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Research: TMT
Vection’s Q324 update showed strong double-digit growth in revenue and cash receipts, driven by multiple contract wins, including its largest contract to date with an existing defence customer. A swing to positive operating cash flow in Q3 (A$4.1m), coupled with contract wins, validates the company’s streamlined sales structure, designed to bolster operational efficiency. Cash generated also supported a quarter-on-quarter reduction in debt. Management is seeing early positive signs by enhancing the platform’s compatibility with Apple Vision Pro, potentially unlocking a key growth avenue from rising enterprise adoption among large global players.
Written by
Vection Technologies |
Moving from niche to mainstream markets |
Q324 activities update |
Software and comp services |
30 April 2024 |
Share price performance
Business description
Next events
Analysts
Vection Technologies is a research client of Edison Investment Research Limited |
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Vection’s Q324 update showed strong double-digit growth in revenue and cash receipts, driven by multiple contract wins, including its largest contract to date with an existing defence customer. A swing to positive operating cash flow in Q3 (A$4.1m), coupled with contract wins, validates the company’s streamlined sales structure, designed to bolster operational efficiency. Cash generated also supported a quarter-on-quarter reduction in debt. Management is seeing early positive signs by enhancing the platform’s compatibility with Apple Vision Pro, potentially unlocking a key growth avenue from rising enterprise adoption among large global players.
Year end |
Revenue (A$m) |
Adj EBITDA* |
PBT** |
EPS** |
EV/sales |
P/sales |
Net cash*** |
06/21 |
3.5 |
(0.2) |
(2.5) |
(0.27) |
8.8 |
8.8 |
2.2 |
06/22 |
18.9 |
1.4 |
(7.0) |
(0.67) |
1.6 |
1.6 |
10.8 |
06/23 |
26.3 |
1.5 |
(11.2) |
(1.05) |
1.2 |
1.2 |
0.7 |
Note: *Adjusted EBITDA is normalised, excluding non-cash payments, exceptional items and interest revenue. FY22 figure re-stated. **PBT and EPS are normalised, excluding exceptional items and interest revenue. ***Includes debt, financial leases and term deposits.
Diversified growth on a lower cost base
9M24 revenue was A$19.8m, up 82% from $10.9m in H124. Cash receipts were up 82% y-o-y to A$26.7m (Q3: A$11.8m, +107% y-o-y), supported by positive working capital movements. Forward contracted revenue of A$6.7m provides visibility for the year; if this entire contracted revenue were delivered in Q4, the total combined with 9M24 revenue would marginally exceed FY23 revenue of A$26.3m. Q324 growth was driven by a A$4.9m defence contract, an upsell to an existing customer, as well as several smaller contracts totalling A$971k across healthcare, real estate and retail. Integration of the Invrsion acquisition supported growth in the smaller fashion vertical, while also supporting the platform’s compatibility with Apple Vision Pro alongside Vection’s investments in spatial computing technology. Management sees spatial computing, in addition to developments in AI, as key to meeting customer demand for technologies that can help reduce costs and improve operational efficiencies. Spatial computing also underpins the company’s first extended reality naval solution contract signed in Q324 and valued at A$500k.
Swing to positive operating cash flow
A move to positive operating cash flow of A$4.1m in Q324 reflects the benefits from cost reduction measures implemented in H124 and top-line growth. Limited capex, despite the decision to capitalise some development costs, supported free cash flow of A$3.4m, driving a A$1.3m debt reduction to A$8m. Maintaining positive operating cash flow should allow the company to invest in its research and development initiatives, while supporting a move back to a net cash position.
Valuation: Share price up ytd, scope for more
Vection’s share price has reacted positively following the Q324 report, up 8% on the day and up 35% year to date – ahead of its peers. We believe continuing to demonstrate the ability to deliver top-line growth on a lower cost base in FY24, as well as providing greater mid-term visibility, could drive the stock price higher.
Exhibit 1: Financial summary
A$000s |
2021 restated |
2022 |
2023 |
|
Year end 30 June |
AAS |
AAS |
AAS |
|
PROFIT & LOSS |
||||
Revenue |
|
3,471 |
18,894 |
26,299 |
Variable Cost of Sales |
(849) |
(11,454) |
(19,280) |
|
Gross Profit |
2,622 |
7,440 |
7,019 |
|
Operating Expenses |
(3,993) |
(10,453) |
(11,356) |
|
Adjusted EBITDA |
|
(209) |
1,385 |
1,465 |
Non-Cash Payments |
(230) |
(1,892) |
(1,860) |
|
EBITDA |
|
(439) |
(508) |
(395) |
D&A |
(658) |
(958) |
(1,217) |
|
Operating Profit (normalised) |
|
(2,285) |
(5,907) |
(7,625) |
Exceptionals/Other |
(26) |
(44) |
(212) |
|
Operating Profit/(Loss) (EBIT) |
|
(2,259) |
(5,863) |
(7,414) |
Net Interest and financial expense |
(171) |
(1,070) |
(3,554) |
|
Profit Before Tax (norm) |
(2,456) |
(6,977) |
(11,179) |
|
Profit Before Tax (AAS) |
|
(2,430) |
(6,933) |
(10,968) |
Tax |
(77) |
(168) |
(55) |
|
Profit After Tax (norm) |
|
(2,533) |
(7,144) |
(11,234) |
Profit After Tax (AAS) |
|
(2,506) |
(7,100) |
(11,023) |
P/(L) from discontinued operations |
(36) |
- |
- |
|
Minority interest |
(137) |
(419) |
(202) |
|
Net income (norm, to Vection Technologies equity holders) |
|
(2,533) |
(7,144) |
(11,234) |
Net income (AAS, to Vection Technologies equity holders) |
|
(2,543) |
(7,100) |
(11,023) |
Average Number of Shares Outstanding, basic, millions |
931 |
1,071 |
1,071 |
|
EPS - normalised, basic (c) |
|
(0.27) |
(0.67) |
(1.05) |
EPS - AAS, basic, to Vection Technologies equity holders (c) |
|
(0.24) |
(0.62) |
(0.98) |
Gross Margin (%) |
75.5% |
39.4% |
26.7% |
|
EBITDA Margin (%) |
NA |
NA |
NA |
|
Operating Margin (before GW and except.) (%) |
NA |
NA |
NA |
|
BALANCE SHEET |
||||
Fixed Assets |
|
18,273 |
17,785 |
16,419 |
Intangible Assets |
17,338 |
17,028 |
15,463 |
|
Tangible Assets |
240 |
293 |
550 |
|
Right of Use Assets |
632 |
424 |
322 |
|
Other |
63 |
41 |
84 |
|
Current Assets |
|
13,063 |
22,419 |
25,683 |
Cash |
7,084 |
14,869 |
11,359 |
|
Receivables |
4,879 |
6,208 |
13,647 |
|
Inventories |
1,084 |
1,341 |
676 |
|
Other |
17 |
- |
- |
|
Current Liabilities |
|
11,272 |
8,475 |
19,382 |
Trade and other payables |
3,615 |
6,974 |
10,969 |
|
Provisions and Other |
6,405 |
30 |
16 |
|
Employee benefits |
36 |
78 |
72 |
|
Lease liabilities |
168 |
195 |
211 |
|
Borrowings |
1,047 |
1,199 |
8,114 |
|
Long Term Liabilities |
|
4,637 |
3,751 |
3,529 |
Provisions |
- |
- |
- |
|
Employee benefits |
333 |
433 |
544 |
|
Lease liabilities |
530 |
286 |
165 |
|
Borrowings |
3,175 |
2,415 |
2,194 |
|
Other |
599 |
616 |
627 |
|
Net Assets |
|
15,428 |
27,977 |
19,191 |
Minority Interest |
(117) |
(479) |
(711) |
|
Shareholder's Equity |
|
15,545 |
28,457 |
19,902 |
CASH FLOW |
||||
Operating Cash Flow (before interest, tax, etc.) |
|
(2,251) |
(1,092) |
(7,392) |
Net Interest |
(50) |
(50) |
(28) |
|
Tax |
(24) |
(104) |
(58) |
|
Capex |
(66) |
(164) |
(403) |
|
Purchase of intangibles |
(1,330) |
(1,838) |
(2,677) |
|
Acquisitions/disposals |
2,305 |
(21) |
(7) |
|
Equity financing |
7,221 |
12,127 |
- |
|
Lease payments |
(96) |
(80) |
(3) |
|
Change in net cash |
5,708 |
8,777 |
(10,568) |
|
Opening net debt/(cash), not incl. leases |
|
(735) |
(2,862) |
(11,255) |
Exchange rate movements |
(280) |
(383) |
365 |
|
Other |
(3,301) |
0 |
- |
|
Closing net debt/(cash), excluding leases |
|
(2,862) |
(11,255) |
(1,052) |
Closing net debt/(cash), including leases and other marketable securities |
|
(2,164) |
(10,774) |
(676) |
Source: Edison Investment Research, company accounts
|
|
Research: Investment Companies
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