Frequentis - a guardian angel?
April 11, 2022•614 words
After an IR call with the Head of IR at #Frequentis, Mr. Marin, I am convinced that I have discovered a great long-term runner in Austria. The Viennese company is excellently positioned to offer attractive prospects for long-term investors. This is already underlined by a successful past. What convinces us about Frequentis?
- Sales increases. Based on the last few years, the company underlined its market leadership with an attractive sales development (2016: 240 EURm, 2021: 330 EURm), which was hardly affected during Corona (sales minus between 2019 and 2020 -400 EURk, i.e. a good 1.5 %). This is due to the fact that the business serves a business area that is not sensitive to the economy because it is safety-critical for every customer.
- Entry barriers. Frequentis operates in two business areas that are highly critical on the customer side and require tenders in order to be implemented. Specifically, these are the two business segments
- Air & Traffic Management (ATM) with a turnover share of approx. 60% and
- Public Safety & Transport (PST) with a turnover share of approx. 40%.
The ATM segment deals with civil airspace security (data service provider for air traffic control, data service provider for flight information, airports, service providers for unmanned air traffic and space agencies) on the one hand and defense on the other hand (air forces, army, navy, internal security, combined armed forces).
The PST segment deals with services that serve public security. Services for the police, fire brigade, rescue services and critical infrastructures for industrial customers are collected in the Public Safety sub-segment. The public transport sub-segment includes services for railway companies and other public transport companies. The third sub-segment, shipping, serves coast guards, offshore installations, ports and search and rescue services.
As can be clearly seen in both business segments, the majority of customers in both areas are official (public) customers. 90% of the sales from 2020 were generated from contracts with existing customers. This is due to the fact that e.g. existing contracts in air traffic control are closed for a period of 20-25 years. Customers are served with services, maintenance and training.
- Debt situation. Frequentis is in the excellent position of having net cash of a good EURm 80 over the past two years. This means that the financial debt is so small that it could be completely dissolved with the current cash and cash equivalents. This would also have been possible with the free cash flow position in both years at once. This underlines the outstanding financial policy of the Austrian company.
- Clear strategic direction. In the IR call, Mr. Marin additionally stated that the company is also in a position to turn down customers if you have negative feelings about them, since the company is not geared towards the short term, but rather the long term. This, coupled with the fact that acquired companies should account for a maximum of 10% of sales in the case of acquisitions, shows that Frequentis is proceeding in a very controlled and experienced manner. When it comes to acquisitions, Frequentis usually plans to take over only 51% of the company so that the existing (functioning) team of the acquired company remains intact. These steps show maturity and foresight. These explanations by Mr. Marin left me deeply impressed.
You can find more details about the IR call clicking on: