Bechtle sales rise despite 'extremely unfavourable' conditions

German VAR sees surge in demand for home office solutions amid ‘extremely unfavourable’ conditions in March

Bechtle has logged sales and profit growth in its first quarter of 2020 despite customer projects being delayed and supply problems from its vendors.

Despite facing "extremely unfavourable" conditions due to the coronavirus, Bechtle grew sales by 9.3 per cent to €1.36bn (£1.19bn) and earnings before interest and taxes by 13.4 per cent to €51.1m for the first three months of the year.

CEO Thomas Olemotz said that the crisis has forced "many projects" to be delayed and made it more difficult for Bechtle to offer on-site support for its customers. The German VAR also claims that it endured some delivery problems from its manufacturers during the quarter.

"We had to deal with the negative effects of the pandemic in the first quarter. Many projects were postponed, there were occasional delivery problems from the manufacturers and the deployment of our employees at the customer's site was significantly more difficult. However, in the industrial environment, as with our public customers, we also felt a strong surge in demand, especially in the furnishing of home offices and in technical solutions for the implementation of virtual forms of cooperation," said Olemotz.

The firm's IT systems house and managed services business, which is delivered through its network of systems houses across the DACH region, was the main growth engine in Q1, growing sales by 9.8 per cent year on year to €859.1m, with an organic growth rate of 8.1 per cent. Earnings before interest and taxes for this segment surged by 23.2 per cent to €32.5m - pushing EBIT margins from 3.4 to 3.8 per cent.

Its e-commerce business meanwhile grew revenues by 8.5 per cent to €496.6m during the quarter. E-commerce sales in Germany leapt by 20.4 per cent, Bechtle claims, due to a surge in demand for home office solutions.

Factoring in both business segments, its domestic German revenues grew by 10.6 per cent to €828.75m, while overseas sales grew by 7.3 per cent to €526.93m.

Bechtle had previous stated in March, when COVID-19 lockdown measures were first being imposed across Europe, that achieving its financial goals this year hinges on how the crisis unfolds. But it said it was still expecting to log "significant" revenue growth for full-year 2020, with profit margins staying at 4.5 per cent.

But now after publishing its Q1 results Bechtle has added more clarity its guidance for the year. It is now foreseeing revenues and earnings growth of at least five per cent.

The forecast is based on Bechtle's largely positive Q1 and the expectation that business will begin to pick up in Q3 and throughout the course of the year.

But Olemotz said he is expecting a "subdued" second quarter performance from Bechtle.

"Even if a reliable forecast is currently impossible and we expect a rather subdued second quarter, we are sticking to our goals for the current year. We are currently assuming that our business will increasingly develop in the course of the third quarter under normalised framework conditions. Despite the consequences of the corona pandemic, the positive prospects for Bechtle in the medium to long term are still intact in view of the ongoing digitalisation," he said.

Bechtle's forecast comes after the Germany announced plans to ease lockdown restictictions across the country, with some public spaces reopening.