By Perry Williams, ShareChat Wellington Correspondent
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Friday 2nd February 2001 |
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Even more impressively for the investor, its share price just keeps on rising.
Since listing on the Stock Exchange at the start of November last year at $1.11, 11c above its offer price of $1, Vending Technologies has been one of the smaller but brightest stocks on the market.
The initial offer saw strong support from retail investors with $7.5 million raised in its initial public offer - not bad in an otherwise difficult market. In the three months since, its shares have rocketed to a peak of $2.44 and were at $2.38 at the end of trading yesterday.
So what's all the fuss about? And will the company still be around to dispense snacks in a few years time?
All indicators point to a promising year ahead.
In the year to March, VTL made a net profit of $797,934 on revenue of $5.1 million. It is forecasting a net profit for the year to March 2001 of $3.13 million and $4.09 million in 2002.
Certainly the company can lay claim to some impressive growth.
At the time of its stock exchange listing, the company operated just over 400 vending machines in New Zealand and Australia.
By the end of this financial year (March 31), the company expects to have 2200 machines in Australasia.
Co-founder Mervyn Doolan, also the company's finance director, says the market is still in its infancy in New Zealand with numbers up from 1000 six years ago to 12,000 now. But that's tiny when you consider vending machines are a $34 billion market in the United States.
Doolan chuckles from time to time when I talk to him. You get the sense he thinks he's sitting on a goldmine.
That's not surprising given the company has a variety of revenue streams at its disposal.
Not only does it manufacture new machines, it also buys and refurbishes old ones, installing its proprietary circuitry and software to bring them up to speed.
Then there's the management of those machines and continuing servicing. VTL also hopes over time to retain ownership of an increasing proportion of the machines, which means investors should consider it a part of the retail sector as well as manufacturing.
Doolan says one of the most important points of difference for his company is that its machines have in-built computerized management.
Basically, each machine is hooked up to a leased phone line which tracks all transactions through the machines, determining the amount sold and demand for new stock. It also gives revenue accountability, a security watch for employers, and provides demographic data on the kind of food eaten where. This is the kind of information that data-hungry food and beverage companies will pay to find out about.
Currently, the machines offer beverages, snacks and hot food such as soup in cans, but Doolan notes the potential for corporates is enormous with moves planned into the whole meal replacement option.
Technologically speaking the firm is ahead of the international game too.
Doolan says after traveling extensively through the US and Japan, the company could not find a machine which capitalized on current technology.
"Basically there are a lot of old machines which need to be upgraded which costs a lot of money. We decided to develop our own machine and use the technology to save a lot of work."
Doolan claims the machines use world-leading software. Costing between $3,000 and $15,000, they can hold from 22 to 40 product lines.
Their technology allows the head office to know exactly how much of each product is being sold each day from each machine.
So where do these high-tech machines fit in to the New Zealand market?
Not surprisingly, Coke is far and away the market leader with 10,000 machines in New Zealand while Bluebird Foods operate another 1,000 machines. But after that are what Doolan calls a huge number of "mum and dad" operators who mostly have fewer than 100 machines.
"The market is wide open and we're building some very good relationships. We just won a contract to supply 400 machines to a hospital in Melbourne and the word is spreading fast."
The company has bullish growth plans, aiming to have 4,700 machines under management throughout Australia by March 2002. It also intends expanding into Asia and has had interest from Japan.
It's clear while the company is enjoying good growth in New Zealand; Australia is the goal in the long-term. The company is putting a further 150 machines into the Australasian market per month with two-thirds going into Australia.
And Doolan says he expects VTL's broker, Craig and Co, to recommend a dual listing on the Australian Stock Exchange, as the company became a more dominant player there.
Doolan says there is still a misconception that vending machines are unreliable and could short-change a customer.
"But that will change with time. You're getting kids using them more than a dairy and that [market] can only get bigger."
He says the Stock Exchange listing was a big help for the company to gain credibility in the financial world.
"That was a big part of the float. We're now taken seriously."
Even in Japan where there is one vending machine for every 25 people, Doolan can see growth opportunities.
"It's unbelievable. They sell pretty much everything (beer, cigarettes, magazines) in machines except food so that's definitely a growth option."
Yet Doolan says no matter how large the company becomes all assembly and development will stay in New Zealand.
The company reported a maiden interim profit of $1.25 million for the six months ending September 30. Revenue during the period was up 269% at $8.91 million, from $2.4 million last year. Receipts from customers rose 230% at $8.1 million while payments to suppliers and employees rose 366% to $5.5 million.
Generally speaking analysts are loathe to talk about the company - it's too small for many brokers to bother analysing.
One mentioned the fact that two shareholders who hold 4.05% of the company each are interests of, and associated with, Gary Stevens and Roger Moses, who have been embroiled in controversy over their former company, Reeves Moses. It was found to be in breach of the Securities Act on several contributory mortgage loans when the pair were managing it under ownership of Sovereign.
"But that seemed more relevant at the time of listing. I can't see that sort of history causing the demise of the company."
He noted its share price had shot up from $1.70 to $2.40 in the last month.
Co-founder John Hitchin has previously said Mr Moses and Mr Stevens had bought the shareholding long before the breaches were raised.
However another analyst, after much coaxing, admitted the company's impressive share price performance has grabbed some industry interest.
"It's just a classic growth story. They spotted a big gap in the market, developed their own technology and now they're enjoying good results. Certainly worth keeping an eye on."
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