(AOF) – Rexel’s net profit fell 16% to 774.7 million euros. The adjusted Ebita of the specialist in multi-channel professional distribution of products and services for the world of energy fell by 5.7% to 1.3 billion euros to represent 6.8% of sales, down 71 basis points. The margin improved by 13 basis points, restated for non-recurring items linked to inflation in the prices of stored products excluding cables, net of higher bonuses linked to performance in 2022.
Sales increased by 2.4% to 19.153 billion euros. They increased by 4.3% on a constant number of days.
Rexel will propose to its shareholders to maintain its record dividend of 1.20 euros per share, payable entirely in cash. This represents a distribution rate of 43% of the group’s recurring net income, in line with Rexel’s policy of distributing at least 40% of its recurring net income.
“Our record results in 2022 and 2023 place us on track to achieve the 2022-2025 four-year objectives,” underlined Rexel.
The group is now targeting, for 2024, at comparable scope and exchange rates, stable to slightly positive constant day sales growth, with a high base effect in the first half and an adjusted EBITA margin between 6.3% and 6 .6%. Rexel is finally targeting a free cash flow conversion above 60%.
During its investor day on June 7, the French company will present the initiatives implemented as part of Power Up 2025 and will share its updated medium-term objectives.
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Key points
– World number 2 in professional distribution of electrical equipment, with more than 6% market share, created in 1967;
– Distribution 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%), climate engineering (6%), tools, renewable energy, software, security and communication;
– Business model based on 3 pillars: local anchoring and global coverage (60% of revenues in countries where the group holds 15% 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 board of directors of 12 members and Guillaume Texier being general manager;
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Solid balance sheet with, compared to €5.3 billion in equity, net debt giving a leverage effect of 1.26 at the end of June and free self-financing of €242 million.
Challenges
– “Power Up 2025” growth strategy:
– 2 pillars: “Excel fundamentals” (talent, suppliers, supply chain, digital and productivity) and “a differentiated leader” (data & AI, advanced services, energy transition solutions, ESG and mergers and 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 million, 2/3 of investments going into digital:
– multichannel 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, leading to 25% of digital sales,
– expansion 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), reduction of 35% in CO2 emissions from operations and 45% in those resulting from the use of products sold,
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green borrowing and indexing of bond lines on the achievement of CO2 objectives;
– Continued portfolio rotation, beneficial to profitability, with the acquisition, for €485 million, of the Dutch Wasco;
– Success of the new purpose of “providing electrification solutions”, at 22% of total revenues and growth 5 times higher than that of other divisions.
Challenges
– Three major impacts – material inflation 1
time
notably 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 sales 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;
– Uncertainties about activity in China (around 4% of sales), handicapped by the recovery from Covid;
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After sales up 8% at the end of June, 2023 targets set for growth close to 6% in turnover and 6.6 to 6.9% operating margin;
– Continued share buybacks until 2025.
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Concerns remain
According to the Federation of Specialized Trade, Procos, in October 2022, activity fell by 1.5% year-on-year. However, the activity of beauty and health (+ 5.2%) and specialized food (+ 3.5%) are dynamic compared to October 2021. Attendance at points of sale was very impacted by the problems fuel and unfavorable weather. Compared to October 2019, a 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 gap of four to five points.
There are several reasons for concern for the future. The players are experiencing a very significant jaws 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 in sales 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 emergency: cap the price of energy for 2023 and retroact on contracts already signed to prevent the rate of failures from accelerating.