Francotyp-Postalia (FP) looks back on a more than 90-year history as a producer of franking machines. In the past it expanded its product offering into mail services (eg pre-sorting mail). Future growth is expected to come from digital and IoT solutions, assisting current customers in their digitalisation process and finding new applications for the IoT know-how already present in FP’s secure high-tech franking machines.
Written by
Francotyp-Postalia |
Industrials |
Share price graph
Share details
Business description
Analyst
|
From analogue to digital
Francotyp-Postalia (FP) looks back on a more than 90-year history as a producer of franking machines. In the past it expanded its product offering into mail services (eg pre-sorting mail). Future growth is expected to come from digital and IoT solutions, assisting current customers in their digitalisation process and finding new applications for the IoT know-how already present in FP’s secure high-tech franking machines.
Growing with share gains and digital solutions
About 25% of FP’s revenues come from hardware sales, with 40% from equipment rental income, services and the sale of consumables, which are relatively high-margin businesses. Mail services, like the pre-sorting of outbound mail, contribute about 30% of revenues, with a rather low margin. FP still sees growth in its traditional business, but a bigger growth push is expected from digital solutions like FP Sign (a digital transaction and secure e-signature process) and IoT applications like FP Secure, providing a secure data gateway. IoT know-how is already present in FP’s secure franking machines, which require secure communication between FP’s customers, its servers and the postal services. The development of these new business areas is a key point of the company’s ‘ACT’ strategy, announced in 2016. With almost no revenue contribution from these new product developments at present, they are targeted to contribute more than €30m by 2020. In total, the company targets revenues of €250m, and an EBITDA margin ≥17% by 2020, and €400m in revenues with an EBITDA margin of 20% by 2023.
2017-18: Transformation puts pressure on margins
In 2017, FP reported revenues of €206.3m (+1.7%). On the back of higher costs associated with the ACT programme, EBIDTA fell by 3.3% to €26.3m. For 2018, the company targets a small revenue improvement vs 2017 and a small improvement in company adjusted EBITDA. FP was clear in its outlook that 2018 will be significantly affected by restructuring costs. H118 revenues reached €104.8m (flat y-o-y, €107.9m currency adjusted, +3.3% y-o-y), and EBITDA came in at €12.8m, virtually unchanged from H117. Adjusted for currency effects and restructuring costs, EBITDA would have reached €15.5m, +21% y-o-y, according to FP. However, the company expects significant restructuring charges in H218.
Valuation: Business re-engineering and new products
The company is trading at relatively undemanding FY18e consensus EV/Sales of 0.4x and EV/EBITDA of 3.5x, with a further reduction in multiples expected in FY19 on the back of the ongoing cost-cutting and growth in digital services.
|
Consensus estimates
Source: Bloomberg |
|
|
First Sensor is focused on three segments: industrial, medical and mobility. All three markets benefit from several mega-trends that are driving demand for sensors and sensor systems. These mega-trends are the transition to Industry 4.0 in which processes are controlled by machines sharing information from sensors; miniaturisation of medical equipment; and the proliferation of sensors in automobiles, culminating in autonomous driving.