News analysis Exertis and the road ahead


DCC Technology (principally known as Exertis in the UK) has published its results for the year to the year ended 31 March 2020. Among the highlights, group revenues increased 7.8%, to £3.913bn from £3.631bn for the previous year. DCC’s technology division saw oper- ating profits increase by 7.3% to £494.3 million, continuing a long sequence of successful results, and this despite DCC Technology ex- periencing a difficult year with the challenges of a UK market impacted by Brexit and related uncertainty throughout the year and the impact of Covid-19 beginning to emerge through February and March 2020.


DCC Technology’s Managing Di- rector, Tim Griffin, is faced with an AV market that has exhibited very different demand patterns in the early part of 2020 com- pared to 2019. The UK business performed well, with very strong demand from retailers and B2B customers for mobility and work- ing-from-home products


being


offset somewhat by reduced demand for certain consumer technology and B2B categories, such as Pro AV products. In both Europe and North America, the most impacted areas of the division have been traditional high street retail and the B2B channel where the lock- down restrictions have meant resellers or integrators have not been able to access end-user businesses. Overall, DCC Tech- nology has traded behind the prior year, although the trading performance in April improved through the month relative to initial expectations.


Collaboration


But does this mean that the move by the corporates to agile working practices had antici- pated the impact of the global pandemic. The last couple of years saw tremendous growth in collaborative technologies but have the corporates no made their decisions now, so the rate of growth will go back to some- thing much more modest? TG: “ There was something of a mad rush to enable a generation to work with mobile technology and the benefits it brings, but I suspect that the levels of in- vestment we have seen over the last two or three months won’t be continued. There will be dif- ferent types of office space tech- nologies that will spawn from a good proportion of people work- ing from home. So, there will be lots of opportunities. assuming that there will be a bounce with people returning to work The new normal will largely be about working practices tempered by


significantly reduced econom- ic activity.”


Digital signage


When we consider the other high growth area within proAV, that of digital signage, there are particular problems going forward, particularly those of touch and social distancing around displays. The AV indus- try has been quick to respond with ‘’touchless engagement’ and ‘gesture-controlled sig- nage’. Moving to AV in outdoor spaces also seems to present opportunities.


TG: “I think you are right. If


you think about the ability to gather, the inside / outside mix will move in favour of more outside. We have a number of our resellers who are fo- cused on the retail communi- ty discovering that they need a lot more digital signage to manage audiences. managing footfall and flow in department stores. Grocers are looking to have a managed flow of traffic around supermarkets as op- posed to having people wan- dering around randomly. That is already proving to be inter- esting and we are seeing some fairly substantial projects and rollouts.”


Digital cinema


In terms of recovery. the prob- lem with AV is that its tech- nologies are designed to work for groups, or even, like digital cinema, large audience. Could these back:


take forever to come


TG: “It is interesting though - in the US some of the drive-in cinemas are starting to bounce and even some of the restau- rants are using their extensive car parks with people in their own little cocoons. So if you are a vendor looking to see how that might play out you might be thinking how you might de- liver sound quality into cars. If


How has the DCC Technology business continued through the lockdown period? Has di- alogue with customers and partners continued to facilitate business? TG: “If you look at the volume


of Teams meetings and chats, they are through the roof. We are finding alternative ways of working with vendors and our customers. There are pockets of our business that have done very well. Be it supporting key blue light services or enabling the mobile generation at home and all of that has been facil- itated remotely. There is obvi- ously a last mile element and we have had a whole raft of heroes in our world going to the warehouse every day. braving the challenge of Covid-19 to service our customers.” But what of continuing busi- ness in the Covid-19 era? DCC Technology selectively uses supply chain financing solu- tions to sell, on a non-recourse basis, a portion of its receiv- ables relating to certain larger supply chain/sales and market- ing activities. The level of sup- ply chain financing at 31 March 2020 was in line with the prior year and had a positive impact on Group working capital days of 5.1 days (31 March 2019: 4.9 days) or £207.8 million (2019: £211.4 million).


you are thinking about home most of us would agree our video and audio could be im- proved. There are also some decisions that need to be made about 5G by some key vendors. I keep coming back to the form factor. The technologies are all there – decisions need to be made about the form factor that enables them to be used in the future and in keeping with the changes in


society. The


likelihood of numbers gather- ing as large audiences could be a way off.”


Business communications


DCC Technology DCC Tech- nology acquired two small businesses during the year, a managed service business in Ireland and a Pro AV specialist in the Benelux region. Although small, both acquisitions sup- port DCC Technology’s strate- gy to continuously enhance its service offering to its custom- ers and suppliers.


In the past, DCC has bene- fitted from the positive impact of acquisitions, particularly those North America and Con- tinental Europe. In the most recent results, these were off- set by a substantial organic operating profit decline in the UK. DCC Technology delivered strong free cash flow, with the reduction in ROCE reflecting the profit decline in the UK and also the impact of recent strategic investments made in the warehousing and operating infrastructure


of the division


which will facilitate growth and enhanced returns in future years.


Weakness in the Europe


As reported through the year, the UK technology market experienced weak demand which impacted the B2B and enterprise channels and had an increasing impact in the retail sector into the important Christmas trading period. Con- sequently, the UK business saw a decline both in revenue and operating profit.


The upgrade of the enterprise management system is nearing completion,


with the system


now live and operating effec- tively in a portion of the busi- ness. The remaining compo- nents are scheduled to go live in the coming months and the upgrade is expected to signifi- cantly enhance the capability of the business to service its customers and suppliers. The Irish business performed in line with expectations, with strong growth in retail and continued


expansion of its services busi- ness, including in enterprise mobile management. In Continental Europe, op- erating profit growth was primarily driven by the previ- ously announced acquisitions of Amacom and Comm-Tec. Amacom in particular has performed very strongly since acquisition, with its technolo- gy-enabled services and cus- tomer integration capability enabling etailers and retailers to expand their customer base and product breadth. In France, while the con- sumer business continued to be challenging, it performed ahead of the prior year as it benefited from revenue growth with key vendors. The French reseller business performed satisfactorily and is continu- ing to invest in its audio-visu- al proposition. The business in the Middle East continued to generate organic revenue growth, despite the impact of Covid-19 restrictions towards the end of the year, which im- pacted high street sales in a market with a relatively imma- ture online presence.


North America


The North American business performed very well, benefit- ing from good market condi- tions and some new vendor additions during the year. The business saw strong growth in the Pro AV, Pro Audio & Light- ing and Consumer Electronics segments in both the US and Canada. In Pro AV, the business gen- erated growth in the hospitali- ty market as well as in sales of Direct View LED, in particular into corporate and retail cus- tomers. In Pro Audio, the busi- ness generated strong sales in recording, post-production and mixing products and with a new vendor in the Canadian market, as well as strong sales of multi-media and consumer


audio products. DCC Technolo- gy has a very strong platform to develop and expand its business in North America, particularly in the Pro AV, Pro Audio and Con- sumer Electronics markets.


Future prospects


With its expanded geographic presence, improved operating infrastructure and an increased focus on value-added services, DCC Technology has built an ex- cellent platform to drive further growth and support its vendors and customers with market-lead- ing services across its chosen markets. The great unknown is the strength of demand and, in particular, the impact of Covid-19 on end-user buying habits.


DCC Technology’s Managing Di- rector, Tim Griffin: “I keep coming back to the form factor. The tech- nologies are all there – decisions need to be made about the form factor that enables them to be used in the future and in keeping with the changes in society”.


P12 AV News November 2019 P4 AV News June 2020


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