AB Group after Q1 2017: even better results and dynamic growth of VAD, gaming and cloud computing segments

The summary of consolidated financial results year on year:

FQ3 2016/2017
million PLN Chang million PLN Chang
Revenues 8.136,3 +14,9% 1.854,8 +8,7%
EBITDA 118,9 +7,3% 24,3 +0,0%
Net profit 68,4 +3,8% 13,2 +6,2%
Assets 2.013,8 +1,8% 1.911,1 +5,1%
Equity 629,0 +13,4% 639,9 +11,8%

(*) Data on the basis of reports for FY 2015/2016, 1H 2015/2016 and 1H 2016/2017

AB Group a strong leader

After the first quarter of 2017 (Q3 of FY2016/2017), AB Group, the leading distributor of IT solutions, household appliances and consumer electronics in Central and Eastern Europe has once again increased the advantage over its competition. Despite the difficult market, the company’s year-on-year revenue grew by almost 9% and reached 1.85 billion PLN, generating 24.3 million PLN EBITDA (stable yoy) and 13.2 million PLN net revenue (+6.2% yoy).

“We are still able to grow, even compared to the record of 2016, when we managed to surpass 8 billion PLN in revenue.This is a result of successful implementation of our long-term development strategy, with safety and caution being parts of our DNA”, said Andrzej Przybyło, Chairman of the Board of AB S.A.

“The growth in the last quarter was driven by the Polish market. The Czech and Slovakian market saw stabilisation after the tremendous success of AT Computers and a series of quarters with two-digit growth figures. The macroeconomic factors, including economic growth in our region, increasing wealth in our society, the influx of EU funds from the new Financial Perspective into new IT projects prepared in Poland and Czech Republic, or the expected impact of the 500+ programme in Poland make us look into the future with optimism”, he added.

It is worth noting that the individual results of AB S.A. do not fully convey the achievements of the Group on the Polish market, since they are not comparable year-on-year. This is due to several factors, including the fact that ever since the new distribution centre in Magnice was commissioned, the logistics services have been carried out by a specially created B2B company, which is also a direct beneficiary of financing for this innovative investment from EU funds.

Strongest finances

Not only is the AB Group stronger than the competition with regards to the scale of our business and our financial results, but we also enjoy the trust of financial institutions.

“The AB Group has been keeping high profitability compared to the rest of the industry, we also have the lowest SG&A costs and that is only after first 9 months of calibrating the logistic processes in new, fully automated warehouse in Magnice”, emphasised Rafał Michalczuk, CFO of the AB S.A. Group

For many years, the Group has also been able to boast the largest equity in the industry, reaching 640 million PLN at the end of Q1 2017, or 33.5% of the balance sheet total. These figures are several times larger than compared to even the closest competitors. Additionally, AB group has a model financing structure – a third of financing comes from equity, while the remainder is financed from third party equity (half of that sum consists of long-term bonds and credit lines), which is in line with the safety rule, constituting a part of the business strategy.

“Strong capital base and responsible approach to conducting business make us a reliable and trustworthy partner for our suppliers, clients and financial institutions. Banks, as well as financial institutions appreciate the financial stability of the AB Group.We also have a lot of headroom to finance our further growth on both ends – clients and suppliers alike”, Michalczuk emphasised.

It is also worth noting that the AB Group significantly reduced their interest-bearing liabilities. By December 2016, the net debt was reduced by 20% year-on-year, which amounts to 87 million PLN. In Q1 2017, compared to Q1 2016, despite the increase of trade volume levels, net interest-bearing liabilities were reduced by 13.5 million PLN and its relation to EBITDA is a safe 2.9 (a decrease from 3.2 seen last year). During last four quarters, AB Group also improved cash flows from operational activities by over 58 million PLN year-on-year.

Cloud and gaming with great potential

According to the forecasts by IDC Poland, in 2016 the entire cloud computing market in Poland was worth 630 million PLN. This year, it should exceed the threshold of 800 million PLN, growing five times faster than the traditional IT services market until 2019.

“The world is turning towards the cloud. The AB Group has been working towards achieving a leading position among the distributors since the early development stages of that market and succeeded.We have formed a strategic partnership with Microsoft, built a custom cloud platform dedicated to the Polish market and we collaborate with over 200 partners and resellers”, said Zbigniew Mądry, Member of the Board and Trade Director at AB S.A.

The AB Group also sees some significant business potential in products for gamers. In 2016, the value of the gaming market in Central and Eastern Europe was already 3 billion USD, including 570 million USD in Poland and Czech Republic alone.

“The market grows at a pace of around 7 percent annually, and the Group already offers all categories of gaming products. We can also boast a great success of our new project related to the gaming sector that we recently launched in Czech Republic – X-Play”, said Patrycja Gawarecka, Sales Director at AB S.A.

X-Play is a network of points of sale in the shop-in-shop formula, which was launched in Q3 2016 and at this point already comprises of 89 points of sale. Currently, AB Group offers almost 7000 products for gamers: gaming consoles, specialised PCs, including computers built at our facility, gaming monitors, accessories, components and games. We also created e-sports product line under the Optimus brand and our Alsen franchise chain is a technological partner of A-Team, a professional e-sports organisation, which recently won the QPAD Arctic Cup FIFA16.

AB – a distributor of choice

In Q1 2017, AB Group signed new or extended the existing distribution contracts with companies such as Canon (advanced printers and copiers), Epson (advanced home cinema projectors), LG (smartphones), Socomec (IT security), TCL (consumer electronics) and Zyxel (networking solutions). Among the most significant distribution contracts from 2016, the results of which are seen in the overall financial results of the AB Group are contracts with: Microsoft (Xbox, Surface), Fractal Design (PC cases), Legrand (UPS and power strips), Samsung (household appliances), Philips (consumer electronics), Lenovo (smartphones), OKI (printers and consumables). It is worth noting that AB Group is the leading partner in the region for global giants of the IT industry, including Apple, Microsoft, HP, Lenovo, Asus and Dell. Overall, AB Group offers almost 100 000 products available from its warehouse.

“The variety of the available products, efficiency of our logistics and relationships with our partners built over the course of 26 years gave the Group a leading position in CEE region with regards to main product categories in IT and consumer electronics sectors in 2016.What is more, the revenue of AB Group are growing faster than the broad market”, emphasised Zbigniew Mądry, Member of the Board and Trade Director at AB S.A.

AB Group is taking advantage of its strong position in the Enterprise segment thanks to value-added distribution activities (VAD), it also develops a nation-wide network of integrators under the Optimus brand.

In Q1 2017 we increased our sales to our Enterprise partners by almost 60% year on year. This is a huge success of our team of experts, engineers and product managers, who adapt our offer for resellers and integrators. We also run a series of VAD initiatives, such as the Competence Centre, Integration Academy, DemoLab or IT Night”, said Patrycja Gawarecka, Sales Director at AB S.A.

The distribution of other goods is also growing. In Q1 2017, the turnover in the household appliances and consumer electronics segment grew by 55% year on year, after a jump by 83% in the entire 2016. The Kakto franchise chain already comprises 231 points of sale in Poland.

AB Group’s success appreciated

AB Group has been successively achieving the new heights in the business world. In the latest edition of the List of 500 published by Rzeczpospolita in April 2017, the company surpassed Asseco Poland, software suppliers, game creators and other IT distributors, taking the 1st place in the IT industry ranking. In the overall ranking, the company was classified as 36th largest company in Poland (+2 places yoy).

Among other noteworthy achievements is the 6th consecutive Distributor of the Year title awarded by the CRN magazine, as well as a triple victory in the Context ChannelWatch survey conducted among over 5000 resellers. For the four consecutive time, the company was also awarded the Distributor of the Year award by HP Inc. and received the first Distributor of the Year Award from HP Enterprise in the region. The distributor from Wrocław was also recognised by Microsoft – the company received the “2016 – Partner of the Year – Distributor” award for recording the highest growth of cloud service sales on the Polish market (fivefold increase year to year), as well as the most dynamic growth of on-line solution sales in the Indirect Cloud Solution Provider model. AB Group also collected numerous awards from other vendors, including the “Pearl of Polish Economy” title from Polish Market magazine, a double Golden IT ACE title awarded by Reseller News magazine for the best Distributor and Event of the Year – opening of the new Distribution Centre in Magnice).

What is more, CRN magazine also distinguished Andrzej Przybyło as the “IT Market Personality”, and Patrycja Gawarecka won the “Partner Channel Manager” award based on the votes of resellers. Andrzej Przybyło is also a laureate of the Vector Award of the Employers of Poland organisation, as well as Ernst&Young Entrepreneur of the Year.