Vectron Systems AG

Vectron Systems AG
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
Source: CBS Research AG
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
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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
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