Vectron Systems AG

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Vectron Systems AG Table of contents Investment thesis ...................................................... 3 SWOT analysis ........................................................... 5 www.cbseydlerresearch.ag 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
Vectron Systems AG 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. www.cbseydlerresearch.ag 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 Close Brothers Seydler Research AG | 3
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