Investor Presentation • Oct 5, 2016
Investor Presentation
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Milan, October 5 th 2016
This presentation may contain forward-looking statements that are subject to risks and uncertainties, including those pertaining to the anticipated benefits to be realized from the proposals described herein. Forward-looking statements may include, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation, supply and demand.
Esprinet has based these forward-looking statements on its view and assumptions with respect to future events and financial performance. Actual financial performance could differ materially from that projected in the forwardlooking statements due to the inherent uncertainty of estimates, forecasts and projections, and financial performance may be better or worse than anticipated.
Given these uncertainties, readers should not put undue reliance on any forward-looking statements. The information contained in this presentation is subject to change without notice and Esprinet does not undertake any duty to update the forward-looking statements, and the estimates and the assumptions associated with them, except to the extent required by applicable laws and regulations.
2016/18E financials
Corporate Governance
→ By far the #1 in Italy, gained #1 positioning in Spain through Vinzeo acquisition (4th Player in 2015), space for scale-up in Portugal (local branch opened in 2015)
A
B
C
→ Average seniority of top management higher than 12 years within the Group (Italy, Spain) (1) and nearly 15 years within the industry
Largest ICT-CE Wholesaler in Southern Europe
Among top #60 Italian corporations by revenue (source: R&S Mediobanca 2015)
3.3 euro/bln sales, 39 euro/mln EBIT (2)
40,000 customers (resellers 68% - retailers 32%)
600 brands, more than 40,000 SKUs stocked
~1,400 employees
4 main logistics sites [Cavenago (MB), Cambiago (MI),
Saragoza, Daganzo (Madrid)]
n. 17 Cash & Carry in Italy - n. 1 in Spain (Madrid)
among the top three distributors in Spain V-Valley established, the fully owned subsidiary in charge of datacenter products distribution
Sales of non-core subsidiaries Monclick and Comprel - acquisition of majority stake (60%) in accessory company Celly
2015 Acquisition of additional 20% stake in Celly to reach
2016
Acquisition of Vinzeo, #4 distributor in Spain to become #1 in the country
1
Flexibility in responding to vendor and reseller/retailer needs by means of a proprietary ERP and web engine
Multidivisional organization to tackle different needs of IT clients/data center/consumer electronics
Providers of market intelligence by leveraging the broad reseller portfolio with Big Data Analytics tools
Stable management team to provide consistency in execution and relationship with key partners
| CORE OFFERING | OPTIONAL SERVICES | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 125,000 warehouse sqm |
• Range and availability: 'one stop-shopping' |
S | • Sourcing of products ('top sellers') • Sourcing of products ('long tail') • Back to back ordering |
40,000 items in stock | |||||||||||||
| 25 million units shioments |
• Delivery • Bulk breaking • Order consolidation |
C K/ TI C S O GI T S O L |
• Simplified logistics • Drop shipment to end customer • Consignment stocking - repackaging • Providing multiple locations with multiple suppliers |
5.5 million boxes shipped |
|||||||||||||
| 2.1 million payment transactions |
• Channel financing |
T DI E R C |
• Extended credit (additional credit lines; factoring) |
Amex loyalty card |
|||||||||||||
| 7.0 million lines of orders managed |
• First level order support (pre-sales) |
G & N TI S E E K L A R |
S | A | • Second level technical support (pre/post-sales) |
7,000 special 'value+ deals managed |
|||||||||||
| 200,000 SKUs published in website |
• Product information |
• Channel Intelligence • Outsourced sales & marketing force |
~450 Sales & Marketing people |
||||||||||||||
| ~40,000 customers served |
• Broad customer base |
M | • On-line sales platform + field accounting • Channel recruitment |
7.8 million yearly web accesses |
2016 m&a activity:
Target Overview
•
| 2015 focusing on networking, cabling, Voip & UCC products |
focalization strategy on IT Value categories: |
|---|---|
| • 94 employees |
- reinforcement of the Networking & UCC business |
| • 2.900+ resellers served |
- entrance into new 'analogic' markets such as cabling, |
| • Main vendors include: HP Networking, Aruba Ntwk, Huawei Ntwk, Brocade, Alcatel -Lucent, Watchguard |
phone control units, video - conference systems - acquisition of new customers like installers and technicians (so far not served) |
| • # 4 h largest Spanish distributor in 2015, broadliner products portfolio with a particular focus |
• Scale up in Spain reaching a market leadership position • |
| Acquire 2 new key contracts |
Edslan &
Investment rationale
• Further step in the
(1) Relative Market Share: Market Leader= Market Share Market Leader/Market Share 2nd Player || Other Players: Market Share Other Player/ Market Share Market Leader (2) Based on Revised Reference Market Estimates || (3) Based on 2014 Revenues || Includes Vinzeo, EDSLan Pro-forma FY Source: Esprinet Group Internal Data, Sirmi, Channel Partner, Internal Interviews, DB Context, Companies balance sheets and expert interviews
Based on Revised Reference Market Estimates || Includes Vinzeo, EDSLan Pro-forma FY - RMS: Relative Market Share Source: Esprinet Group Internal Data, Sirmi, Channel Partner, Internal Interviews, DB Context, Companies balance sheets and expert interviews
Between 2013 and 2015 Esprinet has grown mainly driven by Italian organic growth; in 2016 2 major acquisitions in Spain and Italy added ~610 euro/mln revenues
Source: Internal Company data 18 Note: Excluded Celly
Strong top-line growth trend
Always profitable business since its establishment
• 2
nd tier: from distributors to resellers (~45-50% of total addressable market)
| 1 | Macro economics |
• Improved macroeconomic outlook within Esprinet markets (Italy, Spain, Portugal), in terms of: GDP growth, Disposable Income and IT spending |
|---|---|---|
| 2 | Vendors | • Continued polarization of vendor base, with dichotomy between: Consolidated base of Big, mostly HW-oriented vendors expanding established ecosystem across consumer lifecycle (eg. Wearables, home, auto) with continuous focus on incremental innovation to sustain share (eg. Apple) Fragmented base of Small, niche pure play, SW-oriented vendors, focusing on emerging technologies and innovative applications |
| 3 | Categories and Service Offer |
• Traditional IT & CE (e.g. PC, smartphones, …), with limited space for further disruptive innovation going forward and pressure on sell-out prices • Emerging technologies (eg. Wearables, Sensors, …) and innovative applications (eg. IoT; Cybersecurity) will drive value added IT categories (e.g. networking) & CE demand growth • Increasing penetration of "as a Service" models (eg. cloud solutions, managed printing services) |
| 4 | Distribution | • Increased share of distribution intermediation as vendor look for efficiency but also value added services in customer management • New categories could shift from direct to indirect model (eg. White goods, Industrial sensors & SW …) • Consolidation of distribution landscape could determine a recovery of margins (given both scale and less competitive pressure) |
| 5 | Channel/End market |
• End market (business) switching spending from run rate to change with implications for VARs / Vendors: - need to reinforce service offering, including advisory projects (eg. CAPEX for future efficiency, …) - Telco/ Large vendors evolving offer model and channel management to intercept new needs • E-commerce penetration will continue to grow, mainly driven by pure players: - continuous switch from traditional in-store channels (e.g. retailers/resellers) to online channels - pressure on sell-out prices on traditional IT & CE (e.g. Smartphones) due to price transparency and competitiveness |
Notes: Nominal values in local currency for each year in the period 2009-2014 for Western Europe (except Turkey). 0.3 or above is a strong correlation with this number of datapoints Sources: Economist Intelligence Unit, Euromonitor, GfK, IMF, Analysts report, Bain analysis
2013's Top 3 Smartphone vendors have lost share while Chinese have rapidly grown: top 8 players in 2017 represent ~75% of the market
Historically, major acquisitions accelerated PC consolidation
Top 3 players gained ~9% share since 2011, mostly organically
Note: "Other top players" include other players explicitly mentioned in the Gartner report (~80 players); Does not include Dell's acquisition of Wyse as thin clients not included in PC market Source: Gartner "Market share: Devices, All Countries, 4Q14 Update"; IDC WW PC Market
Source: IDC 2014
in Italy and Spain (% / 2011-2016)
Role of distributors is expected to increase since…
4
| Major Themes | Examples Of Recent Vendor Announcement | |
|---|---|---|
| A | • Increase market penetration |
• Candy 'go-to-market' strategy leverages distribution channel to reach higher share of addressable market in Europe |
| B | • Smartphone vendors switch go to market strategies |
• Smartphone vendors switching towards distribution mainly due to expansion in the market of new comers Chinese players, with no access to end market (eg. Spain) and by carriers not focusing on hardware • in the short term, some carrier partner with vendors to provide attractive offer to customers and increase volumes (eg. Vodafone and Apple) |
| C | • Expanding partner program to include cloud partners |
• Cisco & HP created new cloud partner programs with the following features: - mew access to distributor network, increased access to MDF, technical support, dedicated financing & flexible licensing/loans |
| D | • Increasing indirect channel's share of total sales |
• ~40% of sales through the channel reached in 2015, through: - increased the customer revenue cutoff between enterprise (direct) and general business (indirect) from 500.0 euro/mln to 1.0 euro/bln - re-oriented its inside sales org to exclusively support channel partners by generating leads, helping cross-sell & up-sell etc. |
| E | • Increasing thresholds for top tiered partners and providing greater rewards |
• Citrix increased the standards and rewards for tiered partners: - increased annual sales requirements & # of certified sales & technical people to 3.5 euro/mln and 16 people for platinum partners, 850 euro/000 and 7 people for gold partners - created more differentiated financial benefits to partners based on tiers |
Source: lit search, vendor websites
Digital Transformation initiatives will drive the end market (business) IT spending switch from run to change
5
E-commerce in Italy and Spain at early stages compared to mature European countries (France, UK and Germany), growing at >20%cagr
5
| ш | |
|---|---|
| KEY MARKET TRENDS | IMPLICATIONS FOR ESPRINET STRATEGY |
|
|---|---|---|
| Geography/ Macro-economic |
• Improved macroeconomic outlook within Esprinet reference markets (Italy, Spain, Portugal), in terms of: - GDP growth - disposable income - IT spending |
• Consolidate position in Italy and Spain with objective to gain up to 5% MS in both markets • Step-up in Portugal with ambition of accelerated growth • Evaluate external growth options to enter at scale in other European markets only in a second step |
| Vendors | • Continued polarization of vendor base, with dichotomy between: - consolidated base of big, mostly HW oriented vendors expanding established ecosystem across consumer lifecycle (eg. wearables, home, auto) with continuous focus on incremental innovation to sustain share - fragmented base of small, niche pure play, SW-oriented vendors, focusing on emerging technologies and innovative applications |
• Value/Consolidated vendors: - invest in logistics assets to be the best partner as fulfiller while differentiating with value added services (e.g. category mgmt., CRM & advanced analytics) • Niche/emerging vendors in IT Value: - reinforce brand and offering and fully support their customer base enlargement, also taking advantage from specialist distributors suffering from margin pressure and small scale |
| Categories and Service Offer |
• Traditional IT & CE (e.g. smartphones), with limited space for further disruptive innovation going forward and pressure on sell-out prices • Emerging technologies and innovative applications (eg. IoT) will drive value added IT & CE products demand growth |
• Focus towards value added / high margin categories with growth potential (e.g. IT Value) • Build role as distributor in emerging technology value chain enlarging the customer base (e.g. installers for IoT sensors) • Continue developing as-a-Service value proposition (focus on 'printing' and 'cloud)' |
| KEY MARKET TRENDS | IMPLICATIONS FOR ESPRINET STRATEGY |
|
|---|---|---|
| Distribution | • Increased share of distribution intermediation as vendor look for efficiency but also value added services in customer management • New categories could shift from direct to indirect model (eg. white goods, industrial sensors & SW, etc.) • Consolidation of distribution landscape could determine a recovery of margins (given both scale and less competitive pressure) • Some categories still have a fragmented distributors' base |
• Continue to lead industry consolidation in Italy and Spain to enable margin recovery process • Develop efficient vertical sales process to address emerging product categories (e.g. industry IoT/sensors/wearables) and categories shifting to distribution (e.g. white goods) • Evaluate potential M&A on selected categories (i.e. consumables, IT Value, niche vendors) to acquire new contracts and capabilities and accelerate MS increase |
| Channel / End-market |
• Digital Transformation initiatives will drive the end market (business) IT spending switch from run to change |
• Develop new services and integrated solutions to grow on VARs and SMB • Develop ad-hoc coherent strategy for e-tailers with focus on pure players: |
| • E-commerce penetration will continue to grow, mainly driven by pure players |
- invest in marketing to drive specific brands - proactively pursue 'long tail' products sales growth |
Plan 2016-18E
| (euro/mln) | Esprinet Group FY15A |
Esprinet Group FY16E "as reported" |
Esprinet Group FY17E |
Esprinet Group FY18E |
CAGR 15- 18E |
|||
|---|---|---|---|---|---|---|---|---|
| Sales | 2.694 | 100,00% | 3.054 | 100,00% | 3.575,2 | 100,00% 3.752 |
100,00% | |
| Cost of sales | (2.537) | -94,18% | (2.886) | -94,52% | (3.378,2) | -94,49% (3.542) |
-94,39% | |
| Gross Profit | 157 | 5,82% | 167 | 5,48% | 197,1 | 5,51% 211 |
5,61% | |
| Other income | 3 | 0,09% | ||||||
| SG&A | (110) | -4,10% | (133) | -4,37% | (143,4) | -4,01% (144) |
-3,85% | |
| EBIT | 4 6 |
1,73% | 3 7 |
1,21% | 53,6 | 1,50% 6 6 |
1,77% | |
| D&A | 3 | 0,11% | 3 | 0,10% | 3,3 | 0,09% 3 |
0,09% | |
| EBITDA | 4 9 |
1,84% | 4 0 |
1,30% | 56,9 | 1,59% 6 9 |
1,85% | |
| Finance costs - net | (4) | -0,16% | (2) | -0,07% | (2,6) | -0,07% (2) |
-0,06% | |
| Profit before taxes | 4 2 |
1,57% | 3 5 |
1,14% | 51,0 | 1,43% 6 4 |
1,71% | |
| Taxes | (12) | -0,45% | (10) | -0,34% | (14,0) | -0,39% (18) |
-0,47% | |
| Net profit | 3 0 |
1,12% | 2 4 |
0,80% | 37,0 | 1,03% 4 6 |
1,24% | |
| check Tax rate |
0,0 29% |
- 30% |
- 27% |
- 27% |
||||
| Var. % y-o-y | ||||||||
| Sales | 13% | |||||||
| Gross Profit | 7 % |
|||||||
| EBIT | -21% | |||||||
| EBITDA | -19% |
(1) Includes EDSLan and Vinzeo results only since their respective consolidation (08/04/16 and 01/07/16)
Esprinet Group Plan 2016-18E
| (euro/mln) | Esprinet Group FY15A |
Esprinet Group FY16E "pro-forma" |
Esprinet Group FY17E |
Esprinet Group FY18E |
CAGR 15- 18E |
|||
|---|---|---|---|---|---|---|---|---|
| Sales | 2.694,1 | 100,00% | 3.292,7 | 100,00% | 3.575,2 100,00% |
3.752,2 | 100,00% | 12% |
| Cost of sales | (2.537,2) | -94,18% | (3.115,5) | -94,62% | (3.378,2) -94,49% |
(3.541,6) | -94,39% | 12% |
| Gross Profit | 156,9 | 5,82% | 177,2 | 5,38% | 197,1 | 5,51% 210,6 |
5,61% | 10% |
| Other income | 2,7 | 0,08% | ||||||
| SG&A | (110,4) | -4,10% | (140,8) | -4,28% | (143,4) -4,01% |
(144,3) | -3,85% | 9 % |
| EBIT | 46,5 | 1,73% | 39,1 | 1,19% | 53,6 | 1,50% 66,2 |
1,77% | 13% |
| Var. % y-o-y |
| Sales | 22% |
|---|---|
| Gross Profit | 13% |
| EBIT | -16% |
(euro/mln )
Esprinet S.p.A. and Esprinet Iberica working capital improvement from spike in 2016 mainly due to the following:
WC Days Esprinet iberica
Vinzeo, EDSlan and Celly to mantain same efficiency in working capital management as expressed by 2016 % of sales.
Stabilising utilization of 'non recourse' factoring schemes (Vinzeo).
Esprinet is listed in the STAR Segment the market segment of Borsa Italiana's equity market (MTA-Mercato Telematico Azionairo) dedicated to mid-size companies with a capitalization less than 1.0 euro/bln, which voluntarily adhere to and comply with a number of strict requirements:
Major requirements to mantain the STAR 'status' are the following:
Esprinet is fully compliant(1) with the Code of self-discipline (Corporate Governance Code).
Francesco Monti , was born in Bovisio Masciago on 1st April 1946 . He was among the founding members of Comprel where he served as the Sole Executive .
He served as Chairman of Comprel beginning in 1983 and, following the merger with Celomax , he has served as Chairman of Esprinet .
Maurizio Rota , was born in Milan on 22 December 1957 . After his early professional experiences as sales supervisor for companies operating in the information technology industry, in 1986 he founded Micromax , serving as the company's Chairman .
Today Mr . Rota is the Vice Chairman and Chief Executive Officer of Esprinet .
Alessandro Cattani , was born in Milan on 15 August 1963 . After completing his first degree in electronic engineering, he earned a management Master ("CEGA") at the Bocconi University in Milan .
From 1990 to 2000 Mr . Cattani worked on the development of management consulting projects and he currently serves Esprinet as Chief Executive Officer .
| Name | Position | Exec. | Ind. | Strategy Comm. |
Control and risk Comm. |
Remun and appointment Comm. |
Comp. and sustainability Comm. |
|---|---|---|---|---|---|---|---|
| Francesco Monti | Chairman | X | X | ||||
| Maurizio Rota | CEO Deputy Chairman |
X | X | ||||
| Alessandro Cattani |
CEO | X | X | X | |||
| Valerio Casari |
CFO | X | X | ||||
| Matteo Stefanelli | Director | X | X | ||||
| Tommaso Stefanelli |
Director | X | X | ||||
| Marco Monti | Director | X | |||||
| Mario Massari | Director | X | X | X | |||
| Andrea Cavaliere | Director | ||||||
| Chiara Mauri | Director | X | X | X | |||
| Cristina Galbusera |
Director | X | X | ||||
| Emanuela Prandelli |
Director | X |
Approximately 32.1% of total shares are locked up into a shareholders agreement signed on February 24th 2016 with effectivity and validity in force until 19th February 2019.
More particularly the agreement involves n. 16,819.135 Esprinet ordinary shares (PRT.MI) out of 52,404,340, total shares, as better described in following table below, and provides, inter alia, for an agreement (i) to vote the members of Esprinet's Board of directors/Board of statutory auditors and (ii) to limit the transfer of shares.
| Shareholder | N° ordinary shares locked-up |
% on total issued shares |
% on total locked-up shares |
|---|---|---|---|
| Total | 16,819.135 | 32.095% | 100.000% |
| Francesco Monti | 8.232.070 | 15,709% | 48.945% |
| Paolo Stefanelli | 3,900,000 | 7.442% | 23.188% |
| Tommaso Stefanelli | 750,000 | 1.431% | 4.459% |
| Matteo Stefanelli | 750,000 | 1.431% | 4.459% |
| Maurizio Rota | 2.652.458 | 5.010% | 15.610% |
| Alessandro Cattani | 561.607 | 1.072% | 3.339% |
| Ш | |
|---|---|
| LEED Platinum Certification for the environmental sustainability of the administrative building |
100% energy from renewable sources |
-24% Natural gas consumption 2015 vs 2014 |
||||
|---|---|---|---|---|---|---|
| 180 events on the territory 6.760 attended by customers |
Initiatives in the territory with: Comitato Maria Letizia Verga, AVIS, Ospedale San Raffaele, Comune di Vimercate |
Integrated management system Quality, Environment, Health and Safety |
||||
| 661 workforce employees |
53% of new recruits in 2015 aged under 30 years |
89% Employees involved in the work performance appraisal process |
53% female representation |
Esprinet Iberica: Nave 1, Campus 3 -84, calle Osca 2 50197 Zaragoza (Spain )
Group Headquarter : Esprinet S.p.A. Via Energy Park 20 Vimercate (Italy) www.esprinet.com
Investor Contacts : http://investor.esprinet.com [email protected]
Investor Relations Director : Michele Bertacco [email protected]
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