Adverse economic environment takes toll on Italian distie Esprinet H1 results

Sales are down 13 per cent, adjusted EBITDA down 34 per cent and 65 per cent in adjusted net income

Esprinet had a tough first half of 2023 reporting year-on-year decreases across several business lines in its latest financial results.

Sales from contracts with customers stood at €1.9bn in H1, down from €2.2bn in the same period of the previous year.

The performance of the business lines also showed that in the first six months of the year, screens (PCs, tablets and smartphones) reported a drop of 21 per cent, in a market that shrank by seven per cent according to UK research company, Context data.

The devices segment also slowed down in the first half (down nine per cent), almost in line with market trend (down eight per cent).

The Italian distributor recorded an increase of 12 per cent in solutions and services, which according to the measurement of Context, saw a rise of 16 per cent in the market too.

In the customer segments the first six months of 2023 the market recorded growth of five per cent in the business arm (IT reseller) and a decrease of nine per cent in the consumer business (retailer, e-tailer).

Esprinet reported the following sales trends: a drop of 27 per cent in the consumer segment (€621.6m), and a dip of seven per cent in the business segment (€1.35bn).

The weight of sales to IT resellers in the first half of 2023 rose to 69 per cent compared to 63 per cent in 2022 and 59 per cent in 2021, gradually reducing the weight of the channel subject to greater discount pressures.

Gross profit amounted to €105.4m, eight per cent less compared to the first half of 2022 (€114.8m).

The effect of the increase in the percentage margin (5.53 per cent in the January-June 2023 period, compared to 5.27 per cent in the same period of the previous year), in line with the company's strategy, accounted for 46 per cent of sales, up from 41 per cent in the first half of 2022, and did not offset the drop in sales.

Ploughing forward

"The first half of the 2023 financial year represented an important confirmation of our strategy of transition towards a greater weight of value-added solutions and services," explained Alessandro Cattani, CEO of Esprinet.

"Furthermore, the process of rationalising the lines with lower profit margins continued, also with the reduction of product/customer combinations that we believe cannot be structurally capable of generating adequate returns on invested capital.

"We are satisfied with how solutions and services have come to account for over 60 per cent of the EBITDA Adj. and how the product margin has grown further: two aspects that confirm the correct execution of this strategy."

Cattani said that actions to bring working capital back to natural levels continued with the relevant reduction of the NFP.

But he added the company is unfortunately contending with a contracting market and the associated loss of volumes has not been fully offset by the increase in product margins and cost-cutting activities, also subject to inflationary pressures.

"Given the market consensus which forecasts a significant recovery in demand in 2024, together with confidence in the ongoing commercial repositioning process, we are confident that, in the medium-term, we will be able to resume the growth process that has already seen the Group almost double its operating profitability in the last five years."

Esprinet recently appointed a new strategic alliances manager, Conxi Palmero, to take ownership over the development of new strategic partnerships with vendors and clients, with particular focus on advanced solutions.