Diversity of Exertis offering contributes to ‘extraordinary results’ for DCC Technology
Tim Griffin, Managing Director of DCC Technology, has praised the company’s employees and their ability to ‘roll with the punches’ after parent company DCC, the international sales, marketing and support services group, announced its results for the year to 31 March 2021.
These show that while overall Group revenue was down 9.1%, there was a 7.3% rise in adjusted operating profit (6.6% on a constant currency basis) to £530.2 million, with all divisions seeing growth in this area, despite last year’s difficult trading conditions.
The DCC Technology division, which trades in the UK under the Exertis name, not only increased operating profit by 11%, but also achieved a 14.6% increase in revenue, around three quarters of which was organic, mainly due to strong demand for consumer and work from home products.
This, combined with a 12.3% fall in the volume of products sold in the DCC Retail & Oil division, which was hit hard by Covid restrictions, meant that DCC Technology contributed 33.4% of total Group turnover, compared to 26.5% in the year ending 31 March 2020.
Griffin said: “We delivered a set of extraordinary results on the back of extraordinary people. Making the extraordinary happen is only possible if you have fully engaged teams of brilliant people. I am hugely grateful to them.”
He pointed out that UK staff faced particular challenges due to serial lockdowns, the impact of Brexit and the implementation of a new ERP system.
“Anyone who has done that before knows how painful it is, so there were some additional things in the UK that created challenges. I am really pleased with the foundations they put in place and how they managed to roll with the punches.”
Griffin added: “Our teams have done brilliantly well at managing our portfolio, whether that is expanding capacity to do drop-ship and last-mile logistics or managing cost bases to be able to reflect the downturn in demand and managing the complexity of the supply chain. They have been doing extraordinary things throughout the year.”
Overall, DCC Technology’s performance and that of DCC Healthcare, which also grew strongly, helped to offset some of the volume declines in DCC Retail & Oil and enabled DCC to deliver its 27th year of consecutive dividend growth.
It also validated the Group’s focus on diversity, both at a macro level and within the DCC Technology division itself, where falling demand in some areas was balanced by growth in others, such as prosumer audio products, which people turned to to create more professional social media and TikTok content, or musical instruments, which saw increased demand from furloughed workers wanting something productive to do in their spare time.
“DCC Technology is not a broadliner in the traditional sense, but a collection of specialists and that diversity has again borne fruit. We have businesses that have been exceptionally blessed – consumer and anything to do with work from home. Then, at the other end of the spectrum, there are businesses in the B2B space – ProAV, enterprise, datacentres – that have been somewhat challenged,” he said.
“With the ‘porpoising’ in and out of lockdown, we saw an ebb and flow of demand and we had to be pretty agile to respond to that. Obviously, that is fairly complex in terms of management of working capital, stock levels and so on, and that unpredictability was challenging.”
Prospects for 2022
With the first month of the 2022 financial year already complete, Griffin is confident that B2B businesses that were most challenged last year – typically those that require access to customer premises, such as Pro AV and digital signage – will come back strongly this year.
“We are already starting to see a bounce for B2B and Pro AV, with pent-up demand coming through, crowds starting to come back and schools re-opening. I also think there will be a more structured approach to working from home, which will drive refresh cycles. If people are going to work from home on a continuous basis, employers will start to think about adopting a more programmatic approach to a healthy and settled home working environment, so that business should hold up reasonably well too.”
Meanwhile, Griffin says DCC Technology will continue down the road of digital transformation to enable its customers to manage their order processing in a simpler way and to help them transact in an e-commerce world by providing everything from web hosting to fulfilment. Another priority is to continue to address sustainability as part of a commitment to cut Scope 1 and Scope 2 impacts by 20% by 2025, while also tackling Scope 3 challenges around packaging, plastics and recyclables.
He added: “We are always looking to grow, so acquisitions will be part of our plans as well. We think about our business in two dimensions: one is geographic and the other is our key specialisms. We effectively try to ensure each specialism is represented in each geography and then look to make acquisitions where there are synergistic opportunities. We tend to think about the world as one third organic growth and two thirds inorganic. Last year, this mix was reversed as trying to do acquisitions in a remote environment is pretty tricky.”
When asked about the value of distribution, Griffin was bullish about its continued relevance.
He said: “We think value creation is in three buckets: one is providing vendors with reach, market access to parts of the ecosystem that they wouldn’t be able to reach within their OPEX envelope – reach is massively important; another is simplicity from a supply chain point of view – a lot
of vendors are starting to think about data and customer insights and we enable them to have those insights without the disintermediation of two or three steps within a supply chain; and, thirdly, we talk about leverage – how do we enable our customers to do more by providing them with skills and services in areas that they shouldn’t be investing in so that they can focus on their core business. Those three areas I don’t think are going away. I think they will evolve and our opportunities will increase, not become less.”