ABC Data hangs onto cash, looks at cloud, M&A opportunities
ABC Data has maintained its margins as it prepares to launch cloud-based offering to its partners. It is also looking for more acquisitions and expansion in eastern Europe. It has just reported PLN 4.9bn in consolidated sales revenues for 2016 and maintained a margin on sales at a relatively high 5.3% level, even while coming under competitive pressure, it says.
Sales were up on the previous year mainly because of the acquisition of the iSource subsidiary where they were higher by 75% in comparison to 2015. iSource remains the leading Apple product distributor in the Polish market, it says.
“In 2016 we faced the high dynamics of changes in the Polish IT distribution market. Although it did not influence significantly the operation of ABC Data, the changes could be felt and perceived in a dialogue with the business partners and financial institutions. We honestly informed them about our situation, which paid off as we maintained external financing at an optimum level, “ says Ilona Weiss (below), CEO.
“Despite a highly competitive market we maintained the margin on sales at a high level of 5.3%, which for a long time has been one of the highest ones in the market. I consider it as our great success given the price pressure related to the fact that large, international distributors entered the Polish market and there was a strong competition between the largest distributors in Poland”
2016 EBITDA profit of PLN 40.4m and net profit of PLN 17.2m were lower than in 2015 due to increased financial costs related to recognizing a write-off in the valuation of ABC Data in BizneslinkCO sp. z o.o. in the amount of PLN 6.4m. The high level of costs was also influenced by a change in the cash management in the Group caused by a volatile market situation using short-term external financing, and a policy of cash retention.
Given the present market situation “where it is so important to have an appropriate level of uncommitted cash”, the Management Board decided to recommend not paying a dividend for the year 2016 and to dedicate the profit for the previous year to the reserve capital of ABC Data.
“As a company which in preceeding years paid out the highest dividend yield in Poland, it was a very difficult decision, first and foremost due to high expectations of our shareholders. Nevertheless, I believe that they will understand this decision which was made because of the need to maintain the optimum level of our own resources in order to finance the working capital and to develop organically the Group continuously” says Ilona Weiss.
Moreover, to meet the expectations of shareholders, the Management Board will initiate a programme of buying back the Company’s own shares for their further resale or redemption. The Company is planning to buy out its own share for not more than PLN5m in the period until 30 June 2018.
The ABC Data Cloud platform launched this year will complement the set of advanced e-commerce tools and allow the Group to grow in the cloud computing area: “One of the most positive sectors of the IT market” says Juliusz Niemotko, Vice-President of the Management Board of ABC Data. “Our platform will be equipped with a whole spectrum of functionalities, implemented for the needs and expectations of its users. The platform will be distinguished with the presence of both Polish and foreign cloud service providers. It will be definitely one of the strongest debuts in the e-commerce market this year.”
In the next few months, ABC Data says it will concentrate on further strengthening of its market position in Central and Eastern Europe and on increasing its competitive advantages, especially in the areas of e-commerce, VAD and the Cloud.