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Research: TMT
Vection Technologies’ Q323 activities report confirms that contract growth continued to accelerate in H223, with the company reporting 100% total contract value (TCV) growth from the end of January to 28 April. The momentum in TCV growth indicates that management is well-positioned to deliver the triple-digit half-on-half top-line growth required to reach its FY23 expectations. Cash receipts on a quarterly and nine-month basis increased year-on-year. Vection Technologies’ balance sheet is set to be sustained by a further A$3.5m in Q423 from an R&D tax receipt and outstanding invoices, supporting the company’s M&A pipeline.
Vection Technologies |
Poised to reach guidance after a strong quarter |
Q323 activities report |
Software and comp services |
4 May 2023 |
Share price performance
Business description
Next events
Analysts
Vection Technologies is a research client of Edison Investment Research Limited |
Vection Technologies’ Q323 activities report confirms that contract growth continued to accelerate in H223, with the company reporting 100% total contract value (TCV) growth from the end of January to 28 April. The momentum in TCV growth indicates that management is well-positioned to deliver the triple-digit half-on-half top-line growth required to reach its FY23 expectations. Cash receipts on a quarterly and nine-month basis increased year-on-year. Vection Technologies’ balance sheet is set to be sustained by a further A$3.5m in Q423 from an R&D tax receipt and outstanding invoices, supporting the company’s M&A pipeline.
Year |
Revenue |
Adj EBITDA* |
PBT** |
EPS** |
EV/sales |
P/sales |
Net cash*** (A$m) |
06/21 |
3.5 |
(0.4) |
(2.5) |
(0.27) |
12.2 |
14.6 |
2.2 |
06/22 |
18.9 |
0.9 |
(7.0) |
(0.67) |
2.2 |
2.7 |
10.8 |
06/23e |
26.1 |
3.7 |
(6.4) |
(0.59) |
1.6 |
1.9 |
11.5 |
Note: *Adjusted EBITDA is normalised, excluding non-cash payments, exceptional items and interest revenue. **PBT and EPS are normalised, excluding exceptional items and interest revenue. ***Includes debt, financial leases and term deposits.
Guidance maintained following strong Q323
Vection Technologies reported A$5.7m in cash receipts in Q323, up 85% y-o-y and up 24% q-o-q. Its balance sheet remains robust with net cash of c A$8.9m at period end, despite total cash burn of A$3.1m. Management expects Q4 cash inflows of A$1m from a 2022 R&D tax refund (expected on 24 May), and A$2.5m from net outstanding invoices. TCV at 28 April was A$20m, up 100% versus H123 and already ahead of the A$19m reported in FY22. At this rate, the company is well on track to meet management’s A$24–26m guided range and our A$25m revenue forecast for its IntegratedXR product suite. We note the company’s proven track record of converting c 100% of TCV into revenue by year-end, but we leave our forecasts unchanged reflecting the current uncertain trading environment.
TCV driver presents larger opportunity
Following our last TCV update, Vection Technologies announced that its major defence pilot order has increased from A$1m to A$2m. First mentioned in our H123 update, the pilot forms part of a larger tender of up to A$30m, which management expects to finalise within the next four months. It has a pipeline of M&A targets, which could be used to grow its product stack to enter new verticals or encourage more upsells and cross-sells among existing clients. Its acquisitive firepower should benefit from a A$1.1m increase in its credit facilities to A$5.0m, of which A$2.9m remains undrawn, as well as from management’s and our expectations of a strong Q423. Partnerships and technology integrations, such as its latest with expert.AI to digitise technical manuals, will also be key to the company developing its technology.
Valuation: Delivering on objectives could drive stock
Vection Technologies currently trades on 1.6x EV/sales for FY23, representing a 63% discount to our small-cap peer group average and a 3pp decline since our last update. In the short term, we believe additional TCV growth towards management’s guided range and further detail on potentially transformational contracts, including its defence order, could act as catalysts for its stock performance.
Exhibit 1: Financial summary
A$000s |
2021 restated |
2022 |
2023e |
|
Year end 30 June |
AAS |
AAS |
AAS |
|
PROFIT & LOSS |
||||
Revenue |
|
3,471 |
18,894 |
26,056 |
Variable Cost of Sales |
(849) |
(11,454) |
(13,127) |
|
Gross Profit |
2,622 |
7,440 |
12,929 |
|
Operating Expenses* |
(3,993) |
(10,453) |
(11,595) |
|
Adjusted EBITDA |
|
(424) |
881 |
3,695 |
Non-Cash Payments |
(230) |
(1,892) |
(2,606) |
|
EBITDA |
|
(654) |
(1,011) |
1,090 |
D&A |
(658) |
(958) |
(1,000) |
|
Operating Profit (Normalised) |
|
(2,285) |
(5,907) |
(2,557) |
Exceptionals/Other |
(26) |
(44) |
(285) |
|
Operating Profit/(Loss) (EBIT) |
|
(2,259) |
(5,863) |
(2,272) |
Net Interest and financial expense |
(171) |
(1,070) |
(3,840) |
|
Profit Before Tax (norm) |
(2,456) |
(6,977) |
(6,397) |
|
Profit Before Tax (AAS) |
|
(2,430) |
(6,933) |
(6,112) |
Tax |
(77) |
(168) |
(183) |
|
Profit After Tax (norm) |
|
(2,533) |
(7,144) |
(6,580) |
Profit After Tax (AAS) |
|
(2,506) |
(7,100) |
(6,295) |
Profit/(loss) from discontinued operations |
(36) |
- |
- |
|
Minority interest |
(137) |
(419) |
(371) |
|
Net income (norm, to Vection Technologies equity holders) |
(2,533) |
(7,144) |
(6,580) |
|
Net income (AAS, to Vection Technologies equity holders) |
|
(2,543) |
(7,100) |
(6,295) |
Average Number of Shares Outstanding, basic, millions |
931 |
1,071 |
1,118 |
|
EPS - normalised, basic (A cents) |
|
(0.27) |
(0.67) |
(0.59) |
EPS - AAS, basic, to Vection Technologies equity holders (A cents) |
(0.24) |
(0.62) |
(0.50) |
|
Gross Margin (%) |
75.5% |
39.4% |
49.6% |
|
EBITDA Margin (%) |
NA |
NA |
4.2% |
|
Operating Margin (before GW and except.) (%) |
NA |
NA |
NA |
|
BALANCE SHEET |
||||
Fixed Assets |
|
18,273 |
17,785 |
14,912 |
Intangible Assets |
17,338 |
17,028 |
14,180 |
|
Tangible Assets |
240 |
293 |
339 |
|
Right of Use Assets |
632 |
424 |
361 |
|
Other |
63 |
41 |
33 |
|
Current Assets |
|
13,063 |
22,419 |
25,055 |
Cash |
7,084 |
14,869 |
7,379 |
|
Receivables |
4,879 |
6,208 |
7,502 |
|
Inventories |
1,084 |
1,341 |
2,174 |
|
Other |
17 |
- |
8,000 |
|
Current Liabilities |
|
11,272 |
8,475 |
12,428 |
Trade and other payables |
3,615 |
6,974 |
10,637 |
|
Provisions and Other |
6,405 |
30 |
183 |
|
Employee benefits |
36 |
78 |
108 |
|
Lease liabilities |
168 |
195 |
183 |
|
Borrowings |
1,047 |
1,199 |
1,317 |
|
Long Term Liabilities |
|
4,637 |
3,751 |
3,429 |
Provisions |
- |
- |
- |
|
Employee benefits |
333 |
433 |
477 |
|
Lease liabilities |
530 |
286 |
233 |
|
Borrowings |
3,175 |
2,415 |
2,103 |
|
Other |
599 |
616 |
616 |
|
Net Assets |
|
15,428 |
27,977 |
24,111 |
Minority Interest |
(117) |
(479) |
(898) |
|
Shareholder's Equity |
|
15,545 |
28,457 |
25,009 |
CASH FLOW |
||||
Operating Cash Flow (before interest, tax, etc.) |
|
(2,251) |
(1,092) |
2,067 |
Net Interest |
(50) |
(50) |
(30) |
|
Tax |
(24) |
(104) |
(183) |
|
Capex |
(66) |
(164) |
(246) |
|
Purchase of intangibles |
(1,330) |
(1,838) |
(1,838) |
|
Acquisitions/disposals |
2,305 |
(21) |
- |
|
Equity financing |
7,221 |
12,127 |
- |
|
Lease payments |
(96) |
(80) |
(65) |
|
Change in net cash |
5,708 |
8,777 |
704 |
|
Opening net debt/(cash), not incl. leases |
|
(735) |
(2,862) |
(11,255) |
Exchange rate movements |
(280) |
(383) |
- |
|
Other |
(3,301) |
0 |
(8,000) |
|
Closing net debt/(cash), not incl. leases |
|
(2,862) |
(11,255) |
(3,959) |
Closing net debt/(cash), incl. leases and other marketable securities |
(2,164) |
(10,774) |
(11,543) |
Source: Vection Technologies, Edison Investment Research
|
|
Research: Investment Companies
The Bankers Investment Trust (BNKR) has been managed by Alex Crooke, co-head of equities at Janus Henderson Investors (JHI), since July 2003. It can be considered as a ‘one-stop shop’ for global equity exposure as the fund is made up of six geographic portfolios (sleeves), which harness the talent of JHI’s regional specialists. Crooke (in conjunction with the board) sets BNKR’s asset allocation and manages its gearing. He believes that inflation will remain elevated, and that future shareholder total returns will be more balanced between income and capital growth, which will play into the trust’s strengths. While BNKR’s income growth lagged the rate of UK inflation in FY22, the manager is confident in the prospects for the trust’s income generation. He highlights BNKR’s top 10 holdings, which are dominated by US companies; higher income from these businesses is supporting the trust’s overall income stream. BNKR has paid an annual dividend for the last 132 years, and FY22 marked the 56th year of consecutive growth.
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