Vending machines sales have crashed

The vending machine manufacturer Selecta, based in Cham, not only has to deal with a mountain of debt, but is also suffering from a lack of revenue due to the Corona pandemic. The Group is now betting on a drastic austerity course.

They are an integral part of railway stations: the red and white vending machines with the Selecta logo. The reduction in train passengers and the lack of frequency at vending machines in offices due to the Corona crisis have greatly affected the Group, however. From April to June, sales almost halved to EUR 212.8 million, compared with EUR 403.6 million in the same quarter of the previous year. The net loss even increased to EUR 50.5 million in the second quarter. That's EUR 30 million more losses than a year ago, as Selecta announced at the end of August. But the decline in sales is not everything: a mountain of debt of CHF 1.7 billion, which results in CHF 110 million in interest payments every year, is also hard to bear.

And the Corona crisis has lasting consequences: "We assume that up to 20% of sales will not come back," Thomas Nussbaumer, Managing Director of Selecta Switzerland, recently told the "Bund". And the  "Handelszeitung"  reported that: "in the meantime, executive managers are being transferred or dismissed at a record-breaking pace, some voluntarily, while others are ‘helped on their way’ at the group's global headquarters in Cham." Among others, the CEO, the Chairman of the Board of Directors, the Chief Financial Officer and the HR Chief executive have left the company.

The mood at the headquarters is divided
Jon Brezinski, the CEO of the Lucerne-based Invenda Group, which also breathes digital life into Selecta vending machines, also noted that there are currently difficult at times at Selecta:  "At an international level, joint projects have been stopped or postponed, partly for budget reasons."

The cooperation with Selecta Switzerland has continued as normal, however, he emphasizes. Two Selecta managers joined his start-up in Lucerne this year.

Photo 1: Selecta-Automat at a Swiss railway station: due to the lack of commuters, the utilisation of the machines has decreased significantly.
Photo 2: Jon Brezinski,CEO of the Invenda Group
Photo 3: Tomasz Grzelak, analyst at the VP Bank in Liechtenstein

About two weeks ago, it was announced that Selecta Switzerland CEO Thomas Nussbaumer himself – a primordial rock in the Group – would also be leaving Selecta. But that had been established for some time. Nussbaumer's successor will be Frank Keller, who worked for the British Compass Group until March. Among other things, he was already engaged there as country head in Switzerland. A new management team is now also operating at group level: The US investment company KKR, which bought the Selecta Group in 2015 and originally wanted to put it on the stock market in 2018, has installed Wall Street legend Joe Plumeri as the new Chairman of the Board of Directors. Christian Schmitz, who previously worked at McKinsey and oversaw the transformation of several companies, took over as the new CEO.

KKR has now invested EUR 125 million in additional capital in the struggling group. In addition, there is a credit line of EUR 50 million, for which KKR receives a special form of preferential shares to a volume of EUR 175 million. Tthe company has now agreed with a "substantial number of creditors" to restructure the bonds and extend the maturity to 2026 for debt relief. At the same time, a drastic austerity course is to be implemented. There are 400,000 devices in operation throughout Europe, with 29,000 vending machines and coffee machines across Switzerland. This year, 11,000 devices are to be dismantled throughout Europe, and 60,000 next year.

Up to 15% of the jobs could also be cut, as the "Handelszeitung"  has learned. The Group does not comment on how many of the vending machines and workplaces in Switzerland are specifically affected. Selecta Switzerland employs 930 people. As can be heard from staff circles, the mood at the international headquarters in Cham is currently divided in two. Some are afraid of losing their jobs and are looking for something else. The others are glad that a programme is now in place, and that the Group is moving forward again.

Experts support the savings programme
Analysts such as Tomasz Grzelak of VP Bank in Liechtenstein view the savings programme at Selecta as positive: "I consider the restructuring strategy to be absolutely necessary to ensure the existence of the company." Some of these are quite tough, but absolutely necessary steps. "After the refurbishment, Selecta will have healthy foundations in the still-difficult market environment," concludes Grzelak. With regard to the initial IPO, he writes that he expects these plans to be postponed again. "At the moment – and probably in the next few months – it would simply be impossible to achieve an attractive price for Selecta shares."

Grzelak does not really see the future of the company as rosy: "The working models are now changing sustainably, so I assume that there will generally be fewer commuters, which is negative for business."  He could therefore not imagine that the investor KKR would leave the Selecta investment with a good return.