Distributor Exertis, the trading name of DCC Technology, suffered a near 30% drop in operating profit compared to the previous year, according to its 2016 financial year results ended March 31st.
UK losses accounted for most of the dip, as the company depended on strong PC, tablet and phone sales. But for the rest of the DCC businesses, overflowing with cash, the time is right to invest in systems and grow organically and through acquisition.
The balance sheet for the group is strong, giving the company the wherewithal to pick up other businesses across Europe. The cash for investment and acquisition is there: The year saw overall growth of 35.5% in Group operating profit to £300.5m, driven in particular by the performance of DCC Energy.
But DCC Technology (the Exertis business) saw sales fall to £35.1m from £49.3m, making for a 'very difficult year'. The UK business, which accounted for 72% of the revenue of the division, found it tough particularly in the first half of the year, with 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.
A new UK distribution centre will come on stream in the next year, adding capacity and efficiencies. This is what vendors are asking for, said Ennis, also noting 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.
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.
The Continental European business also 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 expertise in cabling and connector products and also significantly broadened the customer base of the Continental European business.
According to Niall Ennis, Managing Director of DCC Technology and Group Managing Director of Exertis, the strategy is not 'one size fits all', and he is looking at emerging areas such as smart-tech, AV and more B2B products, as well as implementing a new ERP system.
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', stated Ennis.