(AOF) – Rexel announces the acquisition of Wasco, one of the leading distributors of heating and air conditioning products and services in the Netherlands, thereby strengthening its ability to seize fast-growing electrification opportunities in Europe. The acquisition of Wasco will allow Rexel to take advantage of opportunities linked to the energy transition. This acquisition remains subject to customary conditions, including the completion of Wasco’s works council consultation process and the approval of the competent competition authority, namely the European Commission.
It should be finalized in the second half of 2023.
The acquisition of Wasco will allow Rexel to take advantage of opportunities linked to the energy transition. These markets (heating / air conditioning in the case of Wasco, but also photovoltaic solutions, industrial automation, as well as charging station solutions for electric vehicles) should also provide resilience thanks to companies’ emission reduction programs, as well as than government support plans.
Rexel is already recording sustained activity in the field of climate engineering, concentrated in countries where heating is traditionally electric, such as France.
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Key points
– World number 2 in the professional distribution of electrical equipment, with more than 6% market share, created in 1967;
– Breakdown of sales of €18.7 billion between Europe for 51%, North America for 42%, ahead of Asia-Pacific (7%);
– Eight major product groups: electrical installation equipment (44% of sales), conduits or cables (22%), lighting (15%), HVAC engineering (6%), tools, renewable energies, software, security and communication;
– Business model based on 3 pillars: local roots and global coverage (60% of revenues in countries where the group holds 15% of the market share), power and agility of logistics, generalization of artificial intelligence in logistics and commercial processes;
– Split capital (20.2% for the Cevian fund and 1% for employees), Ian Meakin chairing the 12-member board of directors and Guillaume Texier being managing director;
– Solid balance sheet with net debt reduced to €1.5 billion, giving leverage reduced to 0.96 against €5.3 billion in equity and free cash flow of €873 million.
Challenges
– “Power Up 2025” growth strategy:
– 2 pillars: “the fundamentals of Excel” (talents, suppliers, supply chain, digital and productivity) and “a differentiated leader” (data & AI, advanced services, energy transition solutions, ESG and mergers & acquisitions) ,
– external growth generating €2 billion in additional sales,
– annual growth of 4 to 7% in sales (including 40% in digital) and operating margin of 6.5 to 7% of sales;
– Innovation strategy financed at 80 M€, 2/3 of the investments going to digital:
– multi-channel offer with platform dedicated to fluidity, Esker deployment of the Email to EDI solution and artificial intelligence for sales alerts, pricing modules and assortment optimization, resulting in 25% of digital sales,
– extension of services to suppliers (data analysis, prediction, etc.),
– open innovation via the global Digital factory, clouds open to customers and Hi! Paris, center specializing in AI and data analysis;
– Environmental strategy included from product design with 48% green turnover and objectives validated by the SBTi:
– by 2030 (vs 2016), 35% reduction in CO2 emissions from operations and 45% reduction in those resulting from the use of products sold,
–
green loan and indexation of bond lines on the achievement of CO2 objectives;
– Positive impact on sales and operating margin of portfolio management (5 acquisitions, 4 disposals in 2022 and, in January 2023, 2 acquisitions and 1 disposal);
– New purpose: to offer electrification solutions for a sustainable future.
Challenges
– Three major impacts – material inflation 1
time
in particular copper needed for cables (17% of sales), shortage of electronic components and tensions in the availability of labor – offset by operational agility, the increase in selling prices;
– Strong disparity in margins (3.4% in Asia, 16.1% in North America and 13.6% in Europe)
– Continued rise in digital sales (25% of revenues) in the face of increased competition with Amazon Business in distribution to professionals;
– Uncertainty about activity in China (approximately 4% of sales), handicapped by the resumption of Covid;
– After sales up 14%, 2023 objectives of 2 to 6% growth in sales and 6.3 to 6.7% operating margin;
– Record dividend of €1.2, representing a payout rate of 40% and continued share buybacks.
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Concerns remain
According to the Federation of Specialized Trade, Procos, in October 2022, activity fell by 1.5% over one year. Nevertheless, the beauty and health (+ 5.2%) and specialized food (+ 3.5%) activity is dynamic compared to October 2021. The frequentation of the points of sale was very impacted by the problems of fuel and bad weather. Compared to October 2019, the pre-covid year, the drop in attendance is very sharp (-20.9% in October). Shopping centers and the outskirts are more impacted than city centers with a difference of four to five points.
Several reasons for concern exist for the future. The players are experiencing a very significant scissor effect given the increase in their operating costs while the evolution of demand is very uncertain. Very few brands can pass on the increase in their costs to their selling prices. The federation therefore asks, among other things, to limit the indexation of the Commercial Rent Index to + 3.5% for the rents of all companies in 2023. It also invokes an absolute urgency: to cap the price of energy for 2023 and retroact on the contracts already signed to prevent the rate of failures from accelerating.