With ERP upgrade complications behind him, Tim Griffin, Managing Director of DCC Technology, is looking forward to a strong second half performance from Exertis
Tim Griffin, Managing Director of DCC Technology, trading under the Exertis brand in the UK, describes the distributor’s latest half-year results as ‘very pleasing’, even more so given the many challenges it faced in the first half of its trading year. Going into the commercially more significant second half of the year, he told Technology Reseller that he was confident of beating his plan for the year.
Highlights for DCC Technology in the six months to 30 September 2021 include a 6.5% increase in operating profit to £27.2 million, from £25.5m in the same period in 2020, albeit on fairly flat revenue growth of 0.8% to £1.985 billion, from £1.969 billion in the same period last year.
On a constant currency basis, the respective figures are +19% and +3.7%.
DCC as whole, including DCC LPG, DCC Retail & Oil, DCC Healthcare and DCC Technology, increased revenues by 26.8% to £7.52bn (29.7% on a constant currency basis). Operating profit grew by 11.2% to £195.8m (15.5% on a constant currency basis).
“These results are pleasing in many respects and challenging in some,” said Griffin. “Clearly to be 19% up on a constant currency basis is very good news, and a good slab of that (one third) is coming from organic growth. Part of our DNA and our model is to acquire, and it is good to see that reflected in the numbers as well. Even without constant currency, to be 6.5% up, beating our plan, beating prior year, is very, very pleasing. More importantly, I suppose, is that we can see line of sight to beat expectations for the year. We go into the second half with a lot to do but we are confident.”
DCC Technology in the UK
While DCC Technology saw growth in North America, Ireland and continental Europe, both revenue and operating profit declined in the UK, which was affected by product supply disruption, the global shortage of chipsets, labour shortages, Brexit and logistics challenges.
Griffin adds that the planned implementation of a new warehouse management system in the second quarter, the last component of a major ERP upgrade, also “put a little bit of grit in the cogs and caused significant slowdown”.
“A warehouse management system effectively allows you to be able to pick, pack and ship as efficiently as you can. Our Burnley facility is a huge shed – the size of multiple football pitches – and being able to run that efficiently is crucial. That hand-off between the commercial front office, where we input orders, and the pick, pack, ship element is really crucial, and it was there that we had an issue. We have invested in a pick tower to enable our drop-ship capability for fast-moving small items and getting all that working seamlessly was the challenge.”
In addition to these factors, it is notable that the regions in which DCC Technology performed well had recently been strengthened with acquisitions, like those of The Music People and JB&A Distribution in North America, Azenn (a cabling business) in France and camera surveillance specialist Corepixel in the Nordics. So, does Griffin think the lack of recent acquisitions here affected DCC Technology’s performance in the UK?
“The UK business isn’t a business; it is a collection of businesses. When people talk about the UK business, they tend to be talking about our consumer and B2B businesses, but we have a whole variety of businesses in our portfolio. We’ve got an enterprise business, which is a consolidation of our Hammer acquisition and our branded and enterprise data centre solutions; we’ve got a mobile business; we’ve got an AV business; we’ve got MTR, a refurbished mobile phone business; we’ve got a supplies business; and we’ve got an accessories business in Hypertec, so it is a very diverse portfolio in any case. Our ambition in acquisitions does extend to the UK and over time we will kiss the appropriate frog.”
Back to normality?
In the meantime – and subject to Omicron – Griffin is looking forward to strong AV growth in the UK in the second half of this financial year.
“My expectation is we will continue to get back to normality in the UK and start to see the AV business bounce significantly. AV is a big part of how I expect to make the second half and that plays out across our AV portfolio in Europe and, most importantly, in the US as well. Our American assets are a crucial part of the second half.”
He notes that the return of crowds is driving a refresh cycle in AV solutions, while changing working practices have opened up new opportunities in the corporate market.
“People are starting to think through what changes in working practices mean for corporate solutions, for huddle rooms and for broadcasting. We acquired a company, JB&A Distribution, on the West Coast (of the US) which has a close adjacency to AV, but in the broadcast space. That is now really leaning into day- to-day communications in the corporate world. Some of the big companies in Silicon Valley are adopting those kinds of solutions and we expect that trend to work through the commercial hierarchy as more and more people figure out what hybrid working means for them.
“Hybrid working is evolving cultures within organisations and I think you will start seeing more solutions around bigger displays, bigger formats. I think that cultural shift is the biggest change we have seen over the last two years.”