New logistics, warehousing and ERP system will deliver distribution into new strategic areas Distributor Exertis, the trading name of DCC Technology, had a bit of a setback in its latest results, with operating profit dropping nearly 30% in 2016 compared to the previous year. This seems to have mainly been in the UK, where it depended on strong PC, tablet and phone sales in a very competitive market subject to the state of the economy. But with the rest of the DCC businesses, overflowing with cash, the time is right for it to invest in systems and grow organically and through acquisition.
Niall Ennis (below), Managing Director of DCC Technology and Group Managing Director of Exertis tells IT Europa: “The ERP system is critical and we are building a state-of-the art system. Exertis needs this to be more accurate and react more speedily.”
A new UK distribution centre will come on stream in the next year, adding capacity and efficiencies. This is what vendors are asking for, he says, admitting that Exertis has been behind the market in its e-commerce. Investment is also needed in its facilities and capacity where it has been working at full stretch.
The balance sheet for the group is very strong, giving him a chance to pick up other businesses across Europe; it has used the Swedish acquisition of CapTech two years ago to build out in the Nordics and this will continue, and is also looking at Benelux where it has a strong business around Unified Comms and audio/visual. The DACH region could also provide targets.
The cash for investment and acquisition is there: 2016FY saw an overall 35.5% growth in Group operating profit to £300.5m, driven in particular by the performance of DCC Energy. DCC Technology – the Exertis business - saw sales fall to £35.1m from £49.3m – as it says, “a very difficult year”as challenging trading conditions experienced in the UK, its largest business, more than offset good performances in the division’s other activities.
The UK business, which accounted for 72% of the revenue of the division found it tough particularly in the first half of the year, and also by weaker than anticipated demand for tablet computing, smartphone and gaming products. These factors contributed to a like-for-like sales decline of 7%. Although the business achieved growth in other areas such as audio visual and components, the change in product mix, together with the effects of negative operating leverage, contributed to a reduction in operating margin in the UK.
In response to the challenging trading conditions in the UK, the business has reduced its cost base and is continuing to build its market position in new and developing product categories such as smart technology, audio visual, network security and virtual reality.
DCC Technology’s business in Ireland achieved strong growth and benefited from improved demand across a number of product segments, reflecting good business development activity and the continued recovery of the Irish economy, it says.
The Continental European business achieved good growth, reflecting strong organic growth in the Nordics and Benelux, offsetting weaker demand in the French market. The business also added, in the final quarter, the specialist CUC, which has performed “in line with expectations”. The acquisition of CUC has added specialist expertise in cabling and connector products and also significantly broadened the customer base of the Continental European business.
Exertis' strategy is not to be a “one size fits all,” explains Niall Ennis. It is looking at emerging areas, including smart-tech, A/V and more B2B products. With some 300 vendors, and adding new ones at the rate of 40-50 a year, (though some lines are also being dropped), there is bound to be change. He aims at using the new systems and capacity to build supply chain services, offering rapid time to market and demand generation for vendors, coupled with flexibility and speed of reaction. By offering fulfilment and a service direct to customers, “we aim to be an excellent partner for vendors.”