AB expects to maintain its good run on the IT distribution market
AB expects to maintain high growth dynamics on the IT distribution market in Poland, the Czech Republic and Slovakia, and it also wants to improve profitability. In the last quarter, the industry recorded the fastest growth in all of 2020, and AB once again increased its market share, company board member Zbigniew Mądry told PAP Biznes.
„All the time in our industry has been good, and we keep maintaining high dynamics. We expect this state of affairs to continue, and several things point to that. In 2019, we ranked last as Poland in the EU in terms of IT spending per capita, and the Czech Republic and Slovakia – the other countries where we operate – were not much better. It will be much better after this year. There are already data on the distribution market from Context – Poland was the absolute leader; the growth rate in 2020 was 30 percent. The second place went to the Czech Republic with an increase of 15 percent” said Mądry.
„The market growth rate in the fourth quarter was even better than in the very good third quarter. In the fourth quarter, the markets in Poland, the Czech Republic and Slovakia grew by 26 per cent, compared to 19 per cent for the year as a whole. We feel very good about the fourth calendar quarter. We continue the long-term trend of increasing our market share,” he added.
According to the PAP Biznes interviewee, much of the growth in 2020 was due to the exceptional pandemic situation and the poor condition of technical infrastructure in Poland.
„This can be seen in the Czech market, which is more developed than Poland, and the dynamics there were twice as low as in our country. This shows how much we needed IT equipment in Poland,” he said.
„Still as many as one in four schoolchildren, or one million children and young people, have no or limited access to a computer. A common situation is that there is one computer for every two children. This includes remote working by adults. More equipment is required. This, among other reasons, is why the IT industry became one of the industries of first need during the pandemic,” he added.
The AB board member said that in 2020 the highest growth rate, 57 per cent, was achieved in laptop sales.
„Our country also fared very well compared to Europe in terms of smartphone sales (49 per cent y/y), with top-of-the-range devices selling particularly well, despite major problems with their availability. This confirms, moreover, the classic mechanism of the boom in luxury goods during the various crisis periods as wealthier people still have plenty of money at their disposal. And that group in Poland and in the CEE region has been systematically expanding,” Mądry assessed.
He added that all sorts of accessories, such as webcams, broke sales records in 2020, with multifunction printing devices, among others, joining the group in the latter part of the year.
„Consumers have convinced themselves that they will work, study or do official business remotely for more than a few weeks or even a few months, and the need for printing and scanning has not ceased all the more,” – the board member said.
The AB board member also pointed out that the dynamic development of online sales supported market in 2020.
„The percentage of people buying online in 2020 in Poland grew very significantly and the value of the e-commerce market increased by 35 percent to PLN 100 billion. And this has been accelerating all the time, we are catching up with Europe. This is indicated by a Dell report that came out a few months ago. In it, Poland is the number one country in terms of willingness to change towards digitisation. Previously, the percentage was very low. This is very optimistic for the future for our industry,” he said.
The high demand for electronics has meant that the market has experienced problems with the availability of many goods. As Mądry explained, AB therefore decided to review its procurement policy and in many important categories planned and placed orders six months in advance which does not normally happen.
„Thanks to that, we have no shortages of goods and we are calmly looking to the months to come,” – he said, while assessing that the company is doing well with inventory management also in the most unpredictable hardware categories, such as graphics cards and memories.
The AB board member said that in the next few years, the Group sees additional growth potential in its cloud platform for software distribution, as well as it is expanding its offering in the infrastructure-as-a-service segment by starting, among other things, a partnership in Hewlett Packard GreenLake.
„We also have information from other suppliers who want to be present with us with similar sales models. The trend will grow as it gives companies flexibility,” he assessed.
The company has also launched, among others, the Alsen Instalacje network, which offers solutions for resellers in the field of smart home, internet and photovoltaics.
„Many resellers have moved beyond narrowly focused IT products and services because they are taking advantage of business opportunities in areas where IT has entered strongly. With our support, more resellers will be able to expand their offers. This is also what the end-users expect – a one-stop-shop format in which one company will make many ICT systems, monitoring systems and, for example, photovoltaics, and those systems usually work together,” he said.
THE AB GROUP EXPECTS IMPROVED PROFITABILITY
„We intend to fight to increase profitability in future periods through logistical and financial savings and to improve the economics of our operations, also by benefiting from the efficiency leverage resulting from the scale of operations,” Mądry said.
„Our product management department is now accounted for by the profit generated, taking into account the financial costs of the entire sales cycle, transport and delivery costs. Previously, many factors were not taken into account. This is one of the elements that I view as positive over long-term on the path of improving net margins,” he added.
In the third calendar quarter of 2020, the group’s net margin increased to 0.7 per cent from 0.5 per cent.
As the board member explained, the distributor has, among other things, introduced machine learning tools to increase efficiency in the sales department and also use business intelligence tools to optimise its offer.
„In just a dozen or so months, we have increased the percentage of products from a stock sold within one day from an already objectively very good 20 per cent to over 30 per cent. This is a move to increase the profitability of our business, to further improve efficiency,” he said.
„We also set out to verify the profitability of operations with individual customers. And contrary to simple logic, the number of customers has increased,” he added.
Increasing automation is also expected to help improve efficiency.
„We are the only IT distributor in this part of Europe that has a real automated system in the warehouse. We have periods when the level of transactions carried out completely automatically exceeds 85 per cent. This is very important in the context of the growing e-commerce market. We are able to handle seasonal peaks in e-commerce orders without increasing the staff,” Mądry said.
„The AB Group is a technology company; it is an e-commerce company. However, investors on the WSE are still looking at us in this way to a small extent. Just as we have changed operationally, we are also hoping for a qualitative change in terms of pricing on the WSE,” he added.
FOLLOWING CONSOLIDATION, COMPETITIVE PRESSURES MAY DIMINISH
In 2020, the acquisition of ABC Data and Veracomp was finalised on the IT distribution market in Poland. As Mądry explains, precisely because of the acquisitions being closed, last year was still a period of significant competitive struggle.
„We managed to maintain and strengthen our leadership position, but we acted selectively. We have consciously ceded some of the least attractive business to our competitors because we are convinced that what matters to our shareholders is profitability and the volume of profit, not just the revenue position,” he said.
„I hope that the level of competition in the Polish market will have already stabilised at a normal level for developed markets. We have two big players and a larger number of supporting distributors with narrower portfolios or specialist distributors,” he added.
The Group itself is open to acquisitions, both in Poland and abroad.
„We see that growth in certain areas, which I do not want to name specifically yet, would be best through acquisition. However, we are now seeing that after a good year in 2020, those who were thinking of selling the business do not want to do so or are very expensive. We respect our shareholders’ money, which is why we do not do transactions just for the sake of doing them,” he said.
„Our goal is to achieve such spectacular acquisition successes as in the case of the Czech-Slovak group of companies, which, as part of the AB Group, have become dominant in those markets,” he added.
AB is also looking at entering new geographical markets.
„Here too we are acting prudently. For example, right next door we have Europe’s largest IT market – Germany. But it is already, figuratively speaking, 'concreted over’, so the raison d’être here would possibly be a major takeover. There are attempts of new players to enter but they are all doomed to failure in our view. We have also been looking at the Baltic States and we continue to look in that direction. There is also the example of Hungary but this market is still unpredictable,” he said.
„It is important to realise that 75 per cent of the CEE IT market is in Poland, the Czech Republic and Slovakia. So, it is not necessarily economically justified to create distribution companies or to take over businesses in small countries which we can serve from Poland and which we do. We are also making sure we do not acquire companies that will give us, say, an extra 1 per cent of sales, but will take the same amount of time as something that would bring in a 20 per cent growth.” he added.
_ _ _
Łukasz Kucharski (PAP Biznes)
This dispatch is taken from the full version of biznes.pap.pl link