News source: 4investors | 23.11.2023, 07:25
With the acquisition of the Cologne-based MoovIT Group, Avemio AG (ISIN: DE000A2LQ1P6) has taken an important step in its transformation from the largest trading company for professional film and television technology in the German-speaking market to an internationally positioned media technology group. For the current year, the company, which is listed on the Düsseldorf primary market and arose from a reverse IPO of Teltec AG, is targeting an increase in sales to EUR 120 million and an EBITDA of around EUR 5.0 million. In the medium term, revenue is expected to rise towards one billion euros thanks to further acquisitions.
The editorial team of 4investors.de spoke with Avemio CEO Ralf P. Pfeffer about the recent price capers of the Avemio share, consolidation in the highly fragmented European market, an AI-based search engine and the “portmanteau word” Metaverse.
4investors.de: Mr. Pfeffer, given the occasion, the first question that must be asked is about the fall in the share price on November 13. What was the background to the rise in the share price from an initial EUR 40 to more than EUR 80 and then the fall back to EUR 40 in mid-November?
Pfeffer: As a rule, it is difficult for the management board of a listed stock corporation to comment on share price developments. In this case, however, the entire Avemio Management Board has a clear opinion: at the beginning of October, a sample portfolio was included in a stock market letter that strongly recommended the Avemio share as a buy, in some cases with dubious claims. According to the stock market letter, the initiators of the recommendation were probably invested in the share themselves. As a result of further positive “recommendations” from this stock market letter, the Avemio share price subsequently rose to EUR 85.
The underlying “scam” is to drive up the price of shares that are close to the market with recommendations and then “cash in” at the right moment. This probably happened on November 13 and led to a sharp fall in the share price as a result of the sample portfolio sale – and the resulting share sales.
4investors.com: Especially as the Avemio share is now trading at the September level again …?
Pfeffer: Yes, the Avemio share is back in the range between EUR 40 and EUR 50 after these short-term price fluctuations, which were not the responsibility of the company and had no operational background. This is also in line with the assessment of the research firms accompanying us, Montega AG, Hamburg and GBC, Augsburg, which currently see the fair value of our share at EUR 40 and EUR 51 respectively.
4investors.de: Have there been any share sales by insiders in recent weeks?
Pfeffer: No. And it is also important for me to mention that none of the former Teltec shareholders who exchanged their shares for Avemio shares as part of the reverse IPO were involved in this transaction and did not benefit from it. All existing Teltec shareholders were still subject to a lock-up period. During this hard lock-up, the shares were not in their securities accounts and therefore could not be traded.
We have brought a plan with us to the stock exchange and will not allow it to be thwarted by speculators acting in their own interests. In my more than 30 years as an entrepreneur, I have had to overcome a number of challenges, so our company and its management also work when times get uncomfortable.
4investors.de: Let’s talk about the operating business: In recent years, the Avemio Group has become the leading system supplier for hardware and software solutions.
and software in the areas of film technology, broadcast, professional audio and video solutions in the German-speaking market. Could you please briefly explain to our readers how you achieved this?
Pfeffer: This rise is based on a three-decade-old realization that the industry for professional film and television technology would change from a seller’s to a buyer’s market as a result of the digitalization that took place from the mid-1990s onwards. Until then, analog film and television technology was literally rocket science with extraordinarily high know-how requirements. The market was dominated by manufacturers who often set a standard with what they did and the associated patent, and in some cases had a worldwide monopoly.
4investors.de: And that changed as a result of digitalization and the Internet?
Pfeffer: Yes, my analysis at the time showed that digitalization would make the range of products more diverse. The privatization of the broadcasting market also changed the demand side in the 1980s. Not least because a supply industry for features, reports, documentaries and films emerged. In Munich and Cologne in particular, this development was supported by politicians, making them the most important media locations in Germany to this day. The emergence and development of the Internet, smartphones and social media as well as the digitalization of other media and their use of videos as a means of communication have reinforced this trend.
4investors.de: When did you found Teltec, the core of what is now Avemio AG?
Pfeffer: Teltec – which stands for Television Technology – was founded in 1993 as a spin-off of a technical service provider from a production and post-production company. We wanted to break new ground, and we did so against great resistance. As someone who tried to redefine existing industry practices, we were quite unpopular for a long time. We violated the unwritten market law of having only a few manufacturers in the product portfolio, but then representing them more or less exclusively.
Over many years, we became the first manufacturer-independent trading company in the industry and in 2015 we became the German market leader with an annual turnover of 15 million euros. At the same time, many previously independent market segments, such as security and medical, have been transformed into a single large moving image market.
4investors.de: And when was the starting signal given for the market consolidation?
Pfeffer: Our unique market positioning has put us in a position to unite all major competitors in Germany and Austria under one Group umbrella from 2017 as part of a buy-and-build strategy. To this day, our manufacturer independence is a major competitive advantage throughout Europe that cannot simply be copied. The barriers to market entry are enormous because professional videos, their production, post-production, archiving and distribution are still highly complex and technically very demanding.
4investors.de: Your new destination is now Europe …
Pfeffer: Correct. After we had succeeded in consolidating the German-speaking market under our own steam, we decided to extend this success story to Europe. The market segment, which we lead in the German-speaking segment by a wide margin over the next largest competitor, is becoming increasingly broad thanks to new offerings such as social media, YouTube, Instagram, Twitch and, in future, Metaverse.
4investors.com: Even with a dominant market position, you cannot escape the short-term developments of the market. Have you felt any economic headwinds in your operating business so far this year?
Pfeffer: But yes, we have now reached a size where an economic downturn and the associated reluctance to invest will not leave us unscathed. However, this is nothing new for us either. We have seen such sinusoidal developments over the three decades of our existence, even if the long-term trend has always been upwards. We have always seen and continue to see opportunities in such economic dips.
4investors.de: What particular opportunities do you currently see for the Avemio Group, especially in the European market?
Pfeffer: The European market is highly fragmented. Many business models that were still performing reasonably well before the coronavirus crisis, supply chain problems and the war in Ukraine are currently facing a strategic dilemma due to a lack of breadth in the product range, among other things. The professional providers are hardly in a position to serve the new, small-scale markets. And the other market players lack the know-how and, above all, the important supplier access needed to be successful in the long term.
Most of the European country markets in our specialty market and the
The respective product portfolios of almost all current providers prevent the efficient operation of a purely regionally oriented web store. E-commerce expertise has become a decisive competitive component in recent years. The high demands on marketing, warehousing and logistics, social media presence and much more require a certain company size that hardly anyone in Europe has.
4investors.de: According to this, the current crisis is even encouraging your consolidation efforts of the European market?
Pfeffer: Yes, this was most recently demonstrated by the acquisition of the Polish company PVP, which we made in the spring of this year. Like all previous mergers in the German-speaking market with former competitors, this sale to us was not entirely voluntary due to the lack of available alternatives. Nevertheless, PVP doubled its turnover in the first quarter of its membership of the Avemio Group.
Although PVP is currently still a long way from being the Polish market leader, it can achieve this quickly together with us thanks to the market position it has achieved in 25 years. This is very similar to what has already been achieved with the Austrian partner in Vienna and is also planned with other foreign targets.
4investors.com: Avemio is aiming for sales of one billion euros in the medium term. In 2022, turnover amounted to 105 million euros. How and where should growth come from?
Pfeffer: We went public with the aim of accelerating our buy-and-build strategy. We are pursuing a clear goal with this first billion euro turnover and have developed a list of more than a dozen targets over the past few years. Initial talks were held with all of these companies. We are already in preliminary negotiations with some of them. Only these target companies generate a total turnover of more than one billion euros.
Since we went public and word got around that we are one of the few strategic buyers in the video industry, we have been actively offered further companies this year that fit very well into our growth and consolidation strategy. We have no shortage of opportunities.
4investors.de: And how do you intend to finance the buy-and-build strategy?
Pfeffer: We can manage smaller acquisitions on our own. However, in order to reach the billion-euro target, we need investors with whom we want to achieve this goal. The exceptionally high scaling potential of our business model was the most important reason for our IPO. The position of European market leader is vacant because there is no internationally positioned retailer. Based on the US market leader, the benchmark for the annual turnover of a European champion is well over five billion euros.
We create value with every acquisition; in the past, the multiple arbitrage was at least twice the value. If the capital market trusts us to reach the billion-euro mark in sales, then the early movers in particular, whom we are currently addressing on the investor side, will be very happy to invest in Avemio. Until this happens, we want to make one or two acquisitions in the double-digit million euro range on our own.
4investors.de: You also self-financed the most recent acquisition. In July, Avemio acquired the companies MoovIT and MoovIT Software Products, a broadcast IT expert. What were the reasons for the acquisition and what do you expect from it for the future?
Pfeffer: After the IPO, we announced at the beginning of this year that we would improve our technological market positioning in addition to our buy-and-build strategy and the associated consolidation of the European retail landscape in the video industry. Our declared aim was to develop into a media technology group. This transformation has taken on great momentum with the merger with the two MoovIT companies in Cologne. Above all, we expect this to lead to a significant improvement in the trading margin. The MoovIT Group’s software and services business is very high-margin. And at least as important: as the market leader with MoovIT’s expertise, we are now also very prominently occupying the topics that are only now being commercialized in our market segment, such as cloud, artificial intelligence and metaverse.
4investors.de: But this is not your first contact with the topic of artificial intelligence …
Pfeffer: No, in the field of artificial intelligence, we already launched an incubator for innovative business models in 2020 and provided it with two million euros in equity. This has already resulted in the founding of five companies. One start-up has already caused a sensation at industry trade fairs around the world this year. It is a moving image search engine that even identifies “feelings” in video sequences without having to teach them to the AI. This enables a significant reduction in production times and even creates completely new possibilities.
4investors.de: What kind of response is this AI-based search engine getting on the international market?
Pfeffer: “With the two innovative co-entrepreneurs, both of whom have already developed and marketed pioneering software solutions several times and thus enriched our industry, we are already successful worldwide with this software solution. This AI development is attracting a great deal of interest, particularly in the USA.
For the MoovIT founders, our technological strategy, but also the fact that we reach more than 30,000 B2B customers in German-speaking countries and are growing internationally, were the interfaces for a collaboration. MoovIT plays a key technological role at the top of the moving image pyramid worldwide. Next year, MoovIT’s unique software and system solutions will be used at both the Olympic Games and the European Football Championships.
4investors.de: How do you identify acquisition targets in general and how do you integrate them into the Avemio Group?
Pfeffer: As a rule, we know the targets. We have been working for three decades in a very international market, which only lacks international structures on the trading side. Our mission is to achieve this quickly.
So far, we have done very well in Germany and Austria by acquiring teams with a functioning management and the know-how about and proximity to the respective local and, in future, national market. With what we bring to the table, we generate added value that is particularly important and valuable for the customers of the newly acquired partners. Over time, this results in
Opportunities for optimization in many areas. It is not uncommon for us to learn new things or for the entire organization to benefit from the know-how that the respective team brings to the group.
Economies of scale arise in the course of integration, primarily through IT integration. When selecting acquisition targets, we take great care to ensure that the merger creates synergies. We leverage this through a decentralized and collegial management style, which also provides a basis for mutual enrichment.
4investors.com: The metaverse in particular is expected to generate strong growth. How is Avemio positioning itself to benefit from this growth?
Pfeffer: First of all, metaverse is a portmanteau word like Industry 4.0 or cloud. Everyone who uses such words has their own definition. What all these terms have in common is that they describe a future that is not very concrete. Nevertheless, this future is fast approaching. We are currently seeing many different markets investing heavily in this future. The telecommunications industry, for example, is bringing completely new players into our ever-growing market.
Even my strategic view of things cannot define exactly what the future business models in this area will look like in detail. However, this does not play a major role. We are the ones who will plan, implement and manage – if not technically operate – the future technical infrastructures. Much more important for us in this context are the investments in IT and AI, such as the start-ups described above and the MoovIT takeover. The shift from hardware to software, which has been progressing for many years, will continue.
4investors.de: Why will the many niche markets that exist in the moving image market today, such as in the medical or security sectors, merge into one large moving image market?
grow together into a large moving image market?
Pfeffer: The simple answer is: because this has long since happened on the manufacturer side! If you look at the major manufacturers today, such as Sony and Panasonic, they have long since created standardized structures in the areas of research and development, production, distribution, dealer network, service and so on. The market and therefore trading structures followed suit.
If you look at the changes in the medical and security sectors, for example, you can see that the existing structures in these markets are changing.
have changed a great deal. In the area of video conferencing systems, the development was most obvious with the emergence of Skype and other alternatives. The partner who operates the Teltec branch in Ludwigsburg (VKP) originally earned very good money with this topic.
4investors.com: Finally, let’s talk about the Avemio share: Avemio AG is listed on the primary market of the Düsseldorf Stock Exchange. What do you expect from the stock market listing?
Pfeffer: The uplisting to the primary market on May 11 is part of our growth strategy and capital market story and was an important step for us to increase our transparency. The aim was also to convey our professional approach and constant willingness to optimize to the capital market.
