth - 22% -7% 

Total output** 20.9 25.34 23.62 

YoY growth - 21% -7% 

Cost of materials -8.00 -9.07 -8.70 

as % of total output 38% 36% 37% 

Gross profit 12.90 16.27 14.91 

Gross profit margin 62% 64% 63% 

EBIT 3.20 5.59 3.81 

EBIT margin 15% 22% 16% 

Net income 1.60 3.00 2.56 

Prior to the current ongoing recession, Vectron achieved a top-line growth of CAGR 

21.9% over the period 2005 to 2007. We expect this trend to slow-down to a CAGR 

of 12.3% until 2012E as consequence of the current recessive macroeconomic 

environment and the slowing growth pace in its underlying market. In our opinion, 

the current economic downturn will last throughout the entire FY 2009E, in which 

customers will continue to hold back their investments. 

Vectron faces the current challenging market environment with a counter-cyclical 

strategy by streamlining its product portfolio and by forcing its internationalization. 

Overall, the company intends to take advantage of the current economic recession 

to improve its market position and to achieve disproportional growth afterwards. 

Overall, our forecasts are based on the following growth drivers: 

� International business expansion: The company´s international 

business is expected to evolve to a main revenue pillar over the next 

years. Vectron uses the current weak market environment to establish a 

substantial international distribution network. Therefore, the company 

added further sales resources in FY 2008 in order to acquire distribution 

partners with significant selling power in their corresponding markets. 

Sound financial 

background without 

bank debts 

High cash taxes 

weighed on CFs 

We expect a slowdown 

in top-line growth 

Vectron faces the 

current recessive 

market conditions with 

a counter-cyclical 

expansion strategy 



Overall the company aims to become a leading European market player in 

the mid-term. 

� Higher revenues in its existing markets: With new products and 

revolutionary innovations, Vectron intends to tap new niche segments 

which have been neglected by the company in the past. Vectron has 

already introduced new products in the area mobile and hybrid devices 

and intends to modernize its entire product portfolio of stationary devices 

within the next year. Overall, the product portfolio diversification will help 

to expand its business activities beyond its classical customer focus. 

� Squeeze-out of small regional competitors: In a highly saturated and 

fragmented market where demand has become more sophisticated, many 

small operators face the problem of delivering appropriate product 

solutions. Therefore, we expect the squeeze-out of these small operators 

over the next years. Vectron as a technology leader with strong financial 

background should be one of the main gainers of such a consolidation 

process. 

� Untapped potentials within its existing installation: The company has 

currently an installation basis of more than 90,000 systems which provide 

a significant potential for upgrades and replacements over the next years. 

After the decline in FY 2008, we expect Vectron`s top-line and the bottom-line to 

experience a further significant drop in FY 2009E as a consequence of the current 

recessive economic environment. We think that the current investment backlog will 

start to ease from the beginning of FY 2010E after which Vectron should be able to 

start to yield the fruits of its current international business expansion and portfolio 

enhancement. Overall, we forecast sales of EUR 20.2m and EUR 23.2m for 2009E 

and 2010E, respectively. 

Revenue and gross profit development 

35.0 

30.0 

25.0 

20.0 

15.0 

10.0 

5.0 

0.0 

63.2% 

23.6 

-6.0% 


We expect a slight decrease in company´s gross profit margin as a consequence of 

the current global economic recession and competitive market environment. 

Although Vectron was able to avoid margin diluting price competition in its 

underlying business in the past, we see potential risks of deflating prices in the long 

run. However, due to the fact that Vectron´s product mix has been moving towards 

higher margin devices over the last year, we expect the effects of possible price 

declines to be rather moderate in the short run. Overall, we assume gross profit 

margins to range at approx. 60% over the next years. 


62.0% 

20.2 

-14.5% 

61.0% 

23.2 

15.0% 

60.3% 

25.8 

60.1% 

28.6 

11.0% 11.0% 

2008 2009E 2010E 2011E 2012E 

Total output (in EUR m) y-o-y Gross profit margin 

90% 

80% 

70% 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

-10% 

-20% 

We expect the 

investment backlog to 

ease by FY 2010E 

We forecast gross 

profit margin to 

stabilize at around 

60% 



The company´s future growth prospects gain additional attractiveness by 

considering the market potentials related to the introduction of a mandatory fiscal 

memory chip, which according to Vectron is scheduled to be launched by the 

relevant governmental authorities in FY 2011. The effects from such a 

measurement would deliver tremendous growth prospects by considering Vectron´s 

sound installation basis of almost 90,000 devices. However, at current stage we did 

not consider for such a scenario in our forecasts. 

Development of the operating business and profits 

In course of the current expansion strategy, Vectron added significant sales and 

R&D resources in FY 2008. We expect to see the full-effects of this expansion 

strategy on company´s operating expenses for the first time in FY 2009E. 

Consequently, we assumed significantly higher operating expenses in FY 2009E 

particularly in the area of personnel costs. Therefore, we expect EBIT margin to 

drop significantly in FY 2009E as a result of the combination of higher operating 

expenses and declining sales. 

However, with the completion of its product portfolio enhancements by the end of 

FY 2009E we expect operating expenses to remain rather stable. Moreover, the 

currently high amortization expenses will substantially decline in the mid-tern as the 

write-offs on software source-codes which the company had acquired in the course 

of the MBO, will terminate by FY 2012E. Therefore we expect Vectron´s EBIT 

margin to return to double digit range after the growth dip in FY 2009E. 

Operating expenses, EBIT margin and net profit 

14.0 

12.0 

10.0 

8.0 

6.0 

4.0 

2.0 

0.0 

11.3 

16.1% 

2.56 


As consequence of depressing revenues and higher operating expenses the 

company´s net income will experience a further drop in FY 2009E, too. 

Nevertheless, we expect Vectron to return to its past growth path in its bottom-line 

in the mid-term as a result of stable operating expenses as well as increasing 

economies of scale. 

Cash flows and financial aspects 

In the past, one of the Vectron´s key strength was its strong cash generating 

capability in its operating business. However, the company´s operating cash flows 

dropped significantly in FY 2008 in the course of the declining net income and the 

high cash tax payments of EUR 2.64m. Consequently, the company´s free cash 

flows experienced a significant decline in FY 2008 that we expect to continue in FY 


12.3 12.4 12.7 13.0 

1.5% 

0.05 

8.1% 

1.34 

11.6% 

1.94 

2008 2009E 2010E 2011E 2012E 

14.0% 

2.56 

Operating expenses (in EUR m) Net income (in EUR m) EBIT-Margin 

18.0% 

16.0% 

14.0% 

12.0% 

10.0% 

8.0% 

6.0% 

4.0% 

2.0% 

0.0% 

Growth prospects 

become more 

promising considering 

fiscal memory chip 

We expect significant 

drop in EBIT margin in 

FY 2009E... 

...with increasing trend 

afterwards 

Return to past growth 

path in FY 2010E 

Cash generation in 

operating business will 

recapture past 

strength 



2009E, too. However, we expect this trend to reverse and Vectron to return to its 

past strength of cash generation in its operating business from FY 2010E on. 

Net working capital (left chart) and Free cash flow (right chart) 

3.5 

3.0 

2.5 

2.0 

1.5 

1.0 

0.5 

0.0 

49 

40 


Given a cash conversion cycle (CCC) of 40 days in FY 2008, we see additional 

potentials in Vectron`s CCC over the next years. Consequently, we assume that 

the company`s net working capital will remain slightly below the level seen in FY 

2008 despite the implied mid-term growth in the top-line. Overall, Vectron has an 

attractive business model and should be able to generate sufficient cash flows in its 

operating business to finance its further business expansion. 

With a current equity ratio of 70%, Vectron has a sound balance sheet with no bank 

debts. Given the profitability in its underlying business, Vectron should be able to 

further improve its equity basis by retaining earnings despite the company´s 

philosophy of high dividend payments. Nevertheless it has to be mentioned that 

Vectron has a large off-balance position of EUR 10.3m (FY 2007) regarding rentand 

leasing agreement related to the property in which the company´s headquarter 

is located in. Moreover, the company´s balance sheet shows a large proportion of 

liabilities associated to Jouissance capital and undisclosed partnership which will 

terminate partly by FY 2011E and FY 2012E. 


37 

34 33 

2007 2008 2009E 2010E 2011E 

NWC (in EUR m) CCC in days 

60 

50 

40 

30 

20 

10 

0 

4.0 

3.5 

3.0 

2.5 

2.0 

1.5 

1.0 

0.5 

0.0 

14% 

5% 

2% 

9% 

9% 

2007 2008 2009E 2010E 2011E 

Free cash flow (in EUR m) FCF/Sales 

16% 

14% 

12% 

10% 

8% 

6% 

4% 

2% 

0% 

Stable working capital 

development 

Sound balance sheet 



Profit and loss account 



HGB EUR 1,000 2007 2008 2009E 2010E 2011E 

Sales 25,421 23,597 20,176 23,202 25,754 

YoY growth 21.6% -7.2% -14.5% 15.0% 11.0% 

Inventory changes -86 19 0 0 0 Herstellungskosten der zur Erzielu 

Total output 25,336 23,616 20,176 23,202 25,754 

Cost of materials -9,067 -8,702 -7,667 -9,049 -10,225 

as % of total output -35.8% -36.8% -38.0% -39.0% -39.7% 

Gross profit 16,269 14,914 12,509 14,153 15,530 

as % of total output 64.2% 63.2% 62.0% 61.0% 60.3% 

Personnel expenses -4,675 -4,558 -5,387 -5,453 -5,666 


Other operating income 221 208 141 162 180 


Other operating expenses -4,876 -5,366 -5,589 -5,638 -5,743 Sonstige betriebliche Aufwendunge 


EBITDA 6,938 5,198 1,675 3,225 4,301 


Depreciation and amortization -1,351 -1,385 -1,362 -1,342 -1,304 


EBIT 5,588 3,813 312 1,884 2,997 


Net financial result 100 189 102 134 149 Net financial result including interest ex 

Profit/loss on ordinary activities 5,688 4,002 414 2,018 3,145 


Exraordinary result -140 0 0 0 0 

EBT 

5,548 4,002 414 2,018 3,145 


Income taxes -2,041 -1,164 -124 -605 -944 

as % of EBT -35.9% -29.1% -30.0% -30.0% -30.0% 

Other taxes -4.9 -4.0 -4.0 -4.6 -5.2 Währungsumrechnungsgewinne u 

Net income 3,503 2,834 286 1,408 2,197 Net income attributable to shareho 


Profit transfer agreement -163.2 -129.9 -113.4 -28.6 -112.6 

Jouissance right compensations -335.5 -145.6 -117.8 -42.9 -140.8 

Net income attributable to shareholders 3,004 2,559 55 1,336 1,943 Net income attributable to shareho 


Weighted average shares outstanding (in thousands) 500 1,500 1,500 1,500 1,500 Achtung, Einheit der Anzahl Aktien 

Basic earnings per share (EUR) 6.01 1.71 0.04 0.89 1.30 



Balance sheet 

Assets 



HGB EUR 1,000 2007 2008 2009E 2010E 2011E 

Noncurrent assets 5,660 4,957 4,707 4,206 3,676 

as % of total assets 31.0% 26.9% 29.4% 23.7% 19.3% 

Intangible assets 5,137 4,168 3,620 2,968 2,355 

Property, plant and equipment 493 768 1,066 1,217 1,299 

Financial assets 30 21 21 21 21 

Current assets 12,569 13,342 11,217 13,471 15,251 


Inventories 1,569 2,382 2,219 2,297 2,575 

Trade accounts receivable 3,888 3,217 2,819 2,988 3,175 

Other current receivables and assets 255 104 182 209 232 

Short term investments 2,365 0 0 0 0 

Cash and cash equivalents 4,493 7,639 5,997 7,977 9,269 

Deferred expenses 

51 121 72 82 92 


Total assets 18,280 18,420 15,996 17,760 19,018 

Shareholders´ equity and liabilities 

Shareholders´ equity 12,086 12,244 10,199 11,535 12,409 

as % of total equity and liabilities 66.1% 66.5% 63.8% 65.0% 65.2% 

Capital stock 500 1,500 1,500 1,500 1,500 

Capital reserve 5,500 4,500 4,500 4,500 4,500 

Retained earnings 40 40 40 40 40 

Unappropriated surplus 3,010 3,168 1,123 2,459 3,333 

Jouissance right capital 3,036 3,036 3,036 3,036 3,036 

liabilities 6,194 6,176 5,798 6,225 6,609 

as % of total equity and liabilities 33.9% 33.5% 36.2% 35.0% 34.8% 

Tax accruals and other accruals 3,352 1,870 1,408 1,690 1,950 

Financial liabilities 21 0 0 0 0 

Undisclosed partnership 1,500 1,500 1,500 1,500 1,500 

Trade accounts payable 608 518 483 570 644 

Jouissance right capital II 0 2,000 2,000 2,000 2,000 

Other liabilities 713 288 407 464 515 

Total equity and liabilities 18,280 18,420 15,996 17,760 19,018 



Cash flow statement 



HGB EUR 1,000 2007 2008 2009E 2010E 2011E 

Profit/loss on ordinary activities 3,004 2,559 55 1,336 1,943 

Tax expenses/income 

Cash taxes paid/received 

Depreciation and amortization 

Other non cash items 

Change in accruals 

Extraordinary items 

Gains/Losses from disposal of assets 

2,041 1,164 124 605 944 

-146 -2,659 -586 -504 -786 

1,351 1,385 1,361 1,342 1,304 

167 -36.752 0 0 0 

246 -274 0 182 102 

-408 -49 0 0 0 

0 0 0 0 0 

"Cash flow" 6,255 2,089 954 2,960 3,507 

Increase/decrease in inventories, trade receivables, 

and other assets 

Increase/decrease in trade accounts payable and 

other liabilities 

-1,919 -68 532 -284 -498 

-52 -136 84 145 125 

Cash flow from operating activities 4,284 1,885 1,570 2,821 3,134 

Net cash outflows from the purchase and retirement 

of PP&E and intangible assets 

Net cash outflows from the purchase and sale of 

consolidated companies 

Purchases of short-term investments 

Sales and maturities on short-term 2,365 

-648 -707 -1,111 -840 -774 

-500 25 0 0 0 

-2,365 0 0 0 0 

Cash flow from investing activities -3,513 1,683 -1,111 -840 -774 

Cash inflow from capital stock increases 

Dividends paid 

Proceeds from undisclosed partnership 

Proceeds from jouissance rigt capital 

Net borrowings/retirements of financial debt 

5,600 0 0 0 0 

-800 -2,400 -2,100 0 -1,069 

0 0 0 0 0 

0 2,000 0 0 0 

-2,213 -21 0 0 0 

Cash flow from financing activities 2,587 -421 -2,100 0 -1,069 

Total change in cash and cash equivalents 3,357 3,146 -1,642 1,980 1,291 

Cash and cash equivalents at the start of the period 

1,135 4,493 7,639 5,997 7,977 

Cash and cash equivalents at the end of the period 4,493 7,639 5,997 7,977 9,269 



Disclaimer and statement according to § 34b German Securities Trading Act 

(“Wertpapierhandelsgesetz”) in combination with the provisions on financial analysis 

(“Finanzanalyseverordnung” FinAnV) 

This report has been prepared independently of the company analysed by Close Brothers Seydler Research AG and/ 

or its cooperation partners and the analyst mentioned on the front page (hereafter all are jointly and/or individually 

called the „author‟). None of Close Brothers Seydler Research AG, Close Brothers Seydler Bank AG or its 

cooperation partners, the Company or its shareholders has independently verified any of the information given in this 

document. 

Section 34b of the German Securities Trading Act in combination with the FinAnV requires an enterprise preparing a 

security analysis to point out possible conflicts of interest with respect to the company that is the subject of the 

analysis. 

Close Brothers Seydler Research AG is a majority owned subsidiary of Close Brothers Seydler Bank AG (hereafter 

´CBS´). However, Close Brothers Seydler Research AG provides its research work independent from CBS. CBS is 

offering a wide range of Services not only including investment banking services and liquidity providing services 

(designated sponsoring). CBS may possess relations to the covered companies as follows (additional information and 

disclosures will be made available upon request): 

▪ CBS may hold more than 5% interest in the capital stock of the company that is subject of the analysis. 

▪ CBS may have been a participant in the management of a (co)consortium in a selling agent function for the 

issuance of financial instruments, which themselves or their issuer is the subject of this financial analysis within 

the last twelve month. 

▪ CBS may have been providing investment banking and/or consulting services during the last 12 months for the 

company analyzed for which compensation has been or will be paid for. 

▪ CBS may act as designated sponsor for the company's securities on the basis of an existing designated 

sponsorship contract. The services include the provision of bid and ask offers. 

▪ Due to the designated sponsoring service agreement CBS may regularly posses shares of the company and 

receives a compensation and/ or provision for its services. 

▪ The designated sponsor service agreement may include a contractually agreed provision of research services. 

▪ The company that is subject of the analysis may agree on a research service agreement with CBS. 

▪ CBS may have significant financial interests in relation to the company that is subject of this analysis. 

CBS and/or its employees or clients may take positions in, and may make purchases and/ or sales as principal or 

agent in the securities or related financial instruments discussed in this analysis. CBS may provide investment 

banking, consulting, and/ or other services to and/ or serve as directors of the companies referred to in this 

analysis. No part of the authors compensation was, is or will be directly or indirectly related to the 

recommendations or views expressed. 

CBS Research AG and the analysed company have a contractual agreement about the preparation of research 

reports. CBS Research AG receives a compensation in return. 

Recommendation System: 

Close Brothers Seydler Research AG uses a 3-level absolute share rating system. The ratings pertain to a time 

horizon of up to 6 months: 

BUY: The expected performance of the share price is above +10%. 

NEUTRAL: The expected performance of the share price trend is between +5% and +10%. 

SELL: The expected performance of the share price is below 5%. 

Recommendation history for the company analysed in this report: 

Date Recommendation Price at change date Fair Value 

14 April 2009 BUY (Initial Coverage) EUR 14.60 EUR 20.71 

Risk-scaling System: 

Close Brothers Seydler Research AG uses a 3-level risk-scaling System. The ratings pertain to a time horizon of up 

to 6 months: 

LOW: The volatility is expected lower than the volatility of the benchmark 

MEDIUM: The volatility is expected equal to the volatility of the benchmark 

HIGH: The volatility is expected higher than the volatility of the benchmark 

The following valuation methods are used when valuing companies: Multiplier models (price/earnings, price/cash 




flow, price/book value, EV/revenues, EV/EBIT, EV/EBITA, EV/EBITDA), peer group comparisons, historical valuation 

approaches, discounting models (DCF, DDM), break-up value approaches or asset valuation approaches. The 

valuation models are dependent upon macroeconomic measures such as interest, currencies, raw materials and 

assumptions concerning the economy. In addition, market moods influence the valuation of companies. 

The figures taken from the statement of income, the cash flow statement and the balance sheet upon which the 

evaluation of companies is based are estimates referring to given dates and therefore subject to risks. 

These may change at any time with prior notice. 

The opinions and forecasts contained in this report are those of author alone. Material sources of information for 

preparing this report are publications in domestic and foreign media such as information services (including but not 

limited to Reuters, VWD, Bloomberg, DPA-AFX), business press (including but not limited to Börsenzeitung, 

Handelsblatt, Frankfurter Allgemeine Zeitung, Financial Times), professional publications, published statistics, rating 

agencies as well as publications of the analysed issuers. Furthermore, discussions were held with the Management 

for the purpose of preparing the company study. Potentially parts of the analysis have been provided to the issuer 

prior to going to press; no significant changes were made afterwards, however. Any information in this report is based 

on data considered to be reliable, but no representations or guarantees are made by author with regard to the 

accuracy or completeness of the data. The opinions and estimates contained herein constitute our best judgment at 

this date and time, and are subject to change without notice. Possible errors or incompleteness of the information do 

not constitute grounds for liability, neither with regard to indirect nor to direct or consequential damages. The views 

presented on the covered company accurately reflect the personal views of the author. All Employees of the author's 

company who are involved with the preparation and/or the offering of financial analyzes are subject to internal 

compliance regulations. 

The report is for information purposes, it is not intended to be and should not be construed as a recommendation, 

offer or solicitation to acquire, or dispose of, any of the securities mentioned in this report. Any reference to past 

performance should not be taken as indication of future performance. The author does not accept any liability 

whatsoever for any direct or consequential loss arising from any use of material contained in this report. The report is 

confidential and it is submitted to selected recipients only. The report is prepared for professional investors only and it 

is not intended for private investors. Consequently, it should not be distributed to any such persons. Also, the report 

may be communicated electronically before physical copies were available. It may not be reproduced (in whole or in 

part) to any other investment firm or any other individual person without the prior written approval from the author. 

The author is not registered in the United Kingdom nor with any U.S. regulatory body. 

It has not been determined in advance whether and in what intervals this report will be updated. Unless otherwise 

stated current prices refer to the closing price of the previous trading day. Any reference to past performance should 

not be taken as indication of future performance. The author maintains the right to change his opinions without notice, 

i.e. the opinions given reflect the author‟s judgement on the date of this report. 

This analysis is intended to provide information to assist institutional investors in making their own investment 

decisions, not to provide investment advice to any specific investor. 

By accepting this report the recipient accepts that the above restrictions are binding. German law shall be applicable 

and court of jurisdiction for all disputes shall be Frankfurt am Main (Germany). 

This report should be made available in the United States solely to investors that are (i) "major US institutional 

investors" (within the meaning of SEC Rule 15a-6 and applicable interpretations relating thereto) that are also 

"qualified institutional buyers" (QIBs) within the meaning of SEC Rule 144A promulgated by the United States 

Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the "Securities Act") or (ii) 

investors that are not "US Persons" within the meaning of Regulation S under the Securities Act and applicable 

interpretations relating thereto. The offer or sale of certain securities in the United States may be made to QIBs in 

reliance on Rule 144A. Such securities may include those offered and sold outside the United States in transactions 

intended to be exempt from registration pursuant to Regulation S. This report does not constitute in any way an offer 

or a solicitation of interest in any securities to be offered or sold pursuant to Regulation S. Any such securities may 

not be offered or sold to US Persons at this time and may be resold to US Persons only if such securities are 

registered under the Securities Act of 1933, as amended, and applicable state securities laws, or pursuant to an 

exemption from registration. 

This publication is for distribution in or from the United Kingdom only to persons who are authorised persons or 

exempted persons within the meaning of the Financial Services and Markets Act 2000 of the United Kingdom or any 

order made thereunder or to investment professionals as defined in Section 19 of the Financial Services and Markets 

Act 2000 (Financial Promotion) Order 2005 and is not intended to be distributed or passed on, directly or indirectly, to 

any other class of persons. 

This publication is for distribution in Canada only to pension funds, mutual funds, banks, asset managers and 

insurance companies. 

The distribution of this publication in other jurisdictions may be restricted by law, and persons into whose possession 

this publication comes should inform themselves about, and observe, any such restrictions. In particular this 

publication may not be sent into or distributed, directly or indirectly, in Japan or to any resident thereof. 




Responsible Supervisory Authority: 

Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin, Federal Financial Supervisory Authority) 

Graurheindorferstraße 108 

53117 Bonn 

and 

Lurgiallee 12 

60439 Frankfurt 

Hamburger Allee 26 -28 

60486 Frankfurt am Main 


Tel.: 0049 - (0)69 - 97 78 45 60

Vectron Systems AG

Create successful ePaper yourself

Delete template?

Save as template?