IVS operates in the vending machine and service sector, with coffee and coffee-like hot drinks representing c 55% of sales. It has grown through acquisition over the last few years and there is still plenty of scope for consolidation given the highly fragmented nature of the sector. Synergies are immediate as scale enables IVS to improve product mix in the acquired businesses and to reduce costs, thanks to greater efficiencies in its refilling and maintenance networks.
Sector consolidation proving an opportunity
The company operates mainly in Italy (c 80% of sales), but also in France and Spain where IVS has now established a sound base. The company has a proven track record in terms of acquiring businesses, integrating them successfully and extracting immediate synergies through increased efficiency. The operating leverage on the logistics side is significant, and through acquisition the group has become one of the largest food service operators in Italy. It is now the leading Italian vending machines operator and the third largest in Europe. Scale should help cement the business proposition as the market goes through a consolidation phase, and IVS benefits from owning companies that include vending machine revamping and coin service companies, thus enabling higher internal efficiency.
Underlying growth less attractive
There is a natural level of churn in the food service business and it is encouraging to note that the new business acquired tends to make a more positive contribution to the company. That said, the main metrics (sales from vending and number of vends) are generally less attractive when excluding acquisitions and new business. This is not a concern in the short to medium term while the business remains acquisitive and continues to expand. However, it is a longer-term issue once the expansion phase is over, as at that point growth is likely to normalise at a lower level. There are currently c 3,000 vending machine operators in Italy and France and c 2,500 in Spain, thus consolidation is highly likely to continue for some time.
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