€35m contract win and record order book
Store Electronics (PARIS:SESL) has signed a €35m contract – its largest ever – with a leading German retailer, which extends the already record order intake announced in the Q1 trading update. Revenue was down 16% y-o-y in Q1, but the healthy order book provides a solid foundation to our €102m FY15e revenue forecast and shows market demand is growing. The strong US dollar and increasingly competitive market, however, are likely to put pressure on margins, and therefore we have reduced our FY15e gross profit forecast by 15%.
Over €76m order intake in five months
SES has won three substantial orders in the first five months of FY15: 250 Stores for Monoprix, 150 for Spar, and now this 250-store, €35m pan-European agreement with a German retailer. These orders clearly illustrate that the market is growing strongly despite the weak revenue in Q1 and, while quarterly swings in revenue are likely to continue, the long-term trend is positive. The order intake for Q1 was €41m and this new contract brings the total for this year to over €76m. Some of these orders are multi-year agreements but most are expected to be delivered over the coming 12 months and therefore provide confidence that SES will meet our €102m revenue forecast.
NFC e-paper products demonstrate their potential
Interestingly, the €35m German order was for SES’s new NFC e-paper products. This is encouraging because an order of this magnitude should help industrialise the production of this new generation of tags. Margins for these new products are initially likely to be lower than for more mature products, but contracts such as this should help achieve more scale benefits and improve margins in the mid-term. It also supports our thesis that the new colour e-paper NFC tags will help drive adoption by providing functionality that allows bricks and motor retailers to achieve pricing flexibility and merchandising ability closer to that of online stores.
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