Vectron Systems AG

Vectron Systems AG
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
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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
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