Spicers Europe beats expectations

Unipapel's accounts reveal a strong performance from Spicers Continental Europe in 2011.

In a recent filing lodged with the Spanish stock market authorities Unipapel has reported that the 2011 results of Spicers Continental Europe (CE) were better than it had expected.
Pro forma sales from Spicers CE in 2011 were €449.6 million ($595 million) versus expectations of €443 million. Considering the uncertainties surrounding the European economy in the second half of 2011, it is a highly creditable performance.
Profit was better than expected too. EBITDA was €36.9 million (versus expectations of €35 million) and the net profit was around €19.4 million.
The importance of Spicers CE to the overall profitably of the Unipapel group is highlighted by a pro forma results statement showing results with and without the impact of the office products wholesaler.
Without Spicers, Unipapel’s 2011 results are:
Total sales: €858.2 million
Gross profit: €93.6 million
EBITDA: €6.9 million
EBIT: -€1.2 million
Pre-tax result: -€10.3 million
Including pro forma results from Spicers, the same lines read:
Total sales: €1.31 billion
Gross profit: €216.4 million
EBITDA: €53.5 million
EBIT: €45.5 million
Pre-tax result: €35.5 million
Profitability clearly outstrips the benefit to the top line. The impact of Spicers CE is to add almost 53% to sales, but gross profit is more than double and EBITDA is over seven times greater.
To a certain extent, this trend was to be expected with more than 85% of Unipapel’s sales in 2011 coming from its lower margin IT distribution business Adimpo.
Adimpo’s profitability in 2011 (EBITDA was down by over €3 million) was hit by a greater mix of lower margin hardware sales, while sales of supplies actually fell slightly due to lower sales in Spain.
Excluding Spain (43% of Adimpo’s sales) which saw sales decline by 6.8% in 2011, Adimpo grew strongly, with an impressive 14.7% increase to the top line in France to €202.5 million, high single-digit increases in Germany and Italy, and 21.7% growth in Portugal (albeit from a smaller base).
The Unipapel wholesaling and production business in Spain was under pressure too as 2011 sales fell by 3.2% to €127.8 million. The percentage decline would have been greater had it not been for a 27.4% increase in the IT consumables category.
The decision to acquire Spicers CE certainly looks to be a logical one given this latest set of results, but one wonders what European suppliers are now thinking after having been asked to ‘invest’ in Unipapel’s growth plans.
Judging by Spicers CE’s already healthy profit margins, it seems it is being asked to prop up falling margins from the Adimpo business and in Spain.