FY17 results reflected the declining impact of regulatory changes on demand in Germany. International sales continued to grow in FY17 and the company saw good demand for its Duratec product line. Vectron’s push into marketing services is progressing well: bonVito is close to profitability and the new GetHappy app is currently being trialled in Leipzig. We view the full launch and then uptake of the app as the key drivers of the share price.
Vectron continued to see strong demand for its products in H117 after a very strong H216, supported by changes in regulations for cash registers in Germany. This effect waned in H217, resulting in a small revenue decline for FY17. Combined with a small increase in costs, the company reported FY17 EBITDA €1.4m lower than a year ago. Despite more than 30% of customers not having upgraded to compliant systems, management does not expect a strong uptick in demand for its POS systems in FY18, instead suggesting that this is more likely to happen in FY19 ahead of further regulations coming into force in FY20.
The original founders have instigated changes to the management structure to ensure the company is well positioned to grow to the next level. The new CEO, Oliver Kaltner, has confirmed that he expects to increase the business’s focus on software and cloud services to deliver full solutions that enable customers to make the best use of the data generated by their POS systems. Several modules of the new GetHappy app are currently being trialled by c 60 restaurants in Leipzig. The date of the full launch has not yet been confirmed, and will be decided in collaboration with Coca-Cola.
Consensus forecasts for FY18 have reduced, factoring in a revenue and EBITDA decline, before the company is forecast to return to growth in FY19. The stock is trading at a significant premium to peers, in our view factoring in a level of success for GetHappy that has not yet been incorporated into forecasts. We view the full launch and then uptake of the app as the key drivers of the share price.