Exertis: £63m UK investment will set us up for ten years
Distributor says it was a 'victim of its own success' last year but is confident of returning to growth
Exertis claims an impending £63m systems and logistics upgrade will set its UK business up for growth for the next 10 years.
The distributor endured a "very difficult year", according to its Anglo-Irish parent DCC Group, which reported its first annual results since being promoted to the FTSE 100 last week.
In the wake of the results, top brass at Exertis opened up to CRN about the distributor's decision to withdraw from several markets and invest more heavily in emerging technologies such as smart technology and virtual reality.
They also said the previously announced warehouse and SAP upgrades - which are set to begin later this year - show Exertis is on a strong footing for growth.
Niall Ennis, managing director of DCC Technology - which trades as Exertis - stressed that DCC Technology remains one of three principle divisions of DCC for future investment, alongside energy and healthcare.
"We made the comment that it was a difficult year, but one of the things I would point out is that we were really the victim of our own success," he said.
"In previous periods, Gerry [O'Keeffe] and his team in the UK had great success over indexing with very high market shares in areas such as mobile phones and tablets, and also have a very strong position in PCs. And we've seen the market in those areas has been somewhat difficult over the past 12 to 18 months.
"But one of the things I feel very confident about is the future growth dynamic of the business. We are very focused on the areas that will drive the business in the future, and that appetite for future growth is being shown by the investment we are putting into the UK business in terms of the systems and logistics upgrades - those two combined will be £63m-odd of investment. That will set us up for future growth for the next 10 years."
The Anglo-Irish distribution giant recently withdrew from the airtime, VoIP and DVD markets but is investing heavily in smart technology, virtual reality and audiovisual, O'Keeffe, who is UK and Ireland managing director at Exertis, added on the call.
"Our objective is always to be number one or two in the market," O'Keeffe (pictured) said.
"We exited the DVD business by the end of March and the other areas you would have seen us withdraw from was airtime and VoIP. With EE's acquisition of [comms distributor] Mainline, which concluded some time in October or November, that basically cut off a significant growth path for us, so as a consequence we decided to pull back somewhat from the airtime side.
"At the same time, we invested in our AV team, our smart tech team and in the PC gaming and wearables areas, and what we're doing in regards to virtual reality and how we build the support functions is key."
Exertis' UK sales - which contribute 72 per cent of the total - fell seven per cent on a like-for-like basis in its last financial year.
Ennis said improving Exertis' operating profit margin, which fell sharply to 1.4 per cent, will be a focus for the next two years; a task he said would be made easier by the new Lancashire-based national distribution centre and SAP system.
"The new logistics facility will really help us drive efficiencies going forward, and I think we will get a higher operating margin out of some of the new areas we are investing in. Even some of the more prosaic areas, such as cables and connectors - where we just bought a business on the continent and rolled out our own range to the UK and Sweden - they can improve the overall operating margins, and that is certainly an area we will focus on improving."