'We're hostage to the environment' - Exertis MD on UK business challenges

Exertis saw a 'significant level' of supply constraints and reduced demand in the UK in the last financial year

Supply chain issues and softer demand from consumer customers are what led to Exertis' UK business to a revenue and profit decline in its last financial year, according to its MD Tim Griffin, who spoke to CRN following the release of its financial results this week.

Though Exertis faced challenges in the UK, as a whole it posted revenue of £4.6bn for the year - a 3.6 per cent increase on the year before - and an operating profit of £81.7m, up 12.8 per cent from the previous 12 months.

Despite posting a strong performance overall, the distributor's UK business logged a decline in both revenues and profits, due to a "significant level" of supply constraints and reduced demand from consumer customers in the UK

Tim Griffin, Exertis MD, told CRN that the pandemic created problems with supply, whilst the consumer business became more challenging as Covid restrictions eased.

He said: "I think most people are familiar with the challenges the pandemic created in China, that had a component element to it, a manufacturing element to it, and indeed a shipping element to it. So all of those kind of added up to a cocktail that was compounded in the UK because of Brexit.

"In terms of the consumer element of it, obviously, we have a very strong consumer business that did very nicely during the early part of Covid.

"But as that unwound, the return to work elements and people spending less time at home and being able to go out and spend more time on entertainment and so on, really challenges the consumer space."

Although now operating effectively, the business was also impacted during the year by the implementation of a new warehouse management system.

When asked how the problems in the UK could be overcome, Griffin felt "confident" that Exertis is well positioned despite being "hostage to the environment".

He said: "We've made significant infrastructure investments that really allow us to deliver a better service to our customers.

"So, we're very optimistic around having put those systems and processes in place that enable us to do everything from drop ship and more timely deliveries right the way through to the end customer. We're confident that makes us well positioned.

"Obviously we are like everybody else and are to a certain extent hostage to the environment."

Exertis, which is the brand name for DCC Technology, says growth was driven by contributions from acquisitions completed during the year, with strong performance from North America.

The distributor said it also generated "good organic growth" in continental Europe.

"Some of it relates to specific vendors," Griffin said.

"We have a different makeup of vendors across the water. Some of it relates to the market there, which has been a little bit more robust.

"One of the fascinating things operating in 22 countries is a domino effect in that you don't actually see them all doing the same thing simultaneously from an economic point of view.

"So even at the moment, Ireland is performing pretty strongly despite the latest economic challenges that have come in, so every geography performs differently."

Griffin added that Exertis expects "very healthy growth in the coming year" with a "good portion" coming from acquisitions.

Asked if the profits for the latest financial year were expected, he said: "We landed pretty much just marginally ahead of our budgets for the year, which was really nice to deliver on given the macroeconomic environment, so I think we've performed well, in the circumstances."