UK downturn taints Exertis growth

Distributor also announces two European acquisitions

Exertis has reported sales growth of over 13 per cent for H1, but expressed concerns over the "general weakness" of the UK technology market.

Parent company DCC said that sales for its DCC Technology unit, which trades as Exertis, rose 13.1 per cent year on year to £1.8bn in the half ending 30 September 2019. Operating profit climbed 42.6 per cent to £25.4m - a margin of 1.4 per cent.

The Ireland-based firm said the growth came predominately via acquisitions made over the last few years, adding that businesses in mainland Europe continued to perform well.

The UK market was however highlighted as a concern, with Exertis Group managing director Tim Griffin telling CRN that UK sales "went slightly backwards on an organic basis".

"It was mainly driven by two facets," Griffin said.

"One was consumer sentiments that were driven by the things that we spend all our time talking about, in terms of Brexit, the election and so on. That is coming through in our retail business.

"The other is the natural investment cycle in enterprise, and then the overlay of the movement to cloud and hybrid - both of which are areas that we are making investment in to be able to support our partners.

"Those are the two main drivers, but you can also overlay a bit of our American cousins' movements with some of the technologies in the Far East."

Sales from the UK make up the lion's share of Exertis' revenue at just over £1bn, while the technology arm as a whole contributes around one fifth of DCC's total revenue.

Griffin said these struggles are predominately isolated to the UK market, claiming the Nordics business "saw huge top-line growth and is starting to see some improvement in bottom line".

He said that "France is up significantly in terms of the consumer business, from a revenue point of view".

He added that recently acquired businesses in Germany and the Netherlands have performed well.

Exertis also announced two acquisitions today, in the form of Dutch €16m-revenue pro-AV business Kerèn B.V. and Ireland-based €1.9m-revenue mobility specialist Bconnected.

In its results report, DCC said that Exertis' US business performed in line with expectations, following the acquisitions of Stampede and Jam last year.

"The good performance was driven by strong demand for display and projector products from the hospitality and government sectors in the US in particular, and the business also saw good demand for Pro Audio and professional event lighting products," it said.

Griffin added that we can expect Exertis to continue to be acquisitive as it builds out its specialist offerings.

"Our investment hypothesis is around two things," he said.

"One is a continued focus on specialisms and the other is expanding in white space from a geographic perspective. But that ambition continues.

"Both AV and services continue to be focus areas and we'll continue to invest appropriately in consumer, like Anacom."

DCC also revealed that the technology arm will be migrating to a new ERP system at the end of its current financial year (31 March 2020), following a successful pilot in the UK.

"We'll reap the benefits of enhanced capabilities to serve our customers even better," Griffin said.

"The challenge that we have from a wider ERP perspective is that we are constantly acquiring, and so the idea of a homogeneous ERP system across our business is something of a pipedream. We'll never achieve it because of the speed at which we acquire, so it's about how we integrate those."