IT distributor Exertis, the trading name of DCC Technology, “traded resiliently” throughout the first half of the year ended 30 September. The business is part of DCC Group, which operates in multiple industrial sectors.
Despite operating profit being behind the prior year in the first quarter, the distributor “recovered” to deliver “modest” operating profit growth in the half year overall, the group said. Trading conditions in the higher-margin B2B sectors, such as the Pro AV product category, “remained challenging”.
First half sales went up 9.7% to £1.969bn and the operating profit crawled up 0.7% to £25.5m. But the operating margin dropped from 1.4% to 1.3%.
Due to the impact of Covid-19, the business experienced a “widespread” reduction in demand during April and May, with retail and corporate closures impacting all markets. However, as the first half progressed and customers “adapted to the new trading environment”, the business experienced an increase in demand for higher-volume, lower-margin consumer and working-from-home products.
As demand patterns changed, DCC Technology implemented a range of cost reduction measures, including adjusting staff working arrangements in areas of the business that experienced reduced activity levels and discontinuing all non-essential expenditure.
The UK business recorded “good” revenue growth during the first half of the year, with strong demand in consumer products from e-tailers, grocers and non-traditional retailers who remained open during lockdown, and from B2B customers offering mobility and working-from-home products.
This strong demand was offset by a reduction in Pro AV, enterprise and other B2B categories. As a result, operating profit in the UK was below the prior year. Despite the “significant challenges” of remote working, the UK business “successfully transitioned” to its new ERP system during the period. “This significant investment will enhance the service offering to all customers and suppliers,” said DCC. “It will be particularly important for the reseller channel where it will enable a significantly enhanced on-line offering.”
The business in Ireland performed “strongly”, with “good” organic revenue and operating profit growth, driven by demand for consumer products and also benefiting from recent investments in expanding its service offering to B2B customers.
In continental Europe the business generated “good” revenue and profit growth. Similar to the rest of the division, the business experienced a “challenging trading environment” for B2B products, particularly in the DACH region, where office closures and the deferral of many larger installation projects impacted demand. In France, the business benefited from operational improvements and increased sales of products from key multinational vendors. In Scandinavia, the business “performed robustly”, with markets in the region generally experiencing a less negative impact from Covid-19.
The business also achieved “good growth” in the Benelux region, where an expanded product range “successfully complemented” the existing strong service offering to e-tailers and retailers of consumer products.
