Esprinetone of the main Southern European players in the sector of consultancy, sales and rental of technological products and in information security, has published its Consolidated Half-Year Financial Report as of 30 June 2023, prepared in accordance with international financial reporting standards (IFRS). What emerges is that despite a solid progression towards high value-added offer segments, the adverse economic context has negatively affected performance in the first half, leading the company to revise its 2023 guidance.
Economic results for the first half of 2023
In the first half of 2023, Esprinet recorded a significant decline in revenues from contracts with customers, equal to 1,905.8 million euros, down 13% compared to the previous year. This decline was influenced by a number of factors, including a contraction in the distribution market and consumer sales. In particular, in Italythe market suffered a decrease of 3%, mainly due to vendite negative in area consumerwhich recorded a decline of 7%.
Protect your business: discover the risk levels by country and production sector
Looking at the performance of the business lines in which the Group operates, according to the “five pillar” segmentation, in the first six months of the year the Screens (PC, Tablet and Smartphone) are arrears of 21%, in a market that is decreasing by 7% according to Context data. The segment of Devices scored a 9% slowdown in the first half of the year, in line with the market trend (-8%).
On the other hand, Esprinet has seen a 12% increase in the Solutions and Services segments, compared to a market increase of 16%. The solutions and services represent now over 60% of Esprinet’s adjusted EBITDAdemonstrating the effectiveness of its transition strategy towards high value-added offerings.
Revenues from Solutions and Services rose to 437.1 million euros compared to 391.2 million euros in 2022 and, in line with the Group’s strategy of focusing on high-margin business lines, their impact on total sales rose to 23% (18% in 2022). The Solutions they are confirmed once again business line that generates the most EBITDA Adj in absolute value: with revenues equal to approximately 40% of Screens, they more than double the profitability of this category.
However, the segment Own brands suffered one contraction of 26% in the first semester. Esprinet also reported a -27% revenue decline in the segment Consumer (Retailer, E-tailer)and -7% in the segment Business (IT Reseller), despite the market recording 5% growth in the latter. The weight of sales to IT Resellers in the first half of 2023 rose to 69% compared to 63% in 2022 and 59% in 2021, progressively reducing the weight of the channel with the greatest pressure on discounts.
All data from the financial report
Financially, Esprinet has seen a significant decrease inEBITDA adjusted, which fell by 34% compared to the previous year, reaching 24.9 million euros. The incidence on revenues at 1.31% compared to 1.74% in the same period of 2022, reflects the increase in the weight of operating costs (from 3.53% in the first half of 2022 to 4.22% in period January-June 2023) mainly as a consequence of inflationary phenomena and the adaptation of national collective labor agreements.
Adjusted EBIT is equal to 15.4 million euros (-48% compared to 29.5 million euros in the first half of 2022) and is calculated gross of the non-recurring costs mentioned above. The incidence on revenues went to 0.81% from 1.35% in the same period last year. EBIT is equal to -10.9 million euros (
L’utile netto adjusted was 6.4 million euros, down 65% compared to the previous year. Esprinet’s net financial position remained negative, although it improved compared to 2022, standing at -207.2 million euros.
The Net Financial Position of Esprinet is negative for 207.2 million euros, improving compared to the negative 256.9 million euros recorded in June 2022 and the negative 341.0 million euros in March 2023. This improvement is the result of capital control actions invested working capital. However, it should be noted that this value is influenced by various technical factors, including the seasonality of the business and the dynamics of trade credit assignments. Therefore, it does not represent the average level of net financial debt observed over the period. The factoring and securitization programs have an overall effect on the level of consolidated net financial debt, which was quantified at 364.2 million euros in June 2023 (compared to 382.3 million euros in June 2022 and 340.9 million euro in March 2023).
Prospects for the ICT sector
In a difficult macroeconomic context for citizens and companies, which did not register such a timely improvement as expected, and considering the first signs of weak demand also in the third quarter of 2023, the information technology (ICT) sector is destined to remain under pressure for the rest of the yearwith a recovery prospect expected early next year.
L’persistent inflationi high interest rates on loans and theeconomic uncertainty continue to influence consumer demand. Meanwhile, businesses are becoming more cautious in purchasing information technologydelaying investments that are not strictly necessary and keeping long-term strategic projects unchanged.
The expected reduction in the growth rate in the infrastructure segment in the third and fourth quarters is attributable not only to a slowdown in demand, but also to the challenge of dealing with a particularly dynamic previous year, especially in the second half of 2022 when orders were filled accumulated following product shortage situations.
The revision of the 2023 Guidance
Based on these considerations, industry experts predict that revenues will remain stable or even record a slight decrease in the second half of 2023. Consequently, in view of the competitive environment and sales pressure, despite constant efforts to improve profit margins, the Group has revised its Adjusted EBITDA forecasts for 2023, placing them in the range between 70 and 80 million euros.
Despite these challenges, Esprinet remains confident about long-term growth prospects in the information technology sector and in its ability to deal with them successfully. Its strategy of focusing on high value-added solutions seems to indicate a promising way to address current challenges and capitalize on future opportunities in the increasingly digitalized world.
Furthermore, over the next three years, the digital transformation trends will continue to drive a significant increase in technology spending, especially in IT services. At the same time, the overall demand for vertical solutions is expected to steadily expand until 2026.
Organizational changes and Cattani’s comment
In a related announcement, Esprinet announced the appointment of Stefano Mattioli as new manager responsible for drafting accounting and corporate documents. Mattioli will assume the role starting from 1 October 2023, replacing Pietro Aglianò, Group Chief Administration & Risk Officer, who resigned due to having reached pension requirements.
Alessandro Cattani, CEO of ESPRINET: “The first half of the 2023 financial year represented an important confirmation of our transition strategy towards a greater weight of value-added solutions and services. Unfortunately, we are dealing with a shrinking market and the related loss of volumes has not been fully compensated by the increase in product margins and cost containment activities, which are also subject to inflationary pressures. Given the market consensus which foresees strong recoveries in demand in 2024, together with the confidence in the ongoing commercial repositioning process, we are confident that in the medium term we can resume the growth path which has already led the Group to almost double its operating profitability in the last five years.”
Article originally published on 19 Sep 2023