Vectron Systems continues to benefit from regulatory tailwinds, achieving revenue growth of 26% in H117 after the 30% growth reported in FY16. This translated to operating margin expansion of 6.7 percentage points year-on-year to 14.9%. The company expects the new GetHappy app to be launched in FY18; this has the potential to provide significant upside to Vectron’s earnings. We do not believe that this is currently factored into consensus forecasts although the share price reflects some level of success for GetHappy in our view.
Vectron reported strong revenue growth in H117, with year-on-year growth of 26%. This compares to growth of 30% for FY16. On a quarterly basis, Q117 revenues grew 40% and Q217 revenues grew 12%, although were down 18% sequentially. The main driver of revenue growth was recent regulatory changes in Germany relating to cash registers, which resulted in strong demand in Q416 and Q117, although it slowed somewhat in Q217. EBITDA doubled and operating profit increased 129% over the period, despite a significant increase in staff costs. Better profitability combined with a lower tax rate resulted in a 225% increase in profit after tax.
Vectron is collaborating with Coca-Cola to support the next version of its GetHappy app with Vectron’s bonVito technology. The app is in the final stages of development and is due for launch to hospitality businesses in January 2018 and to consumers in April 2018. Initial indications are positive, with 4,000 businesses already pre-registered. Adoption of the new service by businesses and ultimately consumers should drive high-margin revenues for Vectron.
Consensus forecasts are for revenue growth of 17% in FY17 falling to 3% in FY18. This implies flattish revenues in H217 versus H117 and we believe assumes that the upgrade cycle flattens off. It also appears that forecasts do not factor in a material contribution from the GetHappy initiative. However, valuation metrics imply that the market has factored in some level of success from GetHappy